The Forecast Plan (Program) of Privatization of Federal Property for 2008 and Guidelines for Privatization of Federal Property for 2008 - 2010 (approved by the Order of the Government of the Russian Federation dd.
April 29, 2007, No. 543-р) ; The Forecast Plan (Program) of Privatization of Federal Property for 2009 and Guidelines for Privatization of Federal Property for 2010 and 2011 (approved by the Order of the Government of the Russian Federation dd. 1 September 2008 No. 1272-р); The Forecast Plan (Program) of Privatization of Federal Property for 2010 and Guidelines for Privatization of Federal Property for 2011 and 2012 (approved by the Order of the Government of the Russian Federation dd. November 30, 2009, No. 1805-р).
It is noteworthy that the forecast plans which contain the task in question, also contain the thesis of that all of the federal state unitary enterprises (FSUEs) which are not involved in exercising public functions, will be suggested for privatization in three years to come.
It should be noted that a serious progress was achieved in this respect: early in 2002 a share of blocks of shares constituting an interest of up to 50% in the total federally held blocks of shares of joint-stock companies accounted for 82%, whereas by the beginning of 2009 this share reduced almost by half down to 38%. The Russian Economy in 2009. Trends and Outlooks. (Iss. 312). – M.: IET, Section 6.
Institutional Problems – the objective of structural reforms in the economy was mentions in the first and the second forecast plans (for 2003 – 2004) and the two latest (within the period under review) plans for 2009 – 2010 ;
– the objective of creating integrated entities in the strategically important industries was only set in the plans of privatization for 2009 – 20101.
Analyzing the sectoral structure of the forecast plans approved in the period between and 2009, it should be noted that enterprises operating in the agricultural and non-production sectors accounted for a big share in each. On the other hand, some of the programs emphasized enterprises operating in other industries: military and industrial and construction sectors in 2006, the above mentioned sectors as well as design & print and fuel and energy sectors in 2007, public road sector as well as geology and precious metals and precious stones sectors in 2009.
Identification of large (major budget revenue generating) entities subject to privatization became an important ‘innovation” in the plan of privatization for 2010 – this role was assigned to the blocks of shares in five joint-stock companies. In addition, a special allowance was made for privatization of a series of transportation facilities included into the list of strategically important joint-stock companies if the President of the Russian Federation made relevant decisions.
Hence the following important changes in the stated plans and “ideology” of privatization from 2010 it can be highlighted:
(1) upgrading the priority of the objective of structural reforms in industries (the objective of privatization of the property which is not involved in ensuring execution of public functions and authorities and authorities used to be ranked as top-priority) ;
(2) creating conditions allowing extrabudgetary investments to be attracted for the development of companies is defined as a priority objective;
(3) focusing on privatization of a series of the largest (major budget revenue generating) companies, on the possibility of discontinuing or reducing a state-held interest in a series of joint-stock companies which are included into the list of strategically important enterprises.
In general, the plan of privatization for 2010 is to some extent connected with the “revival” of structural approach towards privatization which was stated early in the 2000s, as well as widening of the basis for subsequent privatization of large companies in the public sector (above all, through transportation infrastructure enterprises)2.
It is noteworthy that in spite of that the objective of setting up integrated entities (which was included into the two latest programs only) constitutes a relative “novelty” for the forecast plans, the work on setting up such entities (above all, state-owned holding companies) with the use of privatization arrangements has been in progress over a period of 20 years, since 1992. Public active initiation of integration processes ‘on the eve of’ the economic downturn, in 2007 – 2008, should be focused on. During that period the federal government took part in setting up more than 30 holding companies through preparation and privatization of nearly 200 FOUSs and blocks of shares of joint-stock companies. In addition, it is important to mention about the decisions made in 2008 on transfer of the blocks of shares of about 400 joint-stock companies to Russian Technologies State Corporation (by the way, this transaction is beyond the scope of the Federal Law dd. December 21, 2001, No. 178FZ, “On Privatization of State and Municipal Property”), a great number of which still remained to be set up through corporization of FOUSs.
An important feature pertaining to the plan for privatization for 2010 became a 1/5 times increase in expected revenues from privatization in 2010 against the previously planned revenues: RUB 18 bln against RUB 12 bln provided for by the programs for 2008-2009. However, this amount was a very conventional benchmark at the moment when it was officially approved; the stated public plans related to the scope of privatization in RUSSIAN ECONOMY IN trends and outlooks It should be noted that the beginning of a new stage of privatization (November 2009 – March 2010) was associated clearly with a highly intensive discussion at the federal level of objectives and tools of privatization1 by focusing on structural reforms and modernization of the economy. However, later, especially since the H2 2010, the focus was gradually switched to the role of privatization in terms of generating extra revenues for the federal budget, which resulted from growing doubts in any positive prospects for the Russian economy to grow rapidly in the post-recessionary period, increase in social security budget expenditures and, as a consequence, aggravation of the problem related to federal budget deficit for the years immediately ahead.
As part of the Forecast Plan (Program) of Privatization of Federal Property and the Guidelines of Privatization of Federal Property for 2011 – 20132 approved in November 2010, the structural approach towards privatization was more evident than in the forecast plan for 2010 (Table 13).
Table Key objectives of the national policy in the field of privatization of federal property set by the forecast plans (programs) of privatization of federal property for 2010 and 2011–Forecast plan for 2010. Forecast plan for 2011 – 2013.
– structural reforms in the relevant industries ; – creating conditions allowing extrabudgetary investments to be – setting up integrated entities in the strategically important eco- attracted for the development of joint-stock companies on the basis nomic sectors ; of new technologies ;
– privatization of federal property which is not involved in ensuring – reducing the public sector in the economy with a view to developexecution of public functions and authorities of the Russian Federa- ing and encouraging innovative initiatives by private investors ;
tion ; enhancing corporate governance ;
– creating conditions allowing extrabudgetary investments to be – encouraging the development of the stock market ;
attracted for the development of joint-stock companies ; – setting up integrated entities in the strategically important eco– generating federal budget revenues nomic sectors ;
– generating federal budget revenues It should be noted that the forecast plan for 2011 – 2013, like the program for 2010, provides for sale of blocks of shares in a series of large and extra large companies whereby ensuring most of the budget revenues.
Hence, in spite of increased role of privatization in terms of generating budget revenues, the structural priority in the program of privatization for 2011 – 2012 is stated more explicitly and in detail than in the forecast plan for 2010, and the structural objectives of privatization acquired an explicitly innovative and modernizational trend.were revised more than once, both upward and downward.
See, for example: an interview with the Deputy Head of the Federal Agency for State Property Management E. Adashkin, RIA Novosti, on November 24, 2009 (http://www.rian.ru/interview/20091124/195316794.html);
I. Zinenko, N. Govorova, A. Smirnow. Privatization Has Widended Hirizons. – Newspaper dd. February 5, 2010; documents of the “round table” dedicated to the subject matter of “Increasing the Role of Privatization as a Tool for Attracting Investments in the Russian Economy”, which was held at the Ministry of Economic Development and Trade Of Russia (http://www.economy.gov.ru/minec/press/news/doc20100329_05).
Approved by the Order of the Government of the Russian Federation dd. November 27, 2010, No.2102-р.
It should be noted that the “structural element” also can be seen to an extent in the efforts which the federal authorities have been making in intensifying privatization processes at the regional level. For example, the Head of the Ministry of Economic Development and Trade Of Russia E. Nabiullina believes that privatization is needed not only to cover the budget deficit – regional programs of privatization must become an integral part of regional programs aimed at enhancing the investment climate. E. Kukol. Taxes Cast Shadows. – Rossyiskaya Gazeta, November 25, 2010.
Institutional Problems Let us consider and assess the state practical measures in the field of privatization in 2010.
We are of the opinion that it is reasonable to highlight the following basic steps (approaches) as part of the national policy in the field of privatization of federal property should :
– widening the base for privatization, which includes reduction in the number enterprises which are included into the list of strategically important enterprises ;
– developing the legal framework for privatization ;
– developing and widening the range of tools (options) of privatization for large companies ;
– improving privatization arrangements for relatively small companies and lowering the access barriers to privatization for potential buyers of privatized property (assets) ;
– defining a list of the largest companies and banks which are planned for privatization, setting terms and conditions and specific features of privatization thereof.
Widening the Base for Privatization of State-Owned Property by Way of Reducing the List of Strategically Important Enterprises and Joint-Stock Companies and Amending the Original Plan of Privatization for 2010 – 2012.
The applicable laws and regulations for privatization provide for that the President of the Russian Federation make a special list of federally-owned unitary enterprises (FOUSs) producing products (works, services), which are strategically important for the national defense and security, protection of the principles of public order and morality, health, rights and legal interests of the citizens (strategically important enterprises), as well as federally-owned open joint-stock companies and participation of the Russian Federation in management thereof ensures strategic interests of the nation, defense potential and national security, protection of the principles of public order and morality, health, rights and legal interests of the citizens (strategically important joint-stock companies)1. Strategically important enterprises and shares in strategically important joint-stock companies cannot be included into the forecast plan (program) of privatization of federal property provided unless they are excluded from the list.
Therefore, the latter serves as an extra barrier for privatization of specific companies, because these are recognized as strategically important ones.
A list of strategically important companies and joint-stock companies was approved by the President of the Russian Federation in the mid-20042 – more than two years following the date on which the Federal Law “On Privatization of State and Municipal Property” came into force, which required such a list. The original version of the list included 514 FOUSs and blocks of shares in open joint-stock companies. Over the six subsequent years the President of the Russian Federation made more than 100 decisions allowing for various amendments to the contents of the list (Table 14)3.
The Federal Law of December 21. 2001, No. 178-FZ, “On Privatization of State and Municipal Property”.
The Order of the President of the Russian Federation dd. August 4, 2004, No. 1009, “On Approval of the List of Strategically Important Enterprises and Joint-Stock Companies”.
Orders of the President of the Russian Federation dated 22.11.2004 No. 1470, dated 29.11.2004 No. 1483, dated 07.12.2004 No. 1502, dated 19.01.2005 No. 41, dated 26.08.2005 No. 985, dated 02.09.2005 No. 1034, dated 12.12.2005 No. 1442, dated 01.02.2006 No. 68, dated 20.02.2006 No. 140, dated 03.03.2006 No. 176, dated 27.03.2006 No. 262, dated 25.04.2006 No. 427, dated 03.05.2006 No. 456, dated 09.06.2006 No. 578, dated 22.06.2006 No. 623, dated 12.10.2006 No. 1135, dated 22.11.2006 No. 1301, dated 30.11.2006 No. 1320, RUSSIAN ECONOMY IN trends and outlooks As a result, as of the beginning of 2011, the list included 148 FOUSs (by 3,5 times less than the original list) and 49 blocks of shares in open joint-stock companies (by 11 times less). Thirty unitary enterprises were included into the list upon August 2004 (or about 1/5) against 19 (or about 40% of all of the blocks of shares) open joint-stock companies. Companies with a full (100%) state-held interest (31 units or 63.3%), with a majority interest (9 units or 18.4%), with a blocking interest (8 units or 16.3%), and even with a minority interest – 1, prevail in the structure of strategically important joint-stock companies.
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