Russians Promise Growth in '97

Russian government officials speaking at a conference in London this weekend touted prospects for economic growth this year, while analysts said a broad menu of changes must be pushed to improve the country's business climate.

Central Bank Chairman Sergei Dubinin, speaking Sunday at the annual meeting of the European Bank for Reconstruction and Development, promised "a great administrative effort to collect taxes" while stating that Russia is aiming for 6 percent annual growth in gross domestic product by the end of the century.

"This year, for the first time since reforms began, our GDP did not fall in the first quarter of the year, which gives us confidence that growth will begin this year," said Dubinin, quoted by news agencies.

State Statistics Committee Chairman Yury Yarkov told a briefing in Moscow on Monday that the economy grew 0.2 percent in the first quarter of the year compared with the same period in 1996, declaring: "The great depression of the Russian economy that has been in evidence for decades has halted."

Independent economists have criticized the state committee's calculations, however, which they say were revised this year to include a greater share of the unreported "shadow" economy without adjusting previous figures.

Richard Layard, professor at the London School of Economics and an adviser to the Russian government, said the Statistics Committee's ultimate conclusion that GDP is no smaller than a year ago is "absolutely reasonable" given widespread nonreporting of output, but that the committee should explain its calculations more publicly.

Layard, at a news conference in Moscow, also said the government's target of 2 percent growth for this year is "surely feasible" and that Russia would average 5 percent growth over the next decade. In London, EBRD first vice president Ronald Freeman said Russia would be "the growth story of 1997," Reuters reported.

But growth will not be achieved without significant reforms affecting businesses -- regulation of big firms and deregulation for small ones, Layard said.

At the EBRD meeting, government officials pledged to introduce a simplified tax code to parliament this month, increase regulation of natural monopolies in energy and transport, and augment revenue collection.

"I think that this [revenue] problem should be settled once and for all in 1997," Dubinin said, although he acknowledged that the tax take is well behind projections so far this year. He said a revenue target is the last hurdle in negotiations with the International Monetary Fund on the government's 1997 economic program, and would be settled after April 20, Reuters reported.

But former general Alexander Lebed, a presidential critic and harsh critic of the government, told a separate conference in London that investors would be "insane" to put money in Russia in the current climate of frequently changing legislation.

He said Russia must create a "civilized" stock market and "multi-level economy," and criticized existing state authority as "an administrative mutant."

Moscow Warsaw

Average registration

time (months) 2.7 0.7

Number of annual

inspections 19 9

% fined by inspectors

annually 83 46

% needing krysha

(protection) 76 6

% contacted by mafia

in last 6 months 39 8

Source: A. Shliefer, "Government in Transition," Harvard University


Russian small businesses are nearly twice as likely to be hassled and fined by city inspectors as their counterparts in Warsaw, Poland, a recent Harvard University survey reports.

The study, by Harvard professor Andrei Shleifer, also reports that of 55 private businesses in Moscow surveyed, mostly food stores with fewer than 50 employees, 76 percent said they need a krysha, or protection compared to just 6 percent of 50 similar stores in Warsaw.

Richard Layard, professor at the London School of Economics, said the survey illustrates why small business accounts for just 13 percent of gross domestic product in Russia, far below world standards.