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RUSSIA CHARTS NEW ISLAND OF CAPITALISM Murmansk brings to mind wartime arctic convoys, but a free economic zone the Russians are planning for the region could provide a major opportunity for injecting dynamism into Anglo-Soviet trade. This is the view of Professor Vladimir Kvint, vice chairman of the Soviet Export Association and one of the fast-moving, market-oriented Siberian economists who have risen to prominence during the Gorbachev era. Though one of the experts advising the Kremlin on how to put perestroika into practice, this leading economic researcher at the Soviet Academy of Sciences, made clear to The Times that he is far from convinced that the Soviet government is going about reform in the right way. Failure to reorganize the economy in response to the political changes of recent years has meant that it is entering an economic and social crisis which will be at its worst at the end of next year, or early 1991, he said. He sees this crisis as helping to destroy the old economic order, allowing a new one to be created more quickly. ‘‘There is only one way—the market economy—but it will have a specific Russian flavor.’’ But Professor Kvint, who has a background in heavy industry, is critical of the ‘‘guns-into-butter’’ policies now being pursued, switching defense plants to the production of much-needed consumer goods. He says the policy is an ‘‘important mistake,’’ arguing that the decrease in capital investment in the power and heavy industries which has resulted could cause an energy crisis. The attempts to reduce the vast central bureaucracy have also proved a mistake, Professor Kvint said, pointing out that a 900,000 cut in administrative jobs failed to put more people into production industries. Instead, they mainly took generous state pensions. Article by Colin Narbrough, The Times (London), Business and Finance Section, Wednesday, October 18, 1989. russia charts new island of capitalism 357 Having seen its plan for standardized regional development fail miserably for the past 60 years, Professor Kvint thinks the Soviet Union must now adopt a policy of ‘‘investing at the best place,’’ especially where it produces quick returns. Improvement would feed through to the regions later. In this context, he sees the free economic zones playing a key role. Current plans are for zones to be established next year at Vyborg, at the gateway to Leningrad on the Gulf of Finland, Novgorod, to the south of Leningrad, and Nahodka in the Soviet Far East. A zone on the Kola peninsula in the Murmansk region should be of particular interest to British industry, he suggested. The offshore oil and natural gas potential of the Barents Sea, plus minerals, timber, and fish, could make the region attractive to hard currency investors from Britain. A free economic zone would allow Western industry to operate unfettered by Soviet costs. Though Professor Kvint favors early steps towards ruble convertibility , all the indications from Moscow are that exposing the ruble to market forces is a long way off. Free economic zones, built on Soviet and Western investment, would provide a solution to the currency problem, as they would be islands of Western technology and productivity levels well located to supply both foreign and Soviet markets. The horrendous infrastructure problems of the Soviet Union would also be overcome, as the zones would have access to the sea lanes and the roads, railways, and services of their free market neighbors . ...

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