#6 - JRL 7301
Kommersant
August 26, 2003
DOUBLING THE GDP POSTPONED
The Cabinet chooses reforms over growth
The national economic development program for 2003-05
Author: Nikolai Vardul
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
YESTERDAY THE GOVERNMENT RELEASED THE PROGRAM OF DEVELOPMENT FOR 2003-05, ENDORSED BY PRIME MINISTER MIKHAIL KASIANOV. THE GOVERNMENT MADE ITS CHOICE: THE REFORMS FIRST AND GROWTH SECOND. THIS IS A CLEARLY POLITICAL MOVE ON KASIANOV'S PART.
"Doubling" is the buzzword these days. President Vladimir Putin wants the GDP doubled by 2010, and no one among the powers-that-be has dared question this postulate until recently. The Cabinet has been the first. Not that it has gone as far as dismissing the idea altogether, but the date of implementation of the task is postponed.
It may be added that the government managed to abandon a long- range objective within the framework of a mid-range program. This is undeniably a paradox. According to the Constitution, the government will last until the presidential election in 2004 and resign in its wake. Under the circumstances, even the mid-range plans are too much. According to bureaucratic logic, there is no point in the government's conflict with the president who, unless the Constitution is amended, will not remain in the Kremlin until implementation (or non- implementation) of the order to double the GDP, but will most certainly stay there until 2008. All the same, the Cabinet decided to announce in no uncertain terms that doubling the GDP was not to be accomplished by 2010.
This is a clearly political move on Prime Minister Mikhail Kasianov's part. Essentially, his Cabinet faced a dilemma within the 2003-05 program: growth at all costs, or priority of the reforms? The government made its choice: the reforms first and growth second.
Here is an excerpt from the program: "Economic development of Russia in the next several years may continue due to the favorable situation in foreign markets, but in 2006 internal sources of development will be depleted and development may slow or even give way to regression." The conclusion is as follows: "We need to complete the institutional and structural changes necessary for a stable high rate of growth (7-8%) between 2007 and 2015." Some simple calculations will show that the doubling of the 2002 GDP is possible by 2013 provided the conditions are favorable and by 2014 otherwise. Beyond the date specified by the president in any case.
The program does not say a word about why "the rate of implementation of the reforms" (and that is something the government is responsible for) is so dangerously low. What it does is outlining the major factor impeding the economic growth. There are of them.
"The Russian economy is becoming increasingly dependent on raw materials exports," is the least important. The most important is "unfavorable conditions for domestic and foreign businesses" owed to "surplus state regulation, immature free-market infrastructure, absence of the effective system of application of the law." The program emphasizes that "the level of tax burden is comparable with what it is in countries more attractive to investors." Meanwhile, taxes are the bailiwick of the government and nobody else. "Absence of the effective system of application of the law" is the zone of responsibility of courts, prosecutor's office, and the structures like the Interior Ministry and economic departments of the Federal Security Service that answer directly to the president. In short, it is possible to make a fairly accurate guess on who is to be blamed for the failure to double the GDP at the rate the president wants it.
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