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However, comparing the two lists proves that only about 50% of major real sector and trade companies were included into the List of Strategic Companies. 40% of the List are companies which cannot be called majors of Russian economy.

prises (the shares of which are owned by the respective holding). However, the biggest challenge is to analyze a number of managing companies included into the List. The best data available about such companies is list of assets they manage, but it is impossible to assess any consolidated reporting. Solnechniye Produkty Managing Company may be one example it controls several major fat-and-oil producers, cereal-handling elevators, etc., but has no consolidated reporting. This company having got material market share in the respective business areas (mayonnaise, vegetable oil, etc.) is not part, for example, of major enterprises rating Expert-400.

Data about major state-owned corporations are not always available for analysis. This mainly pertains to Rosatom Corporation, the business of which may be evaluated only through some of its subsidiaries (such as OJSC Atomenergoprom). But neither for Rosatom, nor for Rostekhnologiyi (formed in 2008 and still being in the process of set-up at the point of time the List was created) consolidated performance reports are available. At the same time, it is impossible to evaluate all separate enterprises members of Rostekhnologiyi, as there are several hundreds of them.

A significant number of state unitary enterprises included into the List are yet another challenge. They do not disclose their production output and financial performance data.

And finally, there is the double count issue due to the fact that the List comprised both the corporations headquarters and separate subsidiaries/affiliations.

Section Institutional Problems 100% Trade 90% Trade Media Transport 80% Communications Agriculture and Food Transport Processing 70% Transport Construction 60% Agriculture and Food Construction Processing Engineering 50% Agriculture and Food Processing Engineering 40% Construction Chemical Industry Materials Chemical Industry 30% Timber, Pulp and Metallurgy Metallurgy Paper 20% Engineering 10% Fuel and Energy Fuel and Energy Chemical Industry 0% Metallurgy Industry-based list of major Russian Industry-based list of Strategic Companies companies (as per Expert-400) Fig. 1. Sector Profile of Russian Majors According to Expert-400 and the List of Strategic Companies The biggest discrepancies were noticed in three sectors: engineering, construction and trade. A ten-fold gap in trade share between the two lists proves that trade companies were included into the List as exceptional cases and this business area was not recognized as a priority one for identifying the strategic component of the economy. If we exclude trade from both lists, then the majority of deviations will be found mainly in two sectors: construction is strongly underestimated in the List of Strategic Companies, and machine engineering companies are, on the contrary, occupy a much bigger place than they are given in the major companies Expert-400 list.

It is necessary to say that the fact of insufficient presentation of construction companies is caused by the fact that the List comprised only major companies engaged in residential development, while as Expert-400 list comprised mainly companies engaged in industrial (nonresidential) construction (like Transstroy, Mosremstroy, Stroytransgas, etc.).

But even coincidence of sector shares in both lists does not always mean that the companies are the same. Thus, in energy (and fuel) sector the lists are 80 similar, while as in agriculture and food processing only 40% similar.

RUSSIAN ECONOMY IN trends and outlooks 30% 26% 24% 25% Expert "List" 18% 20% 16% 15% 13% 13% 12% 11% 10% 10% 9% 9% 8% 10% 3%3% 5% 3% 2%2% 2% 2%2% 1% 0% Fig. 2. Sector-based Differences Between Expert-400 and the List of Strategic Companies If we analyze the lists by sectors in greater detail, it is obvious that the most critical deviation factor for both lists is the ownership, though this particular criterion was not specified as important one in the Methodology Guidelines. We need to emphasize that some companies were discriminated with regards to qualifying them as strategic ones based not only on the fact of governments interest, but mostly on the fact of foreign capital participation.

Such discretion in including companies with foreign capital into the List may be illustrated by an example in automotive industry: such foreign companies operating in Russia as FordMotors, Volks Wagen, GM-Auto and others (all of them members of Expert-400 list).

The same approach is quite visible in other sectors. Thus, in food processing not only foreign brewing companies were not included into the List, but such major food producers as Nestle-Russia, Krafts-Food and others.

Discrimination based on the fact of foreign capital participation is absolutely obvious, while as preference in favor of companies with government participation versus private capital is not that transparent.

Specific weight of unitary enterprises and government corporations included into the List is ca. 12%, which exceeds significantly their share in the economy (as per Russian Statistics Service, the share of government and combined ownership is less than 8% of the total number of organizations) or their share in the major companies list. This may be explained, first of all, by the fact that many infrastructure companies were included into the List, and most of them are federal state unitary enterprises (FGUPs). Also 20 design bureaus and research institutes in the area of shipbuilding, aviation, rocket and missile engineering and in energy sphere were included into the List.

Another 18% of the List covers joint-stock companies with dominating or blocking government stake. Thus, by number of assets the share of the public sector in the List is a bit less than 1/3. As for the annual revenue, the share of state-owned companies or companies with material government stake is significantly higher (ca. 50%), but this is explained by the Paper Fuel & Pulp & Energy Timber Industry Chemical Metallurgy and Food Agriculture Materials Processing Engineering Construction Section Institutional Problems fact that the List comprises such giants as Gazprom, Rosneft and OJSC RZhD holding the first, the third and the fourth positions in the list of major Russian companies.

Representation of particular sectors was evidently not a criterion for including companies into the List. In other case individual thresholds would need to be established for different sectors and this was done only for agriculture and food processing. That is why the extent of coverage of different sectors differs materially depending on the sector profile: if majors and super-majors are characteristic of a sector, this sector is broadly represented in the List;

for sectors where majors are not typical (e.g., light industry) the coverage is much smaller.

It is difficult to evaluate the coverage just by the list of productive sites, because significant number of companies, as we have emphasized earlier, have got those in various areas of business, while as data on revenues distribution between different positions within the AllRussian Classifier of Types of Economic Activity are rarely available.

We can use expert method to evaluate the share of production in individual aggregated areas of business in terms of its distribution between companies included into the List. Thus, in power generation, there is maximum coverage, up to 90%. For oil and gas industry the coverage is also pretty significant 80%. Some of relatively small industries are also strongly represented in the List, such as pharmaceutical industry (10 producers and 1 distribution chain were included, while as only one producer and three distribution chains from pharmaceuticals were part of Expert-400). Other well-covered sectors are shipbuilding industry, aviation, missile and rocket engineering, defense industry. Chemical industry and metallurgy have over 50% coverage.

Least coverage is found in construction materials (only a few major cement producers were included), construction, food processing and light industry.

Thus, the List of Strategic Companies is not a comprehensive totality of major companies (even though the correlation is pretty close). Neither is it the reflection of the sector-based profile of Russian economy. Nevertheless, it would be wrong to say that the List has no scientific basis at all and is a result of mere lobbying by companies and organizations.

The analysis of this document allows for clear definition of the priorities, which were not explicitly worded, but still underpinned the approach for selecting companies to be included into the List. In our opinion, such priorities were infrastructure (mainly, energy and transport), export, national security with regards to hi-tech defense enterprises, and agriculture.

In total, two thirds of the List is dedicated to such companies1.

Such focus on infrastructure companies is to a certain extent justified, because termination or abrupt reduction of their operations at key infrastructure sites could indeed have a very strong negative impact on citizens, on national security and on businesses in other sectors of the economy. Special attention to major exporters may also be explained in the situation when drastic external demand decline and world markets prices slide with regards to Russian exported products became one of the major implications of the global crisis.

Multidiscipline companies were qualified as parts of such priority sectors based on the expert opinion taking into account their core business RUSSIAN ECONOMY IN trends and outlooks Fig. 3. Distribution of the List of Entities by Priority Business Areas The following general observations may be made on the structure and purposes of the List of Strategic Companies:

1. In general the List is more than 50% consistent with the Expert-400 major companies list. This is especially true for such sectors, as fuel and energy, metallurgy and chemical industry.

The exceptions are mainly associated with discriminating certain companies with foreign capital participation, as well as with underestimating certain sectors of the economy: service sector, trade and construction. The so-called additions to the List (meaning companies which are not in the Expert-400 major companies list, but were included into the List of Strategic Companies) pertain mostly to engineering (because many manufacturing and R&D centers of defense industry were included), pharmaceuticals and transport (by way of including major airports and sea ports).

Despite the discrepancies between the List of Strategic Companies and Expert-400 list of major companies, the cumulative dynamics and key financial indicators of the List reflect the totality of major Russian companies.

2. The List of Strategic Companies is mostly focused on infrastructure (primarily energy and transport), export and defense. Due to these industries being more or less autonomous (in the sense of their challenges and threats being very different and relating to different spheres) the List appears to be pretty eclectic.

3. If we were to evaluate the instrumentality of the List from the point of view of the objectives declared at the stage of its formation, our opinion would be: it did not provide for fully achieving any of them. In particular, the List has substantial deficiencies from the point of view of on-line monitoring of key economic entities: first of all, it does not include major manufacturers in quite some sectors and industries; secondly, in many cases it includes both holding companies headquarters and companies being parts of such holdings. At the same time, the List comprises many companies which can be qualified as strategically important, but have no impact on the overall economic situation (and even on the situation in a particular sector).

Section Institutional Problems The List also raises certain doubts with regards of preventing opportunistic behavior by businesses owners and management and implementation of decisions with seriously negative social implications and/or damage to national economic security, because on one hand the List is too extensive to provide for on-line monitoring of management decisions for all the selected companies, and on the other hand it includes significant number of unitary enterprises and corporations fully owned by the state, in which the owner should control such decision-making within their standard internal governance procedures.

The List is not very instrumental for reviewing the issues of government support to major companies with the purpose of preventing catastrophic scenarios in unfavorable circumstances, because it does not include quite a few major companies. Besides, it is unclear, what scenarios should be regarded as catastrophic. The decision-making practices during the time of the crisis build-up, social catastrophes may occur not only at major companies, but at medium-sized ones, if they are city backbones.

4. The key problem with forming the List of Strategic Companies, in our opinion, was not only the diluted criteria for selecting companies, but even more lack of clear understanding of why this List was needed. It is evidently redundant to be viewed as the list of candidates for receiving government support because it comprises too many entities, most of which have such complicated structure that detailed review of the issues associated with one of such entities (e.g., Gazprom or Rostekhnologiyi) is too difficult for Work Groups and industry commissions.

Publication of the List reflected, most likely, the political declaration of the government at the critical stage of the crisis and in the environment of extremely vague outlook for 2009 development, stating that the government would not allow for bankruptcy of the key strategic companies. This declaration was aimed at reassurance of creditors and suppliers to avoid panic in case of the risk of major business entities insolvency. This objective was achieved to a certain extent.

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