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Mid-size and small companies consider the compulsory membership as an additional financial load, and their concerns are justified and confirmed by the SRO with compulsory membership. While making a decision on this issue, the interests of investors should be also taken into account as the level of their protection can be improved considerably at the expense of compensation funds which will be used as a source of compensatory payments for losses incurred.

There are also sectors where the proposals on the SRO initiated in 2011 were not adopted as legal provisions including SRO of managing companies of multifamily houses (though the ruling party was very active in their promotion); SRO of the compulsory inspection centers for transportation vehicles.

The degree of preparedness of the market/sectors for self-regulation is a critical issue that must become a corner stone. However, the implementation of the government objectives to reduce the degree of state regulation, to reduce budget costs etc. is not enough to make SRO activity effective. Before a SRO is established the following is required:

- to analyze the market/sector to see whether they are prepared for independent and initiative actions, effective control by the SRO bodies of the activities of the SRO members, and implications of introducing a SRO on the market/in the sector;

- to develop measures of state control and supervision during a transition period and further to compensate for inefficient implementation of the self-regulation functions by noncommercial companies.

As practices show, in such sectors as valuation the control and supervisory functions are ineffective; unfair players and poor professionals are not washed out even by bringing them to responsibility; thus the applicable legislation must be corrected and the functions of the control and supervisory bodies must be modified in this sector.

Establishing SROs in the sector of heat supply and possibly in water supply and sewerage sectors would be extremely negative in the country where 42% of rural residential houses only are equipped with water pipes, 32% - with sewerage, 20% - with hot water pipes. The scale of the task (required capex) has been beyond the government capacity; and it would be an urban utopia to rely on the SRO effectiveness.

In February 2011, the draft law On amendments in the Federal law On the securities market and other legal acts of the Russian Federation No. 469229-5 was passed in the first reading. However the law was not enforced by the end of 2011. This new draft envisages the following provisions:

1. Obligation to be members of the SRO of professional participants engaged in brokerage and management of securities if they provide services to non-qualified investors.

RUSSIAN ECONOMY IN trends and outlooks 2. Obligation to be members of the SRO of managing companies which rules of the trust management include the issue of equity shares to non-qualified investors.

3. Obligation of the SRO of brokers and/or managing companies, the managing companies of shared investment funds to set up compensation funds to compensate individuals who are not qualified investors for losses caused as a result of insolvency (bankruptcy) of the said professional participants of the securities market and managing companies.

4. Requirements to the content of standards (rules) of the SRO of brokers, managers and dealers.

The proposed actions are deemed to be justified and they could improve effectiveness of the SRO activities and protection of the interests of the qualified investors on the securities market.

There is also a number of ideas which discussion and implementation could be quite successful:

1. Proposals from the professional community of bankruptcy commissioners regarding higher level of responsibility of the bankruptcy commissioners to ensure the effective instrument of compensation for losses incurred in the course of the bankruptcy procedure are quite fair. Thus, some of the community representatives propose increasing the minimal size of the compensation fund up to RUR20 mln. If so, the compensatory payments for one case could reach RUR5 mln.

2. The concept of passing regulatory acts on the development of mechanisms of out-of-court settlement of disputes and arbitrations that was not incorporated in the legislation seems to be quite constructive; this concept have been implemented practically in a number of SRO at the level of the National Association of the SRO of bankruptcy commissioners.

3. At the moment, the National Association of the SRO of bankruptcy commissioners does not have the functions of control and supervision over the SRO of bankruptcy commissioners; these functions are proposed to be introduced with the regulatory function being the main one.

4. The right to develop standards and rules in construction must be replaced by the respective duty fixed by law, with the requirements to the content of such documents and responsibility for performance. Given the complexity of the SRO structure, diversity of the SRO members and types of works, this duty possibly will be established at the level of NOSTROY1.

5. In the area of the construction SRO, Rostekhnadzor supervisory functions should be enhanced; today they are poorly implemented, and there is a significant number of offenses committed by SRO.

6. To introduce a common responsibility instead of a special administrative responsibility in each sector for offenses committed by the SRO and their leaders is proposed; this will considerably enlarge the area of application also in relation to the SRO types regulated by the law.

7. The list of works affecting safety at the capital construction facilities should be reduced as the list contains works that do not affect the safety of the facilities; also there is certain duplication of works in the general and special (for hazardous and technically complicated facilities) lists.

8. Uncertainty in the authorities of the SRO and the federal government should be resolved in connection with the right to issue a work permit certificate with regards to works that af NOSTROY National Association of builders is a non-state non-commercial organization based on the obligatory membership of self-regulated organizations in the construction sector.

Section Institutional Issues fect safety of the capital construction facilities (the uncertainty emerged after the Russias Ministry of Regional Development issued Order No 624 on December 30, 2009).

9. To improve transparency of the SRO activity on the financial market is required by publishing a SRO annual report at the SRO web-sites and the web-sites of the Federal Service for Financial Markets. Besides, to assess self-regulation efficiency, the RF Ministry of Economic Development suggests stepping-up demands to the SRO on information disclosure by the member-companies including publishing of all member companies reports at the SRO site.

10. As the legislation does not regulate administrative responsibility of persons/entities engaged in professional activities and the officials of the SRO of appraisers (as a result of this, corruption is facilitated, the number of unfair appraisers grows, and the officials of the SRO of appraisers often demonstrate arbitrary behavior towards their members), to make changes in the RF legislation is necessary to establish responsibility of the persons who carry out professional activities and of the SRO officials.

11. In general we can speak about the absence of a special responsibility of self-regulated organizations for abusing the SRO members in their internal activities and of a more specialized responsibility in some of the sectors like valuation1 of agricultural and financial cooperatives, etc.

6.6. Russian Market for Real Estate Like other sectors of the national economy, the state of the market for real estate in was driven by controversial dynamics of macroeconomic and financial indicators.

On the one hand, most last years indicators of the nations socio-economic development (GDP, industrial output, investment in capital assets) posted a positive dynamic.

Affected by developments in the Middle East, the trend to increase in international oil prices which had emerged yet in H2 2010 continued in Q1 2011. After hitting their record highs in April, the oil prices were then slightly down. That affected the dynamic of the Rb exchange rate: in early 2011 Rb was on the rise against USD, but in Q4 2011 it depreciated and bounced back to the values noted a year ago and finally slightly outran them by the end of the year.

On the other hand, like in the past three years, the country saw a continuous capital outflow whose value ultimately proved greater than in 2009-10. The capital outflow continued through the whole year, with its quarterly dynamic increasing since H2.

Negative dynamic of the populations real disposable incomes had a yet more significant impact on the real estate market. According to Rosstat, their average nationwide increase in 2011 was a meager 0.8% (vs. 5.1% in 2010 and 2.3% in 2009).

The RF Ministry of Economic Development, e.g. identifies the following gaps in the legal regulation of the SRO on valuation that must be corrected:

1) no legal provision that would fix the obligation of the SRO of appraisers to submit to the authorized body documents and information as per the Law on valuation activity;

2) no legal provision that would fix the notion and types of the expert review of reports on valuation, and requirements to the experts of the SRO of appraisers;

3) no approved procedure for supervision of the activities of the SRO of appraisers, neither there is a list of legal grounds for RosReestr to perform off-scheduled audits;

4) no legal provision that would fix the authorities to develop and approve the procedure for monitoring the SRO of appraisers activities and for monitoring of this SRO by the relevant executive authorities.

RUSSIAN ECONOMY IN trends and outlooks That said, in H1 of 2011, real incomes did not post any increase nationwide, while in Moscow, they tumbled by 7.3% and climbed up by 1% in Moscow oblast. In H2, the electoral campaign fueled the rise in population incomes. According to data for the 11 months of 2011, the increase rate in the populations real disposable income in Moscow oblast was 4%, St. Petersburg under 2%, while in the city of Moscow the said incomes slid by 2.5%1.

Despite insignificant increase rates of the populations incomes, in the conditions of stable major macroeconomic and financial indexes, the earlier delayed effective demand began to unfold in 2010, which had a positive effect on the real estate market. In 2011, the effect of the factor of delayed demand proved mostly exhausted, and the 2010 recovery of the market proved insignificant in the conditions of falling rates of the populations income growth.

6.6.1. The Land Market According to Rosreestr, the land area owned by residents tends to shrink and as of 1 January 2011 accounted for 121.4m hectares, or 7.1% of Russias land vs. 124.3m hectares (7.3%) in 2009 (Table 23). By contrast, the land in corporate ownership expands and accounts for 12.1m hectares, or 0.7% of Russian land, up 02 p.p. vs. 2009 and 01 p.p. vs. 2010.

Table Classification of Land in Russian Federation by Types of Ownership As of01.01.2009 As of 01.01.2010 As of 01.01.Property form M hectares % to result M hectares % to result M hectares % to result Public and municipal 1576.9 92.2 1576.3 92.2 1576.4 92.Residents, including 124.3 7.3 123.2 7.2 121.4 7.Residents land shares 107.4 6.4 104.3 6.1 100.8 5.Corporate 8.6 0.5 10.3 0.6 12.1 0.Private 132.9 7.8 133.5 7.8 133.4 7.Total 1709.8 100.0 1709.8 100.0 1709.8 100.Source: by data of Rosreestr.

By results of privatization, as of 1 January 2011, most land falls under the joint share property, including unclaimed shares (Table 24).

able Classification of Privatized Land by Forms of Property and Proprietors as of 1 January Thos. of hectares % Joint share property (land shares owned by residents) 76 131.3 57.Residents property (farming, agricultural, personal subsidiary farming, individual housing, 20 546.5 15.gardening, summer housing, etc.) Joint collective property 698.7 0.Land owned by corporations 12 064.1 9.Unclaimed land shares and land shares owned by residents 24 005.5 18.Total 133 446.1 100.Source: by data of Rosreestr.

According to Rosstat, as of 1 January 2011, out of land owned by residents (20, 546.Thos. hectares), 2.1% or 434.100 hectares, was allocated under individual housing (Table 25), while the respective figure as of 1 January 2010 was 439,300 hectares.

Socio-economic situation in Russia in 2011, www.gks.ru Section Institutional Issues Table Land Owned by Residents As of 01.01.Thos. of hectares % Owners of land lots 8 374.5 40.Personal subsidiary farming 5 414.6 26.Peasants (farmer) economy 4 809.1 23.gardening 797.9 3.Individual housing 434.1 2.Self-employed in agricutlure 532.8 2.Other purposes 183.5 0.Total 20 546.5 100.Source: by data of Rosreestr.

The greatest area in residents ownership per 1,000 residents in 2010 was reported in Nenetsky Autonomous okrug 20.7 hectares per capita (Table 26). The leading position in this regard among federal super-regions (okrugs) is held by Siberian Federal Okrug (0.85 hectares per capita), while at the bottom of the list was North-Western Okrug (0.32 hectares per resident).

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