For several months, disputes have not subsided in Russia: is it necessary to sell state assets, and why the leaders of the Ministry of Finance and the Central Bank are actively pushing the country towards another large-scale privatization ladder. A chance for development or another “scam”? Let’s try to understand.
Andrey Kostin, head of VTB, was the first to announce the possibility of a new round of privatization in Russia. The essence of Kostin’s thinking is simple: the country needs additional sources of income. In order to inject the necessary funds into the economy, it is necessary to carry out privatization, to increase the public debt and to distribute the budgetary expenditure according to the primary needs of the country.
According to Kostin, the priority areas for spending the money from privatization should be the development of new transport corridors with infrastructure, the launch of new industries using import-substituting technologies, as well as the development of military industry. . The most likely targets for privatization were immediately identified: the shares of Transneft, Russian Railways, Russian Post, the non-core assets of Rostec and Rosatom, and at the same time the cognac factories.
Will it be like the 90s?
Naturally, the privatization proposal became a trigger for the irritation of the people, who remember the bonds, loan-for-stock auctions and other trappings of the squandering of state assets in the 1990s.
The idea was greeted with hostility by many economists. For example, analyst Mikhail Khazin in his interview described the circle of interests in the new privatization: “2-3 million people in our country who know for sure that this is the only way to make money. They don’t know how to work, they don’t know how to manage the economy of the state, they don’t know how to be responsible for the problems of the state. The only thing they know how to do is privatize and get bribes.
Even among experts, this opinion is not unique, but among ordinary people the term “privatization” is firmly entrenched next to “theft”.
At the recent St. Petersburg Economic Forum, proponents of the new concept of privatization did their best to convince the public, and sometimes, perhaps even themselves, that the transfer of state ownership to business is good for the country.
Central Bank head Elvira Nabiullina and presidential aide Maxim Oreshkin, as expected, supported Kostin’s idea. According to Nabiullina, there are properties in the country that can be privatized without prejudice to strategic interests, and Maxim Oreshkin made it clear that he was in favor of it. Transfer only the part of state assets that is used inefficiently and not just like that, but for the benefit of the budget.
At first glance, such a proposal seems logical, but questions remain: who will or will not evaluate the effective use of this or that state asset? What is considered good business for the state? After all, if there is an unprofitable production, even a free return to private hands can be justified by a “benefit for the budget”.
Other experts, for example Andrei Loboda, director of communications of the Russian mining company BitRiver, note that Russian assets are now undervalued due to the situation in which the country finds itself, and therefore the effect of the sale won’t be that important. The haste with which these ideas are promoted to the masses only leads to more distrust of Privatization 2.0.
Or maybe it’s not that bad?
It’s hard to argue with the logic of the proponents of privatization. Indeed, public companies should, in theory, be less efficient than private companies that react more quickly to market changes, adapt to customer needs, and their owners are personally interested and motivated to develop their business.
On the other hand, by selling a 20% stake in the same Transneft, the state will not lose control of the asset, but will be able to attract the necessary funds now into the business economy. Even taking into account the wary attitude of investors and, perhaps, not the highest price of assets, the revenues of the budget will clearly exceed those of the privatization of state property in the last 10 years.
There is another reason why the authorities have decided to talk about asset sales right now. After the Russian economy was subjected to numerous sanctions, it became much more difficult to withdraw funds abroad. These are not a few thousand dollars, but much larger sums that were settled with European and American promoters or shipbuilding companies involved in the creation of superyachts.
Russian companies have money, but nowhere to invest it. IPOs of major Russian companies could provide a boost to potential wealthy investors. According to some reports, in recent years about 20 million private investors have appeared in Russia, trading shares on the Moscow Stock Exchange. At the same time, the state’s share in promising sectors for privatization exceeds 60%. An ideal alignment to inject sufficient funds into the economy for a qualitative leap.
Smooth on paper
So what can ordinary Russians expect from the new privatization plans? Greetings from the not so distant 90s or booming economy? The truth is probably always somewhere in the middle. Of course, some companies, having received an additional influx of money, will be able to upgrade their equipment, launch new production, expand, or at least continue working without slowing down, which is sometimes a feat in itself. Most likely, such a fate awaits companies where the majority stake will remain state-owned, and investors will closely monitor the effectiveness of management.
The situation is more complicated with illiquid state assets, which the authorities will almost certainly try to transfer into reliable hands. Big companies are not interested in such assets, and private investors and small businesses are extremely unable to bring these dead companies to life. They are likely to be “metal cut”.
One way or another, the process of preparing for privatization 2.0 has begun. It is certainly not worth expecting a large-scale sale of public assets this year. Preparing assets is a long process. Compiling a list of objects, evaluating them is a task that can be heroically accomplished for a year or two. Most likely, the government plans to leave big treats as the icing on a cake. In the meantime, the state is ready to part with small illiquid objects. The Ministry of Finance intends to launch a marketplace for the sale of these assets before the end of the year. They promise that anyone can become an investor. It remains only to answer the question: is it possible to make money on this?
Author: Mikhail Platonov Photos used: BalashMirzabey/freepik.com
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