With stabilization at hand, Russia is no longer trying to build a house in a hurricane which is what reform in a high inflationary environment means. Having reduced inflation, the central objective now must be to bring back growth. Moreover, growth drives international integration because businesses want to go into growing markets more than shrinking ones. Just as the central challenge of the early years of reform was stabilization and the devolution of state functions to the private economy, so the challenge ahead is to pursue structural reform which can create the foundation for growth. Indeed, I would go so far as to say that the prospects for continued stabilization and liberalization are dependent on growth.
Growth raises tax revenues and reduces the deficit which promotes stability.
Moreover, it creates the confidence needed to generate investments that, in turn, beget more growth. What I want to speak about today are some of the key pre-requisites for reform to promote growth. They fall into two broad areas. What the State Must Do There are two principle things that the state can do to promote a favorable business environment. The Russian government has a critical role to play in bringing to life the rule of law, without tangling private enterprise in a web of regulation.