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Thus, the Ministry of Industry issued Ordinance No. 88 dated November 2, 2000 to approve the Procedure for defining economic performance benchmarks for subordinated enterprises. Actual performance under the benchmarks were assumed as reference values for commissions to define targets for the period following the reporting period, to be used in maintaining the register of economic performance indicators of enterprises. Targets were used by enterprises in drafting their development programmes. The Ministry sent to the Ministry of Economic Development its proposals to monitor financial and economic operations of subordinated enterprises under the Monitoring and Operational Planning Programme whose development is under way. The proposals, in particular, included special criteria for assessment of operations of the scientific sectors enterprises, which make up nearly half of subordinated unitary state enterprises (sectoral science and scientific support).

In 2001 managers of 262 enterprises (nearly 80 percent of enterprises subordinated to the Ministry of Industry) made presentations at commission meetings. Operations of 232 out of 262 were acknowledged as satisfactory. This was approximately in line with the share of enterprises, which reported to the Ministry of a regular basis (277 out of 326 unitary enterprises associated with the Ministry). The available reports were analysed, generalised and used by commissions in their work.

Moreover, it should be noted that a profound analysis of financial and economic operations of enterprises would in many cases invite auditing. Unfortunately, the reports of ministries and agencies on improvement of management of unitary state enterprises had very little information on actual audits of subordinated enterprises. The only exception was the Ministry of Industry which reported audits of 57 out of 72 enterprises to be audited under Government INSTITUTE FOR THE ECONOMY IN TRNSITION http://www.iet.ru Resolution No. 81 dated January 29, 2000 on the basis of their performance in 2000. Audits of another 15 engineering and timber enterprises were delayed until late 2001 due to the high cost of auditing services.

Settlement of property issues. Settlement of property issues was part and parcel of efforts of ministries and agencies to improve management of federal unitary state enterprises.

This primarily involves building an inventory of federal property and its legal documentation (making it part of the Public Property Register of the Russian Federation), and focusing on any construction in progress.

Table Intermediate Results of Sectoral Management to Build Inventory of Subordinated Federal Unitary State Enterprises Enterprises with assets registered Total enterprises as of late Ministry (Agency) with the federal property register 2001 - early 2002, units units % of available Ministry of Transport (Minstrans): 834 - Road network; 396 - Road transport; 236 - Airlines; 146 - Sea transport; 36 - River transport 15 Ministry of Railway (MR) 459 361 78,Ministry of Industry, Science and 326 311 95,Technology (Minprom) Ministry of Natural Resources (MNR) 290 200 69,State Construction and Utilities Com174 132 75,mittee (Gosstroy) State Fishing Committee (Goskomry40 bolovstvo) State Standards and Metrology 39 39 100,Committee (Gosstandard) Precious Metals and Jewels Department 33 under the Ministry of Finance Federal Weather and Environmental 12* 11 91,Monitoring Service (Rosgydromet) * Taking into account 6 enterprises set up in the first half of 1990s without coordination with the Russian Weather Service by separating pilot production units from research institutes.

Table 8 shows that inventory in the majority of federal ministries is not expected to be completed soon. From 20 to 30 percent of enterprises associated with the Ministry of Railway, Ministry of Natural Resources and State Construction and Utilities Committee have not yet received certificates of registered assets. The situation was better at the State Standards and Metrology Committee, Ministry of Industry (considering only actually associated enterprises) and the Federal Weather and Environmental Monitoring Service. There is no data available on the enterprises associated with the Ministry of Transport, Ministry of Communications, Minatom, Precious Metals and Jewels Department under the Ministry of Finance, Ministry of Agriculture and State Fishing Committee.

RUSSIAN ECONOMY in trends and outlooks Also, it should be noted that lack of certainty regarding the assets of unitary state enterprises is acting as a brake on harmonization of new charters and new requirements. The charters of 13 enterprises under the State Construction and Utilities Committee are being under reworking due to lack of attachments, which requires from the enterprises to settle the issues of documents specifying their right to assets or settlement of property disputes in court. In specific cases, the issues of previous illegal privatization or assignment of the constituent territories or municipal units arise. Likewise, property issues of 19 enterprises under the Ministry of Industry are settled at territorial agencies.

Throughout 2001 many ministries and agencies carried out inventory of construction-inprogress objects owned by enterprises and institutions subordinated to sectoral management agencies. Propositions were designed on their involvement in economic operations, which normally included the following options:

Construction completion with specifying of sources of financing (core capital and borrowed finds, federal budget funds);

Privatization (joint-stock companies, selling by tender under investment conditions, auction under conditions of further utilization);

Assignment to constituent territories and municipal units;

Leasing.

This work resulted in registration of 185 objects (by 99 organizations) under the Ministry of Railway, 97 units (by 46 organizations) under the Ministry of Industry, 12 units under the Federal Weather and Environmental Monitoring Service, 8 units under the State Standards and Metrology Committee, 5 units (only major ones) under the Ministry of Communication.

It should be noted that the majority of the organizations with construction in progress are non-profit units rather than unitary state enterprises. This specifies the nature of proposals on involvement of these objects into economic operations in which completion of construction is essential and financed mostly with the federal budget.

Specifically, of 185 objects of the subordinate organizations, the Ministry of Natural Resources suggests to write off 12 units (including 10 units of unitary state enterprises), assign 8 units (including 2 units of unitary state enterprises) to regions and municipal units, sell 7 units (including 4 units of unitary state enterprises), and lease 2 units (including 1 unit of unitary state enterprises). Thus, even without regard for the objects, which have not been mentioned, about 80 percent of the objects with construction in progress need investments for completion. Only in two cases construction can be completed by financing with the core capital of the enterprises.

Of 12 of the construction-in-progress objects under the Federal Weather and Environmental Monitoring Service, 2 units are suggested to be completed by extrabudgetary financing and partial selling by tender under investment conditions, 1 unit is suggested to be financed with the budgetary funds. No suggestions have been made with regard to other objects.

Of 8 objects under the State Standards and Metrology Committee, 5 units (including units of unitary state enterprises) are suggested to be completed by financing with budgetary funds, 2 units by financing with the funds of institutions (Standards and Metrology Centers) generated from authorized economic operations, 1 unit is suggested to be written off (by assigning the site to local administration).

INSTITUTE FOR THE ECONOMY IN TRNSITION http://www.iet.ru The State Construction and Utilities Committee has collected a data bank on the objects with construction in progress as part of the assets of the subordinated enterprises. Actual changes in the structure of these assets were represented in legal documents and balance sheets of the enterprises. This resulted in a significant downtrend of the construction-inprogress objects.

Table Preliminary Proposals of Agencies of Sectoral Management on Reorganization of Unitary State Enterprises Total enter- Reorganization methods proposed prises as of Ministry (Agency) late 2001 - I II III IV V VI VII VIII early 2002, units Transport (Minstrans):

- Road network; 396 30 Ministry of Industry, Science and Technology (Minprom) 326 12 60 8 Ministry of Natural Re- sources (MNR): 290 1 68 48 15 39 1 49 - Geological services; 193 1 68 29 15 8 1 37 - Forestry; 83 0 0 17 0 30 0 11 - Environmental protection service; 8 0 0 0 0 0 0 1 - Water service 6 0 0 2 0 1 0 0 State Construction and Utilities Committee (Gosstroy) 174 8 9 16 1 State Standards and Me- trology Committee (Gosstandard) 39 3 - - 3 1 - - Federal Weather and Envi- ronmental Monitoring Ser- vice (Rosgydromet) 6 - 2 - - - - - Note: methods of reorganization are designated by figures as follows:

I acquisition; II merging; III privatization and incorporation; IV assignment to constituent territories; V liquidation (including enterprises with negative net assets on which no decision has been made yet); VI reorganization into federal agencies; VII exclusion from the subordinated enterprises register; VIII maintained as a unitary state enterprise.

Methods of the ministries and agencies aimed at further reforming the unitary state enterprises in various industries. On the basis of the requirements of the Ordinance No. 1348, dated December 6, 1999, of the Government of the Russian Federation, throughout the period of 2000-2001 of sectoral management agencies had been involved in development of proposals and reorganization of the unitary state enterprises. The data specifying the quantitative part of the issue are presented in Table 6.

In addition, we can refer to privatization of 4-5 unitary state enterprises, reorganization of 3 enterprises by acquisition and 2 by merging, as scheduled by the Ministry of Communi RUSSIAN ECONOMY in trends and outlooks cation for 2002-2003. The Federal Land-Surveying and Cartography Service has scheduled to maintain the previous legal form of its organizations.

Table 6 shows that the work on development of reorganization plans is being in full pride. Only the Ministry of Natural Resources, the State Standards and Metrology Committee and the Federal Weather and Environmental Monitoring Service have a final view of their future.

In spite of different approaches at various agencies, it should be noted privatization unitary state enterprises by incorporation is accepted only for 15-20 percent of the total: 18.percent at the Ministry of Industry, 16.5 percent at the Ministry of Natural Recourses and percent at the State Construction and Utilities Committee. Assignment of the enterprises to constituent territories looks even more unlikely. The Ministry of Natural Resources is expected to use this option for about 5 percent of the enterprises, the State Standards and Metrology Committee for about 8 percent.

In general, one may state that the reorganization plans developed by the sectoral management agencies tend to maintain the existing organizational and legal form unchanged or changed (after acquisition or merging) for the majority of the enterprises.

This is often substantiated by the following:

considering an object or type of operation as an exclusive federal property;

ban on privatization;

manufacturing and service provision related to the national security, withdrawn from or restricted for business;

participation in federal programs and provision of unique technological processes;

registration with the Federal property Register.

To date, the procedures of reorganization of the unitary state enterprises by restructuring of their assets though separating various units with their further isolation and integration with educational institutions (to create scientific and educational establishment) are being developed or tested as pilot projects.

*** In summarising the work performed by the federal executive agencies over the last few years regarding improvement of management of unitary state enterprises, we may note a significant progress in terms of asset inventory and harmonisation of the charters of the enterprises and new requirements at the majority of the ministries and agencies. However, lack of data on a series of sectoral management agencies (Minatom, Ministry of Agriculture a State Fishing Committee) and on the majority of structural units of the Ministry of Transport suggest that these agencies are at the initial stage of implementation of a package of measures provided for by the Concepts of Public Property Management and Privatisation.

In addition we have to state that a token character of certification of managers along with poor advancement of practice of competition for vacancies and conclusion of contracts limit a positive effect of the measures provided for by the Concepts. A certain positive experience has been gained at the Ministry of Industry and the State Construction and Utilities Committee.

Lots of efforts will have to made to resolve the issues of allocating a part of the profit to the federal budget (so far, only the Ministry of Natural Recourses and the State Construction and Utilities Committee have been leading in this respect) and preparing sound proposals on fu INSTITUTE FOR THE ECONOMY IN TRNSITION http://www.iet.ru ture reorganisation of the unitary state enterprises. At present they are strictly conservative and tend to maintain previous organisational and legal form and receive budgetary financing for completion of construction in progress.

It should be taken into account that the foregoing analysis is far from being complete.

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