MOSCOW Jan 15 Russia needs to address its poor
business climate and improve education to reverse an economic
slowdown that is being compounded by its structural problems,
the Organisation for Economic Coopration and Development (OECD)
said on Wednesday.
The OECD said Russia's economic downturn was primarily the
result of a slide in its growth potential, in addition to the
end of the period of fiscal expansion that preceded President
Vladimir Putin's election to a third Kremlin term in 2012.
"Structural reforms improving the business climate, in
particular strengthening the rule of law and fighting
corruption, are the most crucial but also the most difficult to
implement," the Paris-based organisation of major economies
said in a report.
Presenting the findings in Moscow, OECD Secretary General
Angel Gurria said such reforms were needed to wean Russia off
its worrying dependence on energy exports.
"It's about the broader diversification of the Russian
economy," he told a presentation during the annual Gaidar Forum.
The OECD's findings come amid a bout of soul-searching among
Russian officials over how to revive an economy the government
now expects to grow by only 2.5 percent per year in the long run
- down from a previous forecast of 4 percent.
During the oil-driven boom of Putin's first two terms,
annual growth averaged 7 percent.
Addressing the conference, Prime Minister Dmitry Medvedev
said Russia needs overhaul its institutions to sustain growth
and avoid the type of economic stagnation typical of emerging
economies that fail to clear barriers to further growth.
Medvedev focused on the need to reform and boost education
and training so Russia has a productive and flexible labour
"We must not artificially support employment at any price,"
the prime minister said. "We should support those who are
willing to change."
The OECD report said recent signs of a crackdown against
corruption by the Russian authorities appeared to be genuine,
and welcomed signs that companies are less concerned about the
efficiency of the court system than in the past.
But it was concerned Russia's record on press freedom was
not improving - noting Russia ranks 148th out of 179 countries
according to a press freedom index published Reporters Without
The OECD criticized recent restrictions on public assembly
and non-governmental organisations (NGOs) as negative for
transparency and accountability.
Corporate governance is also a key problem, the report said,
leading to low company valuations and reduced revenues from
privatisation. It recommended requiring state-owned companies to
comply with tough stock exchange listing requirements.
The organisation also criticized Russia for the prominent
role played by state companies in the economy, calling for it to
push ahead with privatisation of state companies and banks that
dwarf their private-sector competitors.
"Their dominance poses a severe challenge to market entry
and competition and preserves pockets of inefficiency," the
It adding that an ambitious plan for the government to sell
its holdings in all sectors except natural monopolies, oil and
defence, was significantly scaled back last year.
Deputy Prime Minister Igor Shuvalov told the forum Russia
should aim to reduce the state's share in the economy to 25
percent by 2020 from 50 percent now.
(Reporting by Jason Bush; Editing by Douglas Busvine and Sophie