Russia has crowned a tortuous 18-year journey from communist economic isolation by becoming the largest state outside the World Trade Organisation (WHO) to join the premier free trade club.
The more optimistic economists think the transition, which took place on Wednesday, will add an additional tenth to Russia’s gross product of $2 trillion economy and finally herald the end of its era of bureaucratic mismanagement and impenetrable red tape.
“Accession into international institutions such as the WTO lends Russia the credibility it needs to shore up the country’s investment environment“
– Renaissance Capital
But many of the smaller entrepreneurs complain that a flood of more attractive foreign products could simply wipe them out of business and leave Russia without the domestic industry necessary for achieving sustainable growth.
And almost everyone agrees that the onus will now be on the government to fulfill investors’ rising expectations of Russia becoming a country where doing business is not a prohibitively risky bet.
“In the absence of wider reform to clean up the business environment, even the longer-term benefits are likely to disappoint,” the London-based Capital Economics research consultancy cautioned.
The Geneva-based institution’s 156th member had spent years harbouring deep suspicions about dropping its own growth model of strong state enterprise for one practiced in rival capitalist countries over many centuries.
President Vladimir Putin on July 21 signed the accession document – a final step clearing the way for Wednesday’s formal entry – after once saying that the group needed Russia much more than the reverse.
Membership symbolically came for Russia and its Top 10 economy on the same day that the remote Pacific island nation of Vanuatu became the latest minnow to enter a grouping that already enlists almost all of the developed world.
Vanuatu formally grabbed the 157th seat at the trade negotiating table.
“Both accessions show that joining the WTO remains high on the countries’ agendas since trade can bring a predictable and stable basis for economic growth,” WTO Director General Pascal Lamy said in a statement.
Russia will now finish bringing down trade barriers to levels agreed in the negotiations while gaining broader access to foreign markets and benefiting from a more efficient business environment that should help stimulate growth.
Optimisim surrounds WTO entry
Economists call this a best-case scenario that could very well apply to Russia in the years to come.
“This is a great stimulus for developing the economy and competition,” Russia’s veteran former finance minister Alexei Kudrin wrote on his Twitter account.
The more upbeat analysts predict an 11-percent gain in gross domestic product for Russia over the long term.
“Accession into international institutions such as the WTO lends Russia the credibility it needs to shore up the country’s investment environment,” Renaissance Capital said in a special report.
But the bank also stressed that it was now up to officials to take the next step of actually doing away with the reams of paperwork and bureaucratic procedures that could keep businesses’ competitive spirits flowing.
“Big step in the right direction? Yes, but only if Russia makes the most of it,” Renaissance Capital said.
Moscow’s negotiators meanwhile said their immediate task now focused on securing quick WTO membership for Belarus and Kazakhstan – two ex-Soviet countries with command economies that are joined to Russia in a loose customs union.
“Kazakhstan is an absolute priority,” chief negotiator Maxim Medvedkov told the government’s Rossiyskaya Gazeta daily.
“And we have to help Belarus.”