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Note: the absence of certain data from thetable is caused by the same deficiencies of the performance reports.

Table 50

Expenditures relating to past militaryactivities

No

Title of expenditures

Code

Approved 2001 Federal Budget

January

February

March

April

May

June

1.1

Pensions to servicemen

1804

30651

7383

15029

1.2

Recycling and disposal ofarmaments

2200

6036

29

395

728

1654

2242

2719

1.3

Defense conversion

0704

250

41

125

1.4

Military reform

2500

4237

127

509

984

1720

2177

2632

5937

1.5

Funding under the housing certificates programs aspart of the state capital expenditure

0707

4880

2406

Table 50 (cont’d)

No

Title of expenditure

Code

July

August

September

October

November

December

1.1

Pensions to servicemen

1804

1.2

Recycling and disposal ofarmaments

2200

3251

3772

4429

5188

5589

6554

1.3

Defense conversion

0704

1.4

Military reform

2500

2896

3007

3111

3247

3599

5533

1.5

Funding under the housing certificatesconstruction programs as part of the state capital expenditure

0707

Notes: in bold and italics are adjustedexpenses corrected for additional amounts allocated under Federal Law No 161-FZof 14.12.2001.

Status, trends andprospects for the solution of social problems of servicemen

The biggest obstacle to higher combatreadiness of the Russian military organization is the social status ofservicemen which depends largely on two factors: money allowance and housing.

Money allowance to servicemen. The current money allowance paid to Russian servicemen throughout2001 remained unchanged at the dramatically low level. Noteworthy is theregular payment pattern of the allowances, with the exception of the so-calledwartime allowance. There was no lack of comment on the extent of abuse withrespect to this category of allowance.

In April 2001 the State Duma approved afederal law providing for a substantial increase in the money allowance ofservicemen, but the bill was never signed by the RF President because of thedeficiencies and discrepancy between the intent to raise the allowance andfinances available to the government. The reasons for which the pay rise wasrefused must have been related to the difference between the number ofpersonnel in the military organization as declared by the end of 2000, and itsactual strength. It was believed that the overall strength of the armed forcesin the Russian Federation stood at 1,200,000, but certain publications in themid-2001 asserted that the number must have been near 1,350,000. Naturally, aconsiderable amount of funds was spent to support the surplus 150,000servicemen.

The issue of money allowance was discussedon 11 May 2001 at the meeting of the RF Security Council, attended by bothchairmen of the two chambers of the Federal Assembly.

As the meeting recommended, on 31 May 2001the RF President submitted to the State Duma a draft federal law No 98384- Onamending certain legislative acts of the Russian Federation on money allowanceto servicemen and their benefits.

Under the draft law, the amount of thebasic salary depending on the category of the military office and the basicsalary depending on the military rank of the servicemen contracted for activeduty, and any additional payments shall be granted subject to uniform allowancerates applicable to all federal agencies that comprise the militaryorganization in Russia.

The official salary and military ranksalary should be no lessthan the amount of official salary and monthly bonus to it depending on thequalifications rating for the relevant categories of federal civil servants inthe federal executive authorities.

The correspondence between the standardoffice positions and military ranks of servicemen and public service positionsand qualifications ratings of the relevant categories of civil servants shallbe approved by the RF President.

The amount of money allowance of servicemenshould be indexed or increased in the same way and period as provided forfederal civil servants.

Note that there are cases when thecorrespondence of the army allowance with the salaries of civil servants in thefederal government is not feasible. For instance, the allowance paid tosoldiers and junior command officers contracted for active duty would befeasible to relate to the average actual salaries in the country, since it isexactly the difference between the money paid to the servicemen and the averagesalaried across the country that could make the contract with the armyattractive to soldiers and junior command officers. In a market economy wherethe service is a voluntary contract, the militaryorganization of Russia should be a competitive employer on the labor market, offering proper consideration for thehardship and specific circumstances of the military duty.

The official salary to servicemen isexpected to be increased starting 1 July 2002, and the allowance for themilitary rank, starting 1 January 2004. As the money allowance to servicemen israised to the level of the salaries paid to federal civil servants, the monthlyallowance to junior command officers will be doubled, and that of seniorcommand and higher command officer will increase 1.7 and 1.4 times,respectively.

Note also that apart from the significantincrease in the money allowance the servicemen will be asked to bear someadditional expenses as a result of the annulment of housing and utilitiesbenefits. Such additional expenses will not be large. For instance, alieutenant and platoon commander, starting 1 January 2004, will be paid onaverage a monthly amount of Rbs 4,797 (which is 2.03 times more thancurrently), but a significant portion of this amount could be spent to pay forthe cancelled benefits.

Providing servicemen withhousing. Throughout all the after-war decades,neither the Soviet nor, later, the Russian government proved capable ofresolving the issue of housing to servicemen and civilians retired frommilitary duty.

Initially, they tried to address the issueby allotting military institutions a certain quota (10 %) of all homes builtanew by any other ministry. This option, apparently, did not suit all. Then,they continued with the government program called Housing. This scenariofailed to resolve the problem since the main incentive to the performers wasnot measured by the amount of apartments built but rather by the costs sunk inthe construction. Abandoned construction projects everywhere became a telltalemonument to the period.

In 1997 this housing policy was recognizedas inefficient, to be replaced by the presidential program of state housingcertificates. Under the program, it was planned to meet all the requirements ofactive servicemen and retired servicemen in housing, provided they wereentitled to it, within 5 years (1997 – 2002). All in all, over the 5year period, 210,000 apartments must have been commissioned.

The 1998 default and certain other reasonsdisrupted this program too. Currently, the president’s housing certificates programcontinues, but at a very modest pace. The 2001 budget, for instance,allocated a meager Rbs 4.8 billion for the purpose. This amount is hardly goodfor 20,000 certificates whereas homes are still needed for about 200,000households. Given such a pace, it will take more than one decade to satisfy allthose active and retired servicemen who need housing.

These uncertainties about housing at theend of long service undermine the attractiveness of the military profession andcannot but affect the operational efficiency of the armed forces.

What is required is the development of anew comprehensive program Housing for servicemen as commissioned by thePresident, and having the RF Security Council strictly monitor its drafting andimplementation. Such program must provide for:

- faster rates of construction of servicelodgings for servicemen;

- increased funding and fasterimplementation of the President’s housing certificates program;

- additional resources allocated toresidential construction out of proceeds of the real property disposed of inthe course of the military reform;

- saving accounts opened up to youngofficers, warrant officers, soldiers and non-commissioned officers which, givena prospect of long service, would allow them to acquire apartments.

Current issues inmilitary-industrial complex

The current state and prospects for themilitary-industrial complex in Russia remain a concern for virtually allgovernment authorities, many leaders of the federation subjects, and employeesat the key industrial and research institutions. The reason for concern is tobe found in the effect that preservation and consolidation of themilitary-industrial complex has on the defense security as well as on theeconomy, foreign policy, social stability, on the pace of technical andscientific progress, and the promise it holds for many key national interestsof the country.

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