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10 Mar, 2008 07:50

State corporations: teaching old dogs new tricks

The creation of state corporations in key sectors has been central to the current administration’s industrial policy. The idea, however, has proved controversial, especially because the project has developed only slowly, and the financing and structure of

Government corporations look like old Soviet government companies, the only difference being that corporations now own the assets and the government simply appoints the management of the company.

This type of state corporations has been used by countries low in resources to boost hi-tech sectors with the aim of growing and diversifying national output.

The most popular Korean brands started as government corporations. Companies such as LG and Samsung have boosted the Korean economy, But the main impetus comes from competition among the corporations themselves.

Russia has so far set up six corporations over the last four years. Each corporation strictly specialises and monopolises its own sphere, such as shipbuilding or construction.

Analysts say that there are two types of government corporation in Russia. The first involves strategic natural resources. The second, industries in crisis lacking private investment. The government has been trying to revive these sectors using government-backed loans and official influence to get contracts.

Analysts also say that what the government is trying to do is to have these government corporations competing on the international market, not just on the domestic one.