Maxim Burykov
The Government is drawing up a list of companies in need of state support, as Prime Minister Vladimir Putin said at a Government Presidium meeting. Qualifications have been determined. The list will have two parts, one for federal and one for regional aid-300 companies for the former and 1,200 for the latter. As the Government explains, the list is necessary to overcome the formidable barriers through which allocations must travel to reach industry. The companies on the list produce a summary 85% of the gross domestic product and are principal employers, so their survival will prevent skyrocketing unemployment. Experts forecast tough competition for a place on the list. The race will be all the closer as the Government promises to make it an open-end list with terms prolonged when necessary. Mr Putin might sign an initial version of the federal list by tomorrow.
Who Brings up the Rear?
Putin opened yesterday's Government Presidium meeting by announcing a new anti-crisis remedy. "Analyses show many obstacles on the road to government allocations for industry, so I call your attention to the performance of leading Russian companies," he said.
It took the Government several weeks to ponder the idea of slating companies qualifying for government first aid. First Deputy Prime Minister Igor Shuvalov was the first to mention it in public as he met with President Dmitry Medvedev on December 1. The list was secretly debated at the Kremlin and in the Government during the next two weeks. Shuvalov chaired the last meeting on the theme, yesterday morning. Deputy Prime Minister and Finance Minister Alexei Kudrin attended it.
There are four qualifications for getting on the priority list (see supplement). The Government promises to adjust them to rural specifics-in particular, lower the threshold of annual revenues. That is the only concession. Preferences to particular industries are ruled out, Kudrin said as he was summarising the meeting.
A recently established government anti-crisis commission is drawing the federal part of the list. It is ready with a draft now. When journalists asked Kudrin which companies are on the list, he said: "All big companies whose names are well known."
A greater part of the federal list belongs to the military-industrial complex, oil-and-gas, steel, construction industries, and agriculture.
Regional lists will follow the same pattern. Ad hoc teams representing administration and banking will draw them. Regional teams have no deadlines-unlike the federal, which had a mere two days.
O Lucky Man!
The federal and regional lists entitle companies to numerous privileges-state credit guarantees, subsidised interest, government contracts, several years' tax credits, and government additions to registered capital in exchange for company shares. The Government promises no excessive use of the latter measure. It mainly concerns military-industrial companies on the verge of bankruptcy.
The Finance Ministry estimates commission expenditures at 325 billion roubles. The year's federal budget earmarks 175 billion. The ministry is looking for the other 150 billion, Kudrin said. Companies on the regional lists will be funded from regional budgets.
The need for the relief list shows that banks have not yet brought government aid down to industry, says Andrei Sharonov, managing director of the Troika Dialog group.
"The new government measure concentrates on the most vulnerable industries and helps companies that are hit the worst-but still, it is manual fine tuning since system-level measures don't work." The expert also warned that such lists are a bribe-takers' bonanza, especially at the regional level.
Finexpertisa CEO Agvan Mikaelyan does not share these apprehensions. "Any money redistribution might promote corruption-but what are inspections for?" He thinks skyrocketing credit interest rates are the Government's worst enemy: "The whole world is decreasing the cost of credit while Russia alone sends it up." Government aid to industry, he argues, should keep up its growth against a current reverse trend.
The Economic Development and Finance ministries are coordinating a social economic forecast for the next three years. 3% is the highest GDP growth it prognosticates for 2009, Kudrin says. The Government, however, has not given up attempts to achieve a greater figure-in particular, through braking natural monopoly tariff increases to cut corporate expenditures.
Deputy Finance Minister Anton Siluanov said earlier that tariff growth rates would drop 10-15% in 2009. Alexei Kudrin promised a much greater cut yesterday. He also objected to Deputy Economic Development Minister Andrei Klepach, who mentioned an economic recession in Russia last Friday. "We have no recession at all," Kudrin said severely.
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Who Is to Gain?
Industry presently receives government support through state interventions in the stock market, and Vnesheconombank has been assigned 175 billion roubles for the purpose. We do not know what stock is purchased but experts are sure support mainly concerns such government mammoths as Sberbank, Vneshtorgbank, Gazprom, Rostelecom and oil companies alongside KamAZ, AvtoVAZ and other state-affiliated companies. The Vnesheconombank Observation Council has already approved the refinancing of several transactions by mining and microelectronic companies of national purport to a total $2 billion. All told, the council has approved the refinancing of industrial external liabilities for up to $10 billion.
The other kind of government assistance-government acquisition of shares of registered capital-concerns only one company for now. That is the Saturn R&D company. As Prime Minister Vladimir Putin determined, the Government will purchase the managerial block for its market price. The cost has not been made public.
On another decision, credit interest will be subsidised at seven billion roubles for farmers and 2.5 billion for automotive companies.
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Four Basic Qualifications
There are four qualifications for an industrial company to receive direct government aid:
1) output exceeding 15-16 billion roubles a year;
2) personnel exceeding 4,000;
3) the company should be a local economic mainstay; and
4) companies using high technology are entitled to priority in the military-industrial complex.
To receive government aid, an enterprise should correspond to at least one of those qualifications.
Russia has more than 300 companies that qualify, Kudrin says. All told, the Government intends to monitor approximately 1,500 companies.
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Government Saves on Construction
The Economic Development Ministry deems it necessary to cut federal target programmes and the federal targeted investment programme by 15% through smaller construction costs as construction material prices were plummeting throughout the second half of 2008. "The savings will go to anti-crisis support for industries and companies," Deputy Economic Development Minister Oleg Savelyev said yesterday as he was summarising the Government Presidium meeting.
A final decision on programme cuts will be taken at the next meeting of the government budget project commission next week. The Government does not intend to give up another previously announced idea-to outsource certain federal target programmes. "Criteria are being drawn to determine what companies to attract to what functions," Savelyev said.
