DATE=4/4/2000 TYPE=BACKGROUND REPORT TITLE=PUTIN'S PROSPECTS NUMBER=5-46075 BYLINE=ED WARNER DATELINE=WASHINGTON CONTENT= VOICED AT: INTRO: Russia's new president-elect, Vladimir Putin, is not saying what he intends to do, other than strengthen the state and continue free-market policies. Some people, noting his firm support of the war in Chechnya, fear authoritarian tendencies. Others point to his record of economic reform as deputy mayor of St. Petersburg. During a recent briefing at the Center for Strategic and International Studies in Washington, two analysts of the Russian economy discussed the challenges ahead for President Putin. V-O-A's Ed Warner reports. TEXT: Who is Vladimir Putin, asks Bill Thompson of the Economist Intelligence Unit, which forecasts business conditions around the world. He says there are many versions of Russia's newly elected president. // THOMPSON ACT // Everything you read about Putin is true: the people who say he is authoritarian, the people who say he is a democrat, the people who say he is a statist, the people who say he is a reformer. It is all true because it is my own view that Putin basically embodies within himself many of the contradictions of post- Soviet Russian society, and that is part of his appeal. // END ACT // But the president will soon have to define himself, says Mr. Thompson, and that will disappoint some of his supporters. He is expected to declare himself in favor of economic reform because there really is no alternative. Massive foreign investment is needed, but without reform foreigners will not take the risk. Of course President Putin is yet to be tested, says Mr. Thompson. Under pressure, he could rise to the occasion or sink. His big job will be to confront the business elites who profit from the present unproductive, highly subsidized monopolies. Because of an ill and indisposed Yeltsin, Mr. Thompson says Russia has had a six-year succession crisis along with economic and political uncertainty. These conditions have encouraged a predatory capitalism: // THOMPSON ACT // In that environment, a rational agent heavily discounts the future benefits of any long-term undertaking. And if you discount the future heavily enough, then asset stripping is more sensible than investment. Capital flight, too. The very predatory features of Russian capitalism reflect the mentality which says everything may change. We have to steal as much as we can today and ship it abroad because there may be no tomorrow. // END ACT // Mr. Thompson says President Putin must work to civilize this business environment. That environment may already be improving, says Laza Kekic, also an analyst of the Economist Intelligence Unit. He says most western businessmen chose to wait out the economic crisis of 1998. They downsized their firms and laid off a large part of their work force. But now they are getting active again: // KEKIC ACT // Most businesses are not expecting any great reformist leap forward, whether it be in the tax code, accounting standards, even in protection of property rights. But the key feature is most businesses think they can live with this. Most of them actually have a very good experience with their Russian labor force, and most of them get along with their Russian partners. // END ACT // Mr. Kekic says he is cautiously optimistic because Russia is enjoying modest economic growth and is making surprising technological progress in such fields as software and microbiology. He says President Putin could be undermined by the war in Chechnya he so avidly supports. But his selection to succeed Mr. Yelstin was made with great care. Mr. Yeltsin wanted to see his legacy as a reformer, however imperfect, carried on by his successor. Time will tell if he made the right choice. (SIGNED) NEB/EW/ENE/RAE 04-Apr-2000 12:16 PM EDT (04-Apr-2000 1616 UTC) NNNN Source: Voice of America .