Nezavisimaya Gazeta
Russia struggles with lengthy construction permit procedures
Russia remains at the bottom of a 183-country ranking for the ease of obtaining construction permits, despite numerous complaints from developers and government attempts to cut red tape.
The latest complaint came in late April, with Prime Minister Vladimir Putin repeating the promise that he and President Dmitry Medvedev have repeatedly made in recent years to remove bureaucratic barriers hindering construction projects.
The results of their efforts, if any, have been unimpressive, as these international rankings clearly testify. Russia’s only rival for last place is Eritrea.
Although red tape seems the most obvious reason for the government’s inefficiency in dealing with the problem, it is certainly not the only one. The federal government is also reluctant to strip regional officials, on whom it relies, of this major source of income. The whole construction permit system in fact feeds the very same officials who are responsible for bringing in enough votes at federal elections.
The president mentioned the problem in his 2009 state of the nation address, ordering the government to simplify the procedures and shorten them to three or four months from the current two years.
He was not exaggerating. The World Bank’s annual report on the number and length of the procedures required to obtain construction permits in 183 countries, an important indicator in comparing investment environments, registered 54 procedures taking a total of 704 days in Russia in 2009-2010. Obtaining a similar permit in one of the 30 top economies involves 15-16 procedures taking about 166 days.
Thanks to the presidential order, this list was cut to 53 procedures, and the required time to 540 days (about 18 months). At the same time however, the cost of obtaining the permits doubled from around 2,000 per capita incomes to 4,000, leaving Russia one of the most backward economies in this ranking.
Moskovskiye Novosti
Pensions gap widens
Half-measures, such as cutting the number of early retirement pensions or tightening employment record requirements, will not bridge Russia’s pension deficit, according to calculations made by the Independent Social Studies Institute for the draft of Strategy 2020.
Experts are likely to suggest unpopular pension reform measures this year. One of them is increasing the pension age, Tatyana Maleva, director of the Independent Social Studies Institute, said in her report to the authors of the country’s development strategy.
Nearly half of Russia’s households depend heavily on pensions. They are the only source of livelihood for 18 percent of Russian families and one of the income sources for 30 percent, she said.
But the Pension Fund is running out of money, and the government will soon have to cut state insurance payments and in future search for new methods to cover the pension system shortfall.
The government will transfer 1.6 trillion rubles, or $57 billion, to the Fund this year. These transfers may have to grow to a staggering 15 trillion ($540 billion) by 2030, if the average pension is raised to 40 percent of the average wage, as Prime Minister Vladimir Putin has promised. One solution is raising the pension age.
Changes are imminent, and they will all affect future pensioners one way or another. To make up for the decrease in insurance payments to the Pension Fund from 26 percent to 20-22 percent, the gross annual salary from which such deductions are not made should be raised from 463,000 to 660,000 rubles.
The employment record component should also be increased, from 5 to 15-20 years. This will not save budgetary funds but should hinder the growth of shadow employment and encourage people to seek jobs that pay legitimate wages. This in turn will boost the collection of insurance payments.
The number of people eligible for early retirement, such as teachers, should be cut, because so few actually retire upon reaching pension age, continuing to work while drawing their pension. Their wages should be raised instead.
But increasing the pension age to 63, for both men and women, within 10 years will be the most effective measure.
Taken together with other measures, this increased pension age would stabilize budgetary contributions to the Pension Fund at 2-2.5 percent of GDP.
As for the idea of raising pensions to 40 percent of the average wage: this could pose a serious problem. Pensions should be calculated individually, in relation to the wage previously earned, whereas the current system is designed for people who worked during the Soviet period. By 2030, new pensioners will be members of the middle class, and their pensions, if calculated according to the current system, will be dramatically lower than their previous income.
Moskovsky Komsomolets
Belarus: Devaluation to default
On Thursday, the European Parliament once again raised the issue of possible economic sanctions against beleaguered Belarus.
Minsk residents have to wait in line for hours to buy foreign currency.
On Wednesday, the National Bank of Belarus lifted all restrictions on foreign currency purchases and sale transactions, essentially devaluing the Belarusian ruble. It instantly fell 30 percent. Economist Yaroslav Romanchuk said that prior to the devaluation, the National Bank asked top bank managers to keep the exchange rate at about 4,000 Belarusian rubles to the dollar. A higher rate of 4,800-5,500 roubles to the dollar applies to non-cash transactions, while the official exchange rate is 3,040 rubles. Consumer prices soared. Official inflation reached 10.9 percent in the first four months of the year: exceeding inflation forecasts for the entire 2011 period. Real inflation is as high as 50 percent on some goods. Gasoline prices (3,100-3,200 rubles per liter pre-devaluation) will rise to 4,200 rubles on Friday and Saturday.
Belarus’s current economic woes have their roots in a snowballing trade imbalance of recent years. Rising global commodity prices and Moscow’s decision to slash privileges have forced Minsk to swell its already bloated foreign debt. This now accounts for 50 percent of GDP. And the balance of payments cannot patch up budgetary holes.
The crisis is also based in the country’s conservative, centrally controlled, planned economy. The Belarusian Government did not cut spending at the height of the global financial and economic crisis, instead drastically raising public-sector wages, salaries and pensions.
As usual, Belarus looked to Russia, hoping its eastern neighbor would deliver a $1 billion loan and that the Eurasian Economic Community would hand over an additional $2 billion. Russian Finance Minister Alexei Kudrin said on Wednesday that a budgetary loan was out of the question, and that the Eurasian Economic Community could provide $1 billion.
Kudrin suggested Minsk try asking the International Monetary Fund. The IMF is unlikely to issue substantial loans to Belarus, given its depleted gold and foreign-currency reserves. On Thursday, the European Parliament passed a new resolution on Belarus. Minsk said 200 opposition activists might be banned from traveling abroad, and that it might even expel European ambassadors.
Former Belarusian presidential candidate and independent economist Yaroslav Romanchuk said a complete devaluation of the Belarusian ruble was inevitable, predicting it would plunge 30-60 percent by late 2011. He explained this as being due to the authorities’ populist decisions and said the Belarusian ruble should not be pegged to the currency basket.
Andrei Suzdaltsev, Deputy Dean of the World Economy Department at the Higher School of Economics, said Belarus’s economic problems were rooted in the collective-farmer mentality of its leaders. As for political changes or reforms – he is not optimistic. He said the government would not countenance privatization. Officials prefer to blame the general public, who apparently went crazy and bought up all the foreign currency they could lay their hands on, for the crisis.
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