Russia to net 17 billion rubles from privatisation deals

Russia to net 17 billion rubles from privatisation deals

Russian government has adopted the program on privatization of state-owned assets for 2017-2019, Deputy Prime Minister Dmitry Kozak said.

The government meeting headed by Prime Minister Dmitry Medvedev focused on the forecast plan and the main areas of federal property privatization for 2017-2019.

Related ministries and departments have been involved in coordination of the plan in the past months. In end-January, Economic Development Minister Maksim Oreshkin said that the Ministry had submitted its proposals on the plan of state assets privatization for 2017-2019. 

Earlier Oreshkin said that Sovcomflot topped the list of assets to be privatized this year. Also, the plan implies the privatization of Russia’s second-largest lender, an 8% stake in diamond producer Alrosa and state-owned stakes in Novorossiysk Commercial Sea Port in 2017-2019, TASS reports.

Russia plans to privatize around 500 joint stock companies and 300 federal state unitary enterprises raising around 17 bln rubles ($284.4 mln) in 2017-2019, Prime Minister Dmitry Medvedev said.

"The plan is to transfer around 500 joint stock companies and around 300 federal state unitary enterprises, as well as shares in limited liability companies into private hands, also the plan is to privatize more than a thousand other public assets," he said.

"[Privatization] proceeds to the budget will amount to around 17 billion rubles in three years, excluding the effect of share sales by biggest companies with leading market positions, there are such plans as well," the premier added.

According to Medvedev, the privatization plan concerns banks, basic materials companies, industrial and infrastructure enterprises. "Separate decisions regarding them will be further confirmed and adopted," he said, adding that "the government will set particular privatization patterns and time frames taking into consideration the market environment, as well as recommendations of leading investment consultancies".

Russia’s government has discussed a potential privatization of VTB Bank, Russian Railways, Russian Post and other big assets at Thursday meeting, a source familiar with the outcome of the meeting told journalists when asked which companies were mentioned in the discussion.

Another source confirmed the information. He also said that no additional government meetings devoted to privatization are planned, but the discussion regarding the matter is underway.

A professor of the RANEPA Chair of Economics and Finance of the Public Sector, Lyudmila Pronina, told Vestnik Kavkaza that, the state resources for privatization are virtually exhausted. "Each year, the draft federal budget law includes the privatization program, which has declined progressively. So it is not surprising, since almost only shares in these companies can be privatized now," she said.

Although privatization is effective as a means of improving the federal budget balance, but the amount of 17 billion rubles of income for three years, voiced by Dmitry Medvedev, points to the minimum amounts of privatization sales. "Let me remind you that the amount of money for only the privatization of Bashneft and parts of Rosneft was several times greater. Of course, 17 billion rubles is a very small amount of money for such a list of companies," she stressed.

An associate professor of Stock Markets and Financial Engineering of RANEPA, Vasiliy Yakimkin, agreed that the amount of state revenues from privatization voiced by sources and official representatives of the companies will be small, but pointed out that the goal in this case is different. "The main aim, probably, was to lose a share of the state, thereby improving the business climate in companies and increasing their competitiveness. In the future it will bring more dividends than a couple of tens of billions of dollars," he said.

"As for the VTB, I think it should not be privatized in 2017. The bank's work is good now, it is being optimized. In a year or two it will be more expensive, and then there will be more favorable conditions for privatization. However, it should be expected that the privatization program will continue, because private companies work better than public. A state property transfer to a reliable private hands, determined by the market, is good for companies," Vasily Yakimkin concluded.