Moscow authorities are very anxious about the economic processes going on in the Russian capital, but still without success. Factories and enterprises, that used to be the pride and the glory of Moscow, are currently on the decline because of lack of financing and as a result of inability to adapt themselves to the market economy. Russian oligarchs purchase these enterprises almost for nothing, but they don’t need them at all. Yesterday it seemed that Moscow Mayor Yury Luzhkov lost his patience concerning this problem.
Finally Yury Luzhkov had the courage to seriously warn the large-scale business and said that he wouldn’t allow liquidation of Moscow’s industrial enterprises purchased by Russian oligarchs; this is obviously to be done because of land on which the enterprises stand. This was declared at yesterday’s session of the city administration.
Yury Luzhkov was displeased to state that large-scale businessmen often purchase enterprises experiencing hard times, and the deals are concluded in these cases at very low prices. At that, these businessmen are not going to develop production at the ruined enterprises. On the contrary, instead of factories and enterprises new owners plan to build elite apartment buildings and office centers. The Moscow mayor says it is a dangerous tendency; he said that the city couldn’t be turned into a collection of office and commercial centers. Yury Luzhkov officially warned representatives of business circles and authorities of the Moscow districts that the Moscow government would take measures to avoid such consequences. The anxiety of the Moscow mayor is quite understandable. However, the very process of turning Moscow into a set office and commercial centers started long ago and still continues today at a very high speed. What is more, the process is encouraged by the logic of economic reforms carried out in Russia. It is unprofitable to manufacture in Moscow, as it is Russia’s capital where the standard of living is the highest in the country. This consequently means that wages in Moscow are higher than in any other city of Russia. We should also keep it in mind that local taxes, tariffs for electricity and other communal services are higher here as well. So, it is obvious that it’s more profitable to trade in Moscow. And this is the reason why the number of commercial centers is speedily increasing in the Russian capital. As the Moscow Statistics Committee reports on results of the previous year, Moscow is supersaturated with sales outlets by 60%. The Committee came to a conclusion that not less than one third of shops in Moscow are likely to go bankrupt this year.
That is why it is perfectly clear why Guta Bank that purchased the popular Russian confectionery Krasny Oktyabr (Red October) is currently thinking over its closure and over dismissal of more than 2 thousand workers. Instead, the bank plans to build a very expensive elite hotel on the land where the factory stands. It is also highly unlikely that Russian aluminum oligarch Oleg Deripaska, who purchased the textile enterprise Trechgornaya Manufactura will develop the production there. New owners of the factory Krasny Proletary (Red proletarian) are also more inclined to build new highly profitable business centers and elite recreation clubs on the territory of the enterprise than market Russian machines that are in no demand at all and settle social problems of the personnel. The new owners don’t care about the social problems and about the personnel of the enterprise at all. They are mostly focused on making money, no matter how.
Other Moscow enterprises that used to be glorious years ago are currently experiencing the same problems. To tell the truth, it’s difficult to imagine how Moscow Mayor Yury Luzhkov and the Moscow government can change the situation. Certainly, the authority always has an opportunity to vex any businessmen that operate on its territory. However, not a single official can stop objectively running economic processes.
What is more, the population of Moscow heard threats of the Moscow mayor concerning doings of this or that oligarch several times already. Nobody doubts that Lyzhkov’s indignation is sincere. Meanwhile, the principal shareholder of the oil company Sibneft, Roman Abramovich seized up the Moscow oil refinery despite indignation of the Moscow mayor. The team of Anatoly Chubais, head of the Russian energy monopoly, RAO UES of Russia, took over the Moscow electricity monopoly, Mosenergo. Unfortunately, Yury Luzhkov had no opportunity to prevent these takeovers. It is very much unlikely that he will have any opportunity to do it in the future. Even if he becomes a president, which in quite impossible by the way.
Kira Poznakhirko PRAVDA.Ru
Translated by Maria Gousseva
Read the original in Russian: http://economics.pravda.ru/economics/2003/7/21/60/5859_Moscow.html