Various forms of state support for industrial enterprises remain significant in the FSU. In the Russian Federation in 1994, 24% of industrial enterprises surveyed received some form of financial transfer, the same proportion as in 1992. This percentage may be an underestimate of the true figure since managers are reluctant to reveal information about their sources of financing. Directed credits and tax benefits are the most significant forms of state financial transfers, while budget subsidies and investment grants are somewhat less significant. Financial transfers are concentrated among a small number of firms; the ten largest recipients of financial transfers in 1993 through the first half of 1994 account for 70% of the total amount of transfers. Enterprises that receive the largest share of transfers tend to be large enterprises in the energy, agro-machinery, and military-industrial sectors.
While many enterprises still look to the state for support, the magnitude of subsidies to state enterprises has been falling. State financing is likely to continue to become a less promising form of enterprise finance in the future for several reasons. First, tax revenues have been falling, and thus the budgetary resources available to support enterprises continue to be squeezed. Second, intense lobbying for available resources is continuing to weaken the predictability of subsidy programs, making future support subject to ad-hoc, short-term political conjunctures. Moreover, support allocated in such a way is likely to continue to be concentrated among a small number of favored recipients. Third, world experience shows that state-financed industry tends to be inefficient, and large-scale industrial policy is difficult to carry out successfully. Thus state financing of industry is likely to be vulnerable to policy analysis that studies domestic outcomes and international experience.