State corporations to pave way for new privatization round
Published: 14 November, 2009, 21:40
Edited: 16 November, 2009, 13:44
TAGS: Investment, Manufacturing, Economy, Finance
Experts have welcomed President Dmitry Medvedev’s plan to convert Russia’s state corporations into something more dynamic, with some saying they has been a costly mistake.
Seven state corporations set up in 2007, including Rosatom, Rosnano and Russian Technologies, were supposed to speed the development of strategic industries. But they were not obliged to publically report, and were also exempted from bankruptcy laws. This means analysts don’t know how they’ve performed financially or how much the experiment cost
Mikhail Vinogradov, Head of the Petersburg Political fund, also says their political support has waned.
“Now that the creation of State Corporations has been accomplished the political need for them has decreased. Their economic feasibility was in doubt from the very beginning.”
The State corporations were created in the final year of Vladimir Putin’s presidency, and they have attracted growing opposition from his successor, Dmitry Medvedev and others, according to Konstantin Simonov, Head of the National Energy Security Fund
“Mr Medvedev, several months ago gave an order to the general prosecutors office to organize a special investigation of the activities of these State corporations, and of course, we want to know what are the results of these investigations. We are waiting for the next steps, and but I think that that yes, we can say it was a mistake of the state to organize such a strange form of managing of state property.”
Rusnano, VneshEconomBank and Russian Technologies will be the first three state corporations turned into joint-stock companies next year.
They later will be privatized, and Konstantin Simonov says this round of privatization will need to avoid the mistakes of the 1990s, when Russian industries were snapped up by a handful of oligarchs.
“If it will be the second edition of the privatization of the 90s it will be one of the most serious mistakes. But I’m sure now it’s possible to make it more transparent and with more benefit for the state.”
Analysts say the state could go as far as privatizing 49% of shares in state corporations – letting foreigners have minority stakes.
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Part privitisation is a good thing, providing it has rules and the current owners are returned fair value, we don't want mass theft again. But rules and fair value are the key things here. In terms of rules, we definitely need the 49% max rule. This stops the enterprises becoming financial weapons against Russia, secondly the fair value concept is so important, meaning there is no fast buck, we will allow an investor to get a good return, if they join for the mid/long term. But we will make sure the initial price reflects a fair return for the state and ultimately the people to benefit from. However, we can even be more imaginative in the future, and split the residual 51% between direct state holding and a citizen's holding, held in a fund. This would augment state ownership, by direct citizen equity holding with some rules. This means each citizen would get a divident payout from the fund managing their citizens portfolio. Now every one has a slice of the cake, and that is what you need for a good party. But we have some rules again, the rules are simple for the citizen, they get the the citizens alloction at birth, which changes with more companies formed or failed, then they lose it on death, and of course, they are not transferable and have all voting rights vested in the state. Of course if you don't like the way the economy is going, and hence your investment, then you change the government.