The results of so wide a discussion of these themes were quick to manifest themselves. By the present moment, a considerable number of initiatives concerning the regulation of this sphere of civil law relations have emerged both in the Ministry of Internal Affairs and the State Duma. Some of these initiatives, provided they are realized, can be acknowledged as positively influencing the civilized development of the corporate control market, while some of them clearly tend to excessively strengthen the bureaucratic component of the process of property rights to assets being transferred, and also to excessively bureaucratize the verification of the legality of decisions taken by the managerial bodies of economic agents.By way of example let us consider one of the latest initiatives put forth by the Ministry of Internal Affairs in the sphere of regulating the corporate control market. For the purposes of protecting the enterprises from hostile takeovers, the Ministry of Internal Affairs developed and sent to the Federal Tax Service a draft law providing for the authentication by a notary of the most important events in the activity of economic agents. This draft law deals with the adoption, by boards of directors and general shareholder meetings of companies, of the decisions concerning the election of the executive bodies of juridical persons, their reorganization and liquidation, the increase of their charter capital, etc. In our opinion, this initiative (apart from considerably complicating the process of documenting the most important owners decisions for all juridical persons, without exception) cannot, in practice, significantly improve the efficiency of struggle against hostile takeovers, because it is out of the question for a notary to carry out an exhaustive verification of the legitimacy of the documents prepared for witnessing and that of the powers of the persons who have signed them.
In the context of the problems faced by the corporate control market, the most important one is the general tendency towards increasing the State’s share in the process of redistributing the rights of ownership to the largest assets of the Russian economy, typical of the past few years.
While a few years ago this participation consisted, by and large, in solving the conflicts between the existing state authorities and some biggest owners (for example, the “Yukos” case, the buy-out of the assets incorporated in the “Guta” group: “Guta Bank”, the Perm Motors), when the state interests were According to the data published in the mass media and based on the information released by the press service of the Agency for Combating Economic Crimes.
See Sizov, A. “Regulirovanie rynka korporativnogo kontrolia” // Rossiiskaia ekonomika: tendentsii i perpektivy (Regulation of the corporate control market // The Russian Economy: tendencies and prospects). November 2005. M., IEPP, p. 37-41.
mainly against the owners who were “dishonest” from the point of view of the authorities, in 2005early 2006 the authorities began to display an interest in the assets of “loyal” and “causing-noproblems” oligarchs. Thus, it became known, in January 2006, that the federal state unitary enterprise “Rosoboroneksport” made a bid to the main owners of the titanium monopolist VSMPO concerning the buy-out of their shares. Another possible example is the actual imposition of government control over one of Russia’s largest motor companies, the open-end joint-stock company “AvtoVAZ”.
Directly related to the state of the corporate control market are the recent dynamics of the volumes of the initial public offering of Russian corporate stock, which clearly increases the role of the stock market and that of the informational transparency of companies. The qualitative characteristics of the processes of the initial offering of Russian corporate stock in recent years are presented in Table 1.
The dynamics of the volumes of Russian IPO in 2004-Indicator 2004 2005 % of growth Reference: Reference: 1997 – 2003 1 2 3 4 5 Qualitative volume 5 13 116.67 2 (RBK, net- 3 (VympelKom, of IPO market, work of chem- MTS, Wimmpieces ist’s shops Bill-Dann) 36,6) Volume of con- 619.6 4 550.6 624.4% 34.4 ducted IPO, mln USD Source: M&A Agency (www.mergers.ru), Web-Plan Groups The considerable growth of the physical and monetary indicators of the volumes of investments attracted via the stock markets also indicates that the growing number of Russian owners are ready to disclose information on the structure of their property to third parties, which was, in the absolute majority of cases, not typical of Russian companies only three or four years ago, because public offering requires complete disclosure of information on the current beneficiaries of the companies in question.
Another confirmation of the existence of this tendency is the results of the annual surveys of the informational transparency of Russian companies conducted by Standard & Poor’s. The results for recent years demonstrate a significant improvement as regards the information disclosure standards by comparison with the previous periods. Thus, in the year 2005, the transparency index of the biggest Russian companies amounted to 50 %. At the same time, the indexes for the years 2004, 2003 and 2002 amounted to 46 %, 40 % and 34 %, respectively.
In addition, there is a good reason to touch upon the theme of the existing global trends in the sphere of mergers and takeovers, because the development of the world capital market will also influence the processes of integration which are taking place in Russia with the participation of foreign capital. As early as May 2005, the World Bank forecasted that a positive value of the net inflow of foreign capital into Russia was to be achieved in the year 2005. According to the Central Bank, this index was recorded at the level of approximately 3 billion USD as early as the third quarter of 2005, although the value of the index under consideration remained negative throughout the first nine months of 2005. By the results of the year, the forecasts were confirmed: the value of the net inflow of capital into Russia amounted to 0.3 billion USD. It should be noted that this development was taking place against the backdrop of a reduction in the value of the inflow of speculative foreign capital.When considering the statistics of the world market of mergers and takeovers, the following figures may be of interest: according to the research company Thomson Financial, the volume of the global market of mergers and takeovers amounted to 1.8 trillion USD for the first nine months of 2005, while according to another analytic agency, Dealogic, this index was even higher, and amounted to 1.In this connection, it is very important to take into consideration the dynamics of foreign loans of the biggest Russian state-owned (or state-participated) companies, which may make the assessment of this process much less optimistic.
trillion USD, or by almost 52 % higher than the similar index for the year 2004 (1.3 trillion USD).
Analysts from the bank Credit Suisse First Boston interpret these figures as the beginning of a new wave (the sixth, but this time global) of mergers and takeovers (at present, the history of mergers and takeovers in the USA is believed to have experienced five waves of mergers and takeovers in the period between the late 19th and early 20th centuries). In our view, in order to confirm this hypothesis, one should address the figures for the previous years.
According to the M&A Agency, in 2001-3, the volume of the world market of mergers and takeovers (by the number of announced transactions) amounted to:
Table The volume of the world market of mergers and takeovers (by the number of announced transaction), in billions of USD Period/Region Worldwide USA Western Europe 2001 1 700.5 771.4 519.2002 1 231.4 458.3 462.2003 1 260.0 490.0 – 556.0 No data Source: M&A Agency As is evident from the above data, in 2003 the activity on the world market considerably declined (by more than 25 %) by comparison with 2001. In 2002-3, this index remained practically unchanged and amounted to approximately 1.25 trillion USD. According to KPGM, in 2004 the volume of the world market of mergers and takeovers reached the level of the year 2001 and amounted to 1.73 trillion USD. By extrapolating the values to the year 200512, it is possible to assume that the world market of mergers and takeovers will reach the volume of 2.5 trillion USD, which is by 45 % higher than that of the year 2004. Thus, in the period of 2004-5, the world market of mergers and takeovers was growing at the average rate of 40-45 % per annum (the values for 2005 are taken from a forecast). At the same time, the statistics for only two years cannot be instructive. On the average, the duration of one wave of mergers and takeovers in the USA was between 8 and 12 years. Thus, the following conclusion can be suggested: in the years 2004-5, a leap in the volume indices of the world market of mergers and takeovers did take place, but in order to make a definite conclusion concerning the beginning of a new wave of mergers it will be necessary to analyze the future changes of this index during at least two or three years.
These tendencies are extremely interesting against the background of Russia’s investment ratings which demonstrated significant growth in the year 2005 (when both the long-term credit ratings and the hort-term sovereign ratings went up – as stated by S&P). Also, according to the consulting company A.T. Kearney, in the year 2005 Russia moved to the sixth place in the attractiveness rating in terms of direct foreign investments, while in the year 2005 it was only in the eleventh place with regard to this index (for reference: in the year 2003 it held the eighth place).
Capital released as a result of mergers and takeovers can be invested in Russian assets, and this process is already taking place, to a certain degree (judging from the above values of the indices of net inflow of capital into Russia in the year 2005). In the light of all this, further improvement of the transparency of the corporate control market and its regulation in the territory of Russia can be considered as one of the priority directions of the State’s economic policy, because it guarantees the strengthening of the current tendencies and further rise in surplus demonstrated by the international flow of Russia’s capital.
A. Sizov National project “Development of the agrifood sector” A remarkable novelty of budget policy in the Russian farm sector in 2005 is the launching of National project “Development of the agrifood sector”. In this article we examine the basic measures envisaged in the National project and their possible outcomes. The principal deficiency of the project At present, the final data for the year 2005 are not yet available.
is that no essential changes in the agrifood policy are planned while the focus is made on additional funding of already existing and the most inefficient measures.
The RF Ministry of Agriculture has worked out the National project “Development of the agrifood sector” having two components – the development of livestock production and incentives for smallscale farming (crediting of household, collective and individual private farms and cooperatives founded by them).
In the current situation a National project is an attempt to lay down long-term fundamentals of economic development for the period of high budget revenues implying special state financing of the most urgent programs in the national economy. It’s obvious that such programs should not be confined to a mere additional funding of programs already being implemented but should rather provide for the solution of some problems that earlier lacked money but can ensure a breakthrough in a certain field.
However, a deeper examination shows that all measures proposed in the framework of the National project for the agrifood sector in some way have already been included in the country’s recent agricultural policies. So, the message behind adopting the project in its current version is that the present farm policy is absolutely efficient but is short of funds. To our mind, the basic deficiency of the current agricultural policy is not the lack of money but rather its improper use not once stressed in our previous publications.
The National project “Development of the agrifood sector” has two focuses: accelerated development of livestock production and facilitation of small-scale farming (Picture 1 and Picture 2). The project’s term is 2 years; its funding during this period will amount to 30 billion rubles. It’s quite a large sum – in 2006 funds allocated to the National project will account for 20% of the total federal expenditures on agriculture. However, one should not expect any positive effect from spending additional budget funds.
The program of developing livestock production envisages rather large investments in import of pedigree livestock. There are plans to buy 100 thousand heads of livestock and to lease them to agricultural producers. (By the way, this is in fact an official admission of the domestic selection’s complete failure). One should clearly understand that import of highly productive breeds from abroad per se does not guarantee high animal productivity in Russia since the latter is pre-conditioned by compliance with certain technological standards, reconstruction of premises, skilled management. Many Russian regions have already funded import of pedigree livestock from regional budgets but these efforts proved to be non-efficient. Certainly, there are private businesses that are capable to meet all the requirements but the prescribed implementation scheme leaves no hope for success of this particular project component. Indeed, it starts with allocating 8 billion rubles to limited liability company “Rosagroleasing” for the enlargement of its authorized capital. This state corporation is supposed to buy pedigree stock that will be distributed between agricultural producers on preferential terms. Life shows that our agrarian bureaucratic system knows no other way of distribution than the one by so called limits that are set for regions, districts and agricultural producers. This means that pedigree livestock will be supplied not to the farms (or not always to the farms) that are capable to use it properly.