OECD and Russia: working together for a stronger world economy

 

Lecture at the Higher School of Economics


OECD and Russia: working together for a stronger world economy

 

Remarks by Angel Gurría, OECD Secretary-General

Moscow, 25 April 2011
 

Dear Mr. Kuzminov, Mr. Yassin, Deputy Minister Slepnev, Ladies and Gentlemen:

I am very pleased to be at the Higher School of Economics today. This place is the home of leading economists and reformers and it contributes greatly to Moscow’s intellectual stature.

My visit takes place just a few weeks after the 50th anniversary of the flight which took the first man (Yuri Gagarin) into space. This is a powerful reminder of Russia’s pioneering spirit, inspiring generations across the world. Half a century later, the world has moved away from the era of cold war and space race, towards an age of greater interdependence and co-operation. This is a “giant leap for mankind”.

The need for enhanced international co-operation was clearly reinforced by the economic and financial crisis. It triggered a strong, effective and coordinated response, which prevented the recession from becoming more severe.

But we continue to face huge challenges and our success in restoring growth and confidence will greatly depend on our willingness and ability to work together. Major global issues, such as climate change, migration and poverty, are prompting us to redouble efforts in favour of international consensus.

The good news is that the world economy is recovering. According to OECD projections, output will grow by around 41/4 and 41/2 per cent, respectively in 2011 and 2012. But while recovery is underway, it remains uneven and many governments are trying to solve the complex equation of fuelling the recovery and promoting employment, while consolidating fiscal positions and reducing debt. To face these challenges successfully, governments and markets will have to explore new sources of growth to increase productivity and support the recovery in a smart way.

Russia is facing similar challenges. The economy was hard-hit by the crisis, with GDP falling by 11 per cent from peak to trough. Although the post-crisis recovery has been quite strong, output is still below the pre-crisis peak, and Russia has to make significant efforts to increase productivity, lower barriers to trade and investment, improve the business environment and raise the effectiveness of its innovation policies.

The common challenge of promoting a lasting, job-rich recovery while encouraging a rules-based economy to give confidence to businesses and citizens, is prompting us to strengthen international co-operation even further.

And this is precisely what the OECD stands for. Multilateral cooperation is our core mission. It is that very concept, which fifty years ago, led to the creation of the OECD. In pursuing our mission over the years, we have developed appropriate legal frameworks, multilateral tools and standards in a growing universe of policy sectors.

Let me give you some examples of OECD instruments which have improved the functioning of the world
economy.

Based on OECD work stretching over more than a decade, the G20 recently decided to put an end to banking secrecy as a tool for international tax evasion. As the global standard-setter in this field, we provided all the elements needed to reach this very important political decision. Our work is now helping to prevent tax base erosion - in both OECD and non-OECD countries - and helping governments to enhance their capacity to invest in human and physical infrastructure, in order to increase growth and prosperity.

The OECD was also the very first international organisation to develop standardised comparative performance indicators of national education systems. Our PISA report, which now encompasses over 70 countries, has not only advanced the agenda for quality education, but has become the benchmark for policy making and reform.

The key challenge now is to use our experience in the field of multilateral cooperation to promote the emergence of a more reliable and effective global governance architecture; one which will accommodate the concerns of developed, emerging and developing countries. Through its analytical tools and comparative instruments, the OECD is supporting the G20 in areas ranging from taxation, trade and financial sector reform, to corruption, employment, development and green growth.

To continue to fulfil our mandate in a fast-changing world, we are becoming more open and inclusive. Last year, we welcomed Chile, Estonia, Israel and Slovenia as members. Stronger interaction with key emerging economies, in particular Brazil, China, India, Indonesia and South Africa, is an important part of this strategy. These accessions and enhanced partnerships open a new chapter in the history of our organisation. They are a clear sign of the OECD’s firm and established intention to engage strategically with the wider world.

Russia has a special significance for us in this context. The OECD has accompanied Russia’s reform efforts since the early 1990s. In nearly two decades, free prices, free trade, free labour markets, privatisation and competition have transformed the Russian economy. The OECD contributed its vast knowledge and expertise on policy design and implementation, working hand in hand with its Russian counterparts, tackling the challenges of an unprecedented transition from central planning to a market economy.

Since the early 1990s, we have constantly sought to deepen and broaden our co-operation. Recent work with Russia includes seven full Economic Surveys, as well as policy reviews in critical areas such as education, agriculture, investment, environment, innovation, social policy, science and technology, corporate governance and regulatory reform.

We are also pleased that building on the trust we have established over the years, Russia is advancing on the accession track to become a member of the OECD. The accession process can be seen as a joint initiative to support Russia’s objective of modernising its economy. Many of Russia’s own modernisation goals converge with OECD standards and best practices. In this way, the accession can support Russia’s efforts by underpinning and driving change.

Our fruitful exchanges across many areas could be useful to the current excellent initiative to craft a Strategy for modernisation and development for Russia until 2020 and to the presidential modernisation commission, which will steer broad-based technological development and innovation. The forthcoming OECD Review of Russia’s Innovation Policy recognises the formidable strengths of your innovation system. It highlights the need to shift the “centre of gravity” away from the publicly-owned R&D system and towards production firms, whether public or private. It also provides concrete recommendations in favour of a whole-of-government approach, involving greater levels of co-ordination between different ministries and agencies.

Another example is the recent call of President Medvedev for ministers and senior government officials to leave the boards of state-owned enterprises. This measure should be implemented following the standards and best practices on corporate governance. 

Importantly, we can also work with Russia to address the challenges of transitioning to a low-carbon economy. Oil and gas are central to the Russian economy. Breaking away from economic growth founded on the burning of more and more high carbon fossil fuels is the only way to go, and time is running out.

Green growth prosperity is now the only sustainable future, the only alternative. To borrow a quote from Jose Manuel Barroso: ‘there is no plan B as we have no planet B’. The forthcoming Green Growth Strategy of the OECD will propose specific policies, tools and new measurements to guide governments in this challenging, but indispensible process.

The OECD can provide analysis and support to many more priority areas for Russia. Even if there is no single recipe for successful reforms, OECD work on the Political Economy of Reform and Making Reform Happen provides a rich “palette” of policy options to help policy makers in charge of crafting and implementing structural reforms.

The potential dividends are considerable. Our annual Going for Growth publication, which reviews structural policies and compares country experiences, suggests that with the right policy mix, Russia can significantly improve its productivity and narrow the income gap with OECD countries.

The focus needs to be on measures to lower barriers to trade and foreign direct investment, to reduce state control over the economy, and to raise the effectiveness of innovation policies. Our report also singled out reforms to public administration and the health care system as other key priorities.

Let me conclude with some very concrete examples on the benefits of accession.

Accession to the OECD is a transformational process, serving countries as a catalyst for reforms to improve standards and build stronger institutions. A strong case in point is my home country, Mexico. Within its accession process, it relied on the OECD to revamp its competition laws and institutions, which are now among the most advanced in the world.

One of the most remarkable examples of our constructive dialogue with Russia until now, on anti-corruption, is also showing that the accession process helps to improve policies and change for the better.

The OECD reviewed Russia’s legislation on foreign bribery following its request to adhere to the OECD Anti-Bribery Convention; a requirement for accession, but also one of Russia’s own policy goals. The OECD’s recommendations were taken into account in draft anti-corruption legislation, currently pending in the Federal Assembly. Adoption of this legislation should enable Russia to become party to the OECD Anti-Bribery Convention. This would be a new milestone in the co-operation between Russia and the OECD.

We hope that our co-operation will gather speed this year. As Anton Chekhov says, “Man is what he believes” and we are confident that the accession process will help maintain the momentum of Russia’s modernisation, in the interest of a stronger economy and better lives for its citizens. Looking forward, we also believe that Russia will bring many new, diverse and valuable experiences and policy perspectives to the OECD.

My dear friends:

The OECD is celebrating its 50th anniversary this year.

Anniversaries are an opportunity to look back and take stock of achievements, but also look into the future. Our future is full of formidable challenges and infinite possibilities: to promote new sources of growth, pursue new ideas for innovation, develop a new agenda for jobs, reduce inequalities and implement new green growth strategies.

The question is HOW?

Our presence here today is part of the answer to that question. It is by learning from each other, by exchanging experiences, by coordinating policies and putting our minds together to devise innovative policy solutions that we will earn ourselves a brighter future.

The OECD stands ready to work with Russia in this endeavour.

 

 

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