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The Center for Economic and Political Research (EPIcenter)
Moscow, May 1992

From the report of President of the Russian Federation

Decision of the Congress of People's Deputies of the RF "On the Progress of Economic Reform in the Russian Federation

The Congress of People's Deputies of the RF Today it is necessary to reaffirm the DECIDES: correctness of the strategic course of

1. To reaffirm the need to pursue the course reform of transition to a market economy in the Russian Federation.

- To recognize the progress of economic Transition from the command to a market reform in the field of social protection of economy also proved to be painful the population, the taxation, finance and because the entire unwieldy egalitarian credits, investment, industrial and agra- system of social security snapped. It rian policies, of overcoming monopolism of failed to protect not only disabled state structures in the spheres of produc- persons, pensioners, students and other tion and distribution, as well as of the people in need of support. The family, comprehensiveness of the measures implemen- mothers and children - Russia's future - ted, to be unsatisfactory. also found themselves in jeopardy... Health care also found itself in a cri- tical condition... An alarming situation developed in the fields of science, culture and education. We are utterly unsatisfied with the pace of privatization. So far,privatization's progress has been slow and deformed. One must admit that this is a serious stra- tegic deficiency.

To invite the President of the Russian Federation to make substantial adjustments in the tactics and methods of pursuing the economic reform, taking into account the observations and proposals made by People's Deputies at the 6th Congress of People's Deputies of the RF, and to submit to the RF Supreme Soviet before May 20, 1992, a list of measures aimed at priority resolu- tion of the following tasks:

Prevention of a critical decline in One of the crucial (criteria for the production and prevention of mass granting of tax preferences) is perfor- unemployment; mance of contractual obligations, res- toration of vital economic links needed to stem the decline in production. The main thing is to stem the decline in production. The restructuring of industry must go hand-in-hand with broad programmes of retraining of cadres, organization of public works and reasonable utiliza- tion of the experience of pensioners. Needed already now are adjustments in the legislation on employment.

Increasing the production of consumer goods, Already in April industrial enterprises especially food will receive an extra 50 billion roubles in credits. The granting of credits will be goal-specific and tough conditions will have to be observed. Priority will be given to spending which will ensure in the near future a larger production of consumer goods, introduction of the most advanced tech- nologies and the sowing campaign.

Achievement of financial stabilization, The task of preventing inflation still relaxing of the tax burden and orienting remains extremely topical. Today it is the taxation policy towards stimulating the already clear that tax rates must be development of the leading branches of the reduced. But tax concessions must be economy; granted to those who are actively investing and increasing the physica volume of sales. The government and the Central Bank have agreed on allocating extra credit resources to fund priority economic sectors, including unfinished construction projects with a high degree of readiness and the agrarian sector.

Vigorous pursuit of structural, investment Among the major directions of this work and conversion policies; (formation and implementation of a long -term strategy of renewal of the Rus- sian economy) one may identify the following: an indepth restructuring of the national economy, demilitarization of the economy... ...up to 70 billion roubles is allocat- ed for investment needs. Conversion is one of the main direct- ions. Ten billion roubles will be allocated from the budget to finance it in the first quarter, and another 30 billion before the end of the year. 42 billion roubles in concessionary credits and non-budget conversion fund means are allocated. The possibi- lity is being studied to establish an international fund to assist conver- sion in Russia.

Implementation of real and "target-specific" Health care found itself in a critical social protection of population and preven- situation... tion of a decline in the level of consumption; Let us be bolder in attracting non- budget proceeds and means from privati- zation of federal and municipal proper- ty for the purposes of health care and protection of mothers and children.

The reform hit the pensioners, hard. The government is devising measures for their social protection, based on assessments of the minimal subsistence level. In January the level was 650 roubles. These assessments provided the basis for the government's original proposals concerning changing the minimal size of old-age pensions.

Recalculation of the minimal subsistence level of a pensioner in February showed that it already amounted to a monthly 811 roubles. Corresponding proposals on increasing the minimal pension to a monthly 800 roubles were submitted by the President to Parliament for consideration.

Support of budget-funded sectors, especially In connection with the really hard health care, science, culture and education; plight of workers of budget-funded fixing for them tax concessions and order of sectors, especially teachers and indexing of wages of workers in these sectors doctors, I submit for discussion by the in accordance with the wages level in the Congress a government production sphere; introduction from July 1, the wages and salaries of workers of 1992, of labour remuneration of education budget-funded sectors in the second workers at the level of average wages in quarter by 1.6-1.8 times. industry; implementation in full volume of The minimal size of rates and wages for the RSFSR President's Decree of July 11, 1991 workers of the budget-funded sphere is "On Priority Measures to Develop Education proposed to be fixed at the level of in the RSFSR"; 900 roubles. This provision accords with the requirements of the President's Decree No.1 of July 1991, under which the rates and wages of education workers must be fix- ed on the basis of average wages in industry. We deem it possible to extend this approach to the entire budget- funded sphere.

Ready for signing now is a government decision which provides for asking the Supreme Soviet for granting substantial tax concessions to higher education es- tablishments, their scientific struc- tures and enterprises on condition that extra means will be used to de- velop the material base and social protection of students and postgraduaes.

Higher education establishments will be allowed to keep all currency proceeds from foreign economic activity, and they will be exempted from obligatory sales of currency to the state. We also propose a doubling of the exis- ting subsidies for food in student's dinning rooms.

Despite the economic and financial difficulties the government is looking for possibilities and non-standard ways to give support to them (institu- tions of science, culture, and educa- tion). One way is a broad system of tax concessions to all those who remit part of their profits to the develop- ment of culture. The government intends to complete in the near future the de- velopment of programmes of reforms relating practically to all spheres of culture, national-cultural and natural heritage, and education. A draft decision on culture has been prepared, and a similar document is being drafted for education. I hope the Supreme Soviet will support them.

Implementation of effective measures to The rising crime in the country has be- combat speculation, corruption and mafia come an important political and econo- structures; mic problem. Organized crime, corrup- tion, all kinds of shady operators, merging with state-aut structures are trying to dictate "their rules of the game". Today we are especially in need of strong law-enforcement organs. We cannot be frugal in that. I hope that the Decree on the struggle against corruption, recently signed by me, will also play a positive role.

Improvement of price policy and of state A top priority in the present situation regulation of prices of fuel and energy is finding an extra mechanism of apply- resources; ing pressure to prices. This is necessary in order to restore the movement of goods and a normal level of sales, and - the principal thing - to halt the decline in production.

Stimulation of entrepreneurial activity, The societal force, capable of getting including implementation of a set of Russia out of the crisis is a massive measures to support small and medium-sized stratum of entrepreneurs. The govern- entrepreneurs, peasant (farmer) farms and ment will provide state support for agricultural cooperatives; every citizen deciding to embark on this road. This will permit the crea- tion of a new major sector in our economy - small-size economy - millions of small and medium-sized entrepreneurs, and will become an effective instrument of anti-monopoly policy.

Ensuring the participation of broad A major task of the immediate stage of strata of population in privatization, privatization is to open people's per- and a diversity of its forms with a view sonal privatization accounts. Every to increasing the number of property- citizen of Russia must receive his per- owners; sonal privatization deposit no later than the 4th quarter of this year. We need millions of property-owners, not a hundred millionaires. Only in this case the reforms will receive broad support and a solid social base.

Creation of a competitive environment, primarily through demonopolization of concerns, sectoral ministries and departments;

Goal-specific liquidation of reciprocal The crisis of credit-worthiness of non-payments of industrial and enterprises has assumed extremely acute agricultural enterprises; forms (the amount of reciprocal non- payments is in excess of 800 billion roubles). Aware of the compllexity of the period of transition and of the need to mitigate the severity of the payments crisis, the government found it possible to make a limited-scale credit injection into the national economy.

Reduction of the consequences of the Chernobyl disaster to a minimum;

To invite the President of the Russian At present the groundwork is being Federation to align the decrees of the laid for a new approach, a new RF President concerning the land reform policy in the relations between the with the laws of the Russian Federation, state and the agrarian sector. The ensuring, among other things, a guaranteed principal provisions right for the citizens of the Russian have already been formulated. Federation to unhampered organization of They are based on renunciation of admi- peasant (farmer) farms. nistrative levers of pressure, on support of all forms of entrepreneur- ship in the rural areas and on creating equal conditions for the pursuit of economic activity.

It is necessary to point out, however, that the making of state policy today is connected with a number of diffi- culties, including those of legisla- tive nature. The law "On Land Mortgage" has not been adopted. The existing legislation is contradictory. This is true, in the first place, of laws on land reform and on granting workers the right to establish a peasant farm. It is necessary to urgently embark on the work of their adjustment and specifica- tion.

To strengthen the coordination of work of the Supreme Soviet of the RF and the government of the RF in implementing the economic reform. To draw the attention of legislative and executive authorities to the inadmis- sibility of violating the principle of separation of authority. To prohibit the RF government from interfering in the legisla- tive prerogatives of the RF Supreme Soviet, and to prohibit the RF Supreme Soviet and its organs from interfering in the opera- tional and economic activity of the RF government; the RF Supreme Soviet shall concentrate on the legislative back-up of reforms and on oversight functions.

To instruct the RF government together with We wish to increase the interest rate the Central Bank of the RF, and the Savings on deposits because people's deposits Bank to draft and submit within a month to "are melting away", and we decided to the RF Supreme Soviet proposals on indexing bring the interest rate up to 25%. I the population's deposits and on the order of would simply like to ask where the adjusting the interest rates in the RF Savings Bank will get the money from to Savings Bank. pay this interest rate? We have already been paying 15% for a long time (from a speech by G.Matyukhin, Chairman of the Board of the Central Bank of the RF).

The Higher Economic Council under the Presidium of the RF Supreme Soviet, together with the RF government, shall invite to participate in drafting proposals on adjust- ing the progress of economic reform, repre- sentatives of authorities and administrations of republics within the Russian Federation, krays, oblasts, the autonomous oblast, autonomous okrugs, the cities of Moscow and St.Petersburg, labour collectives, trade union and other public associations, as well as economic managers, entrepreneurs, scien- tists and other specialists.

2. To invite the RF President and the RF Defining the state policy today is government to draft and submit to the RF hampered by a number of difficulties, Supreme Soviet in the established order including of legislative nature. The new draft legislative acts and proposals law "On Land Mortgage" has not been to change the existing legislative acts, to adopted. The existing legislation is ensure a purposeful and consistent develop- contradictory. It is true in the first ment of the legal base of economic reform. place of laws on land reform and granting workers the right to estab- lish peasant farms. It is necessary to urgently begin their adjustment and specification.

The RF Supreme Soviet shall submit corres- ponding changes to the existing legislative acts and adopt new legislative acts necessary for the continuance of economic reform.

To provide, in keeping with the current legis- lation, for the priority right of labour collectives to controlling interest in the state programme of privatization.

To invite the RF President to eliminate es of the RF government and the RF President.

The government of the RF and the Central So far the situation (with the circu- Bank of the RF shall adopt urgent measures to lation of money in cash) remains increase the technical possibilities of the difficult and it appears that it will Goznak enterprises with a view to meeting the hardly be possible to drastically cash requirements without delay. The RF rectify this situation in the near Supreme Soviet shall allocate for this future... The Goznak operates to full purpose currency and rouble means in the capacity, but the situation related to budget for the 2nd quarter of 1992. increasing Goznak capacities is not that fine, for there is a shortage of money there too. And the Goznak is within the jurisdiction of the Ministry of Finance and, in general, the money is not allocated in quantity sufficient for an immediate increase in the production capacities (from a speech of G.Matyukhin, Chairman of the Board of the Central Bank of the RF).

3. The RF Supreme Soviet shall within three We need not commander-officials but months pass the laws "On the Council of state civil servants working on a Ministers (Government) of the Russian Federa- contractual basis. When we adopt such tion", "On State Service", "On Responsibility a system is largely dependent on the of Officials of Top State Organs for Non- parliamentarians. A corresponding Compliance with the RSFSR Constitution and draft law has been submitted to the Legislative Acts of the RF". Supreme Soviet.

To invite the RF President to submit to the RF Supreme Soviet for agreement a candidacy to the post of Chairman of the Council of Ministers (government) of the RF.

4. The RF President, the RF Supreme Soviet and One of the main tasks in supporting the government of the RF shall ensure imple- agricultural production is that of en- mentation of the decision of the 2nd (early) suring an effective utilization of the Congress of the People's Deputies of the instruments of state support,especial- RSFSR "On the Programme of Revival of the ly credits. In this connection, we Russian Rural Areas and Development of the propose the adoption of the practice Agro-Industrial Complex". They shall assist of granting only goal-specific conces- the free expression of will by the peasants sionary credits... Repayment of a in choosing the forms of ownership and pursuit certain part of the credit and of an of economic activity. interest in kind must become a major condition for the granting of credits. As the resources start returning, the state will repay its currency indeb- tedness incurred in 1990-1991 through buying grain and other crops. A deci- sion has been taken to sell cars, household appliances and capital goods not sold to peasants last year, at prices of the 3rd and 4th quarters of last year. With a view to stabilizing the economy of the agro-industrial complex and, above all, of cattle- breeding, the presidential decree of April 4 this year provided for the introduction from May 1, 1992, of subsidies per ton of cattle-breeding products sold to the state - for all rural producers. 20 billion roubles has been allocated for the maintenance of social infrastructure of rural areas. The government together the Central Bank were instructed to submit within ten days a proposal to provide the rural areas in April- October with 70 billion roubles in extra credits for the conduct of spring sowing campaign, as well as a proposal concerning investment credits for rural producers. Currency resour- ces, allocated by international finan- cial organizations, will be channelled into the agro-industrial sector.

To insert in the 1992 budget of the Russian Federation a provision to allocate the means for complete funding of government programmes developed pursuant to decisions of the 2nd (early) Congress of People's Deputies of the RSFSR.

5. The RF government shall develop a programme to stabilize the industrial complex, and coordinate it with the government's of the CIS member-states.

6. To recommend that the RF President abolish the posts of RF President representatives in the field in connection with their duplication of powers and functions of the constitutional organs of power and administration.

7. To deem it feasible to examine the progress of economic reform in the Russian Federation at the Congress of People's Deputies of the Russian Federation in November-December 1992.