Privatization of Russian Industries

For some, the privatization of Russian industry has been one of the great success stories of Russia's painful economic transition: quick, firm and radical action was taken to shift the great bulk of Russian industry out of state hands, thereby laying the basis for a radical restructuring of enterprises and improvements in their performance. Others see privatization as a best a failure, at worst a catastrophe. Not surprisingly those opposed to the market and economic reform as a whole share this view. But many commentators who see themselves as supporters of reform find plenty in Russian privatization to criticize: the process led to the transfer of ownership to inappropriate people and as a consequence no beneficial restructuring of enterprises or the economy can be expected.

While this paper will attempt to cover the three key facets of privatization: that enterprises be transferred to private ownership; that the new owners be able de jure and de facto to exercise ownership rights; and, finally and ultimately most importantly, that the new owners exercise their ownership rights in such a way as to bring about improvements in enterprise performance. The key issues to be surveyed, therefore, are: who as a result of privatization obtained ownership of Russian industrial assets, and are they appropriate owners; can new owners, particularly if they are appropriate owners, exercise their ownership rights; and has privatization led to improvements in enterprise performance? The paper will deal with privatization only within the industrial sector; thereby ignoring the highly controversial privatization's of the last twelve months or so in the energy and utility sectors.

Who are the new owners?

Global data showing about 70% of GNP being produced in the private sector reflects the high levels of privatization of industrial enterprises, with the great bulk of enterprises having been privatized by mid-1994. However privatization does not necessarily mean the complete