The Russian economy is recovering, but faster modernisation needed, OECD says
Tuesday, 13 December 2011 | 00:00
The Russian Federation must further modernise its economy to meet long-term development and income inequality challenges, according to the OECD. A combination of sound macroeconomic management, improved business climate, effective social policies and greater energy efficiency is required.
These are key conclusions of two newly published reports – a Review of Labour Market and Social Policies in the Russian Federation and the latest Economic Survey of the Russian Federation – launched in Moscow today by OECD Secretary-General Angel Gurría and Russian Minister of Economic Development Elvira Nabiullina.
The reports identify modernisation and social inclusion as vital to Russia’s future economic development. The Survey notes a number of areas where Russia is performing relatively well, such as public debt management, education and unemployment.
“Russia is not yet fully exploiting the growth opportunities offered by its rich endowment of natural resources and the high skill level of its population,” Mr Gurría said. “Modernisation will reduce the public budget’s dependency on oil revenues and stimulate diversification of the economy. ”
The business environment remains a persistent handicap for the Russian economy. While progress has been made on numerous fronts, the OECD says Russia could do more to cut red tape, speed the pace of privatisation, and ease restrictive foreign trade and investment regimes. There is also a need to reduce pervasive state involvement in the economy, fight high levels of corruption and strengthen the weak rule of law. The OECD encourages Russia to take further steps to raise energy efficiency, which would be good for both the economy and the environment. The government should phase out all subsidies for domestic energy use and introduce mechanisms to price in the negative effects of fossil fuel-based energy. Various other measures are called for, including speeding up the installation of meters for all energy use.
The Labour Market and Social Policy Review reiterates the need to fight poverty and reduce inequality. It calls for Russia to boost support for job seekers, including by enhancing income and re-employment support, enforcing minimum employment standards and improving the representation of workers to reinforce their bargaining power.
The Review calls for a greater focus of social spending on the working-age population and children. Ensuring the long-term financial sustainability of the pension system is a crucial element in that strategy. To this end, the OECD recommends Russia to raise low standard pensionable ages and limit access to early pensions. It also calls for the strongest shoulders to bear their fair share of the cost.
Both reports were drawn up and published in the context of ongoing discussions on Russia’s accession to the OECD. The OECD accession process covers diverse policy areas including investment, environment, anti-corruption, corporate governance, scientific and technological policy and public governance. Russia is one of five countries that were invited in May 2007 to open discussions on membership of the OECD. Chile, Estonia, Israel and Slovenia became members during 2010.
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