Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Russia Can Be a New 'Tiger'




When I first came to Russia, Aug. 1, 1985, I felt like I was in a time warp: the Soviet Union seemed stuck 40 or 50 years in the past, but I knew for certain what the future would hold.


With this feeling in mind I have spent the last 10 years of my life committed to rebuilding Russia as the "New Economic Tiger of the World." By recreating Russia's economic stability and the resultant guarantee of the social safety, health and freedom of opportunity of her citizens, Russia can lead the world into the next century. Therefore, my life commitment to her success!


What do I mean by the New Economic Tiger of the World? I am alluding to the unparalleled economic success of the small but dynamic and powerful countries of Korea, Taiwan, Malaysia, Hong Kong and Singapore. These Asian "tigers," with precious few natural resources themselves, are outdistancing the world several times over in economic growth and the relative quality of life of their peoples. Their secret is a "psychology of success" in the minds of their citizens and the mind of the worlds' investors and risk-oriented capital managers.


Behind this "psychology of success" is both the human psychological environment and the legal and regulatory economic framework in which ideas, capital and incentives for economic growth could thrive and multiply without hindrance. The Asian tigers created a simple system of regulation and taxation under which business would flourish and where it was almost as simple to start, finance and establish a small enterprise as to acquire a driver's license. Businessmen could focus on growth and not tax evasion and underground economic activities.


Russia, by all experts' calculations, has probably more than 1,000 times the natural and intellectual resources and maybe 100 times the land and space in comparison with all of these Asian tigers combined. But until now, economic growth in Russia has been declining steeply, and capital has been leaving at a rate some 40 times greater than that at which it is flowing in.


So, what will it take to make Russia too a tiger?


What is needed is a catalyst for the country's regulation-weary, tax-strangled and crime-worried citizens and businesses. This catalyst must be comprehensive enough, yet simple enough, that virtually overnight the people of Russia and the world awake from their complacency and hopelessness and sit up and listen to the call of success and opportunity.


This catalyst is the virtual overnight elimination within Russia's borders of all current forms of personal and corporate taxation, duties for import and export, penalties for currency violations and value-added taxes for a five-year period. This act, in one great move, eliminates the habit of tax evasion and the principal means by which the underground economy and the mafia flourish in this country, strangling its future.


Immediately allow the sale and freehold of all real estate in Russia by any person of any country. How much money would it take to buy all of Russia? More than all the money in the world today. Immediately eliminate most visa hurdles for visitors, and provide simple requirements for Russian ?migr?s to become residents and eventually citizens, granting citizenship almost immediately for those who bring capital.


Such a catalyst to a great extent would create the essential "psychology of success" within the minds of Russians and people abroad, those with capital and the decision-making capability to move that capital, both intellectual and financial, anywhere in the world.


This whole concept can be summarized by saying: "Play the game of the free market better than those who invented it."


Certainly you are now all thinking that this is a fine and wonderful idea in principle, but how does the country pay for it? How does the government care for the needs its citizens and the defense of its borders and interests? How much will it cost?


According to a 10-year projection by the Committee on Natural Resources of the Russian Federation, created with the support of a group of economic scientists and Russian business people, Russia has in excess of $28 trillion proven, Western-acknowledged reserves and resources, and more than $140 trillion in total though unproven assets. It would be my approach to sell 7 to 12 percent of the proven reserves, or even more if needed, for some $3 trillion over a five-year, tax-free period. This sum would fully finance the government budget, private-sector investment guarantees, pension fund revitalization and recapitalization, infrastructure modernization, banking insurance programs and additional expenses incurred by the state. A small sum indeed to allow the "catalyst" to cause its reaction and to create this psychology of success for the people of Russia and the rest of the desirable world.


All of these funds could be acquired from the "sale" or "lease" on strictly defined terms of just 2 percent to 10.5 percent of Russia's resources and assets to the sources of "free-floating" world capital.


And after five years, what's to come? At the beginning of this program, in order to give the psychology of success a clear future, it is an absolute must that the future plan of simple, reasonable, and maximum tax plans be announced. It would be my approach to implement a 16.5 to 18 percent flat-tax -- similar to that of Taiwan -- with no capital gains taxes and other features intended to encourage free investment and reinvestment within Russia of profits. But at the same time, free and unhindered capital passage of profits, if so desired by the investors, must be allowed.


With this percentage of taxation and with the rewards of a completely free market having created the vast middle class among the residents of Russia, she would truly be known as the "Economic Tiger of the World" and a new leader of the world for the 21st century.





Paul Tatum is president of Americom Business Centers Inc., a partner in the Radisson Slavjanskaya Hotel and Business Center. This comment is adapted from a speech he made to the Federation Council, the upper house of parliament, in October. The Moscow Times welcomes submissions to Soap Box; please call the Business Desk at 257-3741.