What you need to know about the national projects

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Once again the authorities set about solving the accumulated problems: 12 national projects have been launched in 2019, plus a global infrastructure modernization plan. The presidential decree of May 7, 2018 (“On the National Targets and Strategic Objectives of the Development of the Russian Federation until 2024”) triggered the creation of the current package of national projects. The document also defined priority application areas which are generally obvious even to the layman.

Patching the gaps?

The quality of economic growth in recent years does not suit anyone, especially since for some reason the arithmetic increase in GDP (which as a matter of fact is close to unity) does not affect the increase in the living standard of the population whose incomes have been declining for the fifth consecutive year. Therefore, it is clearly necessary to patch the gaps in the humanitarian (demography, medicine, culture, science, education, ecology) and economic (small and medium-sized businesses, labor productivity, non-oil exports) spheres. Obviously, it is necessary to unite Russian territories through an accessible message. And it’s high time for a digitalization project to be launched (mainly in the area of administration).

In his speech at the February investment forum in Sochi, Prime Minister Dmitry Medvedev described the global plan as follows: “The national projects are one of the ways to solve … problems, so that instead of having to wait for some kind of bright future, as the saying goes, people would immediately feel the results… The national projects form a single matrix which is supposed to encompass the entire life of the country. Never has anything like this been done in the history of modern Russia.» Unfortunately, not all experts are ready to support the Premier’s statement.

Alexander Shirov,

Deputy Director of the Institute of Economic Forecasting of the Russian Academy of Sciences, Doctor of Economics

Over the past two years, many economists, both independent and working for the government, have said that we need to take additional steps in improving the economic policy, which would then be able to first trigger initial economic growth and then to accelerate it. The problem is that, unfortunately, regular economic policy measures — monetary policy, fiscal policy, etc., — cannot trigger such acceleration because the economy has a lot of structural imbalances, technological gaps and so on.

Many people discussed the idea of ​​national projects, i.e. projects that would combine regional policies into a common macroeconomic regional policy, a policy related to the development of individual sectors of the economy, which would ultimately lead to a certain result. And we have seen a bunch of such national projects. But there’s a catch.

In total, all those projects will cost approximately 24 trillion rubles until 2024. At the same time, the country’s accumulated GDP for that period will exceed 750 trillion rubles. If you compare 24 trillion and 750 trillion it becomes clear that such a contribution will not be radical. Unfortunately, we must admit that, on the one hand, the current set of programs is based on the assumption that the government resources are sufficient for accelerating the economy, which is wrong in my opinion; on the other hand, it is assumed that the limited funds we will invest in those national projects will bring about some radical changes to the economy.

Anyway, the amount of funding for the programs will be the largest for the new Russia: 25.7 trillion rubles. The money will be distributed as follows: 10.1 trillion will be invested in the development of the economy, 9.9 trillion in the creation of a comfortable living environment, and 5.7 trillion in human capital.

Will they be real?

From the point of view of administration, the new project cycle appears to be more rigid. Each project will be supervised by a Deputy Prime Minister. The Federal Project Office will be the project management headquarters, with similar offices to be established in the corresponding ministries and in the regions, where they will be headed by chiefs of regional administrations who will be personally responsible for the implementation of the national projects in their “bailiwicks”.

The project-oriented approach as a method of complex transformation is not new to the Russian government: between 2008 and 2012, similar attempts were made to close the “gaps” that needed closing as a matter of priority. But the list of key «sore spots» – health, education, housing – remains the same.

The Prime Minister acknowledged that the project-oriented method is “bad, but we don’t have anything better.” Officially, the data sheets for the national projects were approved in late December. However, finishing touches were being added to them until early February, both conceptual (some of the tasks kept disappearing from the list and reappearing again) and financial. It can be assumed that the figures presented in February will not be final either.

The main financial burden of supporting the national projects will fall on the federal budget: 13.158 trillion rubles. The allocation of project funds has been prioritized. Experts note that the launched project cycle is significantly limited by the “budget rule”. The new sources of funding include the January 1 increase of the VAT rate from 18% to 20% and the savings from the five-year increase in the retirement age. Experts have explained the urgency of the pension reform by the needs of the national projects.

The new package of national projects is structured as a set of reference targets with specified deadlines (usually in the form of «complete by December 31»). Experts counted more than 1,300 such targets. In addition, there are global targets, several hundred of them.

Regional budgets will also be used to finance the national projects. Their share of expenditure will constitute 4.9 trillion rubles. Local authorities are not happy with the situation for obvious reasons, and they will be using it as a bargaining chip for claiming various benefits.

Experts have pointed at the obvious incorrectness of some of the reference targets. Some of them are obviously understated (apparently, to facilitate the task of reporting on their successful implementation), and some are unrealistically overstated.

Life borrowed from future generations

Andrei Korotaev,

Lead Researcher at the International Laboratory of Demographics and Human Capital, HSE and RANEPA

There is a feeling that the national project was prepared in a hurry, and certainly without being extensively discussed by experts. The configuration of its key targets – growth of birth rate and increase in life expectancy – forms a very controversial trend.

The target fertility rate (the number of children per woman), 1.7, seems to be understated. This figure is even noticeably lower than what we had already achieved in 2015 (1.78) before the pullback began. To ensure sustainable population growth, the coefficient should be higher than 2.0 children per woman. But the target life expectancy is frankly overstated: formally, it will be calculated later, but it will hardly differ from the one stated in section 1(b) of the May presidential decree, which is 78 years. Thus, we are supposed to achieve a natural population growth by increasing life expectancy. If such an exotic trend is approved, then in the event of its success (which is not very likely) it will reflect borrowing life from future generations: a postponement of the problem of natural loss “for later”.

As far as I know, the experience of Cuba was used as a guideline for life expectancy. In Cuba, the 78-year target was reached years ago. But we must bear in mind that in Cuba, which is not the world’s richest county by far, the share of government health care spending in GDP is three times higher than in Russia. It is reasonable to consider an overstated target (as soon as it has been set) as an incentive for lobbying an increase in health expenditures and the deployment of anti-alcohol and anti-tobacco measures. And it will certainly give a positive effect.

Stimulating birth rate is not easy either. First of all, it would mean taking measures to solve the housing problem. In world practice, this kind of experience has yielded mixed results. But in Russia, as it turned out, those measures work well. For instance, the maternity capital worked well in rural areas, because the sum is sufficient for actually improving the housing conditions, for buying a house for example. It works not so well in district centers, even worse — in regional centers. It works really bad in million-plus cities, while in Moscow and St. Petersburg it doesn’t work at all.

But we have a very successful experience in Sakhalin: within several years, the region that was lagging behind in terms of birth rate compared to the average values for Russia, was able to take the lead, 2.16 children per woman in 2016. First of all, it was due to housing measures that turned out to be effective in fairly large population centers such as Yuzhno-Sakhalinsk. The measures were quite substantial. After the birth of the first child the mortgage rate was reduced to 3.5%, plus another 500,000 rubles were provided as the initial mortgage payment. After the birth of a second child, already a million rubles. And with a third child, mortgage became practically interest-free and half of the debt, up to two million rubles, was extinguished. As an additional measure, young families were paid an allowance of 55,000 rubles after the birth of their first child (110,000 for university students). Substantial support was also provided to large families. Of course, the measures were expensive. But big cities such as Moscow could also afford something like that.

Theoretically, the money needed for stimulating birth rate can still be taken from increasing the excise tax on tobacco. If we increase it to the level of Bulgaria or Romania and scale it up to the size of Russia, we can get nearly a trillion rubles in extra revenues, and it would be enough for implementing new and effective measures to support the birth rate of the “Sakhalin” type, and for significantly reducing mortality rate. But that maneuver should have been carried out much earlier. After the pension reform, the window of opportunity for such unpopular measures has closed for a long time.

Impossible national projects?

Not only individual targets, but also entire projects are being subjected to scrutiny. In particular, the housing project was defined as “impossible” by the participants of the November session of the State Council. The overall idea was also criticized. According to Alexei Kudrin, Head of the Accounting Chamber, only 70% of the targets set by the previous package of national projects have been reached.

During the Gaidar Forum in January, he questioned the format of the national projects: “The Main Ares of Government Activities» state that a separate and detailed action plan will be assigned to each national target. Thus, we will have yet another document format – plans for meeting national targets which will be broader than the national projects.” The key point is that the national projects do not require meeting the national targets. For example, in Kudrin’s opinion, the absence of such area as “combating poverty” from the list of national projects is quite symptomatic. There are also many unaddressed issues in the small and medium business development project.

An incentive to “whitewash”

Vera Barinova,

Head of the Laboratory for the Study of Entrepreneurship Problems at the Institute of Applied Economic Research of the Russian Presidential Academy of National Economy and Public Administration

To adequately assess the degree of attainability of the targets set by a national project it is necessary to have full access to the methodology of their calculation. Unfortunately, such methodology has not been disclosed either for the exports target, or for the share of SMEs in GDP; accordingly, one can only approximate, as an expert, the extent to which such targets can be met.

Based on the analysis of the activities connected with the SME project and other national projects that may affect SMEs, those targets can be partially met. Most likely, the targets will not be fully met. Besides, speaking of the share of SMEs in GDP, it is important to understand that this target is highly dependent on the overall structure of the economy.

At the same time, the difference in the calculation methods provides an opportunity for altering the final result in order to bring it closer to the target value. According to our 2018 research (available in print. — Ed.), the share of SMEs in Russia’s GDP, excluding the public and financial sectors, is already near 39% if one follows the methodology of OECD experts.

As for the employment target, it is more realistic and is likely to be met subject to proper implementation of the policy of legalization of self-employed businessmen, which instead of pushing entrepreneurs back into the shadows, should use incentives to promote the “whitewashing” and the official registration of workers. We also need measures to promote entrepreneurship among the population and to mitigate regulatory and supervisory activities of the state in relation to businesses.

Experts also point out high corruption risks associated with a number of positions contained in the national projects package. Implementation of large-scale transformations is impossible without the participation of businesses. According to the Prime Minister, 250 proposals from entrepreneurs for a total amount of 12 trillion rubles have already been reviewed. The majority of the national projects were launched on January 1, 2019 (some were launched in the fall of 2018). The completion date is the same for every project, December 31, 2024. During the first year of project implementation, 2019, a regulatory and methodological basis should be prepared for the majority of the projects.

Written by Marina Talskaya

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