In the economy of the Russian Federation and many other countries of the world, a significant role is played by natural monopolies. These enterprises are most often represented by large-scale businesses that are leading in their segment. They have the opportunity to develop large markets, including foreign ones, and become carriers of unique technologies. What are the specifics of the formation of natural monopolies? What role can they play in the state economy?
What is understood as a natural monopoly?
Natural monopoly is a company that has a production model, for some reasons, much more efficient than other market players. For example, it may be a company that has access to a cheap source of raw materials or electricity. It will have low costs associated with their purchase, as a result - set lower prices or work with greater profit and develop more dynamically.
Natural monopolies include enterprises that have the ability to monetize a resource that competing companies do not have. This is real, for example, when a firm owns a toll road. In this case, if other transport routes between the objects that it connects are absent or not of such high quality, the company will be able to profit on a monopoly basis by charging a fare.
Classification
A natural monopoly is an enterprise that may represent one or more industries. Therefore, one of the key criteria for classifying businesses of the corresponding type is membership in a particular sector of the economy. In the national economy of the Russian Federation, monopolies most often operate in the following sectors: transport, the fuel and energy complex, communications, utilities, the nuclear industry, and the provision of postal services.
Another criterion for the classification of the firms in question is who owns the entities of natural monopolies. They can be state, municipal structures, private individuals and corporations, foreign investors. The following classification criterion for natural monopolies is legal form. Most often, the monopoly is represented by a public joint-stock company, but their functioning will also be possible, for example, in the form of state corporations or unitary enterprises.
The causes of natural monopolies
What is the reason for the emergence of natural monopolies in the national economy? The reasons for this can be very different. One of the key factors under the influence of which the sphere of natural monopolies was formed in Russia was the mechanism of transformation of Soviet enterprises. Initially, they were adapted to the planned economy and, due to the lack of competition, occupied leading positions in one segment or another. Based on them, firms were formed that operate according to market principles in the modern economy of the Russian Federation.
It can be noted that Soviet enterprises, which solely functioned in the national economy, generally retained their positions in the free market. In most cases, the state remained their owner, but private individuals were also involved in capital investments.
Another reason for the emergence of natural monopolies is relevant, including for Russia - a high investment threshold for entering a particular industry. In order to start a business, for example, in the transport sector, huge capital is needed.Their owner will be interested in recovering their investments and founding a company that can carry out activities in conditions of minimal competition. Therefore, the investor acquires, by spending a large capital, the bulk of those resources, thanks to which the company is going to make a profit in the future. For example, it is building a toll highway, and having designed it in such a way that any alternative will most likely be less effective due to its greater length or shorter width. Competition of natural monopolies is an extremely rare phenomenon, largely due to the fact that the corresponding type of enterprise is deliberately set up in areas where the divergence of business interests is unlikely to be observed.
Another mechanism for the formation of natural monopolies is the presence of administrative barriers to the registration and entry into the market of new enterprises. They can be expressed in excessively high requirements for certification, licenses and other permits, in the need for projects to comply with a very large number of GOSTs, standards and norms. As a result, it is easier for an investor to choose a business in an area that, from the point of view of bureaucratic barriers, is easier to enter. In turn, in the segment in which the investor refuses to participate, those entrepreneurs begin to operate that for one reason or another can bypass or easily overcome administrative barriers.
What natural monopolies are there in the Russian Federation?
The activities of natural monopolies occupy a significant share in the Russian economy. Inter RAO, Gazprom, Russian Railways, Rosatom, and Russian Post are generally regarded as enterprises of the corresponding type in the Russian Federation.
All of them have the features that characterize a typical natural monopoly. Examples of enterprises of the corresponding type can be found in various segments of the Russian economy. In each of them, a potential manifestation of those factors about which we spoke above is possible.
The state regulates natural monopolies aimed at stimulating their fulfillment of a positive market role. In addition, the initiatives of the authorities may be related to the desire to increase the economic efficiency of companies of the corresponding type. Further in the article we will consider the corresponding aspect in more detail.
Monopoly Registers
It can be noted that in Russia, the competent authorities keep records of enterprises that can be attributed to natural monopolies. As a rule, this is done, in particular, by the Federal Tariff Service. The institution maintains its own register of natural monopolies. It presents companies of various segments.
The register of natural monopolies formed by the Federal Tariff Service includes enterprises in industries such as water supply in the field of public utilities, transportation of natural gas through pipelines, rail, air, sea, telecommunications, nuclear energy, and oil transportation. There are other authorities that register enterprises of this type. So, the register of natural monopolies is maintained by the Federal Antimonopoly Service.
Government contracts
It can be noted that in the national economy of the Russian Federation there may be firms that actually have signs of natural monopolies, but are not included in the corresponding register. In this case, due to the peculiarities of the provision of Federal Law No. 44 of 04/05/2013, the acquisition of services from the relevant company by state and municipal authorities may be complicated. The fact is that in those cases when the provider of a particular service is the only one on the market, government agencies have the right to conclude contracts with him only if he is included in the register of natural monopolies.In this sense, it is in the interests of the enterprise to get to the appropriate list as quickly as possible in order to be able to conclude contracts with budget structures.
The role of natural monopolies in the market
As a rule, the firms in question are very large businesses. Therefore, a natural monopoly is, first of all, the largest employer and taxpayer. Therefore, the state is interested in the effectiveness of firms of the corresponding type, since their activity can be a factor in filling the budget with money, as well as ensuring employment of the population - the most important social task. This is due to the fact that the regulation of natural monopolies by the state is carried out in such a way that the current market positions of enterprises of the corresponding type are maintained, and job cuts and revenue drops do not occur. Accordingly, social stability is also ensured in those regions in which enterprises of the type in question operate.
Sometimes the services of natural monopolies are so in demand that firms of the corresponding type have no problems with revenue and profitability. In this case, government interference in the activities of enterprises can be minimized. The main thing is that the company timely fulfills its obligations to the country's budget. Speaking about the role of the state in the work of natural monopolies, it will be useful to consider in more detail the aspect of regulating the activities of enterprises of this type.
Monopoly regulation
The activities of subjects of natural monopolies can be regulated by the following main methods: publication by the state of regulatory sources - industry sources, or having the status of federal regulatory bodies that directly determine priorities in the management of enterprises of the corresponding type. Or the approval of other regulatory acts affecting pricing in a particular segment. The first regulatory mechanism is applied to enterprises owned by the state. The second begins to “work” in cases where the company is owned primarily by private individuals or foreign companies.
A significant aspect of state regulation of natural monopolies is law enforcement practice. It is important not only the content of the legal acts published by the authorities, but also the implementation of their provisions in the market. The practical need for state intervention in the sphere of natural monopolies may be due to various reasons.
For example, the work of enterprises of the appropriate type may cease to satisfy the objective criteria of competitiveness when its products begin to yield to foreign ones, as a result of which it is becoming increasingly difficult to sell abroad. Consequently, the foreign exchange earnings of the state are reduced, budget revenues are reduced. The state may be interested in speeding up the necessary modernization of the production of its monopolies or those owned by private individuals, in order to increase the competitiveness of their products.
Assistance to state monopolies
The activity of the competent authorities in terms of regulating the activities of monopolies can be associated with the need to protect the national market from the deployment, in turn, of foreign monopolies. The corresponding type of business in other countries, as well as in Russia, can have great financial opportunities, have access to unique resources that allow it to be present in a large number of national markets.
In some cases, the state directly contributes to solving possible difficulties in the functioning of the business model of natural monopolies.This can be expressed, for example, in the provision of companies with the appropriate type of loans on a priority basis and on favorable terms with a high probability of subsequent write-offs of part of them. State assistance to the firms in question can be expressed in supporting their activities abroad, since the subjects of natural monopolies often work with international markets and their stability largely depends on the level of demand in foreign countries.
Enterprises of this type may have access to unique technologies and even develop them, having sufficient capital available. Therefore, in some cases, the state may be interested not only in the financial stability of firms of the corresponding type, but also in the fact that one or another natural monopoly continues to be the only or one of the few entities that have rare technology. This circumstance can positively affect the competitiveness of the country's economy, the situation in other industries in which the corresponding technology can be involved.
Note that for the state, the leadership of companies registered in it, rather than foreign ones in one segment or another, may be significantly preferable. This is primarily due to the fact that the proceeds from the business of a company with a residence in a particular country are likely to remain in it. This, in turn, contributes to the overall capitalization of the economy. Foreign firms often strive to withdraw revenue outside the state as quickly as possible, although even so they can transfer significant amounts of tax payments to the budget of the country in which they operate.
Summary
So, natural monopolies in Russia are a significant part of the national economy. This is largely due to the fact that the largest enterprises of the corresponding type were founded in the USSR in the absence of market competition, initially had a leading position in the market and access to those resources that were not available to potential competitors. Russian Railways, Russian Post, Gazprom - each of these corporations, based in the USSR, can be considered a natural monopoly. Examples of firms of the corresponding type, of course, are in many other industries. Natural monopolies are business entities that are the largest taxpayers and employers. Therefore, the state is interested in the stability of their work and to the best of their ability contributes to this. However, in some cases, authorities may intervene in the activities of natural monopolies due to the need to modernize a particular market segment.
The enterprises in question, on the one hand, are a powerful pillar of the economy, since they accumulate significant amounts of capital, have the ability to invest in various innovative industries and become competitive in the international arena. And this helps to increase the investment attractiveness of the national economy of the country as a whole. On the other hand, the lack of competition in those market segments in which natural monopolies operate, can lead to the formation of conservative priorities for managers of the respective businesses, and as a result, to the opposite result, when the competitiveness of products decreases. Therefore, it is important for the country's authorities to monitor the processes that occur in the sphere of natural monopolies and to promote their effective development, observing a balance between the interests of the state and private investors.
