The creation of a genuinely modern, mainly professional army requires appropriate incentives, including decent housing, the right to free higher education after military service and better pay, Ivanov said at Pskov in northwestern Russia, as quoted by the ITAR-TASS news agency.

Russia's military has been in crisis for several years, dogged by underfunding and by a high draft-dodging rate due to the miserable conditions of service.

Ivanov's announcement came as the commander of the 76th airborne division at Pskov, which began taking on servicemen on a contract basis last September in a closely-observed experiment, admitted that recruitment had fallen well behind the hoped-for level.

The division, housed at an old fortress near the Russian border with Estonia, had been planning to recruit 3,000 soldiers by the end of this month, but its efforts have been hampered by the poor pay and living conditions.

Georgy Shpak, the country's top airborne troop commander who heads the division, admitted that his unit still required more than 2,000 professionals.

"The unit still needs 2,153 persons among the ranks of sergeants and privates," the Interfax news agency quoted him as saying.

Ivanov said his ministry was considering wage increases for contract servicemen averaging 3,300 rubles (108 dollars) a month, varied according to rank.

The current pay of privates and sergeants in the Pskov division is 5,800 rubles a month.

The results of the Pskov experiment to date had convinced the military leadership that the transition could not be confined to a mechanical substitution of contract servicemen for conscripts, ITAR-TASS quoted Ivanov as saying.

"A fundamental increase in the military unit's combat readiness is the desired end result. The task will be complicated and demanding, and will require a smooth coordination of efforts by various branches of power," he said.

The move to a contract army was "inevitable," Ivanov said, though he admitted that the transition would take a long time to implement.

Professional training and new types of weapons are more important in determining combat ability in modern warfare than a multi-million army of soldiers, he noted.

Long-standing Kremlin ambitions to reform the bloated Soviet-inherited armed forces have been stubbornly resisted by the military old guard fearful of losing power and privileges.

A plan by former president Boris Yeltsin in 1996 to abolish the deeply unpopular military conscription was shelved two years later.

Yeltsin's successor Vladimir Putin proposed in 2000 to eliminate conscription by the end of the decade.

But Ivanov formally shelved the plan last November, declaring that limited finances made it impossible to fulfill the pledge.

Instead, he said, conscripts would make up half of the armed forces until at least 2011.

Nevertheless Putin vowed to press on with introducing fully-professional units in the the 1.1 million-strong armed forces.

The Russian defence ministry is due by June 1 to present a draft federal programme for the transition to contract service in other Russian army units, ITAR-TASS said.

By May 1, the agency said, some 58 percent of privates and sergeants at Pskov were serving on a contract basis.

The recruiting of contract servicemen had to be suspended at one point because of a lack of accommodation. The problem was resolved by building hostel-type barracks for privates and sergeants.

Shpak noted that the poor recruitment rate to date was due to "poor salaries and an unwillingness to live in barracks."

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