Reducing Structural Dominance and Entry Barriers in Russian Industry

Abstract

The absence of new business in Russia is striking. Reforms to make Russia more competitive should start with eliminating regulatory and institutional barriers to the entry of new competitors.

Many industrial firms in Russia have undergone changes in ownership, but relatively few have been competitively restructured. Using survey and other data, Broadman suggests that much of Russian industry is immune from robust competition because of heavy vertical integration, geographic segmentation, and the concentration of buyers and sellers in selected markets.

Moreover, regulatory constraints protect incumbent firms from competition with new entrants, both domestic and foreign. Broadman sketches a reform agenda for Russia's post-privatization program, which emphasizes the restructuring of anticompetitive structures and the reduction of barriers to entry. Broadman's proposed reform agenda calls broadly for strengthening Russia's nascent rules-based framework for competition policy to reduce discretion, increase transparency, and improve accountability.

This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Regional Office - is part of a larger effort in the region to assess structural reform in Russia. The author may be contacted at [e-mail].

JEL Classification: D42, D81, K21, L42