Business
Russia’s Putin Orders Investment, Labour Shake-Up
Vladimir Putin ordered Russia’s government to boost investment and shake up state-run industries in a flurry of decrees issued after he returned to the presidency on Monday.
The initiatives are part of Putin’s call for a “new economy”.
Putin set out his long-term economic and social goals in the orders, issued on the first day of a six-year presidency during which he will face pressure to improve Russia’s business climate, shrink the state’s role and ease reliance on energy exports.
The president ordered the government to take measures to raise capital investment to no less than 25 per cent of GDP in 2015, from the current level of 20 per cent, and to create 25 million high productivity jobs by 2020.
He also called for a 50 per cent increase in labour productivity by 2018 and a 30 per cent increase in the share of high tech products in GDP in order to lessen Russia’s dependency on natural resources.
Putin, who has repeatedly spoken out against corruption and red tape, with little obvious success, during his 12 years in power, also said he wanted Russia to climb from the 120th place it occupies now in the World Bank’s Doing Business index to 50th place in 2015, and 20th place in 2018.
The orders from Putin, who ran Russia as president from 2000 to 2008 and then as prime minister until Monday’s inauguration ceremony, reflected an acknowledgement of the need to attract more investment and diversify the economy.
In his address after taking the oath of office, Putin said that “the lives of future generations, the historic prospects of our state and nation depend on real successes in creating a new economy and modern standards of living”.
After the ceremony, Putin sent a letter to the speaker of the State Duma lower house of parliament, asking legislators to approve the candidacy of former President Dmitry Medvedev as prime minister.
He is expected to be confirmed on Tuesday.
Putin’s decrees formalise ideas and goals he expressed in speeches and articles during the presidential election campaign.
The decrees set tough goals for Medvedev, who is expected to be a much weaker prime minister than his predecessor Putin, with many insiders predicting Medvedev’s time on the job is limited.
Putin and Medvedev are yet to announce their choices for ministerial jobs.
Medvedev would like to squeeze political heavyweights like Deputy Prime Minister Igor Sechin out of the government and bring in his loyalists.
In line with the law, the government resigned on Monday, with Deputy Prime Minister Viktor Zubkov becoming an acting prime minister until Medvedev’s appointment.
Medvedev will have two weeks to form the new cabinet.
In the decrees, Putin said he wanted the government to sell its stakes in firms which do not belong to natural resources or defence sectors and are not natural monopolies.
That would require a change to the state’s privatisation programme which he wanted in place by Nov. 1, he added.
During Medvedev’s presidency Russia drafted an ambitious 32 billion dollars privatisation plan but little progress has been made while the role of the state in the economy has continued to grow.
Putin also wanted to limit acquisitions by state-controlled companies, which should also come up with schedules for non-core asset sales by Dec. 1.
The decree asked the government to analyse the efficiency of three “state corporations” whose activity is regulated by special laws and which receive capital injections from the budget.
Putin also asked the government to present proposals by June 1, 2012 on the reform of the government procurement system with obligatory public hearings on all state orders exceeding one billion roubles ($33.63 million).
Putin called for an increase in real wages by 40 to 50 per cent by 2018 and said average mortgage rate should not exceed inflation by more than 2.2 percentage points.
The facility will be disbursed through participating Microfinance Institutions (MFIs), which will in turn extend the loans to their customers, particularly SMEs, as they directly interface with businesses at the grassroots level.
The Executive Director of COMCIN, Mr. Micheal Ogbaa who represented the Chairman, Dr. Iredele Oyedele (FCA, FCCA), said the initiative is designed to strengthen micro-lending institutions and expand access to finance for grassroots entrepreneurs, particularly women and youths in the informal sector.
Ogbaa explained that COMCIN does not lend directly to individuals but works through its network of microfinance and cooperative institutions, which in turn provide loans to end users.
“We came together to advocate for the microfinance ecosystem. Commercial banks often exclude people at the grassroots, but our members are positioned to reach them. This facility will empower them to do more,” he said.
He noted that the loan scheme offers low interest rates and flexible repayment plans, making it more accessible to small business owners.
According to him, about 90 percent of beneficiaries are expected to be women, who play a key role in sustaining families and driving economic activities at the local level.
“Our focus is on traders, service providers, and players in the informal sector. These are the real movers of the economy. By supporting them, we are strengthening families and contributing to national development,” he added.
Ogbaa disclosed that eligible SMEs with proven integrity and business track records could access up to N5 million each through participating micro-lending institutions. The rollout has commenced in Lagos and will extend to Abuja, Enugu, and other regions, including the South-West, South-East, and North-East.
He said 12 micro-lending institutions have already benefited from the scheme, while 85 applications are currently being processed under the pilot phase.
“Our target is to reach at least 100,000 SMEs nationwide. We are building a platform that connects funding partners with credible micro-lending institutions, creating a reliable channel for financial inclusion,” Ogbaa said.
He added that COMCIN is also working to attract larger funding pools from development finance institutions and private investors, noting that successful implementation of the pilot phase would boost confidence and unlock more capital for SMEs.
“We have seen encouraging testimonies from early beneficiaries. As we demonstrate transparency and efficiency, more institutions will be willing to channel funds through us,” he said.
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