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. Last Updated: 07/27/2016

Industry Fair Game for West in 1993

The government announced Tuesday that it would hold the first auctions of shares in big industrial companies on Jan. 21, 1993, a long-awaited step in its mass privatization program.

Fekryat Tabeyev, chairman of the State Property Fund, said that the auctions would be part of an international conference in Moscow and that foreign investors would be able to bid.

"It will open the door for Western investors into Russian industry", he said.

Several municipal authorities have auctioned off small enterprises but these auctions will be the first to sell shares in big industrial plants run by the federal government.

The auctions will mark a decisive change both politically and financially in the government's mass privatization program for 1992, which is designed to turn 60, 000 federal and municipal firms into private companies.

Financially, the first stage of privatization, now well underway, has involved the creation of joint stock companies and the distribution of shares to workers.

In the second stage, which will officially start at the January auction, the fund will start to sell shares not taken by the workers collectives to other outside investors on the free market. Foreign investors are generally only allowed to purchase 10 percent of the shares in any Russian firm.

At least 49 percent of shares of each firm, and in many cases more, will be sold off in this way. These will become the property of the State Property Fund, a sort of government holding company, until the shares are sold.

Politically, control of the program will gradually pass from the State Property Committee, headed by Deputy Prime Minister Anatoly Chubais and answerable to President Boris Yeltsin, and be transferred to Tabeyev's State Property Fund, which is controlled by the Supreme Soviet and its speaker, Ruslan Khasbulatov. At a press conference Tuesday, Tabeyev said that 9, 000 firms, or 17 percent of the total earmarked for the 1992 privatization program, had already completed the first stage.

Tabeyev also said-that at least two factories had won special deals which go outside the normal privatization guidelines and help workers and existing management to retain control.

"The vast majority of existing managers already understand how to function in a market economy", he said. "There is no reason to replace them".

In September, the giant Moscow-based Zil truck plant was granted a similar deal.

The two special deals cover the Kamaz truck plant and the Avtovaz car plant that makes the Zhiguli and exports the Lada.

Tabeyev said Kamaz had completed the first stage in February 1992 before privatization laws were passed. All but 20 percent of Kamaz shares have already been distributed.

About 40 percent went to the workers collective. Smaller parcels went to Kamaz suppliers including the Kazakhstan government. Other parcels were distributed to private individuals whom Tabeyev declined to name.

Another 4. 5 percent of shares were "privatized" by being transferred to the Transport Ministry.

At Avtovaz, workers had initially demanded 100 percent of shares. Anatoly Chubais, the deputy prime minister, visited the plant in late September and, according to Tabeyev, a compromise was struck.

Avtovaz workers chose a method of privatization under which workers and managers would normally receive a maximum of 40 percent of shares in the first stage. But in response to worker's demands, Yeltsin signed a special decree granting workers an extra 10 percent of the firm's asset base as a dividend.

Describing the auction on Jan. 21, Tabeyev said that the fund would offer industrial plants and their buildings.

He said some military plants and their military hardware might also be auctioned".