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December 2013
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Investment Ministry

April 2012

The authors of the updated “Strategy 2020” offer their suggestions about defending business from the government

What is “Strategy 2020”

Short overview

At the beginning of 2011 Prime Minister Vladimir Putin called upon a group of experts to develop a strategy for economic growth in Russia up until 2020. 21 expert task forces were established for all spheres of society from macro-economics and health care to cutting down on bureaucratic red-tape and strengthening Russia’s influence on the global market. Yaroslav Kuzminov, Rector of the national research university “Higher School of Economics”, and Vladimir Mau, Rector of The Russian Presidential Academy of National Economy and Public Administration are heading up this project.

Representatives of federal and regional government bodies, the Russian Academy of Sciences, universities, successful groups of entrepreneurs are also taking part in this project. A final report was published in the middle of March.

The authors of “Strategy 2020” proclaim that improving the business climate is the main way to guarantee that investments will flow to Russia. According to the document, the business environment in Russia leaves much to be desired and it is getting more and more difficult to do business. The authors suggest taking a few specific measures which will help change things for the better.

National investment council

The authors mention that it is necessary to create a government-affiliated National investment council. This council should work on developing a strategy for improving the investment climate and removing some stumbling blocks for investors. The members of the Council should temporarily (for six months) suspend legislators’ right to pass regulatory legal acts in order to fully assess their impact on businesses. Also, the Council could initiate abolishing or changing the current legislation.

12 acclaimed specialists on key aspects of law and economics will form the National Investment Council. A person who has weight and proved him/herself in the government, entrepreneurial community and is trusted by the government leaders will head up this council. A special “red button” will be set up on federal government sites where entrepreneurs can address their concerns if their rights have been infringed.

The members of the Council should temporarily (for six months) suspend legislators’ right to pass regulatory legal acts in order to fully assess their impact on businesses

Investment policy

According to Strategy 2020, investment policy in the raw materials sector should move away from soliciting financial resources to technology transfer. It is possible to lower risks by switching from a credit model for attracting foreign financial resources to direct foreign investment. Authors forecast that investors focused on expanding domestic consumption will become less interested in Russia. Investors focused on the availability of human capital are more so attracted by the quality of the investment climate, investment security (with lower profitability), cost and competence of labour, potential for innovation and infrastructure.

Strategy 2020 authors are paying close attention to measures necessary for improving the country’s investment climate. Specifically, it is best to avoid trying to eliminate all institutional problems at once, but rather it is more effective to work on removing those institutional limitations and malfunctions that hamper economic growth. First and foremost, the Criminal code should be reformed so that it reflects the current state of affairs on the Russian market. Making a profit should not be viewed as a criminal act and economic crimes should no longer lead to a prison sentence.

It is necessary to reform the institute of arbitration courts by breaking this system down into certain sub-categories for bankruptcy, taxes, etc. The experts recommend giving preference to court decisions made abroad (if participants of these court proceedings believe their decisions are legitimate) in regards to economic disputes in Russia; this will improve investment security.

Open Market

The strategy authors suggest taking a few measures geared toward developing a free market. There are a few particularly key measures that need to be taken. One of the biggest problems for the Russian economy is “corporate raids”. In an effort to fight with corporate raids, Strategy 2020 proposes eliminating inactive companies and fraudulent ones registered by swindlers and use an accelerated system for returning illegally seized property. These types of property claims will be settled in court so that the lawful owners will not be taken advantage of by “corporate raiders”.

For new business owners experts advise focusing more on following business rules and regulations (with higher penalties for their infringement) rather than getting bogged down in administrative control. This is completely in line with technical regulation.

It will be possible to increase transparency for utility use by creating a “public line” and implementing fines for an unjustified refusal to pay utilities fees (70% of the cost of utilities). It is best to ban natural monopolies from creating sub-companies in sectors that cannot be regulated. The government should change its approach from being a bit self-interested to working on providing land and setting up utilities for those who are interested in developing the Russian and external markets (whether these investors are Russian or foreign).

Tax policy

It is necessary to create a more business-friendly tax system by making the move from being a small business to a medium one and a medium one to a large one more gradual

Authors believe it is necessary to create a more business-friendly tax system by making the move from being a small business to a medium one and a medium one to a large one more gradual. This will be done by simplifying accounting procedures and granting temporary tax holidays for certain taxes

All of these suggested proposals should be implemented in 2012. According to the Strategy 2020 authors, this will allow Russia to boost up its image amongst investors and let Russia catch up to other developed countries in terms of economic growth.

Andrei Susarov,
Columnist for The Moscow News
Special for russian-survey.com