Publication: Monitor Volume: 8 Issue: 77

President Vladimir Putin delivered the annual State of the Nation address in the Kremlin yesterday before an audience of 1,000, including Russia’s parliamentarians and other top officials and dignitaries. He listed a number of the “achievements” of his administration and cabinet over the past year–a modest reduction in unemployment and a modest growth in real wages, the passage of measures to reform the tax and judicial systems, debureaucratize business and permit land sales. At the same time, he noted that 40 million Russians continue to live in poverty. The main thing holding the country back from rapid economic growth, he said, is its “ineffective state apparatus”–which remains “a black box” for most Russians and is pervaded with corruption. The only way to ensure a faster rate of economic growth, he said, is to create conditions under which Russian citizens can earn money and profitably invest it in the Russian economy. “Today the colossal capabilities of the country are blocked by an awkward, ineffective state apparatus.”

The problem, he continued, is not that Russia’s bureaucracy is bigger than that in other countries. It might even be smaller. The real problem, according to Putin, is that Russia’s state bureaucracy is “badly organized” and that state officials “are not familiar with system management.” The solution, therefore, is an “administrative reform” that will turn the state apparatus into a “compact working instrument of state policy.” The head of state called on his cabinet to present plans for restructuring the state apparatus.

Putin made his frustration over the economy’s performance known on April 8, when he criticized his cabinet for displaying “insufficient ambition” in putting forward a four-year economic plan that projects annual growth rates of 3.5 to 4.6 percent. These, he said, would not be enough for Russia to catch up with developed economies. Putin’s economic adviser, Andrei Illarionov, had earlier declared that excessive government spending is impeding the growth of Russia’s economy, which peaked in 2000 at 8.3 percent and has been slowing ever since (see Russia’s Week, April 10, 17; Fortnight in Review, April 19).

Overall, Putin’s speech was general in nature and short on specific proposals. Among the other domestic issues he touched on was the reform of Russia’s natural monopolies–Gazprom, the natural gas monopoly, United Energy Systems, the electricity grid and the railway system. This reform, he said, should entail government approval of the monopolies’ budgets, beginning this year, and should not harm consumers. Addressing the issue of the country’s business climate, Putin declared that it was time to end “the senseless contest between the people and the authorities, in which the authorities adopt new laws and the people think about how to get around them.” In one of his few concrete proposals, Putin said it might be necessary to declare a three-year moratorium on audits of small businesses. As for the country’s judicial system, he said that Russia should have a court system that is respected both at home and abroad, that the structure of arbitration courts should be “optimized” and that criminal law needed to be “humanized.” He praised local self-government bodies, saying that they were essential to “an effective system of state power” and “an important resource of social control over the authorities” (Nezavisimaya Gazeta, April 19).