Review of Industrial Organization 17: 155–176, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
Reducing Structural Dominance and Entry Barriers
in Russian Industry
HARRY G. BROADMAN
Russia and Europe & Central Asia Operations, The World Bank Room H-4-167, 1818 H Street,
N.W. Washington, DC 20433, U.S.A.
Abstract. While many industrial ﬁrms in Russia have undergone ownership change, relatively few
have competitively restructured. This paper, using survey and other data, suggests much of Russian
industry is immune from robust competition due to seller/buyer concentration in select markets,
a high degree of vertical integration, and geographic segmentation. Regulatory constraints protect
incumbent ﬁrms from entrants, both domestic and foreign. The absence of new businesses is strik-
ing. Restructuring anti-competitive structures and reducing barriers to entry should be key items
in Russia’s post-privatization program, and the paper sketches out a reform agenda. The nascent
rules-based framework for competition policy should be strengthened to reduce discretion, increase
transparency and enhance accountability.
Key words: Competition policy, corporate governance, entry barriers, privatization, regulatory
reform, Russian industrial structure.
The development of a competitive private sector business environment in the indus-
is essential to the sustainability of Russia’s growth. Since the start of
reforms in 1992, signiﬁcant progress has been made in many areas of the economy.
Russia’s industrial sector is one where price controls have been lifted on 90% of
wholesale and retail goods, and most state owned enterprises (SOEs) have been
privatized, although some key SOEs have yet to be fully or partially divested.
Yet Russia had not undertaken signiﬁcant restructuring of dominant ﬁrms or
eliminated non-economic barriers to entry before price liberalization or privatiza-
The views contained in this paper are those of the author’s alone and do not necessarily reﬂect
the views of the World Bank Group, its member countries or its Board. For helpful discussions and
comments the author is grateful to K. Hendley, B. Levy, P. Murrell, J. Nellis, B. Slay, and V. Tsapelik.
The focus of this paper is Russia’s manufacturing sector; it does not address the infrastructure
monopolies (what the Russian authorities refer to as the “natural monopolies”). This article draws
from Broadman (1999a).
See Broadman (1998). As of December 1999 more than 130,000 enterprises had been privatized
in Russia since 1992. There are approximately 29,000 federally-owned enterprises and institutions,
of a total of 88,000 state owned enterprises nationwide.