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10-23-2008 - RBC News - Russia must avoid the heaviest consequences of the global financial crisis, President Dmitry Medvedev said in a video blog posted on the Kremlin’s website on Thursday. The crisis that originated in the United States has ricocheted on the economies of almost every country because both the power of America’s financial market and its impact on the global economy are great, according to Medvedev. A rapid decrease in credit availability has dented demand; sales markets themselves are shrinking; the use of production facilities is declining, and people are losing jobs, which leads to even further recession in demand. As if that were not bad enough, investment programs are being suspended, and production expansion plans are being frozen. “Russia has not yet been ensnared in this gloomy turmoil. And it can avoid it. It must avoid it,” the President emphasized. Had it happened five or seven years ago, the crisis would probably have had less impact on Russia, he added. But today, the situation is quite different: Russia is a country with an open economy. “On the one hand, this gives us enormous advantages; on the other, it forces us to react and tackle the problems faced by all other major powers,” Medvedev emphasized. Russia has a chance to avoid currency, banking, or debt crises and go through today’s troubles without losing its potential. “We have taken a number of steps to restore confidence in the finance sector and ensure normal lending. In addition, decisions have been made to ensure the stable development of retail trade, agriculture, construction and mechanical engineering, as well as the defense industry, and small businesses. Given the decline in global demand and the impossibility of borrowing as before, it is these spheres that require our immediate support. Our actions should largely offset the above-mentioned negative effects,” the President said, adding that Russia’s international reserves and the Stabilization Fund had been created exactly for such times of trouble. Medvedev pointed out that Russia should not only protect itself from problems now, also “make the most out of the emerging opportunities, of which there are many.” First, the formation of highly competitive companies is certain to begin. They will mainly appear through consolidation in various economy sectors, including the banking sector, retail trade, and construction. “We will be ready to take the necessary measures and provide additional financing for those purposes. Stability of development in those spheres will also help create new jobs,” the President maintained. Second, financial organisations must become more efficient and pay more attention to their own reliability. This will boost the overall stability of Russia’s banking sector, making it more appealing to investors and depositors. Third, falling demand will force Russian companies to cut production costs. It is vital, then, to make their business operations, technologies, and management as state-of-the-art as possible, and in as short a time as possible. Thus, energy and labor efficiency could rise to levels allowing them to compete with the most successfully international companies. The government will support the creation of efficient jobs, tax incentives for innovations, and staff training, Medvedev stressed. Fourth, the current situation should be used to modernize the spheres in which the authorities and businesses have acted too slowly, especially in regard to education and healthcare, judicial reform, technical regulations, and the shift to digital technologies. Finally, Russia should actively participate in the development of new rules of the game in the global economy “to ensure maximum advantages for ourselves and for the promotion of a new ideology that will provide for a democratic and sustainable financial architecture in the world,” Medvedev said. To achieve this goal, new financial centers should be created, and new reserve currencies should appear, as well as new collective decision-making mechanisms. “This is good both for us and for all our partners,” the President emphasized. The heads of the world’s leading nations will meet in Washington on November 15 to discuss all these issues, according to Medvedev. “Russia is determined to actively promote its ideas,” he said. In the latest move to stabilize the situation, Medvedev has signed a decree to establish a national crisis management center, which will be supervised by the Emergencies Ministry, the presidential press office reported. The decree guarantees salary payments to the employees of civil defense forces on contract and the employees of the Fire Fighting Service of the Emergencies Ministry appointed to the national control center for resolving crisis situations. Those appointed to positions with a lower salary will retain their pay until they have a right to a pay raise. The decree took effect upon signing.