Housing, Autos in 2010 Anti-Crisis Program

The government, which had promised to end its anti-crisis program, has decided to continue it as a modernization effort, although analysts say the package suffers from not having measures to develop competition or stimulate the private sector.

The anti-crisis program for 2010 was approved by the government on Dec. 30. The document is conceptual, while a plan of action will be revealed soon, an Economic Development Ministry official said.

The 2010 budget includes 195 billion rubles ($6.63 billion) for anti-crisis measures, while another 233 billion rubles will be spent on economic stimulus measures approved in 2009. Some of the measures are no longer being treated as crisis-related and will become part of the long-term budget plan, a government official said.

After approving the 2009 anti-crisis program, government officials promised that it would be the last. But the anti-crisis committee headed by First Deputy Prime Minister Igor Shuvalov decided a few weeks before the new year that a program and plan were needed for 2010, the sources told Vedomosti, adding that the program could in part be considered a post-crisis development plan, which all members of the G20 are supposed to create.

Of the 195 billion rubles in anti-crisis funds, 139 billion rubles have already been allotted for specific purposes. The remaining 56 billion rubles are unlikely to be used soon, since "a reserve is needed in case the economic situation changes," the government source said.

The anti-crisis program spans "from measures easing the effects of the crisis to modernization measures," otherwise it would be difficult to achieve the goals in the government's plan for social and economic development through 2020, the Economic Development Ministry source said.

The majority of the modernization measures are described in general terms. Among the specific ones are purchases by Rusnano, Vneshekonombank and other state banks of foreign technology assets.

"It's an opportunity to get the most modern technologies for the innovative development of the country. But it's too early to talk about any specific deals," a Rusnano spokesperson said.

Rusnano's supervisory board has not yet discussed the purchase of foreign assets, a source close to the state corporation said, adding that domestic companies in whose projects Rusnano invests, not the state corporation itself, need new technologies.

A spokesperson for VEB declined to comment.

"They were right to put the accent on modernization, but the program doesn't have any measures for developing competition, and that's where demand for innovations arises," said Igor Nikolayev, of FBK.

Alexander Morozov, of HSBC, said the government's proposed modernization measures were for post-crisis development, rather than an anti-crisis response. "But they're not enough for the task of modernizing Russia's economy. You can't have modernization just through state institutions. You need stimuli for the private sector," he said.

The government's anti-crisis program is promising to keep up social spending. Welfare programs will be increased 10 percent, and the fight against unemployment will be continued, albeit on a lesser scale. This year's budget includes 36.3 billion rubles for efforts to fight joblessness, compared with 43.5 billion rubles in 2009.

The program also includes measures to stimulate the economy, particularly in the auto industry and the construction of residential housing.

In 2010, 11.1 billion rubles is allotted for a program to encourage people to buy new cars and turn in older models, and another 20 billion rubles will be spent to continue state purchases of automobiles.

The state will also continue buying up unfinished apartments that are at least 70 percent complete. In 2009, the purchases were conducted by the housing and utilities fund, while this year they will be done by the Defense Ministry and will be based on the Regional Development Ministry's recommended prices for each region, the government source said.

"On average in Russia, that's 25,000 rubles to 30,000 rubles per square meter," the source said.

Up to 102 billion rubles from the fund for compensating mothers for having multiple children could be used to stimulate residential housing demand. The housing and utilities fund will receive 15 billion rubles to stimulate low-rise housing development.

There's already a good market for housing that's 70 percent completed, so it would be helpful if the state were buying housing that's 20 percent to 30 percent completed, said Mikhail Urinson, director of Alur Investments and Development. He also said it should be a longer-term program.

"The measure is intended for one year, while construction of a multistory building takes 18 months to two years," he said, adding that he thought the purchase price was reasonable.

"For those prices, you can only sell a smile," said Andrei Pankovsky, deputy chief of DSK-1, adding that it would be better to spur private demand. "The state could fully subsidize mortgage rates for doctors, teachers and so forth," he said.

If the anti-crisis measures are successful, the economy will grow more than the Economic Development Ministry's official forecast of 3.1 percent, the program says. Morozov, of HSBC, said the anti-crisis measures would not add more than 1 percentage point of growth and that his forecast for 2010 was a 3.7 percent rise in GDP. Nikolayev, of FBK, said the measures most likely wouldn't lead to economic gains, predicting that GDP would fall 2 percent to 4 percent this year.