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14 Nov, 2009 18:40

State corporations to pave way for new privatization round

Experts have welcomed President Dmitry Medvedev’s plan to convert Russia’s state corporations into something more dynamic, with some saying they has been a costly mistake.

Seven state corporations set up in 2007, including Rosatom, Rosnano and Russian Technologies, were supposed to speed the development of strategic industries. But they were not obliged to publically report, and were also exempted from bankruptcy laws. This means analysts don’t know how they’ve performed financially or how much the experiment cost

Mikhail Vinogradov, Head of the Petersburg Political fund, also says their political support has waned.

“Now that the creation of State Corporations has been accomplished the political need for them has decreased. Their economic feasibility was in doubt from the very beginning.”

The State corporations were created in the final year of Vladimir Putin’s presidency, and they have attracted growing opposition from his successor, Dmitry Medvedev and others, according to Konstantin Simonov, Head of the National Energy Security Fund

“Mr Medvedev, several months ago gave an order to the general prosecutors office to organize a special investigation of the activities of these State corporations, and of course, we want to know what are the results of these investigations. We are waiting for the next steps, and but I think that that yes, we can say it was a mistake of the state to organize such a strange form of managing of state property.”

Rusnano, VneshEconomBank and Russian Technologies will be the first three state corporations turned into joint-stock companies next year.

They later will be privatized, and Konstantin Simonov says this round of privatization will need to avoid the mistakes of the 1990s, when Russian industries were snapped up by a handful of oligarchs.

“If it will be the second edition of the privatization of the 90s it will be one of the most serious mistakes. But I’m sure now it’s possible to make it more transparent and with more benefit for the state.”

Analysts say the state could go as far as privatizing 49% of shares in state corporations – letting foreigners have minority stakes.