These proposals should help large state enterprises temporarily separate their transformation into joint stock companies from the related allocation and sale of shares. Reform is highly dependent on a change in the approach to "large-scale privatisation". Such privatisation could only be implemented quickly, if we engineered some sort of forcible redistribution. This, however, would not resolve a single problem. We should make support for additional investments by new proprietors (with a controlling inter est) and the maximum possible power for managers, as well as effective control of the proprietors, a top priority issue.

Dangers

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Any "rapid" privatisation of large industrial enterprises, carried out virtually simultaneously with their transition to joint stock companies, is fraught with very serious consequences. On the one hand, work collectives are set a strict timeframe, gover ning their privatisation choice; by October 1 1992, they must choose between two scenarios. Either (as in scenario 1) members of the work collective receive 25% of the shares free of charge, in the form of preferential shares; up to 10% of the shares may be purchased by them at a discount price; up to 5% of the shares may be bought by the enterprise managers; and 60% or more of the shares are transferred to the state property fund. Alternatively (scenario 2), the work collective buys up to 51% of the ord inary shares (with a coefficient of 1.7 times the nominal value): the remainder are transferred to the state property fund. A third scenario stipulated that innovative groups of enterprise employees could receive 20% of the ordinary shares, if they manage d to fulfil the terms of an agreement signed with the state property fund and prevent an enterprise's bankruptcy. However, it does not apply to Nizhni Novgorod oblast: no enterprises meet its conditions (staff of over 200, and book cost of capital asset s from 1 million to 50 million roubles).

On the other hand, the property committees and funds are also subjected to a strict framework. After receiving the shares, they must sell them as soon as possible (or at least a significant share) to support the "voucherisation" programme (at least 35% of the shares of these enterprises must be sold in exchange for vouchers). Otherwise, the local authorities will have to justify their actions to their electorate, as the privatization vouchers are only valid until the end of 1993.

The vast majority of enterprise managers and members of work collectives only have an elementary grasp of the reasoning behind these reforms and their consequences. In addition, even if the joint stockholding programme proceeds in accordance with the Gove rnment's plans, it will have the completely opposite effect. Most enterprises will find it impossible to locate a major investor, effect a rational reorganisation, provide a fair appraisal of the enterprise's value, etc. Decapitalisation and administrative disorganization pose a genuine threat. First of all, enterp rises do not receive anything from privatisation. All funds from the sale of shares are diverted to the side, to the state. Moreover, the enterprises unexpectedly receive a "quitrent" in the form of dividends which must be paid to a huge number of small s hareholders. Secondly, the assets are inevitably dispersed far and wide and consequently there is no true owner-- i.e., a holder of the controlling block of shares, who might be interested in investing in the enterprise. The existing traditions of self-ma nagement (the role of work collectives), the inadequacy of the legislative base (the lack of guarantees of the mutual rights and obligations of shareholders and managers), the contradictions in the standard acts on joint stockholding, and

finally, the ins ufficient training of management personnel in new conditions, are bound to make the new joint stock companies virtually unmanageable.

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