Putin's speech brings no economic surprises

Putin's speech brings no economic surprises
By bne IntelliNews December 3, 2015

The annual address of Russian President Vladimir Putin on December 3 did not bring any major surprises in the economic, industry and state finances, but reiterated initiatives previously discussed by the government and the presidential administration.

In a one-hour speech in the Kremlin, Putin touched upon the most pressing and discussed economic challenges, such as the need to maintain federal budget within 3% in 2016, the need to adapt to low oil prices and the sanctions environment, as well as to clean up development institutions, some of which became "dumpsters for bad debt", he said, referring to Vneshekonombank (VEB), which needs to refinance roughly $20bn of liabilities.

Capital still welcome back

Most notable feasible initiative was Putin's suggestion to extend the "capital amnesty" initiated in 2014 for another six months.

"Amnesty for capital returning to Russia was announced last year," Putin reminded, adding that "businessmen are slow to take this opportunity". However, he did not blame the business community, but suggested instead that capital remains offshore because the "offered procedure is complicated and guarantees are insufficient".

According to previous reports, declaring foreign assets and capital in Russia attracted only 500 applications due to unclear regulation of the amnesty process and possible unforeseen future legal risks for those submitting the declaration.

Putin instructed lawmakers to hold additional discussions with the Supreme Court, business community and law enforcement authorities, and to make corresponding adjustments to extend the capital repatriation effort.

Tax authorities' consolidation

The Russian president also announced the consolidation of two Federal agencies: The Federal Customs Service (FCS) and the Federal Tax Service (FTS), which has been discussed by the government for the past six months.

At the same time, it remains unclear whether the services will be actually merged, or only their information systems would be united.

Previously, across-the-board reconfiguration of the information system was announced by the head of FCS Mikhail Mishustin, potentially opening it up to other agencies such as the Ministry of Finance and the Auditing Chamber.

Using idle agriculture land

Another initiative raised by Putin was the confiscation of unused farmland with subsequent sales at auction, with the respective bill planned to be passed by the State Duma in the fall of 2016.

In order to galnanize some 20mn hectares of idle farmland into use, owners will be given a deadline of three years for cultivation, after which confiscation through court could become possible.

Agriculture was also listed by Putin as a priority sector for state support, along with construction, car making, manufacturing, and heavy machinery production.

Far East priority

On the regional level, Putin named the Russian Far East regions as a main priority, specifically in the development of the fuel and energy complex and energy generation.

Specific suggestions included levelling off energy tariffs for Far East regions where these are currently higher than average and expanding the Vladivostok free port zone to other ports in the region (ports of Khabarovsk, Petropavlovsk-Kamchatsk, Sakhalin, and others.