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$68bn in 2003 in investments to Russia
Total investment in the Russian economy will amount to $68bn in 2003, or 20-22 percent of the GDP, Russian Finance Minister Alexey Kudrin said at a meeting of the Defense Ministry Tuesday, the Government Information Department reported. Last year, investments totaled $57bn, or 17 percent of the GDP. Internal investments rose 12 percent in January-June 2003, against 3-4 percent in the same period last year. According to Mr. Kudrin, the investments will be used to create new companies and products and to modernize old companies in different industries. The Finance Minister stressed that it was time to reduce the role of the state in the economy. According to him, the government participates in the economy not just through state-owned companies, but it also controls business through its stakes in the companies Gazprom, Unified Energy Systems of Russia, Aeroflot and Russian Railways. “Being both a market regulator and a market participant, the government does not ensure the efficiency of the market,” Mr. Kudrin said. In his opinion, the government should control those sectors that are linked to railway transportation, the production of raw materials and the defense industry. Mr. Kudrin also pointed to the necessity of increasing the competitiveness of the Russian economy, as the improvement of the country’s internal indicators, including personal incomes and living standards, depends on competitiveness. The Russian economy still remains closed to the outer world due to high customs tariffs. On average, the effective duty rate is 3-4 in the United States and the European Union, while it is about 10-15 percent in Russia. Joining the World Trade Organization would make the Russian market more open, and the level of protection in the form of customs tariffs could be reduced to 5-7 percent, according to Mr. Kudrin. He noted that at the present stage, the Russian financial sector was unable to provide for the re-direction of capital to the industries ensuring the country’s economic competitiveness. The Finance Minister added that measures to develop financial markets were considered at a government meeting on November 11, aimed at enhancing the effectiveness of the industrial sector. Mr. Kudrin also stressed the importance of protecting the economy from crises. “Capital has become very mobile, and there are technical means to withdraw it from the country quickly,” he said. In this respect, only a well-considered credit, monetary and financial policy of the state, which stimulates competition and supports the budget and macroeconomic figures, will protect the country against these risks. Speaking at the meeting, the Finance Minister said the main reasons for Russia’s economic achievements over the past 3-4 years were political stability and the consolidation of power. He stressed that the successful economic policy in recent years was partly due to the ruble’s devaluation in 1998, which created favorable conditions for the Russian industrial sector. In addition, high oil prices allowed the authorities to use additional revenues to pay the country’s foreign debt, which reduced from 140 percent of the GDP in 1998 to 35 percent of the GDP in 2003. An important role was played by reforms, especially the land and tax reforms, and the continuing privatization.
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