Kudrin report finds only third of Russia's planned reforms implemented

Kudrin report finds only third of Russia's planned reforms implemented
Russia is failing to implement crucial reforms
By bne IntelliNews January 5, 2017

​A report produced by the think tank headed by former Russian finance minister and co-head of the presidential council Alexei Kudrin found that less than a third of the reform measures laid out in the government’s 2020 strategy have been implemented.

In addition, measures already in place are mostly technical and deeper systemic reforms for Russia have been largely avoided, reports the Bank of Finland Institute for Economies in Transition (BOFIT).

Monetary and fiscal policy are areas where the most reform success has been achieved. Examples include the shift to a floating ruble exchange rate and introduction of the “budget rule” in 2013 that sought to cap public spending based on average long-term oil prices. (The rule was suspended in 2016 amid plumeting oil prices but reintroduced before the adoption in December of the 2017 budget which pegs spending to a $40 per barrel price.)

In many key areas of the economy not a single proposed reform has been fully implemented, and the response in some cases has even directly contradicted the reform proposal. These areas include shifting to a new growth paradigm, improving the business environment, reducing the state’s role in the economy, improving the quality of institutions and stemming Russia’s brain drain.

“The report noted several obstacles to reform,” said BOFIT in a note. “A central problem is Russia’s administrative structure. The president alone has sufficient authority and resources to push through reforms. Given the vast amount of needed reforms, it is impossible that all could be personally shepherded by the president. Several respondents pointed out that reforms have been complicated also by other factors. Earlier high oil prices provided an easy excuse for putting off reforms, while in recent years geopolitical developments have led to a reordering of national priorities, with economic issues getting moved to a back burner. In addition, reforms face increasing resistance by different interest groups aiming to preserve their own advantage. On preparing development programmes, the report notes that the priorities should be formulated more carefully and precisely and resources mainly focused on realising these priority goals.” 

To enable reform implementation in the future, the report proposes the establishment of a new body to coordinate reform policies. It would have its own budget, staff and authority over ministries to implement reforms.

The report from the Center for Strategic Research (CSR), which is headed by Kudrin, came out at the end of December. The report is based on expert assessments of Russia’s progress in implementing economic reforms. Special attention was given to measures proposed in the unofficial “2020 strategy for developing the Russian economy” laid out by a vast group of experts in 2011. The report findings will be used by the CSR in drafting its 2018–24 economic development programme at Putin’s request.

Russia’s economy ended 2016 with a 0.8% contraction and its growth in the next three years is limited to 2.4% at best under the forecast of the Russian Ministry for Economic Development (MED).

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