The Role of the State in Russian Markets is Increasing

7 april 2016

The state sector continues to play a significant role in the Russian economy, the Analytical Center's experts note. And even though the share of state-owned companies in the total revenue of major corporations has seen sustained growth in recent years, it has now become clear that new sources of budget revenue need to be found. One such potential source of revenue could be the sale of state assets. You can read about this and other current economic issues in the Analytical Center’s new competition development bulletin titled State Participation in the Russian Economy: State Companies, Purchases, Privatization.

The bulletin looks at the role of the state in the economy from several vantage points: the share of state companies in the corporate sector is examined, the demand generated by the state through purchases and finally the privatization of state-owned assets is considered.

Experts believe that it still remains to be seen whether selling off state assets as the economy is undergoing a structural reform actually makes sense. First of all, there is the obvious problem of finding a strategic investor willing to take on the investment commitments expected of it, and, secondly, the main goal the state should be striving for when selling off its assets should be increasing the efficiency of state-assets management rather than simply making a quick buck for the treasury. With the low oil price and the ruble continuing to fall because of the western sanctions the value of many assets has more than halved. Thus, the potential losses the state will incur in the form of negative capital gains when selling its assets may be quite significant.

One of the ways the state participates in the economy is through state and municipal purchases under Federal Law 44-FZ and through the purchases of state-owned companies, including those made under Federal Law 223-FZ. In 2015, published notices under 44-FZ and 223-FZ reached almost RUB 30 trillion or 37% of Russia’s annual GDP for the year in the current prices. January 1, 2016 saw restrictions introduced on the capacity and prices of some types of goods purchased by federal state authorities.

Read the bulletin for important news. Thus the state plans to expand its support to small and medium sized businesses by getting companies partially owned by the state to buy innovative and high-tech companies from small businesses. On March 21, 2016, the Russian government issued resolution No 475-r, approving the list of legal entities that must purchase innovative and high-tech products from, among others, small and medium sized businesses.

Other news include reduction in the level of corruption in Russia in 2015 by 2 points on 2014. In addition, according to the Corruption Perception Index, Russia has improved its positions in the rating of innovations. The Bloomberg Innovation Index published in January 2016 puts Russia in the 12th place out of the 50 most innovative economies in the world (the year before Russia was rated 14th).

For other competition development bulletins see Publications.