02
Economics
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Find story ‘Russia today: up to the down staircase’ by Vladislav Inozemtsev
Inheritance Social Transformation will Rely on Continuing Reform in the Post-Putin Era
Business Events of the Year
St Petersburg Means
Close the Gap
Business
The St. Petersburg es of government investment
International Economic support.
Forum has become the Next year’s forum will contin-
highlight of the Russian ue in this vein, offering semi-
business calendar. nars on the state's new In-
Contracts worth billions of vestment Fund, special
dollars are signed there every tax-light economic zones, the
Long-term Economic Plans Must Be
year. Development Corporation,
and high-tech oriented funds.
ALEXEI ALEXEEV
But, given the personal nature
MOSCOW of Russian business, just as
Structured to Bridge the Social Divide
valuable is the chance to talk
Reporting on the results of the with senior Russian ministers
2007 International economic in an informal atmosphere.
forum in St. Petersburg, the One investor said that he had
Russian Ministry for Econom- been bogged down in endless
ic Development and Trade debates with a regional civil
problems of everyday life – edu- fers dramatically from one re- has estimated that the forum servant over a plot of land for
cation, health care, housing and gion to another. Remote re- generated as much as $13.5 his plant, but after talking to a
IZOSOFT.RU
food. Despite the initial skepti- gions have seen almost no billion worth of contracts and minister at the forum, he man-
cism of some experts, several changes in the last few years 30 protocols of intent. aged to resolve the issue in a
billion rubles have reached uni- and can in no way compare with The majority of the latter, in- matter of minutes.
versities, schools and hospi- Moscow, St. Petersburg, Sa- cluding construction of a giant And, of course, St. Petersburg
tals. mara, Nizhny Novgorod and automotive plant in the Kaluga is undeniably one of the
But national projects alone can- other cities where progress is Region, are already well un- world's best cities to hold a
not solve the situation. The gov- evident. This is why people con- derway. conference. A Northern city
ernment needs to carry out re- tinue to migrate to big cities, The forum has long been ap- with dramatic, bitter winters,
forms and introduce new abandoning Siberia, the Far preciated by the international summer sees it become a par-
mechanisms of work. There are East, and the European far business community as an adise of magnificent monu-
several positive examples, such north. opportunity for businesspeo- ments and breathtaking archi-
as the introduction of child ben- These social realities show that ple to learn about new sourc- tecture.
efits and attempts to set up Russia is approaching another
modern colleges in Kras- frontier. Only by surmounting
noyarsk and Rostov-on-Don. these problems will Russia be
However, most of the budget is able to guarantee economic de-
spent on patching up the worst velopment for years to come. It
IPOs: Russians Rushing to
holes. This is why consumers would be naive to hope that the
have not seen too many chang- current trends (even though
the Stock Market
es – there are still the same long mostly positive) will be sufficient
lines in shabby outpatient clin- if Russia hopes to tackle this In January to September ing their new shareholders’
ics, and no free prescriptions. major challenge. 2007, Russian companies hope. Regrettably, the launch-
Reforms need to be thoroughly We need fresh ideas and new held 16 IPOs worth a total of ing of the VTB IPO coincided
Russia has been experiencing a dynamic consumer boom for a number of years now prepared or they will not have approaches to guarantee the $19.2 billion. Of this, over $10 with the beginning of the glob-
the intended result. This espe- continuity of our social policy. billion was split between the al liquidity crisis, so today VTB
cially applies to affordable hous- We should not forget the main two largest Russian banks – shares are down 10% from
Russia will soon have a new are under construction and su- Only recently, the average in- ing – still only a dream for most lesson of the last 15 years – that Sberbank (the Savings Bank), May.
parliament, a new president permarkets have replaced come of the top 10% of the so- Russian families. Mortgages if they are to be positive, chang- in which nearly every Russian Nonetheless, tens of thou-
and a new government. The small shops in most medium- cial pyramid was 13 times high- were supposed to help trans- es must combine social expec- keeps his or her savings now, sands of Russians have been
era Vladimir Putin launched sized or big cities. The middle er than that at the very bottom. late this dream into reality, but tations, financial and economic and VTB, known in the Soviet involved in stock market oper-
in 1999 is drawing to a class is approaching 20% of the Now it has gone up to 15.3 inadequate housing construc- realities and the enthusiastic years as the foreign trade ations this year. Russia has
close. However, Russians total population, and those who times as high. Rising inflation is tion, the amount of red tape in- backing of all social forces. This bank, or Vneshtorgbank. never seen a time when so
still expect continued social are less well off are also improv- hitting the poor hardest, making volved in the registration of land is our main request to those Sberbank shares have gone many of its citizens have
progress. That will require ing their living standards, all the this picture even worse. By offi- plots, an insufficient engineer- who will soon lead Russia into up 10% compared with their turned into capitalists over-
new ideas. more so since bank loans for cial estimates, last October saw ing infrastructure and a short- the future.
-
placement price, thus justify- night.
cars, furniture, fridges and even the first month-to-month drop in age of building materials have
YEVGENY GONTMAKHER
mobile phones are readily avail- real wages in many years. more than doubled real estate Yevgeny Gontmakher, direc-
MOSCOW able. But this glowing picture of In the last two years, social pol- prices. As a result, even most tor of the Center for Social
nearly European prosperity is icy has been focused on so medium-income families are Studies at the Institute of Eco-
Last year, Russia finally re- marred by several circumstanc- called “national projects,” which still unable to buy a house. nomics of the Russian Acad-
2014 Olympics:
stored its GDP to pre-default es. The income gap is growing. are devoted to the most urgent Russia’s social landscape dif- emy of Sciences
levels, thus ending a chapter
The Economics of Sports
from its past. This year has seen
the start of a journey into an un- Sochi, Russia’s Black Sea re-
certain future.
RBTH Dossier 2007 economic performance comparison
sort, will host the Winter Olym-
In recent years, policy has gen- pics in seven years, is becom-
erally been confined to the ing one of the world’s largest
short-term perspective, but now investment venues today.
that is changing. Many govern- Industrial production, % change in 2007 Consumer prices, % change in 2007 Hundreds of companies are
ment publications have started bidding for the rights to build
to look beyond 2009 to 2010, the Olympic facilities.
and some as far into the future Most of them are foreign com-
as 2020 to 2025. panies, many of which are
Just a couple of examples in- planning to invite world-fa-
clude the Ministry of Economic mous architects to design fa-
Development and Trade’s long- cilities. Sochi residents are
term development strategy and complaining about a surge in
“Coalitions for the Future,” a real estate prices, though
document prepared by the Cen- many of them have become
ter for the Development of Infor- millionaires overnight. About
mation Society (RIO Center). 320 billion rubles (over $13
Of course, the overwhelming billion) has already been allo-
majority of people perceive evo-
Unemployment, percent rate Gross domestic product, % change in 2007
cated to build sports and infra-
lution only through changes in structure facilities.
their lifestyles. Like people ev- Thanks to the 2014 Winter
erywhere, Russians are primar- Olympics, Russia’s southern
ily worried about prices, crime, coast will become home to a
salaries, pensions, housing, modern year-round resort.
health care and education. The
social make-up is very uneven,
as is typical during a transition.
On this front, we should note
that Russia has been experi-
Nanotechnologies:
encing a dynamic consumer
boom for a number of years
Worth a Closer Look
now. Large shopping centers
SOURCE: FEDERAL STATE STATISTICS SERVICE (ROSSTAT)
Not long ago, most Russians est developments in this
had still never heard of the sphere are used in pharma-
field of nanotechnology. Re- ceuticals, radioelectronics and
cently, however, it has be- other industries.
Opinion 2007 Was Volatile but Positive Year for Business Interests in Russia
come a hot topic in Russia, At the Russian President’s ini-
both in people’s homes and in tiative, a state nanotechnolo-
Annual Review Upbeat as Russia
the Kremlin. gy corporation has been set
According to Andrei Fursenko, up with the authorized capital
Russia’s Minister of Science of 30 billion rubles (about $1.2
Finishes the Year Strong
and Education, Russia spends billion).
over 10 billion rubles ($400 Experts have no doubt that
million) annually on research Russia will become a leader in
and design work in the sphere this sphere of science and
of nanotechnologies. The lat- business in a few years.
The Russian economy in 2007 as the uncertainty surrounding community was reassured ufacturing plants and invested and far more lavish than Euro-
shrugged off an inauspicious the forthcoming elections, about the continuity of policy hugely in the economy through peans who are weighed down
start, only to be held back caused a massive effusion of following the elections and development institutes. by taxes and high utility fees.
again by the Litvinenko crisis. money from the country. In May pleased with the government’s State consolidation has not de- To be closer to such a custom-
Nonetheless, when nerves the outflow of capital exceeded commitment to improving the terred investors worried about er, one needs to localize pro-
settled following the June inflow for the first time in months. climate for investment and re- increasing government interfer- duction. In September, Rus-
summit in St. Petersburg, But there were also positive ducing capital flight. Russia ence in the economy. On the sia’s Economic Development
rapid growth returned, and developments. has now become a country contrary, the two processes and Trade Ministry had to stop
the year ended favorably. The London Russian Economic where every major internation- have run in tandem. In many accepting requests for permits
Forum, held in April, praised al company looks to at least cases, the state has taken con- to build car manufacturing
ALEXEI MOROZOV
Russia’s progress (even though post its representatives, and trol of heavy industries which plants because the supply of
MOSCOW Russian officials boycotted the preferably to open production private businesses had shown cars was exceeding demand.
event because of strained rela- facilities. Though red tape re- no interest in. As a further incen- The duration of this boom will
This year was one of contrast for tions with the West following the mains a problem, few busi- tive, the government’s invest- depend on global markets, the
the Russian economy. On one Litvinenko affair). Speakers at nessmen worry that they will ment in development institutions results of the parliamentary
hand, Russia reaffirmed its the forum said that Russia had not profit here. Many report that has provided investors with ac- and presidential elections, and
growing reputation as a highly become one of the world’s most their plants in Russia are be- cess to state funds. many other factors, including
attractive business destination. attractive markets, offering max- coming the most profitable A healthy consumer market is oil prices, which are of benefit
On the other, this year saw the imum returns on investment. A units in their business empires another reason for optimism. not only to the rich but also, in-
emergence of several risks that second forum, held in St. Pe- – even more profitable than Wages and consumer lending directly, to ordinary Russians.
could hurt the progress made tersburg in June, discussed production in China. are growing faster than pro- Businesses believe that 2007
over the last few years. practical projects. This time At the same time, the Russian duction in Russia, yet a mort- will not mark the end of good
The year began badly, with ana- Russian officials, headed by government has begun con- gage crisis has (so far, at times in Russia, as many of their
lysts worrying about increased President Vladimir Putin, were solidating the assets under its least) been averted. Russian newest projects are designed to
government interference in the very much in attendance. control. It has set up corpora- consumers remain the most last for five or more years. Rus-
economy and the related risks This seemed to turn the tide. tions uniting shipbuilding, enthusiastic in the world. They sian officials want to believe this
to private property. This, as well The international business auto-making and aircraft man- are richer than the Chinese, too.
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