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some results of the year The main trends and dynamics of the privatization process are to be discussed in this section. The specific feature of the year 2005 was the absence of any big privatization transactions. At the same time, the quantitative parameters of privatization established for the year 2006 have become better balanced, alongside growing attention toward liquidating the institution of federal state unitary enterprises (FSUE). From the point of view of budget revenue, the positive trends of 2001-2004 associated with an increased share of revenues generated by the use of public property (i.e., reproducible revenue) were still retaining their significance in 2005.

In the first 3-year Forecast Plan (or Program) of federal property privatization for the year 2004 and the main directions of federal property privatization until the year 2006 (approved by the RF Governments Regulation No 1165-r of 15 August 2003), the following algorithm of activity was already envisaged: in 2003 privatization of state-owned blocks of shares in the amount of up to 2 % of charter capital; in 2004 the States withdrawal from all the joint-stock societies where the States share is less than 25 %; in 2005 - the States withdrawal from all the joint-stock societies where the States share is between 25 % and 50%; in 2006 the States complete withdrawal from all the companies Krasnaia Zvezda. 2005. 29 December 2005 ( 242).

Rossiiskaia Gazeta. 19 January 2006 ( 8).

Vremia Novostei. 26 December 2005 ( 241).

Krasnaia Zvezda. 11 November 2005 ( 208).

where the States share is more than 50% and which do not belong to the strategic category; in 2008 the completion of privatization of federal property which is not used for the performance of RF government functions. Under this scenario, by late 2008 no more than 2,000 FSUEs and 500 various blocks of shares are to remain RF state property..

A certain adjustment was already made to the Forecast Plan (or Program) of federal property privatization for the year 2005 and the period until the year 200722: the prolongation of the federal property privatization prospects for the year 2007; the completion of the privatization of blocks of shares accounting for the less than 25% of the charter capital of open-end joint-stock societies in 2005; changing the sectoral structure of the federal property being privatized; the introduction of the notion of a prospective financial plan into the planning of federal property privatization.

The Forecast Plan (or Program) of federal property privatization for the year 2006 and the main directions of federal property privatization for the years 2006 - 2008 (approved by the RF Governments Regulation No 1306-r of 25 August 2005) are even more cautious in terms of establishing quantitative indices. In accordance with this document, the main goals of the government policy in the sphere of federal property privatization in 2006 - 2008 are as follows: the privatization federal property which is not used for the performance of the government functions (or the execution of powers) of the Russian Federation; the ensuring of a stage-by-stage reduction in the number of federal state unitary enterprises; acceleration of federal property privatization; the formation of federal budget revenue. In it is planned to offer for privatization those stakes whose size does not exceed 50 % of the charter capital of a given joint-stock society, with the exception of stakes in those joint-stock societies which are on the list of strategic entities, or those participating in the formation of integrated structures (within the implementation framework of the Federal Target Program (FTP) Reforming and development of the military-industrial complex (MIC) (the years 2002 2006), as well as those stakes whose sale will be effectuated depending on the needs of federal budget revenue in 2006 and in the period until 2008 in accordance with the prospective financial plan.

Nevertheless, the unrealistic nature of the established timelines remains obvious even after certain adjustments have been made, and the practical experience of 2004-2005 simply serves as an additional evidence thereto (Table 1). The quantitative privatization parameters established for the year became better balanced; however, just as in the previous years, certain poorly substantiated (both economically and organizationally) and purely administrative upward adjustments are quite probable. It can be assumed that in 2006, as well as in the medium-term perspective, the dynamics of the privatization process will be dominated by two mutually opposed trends.

For one thing, one of the tasks set for the years 2006 - 2008 was to create at least an illusion of privatization having been completed as a component of institutional reform the realization of federalowned blocks of shares and the transformation of the FSUE sector. The actual effect of the process both on the State and the involved enterprises in this context becomes secondary to the potential political dividends.

For another, the accelerating property-oriented expansion of the State - be it in the form of a general economic development strategy, a trivial property redistribution in favor of clans close to the government, or opposition of interested ministries objectively places the most significant or profitable assets among those that are still owned by the State outside the ongoing privatization process. As Minister of Economic Development and Trade G. O. Gref said in 2005, saleable enterprises are not given to us, to be included in the privatization plan. Always 150 reasons can be found to them to be left in State ownership. Only those that can be labeled as garbage are actually included in the privatization plan. The market is not interested in them, and so we resell enterprises 4 - 5 times. More and more enterprises are offered for sale, while less and less are sold And with time, the ratio of the enterprises offered for sale and those actually sold will be only decreasing.23 The complexity of the situation faced by the RF Ministry of Economic Development and Trade as the state agency responsible since 2004 for the implementation of the privatization program is obvious, however the actual situa The project for the years 2005-2007 was considered at the session of the RF Government on 29 July 2004, the Forecast Plan for the year 2005 was approved by Order of the RF Government No 1124-r of 26 August 2004.

Sliianiia i pogloshchenia (Mergers and takeovers), 2005, No, p. 8; Kommersant, 2005, 5 August.

tion is even more complex: the necessity of getting rid of the non- saleable ones is, nevertheless, very important, but at the same time, in view of the existing situation as regards raw materials and the corresponding budget revenue, it is difficult to find appropriate arguments in favor of the sale of new highly profitable assets. The problem becomes even more serious if one remembers that there is no clear understanding of how the accumulating revenue can be spent.

Table 1.

Main federal property objects and privatization program of 2000.

1999* 2000 2001 2002 2003 2004 2005 FSUEs, total number ** 13 786 11 200 9394 9846 9275 8820 8293 - Privatized FSUEs in one year:

- Forecasted - - - 1652 970 1374 1245 - Actual *** - 2 5 102 571 517 741 - Joint-stock societies with blocks of shares 3611 3524 4407 4 222 4 035 3905 3524 - owned by RF ** Including by share in charter capital - 100 % 382 61 90 99 124 273 413 - - 50-100 % 470 506 646 589 552 499 474 - - 25-50 % 1601 1211 1401 1 382 1308 1183 1093 - - less than 25 % 863 1746 2270 2 152 2051 1950 1544 - - golden share 580 - 750 958 640 284 259 - Federal-owned blocks of shares sold in one year:

- Forecasted - - - 1126 1965 1702 566 - Actual *** - 87 125 112 630 565 - * As of the end of each year. The year 1999 is taken as baseline, considering that The Concept of state property management and privatization in the Russian Federation (approved by the RF Governments Decree No 1024 of 9 September 1999).

** Without taking into account the special power (golden share). In the early 2000s, the total number of unitary enterprises was approximately 85,000, including state-owned approximately 20,000, municipal - approximately 65,000. In 1995 the State owned no less than 15,000 17,000 blocks of shares of various sizes, in 1999 approximately 3100 consolidated blocks of shares and 7,000 8,000 blocks of shares that had not yet been sold (kept on the balances of regional property funds). In 1995, a golden share was incorporated in 1,004 joint-stock societies.

*** It is impossible to correctly interpret the available actual annual data on the privatization of State-owned blocks of shares and FSUEs for the following reasons: 1) absence of regular releases of information by the RF State Property Committee (Rosimushchestvo) and the Russian Fund for Federal Property (RFFP); 2) as a rule, in one year 10 to 50 % of transactions are actually effectuated, and the blocks of shares that have not been sold are carried forward to the next year; 3) the counter-process of FSUEs corporatization and other methods for increasing the number of State-owned stakes; 4) reorganization in power engineering and communications, placing the property complexes of some FSUEs as contributions to the charter capitals of state-owned holdings, the formation of integrated structures in the MIC, the railway sector, etc. The privatization data concerning FSUEs are rather arbitrary, because the official privatization statistics incorporate also the number of those FSUEs in respect to which only the preliminary decision has been made, or those that have undergone only the stage of being transformed into a joint-stock society. Besides, the number of FSUEs as such may also grow (as a result of spin-offs, creation, etc.). In January 2005 the RF Ministry of Economic Development and Trade suggested that 42 FSUEs and 63 open-end joint-stock societies be added to the existing privatization plan for the year 2005, and in March 2005 547 FSUEs and 947 open-end joint-stock societies..

Source: data of the RF Ministry of Economic Development and Trade and the Federal Agency for Federal Property Management (FAFPM).

One of the typical trends, characteristic of the years 2004-2005, was the growing focus on the liquidation of the institution of FSUE, due both to external factors (the criticism aimed at the RF Ministry of Economic Development and Trade and the FAFPM, failures associated with the sales of residual blocks of shares), and to the sectors economic and financial insolvency (clearly demonstrated by the comparison of different types of revenues from the use of federal property). Nevertheless, among the 1245 FSUEs earmarked for reorganization in the year 2005, only 22 were reorganized into joint-stock societies during the first half-yesr and were actually ready for privatization. As shown by the years results, definite decisions were made in respect to 40 % FSUEs (741 enterprises, including the 39 sold as property complexes, and 702 turned into corporations); accordingly, the greater majority of these enterprises will begin the actual reorganization process in 2006, at best.

Despite the evident inconsistency of the actual practice of reforming in this sector with the declared targets (the minimum achievement the preservation of only about 1000 FSUEs, the maximum achievement total liquidation of this form by 2008), the gradual liquidation of this organizationallegal form represents an undoubtedly positive solution. This has been admitted by the Federal Agency for Federal Property Management (or Rosimushchestvo) as well: Practice has shown that the preservation of enterprises in the form of FSUEs means that their problems are thus being put in storage and further enhanced. During the period when the extremely inefficient form of a state enterprise by right of economic jurisdiction was in existence, many FSUEs, in fact, lost not only their potential for performing public functions, but their property and intellectual potential as well.The emphasis placed on reorganizing the FSUE sector had a direct impact on the outcomes of privatization. The year 2005 was marked by the absence of any big privatization transctions. Certainly, this can be explained by a variety of reasons, both objective and subjective in addition to the reorientation of departmental efforts toward the FSUE sector, there was the overall favorable situation with budget revenue, the possibility, stipulated in the existing law, of a flexible approach to the execution of transactions, the competition of interested parties (departmental as well as private) in respect to the most attractive objects, etc.

The initial list of biggest objects earmarked for privatization in 2005 incorporated the FSUE Rosspirtprom, with the sale of its shares (200 enterprises, 80 % of the Russian market), Domodedovo ailines (25% of shares), Novorossiisk and Tuapse cargo seaports (approximately 20 % of shares), Rosgosstrakh (25% + 1 share), etc. Nevertheless, the following biggest transaction did take place in 2005 the sale of the shares of the open-end joint-stock company Polief (100% of shares 3.billion roubles), the open-end joint-stock company Galogen (50.8 % - 830 million roubles), the open-end joint-stock company St. Petersburg Seaport (20 % - 0.8 billion roubles.), the open-end jointstock company Slava (37.6 % - 657 million roubles).

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