Let’s Get Privatization Right This Time Around
In an opinion editorial for The Moscow Times, Anders Aslund, a senior fellow at the Peterson Institute for International Economics and former economic adviser to the Russian government, comments on privatization in Russia.
He recalls his role as a government adviser in 1992, and notes that as a result of the loans-for-shares privatization, the country's oil production surged by 50% from 1999 to 2004. Since 2004, Russia's oil production has leveled out because of the YUKOS confiscation and Gazprom's purchase of Sibneft. Aslund argues that Rosneft and Gazprom are blatant examples of expropriation and stagnation, whose only beneficiaries are their managers and perhaps high-ranked bureaucrats.
Although state corporations have expanded again, this has been accomplished through state raiding, not free-market mechanisms. Aslund comments that as usual with state companies, they have reduced economic efficiency. Russia's state corporations have again been exploited to enrich the corrupt and powerful insiders. As a result, the country's economic growth rate has fallen sharply.
He calls for a new large-scale privatization in Russia, with the aim not to reap state revenues, but to reduce the size and influence of state companies. Aslund argues that the best solution is a combination of two methods: initial public offerings of a majority of the shares and open auctions of individual companies or assets. He notes that while it is difficult to avoid some corruption in privatization in a country where corruption is so pervasive, an increase in private enterprise and a decrease in state enterprises can at least make a dent in the country's level of corruption.
Aslund concludes that privatization should break up monopolistic state corporations, oust their managers, enhance transparency and improve corporate management. State revenues remain secondary.