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Thread: Economic reforms in Russia

  1. #1
    The Un-Holy One The Man's Avatar
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    Economic reforms in Russia


    Former Russian finance minister Alexei Kudrin speaks during an interview with Reuters in Moscow, Russia, July 24, 2017. Picture taken July 24, 2017. REUTERS/MAXIM SHEMETOV

    (Reuters) - Russia risks being saddled with U.S. sanctions for decades, curbing economic growth and preventing it from regaining its status as a leading economic power, an adviser to President Vladimir Putin said in an interview.

    Alexei Kudrin told Reuters that the current proposed tightening of sanctions in Washington should not have any serious impact. But he called for a major structural reform program after the 2018 presidential election.

    He said that was the only way for Russia to return to growth of more than 2 percent a year.

    Putin has not yet said whether he will run for re-election next year, but is widely expected to do so and to win what would be a fourth term as president.

    Putin has tasked Kudrin, who has known Putin since they worked together in the St Petersburg Mayor's Office in the 1990s, with devising a strategy to lift Russian economic growth after 2018.

    Whereas Putin oversaw several years of growth in excess of 5 percent in his early presidential terms, the Russian economy suffered two years of contraction in 2015 and 2016 and is forecast to grow by a little over 1 percent this year. In May GDP rose by 3.1 percent year on year, but that pace is not expected to last.

    The slowdown has put Putin under pressure.

    U.S. lawmakers earlier this week voted to impose new sanctions on Russia -- on top of earlier penalties over its role in the Ukraine conflict -- and Kudrin said the mood in Washington meant it would be difficult for U.S. President Donald Trump to ease sanctions in future.

    "In its current form the tightening of sanctions under discussion wouldn't seriously affect the Russian economy, there aren't serious changes with the version that exists. But the hope that sanctions would be canceled in the coming years has now faded," Kudrin said.

    "We are likely to end up with the story with the old Jackson-Vanik amendment -- even when all the conditions had already changed, they couldn't cancel it," he said.

    Jackson-Vanik, a 1974 provision to a U.S. federal law that punished former Communist bloc countries for restricting human rights, was only repealed in 2012 under previous U.S. President Barack Obama. It was a major sticking point in relations between Moscow and Washington.

    Trump was widely perceived to be the Kremlin's favored candidate in last year's U.S. presidential race, and his White House victory raised hopes in Moscow that sanctions could be relaxed as early as this year.

    But Trump's administration has since become bogged down in investigations into possible ties between his campaign and Russia. Trump has said his campaign did not collude with Russia, which flatly denies allegations it meddled in the U.S. vote.

    WINDOW OF OPPORTUNITY

    Kudrin, who served as finance minister from 2000 to 2011, won praise from foreign investors for building up Russia's formidable fiscal buffers during an era of high oil prices. He was one of relatively few liberal voices among top officials.

    He now heads the Centre for Strategic Research, an analytical group founded on Putin's initiative to draft policy ideas.

    Kudrin said Western sanctions in their current configuration were knocking off around 0.5 percent from Russian gross domestic product, down from 1 percent in the year after they were introduced in 2014.

    Russia had a "window of opportunity" after the 2018 election in which to enact meaningful reforms to counteract the effects of sanctions, he said. But for now a populist camp around Putin appeared to have the upper hand over those calling for reform.

    "To what extent the president will use that [window], we don't know," Kudrin said. "After previous elections that window for reforms wasn't used."

    Among the reforms Kudrin is calling for are greater public control over law enforcement officials, raising the retirement age, reducing government stakes in large companies, and improving revenue collection from the shadow economy.

    He said he thought the state should sell government stakes in Russian oil companies in stages over the next six to 10 years, and that it could sell a portion of its majority holding in the country's largest bank Sberbank in the same time period.

    With such reforms, Kudrin said Russia could increase its economic growth rate to 3-4 percent in five to six years, even with sanctions staying in place.

    Without reforms, Russia will not notice the damage from sanctions before it is too late, he said.

    "In the next six to seven years we could not notice the decline in the areas of productivity and technological development. In the end we will see it, because others will grow faster, but by then it will be difficult to change something."

    (Reporting by Alexander Winning, Darya Korsunskaya and Andrew Osborn; Editing by Jeremy Gaunt)
    Russia risks decades of low growth under U.S. sanctions: Putin adviser | Article [AMP] | Reuters

    Kudrin as always hits the nail right on the head. Smart guy.

    The shadow economy is especially a big part of the problem.

    Avoiding taxes is part of the national culture in Russia today. People work for cash, without paperwork. All kinds of semi-legal and outright illegal business thrives.

    Here is a nice photo from Moscow

    You have a man driving an illegal "bomber" taxi, thousands of which run around the city, men in regular cars with stick on/off taxi signs (around 100,000 taxis in Moscow today, half are illegal "bombila" cabs); in front of a stall offering to sell/buy/repair used cell phones, many of them - undoubtedly stolen ones, of course), and it also sells hookahs and accessories for them, hookah smoking is popular in Russia these days.

    That's just a couple examples. Really, EVERYONE WHO CAN there works for cash, off the books, hiding their incomes.

    Bribery is also common, it permeates society, it is a regular part of a person's life, every day.

    You come into the parent-teacher conference at your kid's school, and you bring a nice envelope for each teacher in whose class you want your girl or boy to get better grades


    You pay a bribe to the doctor at the local hospital, to get your elderly mother higher up the wait list for surgery she needs, or for him to prescribe her better medicine, or whatever else


    Police pull you over, give you a ticket? No worries, pay the appropriate officer and the ticket and all records of your offense will disappear


    Etc, etc. Up it goes to the level of mayors and governors and federal ministers, where bribes are counted in millions or even tens of millions of dollars.

    The corruption is said to eat up like a third of Russia's GDP, annually...

    But the government won't do anything about it, in part, because the population doesn't WANT them to!

    Yes, people grumble online and in their kitchens about corrupt officials.

    But they are used to living this way. They LIKE living this way, where a bit of cash can solve any problem for you


    I recall Tigran Keosayan, a Russian TV personality

    asked the audience on his show, how many of you are against the corruption in our country, raise your hands. Pretty much everyone in the studio did, obviously. But then Tigran asked, how many of you paid a bribe or even yourself accepted one recently? Again, uncomfortably, but most hands went up...

    This culture of corruption that is now ingrained in people there like this can never sustain a healthy, legitimate economy...

    And raising retirement age will not be very popular either, since many people already fear not living to see their pensions, with average life expectancy for men at barely 60 years as is (women live 12 years longer, on average, they are better off in tbat regard).

    So... Kudrin's proposals are good. Actual implementation will be the hard part...
    Thanks from BitterPill and galatin

  2. #2
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    Bribery is hardly limited to Russia.

    Many parts of the world, you have to pay extra to get people to do their jobs.
    Thanks from The Man and BitterPill

  3. #3
    The Un-Holy One The Man's Avatar
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    Quote Originally Posted by Miller47 View Post
    Bribery is hardly limited to Russia.

    Many parts of the world, you have to pay extra to get people to do their jobs.
    Indeed.

    It's so sad though.

    Russia could do much, much better for themselves, provide a much better life for her people, without the corruption. That's what always holds them all back, over there, not the Western sanctions, so much; or even the oil prices. The corruption. The country is rotting from the inside
    Thanks from BitterPill

  4. #4
    The Covfefe are Coming! BitterPill's Avatar
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    Quote Originally Posted by The Man View Post
    Indeed.

    It's so sad though.

    Russia could do much, much better for themselves, provide a much better life for her people, without the corruption. That's what always holds them all back, over there, not the Western sanctions, so much; or even the oil prices. The corruption. The country is rotting from the inside
    Corruption robs a society of its vitality.
    Thanks from The Man

  5. #5
    The Un-Holy One The Man's Avatar
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    Quote Originally Posted by BitterPill View Post
    Corruption robs a society of its vitality.
    The terrible thing is, it's become generational there. Passed down from one generation, to the next. Kids learn early on about the corruption and how to play it to their advantage.

    For example, in Russian schools, they have these what are called Duty Groups, which began in Grade 7 in my time, but start much earlier now, apparently


    They are volunteer pupils, who watch over other kids, and maintain order in the school

    check the safety equipment

    set the tables at the cafeteria during the meal times (and also, more importantly, check that all the other kids wash their hands before entering the cafeteria, a tradition from the Soviet era, as is this whole thing)

    They also help clean up the building after hours.

    They get excused from classes to participate in this.

    This is supposed to create a sense of maturity and responsibility in those kids; as well as combat bullying and crime and violence in the school system (on the assumption that actual children are much more effective at resolving issues and conflicts among their peers than are adults, like teachers or principals).

    Well, my son back there, Igor, he is 11 years old now (long story, teenage romance, I left for Canada with no clue Galia, my then girlfriend back in Moscow was about to give birth, she kept it from me, deliberately, didn't want me to stay, which I would have; I had no future there, she is right about that...)

    He was on school Duty recently. I was Skyping with him and Galia last night, I keep regular contact with them now, help them anyway I can. Well, he told me how him and this friend of his, this Pavel, they were responsible for the cafeteria entrance.

    "It was great. Just like Pavel promised, we got the most lucrative posting, Papa!"
    "Lucrative, huh?"
    "Of course! They were serving ice cream and all kinds of other extra stuff, and all the kids were eager to get in. But we could keep out anyone WE thought had dirty hands!"
    "Aha..."
    "Yes! They all paid us their pocket money! I made 172 rubles (almost $3 ), can you believe that, Papa!"
    "Ah... Good for you, Igor, good for you..."

    lol I laughed, his mom laughed... But we both knew this wasn't so funny... This is not the life lesson a kid like him should be learning, at that age... But, over there, that is what you need to learn, at this point, to survive and thrive...

  6. #6
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    The problem of Russia since at least Nicholas I, is how to build a civil society. Things come from the top and even there is no mor a feldjaeger to bring the orders of the tsar to his subjects, inertia and corruption are bound to resist to autocracy and dilutes it in the immensity of the country. Did the climate between the rulers and the ones who are ruled changed from Custine's Russia in 1839, Biely's Petersburg, Brezhnev's times and nowaday ? Russia dreams of greatness depend from the price of energy or just the capacity to implement reforms ? As long as myths will prevail in the minds of Russians to avoid the unpleasant reality, nothing will move much whatever good, great Russians can be in many fields........
    Thanks from The Man

  7. #7
    The Un-Holy One The Man's Avatar
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    Quote Originally Posted by galatin View Post
    The problem of Russia since at least Nicholas I, is how to build a civil society. Things come from the top and even there is no mor a feldjaeger to bring the orders of the tsar to his subjects, inertia and corruption are bound to resist to autocracy and dilutes it in the immensity of the country. Did the climate between the rulers and the ones who are ruled changed from Custine's Russia in 1839, Biely's Petersburg, Brezhnev's times and nowaday ? Russia dreams of greatness depend from the price of energy or just the capacity to implement reforms ? As long as myths will prevail in the minds of Russians to avoid the unpleasant reality, nothing will move much whatever good, great Russians can be in many fields........
    It's not since Nikolai, it's since Ivan the Terrible, and before... I think the Tataro-Mongol invasion, and subsequent Golden Horde rule for 300 years, eradicated any development of such things, civil society, democracy, in Russia way back then, in the 13th century.

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