Transition   Privatization   

 Excerpts from
The Privatization process in Russia, Ukraine and the Baltic States
by Roman Frydman, Andrzej Rapaczynski and John S. Earle
CEU Press, 1993


The legislative background of Russian privatization

The first serious proposals to privatize state property in Russia date back to the days of the Soviet Union and the famous 500 Days Program, outlined in mid-1990 by Grigory Yavlinsky and Stanislav Shatalin. While the 500 Days Program was ultimately rejected after much vacillation, the more cautious reform proposals submitted, in October 1990, by Soviet Prime Minister Nikolai Ryzhkov and his deputy, Leonid Abalkin, and the later plan, put forward in 1991 by Ryzhkov’s successor, Valentin Pavlov, contained some provisions for privatization, although no detailed program was ever proposed. The common thread in the Ryzhkov—Abalkin and the Pavlov plans was the retention by the central ministries of full control over the privatization process.


There were also various separate proposals at the Russian republican level, culminating in the adoption, in June 1991, of the Law on privatization of State and Municipal Enterprises in the Russian Federa­tion (“Privatization Law”). The law’s adoption was preceded by the formulation of a liberal-oriented Russian economic reform program, associated with the then republican Minister of the Economy, Yevgeny Saburov. Saburov’s proposals contained very optimistic forecasts on privatization, including some barely realistic timetables…Even though Saburov’s proposals were never developed into a full-fledged program, the 1991 Privatization Law constituted a watershed in the Russian privatization process. It set up a special agency, the State Committee for the Management of State Property (often referred to by its Russian acronym “Goskomimushchestvo,” …), to organize the privatiza­tion process and to represent the interests of the state governmental bodies. The chairman of the State Property Committee is given ministerial status and is an ex officio deputy chairman of the Council of Ministers. … The Privatization Law also envisaged the conversion of most large state enterprises into joint-stock companies, and the establishment of federal and local “property funds,” designed as the trustees of corporatized state property. Finally, the law prescribed a series of privatization procedures to be followed in all privatizations. Although some provi­sions of the Privatization Law have been amended by subsequent presidential decrees, it remains the basis for the present attempt at ownership transformation in Russia.

In the wake of the demise of the Soviet Union … Russian leaders focused on macroeconomic reform and the introduction of radical price liberaliza­tion in January 1992. As a result, the implementation of the Privatization Law…was somewhat delayed. Nevertheless on January 29, 1992, president Yeltsin issued his Decree No. 66 on Accelerating Privatization of State-Owned and Municipal Enterprises (the “Acceleration Decree”), …. In December 1991, the President also issued a document called “Basic Provisions of State Program for Privatization of State and Municipal Enterprises in the Russian Federation in 1992” (the “Basic Provi­sions”), constituting a draft of the first annual privatization program required by the Privatization Law. The Basic Provisions outline various categories of enterprises and the order of their privatization, with a special emphasis on the immediate privatization of wholesale and retail trade facilities and other smaller enterprises. The Basic Provisions also postponed the issuance of vouchers to the population, and imposed a series of obstacles to foreign participation in the privatization program.

The enactment by the parliament of the final “State Program for Privatization of State and Municipal Enterprises in the Russian Federa­tion for 1992” (the “State Program”) did not take place until June 11, 1992. The battles raging over the program were centered mostly around the role of workers and management in the privatization process. A number of parliamentary deputies, the old sectoral ministries, enterprise associations, and the powerful industrial interests lobbied for ever more preferential terms for insiders and for the retention of ministerial control. In opposition to this coalition, the team of reformers around the acting Prime Minister, Mr. Gaidar, and the leaders of the State Property Committee defended the idea of privatization which included participation of outsiders and a change in the basic governance system of the Russian enterprises. The existing State Program is a compromise between the two positions. Insiders gained very great advantages in the purchase of state assets and, in many cases, the ability to retain control of large enterprises ….. On the other hand, ministries are kept out of the process and free transferability of the workers’ shares is instituted to facilitate further ownership changes through secondary markets.

The last important legislative enactment at the time of this writing was the President’s Decree No. 721 on Organizational Measures for Transtorming State Enterprises and Voluntary Associations of State Enterprises into Joint-Stock Companies (“Decree 721”) containing the Statute on Commercialization of State Enterprises and their Simultaneous Transformation into Publicly-Held Joint-Stock Companies (the “Commercialization Statute”). This law mandates an extremely accelerated procedure for the conversion of state enterprises into joint-stock companies (called here “corporatization”), which amounts to their imminent removal from the control of sectoral ministries and other organs of state administration. ..

4A. Organizational structure of state regulation of privatization

The Property Committees

The main organ charged with the organization, management, and supervision of the privatization process in Russia is the State Commit­tee for the Management of State Property, or “Goskomimushchestvo R.F.” This body is a ministerial office, and its chairman (at this time of writing Mr. Anatoly Chubais) is a member and ex officio Deputy Chairman of the Council of Ministers of the Russian Federation. …

The central office of the State Property Committee (located in Moscow) employs over two hundred people. …The “territorial agencies” of the State Property Committee are attached to local governments, but their personnel is directly accoun­table to the Moscow office. ….

Parallel to the structure of the State Property Committee, the Privatization Law also calls for the creation of a series of local committees for the management of local state property (local property committees), attached to the administrations of the constituent republics, territories, regions, autonomous regions, autonomous areas, districts (except city districts), and certain cities. Altogether there are eighty-two such local committees. Although most state property in Russia belongs to the Federation (89 per cent of enterprises responsible for 95 per cent of output), the role of local governments will be quite important in the early stages of the program, since they own many individual units, such as shops, service outlets, and small workshops, which are scheduled for early privatization. …

4. According to the Privatization Law, shares of joint-stock companies owned by the state are transferred to special federal and local property funds, set up by the praesidia of the appropriate legislatures. The property funds are then instructed to exercise ownership rights on behalf of the state during the general meetings of shareholders, sell the shares held in the funds in accordance with state privatization programs, act as founders and purchasers of future state-owned joint-stock companies, and process the revenues from state-owned companies. …

5. It is significant to note that sectoral ministries of the Russian Federation have a very minor role in the privatization process (since they are the centers of the industrial lobby in Russia). They are charged with assisting the State Committee of the Russian Federation for Antimonopoly Policies … the ministries and local administrative bodies are specifically barred by the State Program from having any role in administering the state enterprises in the wake of the adoption of the privatization decision concerning these enterprises…

6. Among important bodies promoted by the state will be the invest­ment funds participating in the voucher privatization program. These funds, however, will be private institutions, rather than state organs.

Distribution of proceeds from privatization

According to the State Program, the proceeds from the privatization of state and municipal enterprises are distributed in specified proportions among the federal and local budgets, with small percentages also going to institutions involved in the administration of the privatization process. …

4B.  Overview of privatization programs

The scope of privatization envisaged in the State Program

The State Program divides all state enterprises, according to their eligibility for privatization, into the following categories:

     Facilities and enterprises which are prohibited from being privatized in 1992. This wide category includes, among others, the Pension Fund of the Russian Federation, radio and television centers, pipelines, enterprises involved in monitoring and protecting the environment, highway maintenance organizations, enterprises producing narcotic and toxic substances, ports, waste disposal enterprises and equipment, gold and diamond reserves, public utilities, most of the nuclear industry, specialized hospitals, nurseries, and sanatoria, water resources, resources of the continen­tal shelf, minerals, objects of historical and cultural heritage, etc.

     Facilities and enterprises which can be privatized only by the decision of the government of Russia. These include the armaments industry, parts of the atomic industry, enterprises processing precious metals, the energy sector, commercial banks, communications enterprises, the printing and publishing industry, remaining sanatoria, etc. ...

     Facilities and enterprises which can be privatized only by the deci­sion of the State Property Committee, in consultation with the branch ministries. These include enterprises with a dominant market position, enterprises with more than 10,000 employees or fixed assets with a book value (as of January 1992) of more than Rb 150 mm, surplus military property, rail, air, and sea transport enterprises, large construction enterprises (including materials for construction), animal breeding farms, educational and research institutions, the medical and pharmaceutical industry, liquor and tobacco production, the baby food industry, petroleum products, folk arts and crafts, etc. …

     Facilities and enterprises which may be privatized only in keeping with local privatization programs. These include municipal and public service enterprises (baths, waste treatment plants, licensed pharmacies, and institutions of “socio-cultural significance”). …

     Facilities and enterprises subject to mandatory privatization. These include wholesale and retail trade establishments, restaurants, construction, agricultural enterprises other than state farms, the food production and processing industry, light industry, all enter­prises operating at a loss (with the exception of those listed in the first category), uncompleted facilities, motor transport enterprises, and the property of liquidated enterprises.

The State Program predicts revenues from privatization to amount to Rb 72 bln in 1992, Rb 350 bln in 1993, and Rb 470 bln in 1994. However, the main sources of funds used in privatization during these years are expected to be vouchers and privatization funds (accounts) of the enterprises. …

 Methods of privatization envisaged by the State Program

The State Program divides all enterprises to be privatized into three categories:    
•     small enterprises — with up to 200 employees and book value of fixed capital (as of January 1, 1992) of less than Rb 1 mln;
•     large enterprises — with more than 1,000 employees or book value of fixed capital over Rb 50 mln;  
•     all other enterprises.

Enterprises in the third category can be privatized by any means permitted in the State Program, and their privatization may or may not involve prior corporatization Privatization of small enterprises is to proceed without prior corporatization, by means of an auction, tender, private placement, or liquidation followed by a sale of assets. Large enter­prises must all be converted into joint-stock companies, and their shares must be sold or distributed in the manner described in the State Program, the Privatization Law, and the Voucher Statute. (For more details, see the appropriate sections below.)

The initial privatization procedures

The Privatization Law and the subsequent amending acts specify the first stages of the privatization procedure that is common, in part, to all state enterprises subject to privatization.

The Privatization Law had originally envisaged an individual, enterprise-by-enterprise decision concerning the initiation of the privatization process. The proposals could come from the State Property Committee and its territorial agencies, local property committees, enterprise insiders (the general manager or the work collective), potential investors, banks, creditors, or even ‘allied’ enterprises. Within one month of the application, the appropriate property committee is required to announce its decision (which had to be positive, unless some legal provision restricted the privatization of the enterprise), and to set up a special enterprise privatization commission. The privatization commission, according to the Privatization Law, was to include representatives of the appropriate property committee, the local soviet, officials of financial agencies, the management, and the council of the work collective. The privatization commission was charged with preparing, within six months, a detailed privatization plan for the enterprise, coordinating it with the local soviet and the work collective, and obtaining approval from the property committee. If the work collective rejected the plan presented by the commission, the commission was to modify its plans. In the event of another rejection by the work collective, the plan was supposed to be considered by the local soviet. If the local soviet twice rejected the plan, the final decision was to be left to the State Property Committee….

Acceleration Decree.

The job of preparing a privatization plan of an enterprise involves the valuation of the enterprise….. On the basis of this valua­tion, the privatization commission subsequently determines the start­ing price of the enterprise at an auction or the authorized capital of the joint-stock company into which the enterprise will be transformed, …

The extremely short deadlines imposed by Decree 721, make it also unlikely that privatization commissions will be able to prepare well thought-out privatization plans for their enterprises. Instead, the plans will probably follow a general model prepared in advance by the central authorities… Still, the saving grace of this hasty pace may lie in the fact that, again unlike corporatization, the original privatization plan is not likely to be realized immediately, so that in most cases there will be time for future revisions which take into account the special circumstances of the individual enterprises.

Privatization of large enterprises

This category, comprising ca. 4,000 enterprises, constitutes —together with those remaining state enterprises that elect to privatize through corporatization and the sale of the shares of the new state-owned joint-stock company — the greater part of Russian industry. It is this part of Russian industry over which the greatest battles have been fought. Initially, the Privatization Law had foreseen a rather traditional program of sale for these enterprises, involving their valuation according to the discounted-future-cash-flow method, their transforma­tion into joint-stock companies, and a sale of shares “on the securities market” over an extended period of time.

An important provision (Article 9) of the Privatization Law prohibits the sale of shares of privatized enterprises to any juridical person more than 25 per cent owned by any state body. The purpose of this provi­sion, in addition to ensuring that privatization is not merely spurious, was to end the practice, common under the laws of the Soviet Union, in which some enterprises or their parts were transformed into joint-stock companies and their shares were acquired by other state enter­prises. This practice created a network of cross-holding that further obfuscated the ownership and control situation, and gave managerial insiders firmer control over a portion of the state sector. ..

According to the Privatization Law, the employees of new state joint-stock companies were entitled to a 30 per cent discount on their purchases of shares, up to a limit specified by the (then still non­existent) state privatization program. Installment purchases by employees (with up to three-year terms and a minimum 20 per cent down payment were also envisaged, …

The growth of special benefits for insiders pre-dates the adoption of the State Program. In the earlier Basic Provisions (the presidential blueprint of the State Program), the workers of large enterprises had already been offered up to 25 per cent of enterprise shares free of charge, and the right to purchase up to an additional 10 per cent at a 30 per cent discount ….

Insiders’ options have been still further expanded in the final version of the State Program, which gives enterprise work collectives a choice among three variants of preferential terms:

• Variant I, essentially taken over from the Basic Provisions, allows workers to receive, without payment, 25 per cent of the shares of their enterprise (but with a value of no more than twenty times the minimum wage per worker) in the form of preferred, nonvoting stock, and to purchase an additional 10 per cent of the shares (with full voting rights, but with the value amounting to no more than six times the minimum wage per worker) at a 30 per cent discount off the nominal price. …

In addition to these insider benefits, the high administrative officials of the enterprise (the manager, his deputy, the head engineer, and the head bookkeeper) are also granted an option to purchase a total of up to 5 per cent of the shares at the nominal price (but not more than 2,000 times the minimum wage per person). The procedure for distributing free shares is to be determined by the general meeting of the collective.

• Variant II does not grant any discounts, but allows the employees to purchase up to 51 per cent of the shares at the nominal price, with no additional restrictions.

• Variant III, available only to enterprises with more than 200 employees and fixed assets between Rb 1 mm and Rb 50 mm, combines discounts to all workers with special privileges for a smaller group of insiders who gain the approval of the whole collective and undertake special responsibilities for the future of the enterprise. ..

In order to elect Variant II or III, the work collective of the enterprise must vote for it with at least a two-thirds majority; in all other cases, the “default” Is Variant I.

In addition to the already described advantages granted to insiders, the State Program provides that 10 per cent of the proceeds from the sale of the remaining shares to outside investors will be paid to the employees’ “personal privatization accounts,” which the enterprises may establish for their employees …

The remaining shares of commercialized enterprises will be placed in the state and local property funds, which will be charged with selling them to outside investors. The procedures for these sales are prescribed by the Privatization Law … The prescribed mode of sale will be an auction using either open or sealed bids. The initial offer is to comprise 10 per cent of the total company shares, followed by further offerings every month. Presumably, a large portion of these sales will be to individuals and investment funds using the vouchers distributed to the population, and the rest might be sold for cash to domestic and foreign investors, as originally envisaged in the Privatization Law. But the sales for cash cannot be expected to be very large, and the State Program does not envisage large proceeds from such sales.

Small-scale privatization

…The standard wisdom on this subject was that the break-up of the monopolistic structure of the Soviet distribution, retail trade, services, and consumer-oriented production was a prerequisite for the improvement of the living stan­dards of the population. The focus here was not so much on property as on decentralization and the introduction of rudimentary market institutions. While the growth of the private and cooperative sectors played a role in this respect, the most significant result of these developments in the last years of the Soviet Union was the widespread creation of so-called lease enterprises. (See the subsection on lease enterprises above in Section 3A.)

One of the most serious obstacles to the success of reform programs contemplated in the Soviet period, whether they involved privatiza­tion, leasing, or some other form of decentralization, was the existence of price controls which made marketization impossible. As long as the price of bread, for example, was held at ridiculously low levels, any attempt to release bakeries from state control would have immediately resulted in their conversion into other types of shops where prices were not as strictly controlled. On the other hand, if new owners or tenants were forced to maintain the same line of business, it was impossible to conduct it without being integrated into the old supply and distribution networks, since otherwise there was no way of obtaining the necessary inputs and goods and adhering to mandated prices.

Serious changes became possible only when price liberalization was introduced in January 1992 … But even then, the problem had aspects of a vicious cycle, since in the absence of genuine decentralization, price liberalization often led to an enormous increase of monopoly profits for many enterprises, and created very few of the initial benefits of competition. A quick destruction of the state enterprises’ lock on the market infrastructure came to be seen, therefore, as essential for the success of the more fundamental reforms of the Russian economy.

Even prior to privatization, the Russian government attempted to break up the large enterprises in the consumer sector…

Not surprisingly, privatization of small enterprises and other small economic units carved out of existing enterprises became the first priority of Russian privatization, both because of its potential impact on consumers and because the task of small privatization was seen as less daunting than the job of transforming the ownership structure of heavy industry. Consequently, the State Program singled out wholesale and retail trade establishments, restaurants, the food production and processing industry, and light industry as areas subject to immediate mandatory privatization…


As with privatization of larger state enterprises, the employees of smaller state enterprises or parts of enterprises sold at auctions and through competitive tenders have also been granted a series of preferential terms. These terms have also been gradually made more generous over time, although they have never become as generous as the benefits given to employees of larger corporatized enterprises.


In the last years of the Soviet Union a special problem related to small privatization emerged as a result of the proliferation of lease enter­prises. … More than 80 per cent of the leases giving rise to these enterprises contained an option for the lessees to purchase the leased enterprise, which guaranteed “insider privatiza­tion of these enterprises.” Quite apart from the fact that this contradicted the intention of the new authorities to make privatization an open process and that a number of leases had a distinct nomenklatura flavor, the redemption provisions of existing leases usually did not contain any adjustments for inflation, and did not reflect the real value of the enterprises. While the same can be said about the principle of valuation used to determine the price at which insiders can purchase shares of their enterprises in the case of corporatization … the State Program never permitted an entire enterprise to be sold on such favorable terms, nor were such terms ever the basis for the sale of small enterprises.

Soon after its creation, the State Property Committee prohibited new leasing contracts which included redemption clauses, a restriction which was reiterated in the Basic Provisions. The State Program adopted the policy of allowing redemptions on the terms specified in leases entered into prior to the passage of the Privatization Law…

The voucher program

The Russian privatization program has a very important component of artificial capital, created by the voucher program. The intentions of the Russian authorities with respect to the use of vouchers have vacillated somewhat since the adoption of the Privatization Law (which is silent on the matter). While the Basic Provisions did not foresee any use of vouchers in 1992 and contained only vague references to their use in 1993, the Presidential Decree No. 322, issued in April of 1992, announced that vouchers would be distributed to the population in the fourth quarter of 1992. There followed, in August 1992, another Presidential Decree, “On Introducing a System of Privatization Vouchers in the Russian Federation” (“Decree 914”), supplemented by the Statute on Privatization Vouchers (the “Voucher Statute”), specifying the details of the program. Among other things, these acts set the timetable for the process, according to which the first tranche of privatization vouchers will be issued to every Russian citizen, regardless of age, between October 1 and December 1, 1992.

The rationale behind the Russian voucher scheme is to generate demand for shares of privatized enterprises, to insure a greater degree of fairness in the distribution of resources through the privatization process, and to generate political support for the privatization process, both among the enterprise insiders and ordinary citizens.

Unlike some other voucher programs, such as the Czechoslovak or the Polish ones, the Russian scheme did not create a separate program for the sale of shares and assets for vouchers. Rather, it integrates voucher payments with purchases for cash, and preferential sales to enterprise insiders. Consequently, all vouchers will have a nominal value expressed in rubles and will be accepted at face value by the privatization authorities, although their market value is apt to be different from their nominal value, and is likely to change over time. Again, unlike a number of other voucher programs, the Russian scheme makes vouchers freely and unambiguously alienable, creating a separate market for these certificates, and allowing their concentra­tion in fewer hands.

The program envisages the issuance of several consecutive tranches of vouchers, each with an expiration date (which cannot be less than one year or more than two years from the date of issue) designed to reduce the likelihood that vouchers would become an alternative form of general currency. Once used to purchase shares or assets of privatized enterprises (their acceptance as means of payment for other purposes is prohibited), the vouchers will be extinguished and not reintroduced into circulation. The nominal value of each voucher issued in the first tranche (starting October 1, 1992) will be Rb 10,000, and its validity will be from December 1, 1992, to December 31, 1993.

Once citizens receive their vouchers, they will be able to use them in the following ways: 1) to purchase shares of any corporatized state enterprise on the same terms as if the payments were in cash (see the subsection on the privatization of large enterprises above); 2) to purchase state assets at auctions (see the subsection on the privatiza­tion of small enterprises above); 3) to exchange them for shares of special investment funds created in connection with the voucher program (see below pp. 70—71); 4) to sell them for cash without any restrictions. …

 What was not guaranteed was that the markets in which vouchers are used would clear: it remained possible that a significant portion of the vouchers would remain unused before the expiration of their validity, or that shortages of vouchers could develop in the later stages of the program (perhaps even slowing down the privatization process). …

… the general problem arising when the use of vouchers is combined with the use of money. Since prices of privatized assets and shares must be expressed in rubles, it becomes necessary to assign a monetary value to the vouchers as well (something that has been avoided in Czecho­slovakia, for example), and it would be difficult (although not impossi­ble) to rely on their market value alone. The authors of the Russian program have therefore decided to give the vouchers a nominal value. Even they have no reliable way of ensuring that this number even approximately corresponded to the market value of the vouchers. This was bound to create some problems and a degree of confusion among the recipients, who might lose confidence in the program if the market price of the vouchers falls far below their nominal value or if they sell their vouchers prematurely, not realizing that the real value greatly exceeded the nominal price.

Apparently as a result of this type of consideration, the State Property Committee has abandoned the idea of mixing vouchers with money in the same auctions, and now intends to run separate auctions for a certain percentage of the shares, in which only vouchers will be used. But vouchers will still be used together with money in the initial stages of the program, when enterprise insiders will purchase shares offered to them on the preferential terms specified in the State Program. This fact also makes the nominal value of the vouchers particularly problematic. Since, as discussed in the subsection on the privatization of large enterprises, the value of shares sold to the insiders in the Russian privatization program is determined on the basis of the company’s book value unadjusted for inflation, the vouchers are apt to acquire tremendous purchasing power in the hands of lucky insiders whose enterprises have some positive value. …. the chairman of the State Property Committee, Mr. Chubais, has also stated that one voucher will have the real worth of Rb 150,000 to 200,000. Indeed, in an enterprise employing 1,000 people, the value of the vouchers distributed to insiders and their families might easily come to Rb 30 or 40 mm (counting three to four persons per family). Since the State Program seems to associate the number of 1,000 employees with the book value of Rb 50 mm of fixed assets,one can conjecture that the insiders who choose Variant II for their preferential treatment (see the subsection on privatization of large enterprises above) will easily be able to use their vouchers to purchase the full 51 per cent of the shares of their state enterprise (to which the State Program makes entitled them) and stifi have vouchers to spare. In effect, then, the voucher program seems to give the controlling blocks of state enterprises to the insiders free of charge.

The Russian voucher program also contains provisions concerning the creation of special investment funds, which will be able to collect vouchers from the population in exchange for their own shares, and use the vouchers to purchase shares or assets of privatized enterprises. These shares or assets will then be held by the funds in trust for the funds’ shareholders. Investment funds of this kind are common to many large-scale free distribution schemes and can fulfill two impor­tant functions. First, the investment funds allow an average investor to diversify his modest assets and rely on the expertise of the fund to determine the best method of investment. Second, they can lead to a concentration of holdings which may be used to exert influence on the management of the privatized enterprises. It is unlikely that a very large number of small investors, facing serious collective action problems, could do the same.

At the time of this writing, the Russian investment funds are expected to be private institutions, governed by a special set of regula­tions, which will be issued in September 1992. These regulations will provide a simplified registration procedure for participating investment funds (as distinct from normal mutual funds, which will not be able to purchase vouchers in exchange for their shares), and will require that they are organized as open joint-stock companies, with at least 50 per cent of their shares exchanged for vouchers. The draft regulations also require that the funds be invested in at least ten companies, which has been criticized as insufficient for proper diversification under Russian conditions. But even if the investment funds are able to provide the means of diversification and expert advice to the beneficiaries of a Russian voucher program, they are unlikely to be very effective in fulfilling the second of the functions we have mentioned, namely, assuring the presence of an active owner in the corporate governance structure of the privatized enterprises, since the draft regulations also prohibit the funds from buying more than 10 per cent of the shares of any given enterprise….

Spontaneous privatization

In purely quantitative terms, it is possible that the greatest part of privatization has been unofficial, informal, spontaneous, and of dubious legality. We have alluded at various points to the mechanisms through which nomenklatura insiders have been able to convert their controlling positions in many enterprises into legal titles of one kind or another. Other mechanisms through which state assets have been converted into private ownership involved joint-venture arrangements with foreign participants receiving state assets at a very low price in exchange for kickbacks to insiders in the form of ownership participa­tion, bribes, and jobs with special privileges. Siphoning assets from state enterprises, through phony sales and other contractual arrangements, is also said to be very common. Having said all this, however, it is important to note that, despite the wealth of anecdotal evidence and the mythical dimensions of spontaneous privatization, no genuine data are available on the size of this phenomenon, nor do we have a systematic overview of its forms.




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