Kremlin Dream Team Needs More Direction

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The International Monetary Fund, the World Bank and the government are in a shouting match over whether the economy -- growing at roughly 8 percent a year -- is overheating, as the IMF believes, or underinvested, as the government thinks it is. This debate is a good sign of the heightened expectations for Russia's future.

Compare that with 1998, when the IMF managed the country's finances out of Washington and its monetary reserves were at $8 billion, while the gross domestic product was under $100 billion. Today, Russia is one of the world's fastest-growing economies, with GDP of more than $1.4 trillion and currency reserves of about $550 billion. It is about to become Europe's largest consumer market and has already overtaken Germany in car sales.

First Deputy Prime Minister Igor Shuvalov chose the right moment at the St. Petersburg International Economic Forum to call for reinventing the country's economic leadership by rejecting "the catching-up complex" and focusing on building Russia's own social model, which other nations would strive to imitate.

Shuvalov's speech indicates that the Medvedev-Putin team understands the formidable challenge of 2008 -- modernization -- and sees the need for new approaches, different from the ones employed over the past eight years.

President Dmitry Medvedev and Prime Minister Vladimir Putin have begun to emphasize effective institutions, the rule of law, government accountability and investment in human capital as essentials for creating a globally competitive economy.

Medvedev identified corruption, obstructive bureaucracy and inadequate recourse to legal protections as principal impediments to Russia's growth and investment flows.

But when it comes to translating this into realistic government programs, the dream team has been lacking specifics and continues to be mired in policy disagreements. A long-term development strategy has yet to be approved by the government, and the public has not been engaged in this discussion.

So far, the agreement appears to be the need to make massive investments in the country's infrastructure, starved for funds over the past 15 years. As Economic Development Minister Elvira Nabiullina said, it makes little sense to build five industrial plants if you can provide electricity for only two of them.

Shuvalov dodged the question of how exactly Russia's appealing social model would look. Aiming for leadership will not be enough without a sense of purpose and direction.

The dream team needs to produce that -- quickly.

Vladimir Frolov is president of LEFF Group, a government relations and PR company.