Russia Needs to Decentralize Power to Attract Investors

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Apr. 26 – Russia needs to decentralize power to lure a greater number of investors, former Finance Minister Alexei Kudrin said at a conference run by Russian lender VTB Capital in New York.

“The vertical of power that’s built today is flawed and the effectiveness of state governance is very low,” Kudrin said, adding that “the power to regulate currently held by federal ministries should be passed to municipal governments.”

Should the government boost social spending to fulfill promises made during Prime Minister Vladimir Putin’s successful campaign for president, taxes will “inevitably” increase, Kudrin said.

Putin vowed to boost pensions and salaries for state workers and the military, pledges that will contribute to a US$162.6 billion increase in spending through 2018, according to estimates by Capital Economics Ltd.

Putin also delayed increases in utility prices due in January until July during the run-up to the March 4 presidential poll.

“The tariff policy shouldn’t be dictated by political trends, it needs to be clear,” Kudrin said.

Kudrin was forced out by current President Dmitry Medvedev after publicly opposing increases in military spending. During his tenure, Russia cut state debt to less than 10 percent of gross domestic product and oversaw budget surpluses from 2000 to 2008.

“These are just a few points, but they can be continued, they are well-known. Insistent and thorough efforts (in the implementation of these tasks) will determine our opportunities in transition to stronger competitiveness and better investment climate,” Kudrin said.

Earlier this month, Kudrin launched a civic task force that is designed to hold the next government to account and position him as an influential political outsider, Reuters reports.

“The recent elections show that people want to take part in resolving society’s problems and choosing the country’s path of development,” Kudrin told a news conference at a Moscow business center.

“We must help fulfill this task – we want to help develop the institutions of a civic society and help citizens, civic groups and professional people to find their role.”

Kudrin, 51, who in his 11 years as finance minister earned the respect of investors by restoring the public finances to health from a humiliating default in 1998, has been named a fiscal hawk by reporters.

The former minister of finance was widely believed to have been disappointed not to have been offered the post of prime minister in the next Putin administration.

Meanwhile, Igor Yurgens, who heads a research group created by Medvedev, said in February that Kudrin would do a better job as premier than Medvedev.