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One may assume that first group of public representatives (political elite) would focus on privatization for the purpose of structural economic reconstruction, the second group on generating more budget revenues from privatization, and the third group on broadening the opportunities for state-controlled companies in order to simplify immediate public influence on specific industries. Competition between these groups may result in creation of poorly regulated compromises which would broaden the possibilities for making custom-made decisions.

Hence the struggle between the groups with different points of view on the role of privatization may be found to be even less transparent.

Furthermore, very important is the risk of excessive fiscalization of privatization, emphasis on short-terms interests in generating budget revenues, which would inevitably relegate more relevant long-term objectives of privatization (structural reorganization, promotion of the development of enterprises and industries) to the background.

Ideology of New Privatization: Structural and Budgetary Approaches The scale of plans of privatization in a mid-term perspective makes the main ideologeme of this process critically important. Analysis of a population of key events which are somehow related to making the national policy in the field of privatization, allows two system priorities to be highlighted :

(1) structural priority the use of privatization as a tool for reducing direct participation of the state in the economy, providing structural reorganization in industries, developing competition, encouraging the development of companies, attracting strategic investors ;

(2) budgetary priority the use of privatization for widening budget revenues, reducing the public sector as consumer of public resources.

Strictly speaking, the foregoing priorities are not fully antagonistic, each of them offering advantages and weaknesses in terms of development of the Russian economy, in terms of the above considered potential risks.

As part of the structural priority, the emphasis is placed on whether or not it is expedient that some or other companies belong to the public or private sectors in terms of development of the companies as well as relevant industries and markets. This priority imposes strict requirements to the composition of privatized companies, the size of blocks of shares offered for sale, to buyers and, above all, actions of the buyers with regard to privatized companies.

This approach requires careful selection of potential buyers, preferred emphasis on sale of companies to strategic investors who are interested in their long-term development; buyers may have to meet requirements related to operation and development of privatized companies.

This priority if focused on a mid-term perspective, in combination with creation of conditions for development of privatized companies, reformation of the same, considerable reduction of public participation in the economy. However, implementation of this priority may be An illustrative example of the fourth and fifth risks is sale, on a single source basis, of a nearly controlling interest in Bank of Moscow to VTB Bank in February 2011.

RUSSIAN ECONOMY IN trends and outlooks exposed to material risks related to low transparency of the processes of sale of property to strategic investors, inexplicit reciprocal obligations of the state and buyers, uncertainty of arrangements designed to discharge such obligations. Once again, one may get the impression of cheap privatization and defaulted obligations in the future.

Second, the budgetary priority provides for maximization of budget revenues from sale of federal property, for a short-term period though. In implementing this priority, companies for privatization are chiefly selected on the basis of their market value. The principal point is correct valuation of assets as well as selection of the auspicious moment for privatization, which can be done through careful monitoring and forecasting of the market situation. This is why it is reasonable to engage specialized organizations to perform sales. In the meantime, it is inexpedient in this case to impose any requirements to buyers (except for timely discharge of obligations for payment for privatized assets), because limited circle of potential buyers may reduce budget revenues. Therefore, it also becomes reasonable to define any terms and conditions (especially those of investment nature) as to what buyers may do with the privatized property.

In general, this priority organically implies transparency of privatization, acquisition of a wide range of potential, including foreign, buyers, lowering barriers on participation in privatization, considerable reduction of the scale of cashless privatization (in particular, on the basis of contribution of federal property to the charter capital of joint-stock companies). The same priority may become a relevant incentive for activating privatization processes at the level of constituent territories of the Russian Federation. However, to implement the same priority, it is not important to what extent the degree of public control over large companies is reduced (at least in the short-term perspective). Neither is important privatization of many small state-owned properties. This priority is rather of short-term nature, it has almost nothing to do with the objectives of reorganization, rehabilitation of large companies which require considerable time, and is less connected with improvement of institutional terms of development of sectors and industries.

At the level of federal agencies, the Ministry of Economic Development and Trade of Russia is the principal advocate of the first, structural priority, whereas the Ministry of Finance of Russia acts as an advocate of the second, budgetary priority. Indeed, such a division of priorities by government agency is conditional: government officials who represent the Ministry of Economic Development and Trade pointed out many times that privatization is important for generating budget revenues1, whereas the officials from the Ministry of Finance mentioned from time to time that privatization is relevant as a tool for development of business environment and acquisition of private investments2.

The relevance of the two foregoing priorities chanted considerably in the course of creation conditions for new privatization. The structural priority was more relevant for privatization late in 2009, whereas the budgetary priority became prevailing by H2 2010. It is noteworthy that this approach was also supported by representatives of large business associa See, e.g.: O. Redkina. The Government Will Keep Hold of Rosneft. Infox.ru, September 29, 2009] (http://www.infox.ru/business/ finances/2009/09/29/Vlast_nye_otdast_R.phtml).

See, e.g., comments made by the Ministry of Finance A. Kudrin to information agencies following the meeting of the Russian-British Intergovernmental Committee for Trade and Investments held in London on November 5, 2009 (http://www1.minfin.ru/ru/press/speech/index.phppg4=13&id4=8583).

Section 6.

Institutional Problems tions which considered large-scale privatization of state-owned companies as an alternative to potential tax increase intended to generate budget revenues1.

Though both structural and budgetary priorities are relevant for decision-making in practice, compromises in the struggle between the two ideologies are currently reached at the cost of regulatory uncertainty, by increasing the role of rule-of-thumb decisions and broadening nontransparent, positional struggle between different parties.

In our opinion, in spite of attractiveness of the structural priority in terms of long-term development of the Russian economy, it is the lack of long-term and transparent rules of the game in interaction between the state and businesses that will become a relevant barrier. In this respect, it is the budgetary approach that seems to be more balanced in terms of advantages and risks in the short-term perspective.

Preconditions for strengthening the structural trend of privatization in the mid-term perspective will appear, provided that a substantial progress is gained in the development of institutional environment, harmonization in interaction between the state and businesses. It should be noted that solution of a series of principal structural objectives within privatization (e.g., drastic reduction of the public sector, the state should give up on control at the level of specific large companies) is scheduled for 20132015 and beyond. In the meantime, it should be made possible to define the most relevant goals and objectives of privatization, the future of the largest state-owned companies in the mid- and long-term perspectives.

Basic Conclusions and Recommendations 1. During 2010, privatization was one of the top-priority objectives set by the Government of the Russian Federation. In the same period, the base for privatization was enlarged considerably through both large-scale shortening of the list of strategically important companies and organizations and broadening of the forecast plan of privatization. However, shortening of the list of strategically important companies and organizations in 2010 was of a slightly different nature as compared to the previous years: (1) set-up of integrated entities was not the principal keynote for excluding organizations from the list; (2) joint-stock companies prevailed among those excluded from the list, in most of which the Russian Federation held less than 50% of equity interest; (3) most of the excluded organizations operate in the transport sector and related infrastructure.

2. Major amendments were made to the law on privatization. Following are listed the most relevant innovations in this field. Transition to mid-term planning of privatization of federal property; the Government of the Russian Federation was entitled to make decisions on privatization of state-owned property beyond the scope of standard procedures set forth in the law on privatization; the Government of the Russian Federation can decide on the possibility to authorize legal entities to act as sellers of privatized federal property; the admissible options of privatization of large companies were extended, which includes contribution of stateowned property assets to the charter capital of joint-stock companies; privatization of small state-owned property assets was simplified, access of potential buyers to participation in privatization was broadened; the requirements for transparency of privatization procedures were broadened substantially.

The President of the Russian Union of Industrialists and Entrepreneurs (RUIE) A. Shokhin: The Dialogue Between the Business Community and the Chairman of the Government of Russia is Highly Effective. RUIE official webpage, May 17, 2010 (http://www../Default.aspxCatalogId=283&d_no=8261).

RUSSIAN ECONOMY IN trends and outlooks Considering the innovations as part of the law on privatization, it should noted that they are well-defined for solution of the two objectives: (1) improve capability and development of tools for privatization of large and largest companies and (2) reduce costs and restrictions on large-scale privatization of relatively small companies. Judging by the approved regulations as applied to privatization of large companies, the emphasis is placed on custom-made decisions, however, not even general frameworks for making such decisions have been defined to date, and the role and powers vested in the powers of the Government of the Russian Federation in making such decisions were strengthened and broadened considerably.

The most controversial and uncertain is the innovation related to delegation of powers to the Government of the Russian Federation for decision-making on privatization of stateowned property beyond the scope of standard procedures set forth in the law on privatization, especially in cases of direct sale of blocks of shares to the existing shareholders.

3. The beginning of a new stage of privatization was closely associated with emphasis on structural reorganization and modernization of the economy, improvement of competitive environment and facilitation of investments, restructuring and development of enterprises. Later, however, in particular by the H2 2010, the focus gradually shifted towards the role of privatization in generation of additional budget revenues. This resulted from growing doubts as to the prospects of rapid post-recession growth in the Russian economy, broadening of budgetary expenditures, which includes social security expenditures, and, consequently, aggravation of the issue related to federal budget deficit in years to come.

This shift of emphasis was logically accompanied by focusing on privatization of expensive and liquid blocks of shares in large financial institutions, banks, oil companies. In spite of planned privatization of the blocks of shares in a series of largest companies, the state tends to retain its dominating participation in the charter capital of such companies in years to come. Hence solution of the objectives of considerable reduction of the state participation in the economy, structural transformation was postponed in the mid-term perspective.

4. The process of development of plans of privatization, discussion of terms and conditions of privatization of large companies seems to be very situational. Government agencies have been struggling between each other as to the terms and scopes of privatization of specific large companies. In spite of the declared principle of transparency of privatization at all stages, the processes of discussion of its expediency, effects, the list of large companies which are planned for privatization and specific options of this process remain far from being transparent, and the state fails to provide and/or hardly provides enough reasons for the decisions made.

5. Solution of structural objectives in the course of privatization are exposed to a series of material risks, which include :

the risk arising from immaturity of legislative procedures for privatization of large companies and extension of terms and conditions for the custom-made approach towards privatization of large state-owned properties ;

the risk of imposing serious formal and informal restrictions on participation of external investors in privatization, providing specific buyers with preferential terms and conditions ;

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