Privatization to Get Information Support

A high level of informational support will be needed for privatization, according to the Federal Property Management Agency, which is writing letters to investors, inviting them to presentations and even creating a call center for them.

The agency wrote to Economic Development Minster Elvira Nabiullina offering to improve the privatization mechanism, and a copy of the letter was obtained by Vedomosti.

Some of the proposals already are being implemented: The State Duma approved, in a first reading, amendments that would allow the government to adopt a three-year plan for privatization, and the government is reviewing legislation that would enable investment banks to sell government property. Soon, a list of assets that the state is prepared to sell in the medium term will be made public.

Successful privatization is impossible without a large-scale informational campaign, the letter says. The property agency wants to publish investment memorandums, create a call center for investors, write letters and hold road shows and presentations for the sale of large assets.

Market analyses will be needed, and investors will be sought for every enterprise. All of this will require independent investment consultants, the agency says.

Before, it was a seller's market, but now it's a buyer's market. It is necessary to compete for investors and to understand their requirements, said Ivan Aksenov, head of management for the property agency. "The state is interested in strategic investors, who are able to develop the enterprise," he said.

Before the crisis, investors often viewed enterprises that were going to be privatized as speculative assets, he said. "You could buy an idled company and in half a year sell it and make money on the appreciation of the real estate alone," he said.

The property agency is offering to prepare enterprises for sale in advance. Their reports should correspond to the real state of affairs, and property rights should be registered in a proper manner. Investors should also be able to pay in installments, carry out due diligence and work with banks to get financing using the asset as collateral.

The Economic Development Ministry supports the agency's idea, a ministry official said. "We gave the agency an order to strengthen the informational support for privatization," he said.

Calls to ministry spokesmen went unanswered.

These are intelligent ideas, a Cabinet official said. "It's effective positioning; advertising can increase the sales receipts," he said.

The Duma is considering amendments to the law on privatization that would allow part of the revenues fr om the sales of state property to go toward such measures, he said.

In former socialist countries, wh ere privatization is being actively carried out, the necessity of informational support and continuous contact with investors was recognized a long time ago, said Andrei Stepanenko, head of the St. Petersburg Property Fund. Presentations of the fund's assets will be held nine months before their sale, Stepanenko said. Investors need half a year for due diligence.

“If large assets are put up for sale, and they are properly advertised, then the revenues from privatization will be a serious support for the budget," said Yevgeny Yasin, scientific director of the Higher School of Economics. But the property agency has to convince investors not only of the attractiveness of the asset, but also that they can do business with the state, he added.