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. Last Updated: 07/27/2016

Privatization's Big Leap Forward

VOLGOGRAD, Russia -- Under marble murals of Lenin and ornate 1920s-style depictions of the New Socialist Man, hundreds of Russians filled out their applications this week to buy shares in the new Russia.


Volgograd's first brave step into the cold shower of privatization came with an opening ceremony full of reminders of the city's heroic wartime past and a jazzy fashion show with American music pointing the way to its capitalistic future.


The ceremony, at the Palace of Art and Culture, marked an acceleration in Russian government efforts to denationalize state-owned companies.


Eight companies were put up for auction Monday and 12 more will be sold over the next six weeks. Previous privatization sales in Moscow and elsewhere have been for single enterprises, or simply just a few.


Exactly what Volgograd citizens think they are buying into remains somewhat unclear, based on interviews at the ceremony, and on the factory floor at the Dzerzhinsky Tractor Factory -- the largest enterprise put on the market Monday.


Other firms up for sale ranged from a margarine plant and a garment factory to a household chemical products manufacturer and a cargo transport firm. They are being sold for the 10, 000-ruble vouchers that the government has distributed free of charge to all Russian citizens.


While a number of workers interviewed in Volgograd thought that their vouchers would give them control of their companies, there is no guarantee that this will happen. Other workers expressed fears that the current managers will find a way to retain control.


Few seemed to realize that moving from a command economy to one driven by market forces could lead to an end of government subsidies, and sharp increases in unemployment. Anthony Doran, an official of the World Bank's International Finance Corporation, which is assisting in the privatization exercise, called the process "a cold shower -- unavoidable but not necessarily detrimental".


"The changes will be painful, but at the end of the day they will get the right allocation of resources", he said, adding that many companies were oversized and "need to downsize".


Asked about the probabilities that some of the newly privatized firms may fail, he said: "If there is a market, there is the possibility for bankruptcy. The intention is to sell all companies, not just good companies".


The mood, however, was mainly euphoric.


Ivan Shibunin, the governor of the Volgograd region, said the sales were "the beginning of a process of change". He then mounted red-carpeted steps in the Palace of Culture with Viktor Ivanovich Pershin, 76, a beribboned veteran of the battle of Stalingrad, who became the first Volgograd resident to submit his bid for shares.


Pershin, with his role in the 1942 Russian victory over the Nazis at Stalingrad, now called Volgograd, was intended to represent the older generation accepting the new Russia.


Hundreds of Russians then went up to half a dozen stands, where young women working for the Committee for State Property gave them information about the process involved in buying shares. In the first four hours, 200 people submitted applications and another 450 took away the forms to give further consideration before investing.


Information about the specific companies is harder to obtain.


"There is no such thing as relevant company information", Doran said.


The 20-minute fashion show featured clothing from the Rossianochka garment factory, one of the firms up for sale. Models displayed coats, short skirts and business suits, prancing on stage to American pop music. The show served as a teaser to draw people to a seminar on privatization, which was attended by about 400.


One of the interested viewers of the fashion show was Yevdokia Belikina, 65, a pensioner who worked at the garment factory for 36 years. She said she invested in Rossianochka.


"If it makes a profit, we'll get dividends", she said. "We're sure it won't go bankrupt".


At the Dzerzhinsky tractor factory some workers voiced fears that the process would not produce change, but merely result in the old-style managers gaining financial control.


An elderly woman who said she has returned to work because she cannot live on her pension of 5, 000 rubles a month, admitted that she was not still not clear about the privatization process but would invest in the company, hoping the workers get control.


At the Volgograd Margarine Factory, Anatoly Dimitrakov -- the director, said that investors "hoping for big dividends will be disappointed because we must invest in modernization".


Victor Paul, another official with International Finance Corporation, said, "Not all the workers will hang onto their shares", so "the chances are that the workers won't control 51 percent of the shares after a while", even though one of the models for denationalization allows for worker control.


No matter who controls the enterprises, a slogan on a banner at the tractor factory will probably remain relevant. "If you want to live well", it says, "you must work hard".