July 26, 2000, will go down in history as the date Russian reform began. On that day, the first-ever truly sensible and reformist tax package – one that lowers the overall tax burden and deals with senseless levies and taxes – was approved by the Federation Council, the upper house of parliament.

Though the original Kremlin proposal was somewhat toned down by the Duma, the lower house, and does not go far enough, it is still a significant departure from the past.

For almost a decade now, a disorganized White House has sent half-baked proposals to the Duma, only to see them torn apart – as much for their stupidity as any ideological disagreements.

Indeed, the so-called watersheds in recent Russian history – touted as a struggle for democracy and reform – such as the storming of the Russian parliament in 1993, were in effect reduced to simple exercises in power grabbing and the construction of personal fortunes by well-connected people.

The tax package just passed is the first time the Kremlin has used its newly acquired confidence and strength to enact a sensible law. It is a symbolic beginning to what will surely be a long and tedious journey to clean up the Russian legislative and administrative system.

While it must be time to call for more radical and deeper changes to legislation and the enactment of further-reaching laws, starting with protection of private property – a cautious welcome must be extended to the achievements so far.

The ministers of economy and finance seem satisfied enough with growth targets of 5.5 percent, which are a significant improvement on 3.2 percent the previous year.

Though that growth looks impressive, it must be seen against the distressing backdrop of economic contractions suffered in the economy up to the crash of 1998. Against such a background, the growth now being seen is modest and has certainly had no discernible impact on the lives of ordinary citizens.

Moreover, the badly needed investment Russia seeks is still only coming in trickles, as investor confidence remains low. Those with money are still looking for significant signs of longer-term stability.

Yet, almost all indications are that the government has embarked on the course of reform. The laws on the table and in the pipeline, the mood of the subservient Duma, the cutting down of the House of Lords (which the Federation Council had effectively become) all point to a brighter picture for business.

It could therefore be seen as surprising that investors and analysts are only cautiously optimistic rather than bullish.

But, to some extent, the reasons for caution are valid and deserve to be addressed.

The strong hand shown by the president in his dealings with big business – which is being repeated daily across the country by lower functionaries against smaller businesses – is being seen more in the light of authoritarianism than reform.

So far, it is an iron fist that seems poised to punch its way through – even regarding reform. Perhaps that is the only way to get things done in Russia.

But when little changes for millions of small entrepreneurs (the real backbone of the Russian economy) who are still operating in the shadow economy – largely in collusion with, or through fear of, the functionary – outward compliance with laws will be slow to come.

Despite the benefits of operating in the open instead of murky areas of legislation, businesses will be slow to swim toward deeper waters, even if they promise to be cleaner.

On the one hand, it is the implementation of law that matters, but it is the dictatorship of bureaucrats who themselves stand to lose if businesses decide to function within the law.

It is not unusual in Russia for honest businessmen who are willing to pay duties and taxes to be hounded mercilessly by tax inspectors and customs officials. The aim of these bureaucrats is to seek to ensure that a few individuals do not undermine a system of willingness on the part of the majority of businesses to "deal" with the state rather than to comply with its rules.

While the Kremlin has tamed the Duma, it is the taming of this institutionally corrupt bureaucracy that will prove the more arduous task. Moreover, the dictatorial manner of governance that is fast becoming the fashion of the day could potentially turn on its subjects with a ferocity equal to its determination to carry out reforms.

Indeed, significantly, with the fourth estate under attack all across the country, the sophisticated men and women of Russian business must be wondering whether they can share the euphoria that the majority of their countrymen are displaying for their new president.

Reform, economic growth and democracy go hand in hand. There is no way for one to develop without the other.

Economic growth, after all, is a means to freedom – not an end in itself.