Reports & Papers
from
BCSIA
Roundtable Discussion
with
Duma Deputy Konstantin Borovoy
and Russian Regional Leaders
Summary by Ben DunlapSeptember 23, 1999John F. Kennedy School of Government
Nine distinguished Russian visitors, traveling in the United States under the auspices of the "Open World" project of the Library of Congress, and hosted in Boston by the office of Congressman Michael Capuano, came to the Kennedy School to participate in a roundtable discussion of recent political and economic developments in Russia.
Konstantin Borovoy, a deputy in the Russian State Duma from Moscow, kicked off the session with an explanation of a problem in Russia that, in his words, "is not seen from the US": the anti-Western campaigns organized by groups around former Prime Minister Yevgeny Primakov. These propaganda campaigns, according to Mr. Borovoy, began in 1992, but didn''t gain strength until October of 1998, after Mr. Primakov was appointed Prime Minister. Under Primakov, the heads of several important news agencies were replaced with former secret service officers. The campaigns came to a head in April of 1999, manifested in anti-NATO expansion, anti-Americanism, as well as pro-Iraq and pro-Milosevic sentiments.
On the subject of corruption in Russia and allegations of Russian money laundering in US banks, Mr. Borovoy suggested that US aid to Russia could be part of the problem. He said that the head of the Russian stock market addressed an appeal to President Clinton in 1992, warning that US aid to Russia could cause the growth of corruption and lead to money laundering. "Aid given irresponsibly is no good," said Mr. Borovoy.
Vladimir Rud, the vice-governor of Primorski Krai in the Russian far east, said he was impressed by America''s decentralized political system and expressed regret that in Russia "too much energy is taken up with political noise and infighting, and not enough is allocated for economic development." After a series of endless elections, the Russian masses see than nothing has changed with the changing politicians and political parties. People see only that the socioeconomic situation is deteriorating. The most important factor in political development, he said, is a working economy. The problem, according to Mr. Rud, is that Russia has left behind state ownership of property, but hasn''t yet reached private ownership. The current "mythical" owners of many enterprises are "selling Russia out" that''s why Russia is dumping on the world market.
Vladimir Gayev, a local administrator from the Samara region, said that the root of Russia''s economic problems is the tax system. Tax rates are too high, he said, leading to poverty and bankruptcy.
Anatoly Pistsov, the deputy minister of Internal Affairs in the Komi Republic, said that a major reason for capital flight is the weakness and instability of the Russian banking system. On the question of aid to Russia, Mr. Pistsov said that Russia should come up with a plan for what kind of aid it needs and in what amounts. He also said that providing aid directly to the regions of Russia would result in less theft. "Usually we hear about aid, but we never see it because it never goes further than Moscow," Mr. Pistsov said.
Oleg Shuteyev, the deputy chairman of the Tomsk city Taxes-Budget Committee and a deputy in the Tomsk city Duma, added that the quality of life in Moscow is five times higher than in Russia''s regions. He described the state of local small business as "rather weakly developed," explaining that only 25-30% of local taxes are paid by small- and medium-sized businesses. On the other hand, the big taxpayers, such as oil extractor Tomskneft and the gas monopoly Gazprom, are now paying their taxes into the Moscow budget instead of local budgets, following a change in the tax laws. Mr. Shuteyev said that the biggest problem for small- and medium-sized businesses in his region is securing loans.
Galina Matveyeva, the deputy head of the Novgorod city administration, spoke about economic development in her region. She said the region had benefited from large-scale direct investment by the candy maker Cadbury and the chewing gum maker Stimorol. Novgorod, she added was actively involved in the Gore-Chernomyrdin Commission''s efforts to encourage foreign investment in Russia. She said that because federal funds are not forthcoming, regions like Novgorod have to rely on their own resources. Still, said Ms. Matveyeva, "where there''s a will, there''s a way."
Mr. Borovoy wrapped up the discussion of small- and medium-sized business in Russia by challenging the optimism of his colleagues from the regions. "Small business can''t exist in Russia," he said. With taxes eating up 100-140% of profit and complete criminalization of the tax system, said Mr. Borovoy, there is no hope for small-time entrepreneurs to develop a successful business.