RUSSIAN ECONOMY IN trends and outlooks 3. Foundation for Promotion of Housing and Public Utilities Reform Establishment of a corporation in this case has been basically a response to a marked slow-down in addressing the problems of housing and public utilities systems reform. At a meeting of the Russian Government on October 19, 2006 after discussion of the report, made by the Russian Ministry for Regional Development on the plan of measures to reform the housing and utilities system, the work of the Ministry in this area was found unsatisfactory.
The Government has returned again to the discussion of number of measures on the reform of housing and utilities system at its meeting on February 16, 2007. As a result, the projects with a number of measures for the reform of the housing and public utilities in the Russian Federation over 2007–2008 and the plan for development of relevant legal regulations on their implementation were accepted in general. However, in accordance with the adopted documents, the issues of repairs, to be made by the owners of dwelling premises and modernization of apartment buildings were based largely on the amendments, made to the Housing Code of the Russian Federation (on allocation supplementary budget funds, development of relevant regional programs, whereas it was planned to implement those measures only in 2008).
Probably, that fact has urged the government officials to focus on the more intensive measures to accelerate the modernization of housing utilities. On April 26, 2007 the RF President in the Letter to the Federal Assembly of the Russian Federation has stressed the need to create a special fund in the amount of minimum RUR 250 billion, for the repair or resettlement of people from emergency housing stock. The creation of such a fund in the form of a public corporation47 was clearly motivated by the non-profit nature of the activities, as well as the need to ensure timely decision-making, flexibility in the funds utilization, including measures on co-financing for major repairs, regional co-financing of targeted programs.
4. Public Corporation on Olympics Objects Construction and Sochi City Development as a Health Resort The establishment of the corporation, in our opinion, is more a consequence of “example” factor of other corporations and the desire to delegate to a an authorized unit the responsibility for the results of activities, to centralize and expand the capacity, ensure flexible and operational management of resources for the timely solution of the tasks. On June 8, 2006 the Resolution of the Government of the Russian Federation No. 357 has approved the Targeted Federal Program “Development of Sochi city as a mountain health resort (over 2006–2014)”.
In the process of this program development, two options were considered (dependent on the choice of the country for the Olympics), and the activities were planned with regard to both options. Given the quality requirements, tight time frames and complexity of the project management, it was decided, for the first time (in the framework of Targeted Federal Program) to establish of a joint Management Board in the form of public unitary enterprise, which was delegated the functions of construction (renovation), financing of public capital investments, as well as the responsibility for financing other Program activities.
It is worth noting, that the idea of “public corporation” as a legal form with regard to the reform of housing and public utilities was expressed as early as in September 2006, in the report of the Ministry for Regional Development of Russia to the Federal Council, when it was proposed to establish a public corporation for investments in housing utilities.
Section Institutional Problems However, the approval of Sochi as the Olympics city and explicit problems in the plans for the construction served as additional arguments in favor of GK “Olimpstroy”48 establishment as a single monitoring center for Olympic facilities construction, implementation of related management functions, and easier interaction with private investors. According to the federal law on the establishment of the corporation, the RF Government should approve the Program on Olympic construction sites and development of Sochi as the mountain health resort, as well as the transition to the Corporation all the rights and responsibilities under government contracts, signed on behalf of the Joint Management Board of the Targeted Federal Program “Development of Sochi as a mountain resort (2006–2014 years)”49.
5. Public Corporation on the Support in the Development, Production and Export of High-Tech Industrial Products of “Rostechnologii” The basis for the establishment of the corporation was the federal state unitary enterprise “Rosoboronexport”50, a government agency on exports (imports) of armaments, and the holder of control packages in a number of large Russian companies, such as OAO “Oboronprom”, “Motovilikhinsk Factories”, “Corporation VSMPO-Avisma” and”AvtoVAZ”.
In early August 2007 the State Legal Department under the RF President has presented to the Russian government a draft law on the establishment of a public corporation “Rostechnologii”. Herewith, it was proposed to transform “Rosoboronexport” in a joint stock company and transfer the shares of OAO, created on its basis, to the public corporation as a property contribution of the Russian Federation. However, the draft law caused some doubts in the Russian government51.
Apparently, due to the firm commitment to approve that law in the shortest possible term, the draft law “On Public Corporation on The Support in the Development, Production and Export of High-Tech Industrial Products “Rostechnologii” was directly submitted to the State Duma by the RF President on September 25, 2007. According to the initial text of the draft law, corporation establishment presumed the accumulation of funds of its member companies, the formation of a number of integrated structures for exports in the industrial and military-industrial sectors.
The law has been adopted on November 23, 2007, and only three days later, on November 26, 2007, the RF President has signed an Order No. 1577 "On the open joint-stock company “Rosoboronexport”, which specifies:
It should be noted that when the draft law on GK “Olimpstroy” establishment was discussed in the State Duma, some doubts were expressed about the feasibility of the establishment of public corporation, especially due to unlimited term of its activities.
Later, in approving the construction of the Olympic program objects, the Russian government also decided to complete the implementation of the Federal Program “Development of Sochi as a mountain resort (2006–years)” ahead of time (from 1 January 2008) (Resolution of the Government of the Russian Federation No. 991, dated December 29, 2007 “On the construction of Olympic facilities and the development of the city as the mountain resort of Sochi”).
”Rosoboronexport" has been created by merging the federal state unitary enterprises “State company Rosvooruzhenie” and “Promexport” in accordance with the Presidential Decree No. 1834, dated November 4, “On establishment of a federal state unitary enterprise “Rosoboronexport”.
In early September 2007 the Chairman of the RF Government M. Fradkov called to postpone for a while the establishment of the new public corporation based “Rosoboronexport”, notifying that the proposed option of incorporation is not the only version of its formation.
RUSSIAN ECONOMY IN trends and outlooks • “FGUP Rosoboronexport”, should be transformed in a joint-stock company “Rosoboronexport”, and its shares are transferred to the Public Corporation OAO “Rostehnologii”;
• OAO “Rosoboronexport” is the government agent for external trade activities with respect to military products;
• Public Corporation “Rostehnologii” shall exercise external trade activities with military products in terms of advertising and marketing activities52.
Thus, the corporation directly or indirectly (through OAO “Rosoboronexport”) took under control the important functions of external trade activities with respect to military products.
In our opinion, to a certain extent, the establishment of the corporation means forming one more (along with the current Federal Industry Agency) centre of decision-making in the policy for the development of military and industrial complexes, which can be regarded as strengthening competition among various government institutions and can provide both, positive and negative effects.
6. Public Corporation on Nuclear Power “Rosatom” The development of the nuclear power generation complex is included in the priority areas of the Russian government policy, pursued in accordance with a number of strategic documents53. Since 2006, the development of the nuclear industry in general, and nuclear power generation complex in particular, is paid special attention. The government has approved the Targeted Federal Program “Development of Atomic Power Industrial Complex of Russia over 2007–2010 and for the prospective till 2015”54. There were also defined the objectives of public sector nuclear industry restructuring, corporatization of its state unitary enterprises, formation of a vertically-integrated structure (in February 2007 a special law was adopted for that purpose)55, and in April the RF President has signed a decree on establishment of OAO “Nuclear Power Generation Complex”56. Therefore, a vast-scale restructuring Federal Law FZ-¹ 271, dated November 26, 2007 (according to the Federal Law “On Amendments to Articles 9 and 12 of the Federal Law “On military-technical cooperation of the Russian Federation with other countries”, the list of enterprises, authorized to participate in external trade activities with respect to military products, has been revised (Article 12). The list has included the public corporation “Rostehnologii”, institutionally expanded the tentative list of “government agencies” or “special companies” (joint-stock companies, 100 per cent of the shares of which are federally owned or transferred to a non-profit organization in the form of a public corporation, are added to the list of state unitary enterprises).
Program of Atomic Energy Development of the Russian Federation for the years 1998–2005 and up to 2010, approved by the Decree of the Government of the Russian Federation No. 815 as of July 21, 1998; Strategy of atomic energy development in Russia for the first half of XXI Century, endorsed by the Government of the Russian Federation on May 25, 2000.
54 RF Government Resolution No. 605 dated October 6, 2006.
55 On November 2, 2006 the RF President has introduced a draft law to the State Duma and following its discussion on February 5, 2007, the Federal Law No. 13-FZ was adopted “On the specifics of management and utilization of property and shares of organizations, engaged in the field of atomic power and relevant amendments to the specified legal regulations of the Russian Federation”. Organizational structural revisions in the atomic power sector are also specified.
Presidential Decree as of April 27, 2007 “On the restructuring of nuclear power generation complex of the Russian Federation” has approved establishment of OAO “Nuclear Power Generation Complex”, the investment of OAO civil nuclear industry sector shares to its authorized capital before August 1, 2007; transfer some federal educational institutions of professional training to the OAO and installment of state unitary enterprises shares before December 1, 2007.
Section Institutional Problems of public assets has been started in the civilian sector of the nuclear power industry through the creation of a large-scale share holding structure, incorporating enterprises of the complete production cycle: mining and uranium ore refinement, production and processing of nuclear fuel, design and construction of nuclear power plants.
At the same time, with measurable progress in addressing the energy complex, there remained unresolved issues on improving the nuclear weapons complex management, while the issues of unified investment strategy and technology policy in the entire nuclear industry are not resolved yet57.. In view of the above, the Federal Law No. 317, adopted on December 1, 2007 (Federal Law “On Public Corporation on Nuclear Power “Rosatom”, specifying, among other things:
– development and implementation of the national policy by the Corporation for the operation and development of atomic power and nuclear weapons complexes, pursuance of national policy in terms of the nuclear industry, execution of national armament programs and government defense order;
– transfer of the functions and powers of the Federal Agency on Nuclear Energy;
– property contribution from the Russian Federation in the form of shares in OAO “Nuclear Power Generation Complex”, shares of joint-stock companies of federal ownership, state unitary enterprises property, included in the list, approved by the President, as well as the property, that is in the operational management of the federal government agencies, as per the list, approved by the RF Government.
In this case, the choice of such legal form as the public corporation was determined probably by the requirement to combine in one entity the functions of government structure management and authority to perform a full-scale restructuring of nuclear industry property and to establish a consolidated system of government control over economic activity of the Corporation member companies.
*** For all the diversity of objectives of the public corporations establishment and incentives to the selection of this legal incorporation form, those factors can be summarized as follows:
• the establishment of each public corporation is a link of a very long “chain” of measures of government policy, implemented in a particular direction;
• public corporations are not so much an alternative to such mechanisms as targeted federal programs, joint-stock holdings, funded from national assets, but rather an additional organizational structure, supporting them at some stages of development;
• in some cases, the establishment of the corporation was the way to overcome a problem in the decision-making on some key issues in the government.