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. Last Updated: 07/27/2016

Moscow Plan to Control Sell-Off

As Russia opens a new stage of privatization favoring a small class of private owners, the Moscow government is launching its own sell-off plan designed partly to protect Muscovites from what it sees as the dangers of private ownership, said a top city official. Like the new national plan approved Thursday, Moscow's program aims to attract massive investment and involves selling state property for cash rather than the investment vouchers handed out in 1992, Moscow Property Committee chairman Oleg Tolkachev said in a recent interview. But while federal officials expect private owners to undertake deep restructuring such as laying off workers and abandoning unprofitable activities, one of Moscow's "main goals" is to "retain jobs" and prevent many companies from changing their lines of business, said Tolkachev, who oversees the city program. The program gives city authorities broad powers to limit sell-offs, select new owners and govern the activities of privatized firms. Unlike the federal plan, it does not give new owners the right to privatize their companies' land and buildings. Championed by Mayor Yury Luzhkov, who led the charge for the increased local control over privatization granted in Thursday's new policy, the Moscow plan could be a model for future local plans different from and even opposed to the government's. Luzhkov, who recently won President Boris Yeltsin's go-ahead to run privatization in Moscow his own way, has long criticized the voucher privatization run by State Property Committee chairman Anatoly Chubais as a "swindle" that handed over Muscovites' common property to "speculators for a song." The long public struggle between Chubais and Luzhkov reflected the national split over whether speedily decreasing government control will cure or worsen the nation's economic ills. Tolkachev spoke for those who believe privatization so far has mainly destroyed jobs, production and the vast array of benefits giant state companies once provided to entire communities. "We are not against private property," he said. "But you can't say, and you can't think, that administrative control is so much worse." He brushed off charges from the State Property Committee and City Duma deputies that the Moscow plan amounts to unjustified interference in private business that could scare off investment and a broadening of city powers that could increase corruption. "You can't deny the corruptibility of officials," he said. "As long as people are alive, the question will be raised in whose interests decisions were made. But you can't say that a private owner will be better from the point of view of the city's interests." Tolkachev said "several hundred" enterprises would be privatized this year in two different ways designed partly to increase city revenues from sell-offs. At "commercial auctions," companies will go to the highest bidder. At "investment auctions," which the city prefers, city committees will choose a buyer, "not the one who brings the most money today, but the one who has the best investment plan," Tolkachev said. Muscovites may also exchange vouchers for certificates which they can trade for shares in city property, city officials said this week. The special privatization plan adopted April 19 by the Moscow government reads that foreign capital may take part in privatization according to "decisions and decrees" by city authorities. It was unclear Friday whether that entailed any special restrictions. Tolkachev said Moscow authorities would set starting prices for real estate based on their "real market price," which could reach 50 to 60 times their yearly rent in the center and 15 to 20 times on the outskirts, which was much higher than prices mandated by Chubais, he said.