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. Last Updated: 07/27/2016

EDITORIAL: Russia Can Turn Tables On Tigers




For the past decade, it has been popular in economical circles to draw adverse comparisons between Russia's bungled attempts at economic reform and the booming economies of the Asian tigers and the emerging communist giant of China.


During perestroika, Russia was criticized for pursuing political reform before economics, in contrast to the Asian economies where authoritarian regimes were praised for putting economics first.


More recently in the aftermath of President Boris Yeltsin's chaotic reforms, Russia's crime, corruption and political instability were set against the efficiency, openness to foreign investment and legal stability in Asia.


While the crisis in Asia poses temporary problems for Russia by hurting the share market and making foreign investors wary of all emerging markets, once the dust settles it may offer Russia an opportunity.


The cracks that are now appearing in the structure of Asia's economic success should make foreign investors start to question their assumptions.


World markets have suddenly realized that a lot of Russia's problems are also present in Asia, but concealed by ill-founded investor euphoria andthe timidity of the local press and political opposition.


There is no question that Russia has a problem with corruption, but so, too, do many Asian economies. Indonesian President Suharto runs his country's economy like a family business. South Korea's chaebol business conglomerates enjoyed outrageous state privileges and subsidies.


Russia cannot just rely on these comparisons to change world sentiment. Policy makers must prove that the new Russia is a safer bet for their funds than the Asian and Latin American economies.


Russia can start drawing some comparisons of its own. For example, unlike Malaysia, which has responded with xenophobia and resentment to the pressure from foreign investors over the past few months, Russia has cooperated with the International Monetary Fund.


It has accepted a painful interest rate hike, continued a push to raise tax collection and introduced new measures to open the T-bill market to foreign investors. The government has also taken some long-overdue but courageous political steps to break its close ties with business tycoons.


Russia's economic fundamentals are starting to look better than those of some of its Asian rivals. It has a positive trade balance, relatively low debt servicing costs, a realistic budget and a reasonably competitive financial sector.


If the government can keep pushing Russia in this direction, yesterday's disaster may soon turn into a comparative success story.