[Deb Palmieri on Russia Table of Contents] The following article was published in the Russian Commerce News, July-August 2000. The Russian Commerce News is the official publication of The Russian-American Chamber of Commerce®. |
It's a nearly indisputable observation that since Vladimir Putin was elected to office on March 26, 2000, he has moved Russia in a positive direction. In five short months his performance is impressive by any standard, if not breathtaking. Standing back and reviewing his track record over the recent period should provide a pretty good predictor of what we can expect from him in the future.
Vladimir Putin can be credited with stabilizing the Russian economy. Even Russia's most sceptical outside critics marvel at what has happened in such a short period of time. Confidence has been restored. Growth targets have been exceeded. Industrial production and investment growth are strong; there is a healthy trade surplus, which many expect to reach at least $50 bn by the year end. GDP growth is steady; inflation is under control; high energy prices have increased much-needed foreign exchange reserves; wage arrears are decreasing; and balanced growth across industrial sectors is taking place-albeit growth from exceeding low levels; but nonetheless upward, rather than a stagnant or downward movement.
Vladimir Putin stabilized the government and restored public confidence in the office of the president. He reined in the cantankerous dissent and squabbling of the Yeltsin years; and immediately established rapport and respect with the State Duma and Federation Council.
Not only domestically, but internationally, he established his reputation as sensible, serious, smart and capable. A leader not to be dismissed or set aside. He raked in rave reviews, for example, by all the Western leaders who interacted with him at the G-8 meeting recently in Okinawa. The buzzword on Putin: he's a meaningful and serious player, regardless of what policy differences may exist on his handling of domestic and foreign policy matters.
The touchstone issue for foreign investors should be the new Tax Code. In early August, Mr. Putin signed into law the much-needed new Tax Code (see our article this issue for more details). The president described it as "the most important event in the country's life." It features a more rational and sensible tax framework, with lower tax rates; a flat income tax of 13%; VAT; consumption tax; reduction of payroll and pension fund taxes, and other measures to enhance economic growth. It incorporates many Western-style practices, i.e. finally, travel and advertising expenses may be deducted!
Vladimir Putin has so far effectively managed to field tough challenges, dilemmas and headaches: the war in Chechnya; the Andrei Babitsky affair; the Vladimir Gusinsky arrest and Media-Most raid and recent bombing of Moscow's underground passageway. As we go to press, the Kursk nuclear submarine disaster in the Barents Sea is unfolding; this may prove to be one of the greatest tests of his leadership and strain on his administration so far. So far, he has exhibited skill and sound judgment in balancing pressures and demands from constituencies ranging from regional governors; the oligarchs, pensioners, teachers and the military. Not perfectly, of course, but with resolve and determination based on his personal principles of governance: maintain a strong state and an efficient economy to bring about a new Russia.
Foreign investors, could we ask for more in such a short period of time? The word on the streets from foreigners in Russia and investors abroad: Russia is a green light and a good bet. The worst is behind; the ROI trajectory is upward. You can expect mainly positive investment trends in Russia in the next period ahead.
Deborah Anne Palmieri
Russian Commerce News, July-August 2000
Copyright 2001 The Russian-American Chamber of Commerce®