Report of the HSE: No transition to a new economic equilibrium Russia will return in 2006 – Rosbalt.RU

 At a time when oil and gas rents are no longer growing, you need to get rid of old, poor institutions, otherwise Russia will face inertia scenario. This was stated in a new report by the experts of the Higher School of Economics (HSE), submit it on the eve of the HSE at the April conference.

 The report authors presented five basic conditions for the transition to a “new economic equilibrium,” in which the business is characterized by a “normal expected rate of return”, RBC reports.

 The first of these is to reduce the annual rate of inflation to 3-4%. The second – an opportunity for large and medium-sized businesses to obtain resources through credits or placement on the stock market. The third condition was the reduction of political risk business, the following – partial removal of the existing control and monitoring system that today, as the report says, is comparable to the forensic power system, in particular control and supervisory system in its present form “takes away” from business about 2% of GDP per year.

 The final condition is the rejection of the institution sverhnalogovogo “charity taxation” business. “Such a public distribution list: you’ll repair the temple, you – the basketball team to finance, and so on”, – said the rector of the Higher School of Economics. This “charity” costs to business in 2-3% of GDP, and profits for some enterprises up to a quarter, estimate the authors of the report.

 In addition, the authors draw attention to the so-called “offshore capitalism”, which in Russian is specific: if the usual care in the foreign jurisdiction is due to the tax aspects, in Russia it acts as a form of risk insurance

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 The authors believe that all this gives rise to the Russian Business excessive demands on profitability, which in itself is achievable only in special cases. Thus, the authors give an example: if in market developed economies 10-12% of the expected annual yield is normal for business psychological level to start projects in Russia this threshold is 20% or even 30%. To provide this level of profitability can be except that the natural resources, monopoly or innovative business.

 The inertial scenario, which experts fear the Higher School of Economics, suggests that the reserve fund will be exhausted within two to three years. Large non-oil business will not recharge, funding social programs will largely be trimmed (roughly to the level of 2006), which will lead to a decrease in consumer demand and a drop in agriculture, food industry and reteyla.

 “In these circumstances, it is important, when and through which signals the major players realize that the old institutions are no longer able to work,” – the authors believe. However, they point out that some of the conditions for change has already started. Firstly, it is possible to expect reduction of inflation to 6-7%, which will serve as “a signal for the decrease in the yield strips in the evaluation of new projects.” Second, the global attack on offshore complicate withdrawal of capital from the country, it will also reduce the required return. This is the starting conditions for the “dismantling” of bad institutions, but to overcome the remaining required change in government policy – in particular, the creation of institutions of long-term loans by raising the retirement age and the transition to a funded pension system

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