The Russian government approved a new privatization program Thursday that will emphasize selling state enterprises for cash and allow them to own or sell their land for the first time, officials said.
But in a defeat for liberal reformers, the new program will make privatization voluntary, meaning the pace and amount of the government sell-off are likely to decrease. Regional administrators will also be allowed to continue using the voucher, which originally was scheduled to expire on Thursday.
The last-minute change was a response to Moscow Mayor Yury Luzhkov, who continued his long-standing opposition to the government's privatization program this week by decreeing that the voucher would remain valid in the capital until year-end.
Prime Minister Viktor Chernomyrdin is scheduled to sign the program on Friday and President Boris Yeltsin is expected to issue a decree soon after, Interfax reported.
Deputy Prime Minister Anatoly Chubais said the new plan would become effective with the presidential decree and would remain in effect until the parliament passed its own privatization law, according to Interfax.
The Duma, however, will not vote on the matter until after its summer break, which ends in October. Chubais said the Duma's law will not be retroactive.
The new plan offers regional administrators far more freedom, allowing local governments to choose among different variations of privatization. And, for the first time, enterprises will have the right to privatize and sell their land, a right that mostly had been excluded under the initial privatization program.
Like the voucher privatization program, the new plan is a product of compromises between liberal reformers and conservatives within the government.
It received only a moderate endorsement from Maxim Boiko, the head of the Russian Privatization Center.
"It's a workable program. It will allow privatization to continue," he said in an interview.
While voucher auctions were the cornerstone of the old program, cash tenders will be the main vehicle for selling enterprises under the new plan.
The government plans to advertise the tenders in newspapers and accept sealed bids from Russian or foreign investors, said Oleg Kachanov, a deputy privatization minister.
Companies to be sold under the new program will come from two areas. Enterprises that resisted voucher privatization illegally and some, such as certain defense companies, that had been held back because they were deemed vital to the national interest, are expected to be sold.
The federal and regional governments will also sell some of the stakes they retained in companies that were sold at voucher auctions.
Liberal reformers had pushed for mandatory lists of enterprises to be privatized, but the final version makes privatization voluntary. Boiko said, however, that there will be strong incentives for enterprises to agree to privatization since 51 percent of all revenue from a cash auction will be retained by the enterprise.
Also, some of the Western aid money for newly privatized companies will only be available to companies that are 90 percent privatized.
"The reason the old program worked was because there were very strong incentives built in," Boiko said. "This program also has a strong set of incentives."
Another substantial change from the old program is the elimination of the right of employees and managers to gain control of their companies easily Under the new program, employees will be given 10 percent of voting shares or 25 percent of non-voting shares for free. In the old program, employees received 25 percent of the shares for free, but if they wished to gain control they had to pay a price above book value for the shares.
Buying into enterprises will also become more expensive for foreign and Russian investors. The minimum bid in an investment tender will be the Jan. 1, 1994 estimated value. In the old program, companies had been sold based on 1992 estimates.
Kachanov said that could mean companies may be as much as 35 times more expensive.
The program approved also allows regional administrators to continue using the voucher for local auctions after Sept. 1, when an inventory of vouchers is to be completed. Boiko said this was done because certain regions, such as Moscow, had largely opted out of the initial privatization program.
But in a defeat for liberal reformers, the new program will make privatization voluntary, meaning the pace and amount of the government sell-off are likely to decrease. Regional administrators will also be allowed to continue using the voucher, which originally was scheduled to expire on Thursday.
The last-minute change was a response to Moscow Mayor Yury Luzhkov, who continued his long-standing opposition to the government's privatization program this week by decreeing that the voucher would remain valid in the capital until year-end.
Prime Minister Viktor Chernomyrdin is scheduled to sign the program on Friday and President Boris Yeltsin is expected to issue a decree soon after, Interfax reported.
Deputy Prime Minister Anatoly Chubais said the new plan would become effective with the presidential decree and would remain in effect until the parliament passed its own privatization law, according to Interfax.
The Duma, however, will not vote on the matter until after its summer break, which ends in October. Chubais said the Duma's law will not be retroactive.
The new plan offers regional administrators far more freedom, allowing local governments to choose among different variations of privatization. And, for the first time, enterprises will have the right to privatize and sell their land, a right that mostly had been excluded under the initial privatization program.
Like the voucher privatization program, the new plan is a product of compromises between liberal reformers and conservatives within the government.
It received only a moderate endorsement from Maxim Boiko, the head of the Russian Privatization Center.
"It's a workable program. It will allow privatization to continue," he said in an interview.
While voucher auctions were the cornerstone of the old program, cash tenders will be the main vehicle for selling enterprises under the new plan.
The government plans to advertise the tenders in newspapers and accept sealed bids from Russian or foreign investors, said Oleg Kachanov, a deputy privatization minister.
Companies to be sold under the new program will come from two areas. Enterprises that resisted voucher privatization illegally and some, such as certain defense companies, that had been held back because they were deemed vital to the national interest, are expected to be sold.
The federal and regional governments will also sell some of the stakes they retained in companies that were sold at voucher auctions.
Liberal reformers had pushed for mandatory lists of enterprises to be privatized, but the final version makes privatization voluntary. Boiko said, however, that there will be strong incentives for enterprises to agree to privatization since 51 percent of all revenue from a cash auction will be retained by the enterprise.
Also, some of the Western aid money for newly privatized companies will only be available to companies that are 90 percent privatized.
"The reason the old program worked was because there were very strong incentives built in," Boiko said. "This program also has a strong set of incentives."
Another substantial change from the old program is the elimination of the right of employees and managers to gain control of their companies easily Under the new program, employees will be given 10 percent of voting shares or 25 percent of non-voting shares for free. In the old program, employees received 25 percent of the shares for free, but if they wished to gain control they had to pay a price above book value for the shares.
Buying into enterprises will also become more expensive for foreign and Russian investors. The minimum bid in an investment tender will be the Jan. 1, 1994 estimated value. In the old program, companies had been sold based on 1992 estimates.
Kachanov said that could mean companies may be as much as 35 times more expensive.
The program approved also allows regional administrators to continue using the voucher for local auctions after Sept. 1, when an inventory of vouchers is to be completed. Boiko said this was done because certain regions, such as Moscow, had largely opted out of the initial privatization program.
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