Government control expanded
By including enterprises with state shares exceeding 50% into state planning scheme, the government expands and clarifies its command authority in managing the economy. The state is trying to replace the owner, without worrying much about the economic feasibilities.
A Council of Ministers resolution No 1021 of November 13th, “Socio-economic development performance indicators in 2013”, sets performance targets for businesses, inter alia, for those with state shares more than 50%, and holding companies, where the state’s share exceeds 50%.
The state declared the intention to shift from quantitative indicators to qualitative. To implement this, it has defined seven tasks for enterprises with state shares exceeding 50% in capital shares and holding companies, in which HQ are state-owned with more than 50% shares. The projected indicators are: sales return, net income, exports, service exports, balanced foreign trade in goods, balanced foreign trade in services, the ratio between exports of goods and industrial production. Moreover, such targets could be set for businesses without the state’s shares in the authorized capital.
However analysis of the socio-economic development indicators in the territorial context suggests that in 2013, the emphasis again will be on quantitative indicators. The first of them is the GDP growth rate, which is too high for the current economic situation. Foreign direct investment is projected at USD 2 billion on a net basis. Bear in mind, that the only industry, which managed to attract investment over the 2012 plan was the “High-Tech Park”. Perhaps for this reason, the 2013 FDI plan for this industry has been increased from USD 41 million to USD 106 million.
De facto, this regulation establishes the government’s effective right to intervene in business activities of almost any enterprise. The acquisition of a minority stake in a company, where the state is one of the stakeholders, loses economic sense because its financial parameters could change significantly depending on projections, set by the state.
Thus, on the one hand, the state wants to attract investment and counts on business initiative, and on the other hand, sets strict frameworks for enterprises’ commercial activity.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.