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Privatization in Russia started in 1992 soon after the
adoption of the first privatization program. In late 1992, about 150 million
privatization certificates (vouchers) were distributed which gave the
bearer the right to buy small-scale business or shares at auctions, as well
as to pay for housing. The first auction took place in December 1992. The
voucher-based schemes ended on July 1, 1994, marking the beginning of the
second stage of the privatization process and replacing voucher
privatization with cash privatization. By then, 75 percent of small-scale
enterprises had been privatized, along with over 80 percent of the industrial
workforce. Overall, 15,000 companies were privatized using vouchers, which
accounted for 60 percent of industrial assets. A
"loans-for-shares" type of ownership transfer was launched in
1996. Under the scheme the government traded its shares in a company for a
loan, while the creditor took partial control of the company for three
years. In 1997 the privatization process entered a third stage -
case-by-case privatization. The largest 1997 deal was the sale of a
blocking interest (25 percent plus 1 share) in the financial and investment
holding Svyazinvest at the auction. The stake was sold to a Cypriot company
Mustcom Ltd. for 1.875 billion USD. After a few years of inert debates, in
2001 the government launched the privatization of the oldest insurance giant
– OAO “Rosgosstrakh”- 50 percent minus 1 share was put up for sale. By 2001,
the privatization of the aluminum sector was more or less completed with
the sale of the Russian Fund for Federal Property’s 14 percent stake of
Novokuznetsk Aluminum Plant to Russky Aluminum for 6.02 million USD in
August 2001. The privatization of the national coal sector progressed with
the sale of "Kuzbassugol", "Kuznetskugol" and
"Vostsibugol" coal companies. It is expected that divestiture in
this sector will be completed by the end of 2002 after the potential sale
of a 38.41% stake of “Vorkutaugol” holding.
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The privatization process is governed by the new Federal Law on Privatization of
State and Municipal Property (in Russian), adopted on December 5, 2001
and by annual privatization programs (submitted together with the draft
federal law on the federal budget for the respective year) which operate on
different administrative levels: federal, regional and municipal.
The first Russian institution in charge of state property
and privatization was the State Property Committee (GKI) and was initially
created as the agent representing the Government in state enterprises. It
was given ministerial status and subsequently renamed into the Ministry of
State Property in 1997. In 2000, the Ministry was merged with the Committee
on Land Policies and transformed into the Ministry of Property Relations with
the mandate of overall federal policies on property issues, privatization
and management of state property. The Russian Federal Property Fund
is responsible for selling federal assets. The Fund was established in
February 1992 and has 77 representations in the regions of Russia.
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By the end of 2001, 129811 enterprises have been sold, representing
about 66 percent of the entire inventory of enterprises at the beginning of
privatization (according to documents prepared for the summit of the
Russian Federation Government on privatization of state property in 2001
and the privatization program for 2002). About 700 enterprises and packets
of shares were sold in 2001. The largest deal in 2001 was the sale of
shares of “Kuzbassugol” holding (the third biggest national coal producer,
owning 17 coal mines, 3 concentrating mills, and 62 back-up facilities).
The shares were sold at special auctions for 175.5 million USD.
However, there are still about 4000 government stakes in
joint stock companies (including about 2100 of more than 25 percent) and
about 9400 state unitary enterprises. See profiles of companies slated for
privatization in the near future on PrivatizationLink Russia -
an online service launched by the Multilateral
Investment Guarantee Agency in partnership with the Ministry of
Property Relations of the Russian Federation.
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According to the privatization program for 2002, it is
planned to privatize 426 joint stock companies and 150 Federal State
Unitary Enterprises. The largest expected deals for 2002 are the sale of
19.68 percent of shares of “Slavneft Oil and Gas Company”, and 5.9 percent
of stock of “Lukoil Oil Company”. According to economic forecasts revenues
from privatization of federal property in 2002 are expected to reach USD$1.2
billion.
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