Russian President Vladimir Putin makes his annual address to the Federal Assembly traditionally in the Kremlin’s St. George Hall in the presence of more than 1000 people.
A year ago, Putin devoted a significant part of his message on plans for the 2016 economy. He said the very structure of Russian economy should be changed. All strategic sectors, not just producing raw materials, should be raised to a new competitive level. Lagging sectors should be supported. The key to solving problems is technological breakthrough.
Putin said: “If nothing will be changed, we will simply use up our reserves, and economic growth will range somewhere in the zero mark… Russia has no right to be vulnerable; we need to be strong in the economy, technology, professional competence, and fully use today’s opportunities, which tomorrow may no longer be available.”
The President stressed importance of the strengthening of trust between government and business.
Vladimir Putin
“Free enterprise”, Putin said, ”is the most important economic issue. This should be our response to external challenges and constraints.”
The year passed since this Putin’s speech.
Last week the Russian Federal Antimonopoly Service (FAS) presented to the Russian government a report on the state of business competition in the country. According to the statement of the head of the FAS Igor Artemyev, the report is not a program of action but rather a statement of trend of the last two or three years. Artemyev thinks that the report brings to the government a lot of bad news.
According to the report the government is rapidly increasing its presence in the economy. Contribution of the state-owned companies into GDP rose from 35% in 2005 to 70% in 2015. The number of state and municipal enterprises has tripled in the past three years. Such companies are growing in the developing and competitive markets, where the use of administrative resources and state funding is a serious concern. This dramatic increase of number of regional and municipal enterprises is the main enemy of competition in local markets.
According to survey conducted by the FAS, nearly half of the owners of private companies (48% vs. 42% in 2014) believe that government considers private business just “a purse”, from which they can get money. Few entrepreneurs believe that the government recognizes them as a junior or equal partner. 15.8% of companies’ owners believe that government considers the private business a breeding ground for corruption. And only 2% of respondents believe that government sees an equal competitor in private business.
Private businessmen consider state officials the main enemies of competition. that the authorities’ actions are the main reasons for reducing the number of competitors.
It follows from the FAS report that the economy in contemporary Russia is a monopolistic state capitalism.
Chief economist at Alfa Bank, Natalia Orlova, quoted by newsonline24.com.ua, agrees with the conclusions of FAS. In her opinion the role of state and quasi-state institutions (state-owned companies, state corporations, development institutions) is increasing. Private business needs to economize, and the state owned businesses feel more free to spend. State banks present less tight credit policy than private ones, redistributing money in favor of less efficient firms and state-owned companies, not focusing on profitability. Natalia Orlova arrives at the impression that the state is satisfied with the current situation.
Orlova’s conclusion seems to contradict the message given a year ago by President Putin.
The question is could Putin really expect a rapid change of the situation in the contemporary Russian economy?
Instead of answering this question here is one more quote from the Putin’s address to the Federal Assembly. It is known that only 0.2% of the Russian courts’ verdicts are acquittals.
Trying to explain this odd occurrence, President of Russia gave an explanation, which looks like describing the Russian system of “Justice” as a part of a superpowerful criminal economic system.
Putin said:
“During 2014 the investigating authorities filed nearly 200,000 criminal cases of so-called economic crimes. Only 46,000 from 200,000 were brought to the trial. Another 15,000 cases collapsed in court. It turns out, that only 15% of cases ended with sentences. The vast majority, 83% of the entrepreneurs, which were involved in these criminal cases, completely or partially lost their business. That means, they were intimidated, robbed and then released.”
Can such situation be changed just by making new economic plans and delivering new speeches?
He’s rebuilding the Soviet Union.