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in the current budget classification placed into other sections of 94,1 133,9 135,0 157,8 240,1 270,the budget classification In a comparable budget 852,3 1 227,5 945,3 1 063,9 1 090,1 1 120,0 1 323,4 1 315,7 1 375,6 1 444,9 1 654,8 1 548,classification Military expenditures, the UN 1 187,6 1 296,4 1 220,3 1 373,0 1 307,6 1 413,4 1 416,0 1 257,0 1 406,3 1 395,3 data Overall direct military appro- 1 172,4 1 584,9 1 247,8 1 339,1 1 425,8 1 448,4 1 637,3 1 729,2 1 795,4 1 875,1 2 173,3 2 020,priations Direct and indirect military 1 309,9 1 785,4 1 451,2 1 722,9 1 849,9 1 674,2 1 817,6 1 878,1 2 033,7 2 052,9 2 371,4 2 204,appropriations associated with the current and past military activity, combined 3. In real terms (in the 1999 prices)f, as Rb. bln Execution of the federal 115,6 123,5 119,9 121,6 120,1 123,9 135,8 129,1 135,2 142,8 154,9 140,budget expenditures by Section National Defense in the current budget classification The federal budget appropria- 93,7 135,0 103,9 117,0 119,8 123,1 135,2 129,9 136,4 141,5 155,5 140,tions by Section National Defense:

in the current budget classification placed into other sections of 10,3 14,7 14,8 17,4 26,4 29,the budget classification In a comparable budget 93,7 135,0 103,9 117,0 119,8 123,1 145,5 144,7 151,2 158,9 181,9 170,classification RUSSIAN ECONOMY IN trends and outlooks (continued) table 1 2 3 4 5 6 7 8 9 10 11 12 Military expenditures, the UN 130,6 142,5 134,2 151,0 143,8 155,4 155,7 138,2 154,6 153,4 data Overall direct military appro- 128,9 174,3 137,2 147,2 156,8 159,2 180,0 190,1 197,4 206,1 238,9 222,priations Direct and indirect military 144,0 196,3 159,5 189,4 203,4 184,1 199,8 206,5 223,6 225,7 260,7 242,appropriations associated with the current and past military activity, combined 4. Military burden on the economy, as % of GDP Execution of the federal 2,40 2,62 2,77 2,73 2,69 2,53 2,69 2,53 2,50 2,52 3,06 2,budget expenditures by Section National Defense in the current budget classification The federal budget appropria- 1,94 2,87 2,40 2,63 2,69 2,51 2,68 2,55 2,52 2, 50 3,07 2,tions by Section National Defense:

in the current budget classification placed into other sections of 0,20 0,29 0,27 0,31 0,52 0,the budget classification In a comparable budget 1,94 2,87 2,40 2,63 2,69 2,51 2,88 2,84 2,80 2,81 3,60 3,classification Military expenditures, the UN 2,77 3,29 3,01 3,38 2,93 3,08 3,05 2,56 2,73 3,03 data Overall direct military appro- 2,67 3,70 3,17 3,31 3,51 3,25 3,56 3,73 3,65 3,64 4,72 4,priations Direct and indirect military 2,99 4,17 3,69 4,25 4,56 3,75 3,96 4,05 4,14 3,99 5,15 4,appropriations associated with the current and past military activity, combined 5. By purchasing power parity (in current prices), as USD bln.

Execution of the federal 21,9 26,8 30,2 31,9 34,2 36,2 45,6 48,0 52,9 57,1 64,4 64,budget expenditures by Section National Defense in the current budget classification The federal budget appropria- 17,7 29,3 26,2 30,7 34,1 35,9 45,4 48,3 53,4 56,6 64,7 64,tions by Section National Defense:

in the current budget classification placed into other sections of 3,5 5,5 5,8 6,9 11,0 13,the budget classification In a comparable budget 17,7 29,3 26,2 30,7 34,1 35,9 48,9 53,8 59,2 63,6 75,6 78,classification Military expenditures, the UN 28,3 35,9 35,2 42,9 42,0 52,2 57,9 54,1 61,9 63,8 data Overall direct military appro- 24,4 37,8 34,6 38,6 44,6 46,5 60,5 70,7 77,2 82,5 99,3 101,priations Direct and indirect military 27,2 42,6 40,2 49,6 57,9 53,7 67,1 76,8 87,5 90,3 108,4 111,appropriations associated with the current and past military activity, combined For reference GDP deflator, as % to the 172,5 137,6 116,5 115,5 113,8 120,3 119,3 115,2 113,8 117,9 102,0 110,prior year Public administration final 140,1 155,2 133,1 117,6 121,9 117,2 123,3 123,4 116,5 118,5 105,2 118,consumption expenditure deflator g, as % to the prior year Purchasing power parityh, as 5,29 7,15 8,19 9,27 10,41 11,89 12,74 14,20 15,72 18,22 18,45 19,Rb/USD For 2010 the Federal Treasury preliminary data on execution of the federal budget.

b The Defense Ministry expenditures and secret expenditures by sections 0409 and 11 of the federal budget in 20052010.

Section 6.

Institutional Problems c The RF Government did not submit the 1999 data to the UN; the 2010 data will be submitted in 2011, inclusive of expenditures on the Ministry of Interior forces, the Board Guard and civil defense, d Including on the Ministry of Interior forces, the Board Guard, civil defense, and other elements of the military organization e Inclusive of pensions due to the military.

f Deflated by means of the public administration final consumption expenditure deflator.

g,h For 2010 - as estimated by the IET.

Sources: the 19992010 federal acts on federal budget and its execution; Natsionalnye scheta Rossii v 1997 2009 godakh: Stat. sb./ Rosstat. ., 20052010; Obyektivnayay informatsiya po voennym voprosam, vklyuchaya transparentnost voennykh raskhodov. Doklady Generalnogo Sekretarya OON 20012010; Rosstat;

the Federal Treasury.

6.6.4. Conclusions and Recommendations Launched with benevolent intensions but designed in private, the transition of Russias AF to the new look produced controversial outcomes: cuts in the excessive number of officers and volume of assets and diminishment of the governments obligations with regard to provision of housing to the military, on the one hand, and a great number of grievous failures, on the other. The central drawback is negligence of needs of the bulk of the military and even more so of the civil societys. The rising number of economic crimes is a perfect proof of flaws in the transformation of MoD and AF RF. Behind the crimes are numerous factors and the abundant disinformation in particular, whose roots are in bureaucracy, and rarely does the Commander-in-Chief conceive of it as lies. The most recent evidence of crudity was the decision to create the national airspace defense and, accordingly, to increase the number of officers in AF RF by 70,0001.

The remedy lies only in frankness, openness of plans, transparency of budgeting and the budget classification (to be maintained according to the UN standards and the civilized nations experience), control over public spending and the so called extrabudgetary revenues and expenditures. Public control over military spending is critical.

The recommendation is not new, but ignoring it now is pregnant with not just continuation of the past deficiencies, but irreparable consequences. The country is unlikely to be saved by brave assurances and orders the President gave at a recent meeting of the AF leadership: All the planned measureson reforming should be most thoroughly calculated and secured logistically. To this end, the military budget was adjusted and control over spending was organized. I draw attention of all the leadership of the Ministry of Defense: all these processes should be completed in coordination with other government structures, so that we will have here an absolute accuracy2.

In 2011, the military spending increase by 20% vs. the 2010 figures, with the increment spent on weaponry for the army. But new arms will be given to untrained and forced to service troops. None of the military leadership has bothered even to entertain the idea of reallocating a tiny fraction of the said 20% increase to ensure a voluntary, draft-based recruitment to AF RF. No one cared to better train troops, improve their military skills and combat efficiency. Corruption interests prevailed, and that became a major threat to Russias national security.

Mokhov V. Vopros gosudarstvennoy vazhnosti//Krasnaya zvezda. 2011. 3 February (17).

Telmanov D. Serdyukov prodolzhit voennuyu reform s absolutnoy tochnostyu// GZT.ru. 11.2010. URL:

http://www.gzt.ru/topnews/politics/-serdyukov-prodolzhit-voennuyu-reformu-s-/336314.html. Access date: 10.02.2011.

RUSSIAN ECONOMY IN trends and outlooks 6.7. The Year of 2010 Completion of the Municipal Counter-Reform When compared with 2009, the last year did not bring anything new into processes in the municipal self-governance area. Dr. Emil Markwart, President of the European Club of Experts on Local Self Government and one of prominent experts in this area, wittily labeled the processes centralization, vertikalization and partyzation of local self-governance1. His words are proved by the following last years processes:

Inclusion in the law on local self-governance of amendments that provide for a possibility not to establish a local administration in a settlement, which is the administrative center of a municipal district, while the municipal district administration may exercise the respective functions;

Conducted by regional administrations, the managerial revolution has been unfolding in cities and municipal districts in many RF Subjects. The ultimate objective of the revolution became abolition of direct mayoral elections and introduction of the institution of city managers;

modernization of the electoral system aimed at the increase of the nationwide parties role in local elections.

6.7.1. Consolidated Administrations of the Municipal District and the District Center In the spring of 2010, the Legislative Assembly of Leningrad oblast submitted to the State Duma a legislative initiative which allowed one to establish a consolidated administration for a municipal district and a settlement that forms its administrative center. The authors of the initiative believe that would reduce administrative costs and lower the level of uncertainty of residents of municipal district centers about which administration they should appeal to in order to solve their problems.

Originally, this legislative initiative was blocked and failed to mobilize the expert community3 and a number of federal structures support. More specifically, the Legal Department of the State Duma4 submitted its negative comments to the profile State Duma Committee for self-governance: the Legal Department fairly believed that, had the bill in question been passed, it would have cast a doubt upon the possibility of implementation of the principles underpinning the local self-governance bodies independence, transparency and accountability. The RF Government did not render its support to the bill, either. The State Duma Committee for self-governance first considered the bill at its meeting on 2 June 2010. Having Markwart E. Vse mestnoye samoupravili po vertikali. Ot vyborov merov tozhe reshili otkazatsya// -Online.

27.12.2010 URL: http://kommersant.ru/doc.aspxDocsID=1564980&print=true. Access date: 26.01.2011.

This problem was discussed in a greater detail in the IETs monthly reports. See: Starodubrovskaya I., Mironova N. Novaya initsiativa po ogranicheniyu prav poseleniy ostanovlena: nadolgo li // Rossiyskaya ekonomika v 2010 godu: tendentsii i perspektivy. Ezhemesyachy obzor. .:, IET, 2010; Starodubrovskaya I., Mironova N. Predstavleniya o mestnom samoupravlenii Evropy i Rossii raskhodyatsya vse dalshe// Rossiyskaya ekonomika v 2010 godu: tendentsii i perspektivy. Ezhemesyachy obzor. .:, IET, November 2010.

Motyakova O. K voporsu o vozmozhnosti obyedineniya rayonnoy i goroddskoy administratsii//Munitsipalnyaa vlast, 2 (March-April) 2010, pp. 14-15. An appeal by the European club of experts in local self-governance to Y. Mildon, head of the Congress of Local and Regional Authorities of the Council of Europe.

The drafting of the document was commissioned by the State Duma Council of 9 February 2010 (Minutes 175, p. 28).

Section 6.

Institutional Problems found legal uncertainties and contradictions to Russias international obligations therein, the Committee recommended MPs to decline the bill. However, in the mid-summer the Committees opinion reversed at 180 degrees, and on 7 July 2010 the amendment to the federal Act 131-FZ, which foresees that in the event no local administration is to be established in an urban municipal entity, its mandate has to be assigned to the district administration, was passed by the State Duma in the first reading.

While preparing the amendment for the second reading, the scope of the amendments effect was broaden - the possibility to establish consolidated administrations was likewise foreseen for both urban settlements and any other settlements that form administrative centers of municipal districts. Meanwhile, the MPs dumped the idea of a meticulous regulation of consolidation procedures and left the problem of setting concrete mechanisms of interaction between the municipal district and the settlement at the discretion of those local self-governance bodies which would seek to establish a consolidated administration. That occurred shortly after a de facto failure of an attempt to regulate these problems in the law in the course of preparation of the amendment for the second reading.

In its final form, the amendment reads that the Statute of a municipal district and a settlement that forms its administrative center may provide for establishment of the local district administration to which the exercise of powers of the local administration of the said settlement should be assigned. While forming a contest commission in a municipal district, onethird of its members should be appointed by the municipal districts representative body, another one-third - by the representative body of the settlement, and the remaining one-third by the legislative body of the RF Subject upon submission of the supreme public official of the RF Subject. In November 2010, the RF President signed the respective amendments into the law1.

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