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[IWS] OECD ECONOMIC SURVEY OF THE RUSSIAN FEDERATION 2014 [15 January 2014]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Organisation for Economic Cooperation and Development (OECD)
OECD ECONOMIC SURVEY OF THE RUSSIAN FEDERATION 2014 [15 January 2014]
[read online, 138 pages]
Structural reforms to improve the business climate are key to raising potential growth and economic resilience. As energy prices stagnate and labour and capital become fully utilised, growth is falling behind pre‑crisis rates. Making the economy stronger, more balanced, and less dependent on volatile rents from natural resource extraction is therefore a key challenge. This requires higher productivity growth and greater energy efficiency, both driven by competition, stronger investment and better matching of skills and jobs. The sequencing, political economy and implementation of structural reforms are all important.
The strong macroeconomic framework needs further improvements. The new fiscal rule has anchored budgetary policies, but there are loopholes due to the possibility of tapping into oil funds, providing guarantees and shifting unfunded spending obligations on regions. Increasing attention is being paid to public sector efficiency. The monetary policy framework benefits from the transition to inflation targeting and a flexible exchange rate regime, although the importance of administered and food prices in inflation increase transparency requirements. The banking sector is stable but a consumer credit boom poses risks.
Economy too dependent on natural resources -- graph
Improving the business climate is most urgent. The authorities seem to have become more energetic on fighting corruption and strengthening the legal protection of businesses. However, capital outflows and the low market valuation of Russian companies suggest that business is not yet fully convinced. Law enforcement appears to be uneven, whistleblower protection is weak, and civil society organisations and non‑aligned media face constraints. Red tape has been reduced, and recently adopted federal initiatives tackle many administrative barriers. There has been less progress on the regional level. Governance of state‑owned enterprises has improved somewhat, but privatisation plans were recently downsized. Notwithstanding WTO accession in 2012, market opening is meeting resistance. Transport system bottlenecks pose barriers to more geographically balanced growth.
Stronger and more sustainable growth is not possible without better use of skills and stronger innovation. Considerable resources are employed in low‑productivity activities. Lifelong learning, activation programmes and temporary income support remain underdeveloped. Excessive labour turnover undermines on the job learning and contributes to the low level of innovation activities. Social partner institutions are weak and the enforcement of collective agreements is limited. While education enrolment rates are very high, insufficient quality and poor links with the business sector limit the supply of employable skills. Public spending on education is low and the high inequality of educational opportunities adds to the problem. Despite a long tradition of scientific excellence, Russia performs worse than most OECD countries in term of scientific output and patents, which is partly linked to the unfinished reform of the public R&D sector. Firms rarely see innovation as part of their business model. Innovation policies have recently become more focused at firms but results are not yet visible.
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