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    GERMAN GREF ON ECONOMIC COMPETITION

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    MOSCOW, April 6, 2004. (RIA Novosti) - Competition must become the basic stimulus for modernizing the economy, German Gref, Russia's economic development and trade minister, said at the 5th international conference on Russian economic competitiveness today.

    "Competition, competition and once again competition is the basic stimulus for modernizing the economy," Mr. Gref said. "Competition makes it possible to discern between the best performers and bankrupt entities. For centuries, the world has not invented a better mechanism."

    In reference to the transition period, Mr. Gref noted that competition was hampered for a long time in Russia. He said that now the process has started.

    Mr. Gref said that flexible customs and tariff policies are another instrument for setting up a competitive industry. Mr. Gref opposed the creation of preferential conditions for Russian enterprises. Artificial market protectionism merely conserves backwardness at this stage, Mr. Gref pointed out. Average Russian customs duties now are 10-11%, they are 3-4% in Europe and the Untied States, Mr. Gref said.

    "But, I am not calling for reduced tariffs indiscriminately," he said. "This process should be managed very carefully." At the same time, we must reduce foreign trade barriers (as regards Russian goods). "We must move along this two-way street," Mr. Gref said.

    Mr. Gref also suggested creating various incentives, which would compel Russian enterprises to introduce energy-saving technologies.

    According to him, "resources [natural gas and electricity] cost only kopecks and local enterprises fail to appreciate resource-saving technologies."

    "Resources must have real-life prices," he said. "No more, no less." He also said that the market, rather than the Government, "must determine gas and electricity prices, as well as prices for other resources. We always run the risk of overstating prices."

    The Government still has no intention of raising specific tariffs, Mr. Gref noted. "Moreover, you know that I staunchly oppose efforts to even out domestic and global fuel and energy prices at a time when the Russian economy has not adapted completely to the new conditions," Mr. Gref said. "Nevertheless, we will have to accomplish this objective slowly but surely in line with specific economic growth rates."

    Mr. Gref also spoke about Gazprom reforms.

    According to him, the double corporate stock market will be abolished before the end of the year, "and we will adopt all other key decisions with God's help."

    The gas monopoly has started overhauling itself, Mr. Gref stressed.

    Gazprom, which previously operated without a coherent business plan, now has its own business plan and a three-year sectoral-development strategy. Gazprom will purchase all goods, services and contracts on a competitive basis this year. "I think that this will facilitate world-class pipeline-construction costs," Mr. Gref said.

    The Russian Government will discuss Gazprom's reform at a June session, Mr. Gref concluded.

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