The Russian problem Guest Column/ Vladimir Putin
Solving Russia’s economic problems will require decades of hard work. Immediate improvements are expected in the areas of economy and finance, and in social issues alike. However, the Cabinet cannot work wonders or promise to do them. One should not try to deceive oneself. In terms of the economy we are now a defeated nation. Our defeat in the `cold war’ of the late eighties can be compared in scale only to that of Germany and Japan in the second world war. Recovering from that blow, Germany and Japan have managed to work an economic wonder of their own. It took them 20 years of monumental work. We have made negligible progress economically. Therefore, we are not talking about wonders — one has been promised to us already by certain economists after two or three months of `Shock therapy’ — but about a difficult and long movement of this country, its society on the way to a better life. What is most important is the present lack of an effective national economic complex. I deem it to be a lamentable but natural result of the attempts to get integrated into the world economy at all costs, made in the past decade. That integration was probably achieved, though at the cost of extensive damage to this country. My conviction is that, had we not made such haste, had we started with a profound restructuring of the economy well in advance ensuring our economy’s competitiveness, we would not have had to play the role of a mere supplier of raw materials to more developed economies in the world markets. I believe that the key effort and existing resources should now be wholly applied to specific areas, instead of being dissipated. First of all, a more effective use must be found for the high technologies of the military industrial complex, where highly qualified personnel has fortunately been preserved too. The government even has grounds for cautious optimism. On the whole, the situation in the economy is better than could have been expected after the August 1998 financial crisis. A steady growth is being registered in industrial production, accompanied by improvement of companies financial conditions. The forecasts of the economic ministry have it that the next few months will see further revival of production. Our prime goal today is to preserve and consolidate the positive dynamics. The devaluation of the rouble gave some relief to the domestic industry. It is clear to everyone, however, that it is a but temporary relief, there are signs of decreasing economic effects from the rouble devaluation and the substitution of imports domestic goods. The government intends to keep the domestic consumer goods market relatively closed while making it broadly accessible to direct foreign investment and to create a favourable environment for domestic capital investment. Unfortunately, we have but a narrow corridor of possibilities here so far. The Cabinet’s actions are restricted by the giant foreign debt, on the one hand, and by the meagre budget on the other, which is obviously insufficient for the government’s performance of all the routine functions and obligations. Therefore, the government should not make pledges which it is in no position to fulfil. The 2000 federal budget is a challenge for the Cabinet but I am convinced we are going to meet it. The problem of augmenting its revenue section has to do with the effectiveness of our work, first and foremost, efforts to create an environment for a dynamic economic growth and tax collection. As for the federal spending, our policy is built upon planning well justified expenditures. It means a renunciation of ineffective government support and clear cut selection of financing priorities. Additional revenues will be primarily channelled into national defence, financial aid to the regions and the agrarian sector. Next come scientific research and education. Next industry and investment. The federal budget deficit is going to be minimal, as will be foreign borrowing. At the moment, certain foreign political circles are attempting to use the IMF loans as an instrument of pressure on Russia. We do not believe, however, that this trend will prevail. The negotiations with the IMF, however protracted, have not brought up any insurmountable problems of purely economic nature. They are unlikely to emerge. My conviction is that this problem will soon be settled just like the one with the restructuring of the former USSR’s debts. We are expecting a positive outcome. (Author is the prime minister of the Russian Federation)
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