Privatisation, decentralisation and production adjustment in the Russian defence industry

Abstract

PRIVATISATION IN THE DEFENCE INDUSTRY was until 1993 characterised by two features. Firstly, it affected a small number of organisations considered not too important within the sector. Nevertheless, one must point out that, at the end of 1992, some outstanding companies from the defence sector started to be privatised, which marked the first extension of the phenomenon to this sector of the economy. Secondly, the privatisation in this early period lacked organisation and control. Legislation was passed in 1993 with the aim of establishing some order in the privatisation process in the defence industry. From that time (until 1996) the idea was to foster a broad privatisation process with a view to resolving the production problems suffered by the industry, at the same time facilitating reorganisation within defence companies, which would contribute to an increase in the volume of civilian production. This article deals with the second phase of privatisation in the defence industry (from 1993).1 This period is characterised by a strong desire to push through broad privatisation in the sector. In particular, the article analyses the impact of privatisation and one of its major effects, decentralisation, on the adjustment of production in defence companies. First, we shall explain the dimensions of privatisation in this field and its impact on the transformation of production. Second, the main features of the decentralisation will be described, and in particular the creation of small companies within the defence sector. We shall examine the relationship between privatisation and decentralisation and analyse the impact of the creation of this new type of business on the adjustment process in the defence industry.