Remarks by Angel Gurría, OECD Secretary-Common, delivered on the Gaidar discussion board
Moscow, 18 January 2013
Pricey Mr Mau,
It’s a nice pleasure to take part within the Gaidar Discussion board and I thanks for this invitation to handle such a educated viewers. The Gaidar Discussion board is a well-known occasion opening the yr in Moscow and permitting us to replicate on the worldwide and Russian financial outlook in addition to to debate the position of Russia within the world financial system.
2013 will likely be a crucial yr for the world financial system, hopefully a turning level within the exit from the disaster. 2013 will even be a crucial yr for the connection between Russia and the OECD. We at the moment are working full velocity on Russia’s accession to the OECD, and are additionally cooperating actively on the Russian G20 presidency.
Let me first say just a few phrases on the worldwide financial outlook, which has deteriorated, once more. We’re certainly removed from being out of the woods. We undertaking a hesitant and uneven restoration for the OECD space over the subsequent two years, round 1.4% in 2013 and a couple of.3% in 2014. But once more! The euro space will stay in or close to recession effectively into 2013. Progress is anticipated to choose up within the US and Japan, however solely steadily, whereas a faster restoration is anticipated within the rising economies. On this grim context, the Russian financial system will proceed at above 4 per cent in 2012 and 2013, a projection, nonetheless, a lot dependant on oil costs evolution.
However arduous occasions are additionally occasions of alternatives. In Russia like within the OECD, governments should act decisively to handle the lengthy standing structural issues which have weakened their economies. They have to additionally act collectively, significantly throughout the G20, to place the worldwide financial system on a renewed development path. And right here Russia’s management will likely be requested. Russia is certainly a crucial participant on the worldwide scene, for sure. Its management is much more distinguished now in 2013 with its Presidency of the G20. There are excessive expectations on this Presidency, and a rising feeling of scepticism on the G20 capability to fulfil its mission. However I’m satisfied that the Russian presidency may obtain nice outcomes. The OECD stands able to assist it because it has for earlier Presidencies.
However to have the ability to absolutely play this main position, Russia must modernize its financial system. Its strengths are well-known: initially a little or no public debt, a fairly enviable scenario these days. Russia additionally enjoys excessive labour power participation and a excessive stage of training. In some areas, like area expertise, Russia is even on the frontier. Its GDP per capita hole relative to the higher half of the OECD narrowed quickly previous to the disaster. And we at the moment are seeing renewed convergence.
Nevertheless, regardless of its wealthy pure and human endowments, the Russian financial system remains to be comparatively backward. It has a low productiveness and per capita earnings, and low entry to and use of ICT. It suffers excessive inequality in addition to poor outcomes on well being and the setting. Its pattern development has fallen effectively under 4% and stays closely depending on pure useful resource extraction. The share of oil and gasoline in exports has even elevated additional because the disaster. Furthermore, very unfavourable demographic developments will weigh on development potential going ahead and put the social system below excessive stress.
To modernize its financial system, Russia thus faces crucial challenges: a structural problem, a social problem, an environmental problem and an institutional problem. Let me concentrate on them.
Russia first faces a crucial structural problem to cut back its dependence on oil revenues. It wants significantly to insulate its public funds from oil worth fluctuations. This isn’t new and is effectively acknowledged by the Russian authorities.
Diversifying the financial system would require elevating productiveness development, and there may be appreciable room to take action. On this regard it’s essential to extend competitors, together with by making product market regulation much less restrictive and by decreasing the position of the state within the financial system. This must be coupled with a critical reform of state-owned enterprises’ governance, to make sure inter alia that they function below aggressive neutrality guidelines. Opening additional the financial system can be essential and on this regard WTO accession ought to have very optimistic outcomes.
Loads could be completed too to stimulate innovation.
Nevertheless, the modernization of the financial system won’t occur with out tackling Russia’s large social challenges. Proper now, Russia suffers from an exceptionally excessive earnings and regional inequality and from well being outcomes effectively under these of OECD international locations. In a nutshell, Russia wants to speculate urgently within the high quality of its human capital.
This requires initially a extra environment friendly and better-funded healthcare system. Russia wants to extend public well being care funding and guarantee a good and environment friendly distribution of those assets. Prevention insurance policies nonetheless stay crucial, specifically to cut back alcoholism and tabagism that result in excessive untimely mortality amongst males of working age.
On the social coverage entrance, loads is likely to be completed to cut back the excessive relative poverty – 17% of the inhabitants in contrast with an 11% OECD common. And right here the strongest shoulders ought to bear a fair proportion of the price of social safety. Earnings taxation progressivity ought to thus be elevated, in addition to earnings ranges over which social safety contributions are due. The household coverage may additionally focus extra on decreasing in-work poverty amongst households. Lastly, it’s essential to boost the monetary sustainability of the pension system.
A lot stays to be completed additionally to enhance the functioning of the labour market, on the coronary heart of earnings inequality, and thus to strike a greater stability between labour market flexibility and employees’ earnings safety. This suggests redressing the uneven bargaining energy between employees and employers and offering simpler assist to the unemployed.
Final however not least, the training system wants a critical overhaul. With the very best stage of instructional attainment on the earth, Russia’s instructional efficiency as measured by PISA ranks under most OECD international locations. There may be additionally a major mismatch in expertise’ demand and provide. It’s thus essential to replace the curricula within the VET system, to encourage better engagement of employers in it, in addition to to enhance grownup training and life-long studying.
In addition to growing its human capital, Russia must protect its pure capital. It nonetheless has one of the crucial energy-intensive economies on the earth. It’s the fourth largest consumer of power and the third largest emitter of greenhouse gases. Furthermore, it has one of many highest charges of untimely mortality attributable to air air pollution.
The environmental problem and scope for power effectivity funding is thus large. This must be a coverage precedence and loads is certainly occurring, together with in relationship to the OECD accession. Formidable targets have been established in addition to a long-term technique final yr. However progress could be very sluggish. Up to now the coverage measures and devices indentified seem inadequate, in addition to monetary assets. Certainly, solely 0.2% of the federal government funds is allotted to setting. And right here once more, implementation is missing.
To progress additional, much less emphasis must be placed on administrative measures and extra on monetary incentives. This suggests initially accelerating the set up of meters for power and water use, then eradicating subsidies for home power use, whereas aiding low-income households by way of the tax and profit system. It additionally requires reforming the environmental tax system and critically upgrading waste administration practices. Final however not least, environmental and inexperienced development issues must be built-in within the long-term socio-economic technique. That is difficult in every single place, much more in Russia.
Let me now delve on the final however not least problem, the institutional one, which stays colossal. Russia certainly wants to enhance on three crucial and associated factors: the effectivity of its public administration, its enterprise local weather and the extent of corruption.
A extra open, competent and accountable public administration is badly wanted. It’s certainly a prerequisite to design and implement the mandatory reforms to realize a sustainable and inclusive development. Loads has already been completed on this regard, however extra is required. This may require inter alia the implementation of entry to data provisions and a complete technique to have interaction residents way more within the coverage course of.
The poor enterprise local weather is one other obvious and protracted handicap for the Russian financial system. Doing enterprise in Russia is tough and dangerous, as a result of heavy administrative burden, the widespread corruption and a weak rule of regulation. Whereas sure enhancements have been achieved, extra complete, energetic and constant coverage motion is required. It’s pressing for instance to chop crimson tape considerably and to cut back the amount whereas elevating the standard of legal guidelines and rules. Strengthening the safety of whistleblowers can be vital; in addition to reinforcing judicial independence and regulation enforcement generally. This stays an enormous work in progress. However it’s essential, because the implications are wide-ranging and critical, together with low competitors, sluggish innovation and low funding. This thus threatens the general financial diversification technique.
Women and gents,
Russia is dealing with large challenges. It’s extremely wealthy in pure and human property. To modernize itself and thus diversify, it must put money into these property and to protect them. The reform agenda is daunting, masking structural, social, environmental and institutional reforms. Loads has already been completed however implementation stays a crucial problem.
In all these areas, the OECD accession course of offers a helpful alternative to take inventory of convergence, and to establish each the progress in addition to the areas the place the gaps are nonetheless massive. Drawing on OECD expertise and peer evaluate course of could also be significantly helpful to Russian coverage makers. It is going to assist them design and implement these crucial reforms. OECD accession ought to thus not be seen as an finish in itself, however quite as a conduit for enhancing policy-making and financial efficiency. It will likely be a powerful catalyst for Russia’s personal modernisation agenda.
2013 will likely be a crucial yr for reforms in Russia, for Russia’s management and for its accession to the OECD. It is going to thus be a crucial yr for all of us. Allow us to work collectively to ensure it’s a profitable one.
Thanks / Spassibo bolchoy