THE CHALLENGE

TAXES        Russia collects no more than half of its taxes,
             leading to underfunding of state institutions and
             delayed wage payments for state-employed
             teachers, doctors, and civil servants.

ECONOMIC     Although the economy grew 1.5% in 1999,
EFFICIENCY   GDP was nearly halved in the 1990s. Thousands
             of unprofitable enterprises are still operating,
             draining resources, while the gray market is
             estimated to represent 40% of GDP.

CORRUPTION   Russia's bureaucracy is overflowing with
             corrupt officials, while key business
             figures have received favored treatment by
             the Kremlin in return for political support.

UNRULY       War is raging in separatist Chechnya, while in
REGIONS      other regions, governors thumb their noses
             at Moscow by refusing to pay their taxes.
             government.


             HIS PROPOSED SOLUTION

TAXES        Implement a sweeping tax reform that
             would cut payroll and other taxes, simplify
             Russia's byzantine tax code, and bolster
             collection.

ECONOMIC     Introduce a new industrial policy that will
EFFICIENCY   encourage state, private, and foreign
             investment in high-tech and export-
             oriented industries.

CORRUPTION   May dismiss officials close to tycoons, or
             even offer oligarchs pardons in exchange
             for the return of looted assets.

UNRULY       Defying Western criticism, Putin is using
REGIONS      all-out force to battle Chechen rebels
             and vows to create a stronger central