Why Russia Needs a Mobilisation Model

NEW – September 21, 2022

The announcement of partial mobilisation is a serious thing. But, as I explained in today’s comments on current events, my deep opinion is that the reason for this decision is not the opposition of the Kiev regime, not the Russophobic activity of the EU and other Western countries, not the aggressive policy of NATO. The reason is the need to counteract the internal “fifth column” and its sabotage of any actions aimed at the development of Russia.

I will not list here the work that the Mishustin government has been doing in recent months, I will refer here to a good text by Mikhail Delyagin:

Mishustin’s government responds flexibly to various problems that arise, effectively directing budget funds to their solutions and changing outdated rules.

Thus, the allocation of an additional 56.2 billion rubles to support mortgage programs will allow them to be extended until the end of the year, even in conditions of increased demand.

The main part of the funds – 35 billion rubles. – will go to support the program ‘Preferential mortgage’, which allows to receive it at a rate of 7% per annum. In addition to new buildings, funds can be spent on the construction of a private house and the purchase of land for this. More than 16.5 billion rubles will go to support the family mortgage (the rate is 6%), and 4.6 billion rubles will go to support the mortgage of the Far East.

The maximum amount of a subsidised loan at a preferential rate in Moscow and St. Petersburg is 12 million rubles, in other regions – 6 million rubles.

Prime Minister Mishustin noted that helping citizens to purchase new houses and apartments will give an additional incentive to the construction industry.

In addition, 8.2 billion rubles are allocated for the implementation of projects in the field of import substitution, as well as for the modernisation and expansion of a number of production facilities. Already operating enterprises will have the opportunity to increase the level of automation and digitalisation; in addition, 17 new projects will be launched, creating at least 500 jobs. They attract more than 2 billion rubles of private investment.

The funds will be used to recapitalise the Industrial Development Fund (IDF), established in 2014 on the basis of the Russian Technological Development Fund. It provides targeted loans at rates of 1% and 3% per annum for up to 10 years in the amount of 5 million to 5 billion rubles, thereby stimulating the inflow of direct investment into the real sector of the economy.

In addition, the IDF finances 70% of projects up to 100 million rubles together with regional industrial development funds, which account for 30%. Thanks to its work, more than half a trillion rubles have been invested in the real sector of Russia, with the volume of project revenue amounting to almost 5 trillion, future tax revenues – 387 billion rubles, and the number of jobs created – 32,500. Its funds can significantly reduce the launch time of new projects, especially in high-tech industries.

The government of Mishustin directs significant funds to maintain transport. Thus, 15 billion rubles have been allocated additionally to support the air traffic management system. These funds will provide air navigation services for at least one million flights; at the same time, the government emphasises that, if necessary, they will increase this funding by the end of the year.

Almost 1.4 billion rubles was allocated by the Mishustin government to subsidise sea transportation with the Kaliningrad region, ‘in order to prevent an increase in prices for goods and to support local industrial enterprises’. By the end of the year, this will ensure a cargo turnover of 900,000 tons, primarily oil and petroleum products, coal, cement, peat, bricks, cars and furniture.

Now transportation to Kaliningrad is provided by three large ferries – ‘Ambal’, ‘Baltiysk’ and ‘Marshal Rokossovsky’, to which ‘General Chernyakhovsky’ and several universal cargo ships will be added from the end of September.

Financing of social contracts from the federal budget in 2022 is increasing due to the success of this form of social support by 3.6 billion rubles, which will ensure 30,000 such contracts by the end of the year.

For eight months since the beginning of the year, more than 216,000 of them have been concluded with a total coverage of 664,900 people, and half of those who signed a social contract managed to increase their income level, and 22.5% managed to exceed the subsistence minimum in their region. By the end of the year, the number of social contracts will be increased to 280,000.

For maintaining a personal subsidiary farm (from July 1, when these limits were increased by 100,000 rubles) one can get up to 200,000 rubles, for the development of one’s business – up to 350,000 rubles.

Due to the influx of refugees from the DPR, LPR and Ukraine, the Mishustin government allocated almost 1.3 billion rubles to compensate for the costs of their accommodation and meals to 57 regions. For obvious reasons, the Rostov and Voronezh regions received the most – 170 and 145 million rubles. Another 120 million rubles were allocated to the Belgorod region for one-time payments to refugees of 10,000 rubles.

Mishustin’s government considers the development of domestic software to be one of the key areas of support for the Russian economy in the face of sanctions.

Now the need for almost 400 types of programs has been confirmed. More than 80% of analogues have been developed, but more than half need improvement. This is an extremely promising direction, since the cost of purchasing licensed programs exceeds 200 billion rubles per year.

Prime Minister Mishustin noted: ‘We plan to attribute all key types of systems and applications to objects of critical information infrastructure. For each of the positions, the government will set the final deadline for the transition to Russian software.

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The government has provided additional state support measures to enterprises in this industry: tax benefits and exemption from inspections.

The status of domestic products with participation in public procurement under the current ‘second superfluous’ rule is absolutely fundamental. In this case, the client is obliged to reject all bids for participation in procurement that offers imported products if at least one bid is submitted with a proposal to supply domestically produced electronics.

The Mishustin government has introduced a point system for assessing the level of localisation of computer technology. To confirm the production of computer equipment in Russia, it is now necessary to collect a set number of points, which are awarded by performing certain technological operations.

The previous system, based on accounting for the share of the cost of foreign components in the price of products, is badly dependent on exchange rate fluctuations and purchase prices: a number of manufacturers solved the problem by simply inflating the prices of Russian components (according to the principle ‘my level of localisation is my markup’).

In addition, the Mishustin government introduced the differentiation of computing equipment into radio-electronic products of the first or second level, which will be determined depending on the presence or absence of a Russian central processor in the product.

Prime Minister Mishustin stressed that the meaning of import substitution is to create our own products: ‘It is extremely important for us not to recreate the current functionality of foreign software products, but to launch our own, fully meeting the needs of companies, and at the same time they should be export-oriented as well’.”

But the overall result of this work, in general, was clearly insufficient. And the GDP in the country is not growing, and the standard of living is falling, and even the enterprises of the military-industrial complex complain.

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Why is this happening? The fact is that Mishustin has only budget money at his disposal, and even then on a limited scale (the remainder of mandatory budget expenditures that can be directed to investments). And this is clearly not enough, we need to dramatically increase the volume of investment in the Russian economy. But those who lead the monetary authorities of our country do not allow this to be done.

At the same time, it is not enough to simply dismiss them — over the past decades, they have grown cadres who profess the same line, these cadres work within the regulatory framework created by them, both at the level of instructions for ordinary performers and at the level of adopted laws. And the main financial institutions (banks, first of all) work within this liberal model. If to just replace Nabiullina and Siluanov, little will change quickly … To restore a working investment system with existing institutions, it takes not even months, but years …

And here we remember that there is a mobilisation model, which consists in the creation of special institutions to solve pressing issues. For example, for investing in the real sector. These institutions should receive money directly from the Central Bank, and by a special decision of the President (and the Supreme Commander-in-Chief). They will be engaged in project financing and account management of the relevant industrial enterprises, and they simply will not be able to engage in currency speculation (and it is indeed speculation) and capital withdrawal — they will not have the appropriate license. And their rates will be low (since the cost of money for them will be zero).

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And the banks… Banks in such a situation will put pressure on the management of the Central Bank, because they will have customers who will demand low rates, and modern banks cannot give them due to the ban of the Central Bank. After the economy is running, it will be possible to figure out why we need the Central Bank with its current powers, why we need so many banks with foreign exchange licenses, and so on. But — later. In the meantime, we need to invest in the real sector.

Mikhail Khazin

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