Yeltsin orders economic overhaul

(First Edition)

MOSCOW (AFP) - President Boris Yeltsin ordered a thorough overhaul of the Russian government's economic reform programme yesterday - easing export controls, cutting taxes, and cracking down on inter-company debt and fraud.

The decrees will boost output and tighten state control of poorly or fraudulently managed enterprises, according to Alexander Lifshits, the head of a presidential panel of economic experts.

In two liberalising measures, Mr Yeltsin ordered that export licences and quotas, except those applying to certain 'strategic materials' outlined in existing legislation, including uranium, aluminium and diamonds, should be cancelled from 1 July.

He also mandated the government to cut business and value-added taxes by 10 per cent to 20 per cent and create a special tax regime for businesses which have attracted foreign investment. But he also authorised state control over several businesses considered to be part of 'vital sectors' of the economy and said mismanaged enterprises would also be placed under government rule. In a bid to curb capital flight out of Russia, Mr Yeltsin decreed that enterprises would have the right to only one bank account.

Finally, he established an agency to issue and manage bonds to finance inter-company debt and said that businesses would be forced to convert hard currency into roubles to cover their debts.

The measures were announced after production output had fallen by 24.7 per cent in the first quarter of 1994, triggering concerns of impending mass unemployment and economic collapse. Mr Yeltsin also decided to establish a consolidated fund to finance road repairs and construction in Russia.

In Moscow, business leaders gave a cautious welcome to the package of measures, saying they appeared to be 'going in the right direction,' particularly with the reduction in company taxes.

In London, a spokesman for the Department of Trade and Industry cautioned that the reforms were 'only part of the picture'. Britain had also hoped to see an increase in import duties and a reduction in import quotas.