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One also has to understand that a certain freedom in carrying out epizootic measures on the regional level is fraught with impairing competition on the inter-regional market of agricultural and food prod http://www.mcx.ru/index.htmlhe_id=ucts. In particular, there are some diseases posing no direct threat to human life and health (or their negative effect has not been established as yet) but lowering competitive advantages of livestock producers. Dairy cow leucosis is just one example of such diseases. A territory with high level of dairy herd leucosis infection has much poorer chance to enter the Russia-wide dairy market. Therefore regions having funds for fighting such diseases get notable competitive advantages over neighbours short of respective finance. In other words, a classical budget service of maintaining normal epizootic situation may become a tool of competition between regions.

It should also be noted that in the course of administrative reform in the agrifood sector functions have not been separated completely. This is most vivid on the regional level. While in veterinary medicine private business has already emerged, in seed, grade and agrochemical control no private services are offered due to the lack of demand. However, this demand is emerging as the practice of agricultural insurance broadens. Insurers have to be guaranteed against cases when crops perish due not to the insured accident but to improper agricultural technology. For this purpose they need control all along the cultivation process beginning from seeds. Not having their own means for such control insurers presently hire specialists from respective state services that actually conduct private business using state resources. Banks and leasing companies may also demand this service.

In these circumstances the ban on rendering services by state institutions only worsens the situation since such services remain unaccounted and incomes from them get privatized. Therefore it seems rational to legally permit such services and at the same time to launch a program of supporting the creation of respective private institutions. While in veterinary medicine the matter was to divide state and private services, in other services the state still has no alternative.

Finally, its not quite clear why the seed and grade control remained outside FSVPS in the Agricultural Agency Moreover, its not clear why these functions are still assigned to state institutions while many similar certification functions are handed over to private business. The administrative reform simply ignored this issue.

In other words, when reforming the system of agrifood sector administration the law-makers used formally unified approach to all sectors ignoring their specifics and not aiming to solve specific management problems. Its not by chance that just a year after the reforms start the decision was taken to re-unite the Ministry of Agriculture and the Agricultural Agency. How much budget funds and efforts were spent on the thing that was clear from the very start of reforming! In the other field of reforming the result is even worse. In 2004 the decision was taken to transfer farm support authority to the regional level11. As a result only one tool is left for federal bodies to regulate agriculture implementation of departmental budget programs of supporting the sector.

The granting to regions of exclusive powers to regulate agriculture will have the most destructive effect on the sector. First of all, regions-donors able to finance support to agriculture on their territories are primarily located in the climatic zones that are the least fit for farming. Thus the shifting of farm supports gravity center from the federal to regional level implies encouraging of non-efficient resource utilization in agricultural production.

Second, for already many years regional support results in trade wars between regions, attempts to oust neighbors from the market by means of direct subsidies to local producers, bans on agricultural and food products transit, etc. And all this took place despite high share of federal funds. The transfer of agricultural financing authority to regions will support the trend. In other words, this decision of the RF Government brings in the domestic market all the negative effects of protectionism on the world agricultural markets that the WTO Agreement on Agriculture strives to eliminate (meanwhile Russia wants to join this organization with its anti-protectionism principles).

The third outcome of this decision will be the broadening of state intervention in agrifood markets.

In 2004 this trend could already be observed, primarily on the regional level. On the federal level beginning from 2005 the number of applied regulation programs reduced while the share of expenditures on general services is up. On the contrary, on the regional level all the increase of expenditures goes to direct support implying state intervention in agricultural and food markets. The structure of agrifood In compliance with the Federal Law On introducing amendments to the Federal Law On general principles of organization of legislative and executive bodies of state power in constituent members of the Russian Federation No. 95-FL of January 1, 2005.

sector regulation in most regions becomes more complicated, the number of programs and spheres of regulation grows. The hardening of administrative pressure on agrifood markets and the emergence of barriers to inter-regional trade will be the inevitable outcomes of funding authoritys transfer to the regional level.

The support implying regulation of markets and prices and payment of direct subsidies should be rendered only on the federal level in the framework of complex budget programs of supporting a subsector or a specific product since only in this case conditions for competition between farm producers all over Russia will be fair and the countrys market space wont be disrupted. The transfer of agricultural regulation authority to the regional level in compliance with 95-FL contradicts the above principles. The Law made the Ministry of Agriculture hand over all federal subsidies to regions in the form of inter-budget transfer.

In other countries with federative structure such as Germany and the US the federal budget finances 90% of support to the farm sector while members of federation only 10%. An exception is Canada (2004) where similarly to Russia about half of budget funds on agricultural support is provided from the federal budget. However, funds from budgets of the federations members are used not for programs of direct support but for development of rural areas.

In view of the above the mentioned provisions of Federal Law No. 95 should be urgently revised until they anchored as common practice and got supported by numerous legal acts. Otherwise this will become one more institutional trap in the agrifood sector development from which, as shown by the recent years experience, it will be almost impossible to get out.

E. Serova, O. Shick Foreign trade Favorable state of affairs on the world market, as well as an increase of the effective demand of population and enterprises stimulate maintaining of positive trends of Russian foreign trade. Considerable growth is continued of both export and import deliveries.

In July 2005, the law was adopted On special economic zones. Formation of special economic zones (SEZ) is one of those instruments, by means of which the government plans to create a favorable investment climate and accelerate developing of high technologies in Russia.

In May 2005, the Russias foreign trade turnover again reached a record level USD 29.9 bn, which by 43,2% is higher than in May 2004. The favorable state of affairs on the world market, as well as an increase of the effective demand stimulate a steady growth of major indicators of the Russian foreign trade. Export deliveries increased by 49,6% and made up USD 20.4 bn, import ones by 31,4% to USD 9.6 bn. As a result of quick growth of the cost of export, the balance in May 2005, as compared to the same period of last year, increased by 71,6%, having reached USD 10.8 bn.

2000 2001 2002 2003 2004 Balance Export Import Source: Goskomstat of the RF Figure 1. Major Indices of the Russian Foreign Trade (bn dollars) Jul Jul Jul Jul Jul Okt Okt Okt Okt Okt Jan Jan Jan Jan Jan Jan Apr Apr Apr Apr Apr Considerable growth of the value volume of export was reached mainly due to exclusive price dynamics on the world markets of energy sources and non-ferrous metals. By an estimate of the Bank of Russia, the world prices, with account of the Russian export structure as aggregated by goods, comprising about 70% of its cost, decreased in May 2005 as compared to previous month, on average by 2,5%. For the first five months of 2005, compared with relevant period of 2004, they were higher by 37%.

Table Monthly Average World Prices in May of Corresponding Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 19.29 19.00 14.51 15.91 27.50 28.71 25.21 25.34 37.9 47.Oil (Brent), USD/ barrel Natural gas, USD/1 mln 2.271 2.187 2.349 3.724 4.220 3.254 5.984 6.465 6.BTU 0.678 0.634 0.513 0.529 0.957 1.095 0.767 0.835 1.342 1.Gasoline, USD/gallon Copper, 2756.7 2480.4 1736.2 1539.9 1834.7 1708.2 1596.2 1667.5 2720.0 3254.USD/t 1623.0 1618.9 1370.6 1317.9 1464.7 1536.7 1344.3 1397.6 1615.7 1746.Aluminum, USD/t Nickel, 8135.2 7468.1 5058.3 5239.5 10141.4 7115.7 6764.0 8351.9 11068 16930.USD/t Source: calculated according to the data of London Metal Exchange (Great Britain, London), International Petroleum Exchange (London) In May 2005, the oil prices predominantly decreased. Besides the information on the growth of the reserves of oil and gasoline in the U.S. storages, the reduction of prices was contributed to by the data of the International Energy Agency on slowing down the rates of oil consumption by China and the USA, and also OPEC statement about an excess of oil supply over demand on the world market and the US dollars strengthening on the international financial market.

At the end of month the main reason for resumption of oil price growth became information of the US Department of Energy on reduction of crude oil stock reserves in the U.S. after their continued increase, as well as information on the forecasted slowing down of oil production growth in Russia.

In May 2005 vs March, the average oil price of Brent, Dubaiskaya and Zapadnotekhasskaya decreased by 5,5% to USD 47.8 a barrel, while Urals to 3,8% to USD 45.1 a barrel. In January-May 2005, compared with the same period of 2004, the prices of oil were, on average, higher by 41 and 43% accordingly.

Since August 1, 2005, the RF Government Resolution, that approves the rates of export customs duty for crude oil and oil products, obtained from bituminous rock at the rate of USD 140 per ton, is coming into force. Recall that the export oil duty is reconsidered each two months by the Government.

The previous rate was USD 136.2 per ton. Thus, by introducing a new rate a new record in duties has been achieved.

The prices of oil products in May 2005 vs previous month decreased on average by 6,7% (diesel fuel went down by 8,5%, gasoline by 10,7%, fuel oil by 2,1%). In January-May 2005 compared with relevant period of 2004, the prices for oil products were on average by 44% higher (diesel fuel went up by 52%, gasoline by 30%, fuel oil by 34%).

In May 2005 in comparison with previous month, the prices for natural gas increased, in Europe by 0,5%, in the USA decreased by 9,5%. In January-May 2005, as compared to January-May 2004, the natural gas went up in Europe by 45%, in the USA by 14%.

In May 2005 against previous month, the world prices for products of the Russian fuel and energy complex decreased on average by 3%. In January-May 2005 compared with relevant period of 2004, the prices were higher by 43%.

In May 2005 against previous month, the level of prices for ferrous metals did not change. In January-May 2005 vs relevant period of 2004, the prices went up by 22%.

Reduction of prices on the world market of non-ferrous metals for aluminum and copper is explained by analysts by strengthening of the dollar. Rising of prices was observed on the nickel market, concerned with reduction of its stock reserves and also the information on less production of this metal by the company Norilsk nickel.

In May 2005 against previous month, the prices of non-ferrous metals went down on average by 2,9%, with aluminum to go down by 7,8% (to USD 1746 per ton), copper by 4,1% (to USD per ton), nickel went up by 4,9% (to 16930 per ton). In January-May 2005 compared with relevant period of 2004, the prices the prices of non-ferrous metals were on average higher by 14% (aluminum price was higher by 12%, copper by 19%, nickel by 17%).

Maintenance of high growth rates of import deliveries is supported by further expansion of domestic demand in real ruble strengthening. According to the Bank of Russia, In May 2005 vs April the ruble strengthened in real terms against the US dollar by 0,5%, euro by 1,8%. In May 2005, in comparison with December 2004, the real ruble to dollar strengthening was 4,9%, to euro 11,3%. In May 2005, against previous month, the real effective ruble rate to the currencies of the countries major trade partners of the RF, rose by 0,9%, against December 2004 - by 7,6%.

According to the Bank of Russia, in January-May 2005 compared with the same period of 2004, the real disposable incomes of population increased by 8,1% (in January-May 2004 by 8,9%). In May this year, compared with previous month, the real disposable incomes of population increased by 1,2%.

In the commodity composition of import of the far-abroad countries the share of plant and equipment was 45,2% (in January-May 2004 43,5%), food commodities and food staples for their production 18,6% (19,1%), i.e. the trend is observed of g-rowing the share of import of investment purpose, while the share of foodstuff import is slightly reducing.

On July 10, 2005 the State Duma of the RF in one go adopted, in two readings, the law On special economic zones, which provides at first the formation of only two types of zones industrialproduction (on the territory of no more than 20 sq. km for assembly productions) and technicalpromotional (on the territory of no more than 2 sq. km for creation and commercialization of research developments).

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