August 1, 2000｜Russia
Director General, International Finance Department II, Japan Bank for International Cooperation
At the end of June, the economic policy of the new government, and at the beginning of July, the President’s annual message were published. The new government’s attitude of promoting information disclosure and transparency to advance economic reform, emphasizing “equality under the laws,” and striving to banish corruption, should be highly evaluated. These are the points most lacking in the Russian society at present. It is true that the Russian economy has been extricated from the financial crisis which began in summer 1998, and has improved its situation due to some outside factors, such as oil prices and devaluation of the Ruble. However, as the new government has commented, confidence in the Russian government, Russian banks, and Russian currency are still low both inside and outside Russia. Capital is still out flowing. These problems are reducing confidence in the Russian government, and have become serious impediments to the economic reform of Russia.
Presently, international financial organizations, such as IMF, are discussing with the Russian government about a new economic program. Since the Russian government has promoted transparency and information disclosure as important policy issues, the following two points should be included in loan conditions in order to encourage the Russian government to keep the course.
(1) Assets disclosure of the President’s administration, the central government and the central bank
Due to the financial crisis, the Russian government stopped the repayment of national bonds one-sidedly, and persuaded the London Club creditors reduce debts to the former Soviet Union by 37%. According to the report made by the Commission of Federal Overseas Assets of the State Duma on April 26, 2000, overseas assets of Russia are estimated from US$ 3 billion to up to US$400 billion. However, confirmed assets are only real estates equivalent to US$11 million. In 1995, the Ministry of Finance tried to create a database to manage overseas assets, but could not complete it due to a shortage of funding. In 1998, a research organization in the west made an assessment of the national assets requested by the President’s Administration, but the result was not published. Since the Parliament has limited access to information about overseas assets of the state, the truth is still in the dark. I. Lisinenko, Vice-chairman of the Commission of Federal Overseas Assets of the State Duma and a member of Fatherland – All Russia, criticized the fact that overseas assets of the state were excluded illegally from the state management by the leadership of P. Borodin, who was in charge of assets in the President’s Administration, and then that the government has not conducted serious research into the assets. In 1999, Borodin mentioned in an interview of NTV that the President’s Administration had US$650 billion in 78 countries. It is said that US$15-20 billion flows out every year. Also in 1999, it was revealed that assets were hidden by the overseas subsidiaries of the Central Bank of Russia, such as the FIMACO. Russian overseas assets are not transparent at all. The scale of assets must be published to build confidence. International financial organizations are usually deciding Russia’s repayment capacity based on the annual finance, trade balance, and foreign money reserve. However, existing assets that can be used for repayment should be given more attention.
(2) The elimination of dishonest behavior of monopolistic enterprises and land privatization
The new economic policy includes the restructuring (dividing into smaller companies) of monopolistic enterprises, such as GASPROM, UES, and the Ministry of Railways, and the promotion of land privatization. However, many Russian people doubt that the policy is implemented through opaque procedure as past privatizations were. As is clearly shown in the fact that the Federal Prosecutors’ Agency claimed an additional payment in July 2000 to Potanin, the former President of the ONEXIM Bank and the former Vice-Prime Minister stating that he was responsible for the unfairly cheap privatization of Norilsk Nickel. It is widely known that privatization was advanced for the profit of a limited number of people, including reformers who are supposed to be closer to international organizations. International organizations which promoted the privatization did not blame them publicly. Therefore, the privatization has become a symbol of corruption and injustice for the Russian people, and this also lowered confidence in the central government and international organizations. International organizations have advised on the division of monopolistic enterprises and land privatization which are included in the new economic policy. Therefore, future loan conditions should emphasize not only performance of policy but also transparency and fairness in its implementation.
[Translated by ERINA]