Sunday, 4 December 2011

Return of the five year plan?

Russian lawmakers, it seems, have been digging around in the countrys Soviet past for economic policy ideas – and are looking to reintroduce aspects of a planned economy.

The Economic Development Ministry announced last week that it had drawn up a bill on strategic planning of the economy for approval by the Duma after the forthcoming elections.

The bill aims to ensure that the regional and federal authorities coordinate their planning of strategic programs to increase the effectiveness of budgetary spending.

The ministry has been working on the bill for the past two years, but its finalization was blocked by former Finance Minister Alexei Kudrin, whose policies focused on long-term budget strategies over strategic planning.

Kudrin resigned earlier this fall after a fall out with President Dmitry Medvedev over budget spending policies.

The paper noted that the passing of the bill very much depends on who is appointed as the next finance minister after the presidential elections in March.

But as the daily points out, such measures would have very limited functionality since the private sector makes up more than 65 percent of the Russian economy (a greater share than in France.)

Are we talking here about capitalist Stakhanoviks? asked Finam chief economist Alexander Osin, with ironic reference to the Communist workers movement which overachieved state production quotas in the 1930s.

Our state has only maintained control of a few strategic sectors – like banking and oil and gas – everything else is in private hands. So if they are trying to go down the Chinese path, they should bear in mind that the state there controls around 80 percent of the economy.

Other experts say that more structural planning would be positively perceived by foreign businesses working in Russia.

Foreign investors need to see a low risk opportunity in Russia, therefore a laissez-faire economic model might be even less attractive, said Kendrick White, head of the Marchmont Capital Partners investment consultancy. The government is to plan actively, especially when it comes to infrastructural issues, but a return to five year plans is a complete contradiction to a market economy, White said.

Both experts said it is impossible to reintroduce an economic planning process without coordinating it with trends in other countries.

It will work if we see a tendency of growing role of state planning on the world level, said Osin from Finam. Developing countries are actively using state leverages, which is causing huge disproportions in growth rates between countries.

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