Thursday, 2 January 2003

Booming Retail Sector drives economy in 2002

The rising standard of living in the capital is evidenced in the booming retail sector, which enjoyed its greatest year of growth ever, with new supermarkets and hypermarkets opening up seemingly every week. Two leading local chains, Perekryostok and Sedmoi Kontinent, for example, opened 37 and 30 new supermarkets each in the last 12 months, while Turkey's Ramstore unveiled two new hypermarkets and global French giant Auchan undercut everyone with its first mega-mart on the Moscow Ring Road. Not to be outdone, Swedish furniture king IKEA, which already considers Moscow the largest potential market in Europe, this month opened the largest mall in Eastern Europe, the 150,000-square-meter MEGA mall, which is anchored by IKEA's third outlet in Russia and Auchan's second.

Apart from the retail sector, if for no other reason, 2002 could be considered a success for putting August 1998 12 months further away, but much more had been hoped for. In many ways, economists say, it seems as if nothing much has changed at all -- Russia remains a country of contradictions, high risks and good intentions, with a government that is at times unwilling and at times unable to push through reforms that virtually everyone agrees are needed.

Delaying such reforms, economists say, jeopardizes current and future economic growth and makes the nation, already considered overdependent on oil, even more so.

Russia's membership of the World Trade Organisation seems no closer today than it did a year ago. In fact, there has been no progress to speak of on any of the major sticking points, which center on protectionist policies on energy prices, agriculture, financial services and telecommunications. The general consensus now is that it could take Russia, the last major economy outside the WTO, as long as five years to join the global trade body.

The government failed, despite its political will, to make major headway on major reforms, including Gazprom, Unified Energy Systems and the banking sector, all of which will remain focal points for domestic and foreign investors who have seen the Kremlin's political power tested and found wanting. The wait could be a long one. With parliamentary elections slated for December followed by presidential elections three months later, many economists fear little if any major reforms will be undertaken in the next 18 months.

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