Russia lost drive in Putin era: World Bank

8th June 2011, Comments 0 comments

The World Bank warned Wednesday that Russia had lost its competitive drive during the presidency of Vladimir Putin and was now the poor relation within the BRICS group of fast-growing emerging economies.

The bank also backed the "innovation" policies promoted by Putin's successor Dmitry Medvedev, ahead of 2012 presidential elections in which either can run.

The bank's latest survey was unusual for its open criticism of the policies pursued during the 2000-2008 presidency of ex-KGB man Putin -- an era highlighted by state takeovers of huge sectors of various industries.

It said the period's ballooning dependence on basic exports was partially explained by an unproductive labour force that worked in an uncompetitive market with little to ship to nations with more advanced economies.

The World Bank identified a "decomposition of export growth over 2000-08 period" that showed "no contribution of the increase of exports of new products to either new or old geographic markets to ... overall export performance."

The timeframe selected by the bank specifically covers the Putin era when the other countries in the BRICS grouping of Brazil, Russia, India, China and South Africa have made huge strides forward on the global economic stage.

Putin has conducted a recent wave of meetings with potential voters and admitted to one youth group on Monday that "we have basically not been investing anything in non-military production -- or investing very little."

The World Bank agreed by noting that oil and natural gas comprised less than half of Russia's exports before Putin first came to power.

But that figure more recently soared to two-thirds and together with other natural resources such as metals and timber made up about 80 percent of all exports from Russia. The bank said most of the rest were military sales.

"In Russia, the decline of services exports (from 11.4 percent of gross domestic product in 1999 to 7.6 percent of GDP in 2008) is unique among the BRIC countries," the World Bank said.

The World Bank concluded that the "competition and innovation" policies which are now being pushed by Medvedev can contribute to long-term growth when combined with a focus on productivity.

"Results show that productivity is key to exports and that lack of competition and entrepreneurial innovation are relevant obstacles to the emergence of new, potentially exportable products," the report said.

"Enhanced competition and innovation policies could contribute to export diversification," it added.

Medvedev has made innovation -- a mantra of his presidency that critics say has rarely been transformed into action -- a key policy plank and the rallying call of his supporters.

The World Bank applauded Medvedev's attempts to create a Russian version of California's Silicon Valley on the outskirts of Moscow.

"Those initiatives should be strengthened by measures to raise the efficiency of Russia's research system," the bank advised.

"Competition and innovation are sources of economic renewal, which, in turn, are at the core of the long-term development process.

It also cautioned the leadership that the previous decades' dependence on energy exports now carried immense economic dangers because high oil prices easily translated into uncontrollable inflation at home.

"The government should not miss the opportunity of a large oil windfall to substantially improve its long-term fiscal position, further reduce inflation, improve the composition and effectiveness of public expenditures, and establish a basis for dynamic, healthy growth in the future," it said.

© 2011 AFP

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