#1 - RW 5-28-04 - RW Home
Moscow Times
May 27, 2004
'A Safe, Comfortable and Stable Life'
By Caroline McGregor
Staff Writer

President Vladimir Putin used his annual address to lawmakers and the nation Wednesday to reiterate his promise to double the wealth of the nation as a whole and improve the living standards of its individual citizens.

"Our goals are absolutely clear. They are achieving high living standards in the country, a safe, comfortable and stable life," Putin told 800 members of parliament, ministers and leading public figures in the Kremlin.

"They are a stable democracy and developed civil society. They are the strengthening of Russia's international positions. But the main thing, let me repeat it here, is substantial growth in the well-being of our citizens."

Putin said that housing, education and healthcare should be made more accessible, and the quality should be improved. That, in turn, would contribute to his overarching goal of alleviating the poverty in which more than 30 million people, or about 20 percent of the population, officially live.

Spending money to improve these public services is one way to help redistribute the economic benefit and budget revenues from high oil prices to ordinary citizens.

Last year, the economy grew by 7.3 percent, he said, and in the first four months of this year, growth hit 8 percent.

"If we maintain such rates, we are fully capable of doubling GDP per capita, not in 10 years," he said, refreshing last year's target by one-upping himself, "but by 2010."

Many economists, including some members of his Cabinet, had questioned whether this was realistically within reach, and for their benefit, Putin looked up from the text to add this: "See, the government is also applauding. That means they also agree."

Gone was last year's specific target of catching up with Portugal, though he said that "to reach a leading position, we must grow faster than the rest of the world."

He said that only high growth rates "will prevent us from being thrown into the backyard of the world economy." And in a flash of stubborn self-sufficiency: "It's an extremely hard task. But we can do it. And we can do it only ourselves."

"The speech was introspective, with a slight isolationist trend," said Masha Lipman, the editor of the policy journal Pro et Contra. "The message was one of self-reliance, that Russia alone would bolster its position in the world."

Putin's tone toward the rest of the world was vaguely unfriendly as he expressed annoyance with those who have "intentionally" taken his consolidation of power as a sign of growing authoritarianism.

"Far from everyone in the world wants to see an independent, strong and confident Russia," he said, adding defiantly that Russia was committed to democracy and that commitment would not be revised.

Yet his remarks cannot be seen as antagonistic toward the West. Putin hailed closer ties with the European Union, saying its expansion eastward should bring Europe closer "not only geographically, but also economically and spiritually."

Putin's speech was as notable for what it left out as for what it included. The most gaping holes were in foreign policy. Putin never pronounced the word Iraq, instead making a swift, bland and oblique reference to the preeminence of the United Nations in resolving international challenges.

Where other countries were concerned, the topic was economic. Putin said integration in the CIS, including within the common economic space, remained a priority. He said Russia would continue to develop a dialogue with the United States and other major partners such as China, India and Japan.

The rule of law, a prominent point in past speeches, went unmentioned. Administrative reforms and the need to root out corruption from the bureaucracy were also missing.

Putin has repeatedly spoken of the need to put the economy on broader footing, and there has been much talk in the Cabinet of the need to break Russia's oil dependence, but on Wednesday he said not a word.

Chechnya got only a passing mention, with Putin saying the policy of an autonomous Chechnya entrenched within Russia would not be derailed by the assassination this month of its pro-Moscow leader, Akhmad Kadyrov.

Lipman complained that Putin has never provided an adequate strategic vision for where the country is headed. "He said we'll stay the course, but stay what course?"

Putin devoted the first half hour of his 47-minute speech to the specifics of his social welfare reforms.

On health care, Putin proposed a European-style system where basic medical care would be provided to everyone by the state for free, while individuals would shoulder the cost of treatment over and above that, with the help of mandatory medical insurance. Life expectancy is 12 years lower than in the United States, he said, and high child mortality, while diminishing, is unacceptably high.

On housing, he outlined plans to boost the availability of private mortgages, increase competition in the housing construction market and improve property rights, which he said would enabling a third of Russians to buy their own homes by 2010. Modern housing is currently accessible to onsly one-tenth of the population, he said.

On education, where standards have slipped since the days when the system was a national point of pride, Putin proposed that resources be channeled toward professional education, rather than less practical spheres like the arts or humanities. In economic sectors where there is a shortage of specialists, students could apply to the government to cover their tuition with the agreement that they work in that area for a certain number of years after graduation.

Businessmen have a social responsibility to help the state with this task, he said. They should take a larger role in bolstering the skills of the future workforce and more of them should sponsor scholarships, Putin said. "It is in the interests of Russian business to contribute to the training of specialists the economy needs."

Al Breach, the chief economist at UBS Brunswick, said it was clear to him that the speech was one of hard-headed economic liberalism.

Though Putin did not define, once and for all, the relationship between state and business, as Breach had hoped, he praised Putin for a "sensible, serious policy speech" and for the social welfare plans he laid out, to which he drew a parallel with Christian Democratic policies in Europe.

ARMY -- Putin dwelt briefly on the longstanding aim of modernizing the demoralized military, drawing applause for saying Russia had "all we need" to provide up-to-date strategic weaponry. Military spending should be more transparent, and soldiers should be eligible for mortgage credit after three years of service.

TAXES -- The tax system should be reformed to prevent abuse of tax-optimization schemes and criminal tax evasion, he said. Also, the tax system should be made more favorable to allow Russia to better compete with other nations for investment, and the unified social tax and the value-added tax rates should be further reduced.

MACROECONOMICS -- The ruble should be made convertible within two years, even before the current target of 2007. Inflation should be brought down to 3 percent a year, from 12 percent last year, he said without giving a timeframe.

ROADS -- As part of making Russia more competitive, Putin said north-south and east-west arteries must be modernized to better link Russia with Europe and lower the cost of getting Russian goods to export markets, especially in Europe. He also said toll roads should be introduced.