Driving privatization into a new era

With Russia planning a privatisation wave, and major global economies following suit, Business RT spoke with Maarten-Jan Bakkum from ING Investment Management about the drivers.

RT:Why are states divesting themselves of assets now?

MB:“Well we see a lot of privatization plans indeed coming though, but its mainly, I think, because of problems on the sovereign side that some countries are forcing to sell off state assets.”

RT:Privatisation is a key topic of the modernisation agenda in Russia. Do you think it's enough?

MB:“It’s a good point actually.I think that privatization is mention many times, they seem to be serious about, I think it is a good thing for Russia in a bid to improve corporate governance and maybe to attract more foreign direct investment.But we still have to see how much will be achieved and how much will be privatized, and what important companies will be privatized, and what important companies will be sold to the private sector.I think that is important.”

RT:How will large-scale privatisation help Russia become more open and efficient?

MB:“Well that’s the idea.I think that most people expect that if you do privatize it will lead to more foreign investment by definition, and then corporate governance can improve.But I must say that also the rules of the game have to be good, and that I think in Russia there is still some uncertainty about the role of the state in general in the private sector. So we still have to see, first what will be privatized, how much will be privatized, and then how will the state act after that.”

RT:Back in 80s Thatcher sold state assets to small private investors. These days large investment funds are taking a leading role. What do you make of this difference?

MB:“Well, it is a difference, it could mean that the buyers are less dedicated to the assets that they buy, they want to make money quicker than what was the case in earlier decades.But still the shift from the state sector to the private sector I think should be positive, should help to improve the governance of these companies.”

RT:Why are investors so obsessed with state assets going public?

MB:“Well, investors of course, they buy a stake in the company, so they want the company to do as well as possible, to enhance profitability, and everything that goes against a good environment for profitability, something that’s the predictability of policy has to be important, so the role of the state doesn’t normally help the outlook for profits in the private sector.So in that sense I think it makes sense that investors are focusing on this.In the end they are part of the private sector as well.”