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Davos: privatization of Russian state-owned businesses key to funding deficit
Published: 29 January, 2010, 11:42
Edited: 03 February, 2010, 12:59
TAGS: Russia and the global economy, Budget, Big deal, Economy
Russia's leading bankers have been using the World Economic Forum in Davos to push for the privatization of their companies, with the heads of Sberbank and VTB being the most notable.
On Thursday, Sberbank and VTB said the state could cut its stake in Russia’s top two lenders to 50% plus one share as early as next year.
Vladimir Dmitriev, Chairman of Moscow’s main distributor of anti-crisis funds, Vnesheconombank, says it has also set the privatization process in motion, but it will take place later.
“We have presented our view on how VEB may be privatized, but the perspective for this development is long term rather than short term.”
The Russian government needs the money. It expects a budget deficit for several years to come, as it contends with a sluggish economy and falling revenues from commodities.
Like other countries, Russia’s delegation comes to Europe’s highest city straining under a mountain of debt, with big state corporations needed to be sold to avoid the deficit snowballing.
And as William George, Professor at Harvard Business School, says, Russia is not alone in looking for new sources of cash.
“I think, we are going to see much slower growth in the developed countries like the United States and Europe and Japan. Debt levels in the US are going to drag down US growth. We say they won’t but they will.”
A poll of Davos delegates found sovereign debt to be the top candidate as the cause of the next global crisis. But this is unlikely to diminish the appetite of cash hungry governments.
28.01.2010, 18:15
2 comments
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29.01.2010, 16:53
2 comments
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Privatising companies in Russia is a very short sighted thing to do if those companies are viable strategically important entities. It is trading short term benefit from a sale for long term security and long term income. Politicians often like to sell off assets to make it look like they are an efficient government spending less than they are earning. The long term effects are usually bad where those companies sold can be mismanaged by foreign owners who care more for profit than for the effect on local customers. Selling the goose that lays the golden eggs will certainly appeal to the west because the west likes to buy all the golden egg laying geese it can. It gets very angry when a country protects its own wealth (ask Iran).
Slow down! Now, when you have all paid back what the taxpayer put into you, then ---- only then --- can we talk sale. Why on earth would I, the taxpayer, sell the assets that, after a ton of my money, is now solvent? Why, you may be solvent, but the money we put in during crisis needs to be paid back FIRST with interest, and then after taxpayer makes some money on the risk, we can talk some sale. And, sure enough, who wants to sell assets that are making money? We are co-owners, remember! Down the road, taxpayer may need some money for other worthy causes. And then can sell off some of the shares. Just like any other private person or corporation would do! Why is it that these bankers still believe that THEIR money is CAPITAL, while OUR MONEY is GIFT to them? When everyone starts valuing capital same, public funds or other assets will be managed with more prudence.