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. Last Updated: 07/27/2016

State Duma Puts Business on Hold

Itar-TassPutin shaking hands with Duma leaders after parliament adjourned for the summer Monday. From right are Duma Speaker Gennady Seleznyov, People's Deputy head Gennady Raikov, Fatherland-All Russia head Vyacheslav Volodin, Unity head Vladimir Pekhtin, Russia'
In a flurry of final readings, the State Duma on Monday wrapped up a spring session whose economic highlights included the approval of farmland sales, a new bankruptcy law and much-needed small business reform.

President Vladimir Putin met with leading lawmakers shortly after the Duma recessed at 2 p.m. for the summer and praised them for their "colossal work."

Economic Development and Trade Minister German Gref said the bills approved in the session will fuel economic growth and attract new investment.

In all, more than 30 economic bills were passed, many in the last few days. It has already become somewhat of a tradition for the Duma to extend its sessions for several working days, and this year was no exception.

But with Russia gunning for a larger role on the world stage through the G-8 and the World Trade Organization, there never seems to be enough time to approve all the laws needed to push along reforms, lawmakers said.

"As a member of all the sessions of the modern-day Russian Duma, I can't remember one that could be compared to the latest in terms of the intensity of the work and the importance of the laws that were discussed," Oleg Morozov, head of the centrist Russia's Regions faction, told reporters Friday.

"With so many bills and reforms being approved, we think that every session will be easier than the previous one. But in reality, it turns out to be quite the opposite," Morozov said.

In its last day Monday, the Duma approved in final readings the bill on bankruptcy and an initiative to simplify and cut the taxes of small and medium-sized businesses.

Following a government request, deputies abolished a 1 percent turnover tax and did away with a 1 percent road fund tax, which applied to corporate revenues and is to be compensated for by new excise taxes on tobacco, alcohol, gasoline and luxury cars.

The bills will go to the Federation Council in the fall and, if approved, to Putin for his signature.

Also Monday, the Duma tweaked the draft 2003 federal budget to allow the government to increase social spending on military service, regional salaries and the judicial system.

As expected, the Duma approved a government plan to buy the Central Bank's 99.5 percent stake in Vneshtorgbank for 42 billion rubles ($1.3 billion).

Lawmakers said the legislation passed this spring was crucial to the country's economic future.

"Not all of the legislation is for immediate action, but a lot of the bills will considerably change the lives of Russians in the longer term," Viktor Pleskachevsky, head of the Duma's property committee and a member of the pro-Kremlin Unity party, said in a telephone interview.

Putin said Monday that the bill allowing the sale of farmland was the crowning achievement of the session, paving the way for the establishment of a land market in Russia for the first time since pre-revolutionary days.

"Of course there are still a lot of holes in this bill, and it won't be easy to build again the [land] culture that was lost so many years ago," Pleskachevsky said. "But what is most important is that the bill finally sets the rules for the turnover of land."

The bill, which still needs to be approved by the Federation Council, is the logical next step to the Land Code, which was passed last fall and allows the sale of commercial, residential and dacha land. The bill regulates the use and sale of 406 million hectares of agricultural land throughout Russia. Foreigners are restricted to leases of up to 49 years.

Putin said Monday he supported the bill and cautioned that it was important to avoid rushing to sell land before a "civilized market" was formed.

Morozov said the bill -- along with legislation on alternative military service -- made this session one of the most attentively watched throughout Russia as the issues touched everybody's lives.

Legislation that will help improve the investment climate and protect property rights included the tax breaks for small business, which were drawn up by the government and largely supported by the liberal Yabloko party, and the bankruptcy bill.

"The new bankruptcy law is one of the key macroeconomic acts that sets new mechanisms to protect the rights of private owners," Pleskachevsky said.

The former law was often used by creditors and competitors to initiate bankruptcy procedures and seize control of companies.

"With the new law, which is expected to come into force in September, the rights of the owners, creditors and the government will be much better protected," Pleskachevsky said.

The rights of minority shareholders received a boost with amendments that were passed to the law on joint-stock companies and the approval of a voluntary corporate governance code.

On the investment front, the Duma passed in two readings a production-sharing agreement for two oil and gas fields in the Caspian Sea. The PSA, which is being heavily lobbied for by the Union of Right Forces party, is to come up for a final reading in the fall.

In March, the Duma passed a bill on compulsory auto insurance. Supporters of the measure hope it will bring the rule of law to the roads, but both insurers and car owners are waiting for the government to set insurance tariffs. The insurance law is to go into effect July 1, 2003.

A key plank for ongoing pension reform, a bill on investing pension funds, was approved in three readings. The bill, which has yet to be approved by the Federation Council, allows pension funds to invest in Russian equities, treasuries and corporate bonds. It also gives the funds the right from 2004 to buy into index investment funds, which invest in overseas treasuries and equities.

Putin has already signed into law the Duma's amendments to the law on financial leasing, which abolished licensing requirements for leasing companies and removed restrictions on the activities of foreign leasing companies.

A new law on money laundering came into force in February imposing new reporting obligations on financial institutions. The law is aimed at getting Russia removed from an international blacklist of countries that are lax toward money laundering.

On the reform front, the Duma last week gave initial approval to a bundle of legislation for the three-stage, 10-year reform of the railroads that will lead to their privatization.

Also, the Duma managed to override a veto from the Federation Council on amendments to the Central Bank law. If the bill is signed by Putin, a new regulative body called the National Banking Council will be created to oversee the Central Bank's activities.

In a disappointment to many investors and UES head Anatoly Chubais, the first reading of government bills on the reform of Unified Energy Systems was put off until the fall. A special working group of officials from the government, Duma and Federation Council was formed to prepare the bills for the next session.

"There were no evil intentions in some of the Duma delays," Pleskachevsky said. "Quite the opposite, it was because of the huge importance of some bills that we needed more time to work on them," he said.

Putin agreed in his meeting with Duma members Monday, saying care must be taken in taming the natural monopolies.

"Lawmakers working on these reforms have no room for any mistakes because the price for a mistake is very high," Putin said, Interfax reported.

He said top priorities for the fall session were the 2003 budget, the reform of the natural monopolies and pensions, further liberalization of the economy and cutting red tape.

The Duma reconvenes Sept. 11.