The State Needs to Change at the Macro Level

19 february 2016

“We are in a situation where we simply must be considering macro measures,” Konstantin Noskov, the Head of the Analytical Center, said in a discussion of the STATE-2030. SIZE AND AUTHORITY track at the Krasnoyarsk Economic Forum. When we talk about the state, its size, authority, management of functions, we cannot only talk about measures that can be taken at the micro level. An experienced driver cannot work a miracle with a car that does not meet basic requirements, Mr. Noskov is sure.

Mr. Noskov believes that changes need to be implemented in at least 4 areas. “First of all, state participation in the economy as an owner must be minimized,” he said. According to the expert, the current situation is really bad, citing several examples: of the 10 largest banks in Russia only 3 are private (in terms of quantity) and of the 10 largest companies in terms of capitalization 6 are owned by the state. Investors have estimated that in the past 10 years among the 30 leading companies, the ones owned by the state lost 64% of their value while privately held ones only lost 40% of their value.

Mr. Noskov believes it is no less important to stop the current wave of new regulations. For a lot of ministries the main performance indicator is the number of regulations they pass while ideally it has to be the other way around: the more existing regulations get scrapped to make doing business or simply working easier, the better. “In addition, our laws get changed an awful lot, some laws get amended dozens of times a year, which makes doing business in Russia even harder,” Mr. Noskov noted.

“The third thing we need is decentralization, with regional governments getting more authority and more control over finances,” Mr. Noskov is sure. “Today we are giving them authority without giving them any sources of financing.” And last but not least, state authorities must be held responsible for the results of their work rather than for functions or processes. However, the expert believes a major obstacle to implementing this last principle is lack of transparency when it comes to information about who’s responsible for what and this lack of transparency can be clearly seen both at the federal and the local levels.