Investment Fund plans and the people’s skepticism

The Moscow branch of the United Russia party held an economic council meeting on Monday, September 12. There was only one item on the agenda: how to spend the nearly 70 billion rubles “found” by United Russia in the draft federal budget for 2006.

The Moscow branch of the United Russia party held an economic council meeting on Monday, September 12. There was only one item on the agenda: how to spend the nearly 70 billion rubles “found” by United Russia in the draft federal budget for 2006 (this money will establish the Investment Fund). Our correspondent was there to observe the lobbying efforts of United Russia’s Moscow branch.

A huge banner depicting a bear hangs on the front of United Russia’s Moscow branch building, and by the entrance are some small signs for the municipal services of the Dorogomilovo district. United Russia members gathered here to discuss ways of spending the Investment Fund’s money. Similar meetings are currently taking place nationwide: United Russia is compiling options for spending at least 70 billion rubles in socially useful ways. All proposals must be submitted to the Duma before the draft budget’s first reading on September 22.

Economic Development Ministry official Alexander Ustinov told the meeting: “There are three differences between the Investment Fund, as described in the draft budget, and federal targeted programs or federal directed investment programs: funding flexibility, the option to save money that remains unspent, and the option to extend funding over a number of years.”

The draft document stipulates that the state will only allocate funding for any particular program if a private company is also prepared to invest and the project is potentially not unprofitable. As one speaker at the September 12 meeting pointed out, “a project should be not entirely unprofitable, but not sufficiently profitable for the private sector.” The Economic Development Ministry and Finance Ministry have the following vision of the state’s role in spending the Investment Fund. State funding could be directly invested in creating a project – taking part in building infrastructure, such as a light rail line; in this case, private investors should contribute at least a quarter of the project’s costs. Another option is for state funding to provide part of the founding capital of the enterprise that will carry out the project. The state could also offer security for lenders – up to 60% of the loans they provide for the project.

“We are hoping for state support for infrastructure projects,” said Yuri Roslyak, first deputy mayor of Moscow. “We hope the mechanisms for this won’t be as cumbersome as those for the Stabilization Fund.”

Roslyak also set out Moscow’s plans: “The electricity generation capacities of RAO Unified Energy Systems and Mosenergo don’t have sufficient resources to provide for Moscow’s growing needs.” Hence a proposal to spend 45 billion rubles over five years on building power supply centers in Moscow. The next proposal is to spend 40 billion rubles over three years on building dozens of new passenger train stations for a minor rail ring. Next is a proposal for a technology park at Nagatino, at a cost of 28.5 billion rubles, where “small business will be able to cooperate with big business and medium-sized business.” Then a proposal for an industrial plant that will use genetic engineering to produce insulin. The fifth proposal involves developing the Udokan copper deposit – in the Trans-Baikal area, a long way from Moscow. This odd concern for a distant region was explained by Moscow Municipal Finance Minister Yuri Korostelev as follows: “The copper from there will be used here, in Moscow.”

* * *

Citizens believe that bonus petrodollars will be stolen

Yesterday the ROMIR Monitoring agency released results of a poll on the most topical issue in current economic policy: what should be done with the money accumulated in the Stabilization Fund, or the oil export revenue windfall in general. There were 1,600 respondents in over a hundred cities. The consolidated opinion of these Russian citizens can be summed up as follows: the petrodollars ought to be invested in the economy, but in practice they will simply be stolen, so the rise in oil revenues won’t have any impact on the lives of ordinary citizens.

When asked how the petrodollars should be spent, respondents tended to name three main purposes: investing in the economy (37%), developing free health-care (35%), and raising pensions (33%). There was also strong support for social objectives like raising child benefit payments, helping the poor, and raising the wages of state-sector workers.

But almost no one believes that the bonus petrodollars will really be spent in these ways. When asked what will actually happen to the money, half of respondents said that Stabilization Fund money will primarily be used to enrich a relatively small group of people. A third of respondents added that the money will probably be wasted, since the authorities are incapable of spending it efficiently.

And when asked whether the growth of oil export revenues would affect them personally, over two-thirds of respondents (69%) said no.