Deputy Minister of Industry and Energy Ivan Materov
Photo: Ilya Pitalev
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Duma Loosening Restrictions on Strategic Enterprises
The State Duma is expected to pass the first reading of a law introduced by the government on restrictions on foreign investment in strategic sectors of the economy. In the preparations for the second reading, the Duma intends to make important modifications. It will specify the procedure for declaring an enterprise strategic and allow foreign state companies to have control over strategic enterprises.
After two years of fighting over it by the Finance Ministry, Ministry of Economic development and Trade and the FSB, the law “On the Procedure for Making Foreign Investment in Commercial Organizations Having Strategic Meaning for the National Security of the Russian Federation” has turned out to be quite liberal. Instead of controlling the share a foreign investor may have in a strategic enterprise, its management is subject to control and, if the recommendations of key Duma committees are heeded, even the arms, space and nuclear industries will be open to foreign companies, under regulation.
Under the proposed law, a foreign investor would need the permission of a commission headed by the prime minister if the Russian company was engaged in any of the 39 forms of activity subject to restriction and the foreign company had the possibility of receiving control over the company. Shares bought without permission would not have voting rights at shareholders meetings.
Deputy Minister of Industry and Energy Ivan Materov told the Duma that the law is based on international practice. Most developed countries have laws restricting foreign investment in certain sectors, but they are rarely applied. A Deutsche Bank report on sovereign funds and restrictions on them notes that, in the last 15 years, Japan, Germany and England have not used their restrictive laws, the United States did so once, and France did so nine times in 1992-1994. Until the proposed law is passed, foreign companies with any state control have no access to strategic organizations whatsoever.
www.kommersant.com
All the Article in Russian as of Sep. 13, 2007
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