Moscow Times
June 22, 2009
Putin Signs Anti-Crisis Plan, Part 2
By Maria Antonova / The Moscow Times
The government's first anti-crisis plan contained a staggering 55 points. Its second, signed by Prime Minister Vladimir Putin on Friday, has just seven.
Declaring the first anti-crisis plan nearly fulfilled, the government on Friday switched to a second package of measures to prepare for the "postcrisis" period by removing barriers to business, creating a powerful financial system and fulfilling the state's social responsibilities.
"The crisis is a chance to free the economy from ineffective industries. To solve problems brought by poor management, strategic mistakes and inadequate attention of the owners to the effectiveness of their assets, the bankruptcy mechanism will be used," says the 30-page plan, which is posted on the government's web site.
The document says the first package of anti-crisis measures, made up of 55 points that the government began to implement in November, were undertaken to "defend the people and the economy from crisis shock," and "the realization of this plan is almost complete."
The latest plan continues to solve crisis issues as well as create a "foundation for sustainable socio-economic development of the country in the period after the crisis," the document reads.
The program is a combination of anti-crisis measures and long-term projects meant to construct a newer, more efficient economy.
The measures are reflected in the 2009 budget, which was passed last November and predicted that budget revenues would fall from 10.9 trillion rubles ($350 billion) to 6.7 trillion rubles. Total expenditures are set at 9.7 trillion rubles.
The plan outlines seven state priorities: fulfilling the state's social responsibilities; raising industrial and technological potential for future growth; increasing domestic demand for Russian products; restructuring and innovating the economy; removing barriers to business; creating a powerful financial system; and stabilizing macroeconomic indicators.
Expenditures on social programs and the pension fund will increase to about 4.37 trillion rubles in 2009. The government will allocate an additional 43.7 billion rubles in subsidies to regional budgets to "stabilize the situation on the labor market" and halve quotas for foreign workers in 2009.
The plan cites a list of 295 strategic industries as one of the mechanisms in "support of efficient industries." The government first compiled the list last December. The Regional Development Ministry has come up with an additional 1,148 companies of regional importance.
Companies will be allowed to dip into a pool of 300 billion rubles if they meet conditions like "radical cuts in management bonuses," "transparency" and "a program of innovative development, which includes raising energy efficiency, developing new products, and introducing latest technologies." Companies that receive financial support from the government will have to report on how they carried out these conditions, and companies that collect "considerable" sums will have to give "public accounts" at the end of the year.
A report outlining the criteria for "innovative development programs" for natural monopolies and large state companies will be submitted to the government in December.
One of the biggest recipients of government money, AvtoVAZ, was recently criticized by Sberbank chief German Gref for an outdated product line that "has no future."
The government will slow down the growth of energy prices, which was previously set as part of the plan to liberalize the energy market.
"Natural monopolies will finance their investment programs by raising efficiency of the company," the plan says.
To stimulate energy efficiency, the practice of fining companies for "underextraction" of gas will be dropped.
The government will pay special attention to developing agriculture, housing construction, the food and light industry, pharmaceuticals, the auto industry and domestic tourism because they have "the most potential" for growing domestic demand and decreasing imports. A total of 307 billion rubles will be allocated in 2009 to agriculture and fish industries, with 95 billion rubles coming from regional budgets.
The government will "increase anti-monopoly control in the sphere of commerce" to keep prices on "socially important products, especially food," in check. One of the anti-crisis measures is to "radically strengthen the activities that target officials' corrupt meddling in business" in the course of unlawful checks, renting out government property and creating other barriers for business.
About 40.5 billion rubles will be allocated to support small businesses, and 20 percent of all state purchases will have to be made from small and medium-sized businesses, with a penalty to be established for state and municipal organizations that fail to fill this quota. The penalty will be outlined in a new federal law that will be submitted to the State Duma in July.
Another priority is "forming a powerful financial system," which will have access to 495 billion rubles in government funds in 2009. To make sure that some of the money reaches the real economy, the Finance Ministry will be able to decide which organizations require state guarantees on loans "up to 10 billion rubles each." By July, the Finance Ministry and the Economic Development Ministry are to come up with a mechanism binding banks that receive state money to give the money to the real economy for at least one year at an interest rate that surpasses the Central Bank rate by no more than 3 percent.
The government will also "stimulate consolidation in the banking sphere" to form larger and more competitive banking structures, and a report on stimulating measures is be prepared by September.
The macroeconomic policies of the government will prioritize lowering inflation from 13 percent in 2009 to 10 percent in 2010 and 7.5 percent in 2011, raising the credibility of the ruble and making loans more affordable to businesses and individuals.
By 2011, the government plans to lower the federal budget deficit to 3 percent of GDP, and the National Welfare Fund will still have funds equivalent to 2 percent of the GDP by the end of 2011.
Federal subsidies to the regions will amount to 1.31 trillion rubles in 2009, up by 20 percent from last year, with balanced regional budgets set as a priority goal. Putin cautioned on Friday when speaking at the government's regional development committee meeting that subsidies have to be spent "very carefully."
"You have to personally tackle the anti-crisis plan. Personally," Putin told regional heads at the meeting, which took place in Barnaul, in the Altai region.
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