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The RF President in the letter to the Federal Assembly of the Russian Federation on April 26, 2007 has indicated the need for significant changes in the structure of power engineering, in particular, by enlarged share of nuclear power generation, the construction of 26 nuclear power plants on the basis of modern technologies in the next 12 years. To this end, it was proposed to establish a special corporation that would incorporate the nuclear power generating and industrial enterprises, operate in both, domestic and external markets, and moreover, serve for the interests of national defense.

RUSSIAN ECONOMY IN trends and outlooks 5. 2. 4. Distinctions in Discussion and Adoption of Laws on the Establishment of Public Corporations It is worth paying particular attention to tightened time frames in establishment of public corporations from the second half of 2007. After the discussion and adoption of the Law on Bank for Development, all subsequent draft laws on public corporations have presented either by deputies, or by the RF President58. Those draft laws were adopted in the minimum time limits, within 1.52 months upon their submission, while only 11.5 months was allocated for their consideration by the State Duma (see Table 11).

Table Time Frames for Adoption of the Draft Laws on the Establishment of Public Corporations in Date of the State Duma Date of the RF Laws on establishment of Date of presentation to Draft law initiator adoption in final read- Presidents signapublic corporations in 2007 the State Duma ing ture Federal law No. 82-FZ On the Government 19.01.2007 20.04.2007 17.05.Bank for Development Federal law No. 139-FZ On Deputies 04.06.2007 04.07.2007 19.07.the Russian Public Corporation for Nanotechnologies Federal law No. 185-FZ Deputies 04.06.2007 06.07.2007 21.07.Foundation for Promotion of Housing and Public Utilities Reform Federal law No. 238-FZ On Deputies 12.09.2007 18.10.2007 30.10.Public corporation on Olympics objects construction and Sochi city development as a mountain health resort Federal Law No. 270-FZ On RF President 25.09.2007 9.11.2007 23.11.Rostechnologii public corporation Federal law No. 317-FZ On RF President 01.10.2007 13.11.2007 01.12.Rosatom, public corporation on nuclear power As a rule, the debates on the draft laws for the establishment of public corporations in the State Duma were critical59. Most frequently critical remarks were expressed on the functions and powers of corporations, on the procedure of property transfer to their ownership, on various aspects of organization of their interaction with other economic entities in the framework of targeted activities, on management procedures within corporations and on government supervision over their performance. As a result60, quite a number of disputable provi This transfer of legislative initiative from the RF Government to the deputies and the RF President to present draft laws on public corporations establishment is largely explained by rather long term of the draft laws development and discussions in the RF government, particularly noticeable against the background of limited time frames.

This was reflected, in particular, in the final statements on the draft laws, prepared by individual Committees and Legal Department of the State Duma.

There are some examples. In accordance with the initial text of the draft law on the establishment of Rosnanoteh public corporation, it was planned to provide the corporation a number of functions of government authorities (development and harmonization of legal regulations, functions of an agent for state-guaranteed orders), the right of corporations to use up to 10 per cent of their budget for the administrative management expenses. In the draft law on PC Rostechnologii" establishment it was foreseen to authorize the corporation to determine the Section Institutional Problems sions have been abolished, including some redundant functions and powers. However, a number of notable remarks (both, applicable to individual corporations61, and more universal ones62) was not taken into account when finalizing the law drafts.

Finally, the dynamic process of adoption the laws on public corporations in 2007 has brought up a number of important issues, related to their current operation and quality of legal definition of that form of incorporation.

First, the framework nature of the passed laws on public corporations establishment is worth noting. Practically all laws provide insufficient details63 on the terms and principles of the corporations activities (with the exception of the Foundation for Promotion Housing and Public Utilities Reform), they require bylaws adoption and a number of regulations at the level of the corporations. There is no procedure of reorganization or liquidation for the majority of the established corporations in the adopted laws: there are only references to provisions of the corresponding federal law (the liquidation of a corporation determined only in relation to the Foundation for Promotion Housing and Public Utilities Reform, where the term of functioning is specified64).

Secondly, it is worth pointing to the low level of harmonization of provisions of the adopted laws on establishment of public corporations. There is no doubt, that the goals, objectives and activities of each corporation are individual, but even in the case of similar provisions there is a high diversity in their definition, including the details and wording65.

Thirdly, the negative effect on the development of basic law on non-profit organizations should be pointed out. Basically, one could expect that the wide application of provisions on public corporations, the adoption of appropriate laws could promote general practice development, clarify and supplement the provisions of the Law on Non-Profit Organizations. However, this did not happen; only in one case in 2007, simultaneously with the adoption of the Law On the Bank for Development to enable it to borrow funds, an amendment was made to Article 7.1 of the Law On Non-Profit Organizations, defining the minimum limit of the authorized capital and property of public corporation, that secures the interests of its creditors66.

procedure and amounts of regular and (or) non-recurrent contributions from organizations, the shares, which are owned by the corporation; in the draft law on PC Olympstroy" incorporation there was a provision, that the property of the corporation consists of property, allocated by the Russian Federation, by Krasnodar region and Sochi city.

For example, with regard to the draft law on PC Olympstroy, there was a number og comments on the lack of rules, restricting the term of activities of the corporation (in view of the nature of the project objectives).

The comments of this nature include the low level of legislative regulation of corporations activities, the lack of rules and criteria for selecting projects for funding, insufficient regulations in regard to conflict of interest, the lack of procedures for government control over the activities of corporation.

For some public corporations (such as the PC Rosnanotech, PERCENT Olympstroy) provided insufficiently detailed legal base for their establishment, is balanced, to some extent, by strategy and programs of their development.

In accordance with Section 6, Article 3 of Federal Law On the Fund for assistance to Housing and Public Utilities Reform, the Fund will be functioning till January 1, 2021.

It should be noted, that even the wording of the full names and abbreviations of corporations is different (such as PC Rosnanoteh, Pub.Corporation Rosatom, public corporation Rostehnologii).

66 Article 3 of the Federal Law No. 83 FZ as of May 17, 2007 On amendments to some legal regulations of the Russian Federation in view of the adoption of the Federal Law On Bank for development.

RUSSIAN ECONOMY IN trends and outlooks Insufficiently detailed and poorly structured laws on the establishment of government corporations, the low level of legal regulations of corporations activities have also, in our view, brought up to the following issues.

1) Delay in the beginning of corporations performance on their basic objectives.

As of the end of February 2008, only to the Fund for promotion of housing and public utilities reform started full-scale functioning, whereas other corporations were in the process of formation and approval of various documents, regulating their practice.

2) Empowering shadow lobbying of various parties and aggravated risk of biased decision-making to the detriment of consistency and strategic planning.

The establishment of corporations leads to a substantial change in correlation of force in the system of public administration, the transition of decision-making authority to the level of corporations in the backgrouynd of insufficient regulations for corporations activities67, absence of legal provisions on identification and resolution of potential conflict of interests in their operation, incomplete provisions on interaction with public authorities significantly increases the relevant risks.

3) The fears in business environment (sometimes exaggerated) on the tentative risks from the activities of corporations.

The problem is largely based on the vague boundaries in authority and expansion of corporations activities, the uncertainty of the procedure and criteria for the selection of entities to be supported, uncertainty in management principles and disposition of its assets, the vagueness of their plans on further development and approach to interaction with the business community.

4) Mistrust to public corporations on the part of civil society.

This problem is the result of the lack of procedural rules on government control over the activities of corporations and absence of effective tools of public control over their activities, inadequate requirements to their publicity and transparency.

At the same time, risks, related to the above issues can be significantly reduced through the adoption of corporate strategies, definitions and principles of transparency, procedural rules of corporations activities, combined government and civilian control over their activities, greater publicity, the practice of holding regular consultations with interested public organizations and business associations.

5. 2. 5. Public Corporations Potential and Related Problems At this point it is quite obvious, that the potential of the established public corporations is dependent to a large extent on property contribution, made by the Russian Federation, empowering them with wide authority and responsibilities, flexibility in the use of financial resources, their administrative status, as well as their experience.

All corporations (perhaps, with the only exception of Olympstroy) were provided a fairly large property contribution from the Russian Federation, although its structure (packages of shares, property, monetary assets, etc.) is different for each of the individual corpora Only in the Federal Law On Public Corporation on Nuclear Power Rosatom there are provisions, that determine the need for procedural rules. In accordance with Art. 33 of the Law, procedural rules should be approved by the Government, that establishes the order and procedures of a corporation performance, its authority and functions, including the order of its interaction with public authorities, performance of the orders from the RF President and government.

Section Institutional Problems tions: Foundation for Promotion of Housing and Public Utilities Reform and PC Rosnanoteh have been primarily funded with monetary assets, which ensured their functioning for a the long term, whereas the contribution to Rosatom and Rostechnologii corporations were made with the shares of large manufacturing holdings (see Table 12).

Table Property Contribution, Provided by the Russian Federation and Functions, Delegated to Public Corporations Corporations Property Authorities/ Functions Bank for Development and Foreign Economic Affairs 1 Property of the Bank for Foreign Eco- Funds from the federal budget in the amount All the rights and responsibilities of the Bank nomic Affairs of the USSR, shares in of RUR 180 billion (November 2007); for Foreign Economic Affairs of the (former) OAO Russian Bank for Development, RF Stabilization Fund assets in the amount of USSR ZAO Special Government Russian RUR 180 billion (November 2007);

Export-Import Bank of federal prop- Revenues from the activities of Vnesheerty; conombank Other property of the Russian Federa- tion upon approval of the RF Government;

Voluntary contributions and donations of property Russian Nanotechnology Corporation Voluntary contributions and donations Funds from the federal budget in the amount of property, as well as other legitimate of RUR 130 billion (November 2007);

assets RF Stabilization Fund in the amount of RUR 30 billion (November 2007);

Revenues, derived from the activities of the corporation Foundation for Housing and Public Utilities Reform Promotion Funds from the federal budget in the amount of RUR 240 billion (November 2007);

Revenues from the sale of temporarily available assets Public Corporation on Olympics Objects Construction and Sochi City Development as a Health Resort Property, obtained from government Funds in monetary form from the federal All rights and obligations under government contracts, awarded under the Federal budget, as well as other budgetary allocations; contracts, signed by the Federal Agency on Program Development of Sochi as a Revenues from the activities of the corpora- Nuclear Power on behalf of the Russian mountain health resort (within 2006 tion non-recurring income (contributions) Federation 2014); from organizations, the shares, which are Other property of federal ownership, owned by corporations;

approved by the decision of the Russian Revenue derived from the use of the corporaGovernment; tion of its assets and activities Donations Public Corporation on the Support in the Development, Production and Export of High-Tech Industrial Products Rostechnologii 100 per cent of shares of OAO, created The right for participation in foreign trade through transformation of federal gov- activities with respect to military products ernment unitary enterprise Rosoboron- export;

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