US Likes Hearing the Kalmykia Story

American investors, public and private, cheer the republic's market reforms

By , Staff Writer of the Christian Science Monitor

UNITED States policymakers and business executives have been dismayed by the faltering pace of reform in Russia, especially in the weeks since President Boris Yeltsin suppressed the parliamentary uprising. One bright spot from Washington's perspective is the self-governing republic of Kalmykia.

Republic officials, visiting Washington recently to seek more US aid, portray Kalmykia as a leader in free-market reform.

``We want to show all of Russia how we can be ahead, and be the best,'' declares Sergei Baranenko, state economics adviser to the Kalmyk Republic. ``We will do this without subsidies from Moscow,'' he adds proudly.

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The emergence of Kalmykia as a free-market showroom is an unlikely development for the quiet republic located alongside the Volga River, where a sparse and mostly poor Buddhist population shares the terrain with sheep and pockets of untapped oil and gas reserves.

Since last April, when multimillionaire Kirsan Ilumzhinov was elected the first president on a get-rich-quick platform, the government has been actively pursuing economic development.

The obstacles they face are formidable. Chief among them is the republic's ailing infrastructure. Kalmykia's communications system is poor, the roads are in very bad condition. ``Everything was built 25 years ago,'' Mr. Baranenko laments. A new legal code

To boost development, President Ilumzhinov's top officials and a sympathetic legislature established a commercial code this past summer. The government is planning to attract global investors by setting the republic up as a tax-free zone, creating large banks, and building an international airport. All of this, they claim, is the fastest way to raise living standards for the republic's 350,000 people.

Ilumzhinov's motto is ``You have to have money to be independent.'' Two of his top advisers conveyed that message here recently in an attempt to enlist the financial support of US government agencies, such as the Export-Import Bank and the Overseas Private Investment Corporation.

Helping Kalmykia find its capitalist path is Peter Barenboim, vice president of the Union of Advocates in Moscow, who took the lead in crafting the then-Soviet Union's, now Russia's banking laws and commercial code. But after more than three years, his efforts to establish the proper legal framework for foreign investment have been thwarted by political and bureaucratic roadblocks.

Mr. Barenboim is now focusing on Kalmykia, where he found a newly elected president and lawmakers flush with enthusiasm for capitalism and creating prosperity through the free market.

Shaking his head in disgust with Russia's reform gridlock, Mr. Barenboim says, ``I am a Muscovite. But I have completely lost my patience to do something on the central level.''

US investors also have gotten fed up with the snail's pace of Moscow's economic reforms. They're ready to look elsewhere. And if Kalmykia acts quickly to create a more hospitable climate for US firms, business executives aver, small and medium-sized companies will respond.

The Washington-based US-Russia Business Council, and several other US and Russian agencies, will stage an oil and gas conference in Moscow at the end of this month.

A record number of US firms will exhibit their wares and compete with each other for a piece of the estimated $125 billion oil and gas market in Russia - a market in which Kalmykia may be a sizable player if it pursues market reforms. West is enthusiastic

``There is significant oil and gas production out there,'' enthuses Eugene Lawson, president of the US-Russia Business Council. ``Kalmykia is one of the more lucrative areas. There are at least six fields with proven reserves with millions upon millions of barrels of oil. And they're just ready for Western investors to come in.''

Kalmykia could present more enticing development possibilities than elsewhere in Russia. ``We in America - both in the private and the public sector - are still very much hung up on the central power in Russia. And there's not much power there now,'' he says.

Still, what happens in Moscow will affect the business outlook of Kalymkia. ``Nobody's going to [seal a deal based on Kalmyk law] if they think there's a lot in the commercial code that can't or won't be duplicated on the national level,'' Lawson says.

The prospects for a national legal code are still uncertain. On Dec. 12, Russians are scheduled to vote in parliamentary elections that, the West hopes, will produce reform-minded legislators ready to craft laws promoting foreign investment.

But Barenboim points out that there are only a handful of private attorneys in Russia - 30,000 for 260 million people - and that building a legal code from scratch is a daunting task.

``We need laws for bankruptcy, banking, a commercial code - all of this requires a lot of new legislation,'' he says.

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