Prime Minister Vladimir Putin unveiled a bold pledge to liberalise the Russian economy February 2, telling delegates at the Troika Dialog investment conference in Moscow that he if he's elected president come March, then his administration would push for Russia to rise from 120th place on the World Bank's "Doing Business" survey to 20th. He put numbers on how he intends to do this: by reducing energy waste by a factor of 4; reducing the time to file a tax return by a factor of 3 by cutting the amount of reporting necessary; making transport faster by a factor of 7; and reducing the time it takes to acquire an asset by a factor of 5. Putin also pledged to continue the anti-corruption campaign launched by current President Dmitry Medvedev.
Experts say Putin is nailing his colours to the "liberalising" mast, though warn that this being Russia, the proof of the pudding is in the eating.
Putin's no. 20 spot, for instance, seems to be quite arbitrary - in a manifesto article on economic policy published earlier the same week January 30 he raised for the first time the idea of Russia targeting the Ease of Doing Business index - but said Russia should emulate neighbouring Kazakhstan - which is only at place 47 on the index currently.
Naming the no. 20 spot seems to be an ambitious enough target to mobilise state bureaucrats - people laughed when Putin said in 2000 he planned to double GDP, but he in fact did deliver on the target, with a lot of help from commodity markets. But another factor might be more personal: Putin's arch-rival Georgian president Mikhail Sakashvili has pushed his country up over 100 places on the index to 16th place, and Putin, if mentioning the index at all, is not going to be happy to lag behind his Georgian bte noire.
Russia's scores on the ease of doing business index differ considerably across the various subsections: Putin's plan seems to be to target indicators where Russia has horrible scores but where it lies within the government's power to change them significantly through administrative changes, as opposed to social and behavioural phenomenon such as bribery and biased court rulings.
This risks however becoming a more pro-forma exercise with no deep-seated shift in business culture. For instance, both Kazakhstan and Azerbaijan are examples of post-Soviet countries that has 'engineered' a rapid rise through the ease-of-doing business ranks by targeting specific indicators. Both Kazakhstan and Azerbaijan however count as family-run petrostates, where big business, at least, requires connections and tribute to the respective ruling clans, as detailed in a number of leaked US diplomatic cables on the wikileaks website.
Experts are thus divided over the significance of Putin's new goal.
"The fact that Putin mentioned Russias 120th rank in the Doing Business rating represents a significant change in his approach," writes Alfa Bank analyst Natalia Orlova. "Putin touched upon areas where Russian business is facing the most obstacles the key factors making the costs of gaining access to infrastructure in Russia 6-8 times higher than in BRIC peers and limiting investment recovery," Orlova says.
"Unfortunately, Putins goal is too ambitious to be achievable: while moving up 20 steps in the rating does sound like a plan, a 100 step improvement would require a complete reform of the current political and economic framework," Orlova adds.
Orlova also points out that Putin, almost in the same breath as promising an improvement in investment conditions, called on state-owned VTB to buy back shares at IPO price from retail investors who followed government urging to invest in the stock in the 'people's IPO' in 2007. The bank's shares are currently languishing at around 50% of its IPO price. The move could cost the bank R15-18b, but more significant is the direct state order given to a partly privately-owned company. According to Orlova this suggests, "no change in the state approach to economic management."
"Setting overly ambitious goals and mixing two contradictory signals in one speech risks ruining the credibility of Putins positive message to the investment community," she writes.
Troika analysts are similarly skeptical about whether the lofty goals are attainable without Russia undergoing an identity change. The implementation of this program implies a de-concentration of power, i.e. a completely different strategy from what the Kremlin has been doing over the past decade. Only time will tell whether the political elite is able to take such a radical turn."
Keywords: Russia, Government, Politics - Russia News - Russia
Prime Minister Vladimir Putin unveiled a bold pledge to liberalise the Russian economy February 2, telling delegates at the Troika Dialog investment conference in Moscow that he if he's elected president come March, then his administration would push for Russia to rise from 120th place on the World Bank's "Doing Business" survey to 20th.
He put numbers on how he intends to do this: by reducing energy waste by a factor of 4; reducing the time to file a tax return by a factor of 3 by cutting the amount of reporting necessary; making transport faster by a factor of 7; and reducing the time it takes to acquire an asset by a factor of 5. Putin also pledged to continue the anti-corruption campaign launched by current President Dmitry Medvedev.
Experts say Putin is nailing his colours to the "liberalising" mast, though warn that this being Russia, the proof of the pudding is in the eating.
Putin's no. 20 spot, for instance, seems to be quite arbitrary - in a manifesto article on economic policy published earlier the same week January 30 he raised for the first time the idea of Russia targeting the Ease of Doing Business index - but said Russia should emulate neighbouring Kazakhstan - which is only at place 47 on the index currently.
Naming the no. 20 spot seems to be an ambitious enough target to mobilise state bureaucrats - people laughed when Putin said in 2000 he planned to double GDP, but he in fact did deliver on the target, with a lot of help from commodity markets. But another factor might be more personal: Putin's arch-rival Georgian president Mikhail Sakashvili has pushed his country up over 100 places on the index to 16th place, and Putin, if mentioning the index at all, is not going to be happy to lag behind his Georgian bte noire.
Russia's scores on the ease of doing business index differ considerably across the various subsections: Putin's plan seems to be to target indicators where Russia has horrible scores but where it lies within the government's power to change them significantly through administrative changes, as opposed to social and behavioural phenomenon such as bribery and biased court rulings.
This risks however becoming a more pro-forma exercise with no deep-seated shift in business culture. For instance, both Kazakhstan and Azerbaijan are examples of post-Soviet countries that has 'engineered' a rapid rise through the ease-of-doing business ranks by targeting specific indicators. Both Kazakhstan and Azerbaijan however count as family-run petrostates, where big business, at least, requires connections and tribute to the respective ruling clans, as detailed in a number of leaked US diplomatic cables on the wikileaks website.
Experts are thus divided over the significance of Putin's new goal.
"The fact that Putin mentioned Russias 120th rank in the Doing Business rating represents a significant change in his approach," writes Alfa Bank analyst Natalia Orlova. "Putin touched upon areas where Russian business is facing the most obstacles the key factors making the costs of gaining access to infrastructure in Russia 6-8 times higher than in BRIC peers and limiting investment recovery," Orlova says.
"Unfortunately, Putins goal is too ambitious to be achievable: while moving up 20 steps in the rating does sound like a plan, a 100 step improvement would require a complete reform of the current political and economic framework," Orlova adds.
Orlova also points out that Putin, almost in the same breath as promising an improvement in investment conditions, called on state-owned VTB to buy back shares at IPO price from retail investors who followed government urging to invest in the stock in the 'people's IPO' in 2007. The bank's shares are currently languishing at around 50% of its IPO price. The move could cost the bank R15-18b, but more significant is the direct state order given to a partly privately-owned company. According to Orlova this suggests, "no change in the state approach to economic management."
"Setting overly ambitious goals and mixing two contradictory signals in one speech risks ruining the credibility of Putins positive message to the investment community," she writes.
Troika analysts are similarly skeptical about whether the lofty goals are attainable without Russia undergoing an identity change. The implementation of this program implies a de-concentration of power, i.e. a completely different strategy from what the Kremlin has been doing over the past decade. Only time will tell whether the political elite is able to take such a radical turn."