HIVIOSCOW, JUNE 17. 1998 /RIA NOVOSTI/-

Russian industrial policy will be implemented in two stages, Andrei Svinarenko, First Deputy Economics Minister, told parliamentary hearings in the State Duma yesterday on industrial strategy.

According to him, the paramount objective of the first stage (1997-1998) is to create financial and institutional pre-conditions for technological refitting of industries and processes into potentially competitive ones both on the domestic and world markets.

At the second stage (1999-2000) it is planned to ensure a strong growth of industrial production. As a result of a favorable investment climate enterprises will be able more vigorously to invest their resources into fixed assets to modernize, re-build and expand production on a new technological basis.

Concurrently, measures will be taken to remove disproportions between scientific, technological, innovation and investment policies, said the Deputy Minister.

Modernization of production facilities will be done predominantly by Russian machine builders.

Wide use will be made of effective technologies, which will create a base for a policy of resource saving. At the same time, consumer demand will expand as a result of a steady growth of incomes, renewal of fixed assets and an increase in jobs.

Commenting on inducements for investment activity, Svinarenko said that due to the currently taut state budget and the government's large debt obligations, state investments will in the main be used to support the most promising and high technology projects and sectors of the defense complex.

Implementation of the development budget will, on a tender basis, stimulate investments in the form of stakes or state guarantees.

The proportion of state funds in the overall volume of investment in the next five years will not exceed 15 per cent.

In the overall volume of investment the share of direct foreign investments in the next five years will not exceed 10 per cent.

In the medium-term prospective. the most significant will be financing investments out of domestic enterprises' own funds, stressed the First Deputy Economics Minister.