Publication: Monitor Volume: 7 Issue: 155

In recent weeks, Russia has pushed forward with several important economic reforms, establishing a unified price-setting agency and passing legislation to protect minority shareholders and simplify the registration of new businesses. After several months of preparations, the government announced plans to create a Unified Tariff Agency (ETO). The ETO is to assume the various price-setting responsibilities currently spread across a number of government agencies, including the Ministry of Antimonopoly Policy (telecommunications prices), the Ministry of Railroads (railroad prices) and the Federal Energy Commission (electricity and heat prices, as well as oil and gas transportation tariffs). Uniting all price-setting procedures within one agency should make the process more independent from industrial lobbying and speed up the introduction of economically justified prices. It should also eliminate inefficiencies resulting from varying approaches and timeframes that have been used until now for different industries, often resulting in profit margins being squeezed in some industries in favor of others, as input prices rise faster than output prices. According to Deputy Prime Minister Viktor Khristenko, the ETO will be structured along the lines of the seven federal districts, largely insulating it from the influence of regional governors (Kommersant, August 7). Despite the apparent advantages of the establishment of the ETO, there could to be ulterior motives as well. It appears that the government would like to use the agency to control inflation by delaying increases in regulated prices. That would essentially amount to papering over the cracks in the authorities’ efforts to limit money supply growth.

On August 8, President Vladimir Putin signed a bill containing amendments to the Law on Joint Stock Companies that improve the protection of minority shareholders. The same day, he also signed the Law on State Registration of Legal Entities, which radically simplifies the required registration procedures for new businesses. The former legislation requires that all existing shareholders receive priority rights to participate in new share issues, specifies time limits for paying dividends and calling extraordinary shareholder meetings, and introduces other measures aimed at protecting minority shareholder rights. Meanwhile, the Law on State Registration of Legal Entities reduces registration formalities for new businesses to a minimum, with a time limit of five days. The previous lack of a specific time limit often resulted in an extremely protracted registration process. The new law eliminates a major set of barriers to entry that have until now been a brake on economic growth. The simplified business start-up procedures, together with changes over the past year that have drastically improved tax system, represent an important step forward in improving Russia’s investment climate and should stimulate the development of small businesses and enhance the country’s prospects for strong sustainable economic growth (Renaissance Capital, August 9).