Budget Investments in Russia: Not Investment but Transformation of Public Property
The article is devoted to budget investments in the Russian Federation, which have a double meaning nowadays. This fact often causes confusion and misunderstandings in the implementation of investment activities. Traditional Russian understanding of investment corresponds to the concept of capital expenditures or investments in fixed assets. As a result of budget investments, according to the budget legislation, the cost of public property shall necessarily increase. Such investments are budget expenditures for the creation (or purchase) of new capital assets. In this case the budget investments are like a synonym for capital expenditures. A new approach to the concept of cost of investments linked to perception and rethinking the concept of investment prevailing in the countries of Western Europe and North America. Under this approach the investments are understood as a commercial activity of the foreign investors, which consists of investing their funds in an unlimited range of objects of entrepreneurial activity on the territory of Russia. This approach is also embodied by the legislation of the Russian Federation. However, in the second (not traditional for Russia) meaning the investments are carried out at the budget execution. It is for example assets of sovereign wealth funds of the Russian Federation, which are called the Reserve Fund and National Welfare Fund. These funds are formed by part of the revenues associated with oil production in case of exceeding its cost base per barrel, and the free assets of these funds are located in certain foreign currencies and securities.
State Capitalism could be characterized by a triple role of the state: the state performs as a “programmer” to guide economic activity; it acts as a “protector” to safeguard national economic interests; and it also plays the role as a “producer” to create national wealth through its state-owned enterprises (SOEs). However, the influences of State Capitalism in a country are not only limited to the domestic sphere. They often extend internationally, either through the globalization of SOEs, or through Sovereign Fund investments, or by means of other influences. Many recent acquisition projects by SOEs, often in strategic sectors, highlight the importance of understanding this new geopolitical investment which has created special relations between State Capitalism and the free market. They also raise the question of the need for updating national economic security concerns in the context of globalization. As the value of Sovereign Funds reaches several trillion dollars, the controversy surrounding these Funds is evolving. For many, these Funds do not necessarily always look for maximizing business performance, but are sometimes also accompanied by political and strategic ambitions of the respective states from where they originate. The phenomenon of State Capitalism has gained prominence in recent years especially in several emerging markets. It appeared, firstly, because of multiple government interventions in the economy,and secondly, emphasis given to the globalization of their SOEs / economic organizations in international markets (China, Russia, Brazil, Malaysia, Saudi Arabia, India, Korea, etc.). In January 2012, The Economist published another special article on State Capitalism and wondered if the new balance of power that is being built-up with the emergence of market oriented SOEs will pose a challenge to the liberal capitalist model. The objectives of this conference are manifold: to examine the characteristics of State Capitalism in the world economy, especially in emerging countries, to assess its real impact on economic development, to identify its scope to other developing countries, and also to explore the major challenges that it poses to the liberal capitalist model in the world of free-markets.
The author analyzes the decision of the President of the country on necessity of removal of state officials from committees of directors of the largest state companies, its pluses and minuses, and appreciates an investment climate in the country which unsatisfactory condition seriously anxious the country leaders.
In accordance with the international investment legislation, a state is entitled to implement expropriation and nationalization measures with respect to foreign investments within its territory on condition of guaranteed prompt, efficient and adequate compensation provision in favor of investors. The article notes that there is no clear description of the phenomenon of foreign investors' property alienation in the Russian or world practice. Consideration is given to the types of expropriation: direct, aimed at deprivation of property rights for investments by authorities; indirect, or "creeping" expropriation representing gradual divestiture; and measures that are equivalent to expropriation and inhibit receipts of investment benefits. It is underscored that in the process of investment evaluation it is necessary to take into consideration the degree of intervention in property rights, intentions of the government, and the impossibility to discharge adequate investors' expectations.
In the article we study the reasons and character of economic growth in Russia in the beginning of the XXI-st century. The analysis of the features of economic development is a key to understanding of depth of modern crisis in Russia. This article exhibits institutional preconditions for an overcoming the crisis and acceleration of economic growth.
The paper consists of three main sections. The first is devoted to a discussion of the "state capitalism" concept and the reasons for the growing interest to this phenomenon. It is proposed here to consider the state capitalism not only in terms of the state ownership in major national industrial enterprises and banks, but also taking into account the efficiency of SOEs. In the second section, the new data on the state involvement in the Russian economy are represented, including the shares of the state in the authorized capital of the largest industrial enterprises and banks. Their economic indicators are compared. Contrary to some assumptions P / E values for national champions are lagging behind the average for emerging markets. The third section examines the hypothesis that one of the major challenges faced by the state capitalism is the development of investment incentives for SOEs and their performance. It is shown that the interests of the state as an owner of business enterprises are often in conflict with the interests of the state as a social institution. A number of examples are demonstrated. In order to solve this problem the state should reduce its stakes in SOEs except for those that are of strategic importance. The output of the analysis is that the state capitalism as a social phenomenon has no a long-term perspective. Most of so called “state capitalist” countries will take in future the path of traditional mixed market economy.
Тhe article considers accounts Valuation and Budget rules - documents, regulating the budget process, or the process of compiling, approving, implementing and controlling of implementation of the state scheduling of income and expenses in Russia of the end of 19th - beginning of 20th century. The named documents are to be a foundation of present budget law in Russia, that supposes their detailed research.