Improving Russia's policy on foreign direct investment

Foreign direct investment brings host countries capital, productive facilities, and technology transfers as well as employment, new job skills, and management expertise. It is important to the Russian Federation, where incentives for competition are limited and incentives to becoming efficient are blunted by interregional barriers to trade, weak creditor rights, and administrative barriers to new entrants. The authors ague that the old policy paradigm of foreign direct investment (established before World War II and prevalent in the 1950s and 1960s) still governs Russia. In this paradigm there are only two reasons for foreign direct investment: access to inputs for production and access to markets for outputs. Such kinds of foreign direct investment, although beneficial, are often based on generating exports that exploit cheap labor or natural resources, or are aimed at penetrating protected local markets, not necessarily at world standards for price and quality. They contend that Russia should phase out high tariffs and non-tariff protection for the domestic market, most tax preferences for foreign investors (which don't increase foreign direct investment but do reduce fiscal revenues), and many restrictions on foreign investment. They recommend that Russia switch to a modern approach to foreign direct investment by: 1) Amending the newly enacted foreign direct investment law so that it will grant non-discriminatory"national treatment"to foreign investors for both right of establishment, and post-establishment operations, abolish conditions (such as local content restrictions) inconsistent with the World Trade Organization agreement on trade-related investment measures (TRIMs), and make investor-state dispute resolution mechanisms more efficient (giving foreign investors the chance to seek neutral binding international arbitration, for example). 2) Strengthening enforcement of property rights. 3) Simplifying registration procedures for foreign investors, to make them transparent and rules-based. 4) Extending guarantee schemes covering basic non-commercial risks.Environmental Economics&Policies,Labor Policies,International Terrorism&Counterterrorism,Economic Theory&Research,Payment Systems&Infrastructure,Environmental Economics&Policies,Foreign Direct Investment,Economic Theory&Research,National Governance,International Terrorism&Counterterrorism

Give growth and macroeconomic stability in Russia a chance - harden budgets by eliminating nonpayments

The authors analyze the links between Russia's disappointing growth performance in the second half of the 1990s, its costly and unsuccessful stabilization, the macroeconomic meltdown of 1998, and the spectacular rise of non-payments. Non-payments flourished in an environment of fundamental inconsistency between a macroeconomic policy geared at sharp disinflation, and a microeconomic policy of bailing enterprises out through soft budget constraints. Heavy untargeted implicit subsidies flowing through the non-payments system (amounting to 10 percent of GDP annually) have stifled growth, contributed to the August 1998 meltdown, through their impact on public debt, and have made at best a questionable contribution to equity. Dismantling this system must be a top priority, along with promoting enterprise restructuring and growth (by hardening budget constraints) and medium-term macroeconomic stability (by reducing the size of subsidies). Getting the government out of the non-payments system means settling all appropriately controlled budgetary expenditures on time, and in cash, and eschewing spending arrears, thereby setting an example for enterprises, and laying the groundwork for eliminating tax offsets at all levels of government, and insisting on cash tax payments. To stop energy-related subsidies, would require not only that the government pay its own energy bills on time, and in cash, but also that the energy monopolies be empowered to disconnect non-paying clients. This will enable the government to insist that the energy monopolies in turn pay their own taxes in full, and on time.Banks&Banking Reform,Public Sector Economics&Finance,Economic Theory&Research,Payment Systems&Infrastructure,Environmental Economics&Policies,Banks&Banking Reform,Environmental Economics&Policies,Municipal Financial Management,Public Sector Economics&Finance,Economic Theory&Research

Case Studies on Impediments to Exports in Small Transition Economies

This series of enterprise case studies grew out from a 1995-1996 research project at IIASA. It acknowledged the importance of export development for the recovery of the economies of Central and Eastern Europe following their deep transformational recession in 1990-1994. The main goal was a systematic empirical analysis of the different kinds of impediments to exports in various small East European countries. The project included the coordinated elaboration of country studies for seven small transitional economies (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Romania, Slovakia and Slovenia) and the writing of three topical studies. The authors of the country studies and the author of the topical study on Russia were requested to base their work on 20 enterprise case studies each (eventually the Russian study was based on 10 cases). Before the start of the research a common scheme of the enterprise case studies was discussed and agreed upon with the authors. After completing their work the authors were asked to supplement a short version of their case studies to their main text. Eventually it was decided that, due to the length of the full text, two related publications would be arranged, one book made up of the country studies and topical studies, and another of the enterprise case studies. The book was published by Edward Elgar: Cooper, R. and Gács, J. (Eds.) (1997) Trade Growth in Transition Economies: Export Impediments for Central and Eastern Europe, Edward Elgar, Cheltenham, UK. The second publication is the present series of case studies

Case Studies on Impediments to Exports in Small Transition Economies

This series of enterprise case studies grew out from a 1995-1996 research project at IIASA. It acknowledged the importance of export development for the recovery of the economies of Central and Eastern Europe following their deep transformational recession in 1990-1994. The main goal was a systematic empirical analysis of the different kinds of impediments to exports in various small East European countries. The project included the coordinated elaboration of country studies for seven small transitional economies (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Romania, Slovakia and Slovenia) and the writing of three topical studies. The authors of the country studies and the author of the topical study on Russia were requested to base their work on 20 enterprise case studies each (eventually the Russian study was based on 10 cases). Before the start of the research a common scheme of the enterprise case studies was discussed and agreed upon with the authors. After completing their work the authors were asked to supplement a short version of their case studies to their main text. Eventually it was decided that, due to the length of the full text, two related publications would be arranged, one book made up of the country studies and topical studies, and another of the enterprise case studies. The book was published by Edward Elgar: Cooper, R. and Gács, J. (Eds.) (1997) Trade Growth in Transition Economies: Export Impediments for Central and Eastern Europe, Edward Elgar, Cheltenham, UK. The second publication is the present series of case studies

International Trade Issues of the Russian Federation

Trade and capital flows between Russia and the rest of the world are now significant for both partners. The economic reforms introduced in Russia since 1991 have converted an autarkic, highly regulated economy into a relatively open one. The dramatic change followed from the abolition of central planning and complex exchange rate controls as Yeltsin came to power in Russia and the Soviet Union collapsed. Yet the years since 1991 are not simply a record of tearing down trade barriers. Instead Russia's role in the international economy appears to be erratic and inconsistent. Also the transformation of earlier inter-republic deliveries between former republics of the Soviet Union to trade between independent states implied the sometimes controversial establishment of new trade barriers. The country's struggle to develop a viable trade policy provides unique insights into the consequences of the conflicts of economic ideas: free trade versus protectionism; rewards for economic efficiency versus social equity; and macroeconomic stability versus maintaining employment. The clash among policy proposals has been reflected in political struggles, for the decisions on these matters have an impact on the lives of the 179 million Russians. The papers that make up this volume are from a conference held in May 1994 at IIASA, in Laxenburg, Austria. The conference was on Russia's international trade issues, aside from its ties to the republics of the former Soviet Union, a topic of another conference in 1993

Give growth and macroeconomic stability in russia a chance harden budgets by eliminating nonpayments

The authors analyze the links between Russias disappointing growth performance in the second half of the 1990s, its costly and unsuccessful stabilization, the macroeconomic meltdown of 1998, and the spectacular rise of non-payments. Non-payments flourished in an environment of fundamental inconsistency between a macroeconomic policy geared at sharp disinflation, and a microeconomic policy of bailing enterprises out through soft budget constraints. Heavy untargeted implicit subsidies flowing through the non-payments system (amounting to 10 percent of GDP annually) have stifled growth, contributed to the August 1998 meltdown, through their impact on public debt, and have made at best a questionable contribution to equity. Dismantling this system must be a top priority, along with promoting enterprise restructuring and growth (by hardening budget constraints) and medium-term macroeconomic stability (by reducing the size of subsidies). Getting the government out of the non-payments system means settling all appropriately controlled budgetary expenditures on time, and in cash, and eschewing spending arrears, thereby setting an example for enterprises, and laying the groundwork for eliminating tax offsets at all levels of government, and insisting on cash tax payments. To stop energy-related subsidies, would require not only that the government pay its own energy bills on time, and in cash, but also that the energy monopolies be empowered to disconnect non-paying clients. This will enable the government to insist that the energy monopolies in turn pay their own taxes in full, and on time. Document type: Boo