Table Public Corporations, Established in Date of relevant Public corporation Objectives law adoption 1. Public Corporation “Bank for May 2007 Enhance the competitiveness of the Russian Federation economy, its diversiDevelopment and Foreign Eco- fication, encourage innovation through investments, foreign trade, insurance, nomic Affairs (Vnesheconom- consulting and other activities for the implementation of new projects in the bank)” Russian Federation and outside the country, including projects with the participation of foreign capital, addressed at infrastructure improvement, innovation, special economic zones development, environment protection, support of domestic export of goods, works, and services, as well as support to the small and medium businesses 2. Public Corporation “Russian July 2007 Promotion of the government policy in the field of nanotechnologies, develNanotechnology Corporation” opment of the innovation environment in the area of nanotechnologies, im(PC “Rosnanotech”) plementation of the projects for prospective nanotechnologies and nano industry 3. Foundation for Promotion of July 2007 Development of safe and favorable living conditions to the population, proHousing and Public Utilities motion of housing and public utilities reform, development of effective Reform mechanisms for the management of the housing resorces, introduction of energy-saving technologies with the financial support, provided by the Foundation 4. Public corporation on Olym- October 2007 Support in management and other socially efficient functions, related to pics objects construction and design, engineering, construction and renovation works, maintenance of Sochi city development as a housing utilities, required for XXII Olympics and 2014 Para-Olympic Games mountain health resort (GK in Sochi, as well as the development of the city as a health resort “Olympstroy”) 5. “Rostechnologii”, public cor- November 2007 Support in the development, production and export of high-tech products poration on the support in the through promotion of national designers and producers of high-tech comdevelopment, production and modities in domestic and external market, investments attraction to various export of high-tech industrial industrial sectors, including national military defense products (“Rostechnologii” pub- lic corporation) 6. “Rosatom”, public corporation December 2007 Support to government policy, legal regulatory activities, public services and on nuclear power (“Rosatom”) national property management in nuclear power sector, development and support to the safe operation of nuclear power and nuclear weapons sectors of the Russian Federation, ensure nuclear and radiation safety, nonproliferation of nuclear resources and technologies. Assistance in development of nuclear science, technologies and professional training, international cooperation in this area One can see there is no reference to “corporations” in the names of those laws.
Section Institutional Problems Public corporations, established in 2007 are significantly distinguished in both, the background of incorporation and the objectives and functions thereof. Thus, while the Bank for Development and the Foundation for Promotion of Housing and Public Utilities Reform can be regarded as some elements of progress in “public corporation” legal form, other public corporations are set far apart from them and are much more related to the implementation of industrial (sectional) priorities, as well as to the administrative system enhancement.
Reviewing the basic incentives of such expressed growth of the government interest in public corporations establishment, one should highlight three major factors.
First. The long-term objectives to promote sustainable economic and social development came to the topside, the inefficiency of the existing tools for government policy implementation became clear. For example, the Federal Targeted Program (Federal Program) is a very mature and transparent tool. In recent years, significant efforts have been made to improve the efficiency and effectiveness of the Federal Programs implementation. However, that tool does not fully meet the new challenges in the development of public policy, as in the current administrative system it is ineffective for the resolution of inter-governmental problems.
Moreover, it prevents capital investments in newly incorporated business entities and is restricted in supporting the long-term projects due to accountability within the budget cycle.
Second. Inadequate quality of the administrative system, its primary focus on the current challenges, problems in the development and implementation of national policy in terms of improvements in the new sectors of the economy have brought up the need to seek for the new agents of public policy (the government agencies, addressed at long-term challenges). The choice of the “public corporation” legal incorporation form was made in a number of cases due to their ability to provide relevant functions of government management outside the standard framework of the administrative system restructuring.
Third. A significant factor in the transfer of government attention to the public corporations is the factor of limited time frames of the elected government power before its reelection, in the pursuit of fixing some priorities in the national policy under such conditions, which have to be ensured by necessary priorities and financial grounds. It should be noted, that within 2006 – early 2007, the government was satisfied with OAO41 incorporation, a 100per cent of the shares of which were in federal ownership. Herewith, such important tasks were addressed as:
1) restructuring and consolidation of national assets, creation of large economic entities in the public sector of the economy, accelerated development of selected high-tech industries (such as OAO “Consolidated Aircraft Corporation”, OAO “Consolidated Shipbuilding Corporation”);
2) enhancement of effective performance of certain government functions through the transfer of powers to the level of economic entities, incorporated by the government, namely to the OAO “Special economic zone”;
3) creation of Development Institution OAO “Russian Venture Company”.
However, on the one hand, as early as in 2006, it became evident that the process of creating large government-owned structures in the form of OAO is excessively time-consuming The objective of establishing public corporations at the highest political level was set forth in 2007: on April 26, the RF President in the message to the Federal Assembly of Russian Federation for the first time noted the need to establish two special corporations (for the development of nanotechnology and for the development of the nuclear industry).
RUSSIAN ECONOMY IN trends and outlooks and would sometimes take several years (this was largely dependent on the need to observe the legal regulations on privatization), but on the other hand, in early 2007, there was an experience in the design and discussion of the Russian draft law “On the Bank for Development” in the State Duma for the establishment of a public corporation.
Thus, in some cases, the use of public corporation legal form has helped to simplify necessary procedures, reduce the time frames and expand tentative trends of restructuring national assets in the industry, having transferred (due to establishment of corporations on the basis of special laws), the process of approval of the relevant decisions from the RF Government to the level of the RF Federal Assembly.
When there were some additional factors in the process of creating any public corporation, (sometimes quite specific and situational), providing a surplus impact over the selection of the legal form of incorporation. Let us consider those factors as per each existing corporation.
1. Public Corporation "Bank for Development and Foreign Economic Affairs” The establishment of the corporation was aimed at building an efficient public financial development institution. The RF Government has approved on January 19, 2006, in particular, such measures as the development of the concept for public financial development institutions, as well as preparation of the draft law on export-import bank42. In late January 2006, at the top political level, the plans were announced on establishment of the Russian Bank for Development43. That objective could be achieved by several means. In particular, the following options were considered:
1) establishment of a public corporation on the basis of the USSR Vnesheconombank assets, including ZAO “Roseksimbank” shares, as well as the transfer of OAO “Russian Bank for Development”, owned by federal government.
2) establishment of a corporation in the form of OAO, 100 per cent of whose shares is in federal ownership, with affiliated companies OAO “Russian Bank for Development” and ZAO “Roseximbank”;
3) extension of OAO “Russian Bank for Development” capital.
However, along with the main challenge, there were set forth two more objectives:
(1) reorganization procedure of the USSR Vnesheconombank, outlined in the “development strategy for the banking sector in the Russian Federation until 2008”, definition of the bank status and (2) savings of national assets, allocated to support the activities of the newly incorporated financial institute for development. To implement the second and third options, substantial budgetary resources would be required for initial capitalization. Moreover, the second option looks complicated in terms of legal framework of relations with the USSR Vneshekonombank due to its special status, whereas the third option was restricted, as it did not include bank support to export-import operations.
Thus, the desire to resolve several different tasks has predetermined the option for the RF government to select the first option by the end of 2006, i.e., incorporation of a public cor42 At a press conference on January 31, 2006, the RF President has informed on the plans to incorporate the Russian Bank for Development with an authorized capital of USD 2.5 billion.
At a press conference on January 31, 2006 the RF President has notified on plans to establish the Russian Development Bank with an authorised capital of USD 2.5 billion.
Section Institutional Problems poration44, although the tentative risks were noted, such as restrictions in independent resources attraction, imbalances and conflict of interest in the development of its structural elements, the lack of transparency of activities, excessive bureaucracy.
2. Public Corporation “Russian Nanotechnology Corporation” Establishment of this public corporation was preceded by a sufficiently long period of public policy development in terms of nanotechnologies. The issues of nanotechnologies and nanoindustry development have been repeatedly discussed at the Russian Government meetings: on November 18, 2004 the Concept on development in the field of nanotechnology for the period until 2010 in the Russian Federation was approved, on August 25, 2006, the Program on coordination in the area of nanotechnologies and materials in the Russian Federation was adopted. However, the measures were not properly coordinated, the decision-making processes on a number of important measures were delayed (for example, the works on the Targeted Federal Program for the Development of Nanotechnology Infrastructure45, on formation of the Fund for Nanotechnologies Development for the direct capital investments in companies with high potential).
To a significant extent, this was the result of the absence of any industrial department, involved in nanotechnology development on a priority basis. Under these circumstances, for the purpose to promote the formation of an integral government policy in the development of nanotechnology, an “external” action was required in regard to the Government. The RF President has approved on April 24 2007 the Presidential Initiative “Nanotechnology Development Strategy”, where the Russian Nanotechnology Corporation was defined as one of the key elements of the national nanotechnological network. Its objectives are organizational and financial support to innovation activities in the field of nanotechnology. On April 26, 2007 the RF President in the message to the Russian Federal Assembly Federation has appealed to finalize and adopt the law on the establishment of a special Russian Nanotechnology Corporation as soon as possible. The government should ahave llocated at least RUR 130 billion for the Corporation funding.
The choice of a public corporation legal status as a form of incorporation46,probably, was made due to the initial plans to authorize it with some government functions (in particular, to participate in the development of government policy in the area of nanotechnology and in drafting regulations, in placing orders for research and development in the area of Nanotechnology for national needs, in functioning as government representative in Targeted Federal Programs).
At the RF Government meeting on December 14, 2006, there was approved the draft of the federal law “On the Development Bank”, outlining the provisions for “public corporation” legal form of incorporation.
In accordance with the Consolidated Plan of activities to implement the basic provisions of the President’s of the Russian Federation Letter to the Federal Assembly of the Russian Federation in 2006 (Government of the Russian Federation (approved by the decision of the government on June 7, 2006), it was planned in October 2006 to approve the program of research, innovation and production infrastructure for nanotechnology for 20072009, but the adoption of an appropriate program was made with noticeable delay: Federal Program “Nanotechnology infrastructure development in the Russian Federation for 2008–2010” was approved only on August 2, 2007 by the Resolution of the Government of the Russian Federation No. 498.
In this case, it is difficult to judge, what was the primary factor. Probably, after the decision at the top political level on the establishment of a public corporation, there was an intention to use the corporation (due to its status), in to execute some government functions.