Private Sector Initiative for Russia

On May 3, 2001 the Carnegie Endowment Russian & Eurasian Program hosted a lunch meeting with members of "2015 Club," a group of young Russian managers who are working to transform Russia over the next fifteen years into a modern and effective player in the global marketplace.

The panel included Irina Khakamada, Deputy Speaker of the Russian Duma; Andrei Arofikin, Director of Credit Suisse First Boston; Vladimir Preobrazhensky, Vice President of Vympelcom; and Sergei Vorobyov, Managing Partner of Ward Howell International. Other participants were Nikolai Kovarsky, Vice President of Avtobank Group; and Sergei Nedoroslev, President of KASKOL Group. The meeting was moderated by Andrew Kuchins, Director of Russian & Eurasian Program at Carnegie Endowment. We provide below a summary of the presentation.

Introduction

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Andrew Kuchins, Director of the Russian and Eurasian Program at the Carnegie Endowment, opened the meeting by introducing members of "2015 Club" as people who "give one some hope and optimism for the future of Russia." Describing the history of this group of Russian managers and businesspeople, Kuchins mentioned the Club's book on alternative futures of Russia, Stsenarii dlya Rossii (1999). That project was a collaboration of many publicists, businesspeople, scientists and humanitarians, and it described three scenarios of future development of Russia. The first scenario, "mega-Serbia" is rather dark, with emigration as the only near-term solution. The second scenario, "a tale of lost time," is Russia muddling downward -- not catastrophic, but not hopeful, either. The third, idealistic scenario is one of a bright future, where current and future generations of Russians can lead healthy and prosperous lives. The mission of the "2015 Club" is to make the third scenario a reality, using the resources of National Project Institute, a new think-and-do tank founded by the Club.

2015 Club: Who and What For?

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The first speaker, Managing Partner of Ward Howell International Sergei Vorobyov, related to the audience the ideas behind the 2015 Club and the group's mission. Vorobyov described members of the Club as "diehards of Russian market democracy, who believe that it is in their common business interest to rebuild one big common market." The ideology tying the group together is that "a small piece of a growing pie will always be bigger than a big piece of a diminishing pie." Thus, instead of the usual practice of fighting for a place in the old and weak Russian economy, members of 2015 Club are trying to construct a new positive economic environment, and only then take their "pieces of the pie." The ethical code of the organization, according to Vorobyov, goes against the dubious practices of some new Russian entrepreneurs -- it is for "constructive creation of a long-term future, not fighting elbows first."

Members of the Club believe in the existence of a "new Russian economy" alongside the old "virtual" sectors. Vorobyov suggested that about 10-15% of the Russian economy consists of new sectors and competitive sectors that respond to clients' demands. "Transparency and clearly-defined rules," which create a stable economic environment, are in the interests of these businesses. "We want to play by the rules!" Vorobyov exclaimed. As for sectors of the old economy, "although they recently started to stimulate productive and decent behavior," corruption and lobbying have remained more profitable.

Recounting the three alternative scenarios for Russia's development, Vorobyov emphasized the idea of emigration. In the first, "back to the past" scenario, "all normal people should leave Russia"; in the muddling-through scenario, the members of the Club would stay while their children would emigrate; and in the ideal scenario, also called "New Social Contract," both the current and the future generations would be happy to raise their children in Russia. The mission of the 2015 Club flowed naturally from these scenarios -- it is "facilitate the launch of the positive scenario for Russia." The deadline of 2015 was a pragmatic one, based on the age group of the Club's members and their children. Speaking of the unique nature of the group's scenarios, Vorobyov emphasized that members of the Club are "not speculative onlookers, but active agents for change from within."

Practical Policy Goals and Accomplishments

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Andrei Arofikin, Director of Credit Suisse First Boston, continued the presentation by describing the practical goals of the group. They included identification and introduction of "productive and positive norms and values, such as trust, responsibility and personal freedom"; introduction of productive models for social interaction, like negotiation and consensus; and education of young leaders for the positive scenario. To assist in realization of these goals, the 2015 Club created a "think-and-act tank," National Project Institute - Social Contract (Institut Natsionalnogo Proekta - Obschestvenny Dogovor) [ http://www.inp.ru/]. This organization, established in partnership with Confederation of Consumers' Societies, is concerned with "practical policy without getting involved in politics." Arofikin emphasized the open partnership principle of the Institute, inviting any civil, business, or human rights organization that shares the notion of the positive scenario to join.

Although the Institute was created only eight months ago, it has already been successful in moving closer to the goal of "developing an efficient design for Russia, which will be sustainable and compatible with economic growth." According to Arofikin, the Institute "managed to translate the message and the language of the Club's scenario exercise into an approved government strategy." The Club has focused on working with German Gref's Ministry for Trade and Economic Development. The interests of the 2015 Club, which include cultivation of grassroots businesses, creation of a level playing field, and removal of illegal and arbitrary regulations, have "miraculously coincided" with Putin's program of "consolidating the chain of command and depriving the bureaucracy of independent incomes." The Club has drafted five deregulation laws that have been approved by the government and are going through the Duma now. The Institute has also initiated projects targeted on judicial, educational, military and pension reforms. Two grassroots regional 2015 Clubs have been established, in St. Petersburg and in Rostov, and the Club is engaging the thinking public in other Russian cities.

Current and Upcoming Projects

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At this point, the baton was passed to Vladimir Preobrazhensky, Vice-President of Vympelcom, who spoke about the current and upcoming projects of the 2015 Club. One undertaking is Scenario Exercise 2, which plans to fill potential gaps in the future development of Russia. One question that this exercise will attempt to answer is "what kind of country we are trying to build?" Although there has been abundant discussion of Russia's "special way" of development, there has not been any articulation of a clear vision. One concept that interests the members of the Club is Russia's "national interests and identity." Using sociological methods, the Club wants to investigate "what is happening with the minds of the people going through a comprehensive transition from traditional patriotism to a new national identity, more open to globalization." Preobrazhensky proposed that a vital impulse for the launch of the positive scenario would be communication. Another aspect of development that the Club wants to focus on is consequences and opportunities facing Russia on its road toward the information-based society, such as the impact of informationalization on social differentiation. Connected with this is the Club's intention on finding a balance between social justice and speed of development, through accelerating the learning curve of Russian society. Another dimension of the Scenario Exercise 2 is the new security agenda, with "different configuration of security challenges and new opportunities, which should be explored."

The idea behind the Club's new scenario exercise is identification of at least five major gaps, which will be facing Russia starting from 2003. The first is the upcoming balance of payments crisis, ensuing from decreasing oil prices, debt repayment and potential dollar devaluation against the euro. The second gap is the deterioration of physical infrastructure, resulting from under-investment. The potential social crisis constitutes the third gap, and the 2015 Club is working to prevent the crisis by "more targeted distribution and pension reform." Defense reform, requiring substantial expenditures, was the fourth gap mentioned by Preobrazhensky. Finally, the fifth gap was entry into the World Trade Organization (WTO). The five gaps, according to members of the 2015 Club, "can affect dramatically the evolution of Russia." The Club is proposing to address these future problems by raising mobility (both geographical and social), transparency as a way to cope with corruption, and digitalization to allow Russians to benefit from the information technology revolution.

Private Sector Solutions

At this point, Andrei Arofikin took over to talk about private sector solutions to the problems detailed by Preobrazhensky. The Club argues that the structural gaps "cannot be resolved by the government alone." However, the private sector, represented by the businesses of the 2015 Club's members, has the capacity to facilitate solutions, thus "expanding policy options for the government." For example, the physical infrastructure problem described by Preobrazhensky requires large amounts of investment to fix and upgrade it. The demographic crisis "needs to develop private sector schemes, which would create collective investment vehicles and channel the savings into investment." The capacity to broker, to trade securities, to run investment funds is in the private sector. The government needs to allow private pension schemes, maintained Arofikin. Another solution that the private sector can add to the government's menu of choices is "an emerging Kyoto framework of trade in emission credits." What the government needs to do in this case is "to develop domestic and export market for certified emission reduction units," based on National Project Institute's initiative. The private sector can also initiate a dialogue on Russia's entry into WTO.

The 2015 Club is also actively involved in designing a Private Sector Initiative for Inclusive Security. By "inclusive security," the Club means an enlarged concept -- "not only military security, but also economic, financial, ecological and demographic dimensions." Inclusive security is geared toward bringing Russia into "international economic and security framework." The private sector can address the new security threats through "confidence-building, business links and raising public awareness." The Club encourages the global community to consider "enlargement of agenda, aiming at creating a favorable environment for private-sector solutions to engage Russia's resources."

Economic Reform in Russia and the U.S.-Russia Relationship

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Irina Khakamada, Deputy Speaker of the Russian State Duma, made the last presentation. She began by saying that ten years of reform have not been in vain, as alongside "bandit capitalism" there arose clean transparent capital of Western-style managers. Russia has not chosen its "own special way" and is not looking for special treatment by the U.S., thus the relationship between the two countries should be based on mutual interests.

Although this relationship has worsened with the arrival of new administrations in both states, Khakamada believed that there could be a positive aspect to the recent developments. Clinton wanted to see a democratic Russia and told the country's leaders what to do, but this is an outdated approach. Khakamada argued that the only way to support Russia now is by encouraging revolutionary liberal economic reforms. She mentioned the three law packages going through the Duma now, dealing with tax reform, judicial reform, and economic deregulation. Some economic reforms have already been implemented, such as privatization of urban and fallow lands.

The negative tendencies in U.S.-Russia dialogue stem from Washington's attempts to compare Russia to the high standards of developed democratic societies. Khakamada admitted that Russia has problems with press freedom, as well as the development of democracy and civil society. However, she maintained that progress on these issues is impossible without economic reforms. "An ineffective Russia will be the greatest threat to the West," she warned. "If the West continues to criticize Russia's politics without acknowledging and supporting its liberal economic reforms, then in ten-fifteen years we will be discussing the problem of corruption in Russia, regretting that such vast resources are wasted. Then these young businesspeople you see here today will have only one option left -- to pack their suitcases and leave," concluded Khakamada.

Question & Answer Period

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Summary by Victoria Levin, Junior Fellow with the Russian and Eurasian Program.