In the fourth blog in a series from the Troika Dialog Investment Forum in Moscow, a panel comprising business executives, financiers, government officials and investors agreed that Privatisation is good for Russia but some internal contradictions and internal conflicts in the process need to be cleared up.

First, the government needs to decide if privatization is aimed at financing the budget deficit, or is it merely a political decision designed to bring in structural reforms? Most panelists said the second aim was more important. Privatization is necessary to reduce the state's role in the economy, shrink the public sector and increase the role of the private sector.

Aleksei Uvarov, head of The Property Relations Department, Ministry of Economic Development of The Russian Federation, said it is important to privatize large state holdings, but also to spin off related entities from state holdings to reduce the size of the public sector.

Slava Pivovarov of Altera Capital recalled research by McKinsey which described privatization as "low hanging fruit" to achieve growth. Other advantages were identified by the CEO of the Russian Direct Investment Fund, Kirill Dmitriev, who said privatization could help promote competition.

Alexei Kalinin, senior partner at Baring Vostok Capital Partners considered it was also an important factor in developing market breadth and depth while Ruben Aganbegian, president and CEO of the MICEX-RTS exchange, warned that fiscal goals and structural reform are actually at loggerheads.

Nikolai Shvets, director general of JSC IDGC Holding, praised the state as the most effective owner of assets but added that as the head of a state company, he needs to see the rules for the development of a particular sector made before privatization is carried out.

Privatization has a mixed record so far: Among those last year were VTB and Freight One, as well as the failed Sovcomflot deal, while those upcoming include United Grain Company, a block in Apatit and the sale of SG Trans.

Further privatization is seen unlikely to occur until government budgets come under pressure. Legislation has been changed so that the state can now privatize assets without the need to create a special fund. There was suggestion that privatization should occur in small blocks, with a gradual increase in the free float, and there are other routes, such as share swaps or convertible bonds, as Blackstone did in Q3 2011.

The role of private equity funds was discussed. Dmitriev said he would be interested in buying some assets, particularly in the agricultural, banking and logistics and transportation sectors. Kalinin sees the main role for private equity firms as "sherpas", taking stakes pre-IPO or intermediating further sales of these assets to investors.