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. Last Updated: 07/27/2016

Hard for This Service to Stay Competitive

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Officials from the world's anti-monopoly agencies have been sharing their experience in Moscow this week at the Sixth International Competition Network conference. Russian participants would have done well to listen to their colleagues. Burdened by giant monopolies, heavy regulation and endless bureaucracy, the level of competition in the economy remains underdeveloped.

Prime Minister Fradkov told the conference that the last seven years of growth in the economy are the result of increased competition and that new anti-monopoly measures that came into effect May 13 would help continue this trend.

Perhaps the Federal Anti-Monopoly Service will be stronger, but the barrier to competition is based not on the laws on the books, but on the rules of the game as it is really played. In 2003, 1,200 companies combined to account for 80 percent of gross domestic product, according to Delovaya Rossia. In 2006, this was a mere 500 companies.

The anti-monopoly service is unable to deal with national champions, whose monopoly position is sanctified from above. On Wednesday, for example, service chief Igor Artemyev promised to open an investigation into Gazprom's purchase of Salavatnefteorgsintez without approval from his service. But it's doubtful that anyone at the state-owned energy giant is worried, as it generally wins these battles in court.

The anti-monopoly service expressed concern this week over the likelihood that Gazprom would snap up almost 20 percent of the country's energy generation capacity as a result of the planned breakup of Unified Energy Systems. Given Gazprom's position, these concerns are unlikely to influence the result.

In the oil sector, the number of companies continues to shrink while the state's role continues to grow. Only in electricity is there a real attempt to buck the trend, but significant generating assets are likely to end up in Gazprom's hands all the same. Moreover, there is no guarantee that the reform of the electricity sector won't end up creating monopolies at the regional level.

In a study carried out from 2005 to 2006 by the World Bank and the Higher School of Economics, about 40 percent of business leaders surveyed said they had no competitors. First Deputy Prime Minister Dmitry Medvedev has cited the lack of competition in the construction industry as a barrier to the government's national housing project. Protecting meat producers from outside competition has led to shortages and higher prices. The list goes on.

The economy is growing not because of competition, but despite increasing monopolization. Thanks to rising consumption and imports, energy dependency is falling. But the energy sector remains the main engine of growth, and without the development of greater competition, there is no point in waiting for genuine diversification.

This appeared as an editorial in Vedomosti.