REFORMING THE RUSSIAN ECONOMY
June 10, 2004
Though Russian President Vladimir Putin has sometimes ruled as an autocrat -- clamping down on the media, skewing elections and renationalizing property -- he has also been a staunch advocate of reform whose policies have contributed to Russia's economic growth of 38 percent over the last five years.
Under Putin, the government has kept a lid on expenses, using gains from high oil prices to pay off its debt. But the country is not solely dependent on oil -- Russia's growth is being driven by a surge in productivity, which has increased by 14 percent each year.
Consequently, Putin's reforms laid the foundation for Russia's economic boom, say observers:
- Putin slashed personal income taxes in favor of a 13 percent flat tax; a policy that has inspired entrepreneurship and encouraged millions of citizens out of the shadow economy and onto the tax rolls.
- The government abolished serious restrictions on private land ownership -- farmland can now be bought, sold or mortgaged for the first time since 1917.
- Putin designed a new pension system to encourage private pension funds and generate long-term capital for Russia's financial markets.
In addition, Putin overhauled commercial legislation and reformed the court system, creating a clearer legal environment for businesses. Businesses are also less exposed to mob violence: the number of contract killings declined from 700 a few years ago to 70 in 2002.
In his second term, Putin wants to continue his economic reform agenda: cutting the number of government employees by 20 percent, partially privatizing the electricity and railroad industries, and moving Russia's army towards an all-volunteer force.
Source: Patricia Kranz and Jason Bush, "Putin's Game," Business Week, June 7, 2004.For text http://www.businessweek.com/magazine/content/04_22/b3885096_mz054.htm
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