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Ministry of Economic Development and Trade of the Russian Federation (MERT)

The Ministry of Economic Development and Trade of the Russian Federation is the main Government body responsible for carrying out the state's investment policy. It is responsible for co-coordinating the activities of federal and regional executive bodies in relation to foreign investment, domestic and international trade, organizing international tenders, preparing concession agreements and production-sharing agreements, infrastructure development, and negotiating credits agreements with international financial organizations.

The Ministry of Economy merged with the Ministry of Trade to form the Ministry of Economic Development and Trade under the order of President Vladimir Putin in May 2000. German Gref was appointed Minister of the agency upon its conception.

Ministry of Economy

In May 1997 the Ministry of Defense Industries, which was responsible for the military-industrial complex and civil aviation, was dissolved and incorporated into the Ministry of Economy in the form of a Department of Aerospace Industry and Shipbuilding. On August 21, 1997 the reorganization of airspace and defense industry was formally announced to enable it to have a more equitable share of foreign arms sales. The new Minister, Yakov Urinson, continued to advocate strongly for military-industrial reforms.

After strenuous debates took place at the Ministry of Economics, the "Concept of Restructuring the Russian Aviation Industry Complex" plan was finally made public in early September 1997. Essentially the plan presupposed vertically-integrated structures and large-scale merges and consolidation among aerospace organizations and research institutions.

On August 6, 1999 the Russian government ratified the structure of three Russian agencies on the Defense Industrial Commission enterprises management - on shipbuilding, conventional arms and control systems. However, the regulation on the agencies, which elaborated their functions, remained in the stage of ratification. These three agencies acquired some of the Ministry of Economics functions, including enterprise licensing and some federal target programs. The agencies were eventually disbanded in February 2004 and their functions assigned to the Federal Industry Agency within the Ministry of Industry and Energy.

The Ministry of Economy also participated in defining the amount of financing that would be allocated to space projects in order to account for the needs of industrial development. It worked closely with the Ministry of Finances and, together with the latter, played a key role in preparation and implementation of the Federal Budget. Issues, related to space activity, were dealt with by the Department of Armaments, Military and Special technology within the Ministry.

In 1997, upon dissolution of the Ministry of Defense Industry (MOP), the Ministry of Economy took over management of all state-owned companies of defense-related industries. It apparently adopted some internal organizational structures and staff from MOP.

During 1998 most important space and missile-related companies were re-subordinated to the Russian Space Agency.

State of the Economy

By the end of 1997, Russia's steadily declining GDP seemed to have bottomed out, inflation was under control, and the ruble was stable. In mid-1998, however, there was a sharp economic crisis triggered by government revenue shortfalls and a pyramid-type government borrowing scheme, worsened by the Asian financial crisis and falling world oil prices. In August, the government suspended payment on its debts to commercial and government creditors and devalued the ruble, which promptly lost two-thirds of its value, while the Russian stock market lost 88% of its value. Many peoples' savings were wiped out. The emerging middle class was hard-hit. The number of Russians living below the official poverty line increased 25%. Some analysts warned of the danger of a total economic collapse. Russia's 1998 grain harvest was the worst in 40 years, raising fear of famine.

These dire predictions, however, were wrong. In 1999, the economy began to recover. Inflation was held to 36% and the ruble was stabilized at about 25-28 to the dollar. Economic output increased and the GDP grew by 3.2%, its best performance of the decade, due partly to the sharp increase in the price of imports and increased price competitiveness of Russian exports caused by the 74% ruble devaluation in 1998. The surge in the world price of oil and gas also buoyed the Russian economy. The economic upturn accelerated in 2000, led by a 7.6% increase in GDP, 20% inflation, and a budget surplus. Economic performance remained strong and continued from 2001 through 2007.

The Putin government favored marketization and land reform. Putin declared reviving the economy his top priority. His liberal economic reform team formulated policies that won G-7 (now G-8, with Russia as a full member) and IMF approval in his first term. Some notable initiatives included a flat 13% personal income tax and lower corporate taxes that helped boost government revenue and passage of historic land privatization laws.

In May 2004, Russia reached agreement with the EU on Russian accession to the WTO. EU leaders reportedly made numerous economic concessions to Moscow. Russia agreed to sign the Kyoto Protocol and roughly double the price of natural gas domestically by 2010. Meanwhile, massive oil profits and related government revenues made it easier for the government to put off politically difficult decisions on structural economic reform. Reform was further undermined by the Kremlin's de facto privatization of oil giant Yukos, which had darkened the investment climate.

Toward the end of his final term Putin appeared to be turning away from market reform toward greater government control of key segments of the economy, with top government officials being put into leadership positions in many of Russia's largest economic enterprises.

Leadership

Yevgeniy Grigorievich Yasin (1994-1997).

Yakov Moiseyevich Urinson (1997-1998)

Andrey Georgievich Shapoval'yants (1998 - 2000)

German Oskarovich Gref (2000 - 2007)

Elvira Nabiulina (2007 - )

References

1. Adres-Moskva 1996-97 p.435 2. Novosti kosmonavtiki #9, 1996, p.6

Sources and Resources

The Ministry of Economic Trade and Development of the Russian Federation
The Ministry of Economic Trade and Development of the Russian Federation (English)



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