Praise for the Voucher

Much attention has been focused on the political, social and economic difficulties facing Russia as it undergoes the painful transition to a market economy.But what seems to have escaped attention is the tremendous progress that has taken place over a short period of time and against a background of political instability. This has been achieved with the most ambitious and arguably the most successful mass privatization effort ever mounted.Since the program is coming to an end soon and the privatization voucher is set to expire, now is a good time to take a look at what has actually been achieved.In the 18 months since mass privatization began, over 12,000 medium and large companies have been privatized at auctions. Today, more than 60 percent of industrial workers in Russia are employed by newly privatized enterprises. Throughout the country, millions of private investors have enthusiastically bought shares in the "gems" of the Russian industry, including car makers ZiL and AvtoVAZ, major oil firms Yuganskneftegas and Lukoil, optics maker LOMO and many more.Large investors -- both domestic and foreign -- have taken strategic positions in industries such as food, tobacco, wood processing, chemicals and non-ferrous metals.Russia is going further than most countries by privatizing its electric, gas and telephone utilities as well.A virtual explosion has occurred in the securities and capital markets with 14,000 industrial companies and 650 mutual funds issuing shares over the last 18 months. Russia now has over 40 million shareholders -- more than that in the United States and Britain combined. The emergence of stock markets, brokers and other financial institutions allow investors to buy, sell and trade shares.Strategic investors are actively acquiring controlling blocks of shares in newly privatized companies. A sound start has been made in corporate management with shareholders' rights groups established throughout the country.Annual shareholder meetings are becoming lively affairs: In at least three regions, more than one in 10 annual meetings have led to the ouster of the old-style management.There is growing evidence of active restructuring in privatized firms. According to a recent World Bank study, some 47 percent of newly privatized firms changed their product mix in 1993; 57 percent introduced new incentive-oriented work compensation schemes; 60 percent laid off workers.None of this has been achieved without opposition from Communists, nationalists and "half-hearted reformers" at home. However, throughout the endless political battles, the fundamental objective of privatization has remained intact: To create a nation of shareholders whose personal interest is directly tied to the success of thousands of privatized enterprises and to the broader success of a market economy. The credit for all this belongs to the leadership and persistence of President Boris Yeltsin and Deputy Prime Minister Anatoly Chubais, who has overseen privatization from the start.But many challenges remain. Russia must move aggressively toward land and real-estate privatization to allow reform in the agricultural sector. An active competition policy and workable bankruptcy procedures are needed to ensure that privatized enterprises are fully subject to market rules.Opposition to reform remains. The formidable pro-private property constituency is under-represented in parliament. Despite initial strong and effective support for Russian reforms, the West seems to be again struggling to find the best strategy to promote change in Russia.I am convinced, however, that Russia's ambitious drive to privatize property will be successful. With it, the overall transition to democracy and a market economy will become irreversible.Maxim Boiko is the head of the Russian Privatization Center. He contributed this comment to Reuters.