Property Rights Security in Russian Deprivatization (Essay Sample)
This paper seeks to ascertain effects of provisions under the Property Rights Security in Russian Deprivatization by answering the following questions: 1. What impact will the prospect of Deprivatization have on investment by managers of private firms? 2. What effect will Deprivatization have on foreign investments in Russia? 3. Who gains from Deprivatization? Who loses? 4. Assuming more people are hurt by Deprivatization than helped, why would a local politician support such policy?source..
A property right is in basic terms a socially-enforced right aimed at selecting the uses of a given economic good. However, a property right is termed private in the event that it is assigned to a particular individual. Since owners bear strong responsibilities of their property, this right ensures that transactions are carried out in a manner that increases efficiency and value. Therefore, this paper seeks to ascertain effects of the provisions under the Property Rights Security in Russian Deprivatization by answering the following questions.
What impact will the prospect of Deprivatization have on investment by managers of private firms?
The prospect of Deprivatization will force managers of private firms in Russia to have second thoughts when initiating businesses in the country. First and foremost, this policy will render certain past privatization as illegal and therefore transactions will be reversed. For that reason, all privatized firms will need to be run as either a state-owned enterprise, or be sold to another different party (Brickley, Smith, & Zimmerman, 2009).
In the long run, this will have a detrimental effect on managers of private firms as it will strip them off the power to make their own decisions regarding to the operation of their firm. In fact with this policy, decisions will be made solely by the state and hence; this will limit efficiency levels of managers. Consequently, private firms will be unable to respond promptly to changing environmental and market conditions as a result of the prolonged period of decision making process.
Based upon legal facts, Deprivatization will gravely affect the strategies, profits, and corporate focus of managers. Here, managers will only meet the requirements of the state and thus, execution of responsibilities will only be aimed at fulfilling the impending necessity by the government and not the actual need on the ground. Strangely enough, political views along with paybacks will make additional investments by private firm’s managers be a high risk intervention. Eventually, these managers will lose most of their investments. Besides, in the absence of both the incentives and pressure for these managers to maximize profits by reducing costs, they will only meet their superior requirements thus depriving the firm.
What effect will Deprivatization have on foreign investments in Russia?
The majority of private buyers in Russia are foreign companies as well as investors, and their main responsibility is to move the nation from the centrally owned economy to a thriving market system. However, with provisions of Deprivatization ruling out initial privatization as illegal, direct foreign investment will be discouraged. This is because investors will fear that their companies will be sold and they may run bankrupt. In this regard, foreign investors allied to Russia will definitely move to other regions in search of safe investments.
Basically, political stability along with well structured property rights foster foreign direct investment to a larger extent. However, with Deprivatization set to rock the county, political influences are set to harm the management of most foreign investments. In the long run, foreign investors will subsequently shift to other states to avoid losing their hard earned investments (Herspring, 2005).
It is lucid to point out that, foreign investments has various advantages in Russia. Among them are; increased job opportunities, increased taxes to the government, increased foreign intellectual property and technologies, and stimulation of economic growth (Gaisford, Maevskiĭ, & Kerr, 2007). Nevertheless, in the near future all the aforementioned benefits are set to decline as a result of the impending Deprivatization.
Who gains from Deprivatization? Who loses?
Who will gain?
In essence, only a few will benefit from the prospects of Deprivatization while a huge number of individuals will lose and suffer the consequences. The local government will gain than anyone else in Russia. This is because running of private firms will entirely be left under its superior supervision. In this regard, a huge percentage of profits and revenues obtained by private firms will be channeled to the local government thus enormously impacting the initial investors.
Politicians will also benefit greatly from the abovementioned provisions. This is because; most of them will definitely abuse their power in order to increase profits from such organizations. Strangely enough, they are likely to enact laws that will freeze all the hard earned revenue into their expeditious accounts. This is largely because; they will be left with the luxury to endorse the Deprivatization of their own goals and objectives.
Moreover, wealthy businesses will not be left behind in the list of gainers as they will probably use their hefty packages to influence the government in the allocation of critical business resources. For instance, wealthy businesses will corrupt the allocation of tenders for their own mischievous needs.
Who will lose?
As exposed in the prior sub-section, a larger percentage of individuals in Russia will lose through Deprivatization. First and foremost, consumers will be the biggest losers. This is because, with Deprivatization, most investors will migrate to other nations and, therefore products and services in the country will be unaffordable. Eventually, consumers will be required to pay more in order to get products and services.
Consequently, the local economy will be hurt si...
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