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Russian President Puts State Firms Under Scrutiny


Russian President Dmitry Medvedev has said he sees private business as an engine of Russia's modernization and has suggested that the state corporations should be sooner or later privatized.

Russian President Dmitry Medvedev has said he sees private business as an engine of Russia's modernization and has suggested that the state corporations should be sooner or later privatized.

MOSCOW (Reuters) -- President Dmitry Medvedev has ordered prosecutors to conduct sweeping checks of the use of state funds by Russia's giant state corporations and questioned their effectiveness, the Kremlin said.

"The president ordered [prosecutors] to present their proposals including on whether there are reasons to further use...structures like state corporations," a statement by the Kremlin press office said.

The brief press release gave no further details. Officials could not be immediately reached for comment.

Medvedev's predecessor and patron, Vladimir Putin, who last year became prime minister, has defended the creation of state corporations with easy access to budget money and good political connections as a driver of Russia's economic development.

His critics say the corporations, including bank VEB, Russian Technologies, nanotechnology firm Rosnano, nuclear agency Rosatom, development corporation Olympstroi, and the Deposit Insurance Agency, show the Kremlin's growing grip on the economy and crowd out private investment.

Medvedev has said he sees private business as an engine of Russia's modernization and has suggested that the state corporations should be sooner or later privatized.

The Russian media has said that this idea was included in a draft plan of legislation to improve the legal status of Russian businesses, prepared by Medvedev's aides earlier this year.

The plan included a change in the status of state corporations that would strip them of special privileges.

However, some analysts suggested that Medvedev's order was aimed at finding extra revenues amid the economic crisis rather than at challenging the legacy of Putin, with whom Medvedev rules Russia in a so-called "tandem" power-sharing arrangement.

"When the state of the budget is one of the sore points for the Russian economy, such measures are directed at finding extra sources of financing in case oil prices fall," said Yaroslav Lissovolik, chief strategist at Deutsche Bank in Russia.
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