Regional authorities do not have great resources at their disposal to normalise settlements and solvency. However their efforts in this area may reduce the degree of "economic tension" building up in enterprises and prevent social crises.

Firstly they can provide information. The region's economic department should compile a list of the most influential enterprises in the region. Statistics should be gathered at least once a month on these enterprises via the Central Bank of Russia or via the enterprises' economic planning departments. These statistics should be used to analyse the creditworthiness of the enterprises and their degree of "impending insolvency". The region should be read to provide provisional financial aid to these enterprises via deferred tax remissions to the local budget or the provision of low-interest credits, etc. Should such aid be unavailable or seem futile, the region's employment agencies should prepare themselves for potent ial production shutdown and elaborate, in conjunction with the enterprises concerned, a retraining strategy and worker's social support programme.

Secondly the enterprises are extremely short of financial resources. Banks charge very high credit interest rates beyond the means of the enterprises. The region could promote the following processes with resources accrued from its taxation policy (via a share of tax receipts remitted to the local budget) and also other resources (official support and recommendations, the provision of premises, financial means, etc.):

1. Replenishment of working capital. The local soviet could adopt a decision on preferential taxation on enterprise profits, to enable it to replenish its working capital. Given the current high credit interest rates, this policy could become an efficient lever for profit utilisation and significantly enhance the soundness of the biggest enterprises. Such a policy has been adopted in Belorussia.

2. Circulation of bills. A legislative base exists (the law on circulation of bills was adopted back in 1991) to replace illegal credits between enterprises in the guise of default payments with legal forms of commercial credit (bills). Enterp rises would be able to use on a wider basis this type of settlement measure, if the region implemented several measures to stimulate the circulation of bills.

Above all, a sufficiently reliable guarantee (surety) is needed for the bills, on a par with the enterprise which has issued the bill. The biggest commercial banks and other authoritative and reliable enterprises could act as guarantors. The guarantees could be backed by an enterprise's assets (as a rule, assets which can easily be sold will be used). However, the biggest pledge transactions may only be carried out by state-owned enterprises, with the prior authorisation of the owner, i.e., the regional state property fund. The number of such pledge transactions could be expanded.

Consequently settlements would be accelerated: if they were not carried out, the state property would be promptly redistributed, sold off at auctions, etc. This might well turn out to be one of the best ways of promoting genuine privatisation.

3. Clearing settlements. In recent times, attempts have been made to set up regional clearing chambers. We believe that enterprises may well adopt clearing for mutual settlements to economise their working capital.

As a rule, however, most clearing settlement proposals are regional in nature and may therefore only affect regions with major internal product rotation. If a region specialises in agriculture, mining or processing and is not party to a number of sectors, (as is the case for most regions in the former USSR) clearing will only have a very limited effect and may even technically complicate and slow down settlements.

Another approach offers more promise: the region could help the biggest enterprises, linked by mutual deliveries and settlements, to set up clearing chambers. In this case, settlements on a clearing basis would be far more effective and could lead to an a ppreciable saving of working capital. Enterprises incorporated in the clearing system, which account for a significant percentage of total mutual settlements, should serve as the basis for clearing procedures, rather than enterprises linked only by their regional affiliation. In addition a special commercial enterprise does not need to be set up as a clearing chamber: one of the biggest banks could fulfil this role.

Although regions may only have a small influence on the solvency of the biggest enterprises, these measures would still have an appreciable effect.

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