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Source: www.asiaecon.org |

RUSSIA'S NEW ECONOMIC PLAN


In another attempt to boost the economy, the Russian government has promised to place 4 billion rubles ($120 billion) worth of orders with domestic companies, a deputy economic development minister said Monday.


In another attempt to boost the economy, the Russian government has promised to place 4 billion rubles ($120 billion) worth of orders with domestic companies, a deputy economic development minister said Monday.

The money will be spread out among various industries, with 800 billion ($23.94 billion) rubles going towards small businesses. At a conference called “State Order-2009: Stability in Crisis”, Deputy Minister Anna Popova said, “We will give ... preference to domestic producers and will pay special attention to small businesses.”

Besides small businesses, the automotive industry will also receive special attention. Prime Minister Vladimir Putin said in December that the government would spend 27.7 billion rubles ($829 million) on vehicles and the Transportation Ministry would receive 40 billion rubles to buy equipment through a leasing company.

“State orders are all I can hope for,” said Sergei Limonnikov, chief executive of Nizhegorodets, which equips Ford vehicles for the police, hospitals and other services. “I sold 50 percent fewer [vehicles] this quarter, and I hope that most of our cars this year will be bought by the state,” Limonnikov said.

Most companies welcome the State and hope to be included. “We would be happy to sell almost all of our products to the state this year,” said Lyudmila Balgurina, chief executive of Tula-based Children’s Toy, which makes toy drums, accordions and guitars. The toy maker is struggling to survive after demand halved in the first quarter.

Companies have been begging for state orders for months, and Putin and other senior officials have promised to deliver in an attempt to revive the economy. But Finance Minister Alexei Kudrin warned earlier this month that the orders could not replace private demand and would be insufficient to get Russian companies through the crisis. He called for the government to cut taxes and red tape to boost private demand.

But some companies were not counting on private demand to help them survive. “We want our drugs to be purchased for city hospitals,” said Svetlana Zaikina, marketing manager at Volgograd-based pharmaceutical company Europa-Biofarm. “Tykveol, one of our drugs used to treat liver disease, costs half the price of similar foreign-made medicine. But the hospitals buy them, even though the quality of our drugs is higher and they are faster acting.”

As competition heats up for state orders, violations have increased among companies making bids for the contracts, Federal Anti-Monopoly Service head Igor Artemyev told the conference. He said bidders have teamed up to keep prices high because the bidder offering the lowest price usually wins the contract.

“Collusions have become widespread as small companies all around the country help, as they say, the companies win state orders,” Artemyev said, adding that the problem was most widespread in construction. “They just strike agreements among the bidders so that everything is actually decided before the auction.” Artemyev warned that collusion was a crime punishable by up to five years in prison under a law that would come into force at midyear.

With the fierce interest in state orders, Russia’s Academy of National Economy will soon start offering short courses of up to three months on how to win a state order. “We have just opened enrollment and expect huge demand,” academy rector Vladimir Mau said on the sidelines of the conference. “We will also train state officials how to spend the money allocated for state orders properly.”

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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