Investment Crisis in Post-Soviet Russia

Abstract

Five years ago following the disintegration of the Soviet Union and the collapse of its political and economic management structures, the leadership of the Russian Federation announced its new policy of market reform. The main aim of the policy was decentralisation of the over-centralised State System of management of the national economy, privatisation of state-owned enterprises, and the formation of legal, financial and other structures facilitating the development of market economic mechanisms. In January 1992 the reform was started with the introduction of price, currency and trade liberalisation. At the end of the same year this was followed by the beginning of the privatisation campaign. Lifting of State control over prices almost immediately sparked off a huge inflation wave which very soon became one of the major obstacles to the continuation of the reform. Although the Russian government has been successful in Controlling and lowering the inflation rate since 1995, this has not stopped the economy from sliding further and further into recession.