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Minister Elvira Nabiullina Speaks at the Presentation of OECD Economic Review for Russia and OECD Review of the Russian Labor Market and Social Policy

12.12.11

On December 12, 2011, the Ministry for Economic Development of Russia held presentation of the Economic Review of the Organization of Economic Cooperation and Development (OECD) for Russia and the OECD Review of the Russian Labor Market and Social Policy.

The overviews were presented by Mr. Anchel Gurria, OECD Secretary General.

Minister Elvira Nabiullina delivered a welcome speech to the reporter and the event participants.

There was also signed an Agreement between OECD and the Moscow Interbank Currency Exchange CJSC for launch of the 3-year joint program aimed at improving the principles of corporate governance in the Russian Federation, with the view of international experience. The agreement was signed by Mr. A. Gurria, OECD Secretary General, and R.A. Aganbegyan, President of MICEX CJSC.

The event was attended by deputy ministers A.N. Klepach, A.A. Slepnev, A.Yu. Levitskaya, representatives of OECD, Russian federal ministries and institutions, business associations.

 

Thesis of Speech of

Minister E.S. Nabiullina at the Presentation of OECD Overviews,

Moscow, December 12, 2011

 

On behalf of the Ministry for Economic Development of the Russian Federation, I welcome the OECD delegation, representatives of the federal executive authorities, the expert community at the presentation of two key OECD overviews – the Economic Overview of Russia and the Overview of the Russian Labor Market and Social Policy, on behalf of the Ministry for Economic Development of the Russian Federation.

We highly appreciate the work performed by experts who authored the overviews. The overviews contain an in-depth analysis of the core lines of economic and social policy and are of great practical interest for us.

The overview of Russian economy has been traditionally devoted to the most topical issues to be resolved in the forthcoming years. A couple of years ago, the principal objective we faced was to mitigate the consequences of this financial collapse, to find the most efficient way of bringing the economic setback to a stop and of creating conditions for the post-collapse recovery. So far, we have overcome the collapse. GDP is almost at the pre-crisis maximum; and most social indicators are much higher than the pre-crisis maximum. The federal budget is free from deficiency, and the foreign trade surplus ensures economic stability.

We understand that the Russian economy is still very much susceptible to external shocks. This susceptibility may only be reduced by upgrading the Russian economy drastically. The overview notes that Russia is already in conformity with the range of OECD nations by economic development parameters in most sectors. However, by business environment, healthcare costs, education efficiency, R&D level and costs efficiency we lag behind the developed nations. Therefore, the recommendations contained in the OECD report as to improvement of the business environment, economic diversification, greater energy efficiency, elimination of social inequality, and greater macro-economic stability are of significant interest to us.

OECD assesses growth of Russian GDP at 4%, 4.1% and 4.1% for 2011, 2012, and 2013, respectively. So, the 2012 forecast is higher than the forecast of the Russian Ministry for Economic Development and Trade, but the average annual growth rate is almost the same. They also expect that the surplus of current operations will be maintained (3.3% of GDP in 2013)

We also agree that the business environment is a major obstacle for our economic growth. We should take more active efforts to create comfortable conditions for businessmen to operate in. In general, OECD recommendations in this field meet our future plans. The state outlined the course towards playing a less important role in economic processes in the fields where one can do without its participation. The idea is to carry out substantial privatization, to transfer some functions to private sector. To reduce risks related to foreign investments this year, the Foundation for State Co-Funding of Direct Foreign Investments Aimed at Establishing New Enterprises was established. Effective from this year, we began implementing a drastic reform in law enforcement bodies. Significant efforts are taken to facilitate the SME operating conditions. The last Doing Business indices showed certain improvement of our business conditions. However, still much is to be done to resolve problems in reducing corruption, streamlining customs administration, reduction in administrative barriers, so that to enhance the appeal of our economy.

The overview fairly notes the successes achieved by Russia in creating a healthy financial system, which is described by low budget shortage and low public debt. During the collapse, the need in funding anti-crisis programs led to suspension of action of the budget rules that determine the maximum amount of the not-oil-related shortage and accumulation of oil proceeds in budget funds. In the environment of poorly predictable trends of oil prices, the need to get back to the budget rules is, of course, realized by all of the budget process participants. By 2015, we plan to restore the budget rules, but these rules may be adjusted as compared with the pre-crisis parameters recorded in the budget code (4.7% of GDP of non-oil-related budget shortage).

It is worth considering the proposals as to the separation of the cyclical component of the budget are also worth considering, even though doing this is extremely difficult even at the methodological level. The pension reform is one of the top priority issues for long-term sustainable development of the Russian economy. As for the establishment of an independent expert budget council, even now budget procedures start with thorough consultations with experts concerning the direction of the budget policy, the analysis of sustainability of budget parameters. It is hardly reasonable to establish a special budget council. It is not worthwhile to channel all privatization proceeds to the National Security Fund. We should be more flexible here, and we should channel a portion of funds towards funding the budget shortage and reduction in borrowings. Privatization for us is not only a source of funding but, rather, a tool for improvement of the investment environment. Authors of the overview state that subsidies to enterprises account for a large portion of budget liabilities, by reducing which, we would be able to greatly influence the fiscal position. However, their amount, just as the amount of public investments, is insignificant. Here we need to verify the methodologies – what should be rated as subsidies.

I would agree that Russia will have to go a long way to improve energy efficiency, so that to come closer to the developed nations. However, it is noteworthy that the power consumption in Russian economy has dropped by 4%-5% p.a. since 2000. This is one of the highest energy efficiency growth rates worldwide. We have created the required legal framework. In 2010, we launched the Federal and Regional Energy Efficiency Enhancing Programs up to 2020, which relies on budget co-funding. We will move towards the reduction in cross-subsidies. However, we cannot do that quickly.

Once again, I would like to thank OECD representatives, and the working group on drafting the Overview, It is an event in our movement towards each other, which leads to a deeper understanding of not only the problems of Russian economy but also the general problems and challenges the modern world faces.

Drafting of OECD reports (with participation of Russian experts) and presentation of the overviews form an important integral part of Russia’s OECD accession. Russian Government lays emphasis on this process. In general, we give a positive assessment of the achieved results. We were able to achieve much success in a number of directions, in particular, in healthcare, industrial and scientific policy, information security, investments, competition, tax policy.

These results, in line with Russia’s WTO accession, which is expected in 2012, create the pre-requisites for accelerated accession to OECD. Hopefully, the overviews being discussed now would promote this process.

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