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Ever since being kicked out of office by President Dmitry Medvedev last September, ex-Finance Minister Alexei Kudrin has continued to provide the Russian government with a wide range of economic advice for free. In an article published in the journal of Economic Policy on Friday, the former deputy prime minister challenged Russia's incoming government to provide vital solutions to ten key problems, ranging from tax and fiscal reforms to public administration and corruption. Some observers have pointed out, however, that some of Kudrin's latest economic and policy recipes are all about grandstanding that may harm his own chances of joining a new government.

file photoThe main thrust of Kudrin's idea is that Russia must break away from its paternalistic economic policy ­ created by then-President Vladimir Putin 12 years ago ­ and establish an economic partnership in which the state interacts freely with both its citizens and businesses. A lot of reform programs were announced in the past, but they have mostly remained on paper, said the former finance minister. The results of government efforts to diversify the resource-based economy and stimulate investment were a fiasco, he said. "Perhaps a good example of the seriousness of the problem is the capital flight from Russia, which has been going on for nearly two years despite sustained high oil prices," Kudrin wrote.

The first task, Kudrin said, is to ensure macroeconomic stability and long-term predictability for business. Inflation should not exceed three percent to five percent per year, while tax rates should be stable and predictable. "It is wise for the government to abandon any tax increases in the long-term," Kudrin wrote. The government must also restore the fiscal rule that limited the expenditure of oil revenues, he said. The second task is to reform the bureaucracy and make it more efficient. Among other things, Kudrin said officials should be made to declare all conflicts of interest in all areas of their responsibility. Failure to declare conflicts of interest, he said, should be grounds for dismissal, whether or not damages or malpractice are proved.

The third task is for the government to decentralize and transfer more regulatory and financial powers to regional and municipal authorities. "Regional and local authorities should be accountable to the public, and not to a supreme state body," Kudrin said in apparent reference to Putin's power vertical. The fourth challenge for the government, he said, is taking steps to stimulate growth and investment. The fifth is reducing the excessive state presence in the economy, protection of private property and development of a competitive economy. "There's need to drastically reduce all government involvement, regulation and control and to undertake an active privatization of state companies," Kudrin wrote. The government must also avoid the mistakes of the past, including "an attempt to save any company or companies that failed, either because of the wrong strategy, wrong investment decisions, or simply due to a hopeless lack of competitiveness," wrote the ex-minister.

The sixth objective is to strengthen industrial and municipal infrastructure, including roads, power and water supply, ports and airports, and utilities. Removing administrative barriers to goods and capital is the seventh task, Kudrin said. Businesses should be given more freedom and an increased degree of responsibility along with it. The eighth objective is developing human capital, which Kudrin says could require additional expenses on education and healthcare. Modernizing the labor market to raise employment levels, as well as labor productivity and improving the social safety net, are the ninth and tenth tasks set out by the ex-minister.

But as innocuous as Kudrin's recommendations may seem, some local media, including Nezavisimaya Gazeta, have taken issue with what they call "Kudrin's Paradox," or his habit of disclaiming collective responsibility. "Kudrin 2.0 has changed beyond recognition," said a headline in Monday's Nezavisimaya Gazeta. The paper declared that Kudrin had actually championed some of the unpopular measures ­ like payroll tax increases and centralization of power in the Kremlin ­ which he now counsels the government to roll back.

Some political observers have also criticized what they say are inconsistencies in the ex-minister's actions. Igor Nikolayev, the director of strategic analysis at the consulting firm FBK, said Kudrin's latest recommendations may be evidence of "flexibility" and "lack of principle" on behalf of the former finance minister. "While he was a deputy prime minister and finance minister, Kudrin deliberately compromised his principles by swimming with the current," he said. However, Yevgeny Yasin, a former Russian minister of the economy and a Higher School of Economics professor, believes Kudrin had no room to maneuver. "When you're serving a prime minister who is the de-facto president of the country, there's little choice but to carry out his wishes."

Keywords: Russia, Economy, Investment - Russian News - Russia

 

Ever since being kicked out of office by President Dmitry Medvedev last September, ex-Finance Minister Alexei Kudrin has continued to provide the Russian government with a wide range of economic advice for free. In an article published in the journal of Economic Policy on Friday, the former deputy prime minister challenged Russia's incoming government to provide vital solutions to ten key problems, ranging from tax and fiscal reforms to public administration and corruption. Some observers have pointed out, however, that some of Kudrin's latest economic and policy recipes are all about grandstanding that may harm his own chances of joining a new government.

file photoThe main thrust of Kudrin's idea is that Russia must break away from its paternalistic economic policy ­ created by then-President Vladimir Putin 12 years ago ­ and establish an economic partnership in which the state interacts freely with both its citizens and businesses. A lot of reform programs were announced in the past, but they have mostly remained on paper, said the former finance minister. The results of government efforts to diversify the resource-based economy and stimulate investment were a fiasco, he said. "Perhaps a good example of the seriousness of the problem is the capital flight from Russia, which has been going on for nearly two years despite sustained high oil prices," Kudrin wrote.

The first task, Kudrin said, is to ensure macroeconomic stability and long-term predictability for business. Inflation should not exceed three percent to five percent per year, while tax rates should be stable and predictable. "It is wise for the government to abandon any tax increases in the long-term," Kudrin wrote. The government must also restore the fiscal rule that limited the expenditure of oil revenues, he said. The second task is to reform the bureaucracy and make it more efficient. Among other things, Kudrin said officials should be made to declare all conflicts of interest in all areas of their responsibility. Failure to declare conflicts of interest, he said, should be grounds for dismissal, whether or not damages or malpractice are proved.

The third task is for the government to decentralize and transfer more regulatory and financial powers to regional and municipal authorities. "Regional and local authorities should be accountable to the public, and not to a supreme state body," Kudrin said in apparent reference to Putin's power vertical. The fourth challenge for the government, he said, is taking steps to stimulate growth and investment. The fifth is reducing the excessive state presence in the economy, protection of private property and development of a competitive economy. "There's need to drastically reduce all government involvement, regulation and control and to undertake an active privatization of state companies," Kudrin wrote. The government must also avoid the mistakes of the past, including "an attempt to save any company or companies that failed, either because of the wrong strategy, wrong investment decisions, or simply due to a hopeless lack of competitiveness," wrote the ex-minister.

The sixth objective is to strengthen industrial and municipal infrastructure, including roads, power and water supply, ports and airports, and utilities. Removing administrative barriers to goods and capital is the seventh task, Kudrin said. Businesses should be given more freedom and an increased degree of responsibility along with it. The eighth objective is developing human capital, which Kudrin says could require additional expenses on education and healthcare. Modernizing the labor market to raise employment levels, as well as labor productivity and improving the social safety net, are the ninth and tenth tasks set out by the ex-minister.

But as innocuous as Kudrin's recommendations may seem, some local media, including Nezavisimaya Gazeta, have taken issue with what they call "Kudrin's Paradox," or his habit of disclaiming collective responsibility. "Kudrin 2.0 has changed beyond recognition," said a headline in Monday's Nezavisimaya Gazeta. The paper declared that Kudrin had actually championed some of the unpopular measures ­ like payroll tax increases and centralization of power in the Kremlin ­ which he now counsels the government to roll back.

Some political observers have also criticized what they say are inconsistencies in the ex-minister's actions. Igor Nikolayev, the director of strategic analysis at the consulting firm FBK, said Kudrin's latest recommendations may be evidence of "flexibility" and "lack of principle" on behalf of the former finance minister. "While he was a deputy prime minister and finance minister, Kudrin deliberately compromised his principles by swimming with the current," he said. However, Yevgeny Yasin, a former Russian minister of the economy and a Higher School of Economics professor, believes Kudrin had no room to maneuver. "When you're serving a prime minister who is the de-facto president of the country, there's little choice but to carry out his wishes."

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