Yeltsin Unveils Measures To Boost Industrial Sector
Russian leader moves in attempt to reassert authority over economy
RUSSIAN President Boris Yeltsin issued a package of decrees on May 24, aiming to halt the precipitous decline in Russian industrial production and the threat of widespread shutdowns of plants.
The announcement marks the first time since last December's parliamentary elections that the Russian leader has involved himself directly in economic policy. The initiative for economic policymaking had largely shifted to Prime Minister Viktor Chernomyrdin, whose political power has been on the rise.
The economic decrees are only one of several signs that President Yeltsin is now trying to reassert his lagging political authority. He recently issued a public rebuke to a senior cabinet minister and close ally of Mr. Chernomyrdin, Vice Premier Sergei Shakhrai, leader of one of the larger parties in the parliament. On May 20, Yeltsin's spokesman lashed out at the Chernomyrdin government for its ``delays and procrastinations'' in economic policy.
The president is also clearly worried about the potential troublemaking ability of his more hard-line Communist and extreme nationalist foes should the economy falter more seriously. At a meeting with industrialists on May 19, Yeltsin described the economy as ``close to collapse,'' calling for ``anticrisis measures'' to hold off this prospect.
The government has been proudly showing off the success of its efforts in recent months to bring down inflation, halving the monthly rise in prices from more than 20 percent at the close of last year to around 10 percent now. But officials are also worried about the slide in production, which has been dropping at an annual rate of about 25 percent since the beginning of the year.
Government statistics show consumer and machinery industries are hardest hit, with, for example, tractor production down 80 percent from the same period last year, cars 28 percent, trucks 66 percent, and washing machines 45 percent. Gross national product dropped 17 percent overall during the first four months of the year.
Across Russia, the huge factories that were the pride of the Soviet state-run economy are now in deep crisis. Hundreds of thousands of workers are on temporary layoff, while factories are deeply enmeshed in a web of debt and uncollectible obligations. The Chernomyrdin government has been struggling with how to close down many of these plants, particularly in the defense sector, without creating mass unemployment and a political crisis.
THE package of eight decrees, signed on May 23, attempts to boost production and save enterprises without sacrificing the government's pledge to hold down government spending and control inflation.
The decrees promise long-awaited reforms such as loosening government controls over exports, reduction of burdensome taxes, encouragement of foreign investment, and the creation of procedures for liquidating bankrupt state-owned firms. But these steps are combined with new, tougher government measures to pursue tax dodgers and to force enterprises to pay back huge debts.
The control over issuance of export licenses is a major foundation of power for the bureaucracy, as well as a lucrative source of corruption for government officials. These license and quota controls are to end on July 1. But this decree appears to contain a loophole, maintaining controls agreed to with other governments, which could include the important exports of oil and strategic metals.
Yeltsin also instructed the government to prepare legislation to reduce taxes paid by industrial enterprises by 10 to 20 percent, responding to complaints of onerous taxes that potentially demand firms pay taxes of up to 105 percent of profits. Instead, most firms evade taxes, easily outwitting the government's primitive tax-inspection service. One decree tries to enforce tax discipline by setting fines for tax evasion by companies and raising taxes on individuals and on property.
In a bid to boost foreign investment, the package also offers significant tax breaks to companies with 30 percent or more foreign ownership and with more than $10 million in start-up capital.
The decree on industrial inter-enterprise debt asks the government and Central Bank to carry out a one-time conversion of the debts into new promissory notes. It also fixes a schedule for repayment of debt and requires enterprises to use their protected hard-currency reserves, often kept in off-shore bank accounts, to pay off their obligations.
Yeltsin decreed that no new state enterprises will be created in Russia and that existing state-owned firms that are not to be privatized, mainly defense and energy firms, could be restructured if they are badly managed or bankrupt.