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Sat, Jan 22, 2005 - Page 12 News List

Russian firms slam state's meddling

PROPERTY RIGHTS Business leaders cited the actions by tax authorities against Yukos as an example of harmful state interference, which hurt rather than helped the economy


Russian business leaders accused the government on Thursday of creating a climate of uncertainty for business, including issues such as tax and property rights.

A commission on competitiveness and entrepreneurship, which groups senior government officials and the business elite, said businesses were often groping in the dark.

"We have so many institutional traps that businesses have to make their way through a minefield without a mine detector," said Alexander Shokhin, former minister and top debt negotiator who is now a leading member of the Russian industrialists union.

"[Those traps are] the distrust of authorities, elements of uncertainty over property rights and tax policy," he told the meeting chaired by Prime Minister Mikhail Fradkov.

Fresh in the mind of many business leaders is the recent legal action against oil major Yukos, whose collapse over back-tax claims is widely seen as government revenge for the political ambitions of its founder Mikhail Khodorkovsky.

President Vladimir Putin, who has promised to restore order after the first hectic decade of market reforms, has vowed to force a narrow circle of business leaders, who made fortunes through close Kremlin ties, to play by the rules.

The Kremlin sees tax discipline as a key to the new order.

Shokhin cited the actions by tax authorities against Yukos as an example of harmful state interference, which hurt rather than helped the Russian economy.

The Kremlin denies that the cases against Yukos and Khodorkovsky were anything other than a just probe into shady business practices.

Analysts, however, say that by putting Khodorkovsky behind bars as his trial drags on, Putin has marginalized a potential political adversary.

Since the Yukos case was launched in 2003, Russia's so-called oligarchs -- who built vast business empires from industrial assets acquired for a song in dubious auctions in the mid-1990s -- have worried about who might be next, and Western governments including the US have expressed concern about the rule of law and the sanctity of property rights in Russia. Putin has repeatedly said that there will be no renationalizations.

Russia's prime minister said on Thursday there would be no return to a Soviet style, government-controlled economy, amid fears that President Vladimir Putin's Kremlin is moving to recapture key chunks of the nation's industry.

Speaking at a government meeting on enterprise and competition, Fradkov insisted that the clocks would not be turned back.

"Some may get the erroneous impression of a return to neo-state policy of the old format," Fradkov said, according to the Interfax agency. "This will not happen."

Anatoly Chubais, the head of electricity grid RAO UES, said business fears could pose problems for the government's mid-term program, drafted to meet Putin's goal of doubling GDP in 10 years.

But liberal Economy Minister German Gref says that goal can hardly be reached on time, even with structural reforms.

Russia has shown steady growth, helped by high oil prices, since Putin became president in 2000. But last year GDP grew only 6.7 percent, compared with 7.1 percent in 2003.

Analysts believe a worsening investment climate and the absence of structural reforms was to blame for the slowdown, likely to continue this year.

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