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To: george eberting who wrote (3494)	2/28/2000 12:51:00 PM
From: Bob Smith	Respond to of 3576

After seeing this, I believe there is more impetus than ever for reform. Putin seems willing to take on anybody. Friday, February 25, 2000 BUSINESS Putin Providing Businessmen With Hope By Catherine Belton STAFF WRITER MOSCOW - Foreign businessmen said Wednesday they were cautiously optimistic about Russia's future business environment under acting President Vladimir Putin and that, despite a lack of specific details, they saw the first shoots of opportunity for progress on reforms after years of stagnation and frustration under the Boris Yeltsin regime. "There seems to be an impressive consensus across the board - from members of Putin's economic think tank to State Duma members - that the economy must be reformed," said Scott Blacklin, the head of the American Chamber of Commerce. His comments came after German Gref, the head of Putin's economic think tank, the Center of Strategic Research, addressed the foreign business community at a conference organized by the American Chamber of Commerce. The message sent by Gref and one of the founding members of the think tank, former Economics Minister Yev ge ny Yasin, was a clear call for progress to be made on cleaning up the battered economy. They said short-term reforms would focus on taxes, customs and property rights. But they also placed an emphasis on greater state intervention to make sure businesses stuck to the rules of the game. However, like other statements made by Putin and his economic team in the run-up to the election, more exact information on what a future government under Putin might do remained scant. "There was a very upbeat message promising action. But there was a great lack of specifics. It seems we've been in the desert for so long that we cheer any drop of water when we really need a whole glass," Blacklin conceded. Investing in the Russian economy has not exactly been a bed of roses for foreign businesses on the market for the long term. The immense gains to be milked from investing in a once high-yield treasury bill market disintegrated in the August default of 1998, souring the investment climate for outside investors and leaving behind the bare bones of a corruption-ridden economy. Foreign investors have slammed the many cases of property rights violations last year. The most prominent example came when oil multinational BP Amoco threatened to pull out of the Russian economy completely after Tyumen Oil Co. made an aggressive bid to take over bank rupt BP oil holding Sidanko. The American Chamber of Commerce is proposing amendments to bankruptcy legislation - one of their main demands for change from the new government. "One of the main lessons learned from BP Amoco's experiences with Sidanko is that existing bankruptcy law still allows for violations of shareholders' rights. The way external managers are appointed and the length of time in which a business is in bankruptcy yet can still operate leaves a lot of opportunities for abuse," Blacklin said. He said the chamber was going to send a joint address to U.S. President Bill Clinton and Putin addressing their concerns, which also include the need for major improvements in intellectual property rights, stopping counterfeits, introducing sensible legislation, removing barriers for Internet businesses and e-commerce, and greater protection of shareholders' rights. Yasin promised to address some of these requests. He said, first, measures expected to be passed by parliament would include the second part of a long-awaited tax code, a land code, amendments to the bankruptcy law and legislation on shareholders' rights, Reuters reported. Gref added that particular attention would be paid to fighting off infringements on intellectual property rights - an area so unprotected at the moment that 90 percent of all computer discs are unlicensed. Even BP Amoco's long-suffering spokes man Howard Chase said he left Wednesday's meeting with the feeling that the business climate would improve. "There was clear support for foreign investment," he said. "But the most important task before the government at the moment is a step-by-step approach to rebuilding confidence. It needs to meet its obligations first and then move forward." The former head of the Federal Securities Commission, Dmitry Vasilyev, who has been one of the nation's most vocal advocates of liberal reform, said the ground had been laid to make progress on reform. But he warned that the president-to-be was going to have a tough fight taking on the entrenched interests of the ruling elite who are living "just fine" under the status quo. "Gref did not leave a bad impression. His statements on how the role of the state was to act as regulator and set the rules of the game were very sensible," Vasilyev said after the meeting. "But it's going to be very difficult to overcome the existing interests of the bureaucratic elite who will continue to attempt to work by their own rules; I should know - I had enough trouble myself trying to impose reform while I was at the Federal Securities Commission, and in the end I still lost," he laughed. "Reforming the state might take a whole century. And, if Putin tries to do this by acting to level out the playing field for business there is inevitably going to be a fight," he said. Vasilyev said, however, that the area in which important reform could be carried out in the next two years would be taxation law. "There is a great recognition of the need for change in the tax system - from the population to the government and the State Duma," he said. Vasilyev said one of the main reforms crying out to be carried out was canceling the profit tax altogether. "This would do a great deal to make Russian businesses more transparent and would help wipe out corruption," he said. "Income tax also should be lowered," he added. Vasilyev played down remarks made by First Deputy Prime Minister Mikhail Kasyanov in an interview last week when he said he doubted taxes would be significantly lowered or reformed in the near future. "There is too much momentum building up behind tax reform. Kasya nov will be left behind if he does not follow," he said. Western economists also said they thought it was finally time for change for the Russian economy. "Putin is actually going to implement something which will be a change from previous years," said Roland Nash, an economist at investment bank Renaissance Capital. "The question is what that something is going to be - market reforms or statist?"