…AND ON STRUCTURAL REFORM.
Publication: Monitor Volume: 7 Issue: 100
Russia’s newest economic program has set some clear targets for market-reform initiatives. The new labor code is to be passed by the end of 2001, in order to increase labor mobility and to make it easier for workers to be fired. The same goes for the so-called “IMF package” of bank reform legislation, which makes it easier for the Central Bank (CBR) to close insolvent banks. Confusion is apparent in other areas, however. While the program envisions passage of the new “land code” in 2001, it seems to ignore the fact that the government has split its new land code into two separate documents, pertaining alternatively to agricultural and nonagricultural land. While the program repeats Russia’s timeworn pledges to reform Russia’s natural monopolies–understood as the UES and Gazprom power and gas monopolies, as well as the railroad industry–it contains no specifics concerning how and when this is to be done. This is not a particular surprise, given that government initiatives in this area have been rent with confusion.
Perhaps the biggest surprise comes in the program’s treatment of bank reform, which absorbs nearly half of the document. Russian economic policy toward banking reform has remained almost completely unchanged since August 1998, largely because Moscow has been unwilling to tackle the corruption and mismanagement that dominate the banking system. Long-time observers of the Russian banking scene may therefore marvel at the program’s claim that the government and CBR “ascribe great significance to increasing transparency” in the banking system. The CBR’s promises to fully report its 2000 activities according to international accounting standards (IAS), and to put all licensed commercial banks on IAS by January 2004, may also elicit some skepticism. While the program’s repetition of the CBR’s perennial promise to sell off its stakes in its foreign affiliates is not particularly surprising, the government’s promise not to create any more state-owned banks does come as something of a revelation. Bank reform documents issued by the government last year explicitly called for the creation of a state-owned banking system.
The most important question raised by the economic program may not be “what” changes the authorities intend to make or “when” they intend to make them. Instead, it may be “whether” these changes will be made at all. Russia’s strong economic recovery during 1999-2000 and the transfer of fiscal resources from the regions to the center have promoted dramatic improvements in federal fiscal policy. Some important changes have been made in the tax and tariff systems, and Moscow in 2001 has been fully covering its foreign debt obligations. But despite the Kremlin’s control over Russia’s political agenda and lively debates on economic policy, market reform initiatives have yet to spread beyond these points. Skeptics may be forgiven for doubting whether they ever will (CBR.ru, May 18).
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