By Andrei Skvarsky.
The Kremlin has poured cold water over a forceful proposal by ex-finance minister Alexei Kudrin, today head of Russia’s state audit agency, for a scale of privatisation that would end the current state domination of Russia’s economy.
In an article in a business magazine, Kudrin cites an estimate by Moscow’s state-controlled Institute of Applied Economic Research that the proportion of state-owned assets in gross domestic product grew to 53.1 per cent by 2019 from 31.2 per cent in 2000.
Only four of Russia’s top ten companies are privately owned while none of the top ten U.S. companies has any public capital in it, he says.
The state’s clout over the economy interferes with market laws, slowing down the country’s economic development, he argues.
It hinders competition because of privileges given to state-owned companies, he says.
The majority of such companies are “less flexible in terms of governance: they are heavily dependent on the bureaucratic machine – their directors often include government officials” some of whom “represent state interests simultaneously in 20 or more companies”.
Still another common problem of the public sector is a “lack of business transparency”, according to Kudrin.
This involves “growing hidden debts, which would have to be repaid by the state, or more precisely by the taxpayers”, Kudrin says. “Experts say that ‘surprises’ of this kind sometimes cost more than 10 per cent of GDP.”
Besides everything else, privatisation would be a source of income for the state, according to Kudrin, who is widely credited with a policy during his ministerial tenure that enabled Russia to get through the world financial crisis of 2007-2008 with comparatively small losses.
The state would be able to fund strategic projects by selling some of its stakes in companies rather than by raising taxes, Kudrin says in his article, entitled “The Economy Needs a Chance to Reach Adulthood” and published in Russian magazine KO.
Business television channel RBC, Interfax news agency and other Russian media outlets published summaries of the article.
The Kremlin reacted to Kudrin’s points by ruling out wide-scale privatisation any time soon and by playing down the very idea of it.
“You know that privatisation as a process is important but it shouldn’t be an end in itself,” RBC quoted President Vladimir Putin’s spokesman, Dmitry Peskov, as saying.
“And, moreover, we all remember that in our recent history … we’ve repeatedly had situations where whole industries were on the verge of disappearance as a result of privatisation and it cost a tremendous amount of effort to re-consolidate them in the hands of the state.”
Peskov was referring to a much-criticised privatisation campaign in the early 1990s.
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