Medvedev Lays Out Economic Program

ria-novostiBillionaire Oleg Deripaska speaking to Medvedev on Friday. Behind is Regional Development Minister Dmitry Kozak.
Dmitry Medvedev, likely the country's next president, laid out a liberal-leaning economic program on Friday, urging economic liberty and a crackdown on corruption in his first major speech on the subject just two weeks ahead of the presidential vote.

Medvedev, reading faithfully from notes in a style more rigid than that of President Vladimir Putin, largely echoed some of the major themes laid out by his mentor.

Corruption, a lack of respect for the law and an unwieldy bureaucracy were among the issues Medvedev said he would tackle in his first term, though without offering specific prescriptions.

Yet as concern has grown over Putin's clampdown on dissent and his centralization of power, Medvedev outlined a more open approach that should ring well with Western investors and observers.

"Freedom is better than lack of freedom -- this principle should be at the core of our politics," Medvedev said in a speech at the Krasnoyarsk Economic Forum, broadcast on state television. "I mean freedom in all its manifestations -- personal freedom, economic freedom and, finally, freedom of expression," he said.

Medvedev, first deputy prime minister and chairman of Gazprom, said he would seek to cut down on red tape and the number of bureaucrats, reiterating Putin's call in a major speech to the State Council on Feb. 8. More than one-third of the country's total work force -- 25 million people -- is employed by the state, Putin said.

Signaling a departure from Putin's policy, Medvedev said he was against the practice of placing state officials on the boards of major corporations.

"I think there is no reason for the majority of state officials to sit on the boards of those firms," Medvedev said. Nearly all the country's top officials -- from Kremlin deputy chief of staff Igor Sechin, who chairs oil major Rosneft, to Finance Minister Alexei Kudrin, who chairs diamond monopoly Alrosa -- also head the boards of state companies.

Yet Medvedev said the state would continue to play a role. "They should be replaced by truly independent directors, which the state would hire to implement its plans," he said.

It is unclear how much power Medvedev will wield after acceding to the presidency, a result almost assured by Putin's backing for the quiet lawyer from St. Petersburg. Putin indicated in his farewell news conference as president on Thursday that he intended to take up the post of prime minister.

The huge task of battling corruption could fall to the prime minister, analysts said. Russia is ranked 143rd out of 179 countries on Transparency International's corruption index.

"Corruption is our society's most serious disease," Medvedev told the Krasnoyarsk forum, which was attended by a bevy of top officials from government, finance and industry. Medvedev has refused to take part in television debates with the three other presidential candidates, and has used official speeches instead to lay out his platform.

The government's anti-corruption campaign has taken center stage since Putin appointed Prime Minister Viktor Zubkov last year. Yet few arrests have been made, and the most public -- of Deputy Finance Minister Sergei Storchak in November on charges of attempted embezzlement -- was widely seen as the politically driven result of Kremlin infighting.

Medvedev said he would work to strengthen the judiciary and that his first term would focus on "ensuring the independence of our legal system from the executive and legislative [branches]."

The country's convoluted legal system is widely seen as one of its most politically tainted and corrupt institutions.

Medvedev said he would also seek a law to cut down on the wide-scale practice of corporate "raiding," where business owners are forced or pressured into selling up, often by state-connected officials.

And he said the state should lead by example. "The state should safeguard property in a way that sets an example for society as a whole and for each individual personally."

Both Mikhail Khodorkovsky, the former head of Yukos serving an eight-year jail term, and Mikhail Gutseriyev, the former head of Russneft who has fled to Britain, have accused the state of bringing criminal charges in order to seize their companies.

Neatly summarizing his economic plan, Medvedev said his government would focus on the four "I"s -- institutions, infrastructure, innovations and investment.

His concrete proposals were few, but included reiterating Putin's call to replace VAT with a sales tax, ensuring a favorable tax climate to encourage investment inside Russia, as well as support for making the ruble a regional reserve currency.

On the sidelines of the forum, Kudrin warned against overzealous tax cuts, however.

"If the current taxes remain in force, then within the next five years we would be able to achieve a doubling or tripling in the construction of infrastructure. If we reduce taxes this will not be possible," Kudrin said, Interfax reported. "Yes to tax reduction in the long term, but this must be done very carefully and step by step."

Medvedev conspicuously failed to mention Russia's soaring inflation, which, Putin said in his news conference Thursday, was the one problem his government could have addressed better.

"Inflation won't be a big problem in two to three years, as it has been driven by high federal budget expenditures," said Anton Struchenevsky, an analyst at Troika Dialog. Medvedev's speech focused, rather, on structural problems, he said.

"The problems that his government are going to tackle are the real, crucial problems for the Russian economy," said Struchenevsky, adding that he thought the speech was "positive and encouraging."

"Problems with the investment climate -- with the quality of Russian institutions -- are the Achilles' heel of the Russian economy," he said.