At the same time, it is necessary to note that sectoral executive agencies under the aegis of the Ministry of Property Relations conducted significant work enforcing innovations set forth by the Concept in through 2002.
First, the number of FSUEs was considerably diminished. In slightly more than two years (in the autumn of 1999 through early 2002) it has diminished by about one third (from 13786 entities to 9394 entities).
Although in 2002 the number of FSUEs increased by about 5 %, it remained below 10 thousand entities, i.e.
was at the level similar to that registered in the autumn of 2001.
As Table 1 demonstrates, the structure of FSUEs is heterogeneous, there exist four sectors (agriculture and forestry, science and scientific services, transportation and communications, construction); the share of each sector makes not less than 10 % of all enterprises. While the number of FSUEs has stabilized across the majority of sectors, their number in agriculture, forestry, maintenance supply, and marketing has increased considerably during the year.
There are elaborated projects aimed at the merger and enlargement of unitary enterprises, their integration in holding structure in a number of industries (nuclear energy, rail transport, defense and alcohol industries, operation support of air and sea transport, postal service).
Second, there was carried out the adjustment of charters and contracts with managers of FSUEs to the new requirements introduced in 1999 through 2000. As on October 1, 2002, the RF Ministry of Property Relations approved 2843 charters and 1067 contracts with managers of FSUEs, and certified 2246 managers of FSUEs. Comparing these data with the number of FSUEs as on August 1, 2002 (9810 entities) it may be asserted that there were amended charters of about 29 % of enterprises, made contracts with managers of about 11 % of enterprises, and about 23 % of all directors were certified.
Third, the work on the financial aspect of relations between FSUEs and the budgetary system has brought certain results. In 2001, the RF Ministry of Property Relations registered revenues from FSUEs (Rub. 209.6, budgetary revenues from the use of federal property) for the first time since the early 1990s. The law on the federal budget for 2002 for the first time included the part of FSUE profits remaining after the deduction of taxes, mandatory payments, and charges as a non-tax budget revenue setting it at Rub. 500 million.
According to the preliminary data for year 2002, the RF Ministry of Property Relations has transferred to the budget about Rub. 900 million as FSUE profits. Therefore, it may be noted that the budgetary target was exceeded 1.8 times. The number of FSUEs transferring their profits to the budget increased 6.2 times (entities as compared with 131 entities in 2001), what was more than the number of joint stock companies, which transferred to the budget the dividends relating to the state owned interest in these companies (entities). Unfortunately, no such progress was observed as concerns the absolute amount of budgetary nontax revenues from these sources. The law on the federal budget for year 2003 sets forth the amount of dividends on the state owned interest in joint stock companies at Rub. 10.5 billion, and the amount of revenues from FSUE profits at Rub. 2.5 billion. In 2001 and 2002, the share of these two sources in the total revenues of the federal budget from privatization and utilization of federally owned property was below 1 %.
The latest initiatives of the RF Ministry of Property Relations concerning the management of the public sector relate to the classification of the state owned property according to such categories as property exclusively in federal ownership, property owned by RF subjects and municipalities since such ownership is necessary in order to execute their public functions, what means that property shall be either owned by the respective public entity, or be operatively managed by public enterprises or organizations and therefore be excluded from the civil law relations. It is permitted to transfer some of federally owned property necessary for the execution of state functions on terms of concession or as an investment in authorized capitals of joint stock companies (on condition that not less than 50 % plus 1 share in such a joint stock company shall be in the federal ownership) and create specialized state not-for-profit organizations on the base of property in the federal ownership.
Other properties shall be recognized as properties deprived of such a status and shall be used for commercial purposes via sales and transfer to trust management of JSC shares not classified as necessary to ensure the state strategic interests, conversion of unitary enterprises in joint stock companies, lease or sale of respective unmovable property, or its inclusion in authorized capitals of newly created joint stock companies.
The practical implementation of this rather radical scenario may encounter a number of obstacles: the difficulties related to the elaboration of objective criteria defining property as necessary for the execution of state functions, specifics of FSUEs economic operations, low liquidity of FSUEs assets, difficulties related to the realization of state property rights in the framework of other organizational and legal forms (open joint stock company, holding structures, public enterprise).
The real progress of privatization may present yet another obstacle. In 4 years (1998 through 2001), when the law on privatization (1997) was in force, there were privatized 663 enterprises (objects) in federal ownership, including sales of unmovable property and land plots. Since the enactment of the new privatization law (No. 178 FZ of December 21, 2001), the government made more ambitious privatization plans as concerns FSUEs (it is planned to privatize 152 entities in 2002 and 435 entities in 2003). The progress of privatization will significantly depend on the efficiency of the new privatization tool kit (sales via public tenders, offers without price announcement, transfer of shares in joint stock companies in trust management, etc.), which were stipulated by the new law.
G. Malginov Russia: Introduction of Meat Import Quotas At the end of January 2003 the government introduced quotas on import of basic meat products: beef, pork and poultry meat. Three principal questions arise in this connection: what is the rationale for their introduction, how will they affect domestic producers and consumers and what will be their impact on Russia’s position on the world markets.
Let’s examine the mechanisms of setting quotas. 90% of pork and beef import quotas are distributed between countries-suppliers on the basis of previous supplies (proportionate to the average imports in 20002002) while the remaining 10% are sold at quota auctions. The import duties on supply of these commodities to Russia in excess of the quota will be higher. The import of poultry meat is rigidly restricted to the quota volume that is fully distributed between countries-suppliers proportionate to previous imports.
Quotas are introduced evading earlier government decisions that envisaged a preliminary (180 days in advance) informing of market operators about an alteration of customs regime. Additionally, the meat products import is from now on a subject to licensing by the Ministry of Economic Development.
The size of quotas for 2003 is as follows:
- beef – 315 thousand tons; customs duties on import within the quota equal 15% but not less than 0.15 EUR per kilogram (selected items – 0.2 EUR per kilogram), on import in excess of the quota – 60% but not less than 0.6 EUR per kilogram;
- pork – 337.5 thousand tons; customs duties on import within the quota equal 25% but not less than 0.25 EUR per kilogram (selected items – 0.2 EUR per kilogram), on import in excess of the quota – 80% but not less than 1.06 EUR per kilogram;
- poultry meat – 1050 thousand tons.
The introduction of meat quotas has been discussed in agrarian circles for several years – since domestic production started to grow. In recent years this growth accelerated (Picture 1) but imports expanded as well (the rates of growth of poultry imports are even above those of domestic production) (Picture 2). Still, there is no apparent trend towards higher ratio of imports to domestic production except poultry meat (Picture 3).
Picture 1. Gross meat output in Russia 1998 1999 2000 beef pork poultry Source: RF State Customs Committee.
Picture 2. Meat imports to Russia 1998 1999 2000 beef pork poultry Source: RF State Committee for Statistics and RF State Customs Committee.
Picture 3. Imports as percent of domestic production The data on meat imports in 2002 is not yet available, that’s why we compare the set quotas with the average import volumes in 2000-2001 (Picture 4). It’s easy to notice that the pork quota is quite liberal – it’s above the average 2000-2001 indicators, the beef quota exceeds 80% of the previous import volumes while the poultry quota is most restrictive – about 73%.
beef pork poultry Source: calculated using provisions of the Government Regulation and the data of RF State Committee for Statistics.
Picture 4. Quotas as percent of average imports in 2000-Taking into account all these facts let’s try to answer the named above questions.
First, what is the rationale for introducing quotas Formally, the respective normative acts declare the goal of protecting domestic producers. However, in 2002 the growth rates in all the meat sub-sectors concerned exceeded the average for 4 years (beginning from 1998) that were not the worst ones. Another matter is that this growth led to the overproduction, lower prices received by producers and the corresponding deterioration of their financial performance in 2002. Still, last year almost all agricultural products were overproduced (e.g. the overproduction problem encountered by milk producers was no easier). In other words, the need to protect just meat producers and just in 2003 is poorly motivated. Besides, protectionist measures of this kind always result in lowering of the sector’s competitiveness – one moment quotas are lifted and then domestic producers are left unprotected from foreign expansion, unready for stiff competition.
Quotas could have had sense if they were introduced not in general but against countries dumping their meat on the Russian market. Then it would have been an economically justified measure. In particular, European beef and pork are apparently dumped on the Russian market. The customs statistics evidence that in 9 months 2002 wholesale prices for beef in the EU were 4.5 fold higher, those for pork – 2.5 fold higher than the average import prices for these products at the moment of crossing the Russia’s customs border.
According to the European law such cases should be regarded as an outright dumping affecting interests of Russian producers. It should be noted that the beef and pork dumping has a direct impact on domestic producers of poultry: the share of poultry meat in the total meat consumption in Russia is far below the US and the European averages since the subsidized import of beef and pork makes these products more affordable than in other countries.
Anti-dumping measures against the European meat could have supported domestic producers as well as played their role in the dialogue with the EU concerning quotas introduced against Russian grain beginning from January 1, 2003. Grain quotas severely restrict Russian export to Europe and thus affect Russian grain producers. Introduction of meat quotas against the EU could have transferred the dialogue on grain quotas from the domain of EU-Russia international relations to the domain of EU-EU internal relations: the share of groups interested in the export of meat to Russia is supposedly higher than that of groups lobbying restriction of grain imports from Russia, and just a mere threat to introduce meat quotas could have fostered alleviation of grain restraints against our country. That was exactly the task of import quotas initially declared by Minister G.Greff. However, Vice-Premier A.Gordeev several times disavowed this statement. Besides, the very mechanism of setting quotas (application against all instead of selected countries, distribution in proportion to previous supplies) evidences that they are not supposed to fulfill this task.
There can also be a fiscal interest in introducing quotas – import constraints are the only agricultural support measure backed by both the Ministry of Agriculture and the Ministry of Finance. It’s quite possible that in this respect meat quotas are a substitute for abolished sugar auctions.
The second arising question is the efficiency of quotas for supporting domestic producers. As it has already been mentioned, the size of quotas is rather large. Besides, they are not to be applied against the CIS countries the process of uniting which in the free trade zone has recently accelerated. This means that the effect of constraints on import from the non-CIS countries can be well offset by gray supplies through the CIS countries. According to our estimates, domestic producers won’t feel the difference from the introduced quotas. On the other hand, the meat market operators got into a difficult situation – they were given no time for adjusting to the new customs regime. Many meat processing plants use imported raw meat and for them such a decision can be damaging.
Consumers are also unlikely to suffer from higher prices due to the large size of quotas. A price rise could be triggered by quota auctions (as it was the case with sugar auctions) but only 10% of quotas will be sold thereat and so the effect won’t be sensible. Still, an upspring of retail prices is quite possible since the introduction of quotas can serve a kind of justification for raising prices. But their growth won’t be long-term due to the consumer demand constraints.
The third aspect of introducing quotas is their assessment by the world community. Certainly, the hasty alteration of customs regime in this case cannot be justified by an outburst of imports as stipulated in the WTO Uruguay Round Agricultural Agreement (1994). Such a rush only supports the Russia’s reputation as a country with unpredictable agricultural policies.
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