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RUSSIAN ECONOMY in trends and outlooks 3.8.3. Problems of further modernization of Russias military organization Within the executive power reform which started in the year of 2004, a principally new, the main and a priority element in the activities of the RF Defense Ministry and other power bodies, as the respective state government organs, in 2005 will most likely be re structuring the budget planning activity, the routine activity itself and the respective ac counting procedures. To be put to good order are to be the following activity parameters of all subjects of planning, the power block included:

1. Objectives and tasks of activities;

2. Obligations with regard to expenditures and formation of returns;

3. Results of activities;

4. Distribution of expenditures by objectives, tasks and programs;

5. Results of the budget expenditures.

Accordingly, these parameters determine the section names of a special document called: Report on the Results and the Main Directions of Activities of the Budget Planning Subjects. Actually, some of the above parameters were also formulated in such documents as: The National Security Concept (NSC), The Military Doctrine (MD), The Fundamen tals of the RF State Policies in the Field of the Military Organization (Fundamentals) and oth ers. Distribution of expenditures by objectives, tasks and programs as well as estimating the results of the respective activities in close coordination with expenditures for the RF Defense Ministry on the whole is a principally new task. which is but only partially familiar to the RF De fense Ministry administration officers, for example, from the experience they gained when working out the State Program of Armaments (SPA).

If we take the first group of the above parameters of activities alone, even then close coordination of strategic objectives, tactical tasks, and targeted programs, as required by the Government, will nevertheless turn out to be quite problematic. No less problematic seems to be coordination of a number of indicators in time.

The published methodological recommendations (MR) do contain an approximate list of Russias strategic objectives to be used in working out the said Reports but it is nei ther exhaustively full nor sufficiently enough satisfies the requirements to formulating such objectives by the MR themselves. Besides, the corresponding objectives of the budget planning subjects, in particular such for the Defense Ministrys activities, are to be worked out for each strategic objective of the country. This approximate list does have certain no tional faults as well, such as, for example, division of threats into external and internal ones although the difference between them consists only in the fact that aggression is initiated not by foreign states but by transnational centers which usually tend to operate in secret and under cover.

Noteworthy is also one more requirement with regard to the objectives and tasks which determine activities of the budget planning subjects. This is conditioned by a simple fact that one of the most important sections of the Report, namely Distribution of expendi tures by objectives, tasks and programs (see above, p. 4, in the list of parameters and sections), must be first worked out and then practically used. However, in accordance with both the Budget Code and the Law on the Budget Classification, expenditures must be dis tributed according to the officially approved classification groupings of expenditures, pri marily so by sections, subsections, specialized articles and expenditure types of the budget functional classification.

The structure of two expenditure sections and their subsections in the Federal Budget for the year of 2005 (FB 2005), to such or other extent connected with ensuring the national military security, is presented in Table 59. This table also contains the ap Section 3.

The real sector proved values of respective expenditures as well as shares of expenditures by subsections in each section.

Values of future military expenditures permit to make the following conclusion: Ex penditures on the national defense have grown in the absolute value and are expected to comprise the figure of 533.1 bln roubles or about 16% of the FB expenditures. In relation to the GNP, the level of expenditures will change rather insignificantly.

The structure of expenditures does not clearly show what part of such will be allo cated to the technical equipping of the RF Armed Forces although, according to official declarations of the Defense Minister, it equals 186.9 bln roubles (35.2% of the total ex penditures). The said structure includes expenditures on R&D (33.7%), on purchasing new and modernized models of MAT (60%) and on repairing MAT (6.3%). Any proof as to how optimal such expenditures distribution is, or may be, is not yet know either.

The social component of the military expenditures still continues to be criticized by both military servicemen and civilian personnel. No indexation of the basic pay is provided for in the budget, nor many people seem to be very happy about the increasing special al lowances. To avoid social protests, early in 2005, the RF President instructed the RF Gov ernment to find a positive solution for these social problems of all those connected with the countrys military security at the expense of the expected additional revenues.

Comparison of the budget expenditure groupings, as represented in Table 59, with the strategic aims (both shown in the said methodological recommendations and those mentioned earlier in the approved conceptual documents) inevitably leads to a conclusion that they do not correspond with each other.

Moreover, such classification structure of the military expenditures in the RF was dif ferent in the earlier years (it is changed almost every year) which will make analysis of ex penditures for the period of six years, including the previous years, undoubtedly much more difficult. Suggestions contained in the said methodological recommendations, i.e. to group expenditures of the functional and economic classification by objectives and tasks, are actually rather hard to practically implement. Sufficiently accurate in this case can only be presentation of such expenditures by objectives and by the budget classification groups simultaneously.

Little doubt causes something else: if all the state spending is to be put under control then the same should be extended to the so called non budget returns of the RF Defense Ministry and other power bodies as well. These must become sufficiently obvious for the budget and be put under control.

Moreover, the problem of inconsistencies is not at all exhausted with that. For, there is a number of by laws setting aims and objectives of the budgetary planning subjects.

This primarily concerns the so called power bodies subjects of the budgetary planning.

For instance, in the Regulations on the RF Defense Ministry, by the Decree of the President of the Russian Federation, dated 16.08.04, functions of this ministry are set as consisting of:

1. working out and implementing state policy in the field of defense;

2. normative and legislative regulation in the field of defense;

3. performing other functions in the same area as established by the respective RF laws, presidential Acts and the Government of the Russian Federation.

RUSSIAN ECONOMY in trends and outlooks Table Structure of budget expenditures connected with ensuring the national security Share in Amount summary Name of section and subsection (mln roubl). expendi tures % National defense 531 139.2 Armed Forces of the Russian Federation 388 028.8 73.Mobilization and military training of civilians 1 895.4 0.Mobilization preparation of economy 3 500.0 0.Collective security and peace keeping (preparation and participation) 61.1 0.Nuclear and weapons complex 8 693.1 1.International obligations in the area of military and technical cooperation 6 231.0 1.Applied scientific research in the field of national defense 79 189.9 14.Other matters in the area of national defense 43 539.9 8.National security and law enforcement 398 889.5 Internal troops 23 893.8 6.Security bodies 62 315.8 15.Border services 31 685.0 7.Prevention and liquidation of consequences of emergencies and natural 22 054.7 5.calamities, civil defense Applied scientific research in the field of national security and law en 2 654.3 0.forcement Other matters in the area of national security and law enforcement 19 100.1 4.The said Regulations contain neither directions nor formulations of the objectives to be reached which needs implementing of the said functions. So, on the face of it, there can be no contradictions with any suggestions concerning activities of the RF Defense Minis try. However, further on, the Regulations explicitly state the tasks of the Defense Ministry and if these are considered as tasks of the budgetary planning subject, then, due to the absence of respective objectives, these tasks turn out to be, figuratively speaking, point less. Of the ten tasks, enumerated in the Regulations on the RF Defense Ministry, the first three and the tenth one apply to working out the policy and the respective normative and legislative regulation but in the most general form. Accordingly, estimating the solution of these tasks can be only strictly formal. Hence, there will be no practical possibility either to evaluate the degree of solving such tasks or to make workable conclusions as to rationality of the respective military expenditures.

Very much the same can be said about tasks of the Defense Ministry in the field of coordination. The said formulation of the tasks make it practically impossible to under stand the exact purpose of such coordination or where it is actually leading to. To give an account of their performance is indeed possible but again in a strictly formal form. Which will undoubtedly contradict the very idea of the said reforming the system of state govern ance.

The above analysis results of documents which do not sufficiently enough coincide with each other, permit at this stage to work out but only some proposals of conceptual nature which are connected with the reform of the state governance in the RF and relate to the sphere of activities of the RF Defense Ministry.

1. First of all, in our opinion, we must change our understanding as to the practical use of the RF Armed Forces in the present, relatively peaceful time. This relates, for example, to the intelligence and analytical activities of the Main Intelligence Department of the Section 3.

The real sector General Staff and other departments of the RF Defense Ministry aimed mainly at timely revealing of military threats and ways to efficiently parry them back. Novelty of the pre sent situation lies in the transnational nature of military threats and their merging with the terrorist separatism in the Russian Federation.

2. The objective of technically equipping the RF Armed Forces must be made and kept contentually adequate and fully in accordance with the changes in the tactical and technical parameters (TTP) of the armed struggle means and principally new features of the contemporary period in the economic development of humanity.

3. Content of the task connected with solving social problems of military servicemen, must be tied up with ensuring a high social status for all categories of such servicemen and full exclusion of the compulsory military service in regular military forces in peace ful time.

4. The most radical changes must be made in the content of the basic military tasks in peaceful time. For, the main for many combat branches now is not combat readiness for possible hypothetical military actions but combat watch, force determent of ag gression and solution of other concrete military tasks aimed at preventing any aggres sion. Later on, these kinds of activities must become main for all kinds and branches of the Armed Forces.

Analysis of the Regulations on the RF Ministry of Internal Affairs (MIA), approved by the RF President in his Decree, dated 19.07.04, resulted in the following conclusions: the established functions of this ministry consist in working out and practically implementing the state policy as well as in the normative and legislative regulation in the sphere of inter nal affairs, matters of migration included.

One of the MIA tasks is that of controlling its internal troops (IT MIA) and organizing their practical functioning. But the nature of such activities is not at all specified in the said Regulations. Nor there is any confirmation of the task which was posed to the troops in the previous version of the Fundamentals of the State Policy in the Field of Military Organiza tion, namely suppression, localization and neutralization of internal armed conflicts on the territory of the Russian Federation. There is only one clause of authorities determining participation of the RF MIA in securing the wartime regime as well as in conducting measures of the wartime regime.

Accordingly, to plan the budget spending on the MIA internal troops as well as to es timate the efficiency of their activities on the basis of such task setting can hardly be deemed possible.

Such situation with determining the role of other troops and military formations in other bodies having them at their command, is quite similar.

Section 4. Institutional and Macroeconomic Challenges 4.1.Policies in the sphere of property relations 4.1.1. Privatization and federal property administration:

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