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During the first three Quarters 1999, the retail goods turnover was steadily lower than over the respective period of 1998- the contraction in its volume fluctuated between 10 to 14% and was fairly even by single months of the period in question ( the similar turnover fall rate was also noted in the IVth Quarter 1998 compared with its respective period of 1997). In the IVth Quarter 1999, the volume of retail goods turnover basically matched the one registered in the IVth Quarter 1998, and it is most likely that its further fall would discontinue in 2000- according to some calculations, the quarterly volume of goods turnover in the Ist Quarter would make up a. Rb. 500 bln. The retail turnover macrostructure has experienced some change- the share of food stuffs grew from 47% in 1998 up to 48% in 1999. The assortment of goods in retail trade sector experienced some shrinkage, chiefly because of import articles, and the volume of sales of alcoholic drinks and beer has also changed: in 1999 vs. 1998 the sales of beer grew by 13%, vodka- by 2%, while the sales of champagne, brandy and wine showed a 3-7% fall. Hence, relative to 1997, the sales of wine and champagne fell by a. One- fourth, while the sales of beer and vodka basically remain the same.

In the overall volume of the fall in retail goods turnover, the major part fell on the contraction in the trade companies’ turnover – it fell by a. 10%, with the compression of the volume of the market’s turnover at just 1.7%.

I.Kolosnytsyn

Small banks in 1999

In 1999, the banking sector, Sberbank exclusive, reported a loss by the close of the business year. The ROA index by the aggregate balance data made up – 1.3%. Considering the ranging of banks by the amount of assets, both the ten largest and 50 largest banks became unprofitable. As concerns the other groups with a less amount of assets, the situation changes for the better, and it was the group of the small banks that are beyond the group of the first 500 banks which showed the highest results in terms of the ‘profit to assets index. Such a distribution on the profitability index by its quantity differs from the proportions noted prior to the crisis: at that time, the groups of the banks that followed the first 500 banks by the size of their assets showed losses by the results of the first half 1998, while the ROA index in the other groups was positive ( compare Fig.1 and 2).

What were the factors that allowed small banks a faster adjustment to the post- crisis conditions, except the advantage of a smaller amount of losses they took at the beginning of the crisis, due to liability denominated in foreign exchange towards non- residents and the obligations denominated in foreign exchange on the whole (if the less amount of problems can be called an advantage)& At the first glance, the macroeconomic situation that emerged in 1999. Was more favorable to the large banks than smaller ones. The large- and medium- size banks that survived the crisis have had the major part of their income resulted from revaluation of the capital denominated in foreign exchange. The improvement of foreign trade conditions generated a renewal in the banking operations related to services provided to exporters, which are concentrated with the biggest banks. Small banks’ level of assets and liabilities denominated in foreign exchange in the balance sheets is much lower compared with the average level ( a. 11% vs. 50%), and their possibility to receive income from the re-valuation of assets denominated in foreign exchange are rather limited, provide that, furthermore, over a half of them did not have such type of assets and liabilities. At the same time, the ROA index in this sub-group was even slightly higher than in the sub- group that carried out transactions in foreign exchange ( 3.9% vs. 3.3%).

The comparison of the share of interest assets characteristic of small banks with the respective average index does not show their advantageous position: with the average level of interest assets being 64% of assets, the small banks’ respective index was only 50%. As concerns the idle part of assets, the small banks’ immobilization elements ( real estate, equipment, and other kinds of assets that are not involved in financial operations are traditionally higher.

The small banks’ share of assets concentrated in the banking sector was approximately at the average level, however the structure of their placement differed notably: it is characteristic of small banks that the share of their capital on accounts with CBR is higher, and the share of their capital with other banks is lower ( see Fig.3).It was not typical for a small bank to have close relations with the real sector, either. The small banks’ share of loans extended to clients from the non- banking sectors is lower than the average level ( 30% of assets vs. 38%), but the share of promissory notes is higher than on average ( 15% vs. 6%). Hence, in 1999 the small banks spent less rather than earned more. The proportional weight of their liabilities in their balance sheets was less than the average one ( 62% vs. 83%), i.e. for the small bank the ratio of the banks’ own capital to assets was over two times more than in the whole banking sector on average ( 38% vs. 17%). At the same time, the share of deposits (in a broad sense- the customers’ settlement accounts inclusive) with the small banks is close to the average value ( 45 and 43.5%, respectively), while the share of balances on the settlement accounts has proved to be even bigger than the average index ( 32 vs. 26%). Hence, the small banks cannot complain about the lack of customers- legal entities, though they find it more difficult to attract legal entities’ free capital to be placed on forward deposits. Given that as of late- 1999, the average rate of legal entities’ deposits with the banks made up 12%, the respective index for the group of small banks was 3%.

Private individuals deposits with small banks made up a. 10% of their resources, while the average rate was 6%. As a result, with the small banks’ share of non- interest liabilities being fairly close to the average rate ( 38 vs. 40%), the small banks’ proportional weight of interest liabilities was lower than the average rate ( 24 and 43%, respectively- see. Fig.4), mostly at the expense of a small share of their liability towards other banks ( 5% vs. 21 on average).

However, the majority of small banks found their revenues in 1999 insufficient to reach the ECU 1mln. margin, and by the results of 1999, over 70% of the small banks face this problem. Therefore, it would be logical to consider their future rather within a broader context of the reform of the whole financial sector’s infrastructure than within the reform of the sole banking sector/

Fig.1

ROA depending on the amount of assets, as of July 1, 1998, Sberbank exclusive

  1. Banks ranged 1st through 10th
  2. Banks ranged 11th through 50th
  3. Banks ranged 51st through 100th
  4. Banks ranged 101st trough 200th
  5. Banks ranged 201st through 500th
  6. Banks ranged 501st through 1579th

Fig.2

ROA depending on the amount of assets, as of December 12, 1999, Sberbank exclusive

  1. Banks ranged 1st through 10th
  2. Banks ranged 11th through 50th
  3. Banks ranged 51st through 100th
  4. Banks ranged 101st trough 200th
  5. Banks ranged 201st through 500th
  6. Banks ranged 501st through 1579th

Fig.3

Structure of assets placed in the banking sector (Sberbank exclusive), as per cent to assets

Legend:

  1. capital with CBR
  2. capital with RF banks
  3. capital with banks- non- residents
  4. other assets placed with the banking sector, including cash and investments in banks’ securities

A-the average value by the banks operating as of late- 1999

B- by the group of banks not included in top- 500 by the size of their assets

Fig.4

Liability structure ( as per cent to assets)

Legend:

  1. non- interest liability
  2. interest liability

A - the average value by the banks operating as of late- 1999 (Sberbank exclusive_

B - by the group of banks not included in the top –500 by the size of their assets

L. Mikhailov, L. Sycheva, E. Timofeev

Privatization in Russia increasingly looses its urgency.

Privatization as the element of economic reform increasingly looses its urgency, both in terms of its role as an integral part of the transformation of the economic system ( which was actual for the first half the ‘90s) and from the viewpoint of the budgetary orientation of privatization sales (which, with a different level of success, was dominating over the second half the ‘90s). The process of the fall in the role of privatization in the transitional economy’s development manifested itself, particularly, in the growing criticism of its models (both the Russian model of mass privatization and the would –be ideal, from the Western point of view, Czech coupon system, once again are sharply criticized).

From the point of view of further systemic transformations, privatization has obviously lost its place in favor of issues related to corporate management and restructuring of privatized enterprises. From the viewpoint of completing budget revenue part ( since 1999- financing the budgetary deficit), it is the tasks of rational use and enhancement of the efficiency of managing the government property which become most important. Finally, the investment component of the privatization deals traditionally tends to zero. Furthermore, between 1999 to 2000, many deals with investment conditions, due to various reasons, have become subject to investigation regarding the return of the respective stock packages under the government ownership.

According to the RF Mingosimuschestvo, as of January 1, 2000, the sector of privatized enterprises comprises a. 130,000 enterprises ( 58.9% of the overall number of enterprises in RF as of the date of the beginning of privatization). At the same time, according to the results of the 1992- 1999 privatization, the government still controlled a significant number of enterprises’ stock ( 3,100 fixed with regard to the golden share and 7,000 to 8,000 yet non- sold), the problem of sales of which has become crucial for the 1995- 1999 privatization policy.

The slowdown of the privatization process is related to numerous objective and subjective factors. The most substantial factor is a lack of demand for the majority of the residual packages to be sold ( because of the absence of interest to such economic objects in principle, or due to formal and/or informal poles of corporate control already established at a concrete enterprise). The objective dominant of the ongoing privatization sales were motives of the establishment ( completion of consolidation) of control, which appeared typical for the post- privatization period in all the transitional economies. The current problems with land sites, incomplete objects, mobilization capacities, a great number of state- owned stock packages in place ( non- governed de facto) led to an additional slowdown of the privatization processes and the downfall in the prices for deals in progress.

It should be also noted that there are tow trends at the regional level that impose constraints on the privatization process: on the one hand, the non- fulfillment of the recent decisions on privatization in place, while on the other,- the regional authorities’ aspiration to establish their control over the maximal number of enterprises in the region, including those owned by the federal government.

The objective negative factor became the emergence of the 1997- 1998 financial crisis, which also battered the efficiency of the privatization deals that were crucial for the budget. Considering the drop in the oil companies’ attractiveness to foreign investors in the conditions of the unfavorable state of affairs in the international markets, the prospects for the privatization policy’s budgetary orientation were ( at least until mid- 1999) especially constrained.

The adoption of a new Law On privatization of the state- owned property and on fundamentals of the privatization of municipal property in RF ( # 123 FZ, signed by President on July 21, 1997, effective as of August 2, 1997) has not become a major incentive to accelerate privatization between 1998 through 1999. One of the factors that inhibits that is the State Duma’s decline of the draft Law On approval of the state program of privatization of government property in RF.

It is also significant that in 1999, the revenues generated form privatization (table 1) for the first time ever have not been included in the revenue part of the federal budget, but they were attributed to the sources of funding budgetary deficit. That allows avoidance of a rigid budgetary orientation in the course of the decision making with respect to deals and to a greater extent consider the real juncture.

These two considerations ( the approval of lists of enterprises ignoring the State Duma and the provision for a possibility of a financial maneuver) have led to the appearance of three lists of potential objects of sales at once in 1999. The first list comprised some largest AO=s ( LUKOIL, Gasprom, and Aeroflot), wile the second- blocks of promising enterprises, which altogether may greatly contribute to the budget ( a. 60 enterprises, including oil and metallurgy), and the third- a. 1,200 residual stock packages of medium- and small- size enterprises for sale by regional branches of the RFFI.

Table 1

Privatization between 1995 to 1999

1995

1996

1997

1998

1999

2000

Number of privatized enterprises

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