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(8) Extending significantly requirements to transparency of privatization procedures A considerable number of amendments to clause 15 of the Federal Law On Privatization of State and Municipal Property enhanced significantly the requirements to information support of privatization. It is worth highlighting the following most relevant amendments :

information on all stages of privatization at all levels of ownership must be published in print and electronic media, in which case decisions made by public authorities may only supplement the requirements to contents and quantity of published information ;

open joint-stock companies and unitary enterprises must disclose information (in accordance with the procedure and form to be approved by a regulator in the securities market or an authorized executive authority1) from the date when they are included into the forecast plan;

provision of additional information support with regard to specific property assets.

The adopted regulations certainly deserve a positive appreciation. One cannot note, however, inconsistency and variance of public measures in this sector. Efforts have been made to provide regulatory support of the privatization process at all stages, on the one hand, while a series of the above discussed public individual solutions and measures in the field of privatization are extremely nontransparent, on the other hand.

In general, the following can be abolished with the regard to the completed innovations in the Federal Law on Privatization of State-Owned Property.

First. Changes in legal regulation of privatization are strictly subject to the two objectives:

(1) widen the scope and develop the tools of privatization of large and largest companies and (2) reduce costs and restrictions for large-scale privatization of relatively small companies.

Second. The innovations made as part of the second objective look very positive, promoting better transparency of privatization transactions, ensuring competition, lowering barriers to participation in privatization of property of small companies. Active privatization of small state-owned companies can clean the public sector out of many insignificant assets, show its real structure.

Third. As applied to large companies, the range of acceptable options of privatization was widened, which seems to be important at the stage when generation of additional budget revenues from privatization is not regarded as the sole objective.

The innovations related to privatization of the largest companies and banks seem to be most controversial. Perhaps, in an effort to reduce the required time, taking into account specific features of this type of privatization transactions, the state offered an opportunity to exclude thereof from the scope of the Federal Law On Privatization of State and Municipal Property. Hence, on the one hand, a series of obstacles for structural privatization of large According to the Order of the Government of the Russian Federation dd. September 8, 2010, No. 693, On Specific Powers of the Ministry of Economic Development and Trade of the Russian Federation, the Ministry of Economic Development and Trade is entitled to approve the procedure and form of information disclosure by unitary enterprises and open joint-stock companies from the date when they are included into the forecast plan.

RUSSIAN ECONOMY IN trends and outlooks companies was eliminated, but, on the other hand, no legal frameworks for making relevant decisions were defined.

Forth. The powers vested in the Government of the Russian Federation in the field of privatization, in particular as applied to privatization of largest companies, were enlarged dramatically. In the absence of regulatory frameworks, predictability of such decisions for potential investors may be found low. To date, practical public measures in the field of privatization of the largest companies have been nontransparent and the decisions ill-founded publicly. Generally, lack of official comments and explanations is replaced with multiple statements in mass media which are based on insider information.

Specifics of the Process of Decision-Making and Update of Plans of Privatization for 2010 and Beyond Late in 2008 and 2009, the global economic downturn resulted in a considerable decrease of potential investors interest in purchase of state-owned property whereby revenues from privatization at the 2009 year-end hit historical lows RUB 3,4 bln ( by 3,5 times less than planned). This fact together with numerously repeated governmental statements on prohibition of privatization at knockdown cost1 resulted in historically low planned revenues from privatization, mere about RUB 7 bln2, in the budgetary prospects for 2010 prepared by the Ministry of Finance of Russia in mid-2009 contained (see Fig. 1).

A slight recovery in the Russian economy in Q3 2009 raised considerably the degree of expectations of representatives of public authorities at to potential volumes of privatization of federal property in 2010. As a result, as early as October 2009 the Ministry of Economic Development and Trade of Russia announced a total of nearly RUB 70 bln of potential revenues from privatization in 2010, i.e. 10 times more than was expected in the budgetary prospects which the Ministry of Finance of Russia made a few months prior to that3. The Forecast Plan of Privatization of Federal Property for 2010 which was approved late in November contained a much less amount of budget revenues (RUB 18 bln) which, according to officials, was preliminary and subject to increase up to RUB 70 100 bln, above all, through sale of shares in a series of companies to be excluded from the list of systemic companies4. Such an optimistic forecasts for revenues from privatization were mentioned in the statements of public officials till mid-2010 roughly, until early in August the Ministry of Finance of Russia published the guidelines of the budgetary policy for 2011 and planning period of 2012 2013, which provided for a mere RUB 7 bln of revenues from privatization for 2010, as much See, for example, pronouncements made by the Chairman of the Government of the Russian Federation V. Putin at the meeting of the Presidium of the Government of the Russian Federation held on March 26, (http://premier.gov.ru/events/news/3676/), as well as at the meeting dedicated to the guidelines of privatization of federal property for 2010 2012 and shortening of the list of strategically important enterprises and jointstock companies (http://premier.gov.ru/events/news/5104/).

See Comments made by the Minister of Finance A. Kudrin to information agencies following the meeting of the Government of the Russian Federation held on July 30, 2009 (http://www1.minfin.ru/ru/press/ speech/index.phppg4=17&id4=7912).

G. Maslov. The State Will Generate RUB 70 bln from Privatization. Infox.ru. October 6, (http://www.infox.ru/business/finances/2009/10/06/Gosudarstvo_zarabota.phtml).

See, for example: R. Falyakhov. State-Owned Property Will be Booked On the Assets Side. Gazeta.ru, November 24, 2009 (http://www.gazeta.ru/business/2009/11/24/3290513.shtml); Interview with the First Vice Prime Minister I. Shuvalov to Commersant-online on December 22, 2009 (http://www.kommersant.ru/ doc.aspxDocsID=1297142&NodesID=4).

Section 6.

Institutional Problems as the Ministry of Finance planned in budget prospects in the preceding year. This document forecasts revenues from privatization for a period 2011 2013 which exceed many times (in nominal figures) those generated at the end of any of the previous 15 years: a total of RUB 883,5 bln over three years, which includes RUB 298 bln in 2011, RUB 276,1 bln in 2012, RUB 309,4 bln in 2013. Finally, in September 2010 the Ministry of Finance of Russia assumed that within five years to come total revenues from privatization would total nearly USD 50 bln (RUB 1,5 t at the current exchange rate), which is nearly USD 10 bln (RUB 300 bln) annually1.

60 RUB, bln Sources : The Forecast Plan (program) of privatization of Federal Property for 2008 and the 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-) ; The Forecast Plan (program) of privatization of Federal Property for 2009 and the Guidelines for Privatization of Federal Property for 2010 and 2011 (approved by the Order of the Government of the Russian Federation dd. September 1, 2008, No. 1272-); pronouncements made by the Minister of Finance A. Kudrin to information agencies following the meeting of the Government of the Russian Federation held on July 30, 2009] (http://www1.minfin.ru/ ru/press/speech/index.phppg4=17&id4=7912); pronouncements made by the Minister of Finance A. Kudrin to information agencies following the meeting of the Government of the Russian Federation held on September 23, 2009] (http://www.minfin.ru/ ru/press/speech/index.phpid4=8175); Maslov G.. The State Will Generate RUB 70 bln from Privatization. Infox.ru. October 6, 2009] (http://www.infox.ru/business/finances/2009/10/06/Gosudarstvo_zarabota.phtml);

R. Falyakhov. State-Owned Property Will be Booked On the Assets Side. Gazeta.ru, November 24, 2009] (http://www.gazeta.ru/business/ 2009/11/24/3290513.shtml); A. Makryashina. Revenues from Privatization will Total RUB 100 bln in 2010. Infox.ru, March 17, 2010 (http://www.infox.ru/authority/state/2010/03/ 17/Dohodyy_ot_privatiza.phtml); V. Silayev, E. Nabiullina. Privatization Will Generate RUB 72 bln. Infox.ru, June 18, 2010] (http://www.infox.ru/ business/finances/2010/06/18/NabiullinaPrivatiz.phtml); The Budget Policy Guidelines for 2011 and the Planning Period in 2012 and 2013] (http://www.minfin.ru/common/img/uploaded/library/2010/08/ONBP_2011 2013.doc).

Fig. 1. Planned volumes of privatization of federal property in 2010.

See Comments made by the Minister of Finance A. Kudrin to information agencies at the Reuters Summit held on September 15, 2010] (http://www.minfin.ru/ru/press/speech/index.phpid4=10574).

Jul-Oct-Jun-Jun-Jun-Mar-Sep-Nov-Aug-RUSSIAN ECONOMY IN trends and outlooks It is important to point out that the reported volatility of planned volumes of privatization in 2010 resulted in lack of unified public position as to which large companies must be privatized. For example, in different periods different public officials expressed sometimes totally contradictory opinions on the issue. Among assets which were offered for privatization in 2010 were blocks of shares in the largest companies and banks, namely Rosneft, Sovkomflot, Rosgosstrakh, Rosagroleasing, VTB Bank, Sberbank, Rosselkhozbank. In July 2010, the principal participants in the process of privatization (The Ministry of Economic Development and Trade of Russia the Ministry of Finance of Russia) approved a tentative list of 11 companies and financial institutions whose blocks of shares must be put up for sale in the midterm perspective, namely Transneft, Sovkomflot, Rosneft, Sberbank, VTB Bank, Rosagroleasing, FGS, Rosselkhozbank, RusHydro, Rosspirtprom, and United Grain Company (however, the state planned to retain a controlling interest in all of these companies)1, and in September the list was approved in general and extended by the Chairman of the Government of the Russian Federation V. Putin2. However, it was unclear yet whether the shares in any of the listed companies (or, maybe, other large economic agents) would be privatized till the end of 2010.

A meeting of the Government of the Russian Federation was held late in October 2010, which discussed plans of privatization till 2016: as part of the program of privatization till 2013 and plans of privatization for 2013 2015. Following the meeting, it was announced that about 900 companies were planned for privatization and a total of RUB 1,8 t generated till and inclusive 2015. The blocks of shares in large banks and companies such as VTB Bank, Sberbank, Sovkomflot, FGS UES, Rushydro, United Grain Company were expected to be sold till 2013, and Rosneft, Russian Railroads, Aeroflot, Sherenetyevo, Rosselkhozbank, Rosagroleasing from 2013. Furthermore, it was announced that in the coming 34 years privatization of large companies would not be linked with decrease in a state-held share below a controlling interest, however, it was reported that the state planned to get rid of its controlling interest in Rosneft, Rushydro, VTB Bank, Aeroflot in a more distant prospect after 2015.

It was not until the meeting of the Government of the Russian Federation on November 17, 2010 when plans of privatization of large and the largest companies became clear. The meeting approved the Forecast Plan and Guidelines for Privatization of Federal Property for 2011 2013 which contained, in particular, the following important provisions :

restrictions on privatization of specific types of federal property which cease to be relevant, will continue to be abolished;

the approved plan of privatization in the course of time will be supplemented on the basis of the results of optimization of the structure of state-owned property ;

tight deadlines for privatization of the largest companies are not set, some time frames are set, sometimes for a more distant perspective (beyond 2011 2013).

A very important feature of the forecast plan of privatization for 2011 2013 is that it includes 10 largest companies which are leading in respective industries, whose blocks of shares will be privatized on the basis of specific decisions of the President of the Russian T. Zykova. Public Sales. Rossiyskaya Gazeta, July 29, 2010.

See Comments made by the Minister of Finance A. Kudrin to information agencies at the Reuters Summit held on September 15, 2010] (http://www.minfin.ru/ru/press/speech/index.phpid4=10574).

Section 6.

Institutional Problems Federation and the Government of the Russian Federation (Table 15)1. Revenues from their privatization in 2011 2013 are estimated at a level of RUB 1 t.

Together with the above mentioned largest companies which seem to be privatized according to custom-made schemes, the forecast plan also provides for privatization of the blocks of shares (the value of each exceeds RUB 500 mln) of eight large companies, namely Apatit, Prosvescheniye Publishing House, Sibir Airline, Archangelsk Traiwing Port, Ulyanovsk Motor Plant, Murmansk Fishery Seaport, Vostochny Port, Almazny Mir in 2011 2013.

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