Accessibility links

Analysts: Russian Economy on the Mend - 2003-12-11


Despite recent setbacks, including the arrest of a leading business figure and the failure of pro-business parties to get into parliament, experts say Russia's economy continues to rebound. It is coming back from the currency devaluation and foreign debt default of five years ago. The future of the Russian economy was discussed Thursday at a conference at the International Monetary Fund.

While deploring what he called the politically motivated arrest of Yukos chairman Mikhail Khordokovsky, Swedish economist Anders Aslund gives the Russian government high marks on economic policy. The country has enjoyed rapid five percent economic growth for five consecutive years, a pace that is expected to continue. Mr. Aslund, the Russia economic expert at Washington's Carnegie Endowment, says Russia has become a competitive market economy. He calls the imposition of a 30 percent flat rate income tax a splendid reform.

"There's also been a substantial judiciary reform. We don't know how it works yet. But at least it has been legislated," he said. "We've seen a big reform of natural monopolies, in the railway and electricity sector in particular."

What has not yet happened, said Mr. Aslund, is development of the small business sector.

IMF economist David Owen, the co-author of a new book entitled Russia Rebounds, said President Vladimir Putin's goal of doubling per capita incomes within ten years is attainable.

"It's not unrealistic," he said. "It does imply, however, a continuation of macro-economic policies and an intensification of structural reforms in many areas."

Aleksei Mozhin, Russia's representative on the IMF executive board, pointed out that a major problem facing Russia is the public perception that the oligarchs who dominate business activity are not perceived as legitimate owners.

"That's a huge problem because in a situation where the largest owners in a country are not seen as legitimate owners, whose ownership rights are being questioned," he said. "For good or bad reasons, they're being questioned by the great majority in the society, the very concept of ownership protection, of ownership rights, becomes illusive."

This ownership problem, Mr. Mozhin said, will continue to haunt the Russian economy. The oligarchs, a handful of very rich business leaders, obtained state assets under questionable circumstances in the mid-1990s.

Mr. Aslund described the arrest, last month, of oil baron, Mikhail Khodorkovsky, as an ominous signal that the security services close to President Putin are becoming more influential. He is also distressed by the clamp down on the independent media and increasing state control of the oil and gas sectors that are Russia's principal wealth creating industries.

XS
SM
MD
LG