Results of the Joint Research in 1997

2 March, 1998

This report on Russian economic reform is the final outcome of the joint research project by the representatives of the Ministry of Economy (MOE) of the Russian Federation and the Economic Planning Agency (EPA) of Japan in FY1997.

This project contains three themes: comparison between Russia and other economies in transition, structural change in industries, and long-term economic development with consideration to the change of policies and factors in the Russian economy. They were set out by the Record of Discussions on 4 March, 1997, at the end of the 10th Economic Policy Dialogue (a high-level biannual meeting between the MOE and the EPA). Writers of the papers in this report listed in the attached have enriched their messages through the frequent exchange of views between the MOE and the EPA. Such discussions form the Economic Policy Dialogue, along with meetings between the Japanese economists from inside and outside the EPA and the three MOE economists invited to Japan for this project.

As a result of spirited discussions, a consensus was reached on the following points:

  1. Economic stabilization in Russia has made significant progress. Inflation declined to 11 percent in 1997 from 22 percent in 1996, while economic growth showed a modest pickup for the first time since the start of the economic reforms in 1992. The next challenge is to lead this progress in the economic transition to a successful shift to a sustainable growth path.

  2. To cope with this challenge, it is time to tackle such issues as transformation of industrial structure to regain strength in manufacturing industries, integration into the world economy to facilitate trade and investment, and reduction of the still large government budget deficits.

  3. With regard to economic policy implementation, macroeconomic policy should aim at an interactive increase in consumption and investment with a continued vigilant stance on containing inflation. The structural policy should pursue the following tasks promptly: 1) restructuring the financial market to strengthen monetary intermediation by financial institutions, including the role of public finance, 2) providing an environment to promote investment from home and abroad, 3) enterprise reforms to solve rising debt problems among firms, and 4) tax reform toward a more simplified system.

  4. Without these structural reforms at the micro level, it would be difficult for the Russian economy to shift to a sustainable path for economic development.

Andrei G. ShapovalyanzYoichi Okita
First Vice MinisterVice Minister for International Affairs
Ministry of EconomyEconomic Planning Agency
The Russian FederationJapan

Appendix: Themes of joint research project in FY1997 and authors of papers
First theme: Comparison between Russia and other economies in transition
Russia:Dr. Vladimir N. VOLKOV
Deputy Head, Macroeconomics Forecasting Department,Ministry of Economy
Japan :Mr. Kenji UMETANI
Director, Second International Economic Affairs Division, Coordination Bureau, Economic Planning Agency
Second theme: Structural change in industries
Russia:Dr. Alexey V. KOLTSOV
Head, Division for Structural Policy, Ministry of Economy

Japan :Mr. Hirofumi ARAI
Staff, Second International Economic Affairs Division,
Coordination Bureau, Economic Planning Agency
Third theme: Long-term economic development with consideration to the change of policies and factors in the Russian economy
Russia:Ms. Galina E. MASLOVSKAYA
Deputy chief of Division, Macroeconomics Forecasting Department, Ministry of Economy
Japan :Mr. Susumu KUWAHARA
Deputy Director, Second International Economic Affairs Division, Coordination Bureau, Economic Planning Agency