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Author`s name Michael Simpson

Catch Up With USA and Leave It Behind?

State of the Nation address: President Vladimir Putin urges the country to make a great advance
It is not accidental that the Russian Government felt very much nervous on the eve of President Putin's State of the Nation address. A speech delivered by Vladimir Putin seriously disagrees with the "stable" relaxation of Mikhail Kasyanov's Cabinet. As the President says, forming of a government is possible with the help of the parliamentary majority, which in its turn sounds rather threatening for the prime minister and other members of the government. The President called for economic mobilization. To tell the truth, the government headed by Mikhail Kasyanov didn't mention this objective within the whole period of the term.

President Vladimir Putin called the economic situation in the country difficult. In his words, against the background of success achieved within the past years, some people think that all problems of the country are settled, the future of Russia is successful and predictable and the only problem, as people may think, is that economy must go up 4 or 6% a year.

The President emphasized: "I would like to say it is not so. Although Russia's economic foundation has become stronger, it is still unsteady and weak. The political system is not sufficiently developed, the state machine is ineffective, majority of industries are noncompetitive."

What is hampering the successive economic growth? At the beginning of his State of the Nation address, Vladimir Putin said he hoped Russia would become a country "with safely protected rights of property, where people can work honestly, where they can earn money without fear and any restrictions." Thus, the President admits that none of the aspects is being completely realized in the country. And this is the actual state of things, indeed. At the beginning of the speech, Vladimir Putin said that rescue of the economy from bureaucracy shackles was one of the main objectives. After three years of Putin's presidency, there are no economic sectors that feel free and valuable because of bureaucracy. At the same time, Vladimir Putin said he hoped that Russia would soon take strong positions among economically advanced and influential states of the world; he said that decisions and actions taken by the authority must be focused on this very objective.

"This is a qualitatively new objective and higher degree for the country. This is a degree that Russia failed to reach before because of other pressing problems. Now we have an opportunity to stay on this degree and we must use the chance," said Vladimir Putin.

As the President says, Russia has achieved some progress in  the economic sphere. "Russia's GDP increased by 20% within the three years. Investments in the capital stock increased by more than 30%. Export of goods increased by 25%, including export of machines, equipment and transport vehicles that went up by more than 70%. It is for the first time within 50 years that Russia acted as an importer of grain, not exporter." However, this is not enough.

Russia President Vladimir Putin set the political elite of Russia some super objectives that must be carried out quickly and energetically. The President thinks that first of all Russia must ensure full convertibility of the ruble. At that, the President emphasized that "this is to be not only domestic, but also foreign convertibility of the Russian currency, not only in current transactions, but also in capital ones." Last year, the Russian ruble was one of the world's strongest currencies: the gold ruble's value equaled to the dignity of the country, the president says.

Second, Vladimir Putin thinks that GDP doesn't correspond Russia's economic potential. "We must at least double the gross domestic product within ten years," Vladimir Putin says. In his words, this large-scale objective demands a deep analysis and specification of the economic policy approaches. Economy is to register an increase of more than 7% every year to double GDP within ten years. The President thinks that "Russia has every possible condition for realization of this objective." What is more, he says the country has opportunities to start large-scale construction of modern and strong economy that will result in formation of an absolutely competitive state.

It is obvious that correct tax structure and flexible approach of the authorities to taxation seriously make for economic development. President Putin thinks that it is necessary to develop and introduce a strategic tax system that could be adequate to economy of the country not within a year or two, but longer.

"It is for the first time that the government has switched from the annual to medium-term planning in the taxation policy. A program of taxation changes for the next three years has been recently approved. This is a correct and important step. Now we should go further and develop the outlines of a taxation system that might be effective in Russia within many years."

It is for sure that success of Russian business enterprises mostly influence economic success of the country. The President wants to see the business "modern, enterprising, flexible and mobile", at that, it must remain a worthy successor to the Russian business traditions. Vladimir Putin says that business must be more patriotic; he obviously means the intentions of several oligarchs to merge with large foreign companies.

"First of all, we need economic growth to raise well-being of the population. It is connected with solution of our pressing problems: high-quality food, comfortable accommodation, regular hot water and electricity supply. This also means good education, modern medical services, protection from accidents and natural cataclysms. It means a higher standard of living."

In fact, this wish mostly agrees with the immediate plans developed by the most educated part of the Russian business. Together with the plans to increase export of their goods, businessmen also consider an objective of pressing high-quality and expensive foreign goods on the domestic market. Main idea of this position is that it's time for Russian producers to start production of high-quality and expensive goods for domestic and industrial usage, to give up competing with imported goods only thanks to lower prices of domestic goods.

On the other hand, the President warns that Russia doesn't need reforms for the sake of reforms only. He thinks that economic reforms shouldn't be opposed to economic growth. Basic efforts should be focused on realization of structural reforms in the economy.
 
"Authority cannot, it has no right to deceive citizens of the country. It is time to stop saying empty promises," Vladimir Putin says. This sounds as some kind of warning to  the centrist political forces who probably have an intention to form their pre-election programs out of undisguised populism.

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