Putin Outlines State Interventions to Invest 'National Welfare Fund' in New Infrastructure and Industry

April 26, 2007 (EIRNS)--In the final annual message to the Federal Assembly of his second term as Russian President, Vladimir Putin today presented economic and social programs, ranging from a second Volga-Don Canal to a national drive to rebuild Russia's library system, as vital tasks to be taken up by the Russian state. Even more so than in last year's message, when Putin invoked Franklin Delano Roosevelt on the need for the government to step on the toes of selfish financial operators, in the name of the general welfare, Putin indicated breaks with some the rules of monetarism and globalization that have trapped Russia over the past 15 years.

The Stabilization Fund, for example, was set up in 2002, according to the monetarist dictum that Russia's oil and gas revenue must be sequestered (invested in foreign government bonds), lest its investment inside the country trigger inflation. "Today, however," Putin told the Federal Assembly, "the nature of our economic objectives requires correction of the function and structure of the Stabilization Fund, while maintaining a conservative financial policy. That is why, in my Budget Message, I proposed a new procedure for the use of oil- and gas-derived financial resources." Now, the Stabilization Fund is to be divided into a Reserve Fund (against the eventuality of a petroleum price crash); a part to go into the Federal Budget, to be spent chiefly on social needs; and a Future Generations Fund, "to raise the quality of life and develop the economy, for the improvement of the welfare of future generations, as well as present ones."

Discussing in more detail this "National Welfare Fund," Putin went into the importance of institutions to promote physical capital investment:

"Some of these resources should be directed into the capitalization of development institutions, especially the Development Bank, the Investment Fund, the Russian Venture Company, and others. I propose to direct 300 billion rubles [$11.5 billion] in this way, already this year, and to anticipate further allocation of funds for these purposes in the future. As for the projects to be financed by the development institutions, I think they ought to be dedicated to addressing the most important tasks in our economy.

"First, the elimination of infrastructural constraints on growth. "Second, improving the efficiency of natural resources utilization. "Third, modernization and development of high-technology industrial manufacturing." Putin stressed that the government will not fund all of this activity directly: "Budget resources should not be the main source, but chiefly a catalyst for private investment." The state, he added, "should put its shoulder to the wheel, in cases where the risk for private investors is too great." Meanwhile, "the main role of the government should be to assist business in creating new, truly modern manufacturing."