Page 9 - bne IntelliNews Russia Country report May 2017

and goals are not up for public debate. Kudrin has made it clear that this plan will be presented to Putin as only he is authorised to make the final decision. And doing things this way is how Russia found itself in the hole it is today.
Of the details that have been released, Kudrin is aiming to increase growth to about 3.5% a year and intends to do it by making more and better use of Russia’s world-class human resources. That means spending a lot more on education and healthcare by increasing public spending by 0.8% and 0.7% respectively, according to reports.
Russia’s education system was close to collapse thanks to a decade of neglect and endemic corruption by academic staff that was undermining academic standards. The bill to gain access to one of Moscow’s prestigious institutes in the early noughties was around $10,000, according to bne IntelliNews reporting at the time.
However, a deep reform followed by a crack-down on academic corruption has seen Russia’s universities recover some of their former glory and start climbing back up the global rankings in recent years. Taking a leaf out of the highly successful Chinese reforms, Kudrin wants to equip Russian universities with the latest scientific technology, which in China has led to an explosion of online entrepreneurship and rapid increase in the number of patents issued by China. In 2015, the emerging world overtook the developed world for the first time in terms of patents issued, applying for 1.49m patents, led by China with 1.1mn, vs 1.48m applications in the West, according to figures from the World Intellectual Property Organisation.
The investment into healthcare could be equally productive. A World Health Organisation report issued in the late 1990s found the number one most productive investment a government can make is into healthcare. Not only do workers live longer, they stay at work longer and if they are in good health they are more productive. But even more important is the reduction in massive healthcare costs for taking care of ailing pensioners. The reason governments don’t invest heavily into health is the benefits to the country will come long after the current crop of politicians are literally dead.
Still, the point is not lost on Kudrin, who wants to see life expectancy grow from 71.5 to 76 years, which is also tied up with his plans to raise retirement ages from the current 55 years in order to plug the hole in Russia’s demographic triangle caused by the economic chaos of the early 1990s.
The third plank of the plan is to spend heavily on economic multiplying infrastructure. In the US the government found that each dollar spent on building highways added $6 to GDP as businesses could easily expand their reach and hence their market. Kudrin is also calling for new high-speed rails and motorways. For example, there is still no motorway between Moscow and St Petersburg, by far Russia’s two largest local economies that are both bigger than most Central European countries.
These changes alone could revitalise Russia’s flagging economy, but the big question on how Kudrin intends to pay for all this remains unanswered. He has hinted at diverting more oil revenue to fund the programme as well as cutting defence spending – indeed, it was his very public resistance to hiking military budgets in 2011 that lost him the finance minister’s job in the first place, long before it became clear what Putin intended to do with the modernised army.
9 RUSSIA Country Report May 2017 www.intellinews.com