- The Washington Times - Tuesday, March 28, 2000

Russia's newly elected President Vladimir Putin acknowledged on Monday that his country isn't on the brink of a miracle recovery. Since Mr. Putin is not a man of many words, his comment generated much attention and interpretation.

"The level of expectations is very high. People are tired and struggling and they're hoping for things to get better, but miracles don't happen," Mr. Putin said shortly before his victory was officially announced. "A lot of things that will lead to many controversies need to be done."

Most Westerners hope that Mr. Putin is tacitly promising to take on the politically arduous process of reform. Although former President Boris Yeltsin was responsible for setting in motion a number of important reforms, privatizing state industry, liberalizing prices, decentralizing power and instituting democratic elections, they were hardly uniformly successful hampered in large part by rampant corruption, Mafia-rule and cronyism. Russia still has a very long way to go.

Stamping out widespread corruption will be Mr. Putin's first order of business. Its reach and impact on Russia can't be exaggerated. During Russia's first war on Chechnya which started in 1996, for example, Russia's military strength was severely weakened because military officers would often sell off equipment, sometimes to the Chechens themselves and pocket the profits. But rooting out corruption will prove a daunting challenge, since it is perpetuated by the very same powerful and violent forces which helped bring Mr. Putin to power.

The newly elected president will also have to downscale the bureaucracy. Russia today employs twice as many workers as the Soviet Union did in 1989. Since the government pays them little but grants them a great deal of power to regulate business and economic activity, the potential for abuse is huge.

While Mr. Putin would be wise to reduce the armed forces, he has in fact promised increased military spending. According to unofficial figures, the government spends as much as 10 percent of its gross domestic product on the military. Given Russia's daunting economic troubles, this money could be much better spent elsewhere. In view of Mr. Putin's apparent awe for military prowess, however, it seems unlikely he will cut military expenditures.

Russia also urgently needs a host of pro-business reforms. Since 1987, between $20 billion to $24 billion in capital has left Russia on a yearly basis. In order to stem this hemorrhaging, Mr. Putin must improve banking regulation, protection of private property and lessen the tax burden on private enterprise. He must also propose reforms to make the judicial sector more transparent and efficient.

Unfortunately, the new president has already taken measures that will encumber the passage of this wish list of reforms. In order to minimize the strength of some political rivals, shortly after the parliamentary elections Mr. Putin struck a compromise with the Communists which gave that party the largest number of committee chairmanships and made a Communist the speaker of the Duma, or lower house. The Communists will not support the private ownership of land, a new bankruptcy law or tax reform.

On Monday, Mr. Putin hinted that he would invite communists into his Cabinet when he stated that cooperation is needed from all political parties. In all, this does not bode well for future developments. Perhaps Russia really does need a miracle.

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