Russia's Ministry of Economic Development is preparing a roadmap for increasing labour productivity, to be presented at the presidential council on priority projects on August 30, Vedomosti daily reported citing the document.

Low labour productivity is an Achilles’ heel of the Russian economy. The Central Bank of Russia has also repeatedly warned that inflationary pressures are caused by the gap between wage and productivity dynamics. Low productivity growth spurs inflation when the economy does grow.

According to one World Bank study Russia’s productivity is about a quarter of that in the US.

The productivity measures will become a part of the economic platform for the re-election of President Vladimir Putin in 2018, Vedomosti said citing unnamed federal sources. 

Minister of Economy Maxim Oreshkin, who is emerging as a new intellectual force in the reforming planning process, is spearheading the ideas in the plan. Previous all the running was made by former Finance Minister and co-head of the presidential council Alexei Kudrin and business ombudsman Boris Titov, who both have alternative plans. The youthful Oreshkin seems to have been singled out by Putin, who in a government shake up last year appointed many new young faces to the Kremlin.

Productivity has long been on the agenda, with the goal of boosting productivity 1.5-fold by 2018 set in the infamous Putin's "May decrees" in 2012. These have also put regional governments under pressure as they contain wage increases they are struggling to pay for that were predicated on rising production gains that have failed to appear. The productivity indicator has been shrinking ever since the May decrees were issued, declining by 3.5% in 2012, 0.7% in 2014, and another 2.2% in the post-sanction 2015.

The proposed measures are reportedly divided into two broad directions: one of improving business conditions and monitoring and facilitating competencies on the federal level, and the second of pilot projects for selected companies that might have costs and consultants covered.

The ministry also proposes a package of tax discounts on investment loans, discounted lease programs and loans with interest as low as 1% granted by the Fund of Industrial Development (FRP). There are six to ten potential regions to be chosen to participate in the program.

Pilot regions in 2017 could include Samara, Tulskaya, Tyumen, Permskaya, Bashkortostan and Tatarstan regions (the latter two home to leading regional oil producers Bashneft and Tatneft). 

The authors of the plan reportedly closely consulted the experience of heavy vehicle producer Kamaz that became a domestic success story boosting productivity in January-June 2017 by 37.4% to RUB1.6mn per worker, while cutting the average number of workers by 2.5%.

However, the program's total budget appears to be modest, with RUB30bn over four years. Increases in labour productivity is expected at 2.9% in 2020, should the measures be adopted.

Experts surveyed by Vedomosti also noted that any measures could be sabotaged by currently deteriorating business climate in Russia. In this respect the real goals of Oreshkin and the Ministry of Economic Development appear to be much broader.

On August 25 Bloomberg cited sources that claimed Oreshkin has emerged as "Putin's favourite" and has the presidents ear to try to jump start the economy with notorious structural reforms that haven't taken off for decades.

“We are building the ministry of the future,” Oreshkin told Bloomberg by text message, adding that “a key task is to attract strong personalities and create the environment for them to develop”.