Russian economy in 2006. Trends and outlooks (Issue 28)

Publication date
Tuesday, 03.04.2007

Authors
Y. Gaidar; V. Mau; P.Trunin; D. Polevoy; S. Drobyshevsky, P.Kadochnikov. S. Sinelnikov
Mourylev; А. Mamedov, V. Nazarov, I. Trunin;D. Polevoy; A. Shadrin; D. Kostikov, L. Mikhailov, L. Sycheva; N. Mironova, I. Starodubrovskaya; Е. Аstafieva, Yu. Bobylev, O. Izryadnova, О. Lugovoi, R. Saakyan; S. Tsukhlo; O. Izryadnova, E. Ilyukhina; N. Volovik, S. Prikhodko; N. Karlova, E. Serova, T. Tikhonova, O. Shick; I. Kolosnitsyn А. Surinov; Е. Kobzar; L.

Series
Russian economy in 2006. Trends and outlooks

Contents
Table of Contents
Introduction 9
Section 1.The Socio
Political Background 32
1.1. State policy and state institutions in 2006 32
1.1.1. The main trends of economic and politicaldevelopment 32
1.1.2. Problems of economic growth 37
1.1.3. Financial stability and the Stabilization Fund 46
1.1.4. State institutions and socio - economic development 49
1.1.5. Political processes and the economy 51
Section 2. Monetary and Budgetary Spheres 56
2.1. Monetary and Credit Policy 56
2.1.1. Monetary Market 56
2.1.2. Inflation Processes 60
2.1.3. State of Balance of Payments 65
2.1.4. Basic Measures to be Implemented in the Sphere of Monetary and Credit Policy 70
2.2. The state budget 72
2.2.1. A general overview of the budgetary system 72
2.2.2. An analysis of revenues from the main taxesin the RF budgetary system 75
2.2.3. The expenditures of the budgetary system 81
2.2.4. The estimation of budget parameters cleared of the share of the oil and gas sector
and the impact of international oil prices 84
2.2.5. The main developments in the budget sphere and the changes introduced
in tax legislation 86
2.2.6. The 2007 federal budget 90
2.3. Forecast Models of the RF Economic Development and Restrictions in Economic Policy over
a MediumTerm Prospective 97
2.4. Interbugetary Relations and Subnational Finance 115
2.4.1. Evolution of Budgetary Federalism in Russia 116
2.4.2. Main Trends of Development of Relationships between Budgets of Different Levels 117
2.4.3. The 2007 Federal Budget in the Part of Allocation of Interbudgetary Transfers
to Other Levels of the Budgetary System 124
2.4.4. Concept and Methodology of Advancement of Interbudgetary Relations
in the Russian Federation and its Subjects in 2006 and in the Medium Run128
2.4.5. New Methodology of Allocation of Subsidies on Equalization of Bud
get sufficiency of Subjects of the Federation 140
2.5. Russian Financial Markets 145
2.5.1. Internal Debt Market 145
2.5.2. The market for Municipal and Subfederal Borrowings 151
2.5.3. Stock Market 164
2.5.4. Investments of Pension Savings in the System of Mandatory Pension Insurance 185
2.6. Municipal Reform: the First Year of Implementation 194
2.6.1. NormativeLegal Regulation of the Ongoing Transformations 196
2.6.2. The Implementation of Reform in Certain Regions: General Trends and Local Features 201
2.6.3. The price of municipal reform is the cost of administration 207
Annex 1. An Overview of Legislation in the Field of Tax Regulation and Civil Legislation Adopted in 2006 210
Annex 2. Some Aspects of Approaches to the Problem of Combating Harmful Tax Competition in Terms of Capital Outflow  241
Annex 3. The Problems and Prospects of Applying PerformanceBased Budgeting (PBB) in Russia 251
Annex 4. Accounting Policy for Taxation Purposes: Tax Accounting and Administration 259
Section 3. The Real Sector 276
3.1. Macrostructure of Production 276
3.1.1. Trends and Factors of Changes in Final Demand276
3.1.2. The Specific Features of GDP Formation by Incomes 284
3.1.3. The Dynamics and the Structure of the Production by the Kinds of the Economic Activities 292
3.2. The situation in industry 335
3.2.1. The dynamics of demand for industrial products in 2006336
3.2.2. Influence of demand on the status of industrial enterprises 340
3.2.3. Dynamics of competition346
3.3. Investments in the Real Sector of the Economy 356
3.3.1. Domestic Investmen ts in Fixed Assets 356
3.3.2. Foreign Investments in the Russian Economy 369
3.4. Foreign Trade 372
3.4.1 Foreign Trade Turnover 372
3.4.2. Situation at the World Market 374
3.4.3. Export 375
3.4.4. Import 382
3.4.5. Geographic Structur e of Foreign Trade385
3.4.6. Foreign Trade Regulation 387
3.5. Russian agrifood sector: basic trends in 2006 397
3.5.1. Agricultural performance 397
3.5.2. Financial performance of farm producers 406
3.5.3. Structural adjustment of Russian agriculture 408
3.5.4. Production of agricultural inputs 410
3.5.5. Food industry 411
3.5.6. Foreign trade in agricultural and food products 412
3.5.7. Agrifood policies 423
Section 4. Social Sphere 439
4.1. The Population's Finances and the Consumer Market 439
4.2. Labor Market443
4.3. Migration processes 450
4.3.1. Regulating migration: the legislative framework in 2006452
4.3.2. Economic consequences of the legislative process concerning migration 455
4.3.3. Dynamics and structure of migration flows 460
4.4. SocialCultural sphere 471
4.4.1. Education 471
4.4.2. Healthcare495
4.5. The Situation in Science and Innovation Activity 503
4.5.1. The Main Directions of State Policy in 2006 503
4.5.2. Financing Priorities and Development of an Approach Based on Target Programs505
4.5.3. The Personnel Policy of the State 510
4.5.4. Organizational Changes in the Government Sector of Science515
4.5.5. The Formation of a Network of Innovation Oriented Higher Educational Establishments 517
4.5.6. Promotion of Innovation Activity 520
Section 5. Institutional Problems 529
5.1. Institutional development in 2000s 529
5.1.1. Politics versus economy: asymmetry of mutual influence 529
5.1.2. Political versus economic institutions: public polls and their problems 534
5.1.3. Protection of property rights versus finance537
5.1.4. Legislative system versus protection of the proper ty rights 541
5.1.5. State capitalism versus denationalization 546
5.1.6. Stability versus stagnation550
5.2. Public Sector Transformation and Property Relations Policy 553
5.2.1. Public Sector Status: Quantitative Aspect 553
5.2.2. Outcomes of 2006 Privatization Policy and MidTerm Privatization Plans 562
5.2.3. Major Government Corporations' Activities 573
5.2.4. Changes in legal framework regulating government sector operations 581
5.3. Issues associated with buying out and leasing land plots of business entities 588
5.4. Institutional Problems of Russian Capital Market604
5.4.1. Russian Capital Market Dilemma 604
5.4.2. Evaluation of Russian Capital Market Using CalPERS Pension Fund Methodology 605
5.4.3. Institutional and Structural Disparities and Growth Factors 613
5.5. The Housing Market 632
5.5.1. Overall situation on the housing market and price dynamics in 2005-2006 633
5.5.2. Housing as the priority national program 638
5.5.3. Implementation of the national project in the capital region 647
5.5.4. Stages of development of housing in Russia 652
5.5.5. Forecasts of development of the housing market 657
5.6. The Defense Economy and the Military Security of Russia663
5.6.1. The Major Results of the MilitaryEconomic Activity in the MilitarySocial Sphere 663
5.6.2. The Major Results of the MilitaryEconomic Activity Aimed at the Technical Equipment
of the Armed Forces 672
5.6.3. Military Expenditures of the Federal Budget 676
5.6.4. Current trends in the development of the RF's military economy and possible ways
to find solutions to the militaryeconomic problems 684

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