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26.11.08
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Final Destination Unknown
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By Sergei Balashov
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By 2020, Russia will grow into a global financial center and become one of the top five of the fastest growing nations, all the while becoming a better place to live. Or at least that’s the ambitious plan laid out in the social economic development concept signed off by Prime Minister Vladimir Putin this week. The latest long-term strategy has been in the works for two years and drew criticism from various experts, who argued that too much got left out. Now that the concept has turned into Russia’s development plan for the next decade, questions still linger as to how exactly these bold plans will be turned into reality.
“The fact that it has come out in times of crisis sends a certain message that the country is staying the course,” said Alexander Shirov, the head of the laboratory of analysis and forecast of industrial potential at the Institute of Economic Prognosis of the Russian Academy of Sciences.
The course is indeed no different—it is just more ambitious than even the goals Putin set for Russia during his time as president, including the campaign to double the GDP and restore Russia as a global economic power. The GDP did achieve substantial growth, increasing by 72 percent between 2000 and 2007, mostly fuelled by the now declining commodity prices. By 2020, the per capita GDP is supposed to more than double, growing by some 2.3 times to amount to $30,000 per capita from the current $14,000.
This time, however, the proposed achievements go much further, setting Russia on the road to becoming a totally different country. The bar is set quite high, as the middle class is supposed to grow to encompass 50 percent of the population. Poverty will be halved, average monthly salaries will increase to $2,700, and oil production will jump by nine percent. Russia will rank 5th in the world in terms of per capita income while becoming one of the global leaders in innovational development.
The development concept includes a transport strategy, which outlined development of Russia’s transport infrastructure, a key element of the economy, until 2030, and contains a long-term prognosis of Russia’s social economic development for the next 20 years, which the government has to complete next summer. The concept will function as the basis of any planning undertaken by all levels of the government. “This is the first such long-term strategy, the government is experimenting,” said Shirov. “It is very ambitious, which is good,” he added.
But Russia’s first long-term plan in over 20 years appears to have a number of flaws, ranging from paying little attention to the risks amidst a global economic crisis to being foggy on workforce and investment. While the goals do make sense, a number of experts have been skeptical as to the means to achieve them. The Vice President of the Russian Union of Industries and Entrepreneurs Igor Jurgens stated that the program didn’t take into consideration the risks that have surfaced or could become relevant in the coming years, RIA Novosti reported. In his editorial in Rossiyskaya Gazeta, sociologist Daniil Dondurei questioned the cornerstone of the new concept, which proposed to place a heavy emphasis on innovation and scientific development, essentially turning Russians into an innovational society. “In order to do that, we’d have to overcome cogitative idleness, which would be almost impossible,” said Dondurei.
Forecasters are expressing more down-to-earth doubts, stating that the devil, as always, is in the details.
The GDP projection could be fulfilled based on the current growth rate of 7 percent, as could the financial benchmarks set by the long-term plan, since the investment potential allows for conducting massive innovational and social projects. However, how exactly private money will be poured into innovative development still remains a mystery. “When we go beyond the GDP, we’re seeing a lot of ‘ifs’ and ‘buts’,” said Shirov. “The Ministry of Economic Development seems to be putting innovations and human resources ahead of investment, but investment should come first,” he added.
The planning doesn’t prescribe enough budget funding, thus compromising the viability of projects that will be financed and carried out within the concept. “When business sees potential, it will invest and invest heavily, but there are still some fields that have to be funded by the government,” said Shirov. He argued that the financial shortage caused by the crisis is not a problem, as it will most likely have a mid-term impact and do little to alter the development strategy for the next decade. The real issue is the unavailability of obvious sources of investment for fundamental projects, such as infrastructure and research and development, which will be key in making the switch from commodities to innovation.
“I don’t see how private businessmen would be interested in paying scientists when nobody can be sure of the outcome and the return on investment. It’s hard to imagine them investing twice as much as the government into it,” said Shirov, adding that “leaving it all to business is clearly a utopia.”
There are also few answers on how the restructured economy would be provided with the needed workforce. While the numbers seem to click, there is no clear policy on qualified migrants and nothing about the adjustment of the educational and training systems to the inevitable changes in the employment structure. “We have shortages here, but we’re oversupplied there, that’s just one example. There is a direction of where we should go, but I’d like there to be more clarity,” said Shirov. |
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