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And now, according to Russian Prime Minister Vladimir Putin, nothing threatens Russian banks in the crisis conditions as they have already received sufficient funds. The 2008 results were acknowledged   positive for Russia. Despite the world financial crisis the GDP increased by about 7 % whereas the production grew by 5 %. Inflation rates accounted for 13.3%, higher than expected, but even this is justified, in particular, through the above-mentioned large-scale money inflows to stabilize the economic situation in Russia. According to Putin, our country can overcome the crisis with minor consequences.   This situation is likely to be in the country on the average.

President Medvedev’s stance is as sturdy and optimistic. According to him, national projects must be realized to the full despite all the current year crises and challenges. The government is expected to finance all commitments of 2009. “Particularly because national projects play a vital role in the social development of Russia and, we must admit, they have proved their efficiency over the years we have been jointly working on them”, he said. Besides, the president made it clear that housing objects that are under way must meet the deadlines.

So, the objectives and tasks are set, it is high time they got down to business. But, despite the government subsidies, banks have stopped granting credits for   construction objects, both new and under way, and those that are 50% completed. As there is no money, mortgage has ceased to exist. It played its role as a price stimulator and as it was expected it deceased without providing available housing. The market has come to a standstill.

Real estate prices stopped growing back in summer. Many analysts had prognosticated rapid price correction at first latently with extra square metres, even rooms, then with discounts and now developers have reduced prices from 14 to 50 per cent without attracting wide attention.   All this is happening though real estate can not refer to perishable goods. Especially in winter.

Sales figures (considering that future estate owners account for 20 per cent of investments) and cheap loans have gone into history – it is time to optimize expenses - and construction jobs have come to an end. Though construction is still active in Moscow, it is extinct in the periphery.

 Irresponsible incompetent bankers have become obsessed with American economy putting the welfare of ordinary people at risk. Now they have to realize in practice like slow learners that economics and finance are not the same phenomena in Russia. And according to builders, an albatross around the industry’s neck is getting heavier and is leading to suffocation.

 166,000 m² of housing were built   in the Novosibirsk region in September – that is 4,8% fewer than last year. A drop in the construction of apartment houses is much more tangible, that was minus 11,8% by September 2007. Throughout the year of 2008 a reduction in aggregate construction volumes by 2007 was registered only once – in June   (the lag accounted for 2.1%), but then there was observed a 14.4% growth in apartment houses. In September there was the first drop in construction works in prices (2.7% lower than in September 2007 in prices). According to   Vitaliy Ivlev, the chief officer of the State construction Directorate (Gosstroinadzor)   of the Novosibirsk region, at the end of the year jobs were practically terminated at 43% of Novosibirsk construction sites, about    40% of jobs are somehow being carried out, and only less than a fifth of construction sites are functioning properly.

Nevertheless, a law on mortgage is being implemented filling the gaps in the money-lenders’ education. Our considerate state caring for surfeited creditors legitimated collection of debts on flats without trial if the debt amount exceeds 5% of the pledged property. Large-scale evictions of debtors and turning them into homeless are unavoidable, and the state is instrumental in that.

Analyzing the construction market situation experts of the Russian Builders’ Association    noted that banks have virtually stopped giving loans to carry out investment-construction projects due to liquidity fall and bigger risks that ready housing objects can be not sold. Besides, there was a dramatic decrease in housing mortgage volumes. The number of crediting banks has reduced 20 times. Only about 15 banks have preserved mortgage programmes. Five largest banks, mainly state-owned, account for 80% of mortgage volumes.

As potential buyers are waiting for estate price falls and volumes of mortgage loans are reduced real estate sales have stopped on a large scale. According to Nikolai Koshman, the president of the Russian Builders’ Association, growth rates of housing dropped almost 6 times compared to 2007 figures.   They are expecting a further decline by 20 per cent in 2009. Concerns upon the imminent problem had been expressed long before, but   the authorities turned a deaf ear to this warning.  

All this explains the gravity and complexity of the situation to a slight extent. A drop in demand on the construction industry products caused a reduction in   construction materials and accompanying products. It led to a considerable release of labour resources that had been deficient. The problem was not only  lack of professionals but labour forces of any qualification. Economists say labour forces were  depleted and now it is time to transit from an extensive model of economic growth to labor productivity increase.  

Enterprises and regions have to face a choice – either to sharply increase labour productivity or reject ambitious investment projects. There is another option – to attract migrants.    Currently the industry has to lay out professional personnel, mainly migrants from former USSR and foreign countries. But the problem is that employers have not paid to their employees. The latter was not an incentive for people that instantly became unnecessary to return home without money and meet their relatives earlier than they expected.

     The state does not care for trifles and restricts itself to debtors’ appeals for humanism at the same time making no amendments into state regulation. But fraudulent practice is long elaborated -  for example, Turkish workers build a house and then a customer asks them to leave the construction site without payment. Then Tajik workers come to their place, they are cognizant of this incident and scared of being treated the same way. Everyone can become a victim of cynical and malicious employers: people from mountains, steppes and Russian citizens from the Ural regions. Besides, top priority in solutions is given not to corporate interests but to the financial demands of a particular capitalist.    

Gastarbeiters are naturally unwilling to work and to leave demanding payment arrears  and aggravating the crime rates of the districts where they temporarily accommodate. During these clashes employers call for migrants to observe the labor agreement,     national  diasporas appeal to peace and quiet, whereas customers of the construction sites reinforce security.    Nobody cares for workers. As a rule, they have no money for getting to work and have to walk from distant suburbs, to say nothing of food and a ticket back home.

 

According to Rosstat,   economically active population  accounted for 76 mln people, that is 53% of total population, by late November 2008. 5 mln people, or 6.6% of economically active population, were classified as unemployed (in compliance with  the World Labor organization methods).  The average age of an unemployed (those registered in the Employment Office) in Russia is 34,8 years, that of an employed accounts for 39,5 years. Young people under 25 account for a third of the unemployed (29%), over 10% have higher education and about 18% secondary professional education. Job-hunting takes up 8.4 months on the average,   36.7% are unable to find jobs for more than a year. A third of jobless gave up jobs and a third was laid off.   There are no data on figures reflecting forced vacation periods without pay.

Payment debt growth in construction in 2008, %

(according to Rosstat , 30.12.2008)

In November 2008   PricewaterhouseCoopers made a survey on Measures in the personnel management to prevent or overcome the crisis (http://www.totalreward.ru). The survey participants were   123 largest companies in various economic sectors,    53% out of which  are Russian companies, 40% – international and 7% companies with joint capital. 

The survey showed that 94% of the interviewees are planning or have already introduced changes in personnel management as a result of an aggravated economic situation.   89% of respondents are planning or have already introduced changes in the bonus structure.  Only 5% êof companies are decreasing the base salaries and wages. The majority of the participants noted that their salaries were at the level of 2008  or increased slightly (by about 10%) on the average) but this growth is less than the planned figures for 2009.  Some companies intend to raise wages just to compensate losses caused by inflation. The absolute majority - 91% – of the study participants are cutting down or nor planning a yearly   bonus at all. Fewer than 10% of respondents are planning changes in long-term bonus programmes. In general, changes into the bonus structure are planned to be introduced in January, 2009.

The companies are reducing or freezing expenses on personnel management including wages funds, corporate occasions, training and development, hiring and travel expenses. All in all 48% of the companies regard personnel redundancies as a necessary measure to optimize the personnel number by 10% on the average, 79% of the respondents stopped hiring specialists for new positions back in October-November. About 75%   Russian companies cut down expenses on personnel hiring, training and development while 56% foreign companies reduces hiring expenses and 36% training and development expenses correspondingly.

More than a half of the companies made redundancies in September-November 2008. And many are planning   redundancies in December 2008 - January 2009 and some intend to do it in  the second quarter 2009.  56% of the companies are planning to lay off a certain percentage of employees in each division. The most spread way of laying off is according to the agreement of both parties (94% respondents), 67% of the companies are planning redundancies according to legislation and   46% of the respondents announced redundancies voluntarily.  

About 60% of the participators are planning or have implemented policies to grant supplementary benefits to their employees. The companies    are reducing limits of mobile communications,   transport expenses. 15% of the companies giving allowances on food, medical insurance or voluntary life insurance are   cutting down expenses decreasing their rates, number of participators and changing service providers for more beneficial conditions. Some companies made decisions to cancel medical insurances for their employees in the fourth quarter of 2008 or in January 2009. About 10% of the companies paying sick leaves and maternity leaves  in amounts exceeding those regulated by the legislation  informed of their cancellation or reduction. Fewer than 35% of the companies giving special conditions to their employees on getting loans on concessionary terms  announced changes in these programmes including increased loan rates for employees, tougher requirements to borrowers and loan conditions as well as the programme halt or cancellation.

 Despite all the above stated measures practically all participants realize that one of the top priority factors of success is to keep the key employees. 

  It should be noted that hardly any uniform idea was worked out to define   to what extent an abstract employee is in demand. Practice shows the range of the lucky includes those who are loyal to the management and not the most highly paid workers, not with the highest qualification that can maintain the production viability without creative innovations and changes. Quite modest expenses on new equipment and research are reduced to the lowest degree. There is some demand only on parts for pre-sale renovation of the equipment for sell-off.

 The survey respondents noted that from  2009 an absolute majority of  the companies will start existing on reduced budgets. If the economic situation goes on aggravating, personnel expenses will be further on cut off in February-March. The overall reduction in salaries will give the companies an opportunity to attract qualified specialists on beneficial terms. At the same time it will be more difficult for professionals over 40 to find jobs than for young specialists. The companies are expecting higher loyalty of their employees and as a result higher performance.

 The president’s call to take advantage of the crisis and get benefit was taken by businesses as permission for speculations. This time at the co-workers’ expense. It is easier to grab at the opportunity and fire highly paid specialists instead of explaining the difficulties of the transition period and persuading the necessity to cut the demands. It is not a problem to fill the vacations with less demanding and taciturn candidates both when production is stable and brittle.

 Considering these circumstances “loyalty and high performance of the personnel” should be accompanied by awareness that a rise in economy and personnel deficiency will hardly make “good specialists” fired before stand in a line to put in order a load of work formed n their absence. Besides, separate demagogic statements that the crisis is short-term should be regarded as far-fetched propaganda that has nothing to do with reality. The crisis of the 1990s showed that problems in Russia never disappear at once and it is impossible to return the personnel that were made redundant and deceived. During the crisis creative personalities either degrade or find a different sphere to apply their skills. as the “satiety” period preceding the crisis showed, new talents do not form everywhere and all of a sudden even in better times, if ever. An economic crisis is not as devastating as moral decay. Even years later the supporters of a boss will scarcely understand treachery and lies for his sake.

 According to Deutsche Bank estimations, employment growth by 1% lead to the GDP growth by 1.3%. Now when employment growth has halted, there is a slow-down in economic growth. To resume construction rates and lead the construction industry out of the blind-alley   Nikolai Koshman   offers the state  participation in co-investments   as a means of rejecting land rents and a reasonable pay for connecting to communications and limits on resources  in the investors’ interests, thus eliminating emerging social effects of the crisis.  

It is recognized that a large owner is the best “friend of the state” concentrating considerable financial and other resources in its hands – a tax basis to form the stat budget.   But it should be kept in mind that the owner hardly cares for it. It is interested only in self-enrichment and not in making money for public needs. Embezzlement of financial assets and intellectual property is a common phenomenon thriving due to the government’s lenience towards it hoping for tax incomings. Neither tycoon has been noticed to reduce oil prices for the population, but tax evasion is wide-spread. The friend of the state is a patriot who makes a contribution to the intellectual power of the country by his/her labor, intelligence and industry. Immaterial assets make up 90% in the national welfare of the developed countries. Only “indigenous” developing economiesare satisfied with “feathers, beads and pearls” of the dilapidated productions left over from the underdeveloped and immature capitalism stage.