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. Last Updated: 07/27/2016

Duma Rejects New Government Privatization Plan

The State Duma rejected the government's post-voucher privatization program by an overwhelming vote in its first reading Wednesday, leaving the fate of the plan, crucial to Russia's economic reform, unclear for some time.


The lawmakers also offered amendments that would, if adopted, completely change the nature of privatization proposed by the government. The amendments include imposing limitations on the sale of land and taking power away from the State Property Committee, the main privatization regulator. The government sees the new privatization program, under which state companies are to be sold for cash rather than vouchers issued in 1992, as a key element to attract investment in Russia's privatized firms. The investment program is designed to allow firms to restructure and adjust to free market conditions.


The rejection, by a vote of 186-91 with four abstentions, means that the bill will return to the Duma's Committee on Economic Policy. The committee will have the problem of trying to reconcile diametrically opposed amendments proposed by the ultranationalist Liberal Democrats and the liberal Russia's Choice faction.


While the vote appeared to be a sharp rebuff to the government's privatization policy, it does not necessarily mean that the proposals will not still go through more or less unchanged. The 1994 budget experienced similar setbacks in the Duma before sailing through virtually unchanged in the final reading.


Under the privatization plan that was rejected, the proceeds of the sales of state property were to be divided with the privatized companies getting 51 percent of the investment proceeds and federal and regional authorities splitting the remaining 49 percent. To make the investment more attractive, the buildings and land of the privatized firms were also to be included in the sale.


At the first conference of the government's Foreign Investment Council last month top Russian officials pledged that the post-voucher privatization would help provide a better investment climate in the country, giving investors an opportunity to purchase buildings and land.


Last week, Anatoly Chubais, privatization chief and a principal author of the program, vowed to get it through the parliament and to President Boris Yeltsin's desk by last weekend. Last Thursday, after the Duma postponed a vote on the draft until this week, Chubais indicated that the president could implement the program by decree without the parliament's approval.


The debate demonstrated that privatization of land, long a difficult issue for Soviet and Russian lawmakers, remains a hot potato for the members of parliament.


Sergei Burkov of the New Regional Policy faction, the chairman of the committee on property and privatization, said that the sale of land under the new program should be restricted.


"When a building is sold with the land it stands on -- this is a hidden form of sale," Burkov said. "This article in the program could lead to uncontrolled sale of land, including agricultural land." Sergei Glazyev of the Democratic Party of Russia, chairman of the economic policy committee, said that privatization of land should not be part of the program.


The deputies also proposed that powers over property and its privatization should be taken from the State Property Committee and Chubais, its chairman, and given to the government.


"The Committee should be deprived of its monopoly," said Glazyev, who formerly served as Russia's foreign trade minister. Glazyev did not specify, however, what alternative "government agency" would be in charge of privatization.


The more radical privatization put forward by Russia's Choice calls for completion of the sell-off of state property in three months, according to Grigory Tomchin, one of the draft's authors.


The program of the Liberal Democratic faction provides for greater participation of the people in privatization, according to Vladimir Lisichkin, who drafted the plan. Lisichkin said that under the program every Russian citizen would receive a certain percentage of the government's revenues from exports of raw materials and rent paid by companies. He did not provide details of how the system would work.


During the debate, Vladimir Semago, a Communist deputy, called the Chubais-headed State Property Committee a "liquidation commission by the deceased."


The debate brought out a variety of opinions on privatization.


Grigory Tomchin of Russia's Choice said the communist deputies' antipathy toward results of voucher privatization was the proof of the program's success.


Viktor Mashinsky of New Regional Policy proposed to divide all Russian enterprises into three categories -- "efficient, less efficient and incurable."


Some deputies fell back on familiar ideological language.


Grigory Lukava of the Liberal Democratic faction asked: "What is scientific basis for the privatization program?"