OREANDA-NEWS. September 22, 2010. Finance Minister Aleksey Kudrin said that the government plans to reduce the number of federal employees by 20% (or by 110,000) within the next two years. He said that this should save the budget RUB43bn (USD1.4bn). Local governments will also cut their bureaucracies by 20%, reported the press-centre of OTKRITIE Financial Corporation.

View: Administrative reform was initiated 6 years ago by then-President Vladimir Putin with the aim of raising the efficiency of state service in Russia. As a result, the number of federal ministries was cut substantially, but a few years later it turned out that the announced reduction in the number of federal employees was minimal.

Many ministries were replaced by newly-created committees and/or other structures. Announcement represents a second attempt to push through administrative reform in Russia, this time initiated by President Medvedev. The importance of this reform is hard to underestimate. If successful, it will undoubtedly help bolster the attractiveness of Russia in the eyes of investors. However, it remains to be seen how efficient this reform will be, particularly given that it will be implemented during the politically sensitive election season. Investors will be watching how this reform proceeds closely, albeit with significant skepticism.