We proposed a phased-in transition to closed auctions (or tenders) and open non-commercial tenders, in order to accomplish two tasks. Firstly, to expand the social base, i.e., include in the privatisation process those groups which lack the requisite mean s to participate in ordinary auctions. Secondly, to create a requisite basis for a social policy oriented toward providing opportunities for the least protected social groups (the disabled, war veterans, etc.) to engage in entrepreneurial activity.

Trends

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According to the State Property Committee, by the end of August 1992, 4% of public catering outlets, 8% of retail trade and 12% of services have been privatised in Russia. In Nizhni Novgorod oblast (including the city of Nizhni Novgorod), these indicators were several times higher: 30% for both public catering outlets and retail trade, and 20% for services.

However, lately the auctions have been proceeding far less actively:

a) the number of unsold lots is increasing (in March-April only 1-2 out of 20 lots were not sold, but in the summer and autumn, at times up to half the lots were dropped); and

b) the average purchase price is decreasing (often lots are sold at close to starting prices).

Consequently, even local authorities which successfully implement "small business" privatisation (e.g., in Nizhni Novgorod) are confronted by new problems, mainly a falloff in privatisation activity, owing to the rapid depreciation of capital. The privati sation of retail trade, public catering outlets and services may still be completed by "pure" auctions (but not in all regions). Small business privatization in other sectors via this method will be complicated or cause undesirable social consequences.

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