3.9 Privatisation

Involving foreign investors in privatisation

Pursuant to Law of the Russian Federation ¹ 123-FZ of 21 July 1997 «On the Privatisation of State Property and Fundamentals of the Privatisation of Municipal Property in the Russian Federation", the governmental privatisation programme may indicate types of property subject to privatisation which may not be privatised by foreign legal entities and individuals nor by residents of the Russian Federation whose founders (shareholders) or affiliates are foreign legal entities and individuals.

The current governmental privatisation programme includes certain restrictions on the involvement of foreign investors in privatisation, namely:

• Foreign investors may be involved in privatising trade, public catering and public service outlets and small industrial, construction and automobile transport entities only upon obtaining the approval of the local authorities;
• Decisions as to whether foreign investors may be allowed to participate in the privatisation of sites and enterprises engaged in military production (whose military order production exceeds 30% of total output), the oil and gas industry, mining and handling of strategic ores, precious and semi-precious stones, precious metals, radioactive and rare-earth metals, transportation and communication companies indicated in Section 2.2 of the governmental privatisation programme, should be taken by the Government of the Russian Federation and the governments of the republic-members of the Russian Federation whenever a decision is made to allow these sites and enterprises to be privatised; and
• Foreign investors may not be involved in the privatisation of state and municipal enterprises located in restricted zones, unless otherwise stipulated by the decisions of the Government of the Russian Federation.

Rseluts of Privatisation in St. Petersburg in 1999

In January - June 1999, 21 enterprises (entities, sites) were privatised in St. Petersburg (sale/purchase contracts were approved or closed subscriptions for shares were carried out). There were 11 enterprises privatised in the same period of 1998.

92.5% of the enterprises privatised in 55 St. Petersburg had previously been the property of the subject of the Federation and 4.8% had been federal property

In January -June 1999, thirteen joint-stock companies were founded in St. Petersburg as a result of privatisation, their aggregate charter capital amounting to 1,666,000 roubles. Twelve of them had been owned by the subject of the Federation. When these joint-stock companies were created, 2,260,000 shares were issued, 1,391,000 (61.5%) of which were sold and 869,000 remained unsold.

For the six months of 1999, 72.6 million roubles were earned as a result of privatisation in St. Petersburg (including revenue from privatisations of previous years), which is 10% lower than in the same period of the previous year. The majority of the funds, 86.9%, was obtained from the privatisation of property owned by the subject of the Federation. 69.4% of the funds earned from privatising state and municipal property (remaining after compensating employees of the privatised companies) was posted to the budget of the subject of the Russian Federation, 16.2% to the Federal budget and 9.7% to the state agencies which carried out the privatisation.

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