Privatizations to attract global interest
With the government outlining more of its privatization plans, including sales in stakes of government owned assets to the private sector, Business RT spoke with Roland Nash, Global Strategist at Renaissance Capital.
RT: If the privatization does take place will it change the economic landscape of Russia?
RN: “It is going to raise about 1.8 trillion roubles, that’s about $65 billion, over the next 5 years. That’s about 10% of expenditures per year, between now and then. So it’s a significant sum of money for the budget, but I think more important, as First deputy Prime Minister Shuvalov said, more important is that it send the signal that Russia wants to invite foreign investors into Russia and wants to continue the process of improving the economic environment.”
RT: The Finance Minister says he expects demand to outstrip supply. Do you think there will be enough people who will be interested in these stocks in these companies?
RN: “Everything has got a price. So really it depends on what price these assets are sold at, but right now, some of the assets, I think, are really quite attractive for foreign investors. Some of the banking stocks in Russia – Sberbank and VTB in particular have been doing very well. They’ve been modernizing their companies and growing a fully Russian business. So I think in some shares you will really see quite a lot of interest.”
RT: How do you expect this privatization to take place – are they going to place shares in the open market or just select buyers?
RN: “That’s a little bit unclear. I think in the back of the minds of some investors is the privatization process that took place in the 1990s, and this is an opportunity to get over that. These are open auctions, with plenty of demand, plenty of supply, then I think that that will send a signal that what happened then was only an aberration, and this is the way that things are going to move forward. So there are some question marks. I think there is a good chance it will and that is certainly what they have said so far.”
RT: Do you expect many private Russian citizens to get involved in this privatization? Bearing in mind what happened in the 1990s, do you expect many private citizens to become involved?
RN: “It wasn’t just the 90s, as well there was the privatization which took place just before the crisis, which I think sent quite a bad signal to the average Russian. I mean no fault of Russians but there was a big sell off in some of those stocks. So I think there will be some hesitation to get involved, but I think they are interesting stocks. I would hope that it’s a way of getting people more interested in privatization in Russia.”
RT: Which sectors do you think will be of interest to international investors?
RN: “I think perhaps, against popular view, the oil and gas sector in Russia has tended to underperform, particularly over the last few years, so I would expect the interest to actually be outside of the oil and gas sector, and into things like banking, transportation – a huge amount of money has to be invested into infrastructure – so if the right kind of environment is created, then I think the areas that will be attractive for foreign investors will actually be outside the oil and gas sector.”