New “Big Privatization” begins in Russia: why is it needed and what will be privatized
Deputy Finance Minister Alexei Moiseev. Photo: Elena Afonina/TASS photo host agency
Deputy Finance Minister Alexei Moiseev stunned by the news: “Large privatization in Russia should take place, but you need to understand what to sell, you need to form a market.” True, this statement did not come as a surprise to everyone; in expert circles, this has already been discussed more than once.
Actually, why did they start talking about privatization? The main reason is Western sanctions. It’s no secret that they undermined the Russian economy. And although she managed to stay afloat, new models of interaction are needed – the revival of many industrial sectors, the setting up of new transport routes, logistics schemes, etc. The goals are global and they require funds.
WHY IS PRIVATIZATION NEEDED?
– The need for large-scale privatization is objective, – the associate professor of the Department of Political Economy of the Faculty of Economics of Moscow State University named after M.V. Lomonosov Maxim Chirkov. – Russia is moving to a different functioning of the economy. Our budget expenditures are growing faster than revenues. In addition, it is necessary to develop industries that we have not previously paid attention to. It is now impossible to borrow money abroad for these purposes, so national capital must be invested.
According to experts, there is investment capital in the country, and it needs investments. Russian business is ready to take on certain risks in the development of the most problematic sectors.
WILL IT BE LIKE THE 1990s?
Here, however, there is one nuance. The very word “privatization” acquired a negative connotation back in the 1990s. Many Russians still have vivid memories of the barbarous transfer of state enterprises into private hands after the collapse of the USSR.
– This will not be privatization on the model of the 90s with vouchers and loans-for-shares auctions, – expert Chirkov reassures. Nobody will make those mistakes. The purchase process will take place on a market basis – whoever pays the most will receive the asset. No dumping and bankruptcy to please buyers. The state itself will be primarily interested in selling assets at the highest market price, so the process itself will stretch for several years.
WHY NOT TO LEAVE AS IS?
Economists explain that large-scale privatization is needed not only to receive money for the budget, but also to improve the efficiency of state asset management. World experience shows that the state – in terms of making a profit, modernizing production, developing a development strategy – is not the best manager. It is impossible to support assets affected by sanctions only with state subsidies.
In addition, privatization should improve the situation in terms of increasing tax revenues from new private companies. The main thing is that transparent and understandable conditions should be developed for its implementation.
WHAT CAN BE SOLD AND WHAT CANNOT BE SOLD?
The share of the public sector in the economy is high – 40-50%. These figures were announced at the time at the Stolypin Institute for the Economics of Growth. Therefore, the state has something to sell.
– We have enough companies with partial state participation, – said Maxim Chirkov. – It is possible that they will sell part of the securities of some enterprises and increase their share on the stock exchange. Large privatization will affect many industries, excluding the defense industry.
Speaking more specifically, the state controls mainly backbone and infrastructure enterprises. Such as Vnesheconombank, Rostec, Gazprom, Aeroflot, RusHydro, Novatek, Bashneft, Rostelecom, Irkut Corporation, KAMAZ, and others. Probably, part of their stakes will be put up for sale.