- At the moment, most land of interest to businesses is still owned or controlled by municipal governments. This gives municipal governments strong “market power” as near-monopolist land lords, while greater legal flexibility over land rents (compared to land buy-out prices and land taxes) provides a strong fiscal incentive to municipalities to try to maintain their ownership rights. In addition, there is still considerable evidence of municipalities abusing their market power through administrative barriers, not necessarily to keep rents high<sup>9</sup> , but more often to favor some firms over others and/or exercise undue influence over local business development.

- Businesses continuously complain that there has been very little land privatization to date, and that the limited amount of privatization that has taken place has suffered from severe inconsistencies, non-transparency, and outright favoritism.  The business surveys reinforce these findings with complaints about “need to rely on connections”, excessive discretion and a higher degree of corruption associated with real-estate transactions than most other administrative procedures<sup>10</sup> .  According to businesses’ ranking of their problems with administrative barriers in general, access to land, real estate and construction permits are rated as the most severe obstacles, especially for medium-sized firms<sup>11</sup> . While this problem is not unique to Russia, cross country comparisons suggest that businesses in Russia are even more likely to perceive “access to land” as an obstacle, relative to many other emerging markets.<sup>12</sup>

- One of the most important procedures covered by the survey is the privatization of land under buildings that had previously been privatized. This relatively straightforward procedure involves an average of:

- 11 stages

- 8 different agencies,

- 17 different documents,

- 220 days, and

- about 70,000 Rubles (about US$2000).

The range, however, is quite large, from low figures of about 50 days in Rostov Oblast and 10,000 Rubles in Novgorod Oblast to high figures of over 400 days in Novosibirsk and 360,000 Rubles in Moscow Oblast.

- While many regions and municipalities have instituted mechanisms to privatize real estate, most are not yet transparent or fair. Unfortunately, left to their own devices, they have little incentive to improve their procedures and advance the reforms.

Сhart 1 shows what proportion of land in 15 regions is owned by state and municipalities. As can be seen in the Сhart 1, in 10 out of 15 regions, more then 3/4 of land is owned or is in possession of state or municipalities. In only 1 of these 15 regions (in Rostov Oblast) the share of state and municipal lands is less than 50%. Moscow City stands out with 100% of land still

> 9 In fact, there is significant evidence that many municipalities keep rental rates relatively low and sales prices relatively high also to deter land privatization.

> 10 See Chapter I and Chapter IV of the 2004 FIAS Administrative Barriers report.

> 11 See Chapter I and Chapter IV of the 2004 FIAS Administrative Barriers report.

> 12  See, e.g., Muir and Shen, “Land Markets: Promoting the Private Sector by Improving Access to Land”, World Bank Group Viewpoint Note, available at http://rru.worldbank.org/PublicPolicyJournal/Summary.aspx?id=300.

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