Quiet Start for Russia's Privatization FORMER SOVIET UNION

Article excerpt

RUSSIA'S massive privatization effort began yesterday, but what the government considers a watershed event for market reform appeared to generate little enthusiasm.

Large crowds failed to materialize at distribution centers in Moscow, where citizens could receive privatization vouchers. "We thought there would be horrible lines, but that has not been the case," says Irina Lvova, the head of one distribution center.

Under the plan, a privatization voucher worth 10,000 rubles (about $40) will be distributed to each of Russia's 150 million citizens over the next three months. As of next year, people can use the vouchers to purchase shares in large state enterprises undergoing privatization, or to pool them in an investment fund. Those who do not want to participate can sell their vouchers.

Thirty-five percent of state enterprise shares have been set aside for purchase through the voucher system. The remaining shares can be sold, or given by factories to employees, either for free or at a discount.

Russian officials are counting on the program to spur the growth of a middle class, generally considered the driving force of a healthy market economy. At the very least, Privatization Minister Anatoly Chubais says, the program will make radical reforms irreversible by causing "the death of the command-administrative system" created by former Communist leaders.

The program cleared a big hurdle last week when hard-line members of parliament failed to win legislative approval to delay privatization's start. Parliamentary opponents contend the plan violates existing legislation, an allegation denied by Mr. Chubais and other supporters.

"They'll say anything," Chubais says, referring to hard-liners in parliament. "But behind their statements is the fear that the totalitarian system will crumble."

With the defeat of the conservatives in the legislature, there is nothing left to stop the program from moving forward, Chubais insists. But opponents, who include former Soviet President Mikhail Gorbachev, say the largest obstacle to the program's success has yet to be overcome: the skepticism of the people. …