Privatization gives many Russian citizens a new role shareholder

June 30, 1994|By Will Englund | Will Englund,Moscow Bureau ofThe Sun

PERESLAVL-ZALESSKY, RUSSIA — C PERESLAVL-ZALESSKY, Russia - By late afternoon yesterday, just 24 hours remained for Russians to take part in the world's most radical privatization program, and Lyudmila Artyukh was getting a little sheepish.

Mrs. Artyukh happens to be in charge of municipal privatization in this ancient city 90 miles northeast of Moscow, and she believes - in principal - in the virtues of her work.

Yet somehow, in her own case, she hadn't gotten around to investing the vouchers that she and her daughter received nearly 18 months ago when the Russian government launched a giant program to sell off its industrial and commercial assets to its own citizens.

Those vouchers expire today. Abruptly, Mrs. Artyukh decided to exercise her right as a citizen: She closed up her office and set out in search of the agent for a firm called Doka-Khleb, who had set up a table in a small housewares store on the other side of town.

Doka-Khleb is a Moscow firm that manufactures bread- and pizza-making equipment, and it looked like a good place in which to invest two vouchers in exchange for shares.

Sadly, though, the store was closed for its afternoon break, and Mrs. Artyukh decided she was too busy to pursue the search further. Maybe she'll get to it today.

"But frankly," she said, "I don't have any faith in these vouchers."

And that, on a national scale, has been the toughest nut for the Russian government to crack. Russians are skeptical at best that any good will come their way through a voucher.

Starting in early 1993, the government gave out 148 million vouchers, good for shares in state-owned enterprises. The vouchers could be freely sold, swapped, combined or given away. They were given a somewhat artificial face value of 10,000 rubles, which has soared and swooned and soared again as waves of confidence and despair swept the country.

This week the market value of the voucher was running at about 34,000 rubles, or just over $17.

Thousands of Russians sold their vouchers for a bottle or two of vodka. Millions turned them over to investment funds to handle; of 600 funds in Russia, one proved to be an outright fraud and 15 others are facing inquiries over embezzlement.

And, clearly, many millions of Russians expected they would never see any significant return from their vouchers. Some suspect that unscrupulous operators are cornering all the profits.

One fund, set up specifically at government order to help elderly and handicapped people, paid dividends in 1993 of 2,000 rubles, or about $1.

"It would be very funny if it were not so sad," said Elvina Shevchenko, a social services department head here who helped 1,300 of Pereslavl-Zalessky's elderly people deliver their vouchers to that particular fund.

People who invested late are getting better results than those who invested early, because better firms have come on the market.

And in Moscow, Mayor Yuri Luzhkov triumphed over the man in charge of privatization, Vice Premier Anatoly Chubais, and successfully ordered a six-month extension of the voucher program in the city. Thus today is the deadline everywhere except in the capital.

And yet the program has accomplished an extraordinary feat.

The government committed itself to selling off 8,000 firms, and managed to sell off about 12,000 instead (although retaining a minority share in each). Agents flogged shares for vouchers the length and breadth of Russia.

There are now more shareholders in Russia - about 40 million, many of whom bought additional vouchers from others - than there are in the United States.

The voucher program was coupled with incentives to workers and managers to buy into their own firms, and, in the view of an investment broker in Moscow, Mikhail Vinchel, has opened the door to foreign cash investment as well.

Mr. Vinchel conceded that those who took the time to study the market will do better than others; that people who are lucky enough to be working at profitable firms have a built-in head start; and that those who waited to invest will come out ahead of those who didn't.

"But it has already brought and it will continue to bring a great deal of good to Russia," he said. "The basis for a new economy is being laid."

Mr. Vinchel pointed out, as one of the most successful examples, the case of Rostelekom, a communications firm. Privatized at the end of March, Rostelekom exchanged 9 shares for each voucher. At the time, each share was valued at slightly less than a penny.

Today they sell for $6. They will probably be at $15 by the fall, he said, and should keep going up after that.

Mr. Chubais has proclaimed the program a "victory." He said the only fight now will be over assessing its results.

Roger Gale, of the International Finance Corporation, a branch of the World Bank that helped design the program, said the next big step will be "commercializing the firms" - that is, getting them to think and act like private companies, rather than state enterprises.

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