Wednesday, May 10, 2006

Putin announces innovation in Economics and Industry

Russian President Vladimir Putin called Wednesday for work on making the national currency convertible to be completed, oil and gas to be traded in rubles on a domestic exchange, and an innovation-based economy.In his annual state of the nation address before both houses of parliament, ministers and reporters, the president also said human rights and freedoms had to be upheld to ensure economic growth and corruption had to be eradicated for the good of the nation.

The commodities boom of the last 24 months has helped Russia to move from a high debt position in 1998 to one of the most solvent economies in the world.

The foreign reserves surplus was up 24% to reach 226 B$US as of the 1st May.The federal surplus of 56B$US in the last year and increases in the Pension stabalisation account to 66B$US have meant Russias financial position is surpassed only by China,Japan,and Taiwan.The current account surplus grows by 8.5Bus per month.Whilst energy is an important export it is only 35% of the RF exports.

As we suggested in February the transfer of the Russian economy to a financial and innovation economy was announced.

Putin said work on making the national currency fully convertible should be completed by July 1, almost six months ahead of the original January 1, 2007 deadline.
"In my address of 2003, I set the goal of making the ruble convertible," Putin said. "I must say the [outlined] plans are being implemented."

In an effort to promote the national currency, the president called for the establishment of a ruble-denominated oil and natural gas stock exchange in Russia.

"The ruble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in rubles," he said.

Putin praised the government for seeking to provide an innovation basis for the economy, reorienting it from the current commodity bias that has led to billions of petrodollars flowing into the country.
"We have already started altering the structure of the economy and making it oriented to innovations," Putin said. "I think the government's policy in this area is correct."

With the country embarking projects to set up technoparks and special industrial zones, the president also said investment in production infrastructure and innovations had to be encouraged.
"We have to work hard to stimulate investment in production infrastructure and innovation," Putin said, adding that one way to encourage investment in innovative research was through the introduction of tax breaks.

The president said Russia had to make substantial progress in such high-tech areas as modern energy, communications, space, aircraft building, and become a leading exporter of intellectual services.

Russia is already the largest exporter of electrical turbines and power generating technology.The introduction of special scientific economic zones centred around established scientific research centres of excellence has companies operating R&D and manufacturing in the areas having favorable tax incentives and enhanced research facilities.

There are a number of specific examples such as the investment in nanotechnology of 500m and the hydrogen industry.The new Russian carbon fibre metallurgy that means the Boeing dreamliners airframes will be mostly built in Russia under a JV project.

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