27 Jul 2023 16:16

Govt acquisition of assets from foreigners with resale could become alternative to external management - Russian Union of Industrialists and Entrepreneurs

ST. PETERSBURG. July 27 (Interfax) - Government participation in the discount buyout of assets held by departing foreigners with subsequent resale at market price may become an alternative to the introduction of external management, Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs (RSPP) told Interfax on the sidelines of the Russia-Africa forum.

"At the moment we have a somewhat modified scheme of foreign companies leaving the Russian market. If before it was necessary to find a buyer inside Russia, discount it by 50% - a year ago such a scheme was launched, 10% was then to be paid as a voluntary donation or duty. Then, when temporary management schemes took shape with the transfer of control to Rosimushchestvo, with the appointment of directors not from shareholders but from the state, the question arose whether there are other schemes. I believe that there are. The state can also participate, to put it mildly, in the bidding for the purchase of assets according to the scheme that it itself approved: precisely for half price, and then put it up for sale. This kind of a privatization," he told Interfax on the sidelines of the Russia-Africa forum.

Such a scheme will avoid additional pressure on the ruble exchange rate, which arises when foreigners withdraw funds from Russia after the sale and which, according to Shokhin, has become one of the reasons for using the external management scheme.

"What is its advantage? It is that the ruble exchange rate does not suffer. Because after all, one of the reasons why transactions with assets that were already on the table ground to a halt, as they say, after negotiations were held with potential buyers and so on, is the danger that the withdrawal of money abroad can weaken the ruble even further. Therefore, one of the reasons why the temporary management scheme was used, in my opinion, is related to this," the RSPP chief said.

The mechanism for transferring foreign assets was introduced in Russia by presidential decree in April this year and was first applied to power generating companies Fortum and Unipro . In July, two more companies, both from the consumer sector - Baltika Breweries and Danone Russia - were subject to the new mechanism.

The RSPP suggested using an alternative in the form of privatization - both partial privatization, through the resale of assets bought from foreigners, and mass privatization, through the sale of stakes in state companies on the stock market. Shokhin said that he personally came out with a proposal to initiate discussion of such an option both in the presidential administration and in the government. According to the Interfax source, Vladimir Putin instructed the government to elaborate upon the option of buying out foreign assets by the state at a discount and then reselling them at market price.

"Some assets in the financial sector and industrial sector can be offered for sale not in their entirety, but through a public offering. The notorious people's privatization of VTB . It may have run into a crisis situation, a global crisis. But in principle, no one prevents growing companies from being listed on the stock exchange. And the point here is not only that the current situation will allow for resolving budgetary problems without raising taxes by this way, but also purely institutionally it will help to develop the financial market, and attract investors in the future, and so on," Shokhin said of the advantages of privatization.

"All mechanisms must be used here, not classic privatization, in the spirit of the 90's, collateral auctions, but with the use of modern financial market instruments," he said.