A package of decrees has been prepared for President Boris Yeltsin to sign next month aimed at jump-starting private investment in Russia and curtailing the government's drip-feed of cheap credits to industry, Economics Minister Alexander Shokhin said Friday.


"We are developing a competitive mechanism for the allocation of credits," Shokhin told a press conference. "We hope to revitalize investment without increasing the money appropriated for investment."


Under the draft legislation, the government would extend loans to enterprises based on the merit of their investment plans. This would represent a major break from Russia's traditional credit policy, in which cheap loans go mainly to those industries with the strongest lobbies in Moscow.


Shokhin said the new order would place the bulk of responsibility on the nation's commercial banks, charging them with the selection of viable investment projects to present to the Economics Ministry. The state would then pay no more than 20 percent toward the cost of investment projects that ministry officials deemed worthy. The enterprises would have to come up with the rest of the funding on their own.


"All work on those projects should be done by banks, including feasibility studies," the economics minister said. "And when such projects are submitted to the Economics Ministry we will provide extra investment funds to the more promising of them."


The government's investment would either come as long-term, hard-currency loans at a commercial rate of interest, or the state would take shares in the project that it would later sell on the securities market to recoup its investment. Commercial banks would be responsible for monitoring the projects and ensuring that enterprises adhere to their investment plans.


The government also plans to help enterprises raise their own funds by guaranteeing securities floated to attract private investors, Shokhin said. The guarantees would be provided only to enterprises whose investment plans had already been approved.


Shokhin did not say whether the new system would be applied to all sectors of the economy, or whether it is intended to replace entirely the current system of giving low interest credits to selected enterprises that have strong lobbies in Moscow.


The government presently lends money to such enterprises at a mere 10 percent annual interest, compared to the Central Bank's refinancing rate of 130 percent which largely determines commercial lending rates.


High interest rates and the reluctance of commercial banks to extend long-term loans have been major obstacles to Russia's attempts to revitalize its economy. Total investment in the Russian economy has fallen for the third year in succession, down 27 percent in the first six months of this year compared to the same period in 1993.


The new decrees could offer firms a new avenue for longer- term loans, namely government funds administered by the commercial banks, as well as by issuing their own securities, guaranteed by the government.


Lower monthly inflation figures have recently brought interest rates down. But this has not helped to solve an equally thorny problem for many Russian industries, the massive burden represented by inter-enterprise debt, currently standing at around 112 trillion rubles ($51 billion).


On inter-enterprise debt, Shokhin said that 30 regulations were being prepared to force enterprises to deal more responsibly with their debts.


The regulations would give creditors more power to act on court decisions, including the use of bailiffs to collect debts. Access to arbitration courts would be made easier by cutting the commission the courts charge on hearing a claim -- currently 10 percent -- to 1 percent.


Shokhin, however, was cautious about a Finance Ministry proposal to introduce a system of state promissory notes that would allow enterprises and the government to pay their debts through certificates rather than cash. He said such a mechanism may be inflationary because, in the case of paying wages, for example, a bill of exchange would have be converted into cash.