RUSSIANS STILL CYNICAL ABOUT NATIONAL PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 012764 SIPDIS SIPDIS STATE FOR EUR/RUS WARLICK NSC FOR TGRAHAM, TMCKIBBEN USDOC FOR 4231/IEP/EUR/JBROUGHER STATE PASS ELECTRONICALLY TO USDA FOR OSEC, TERPSTRA; E.O. 12958: DECL: 11/13/2016 TAGS: EAGR ECON EFIN PGOV PREL RS POL SUBJECT: RUSSIANS STILL CYNICAL ABOUT NATIONAL PRIORITY PROJECTS Classified By: EMIN Quanrud for reasons 1.5 (b) and (d) 1.(C) SUMMARY. One year into a $13 billion dollar two-year endeavor aimed at shortcomings in health, education, housing and agriculture, President Putin's National Priority Projects have yet to impress the Russian people. Polls indicate that the public is skeptical -- if not cynical -- of the administration's efforts to date. Even supporters of the project do not expect to see tangible progress this early in the process, but some suggest it is possible that by this time next year, the projects could be making headway. First Deputy PM Dmitry Medvedev, considered a leading presidential candidate, is in charge of the projects' implementation, and continuing public skepticism will certainly not enhance his political base. End Summary. RUSSIANS - CYNICAL ABOUT THE "NATIONAL PROJECTS" -------------- ¶2. (SBU) President Putin first rolled out his plan for the four National Priority Projects in the spring of 2005. The reported goal was to spread to ordinary Russians the benefits of the energy-fueled economic boom of recent years and to begin to tackle some of Russia's most pressing social and economic needs. Coming as it did in the wake of the botched implementation of the monetization of benefits, this effort was intentionally never billed as reform. The GOR has allocated $13 billion to the projects, or 1.7% of GDP, over 2006-2007. Critics say the spending is cosmetic -- populist politics geared toward the next Duma and Presidential elections. Supporters say the projects are the first serious steps in remedying Russia's social ailments, and could soften the public to a new cycle of post-election reform. ¶3. (SBU) Either way, the government is working hard to trumpet the success to date of the projects. In November, Medvedev announced, "One thing is evident: the National Priorities that the Russian president formulated last year hit the spot...effective and fast solutions to the problems at hand are being found." Unfortunately, Russian citizens beg to differ, according to Levada Center polling. While a majority of respondents in a recent poll (58%) were familiar with the projects, they did not believe they would see any benefit, and more than one-quarter had never even heard of the undertaking. Not only were informed respondents unimpressed by the effort, 77% believed the money allocated would be inefficiently spent or stolen. HEALTH - A CURE IN SIGHT? -------------- ¶4. (SBU) The GOR's main goals for the healthcare system are to improve the affordability, accessibility and quality of medical assistance and to develop disease prevention programs. The federal allocation for the healthcare project in 2006 is $3.27 billion. In a recent poll by VTsIOM, a majority (62%) of Russians considered the country's current healthcare situation "negative," and almost half of those polled claimed to have seen no change in the healthcare system since the beginning of the year. On the positive side, one-quarter of those polled said they have started to see positive changes, and Russians seem generally optimistic that the health system's ills will be addressed at some level. While Levada polling found that 42% believe the health project will lead to better healthcare, VTsIOM puts the number at 62%. EDUCATION -- A MEDIOCRE GRADE -------------- ¶5. (SBU) The GOR's short-term education goals have been to provide grants and financing to outstanding students, teachers, and schools; develop schools focused on professional training; and provide necessary equipment and transportation - such as buses and internet access. Slightly more than two billion USD will be spent on education reform in 2006-2007. According to Levada, barely half of Russians believe the National Education Project will "probably" lead to an improved education system, and 39% of those polled doubt that the project will have any impact at all. Education improvements are not a lost cause, however. According to Levada's chief socio-economic analyst, the solid education legacy of the former USSR and the fact that the MOSCOW 00012764 002 OF 003 education project has a clearly defined set of goals gives this project a greater chance of success. HOUSING -- FINDING A ROOF TO PUT OVER YOUR HEAD -------------- ¶6. (SBU) Earlier this fall, Medvedev spoke during a television interview about the need for affordable housing, noting that 80% of Russians believe that owning property is fundamental to their well-being. By October of this year, nine months after the launch of the Housing Project, the GOR had built 26.5 million square meters of housing. Its ambitious target is 50 million square meters by the end of the year. Over the five-year life of the project, the government plans to spend $33.6 billion, build one million single family dwellings, and enable one-third of the population to buy a new apartment. Despite arguably impressive results to date, the Russian public remains highly skeptical that they will personally benefit from this project. Sixty percent of those polled by Levada did not believe the project would improve access to decent housing. In Moscow the figures are no doubt much higher, given recent housing price trends. AGRICULTURE - NO TURNAROUND EXPECTED -------------- ¶7. (SBU) In agriculture, over the next two years the GOR hopes to accelerate livestock development; stimulate smallholder credit and activity; create credit cooperatives; provide rural housing for young agriculture professionals; and create investment incentives for the sector. The Ministry of Agriculture has allocated slightly more than one billion USD for 2006-2007. Analysts are encouraged by the government's focus on smallholders and recognition of the need for credit cooperative development and foreign imports (equipment and genetics). Despite these upbeat observations, Russians themselves are the least sanguine of all about the agriculture project. Slightly more than two-thirds of respondents in a Levada poll believed the national project would fail to change the sector's overall performance. Analysts say the negative sentiment can be attributed to the rather unambitious outlines of the project: how large can the impact be when only one billion USD over two years is spread across more than 16 million producers? A second concern analysts cite is the very short timeline (two years) in which cash and imports are flooding into a sector that lacks the proper legislation, infrastructure, delivery channels, staff and management competency to integrate any radical changes. LOOKING FOR MORE FROM THEIR GOVERNMENT -------------- ¶8. (SBU) Polling data show that many Russians still look to the government to improve their situation. According to Levada, nearly a quarter of the population wants more from their government, especially in the areas covered by the national priority projects. It is notable that Russians are asking for more from their government, but not for more reform -- 80% believe current reforms are either not beneficial or are downright harmful. And it is not only soviet-era pensioners that are demanding more. MEDT's Batkibekov tells us that the younger generation (16-18 years old) seem to share the sentiment, although it is fueled not by nostalgia for the Soviet system, but rather out of a growing awareness of how western governments (especially Western European governments) provide for their citizens. ON THE GROUND, SOME HEADWAY BEING MADE -------------- ¶9. (SBU) Supporters of the National Priority Projects say that it is too early to expect tangible results. Most projects were started less than nine months ago, and given the staggering challenges and deteriorated condition of the social system (particularly health and education),sudden breakthroughs are unlikely. MEDT's Batkibekov thinks benefits in the health sector should soon be most obvious, noting in particular that the year-long procurement process should soon be delivering to many hospitals and clinics state-of-the art MOSCOW 00012764 003 OF 003 (or at least not obsolete) medical equipment. Higher salaries should slow as well the exodus of teachers and attract higher-qualified individuals, but that is a multi-year effort. Regarding housing, supporters and critics alike recognize that the GOR has made significant headway in increasing the supply of housing, though keeping prices within the reach of most Russians has proven far more difficult. COMMENT -------------- ¶10. (C) The project's harshest critics continue to call it nothing more than ineffective populism, with a good dose of fiscal mismanagement (read: corruption) thrown in. That may very well be true, but if it is, we will know soon enough. New medical equipment will either appear or not appear in the country's numerous polyclinics. Teachers will either chose to stay in response to salary increases or not. Housing units will be available (and prices start to soften) or not. And, as obvious as these changes will be to us, we are betting they will be even more obvious (or not) to the average Russian. Medvedev says he is serious about the success of the projects, and they, in turn, have become a very public trial of his ability to govern effectively. BURNS