DATE=3/16/2000
TYPE=BACKGROUND REPORT
TITLE=PUTIN'S ECONOMY (PART 1)
NUMBER=5-45662
BYLINE=BARRY WOOD
DATELINE=WASHINGTON
INTERNET=YES
CONTENT=
VOICED AT:
INTRO: With barely a week before Russia's
presidential election (3/26), the man regarded as
certain to be elected, acting-president Vladimir
Putin, has yet to lay out his program for economic
recovery. V-O-A's Barry Wood reports despite the
uncertainty, many experts are optimistic, believing a
new and more sustained wave of reform is on its way.
TEXT: Judging by the statistics, Russia's economy is
improving. Output in 1999, by official estimates, was
up three-point-two percent, by far the best
performance since the collapse of communism in 1991.
Largely because of the tripling of oil prices, Russian
exports in recent months have been up over 20-percent.
Foreign exchange reserves are up and have risen by
over one-billion-dollars so far this year. The Russian
budget has moved into surplus, and the stock market
for the past four months has greatly out-performed
Eastern Europe.
Matthew Thomas is a Russia analyst at ING Barings Bank
in London. He has high expectations that Mr. Putin
will move quickly on a crucial element -- tax reform.
/// THOMAS ACT ///
First of all I think the tax code has to be
simplified to remove a lot of the gray areas
that unfortunately feed corruption currently.
Secondly, the tax code has to reduce the overall
tax take, which has traditionally been far too
high for business. It has become less since (the
1998) devaluation but it is still punishing. It
is also too high considering the income levels
of the population. We think that a combination
of simplification of the tax code and a
reduction of the tax take would therefore
provide a basis for improving tax compliance,
collection, which is something Russia has
struggled with for a decade now.
///END ACT ///
Mr. Thomas also expects Mr. Putin to move quickly on
land reform.
Natalia Gurushina, a Russia analyst for Deutsche Bank
in London, is also optimistic. She believes that if
Moscow pursues sound policies and puts necessary
safeguards in place foreign investors will return to
the Russian market they largely abandoned following
the 1998 debt default and devaluation.
/// GURUSHINA ACT ///
In this particular case, what investors will be
looking at is legislation. What happens to the
tax legislation? What happens to the law on
production sharing, for example? And I think
clearly a lot of things still need to be done.
For example, legislation on the protection of
minority shareholding.
/// END ACT ///
Ms. Gurushina predicts there will be increased
cooperation between Putin as elected president and the
often obstructionist parliament, the Duma.
For the business community, Mr. Putin says all the
right things: he promises financial discipline, he
says he wants foreign investment, and tax and land
reform. But what will Mr. Putin do about corruption?
What will be his relationship with the oligarchs who
control the economy? Will Mr. Putin's reform be a
continuation of the pseudo-reform that occurred under
President Yeltsin, with the same people in charge?
Keith Crane examines the former centrally-planned
economies for Planecon, an economic research group
here in Washington. Mr. Crane too is cautiously
optimistic and eagerly awaiting Mr. Putin's economic
program.
/// CRANE ACT ///
From our point of view, the major problems now
are not so much at the macro-level but at the
enterprise and banking level. The banking sector
has really never been cleaned up since the
collapse of the Russian ruble in August 1998.
Many of the bank owners have succeeded in the
theft of deposits from depositors. And without
the modicum of a functioning banking system it
is difficult to see how the current recovery
could really have legs (be viable) -- that it
could really accelerate and result in a period
of strong growth for Russia.
/// END ACT ///
Uncertainties abound. There is no sign that the
International Monetary Fund is prepared to resume the
lending that it suspended last year. Even the outlook
for oil prices is uncertain. And experts do agree that
Russia's economic progress this past year is largely
due to the spectacular rise in oil prices.(Signed)
NEB/BDW/TVM/gm
16-Mar-2000 18:36 PM EDT (16-Mar-2000 2336 UTC)
NNNN
Source: Voice of America
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