Russia’s National Projects: A first, short step?

During his five-year tenure as prime minister in 1990s, Viktor Chernomyrdin frequently stated that Russia needed hundreds of billions of dollars to modernize its economy after decades of inadequate investment had left the country’s infrastructure and social sphere in a perilous state.

The four national projects President Vladimir Putin announced on September 5, 2005 to improve Russia’s agriculture, education, housing and health care are an essential first step, but the funds allocated fall far short of Chernomyrdin’s target.

Although Russia has stowed billions of dollars in its stabilization fund and now boasts some of the largest gold and foreign currency reserves in the world, the government initially allocated just 138 billion rubles, or about $4.9 billion, to the four projects. After including off-budget funds and state guarantees, the amount available rose to 180 billion rubles ($6.4 billion).

Still, this allowed large percentage increases in total budget spending on education and agriculture of over 30 percent and 60 percent on health care of in 2006, while the allocation to housing and communal infrastructure grew by 400 percent.

A large part of the money will go to wages and salaries, with public sector workers like teachers, lecturers, doctors and nurses getting substantial increases after their income collapsed following the dissolution of the Soviet Union.

Bright students can benefit from the 5,000 merit-based individual grants worth 60,000 rubles (over $2,000) that have been set up, and conscripts will be entitled to primary vocational training certificates at 100 special centers.

Infrastructure projects are now underway across the country, including plans to establish world-class business schools in Moscow and St. Petersburg, and two national universities in the Southern and Siberian Federal Districts.

Thirty Russian higher education institutions have been allocated 500 million rubles each ($18.9 million), and 600 secondary schools have been allocated 1 million rubles ($37,700) for 2006 to ’07.

Under the health care project, 15 new regional medical centers will be built, the existing ones reequipped, and 12,000 new ambulances purchased. The government also wants to improve primary medical and sanitary care, modernize the compulsory medical insurance scheme, improve preventive medicine and provide more high-tech health care.

Agriculture Minister Aleksei Gordeyev says that “the key goal is to improve the living standards of urban and rural residents,” an aim the government intends to achieve by boosting the production and productivity of private farms and farmers.

The Kremlin also wants to develop cattle breeding and encourage small farms, and then increase Russia’s annual consumption of meat per capita which, since the early 1990s, has fallen by one-third to 53 kilograms, compared to 115 kilograms in the United States.

The final project, housing, aims to make quality accommodation accessible to every Russian. The construction of an estimated 90 million square meters annually is needed just to maintain present levels, and about 200 million square meters a year to reach European standards.

Under the new project, state guarantees of up to 100 billion rubles ($3.5 billion) will be allocated annually to the Agency for Mortgage Credits and Direct Expenses, a huge increase on the 20 billion rubles available previously.

Work on the national projects began soon after Putin announced them, but doubts about them surfaced immediately.

Critics argue that the available funds are hardly enough to pay for what the country really needs, or to effect any meaningful structural reform, since the areas chosen overlook other crucial areas like transport. Also, too many individuals and government and private organizations are involved in carrying out the projects.

Without serious reform, they say, the economy will continue to perform below its potential, constrained by Russia’s poor infrastructure, as well as its declining human capital as the brain drain continues, albeit at a slower pace than in the 1990s, and its educational system, like those in the West, caters to the lowest common denominator and seems unable to cope with globalization.

So, with parliamentary elections due in December 2007 and presidential elections in March 2008, many cynics in Russia see the national projects as little more than a pre-election campaign and a public relations exercise to promote Putin’s protégé Dmitry Medvedev, the first deputy prime minister and one of the two men believed to have the greatest chance of assuming Putin’s mantle.

In October 2005 a council was set up under Putin to implement the national projects, but Medvedev became its first deputy head and is often shown on television at cabinet meetings and during his visits to the Russian regions to inspect progress.

But more than a year later after the projects began, the accusations that the national projects are a PR job look rather hollow because most Russians still have only a vague idea of what the projects are all about—another sign of Russia’s inability to sell itself, whether at home or abroad.

The once feared and mighty Soviet propaganda machine is long gone. And, contrary to the impression given in countless reports in the Western media, the Kremlin and government are remarkably low-key, and stories concerning the president—or Medvedev—are often the second, third or fourth (short) items on the evening news broadcasts, when they appear at all.

In fact, politics itself has virtually disappeared from Russian television which, along with radio, is where most Russians get their news and views.

So, with the countless political programs and live TV debates of the 1990s now replaced by bland news broadcasts lacking real analysis, most Russians don’t really expect much from the projects. Not least because they are simply not very well informed about them.

The projects are to be implemented over two-to-five years, beginning in late 2005 and early 2006. Medvedev claims that “in essence, priority national projects are the mechanism that will help us improve the living standards of every Russian citizen.”

This is a bold claim, but the projects should not be dismissed out of hand since they are, nevertheless, the first real investment in Russia for decades and are much needed.

It remains to be seen whether the Kremlin will step up its investment of the country’s infrastructure, or its efforts to tell the people what it’s doing to try improve their lot.

By Ian Pryde

Published in Trendlline Russia, a series of sponsored supplements on the Russian economy commissioned by RIA-Novosti and published with the print editions of The Daily Telegraph (UK) and The Washington Post (USA) in November-December 2006.

Appeared in The Washington Post as ‘Russia’s National Projects: A first, short step?’ and available at

Appeared in The Daily Telegraph as ‘Russia’s National Projects take their first, short step’ on 14 December 2006.

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