State privatization, anyone?
Posted by democratist on October 23, 2010
October 23rd 2010,
Just over a month ago, (“State liberalism, Anyone?” – 15th September) Democratist noted the growing trend of “strategic partnerships” between Russian “State Corporations” (“private” company structures, which nonetheless remain majority state-owned) with major Western companies in the form of joint ventures.
We suggested that this new approach did not mark a shift towards liberalism, but rather represented a way of encouraging FDI whilst skirting around the need for real economic reform; an additional coating to the veneer of “modernization” that looks likely to quickly peel away in the event that prices for raw materials recover.
With this in mind, we have been casting a rather critical eye at some of the details of Moscow’s much-lauded $59 billion privatization program, as presented last Thursday.
Curiously, for a “privatization” programme, there seems very little emphasis (for the moment at least) on actually making very many of the companies offered for sale especially private.
Instead, in almost all cases, only minority stakes are to be sold, insuring that these businesses remain firmly in state hands. As UralSib chief strategist Chris Weafer told the Wall Street Journal on 22nd October, “I don’t see the government actually giving up control of the most important companies, they’re really just talking about relinquishing excess equity. They’re getting rid of the bits that they don’t want.”
For the moment then, it would appear that these sales have far less to do with privatization, than they do with raising money to balance Russia’s budget, suggesting that talk of “liberalization” remains essentially rhetorical.
However, as we said a few days ago, Democratist suspects that western demand for Russian equity is likely to be muted, given competition from other emerging markets.
It will be interesting to see just how far Moscow will be prepared to go to boost its reformist credentials over the next couple of years, in the event of ongoing low hydrocarbon prices/investor apathy.