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The situation will be aggravating, as it is intended to dismiss shortly another 360,000 military from the army, of whom some 270,000 have no housing, plus there will be others dismissed from other military formations and enforcement agencies.

In the past, it was local executive authorities who were responsible for the provision of ex-military with housing, however decisions made on the top often remained ignored on the spot. Despite that, in the 90s it was intended to keep the obsolete procedures of provision of individuals migrating from the closed military settlements with housing by constructing that at the expense of targeted capital investment. However, the funds for this specific purpose under the respective government programs were allocated in part and irregularly, and, once earmarked, they were used inefficiently or simply vanished.

In the late 1990s the RF government addressed the problem vigorously, which can be attributed to Mr. Nemtsovs personal efforts in this regard. Since 1998 the presidential program State housing certificates has been launched. The program was designed to provide retired military with housing.

It as envisaged that with the start of the program as many as 42,000 military would be receiving housing annually, however, numerous Cabinet reshuffles and the 1998 crisis ruined all the plans. As a result, only some 41,000 military have received apartments over 1998-2000. Besides, the program implementation highlighted a number of drawbacks, of which the major one was the price for certificate, which proved o be at 30-40% lower compared with actual prices for housing.

Some defects of the program have been already remedied, and the respective amendments make the program substantially more attractive. It is intended to allocate Rb. 7.5 bln. for the program implementation. New procedures for providing currently and already retired military with housing certificates substantially extends their chances to receive their housing. First, all the military who served over 10 years in the army and intended for dismissal due to planned organizational measures, or because of their physical condition, etc. are eligible for a subsidy that covers 100% of the costs for the housing purchased, at the amount set by the State Construction Committee. Furthermore, for the military who, in compliance with the law On the status of military have a right for an additional living area, the subsidy ill be calculated with account of extra 15 sq.m. of the overall living area.

Finally, the term of the use of certificates has been extended up to 9 months.

Overall, over the whole period of the program implementation the non-used certificates outnumbered just some 6%, while the program itself was implemented at 50%. The problem is that it was impossible to provide certificates for all those pretending for them. That happened because of the lack of funds, for such certificates were granted strictly under the actual amount of budget appropriations. Alas, such funds were short, which resulted in queues in regions.

This year 6 bln. Rb. worth appropriations (out of the noted 7.5 bln.) would allow to secure certificates for all the military due to be dismissed until the end of the year, while another Rb. 1.5 bln.

was allocated under certificates for already dismissed individuals.

It is the organized migration of dismissed officers and warrant- officers out of closed military settlements that has proved to be the governments most serious headache. This year, this specific category will be issued with certificates according to the residual principle. However, as the program State Housing Certificates is intended for 5 years and will be continued over the years to come, one may hope that the focus will be shifted right onto the said settlements and provision of certificates for those who were included in the respective local agencies lists.

Importantly, priority was granted to the certificate program, because it is well protected from abuse.

As one has no cash, it cannot be siphoned off in favor of crooks or single-day companies, as it would happen beforewith lonas disbursed for construction or pruchasing of housing for the military. In the meantime a company that has bought or constructed hosuing facilities receives money only when a certificate owner becomes an owner of hisapartment.

The State Certificate Program provides the following procedure: a military individual submits his certificate to one of Sberbank branch offices that starts a blocked targeted personal account at his name. Then, having a contract on starting and servicing his account, he signs up a company that he has selected. Having concluded the contract with the company and after his property rights for the housing purchased have been registered in a Registration Chamber, all the documents are submitted to the Sberbank branch office. Sberbank stuff conduct a five-day examination of those, and finally the funds are transferred to the companys account. So, while selecting a company to trust his certificate, a military should not be concerned of its credibility - he just need to opt for a company that offers the most profitable conditions. It is the certificate that provides a dismissed officer or warrant - officer with a right to select a housing that suits him and his family at most, thus avoiding both military construction companies that offer concrete housing in specific locations and the need to line up for housing at local municipal agencies.

Unfortunately, there are 6-7 especially problematic regions in the country, including Moscow and for instance Bashkortostan and Kaliningrad Oblast. There are two reasons underpinning their far poorer performance in terms of the Program implementation compared with the average once nationwide. First, the construction sector is in a bad shape in some regions, with fewer construction companies willing to deal with military certificates. So, in such regions it appears more profitable to solve the housing problem by means of organizing an own construction. To do that, upon the RF government approval, the funds allocated for the Certificate Program will be invested in construction there.

The other reason is high prices for housing that make the certificate prices set by Gosstroy lower than market ones.

It is envisaged that the certificate prices will be to a maximal extent close to market ones. In addition, for many categories of military the price gap between market and certificate prices is now compensated by the noted extra 15 sq.m. of overall housing area that is granted for instance to officers of the rank of colonel and above.

Possibilities for the use of certificates in such regions could be even broader, were this or another construction company eligible for an advanced payment, i.e. to have the certificate funds at the beginning of a construction cycle. However, that would make the Program less protected. Nonetheless, at this point, some compromise is possible: for instance, the funds could be transferred to a construction company in 3-4 months prior to completion of a house, but under guarantees of solvent oblast and municipal administrations (for example, the government of Moscow). In such an event, a company does not need to seek a credit and pay interest on that, while it is military who would eventually benefit from that, as they would receive a bigger housing area of better quality for the same amount set under their certificates.

Summing up, one can reckon that the implementation of this important program is directly dependent on the number of military willing to make use of their certificates, - still, the general opinion that it is easier and more reliable to receive an apartment waiting in a line in a local military settlement is well-grounded.

Difficulties with solving the housing problem necessitate development of new concepts and methods. Specifically, the government discuss transition towards a savings system of provision of housing. The problem was considered at the meeting of the Security Council of RF in May 2001. Then President and the RF government issued orders to the RF Ministry of Defense, along with other federal agencies concerned, o develop draft legal and other acts on transition to the savings system of provision of housing.

A new system should allow the state to fulfill its obligations on provision of military with housing regardless any problems with budgetary funding. As long as a military serves under his contract, he lives in the army housing facilities, including those rented for government needs, and, once retired, he is to be provided with housing for constant residence. Funds needed for its purchase are accumulated on special accounts. While retiring from military service after the overall term of service between to 20 years with a right for housing, military and their family members are provided with a subsidy sufficient to buy an apartment. With the overall length of military service of 20 years, every military runs a personal account, to save funds at an amount ensuring purchase of housing according to social standards. Should he extends the said term, the funds are subject to further increase.

It appears useful to develop a mechanism according to which the amount of the housing subsidy is calculated with account of the quality and length of the services.

In the meantime experts consider several options of arranging the savings system, even not excluding an option of establishing it on the basis of already tested SHC Program, while introduction of an accumulating component suggests the existence of an operator who would care of both saving the funds allocated and their efficient use.

It is possible to establish a special federal off-budget fund. However it may give a rise to numerous problems, starting from the fact that the list of state off-budget funds is strictly regulated by the Budget Code of RF. Should the government decide to take this specific path, it will face the necessity to amend the Tax Code too, for the specifics of an off-budget fund dictates introduction of a special fee with its own tax base. In addition, administering of such a fund would also require serious operational costs.

Meanwhile, the majority of experts contributing to development of the savings mechanism are inclined to the need of establishing of a state military housing insurance company. At this point one can draw a parallel with personal savings insurance. It is intended to break payments into two stages.

Should an insurance case set by the law occurs (the retirement due to the ultimate age, health. or organizational measures) the military is paid his housing subsidy. Due to the quality and length of his service, he is entitled to differentiated payments, and for this specific purpose an investment revenue is saved. For example, should the military serve over 20 years, his insurance premium should be increased annually by the amount sufficient to buy 4 extra sq.m. of overall living area.

At this point, however, there are specific problems too, for instance, selecting a credible insurer. It may be a state insurance company, however, to preclude the emergence of monopoly, for this purpose it would be more preferable to attract existing insurance structures with the respective experience and reputation using tender procedures.

The Ministry of Defense and other ministries and agencies concerned develop draft legal acts regulating the transition towards the saving system of provision of housing for military. To consider strategic options in this regard, the government has created a task force consisting of independent experts.

IET experts also develop their proposals on establishing saving accounts and the respective draft legal acts.

E. Khrustalev, V. Tsymbal, A. Zhukov Foreign trade May 2002 saw main indices of Russias foreign trade declining both relative to May 2001 and April 2002. Nonetheless, food imports reached a critical level. That is why the government undertakes measures to protect domestic producers and initiated antidumping investigations against import of poultry, sweets containing cacao, starch syrup and animal butter. In order to protect domestic light industry, the government make procedures of shuttle import more complex.

The government also proceed with adjusting export duties by increasing export duties on oil and petroleum derivatives along with a stage-by-stage decrease of goods with a high value-added as well as tradables, export of which does not provide considerable amount of revenues to the federal budget.

In May 2002, the overall volume of Russias foreign trade dropped by 3.7% vs. its respective period of 001 and stood at USD 12.9 bln. This can be attributed to the fall in export volume, which accounted for USD 8.3 bln., or at 3.6% down vs. the respective index last year. Imports basically remains unchanged and made up USD 4.6 bln. (a 0.2% rise).

If compared with April 2002, Russias volume of foreign trade slid by 9.8% due to the noted reason, while imports fell by 8%. So, the trend to rise in imports noted between February through April has been stopped.


Main indicators of Russias foreign trade (as USD bln.) -1997 . 1998 . 1999 . 2000 . 2001 . 2002 .

Balance Export Import The price situation on the world market for most important for the nation commodities was as follows: in the first half of May 2002 oil prices still stood relatively high and began to their fall in late May. The reason underpinning the downfall became Russias and Norways refusal to follow OPEC with its restrictions on oil supplies. This resulted in the average price for BRENT with an immediate delivery being USD 22.5/barrel, or at 11.9% down vs. the respective period of the prior year, while URALS was traded at 23.8 USD (down at 11.2%).

As concerns the state of affairs in the world market for ferrous metals, the situation there was rather stable in May. The prices for hot- and cold-rolled reinforcement steel grew by USD 10/t. vs. April and stood at the level of USD 200-230, 250-270 and 290-320/t., respectively. The prices for sectional steel remained unchanged. The most of markets for non-ferrous metals did not undergo any serious price shocks. At London Exchange the average price for aluminum was USD 1,344/t. (down at 1.9% vs.

April), copper - 1,596/t. (up at 0.4%), nickel - 6,674/t. (down at 2.8%).

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