DATE=3/17/2000 TYPE=BACKGROUND REPORT TITLE=PUTIN'S ECONOMY (PART 2) NUMBER=5-45678 BYLINE=BARRY WOOD DATELINE=WASHINGTON INTERNET=YES CONTENT= VOICED AT: INTRO: Oil exporting Russia is benefiting from the tripling of oil prices over the past year and foreign investors are confident that Vladimir Putin will capitalize on improved government finances to launch a new round of economic reform. V-O-A's Barry Wood reports that even if more rigorous reform is undertaken success is not assured. TEXT: David Hexter who has been the Moscow representative of the European Bank for Reconstruction and Development says the oil bonanza has created a huge opportunity for Russia to actually build a market economy. Speaking at an investment forum in New York (March 16), Mr. Hexter says if Mr. Putin is to succeed he will have to remedy the problems that have stymied reform in the past. //Hexter act// The banking system is still a mess. There has been no attempt at systematic structural reform. The civil service remains bloated. The taxation system has not been reformed after years of everybody saying this. The court system remains extremely weak. And there has been no fundamental restructuring of industrial enterprises. //end act// At another forum (March 17) in Washington, Carnegie Endowment researcher Anders Aslund cautions against expectating quick reform of the banking system. While otherwise optimistic about Russia's economic prospects, Mr. Aslund believes Mr. Putin will move slowly in removing former Soviet central bank chief Viktor Geraschenko from the Central Bank of Russia. //Aslund act// The question is how fast can Putin do away with him. Of course there are ways to do away with him. But it is quite difficult. He needs to have a majority in the Duma behind him. So I think this is a test. If Putin is really serious about getting something in order he will take on Gerashshenko. //end act// Mr. Aslund says as long as Mr. Geraschenko heads the central bank there can be no reform of the banking system. At the same American Enterprise Institute conference, Congressional Research Service analyst John Hardt said Mr. Putin must undertake far reaching institutional reforms, creating the rule of law, to instill business confidence. Mr. Hardt is pessimistic, saying the flight of capital out of Russia has risen in the past few months. //Hardt act// This is going up. This is a suggestion to me that the system is still perverse and it is not headed in the right direction. That there need to be basic changes. //end act// Panelists did not agree on whether Mr. Putin will wage a battle against the endemic corruption that has done so much to discredit Russia's past efforts at reform. However, Mr. Aslund believes the oligarchs that dominate the Russian economy will not dominate Mr. Putin. //Aslund act// The oligarchs are essentially down and out as of August 1998. It was one of the best features of the financial crash, that it took out most of the oligarchs. Now you have a few standing. Essentially, it is (Andre)Berezovsky and Avramovich (they are both well-known tycoons) that are trying to pursue it in the old way. And I'm in not doubt that Putin will take them out. //end act// Acting-president Putin has promised to unveil his economic reform program before the March 26th presidential election. (Signed) NEB/BDW/PT 17-Mar-2000 20:21 PM EDT (18-Mar-2000 0121 UTC) NNNN Source: Voice of America .