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25 Dec, 2008 13:28

Government unveils strategic support list

Government unveils strategic support list

Tumbling production has prompted Russian authorities to offer assistance to troubled enterprises. Key energy and infrastructure companies, and firms with unique technologies will get priority access to state support.

The unfolding economic crisis may hit Russia's backbone – its strategic industries. As a part of its economic bailout plan, the Russian government has approved a list of strategic companies which need special attention. Energy, transportation, telecoms, metallurgy and a few other sectors will get support and financial aid if needed according to Economic Development Minister, Elvira Nabiullina.

“We approved a list of 250 firms. The government will work with these companies and will monitor their operations. If they need any financial support, the government will provide it. This may be in the form of credit guarantees, subsidized interest rates, or state orders for their products. In some cases, the government may even invest in a company's charter capital.”

Half a year ago Russia adopted a law on foreign investment in strategic sectors of the Russian economy. It was the last decree to be signed by the then President Vladimir Putin. At the time, state officials were thinking of how to protect sensitive sectors from excessive foreign involvement. Now, the changing global economic environment poses a new challenge according to Ernst & Young Analyst, Aleksandr Ivlev. How to make investors stay?

“The companies which invest in Russia would face pretty much the same issues as they would in other parts of the world. The consequences of the financial crisis are noticed by investors, but in many cases we can see that they are going through the process of changing their strategic investment plans, while keeping their investments in the country and opening new factories and plants.”

However, while some open new plants, others halt production or exit whole industries. Russia's fourth largest steelmaker NLMK has cut production volumes and the working week to four days. And the owner of one of the world's biggest aluminium makers, Rusal, is selling assets to repay the company’s debts. Top managers of strategic enterprises across Russia these days are busy developing anti-crisis measures. For many of them, the priority now is not so much to boost profits, but simply to maintain turnover and sufficient cash flow.