supercomputing and software to real-time data refreshed every few minutes. An interesting software-based approach is «enterprise portfolio management,» in which software manages the construction of large infrastructure or industrial sites. The software manages the project’s timing and labor, but also its costs and materials • in short, all input and all output. Efforts are on the way, especially in Russia, to apply such theories and practices to the whole of the economy. Special economic planning software on supercomputers is being prepared and tested to monitor such economic activities. It would essentially automate the economy through AI and large computing power in real time and eliminate the inefficiencies and mistakes that come with manual calculations and management as done in previous eras.
Special Economic Zones (SEZs) are geographically designated areas set aside for specifically targeted economic activities. They usually benefit from lenient regulations compared to standards applied to the rest of the economy. They are often specific to some business sectors such as high tech, pharma, IT, and start-ups and are strongly oriented to welcome international collaboration and industries with robust growth potential. Moreover, they are touted as islands of excellence.
Can a government act as a technology driver of a planned economy? It is generally accepted that the private sector is more innovative than a stale central government, but this perception is not always correct. Often private sector actors have settled into their own procedures, processes, and inefficiencies. A government can issue edicts to elevate standards and technologies so that the private sector must follow. Often a technology push by the government is opposed and rejected by the private sector, which sees only short-term costs instead of long-term savings. Let’s consider the health care industry: often, to get a recurring prescription, patients must make a phone call for an appointment and prepare documents of previous visits. Then they must drive to the clinic, find and pay for a parking space, sit in a waiting room, and participate in the doctor’s visit. The doctor types data into the clinic’s software and voilà, finally a prescription for the pharmacy. But to streamline this process, government can impose a unified system to make appointments online, with storage of clinical records and treatments history and a chat or messaging system with doctors to request prescriptions and several other services. The private sector needs to adapt and upgrade its modus operandi and procedures to connect to the new system. Besides the health care example, such pushes can be made in the legal field and several other government-related services.
A government has a more precise overview of an economy than a single business or industry, so it is able to direct and distribute efforts and resources where they are more beneficial for the whole industry. In the same way, a highly diversified conglomerate corporation must coordinate different businesses internally to get the best financial results for the conglomerate as a whole.
The Putin Doctrine: 51 Percent State Ownership, 49 Percent to Investors
Russian President Putin has implemented one of the most clever state capitalism ownership structures. Partial privatization lets the state control most of the shares while ceding 49 percent of them to investors. Such a structure applies to several of the largest Russian companies: Gazprom (gas), RosNeft (oil), Aeroflot (airline), Sberbank (banking), and several others. This creates several advantages:
• Attracts private markets, investors, and specialists with best practices
• Removes unstable political parties bickering about company matters
• Removes the risk of political fiefdoms
• Reduces government outlay of money for full ownership
This hybrid model, as a de facto public-private partnership in running business operations, is probably one of the most efficient economic models for an SOE.
Economic infrastructure
Sovereign Strategic Business Infrastructure
Business infrastructure includes all the companies that enable the country and economy to function and that drive the main economic activities. Business infrastructure comprises both government agencies and privately run core systemic companies. The core economic sectorial companies needed to run an economy are energy, telecom, transport, and banking. Additionally, the health care and food industries are vital to a country’s citizens. The same might apply to other industries, which provide large-scale employment to the local population. It lies therefore, in the interests of a country to control such companies. Types of economic infrastructure facilities are the following:
• Utilities
• Energy
• Telecom
• Financial
• Financial institutions and payment systems
• Transport and logistics for people and goods
• Media
Utilities are most often monopolies, as building distinct instances of infrastructure is almost impossible from a financial point of view. So the base infrastructure, such as the electric grid and gas and water networks should belong to the state. Market actors can provide a variety of connectivity services as well as last-mile sales and services to end consumers. Utilities are massive companies with billions in revenue and can often generate large profits. They additionally require significant investment for upkeep and new infrastructure. They require underlying technologies with medium to high complexity, which are excellent business and provide high-value wealth creation for local industries and the domestic economy.
Energy is the most important enabler of cheap economic activity. Therefore, all businesses in the energy market sector should belong to the state. The rationale is to provide the population and business with the best mix of energy at convenient prices. Energy business should limit profit-taking to pass on savings to the economy. Or it should reinvest profits into other wealth creation industries, like capital tools and technologies, for the industry itself. Endless opportunities are available in mining, oil and gas extraction, transport, storage, power generation, and renewable energy technologies to add more R&D and innovation. Otherwise, only investments to build additional capacity and power stations to sell excess energy to foreign countries are alternative options.
The concept for the telecom sector should be identical. At least 51 percent of the physical infrastructure network should belong to the state, with market actors owning the rest. In the telecom context, state ownership can guarantee tighter national security and consumer privacy than private companies. Also, procurement decisions regarding equipment and suppliers are made centrally to manage costs and integration more accurately. The ownership of telecom companies can therefore be useful for building domestic technologies and to supply them with 4G or 5G equipment. That would start a new industry with a high level of value creation and manufacturing of medium-to-high-tech communication equipment and devices.
Banks are the foundation of all transactions for an economy. Payments are made via bank accounts of commercial entities while connected mostly via cards and payment systems between two parties in consumer transactions. A sovereign country should not only control the money via its Central Bank and regulators, but also have a significant stake in the system for stricter direct control. For systemic banks, the government should have the majority of shares or at least a golden share to veto some business practices. Payment systems, as in cards or other mechanisms, should likewise be under firm government control. In the best-case scenario, they should be local implementations instead of belonging to private hands or foreign corporations.
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