- While the large variations (both in pricing and in formulas for distribution of revenues between Federal, Regional and Local levels of government) were certainly problematic from the standpoint of policy stability, the responses of the relevant stakeholders showed clearly that the basics of economic behavior were following predictable patterns (e.g., when normative prices for land were low, businesses responded by increasing applications for land privatization, while public bodies, as sellers, were reluctant to conclude such transactions; conversely during periods when normative prices were relatively high, there were fewer applications from businesses for land privatization even as many public bodies were trying to encourage it).

- To date, most land of interest to businesses is still owned or controlled by municipal governments. This gives municipal governments strong “market power” as nearmonopolist 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>4</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. 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>5</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>6</sup> Another FIAS survey of “potential and runaway investors” from Kaliningrad, Novgorod and Tomsk Oblasts also found that potential foreign investors, in particular, were concerned about access to land.<sup>7</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$2,400) of official fees.

> 4 In fact, there is significant evidence that many municipalities keep rental rates relatively low and sales prices relatively high also to deter land privatization.

> 5 See Chapter I and Chapter IV of the 2004 FIAS Administrative Barriers report.

> 6  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. 7 FIAS, 2004: Russia’s Runaway Investors.

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