Nezavisimaya Gazeta
Finance Ministry Calls for Cutting Defense Spending
Russia’s Finance Ministry on Monday proposed a $125 billion cut in federal spending on national defense and social security. The drastic initiative is unlikely to get government backing.
The Finance Ministry’s most recent proposals are aimed at keeping the budget deficit down to 1.6 percent of GDP in 2013, 0.7 percent in 2014 and actually balancing the budget in 2015. This requires an adjustment to the federal budget for 2013 and the planning period of 2014-2015.
According to the ministry’s estimates, federal revenues will fall by 0.8 percent-0.9 percent of GDP below the official targets for 2013 and 2014. To remedy the situation, the ministry proposes a dramatic cut in government spending on defense and law enforcement, by a total of 4 trillion rubles ($125.7 billion) over 2014-2020.
Moreover, the planned improvement of the pension system is expected to help cut social security spending by nearly 7 trillion rubles ($220 billion) over that period.
The ministry also proposed cutting state procurement by 5 percent, but this reduction sounds immaterial compared with the other huge cuts.
Although analysts generally agree that the government should cut spending, they are unsure that such drastic policies will be supported by the president and the government.
“Spending should become more efficient,” said Anton Safonov from the Investcafe consultancy. “Along with cutting defense spending, a reduction should be considered in spending on civil service staff. The government’s extensive social obligations are unlikely to be reduced in the next few years, and cutting the pension system’s financing seems unlikely too, not with its current poor condition.”
The government should be cutting spending more consistently, to be able to balance the budget even with moderate oil prices. “In 2012, the budget is expected to run a deficit of 1.5 percent, with oil at $100 per barrel, so it is only possible to balance the budget if the oil price climbs higher. Although the price of Urals crude fell to $117 in April and is expected to fall lower still in June, the average 2012 forecast is unchanged at $110-$115,” he said.
It is the Finance Ministry’s challenge to try and balance the budget amid possible downward trends in the global energy markets, said Andrei Novikov from Business Consulting Service. “The year 2014 and 2020 are too far away. With the current global turbulence, the economic situation may change more than once, requiring budgetary adjustment,” he added.
While the Finance Ministry is insisting on cutting specific allocations, raising the general efficiency of government spending is the responsibility of funds recipients and state oversight agencies, he said. “The government may approve the proposed cuts in spending in the future. Otherwise, they will have to either raise taxes or augment government debt,” Novikov warned. “If education, healthcare, housing and utilities, and economic development are spending priorities, spending may be optimized by cutting the inflated civil service staff and security services.”
Moskovsky Komsomolets
Government Admits Embezzlement in the Defense Sector
Deputy Prime Minister Dmitry Rogozin has turned over to law enforcement agencies the findings of the Federal Agency for the Management of Federal Property (Rosimushchestvo) which reveal that the property of the Yakovlev Design Bureau (OKB) and of the Tupolev Group was illegally privatized. As Rogozin said, “Now that we are to fulfill the government armaments program, we see that the huge capability created in Russia’s defense sector was heavily pillaged in the 1990s and 2000s.”
Moskovsky Komsomolets has repeatedly raised the issue of the Russian defense sector losing its premises and production capacities. In an article “We Will Drink All Russia’s Enemies under the Table,” of March 16, 2012, we described an assembly shop at the Almaz-Antei Design Bureau that once manufactured all the country’s air defense systems. Now it has been converted into a concert hall with the longest bar counter in Europe. The designers now have nowhere to develop the S-500 systems because the new owners are evicting them, while S-400 radars are rusting outside in the snow and rain. The same article said: “Is Almaz the only company to have such problems? Drop in at any defense research institute and you will see that 50 percent to 80 percent of its premises are occupied by car services and striptease bars. A popular ice show is now being filmed in the hangar of a well-known aviation company which used to produce warplanes.”
Moskovsky Komsomolets sources say the deputy prime minister took note of the publication and reportedly launched a series of inspections. Now, according to Rosimushchestvo acting head Gleb Nikitin, it has been officially confirmed that the agency conducted inspections at the Yakovlev OKB and the Tupolev Group on Rogozin’s directive. “The overall situation is quite lamentable,” he said. “Since 1992 the Russian Federation has allocated 80,000 square meters of space to the Yakovlev OKB, and that is just in Moscow alone. At present none of those premises remain in the bureau’s ownership.” Between 1999 and 2003, Tupolev sold off 154,000 square meters. The premises went for a song to shell companies affiliated with Tupolev’s management. Today, Tupolev has only 100,000 square meters left in Moscow, most of which is rented out.
The investigators have confirmed that practically no premises remain for the development of new aircraft and systems. This is nothing new. What is surprising is that for the first time in the post-Soviet era the entire defense property affair has been recognized as criminal, although with a reservation. As Nikitin said, “I suggest law enforcement agencies help us check the facts.” However, they may not agree with either Moskovsky Komsomolets or Rogozin – but that is another matter.
Izvestia
Migrant Workers are Leaving Moscow
The inflow of migrant workers has plunged almost by half, yet 10 percent of babies in Moscow are born into migrant workers’ families.
The net migration gain in Moscow has been falling for the past few years. The city’s Department for Families and Youth Policy has reported a decrease of 47 percent in 2011. This is a result of the Moscow government’s policy of “preventing illegal immigration and reducing labor migration.”
However, experts believe that the number of migrant workers has not changed: the official decrease only means that the number of illegal immigrants is growing. In 2010, a total of 39,200 migrant workers left and 125,900 arrived in Moscow, while the figures for 2011 were 65,700 and 124,800, respectively.
According to the Moscow Department for Families and Youth Policy, migrant workers still play a major part in demographics. In 2011, the birth rate exceeded the mortality rate in Moscow for the first time in 23 years, but 9.6 percent of babies were born into the families where both parents are foreign nationals. A total of 34 percent of new mothers are not Muscovites.
More immigrants are bringing their children to Moscow. “There were seven adult immigrants per child in 2008 and six per child in 2010,” a department official said.
Izvestia earlier wrote that the Moscow government was drafting a program for teaching Russian to immigrants’ children. According to the Education Department, such children make up 3 percent or approximately 21,000 students in Moscow schools.
Experts say it is extremely difficult to calculate the migrant workers’ contribution to the growth of Moscow’s population, because there is a huge gap between official data and real figures. Nikolai Kurdyumov, member of the Public Council at the Federal Migration Service and head of the Labor Migration alliance, said there are about 10 illegal aliens per one legal immigrant in Moscow.
“For the past few years, the Moscow government has been trying to reduce the number of immigrants by offering their jobs to people from other parts of Russia, if not Moscow,” Kurdyumov said. “The immigrant quota is cut every year.”
According to Izvestia, the quota for 2012 is 136,000 foreigners, or 14,000 fewer than last year. “As a result, there has been a tangible increase in illegal immigration, which the Moscow government cannot control,” the expert said. “The number of immigrants from the CIS countries will not decrease. Migrant workers easily find jobs not because of their skills, but because they agree to work for much lower pay without social benefits and live in poor conditions. As long as this dumping policy continues, the situation will not change.”
Kurdyumov added that according to tentative estimates, there are about one million migrant workers in Moscow. Renat Karimov, chairman of the central committee of the migrant workers’ trade union, said the number of immigrants has not changed over the past few years and that it is still simpler to come to Moscow illegally.
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