| If you open the newspapers, what are the economic topics
in the headings? Tax problems, social privileges, GNP rates. However, everybody
knows that you can improve the tax system indefinitely, develop new forms
of mortgages and "mop up" banks, but all other measures are pointless
until you resolve once and for all, clearly and unequivocally property
issues. A political and legal estimate of privatisation in the mid-1990s
is the main economic issue today. President Putin should finally make up
his mind. Otherwise nothing will be achieved. If you face claims and run
the risk of being charged at any moment for participation in privatization,
it is irrelevant whether you pay 23% or 25% profits tax. |
And the danger of claims is very real. Everyone talks about Khodorkovsky
simply because he is an extraordinarilyy rich man. But similar cases happen
every day in the country as a whole, which is home to thousands of businessmen.
The law and enforcement agencies are now used on a regular basis to manipulate
Unless the issue of the inviolability and stability of private property
is resolved, any economic policy will always end at a dead end. Relations
built on trust between business and the authorities will remain a daydream,
and fights between the two will be endless. The ability for business planning
will be narrowed to a minimum. The scope of long-term investments will
remain at best at the present level. The judicial system will turn out
to be a victim of these constant battles, as it will only follow political
instruction, instead of independently managing justice. The mass media
will also fall victim for the same reason.
What could be done here? First of all, it should be acknowledged that there
are grounds for making accusations about the unlawful nature of privatisation.
The most vivid example here concenrs the loans-for-shares auctions, which
constituted an obvious fraud. Privatisation was developed not only in the
wrong way, but also in a criminal manner. Many people lost their lives
in the process.
Secondly, you cannot apply select justice to resolve the issue. This would
mean individualization of the problem. This would be typical of Byzantine
politics, involving plotting, intimidation and the settling of accounts,
instead of a resolution of the problem.
Thirdly, it is necessary to understand that it is impossible to review
privatization results in an administrative order, even if this would be
limited to seven to ten loans-for-shares auctions, as another redistribution
of property carried out in this manner will lead nowhere. Property will
be simply transferred from one grouping to another. This way leads only
to new battles. Such historical events must not be allowed to repeat themselves.
Russia has the habit of initially making a mistake with horrifying consequences
and then doing even worse things in its zealous desire to put things right.
The problem should be resolved in a way that is clear to most citizens
and public consent should be obtained as far as possible here. The people
believe that privatization in its current form is
illegitimate. The population was deprived of everything in 1992, and then,
suddenly, 30-year old billionaires appeared. Who can accept this development?
To strengthen property rights, it is essential to demonstrate to the people
that the emergence of private property and privatisation can be clear and
open, that fair decisions can be made in this sphere and the criminal links
between business and the authorities can be brought to an end.
Therefore the resolution of the problem should not result in another collusive
behind-the-scenes transactions between business and the President.. It
is necessary to adopt a package of laws. In my opinion, there should be
The first part of this package should acknowledge privatisation deals as
legitimate (except for those involving murders and other grave crimes against
individuals) and introduce a one-off tax on surplus profits, in other words
a the windfall tax. Its rate can be determined by a simple formula - the
difference between the purchasing price of the company and the profits
obtained over the past nine or 10 years. The tax is set at this rate: how
much – the amount of 25 %, 30 % or 15 % is already a point of debate.
The second part of the package consists of laws on the transparency of
financing of political parties, transparency of lobbying in the State Duma
and other bodies, public television and a number of anti-corruption laws,
including those on restrictions imposed on officials and members of the
government who took advantage of corrupt privatisation in the 1990s.
The third component implies the adoption of efficient working anti-monopoly
laws and anti-trust measures.
Through these measures the state lets business know: yes, all those privatisation
deals did take place, but you will pay a fair price for them and will not
influence politics anymore, as you have in the past. And such a concentration
of capital will never take place in the country again.
However, there is one more problem - the commanding heights of the economy.
Which would the stake like to control and how? Here too the law should
provide clarity. Enough of the Byzantine, let's dot the "i's"
and cross the "t's".
Other solutions are possible: for example, the return of the amounts paid
in the mid-1990s, replaced by a new, but transparent, market price privatisation.
Or identification by experts of the real price of the privatised property
and a demand that the current owners pay the difference. In my opinion
such proposals in the current situation are not contestable.
The only indisputable thing is that we have to discuss different ways out
of the present situation in general, rather than decide who will be next
* * *
The article was published in Forbes as the first in a series from
Grigory Yavlinsky's regular
column in the magazine, when Paul Khlebnikov, Editor-in-Chief of its Russian
edition, was alive.
Freedom of Speech
and Media Law in Russia
Privatisation in Russia