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FEATURE-Russia seeks growth in the rust of Soviet past
By Julie Tolkacheva
MOSCOW, Aug 14 (Reuters) - The most difficult thing for the new managers is to explain to workers at the old Soviet auto plant UAZ was that they were employed there to do exactly that -- work.
Two years ago when the Russian holding company Severstal bought the ageing company it took one worker a year to produce three cars of questionable quality.
"It was very low productivity by any measure," said Sergei Emdin, executive director at Severstal's auto division.
"We understood that productivity could be low...But if someone comes to work and does nothing, he is not only idle himself, but he gives an example to others."
Rusting, industrial relics of the Soviet era continue to put a drag on Russia's hopes to modernise its economy more than 10 years after Moscow's Communist empire collapsed.
PROBLEM WIDESPREAD
President Vladimir Putin has pushed through a series of reforms since his rise to power some two years ago to help lift the economy from the wreckage of the 1998 economic crisis.
But most of the big companies -- with their bloated numbers of staff -- are an inheritance from the Soviet past, when cities were built simply to service a particular industry.
If those firms reduce their staff, sacked workers will have nowhere else to go.
"If we cut jobs sharply, there will be a social explosion," Emdin warned. "It is not an option."
His car company has implemented gradual cuts, to some effect: UAZ's output rose five percent in 2001 and hopes for a 20 percent increase this year.
The government too is pushing for higher productivity.
"Labour productivity should become our major concern in the coming years," Prime Minister Mikhail Kasyanov said in a recent interview.
CHEAPER TO EMPLOY MORE PEOPLE
But Clemens Grafe, a principle economist with the European Bank for Reconstruction and Development, said that rises in productivity in Russia had more to do with increased output than more efficient practices.
"At the moment, they can only increase output because they have spare capacity but that will come to an end some time," he said. "Not relocating workers to a more efficient use threatens long-term recovery."
Alexander Korchagin, head of research at the Prospect investment company, said Russian firms would continue to rely heavily on increasing number of employees as long as labour was cheap.
"Our technologies are not sufficiently mechanised, so to increase production you have to increase the workforce by a ratio of almost one to one because an upgrade often costs more than hiring new people," he said.
Emdin said the Soviet idea that equality in everything was good was still deeply ingrained.
"The main difficulty was 'inner sabotage'. They thought it was better to have more people who got a little but all got the same money than if half were fired and the rest got 25 percent more," he said.
But Grafe said that despite all problems inherited from the Soviet Union, managers were often opposed to restructuring.
"It is a not solely a problem of the lack of investment in many sectors in Russia -- you also need to restructure," he said.
Korchagin said that as the costs of employment rose along with demand for better quality goods that could not be made with outdated equipment, productivity levels would inevitably rise.
"Productivity is growing and will grow," he said. "It was so low in the Soviet times that there is no other way."
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