THE Russian government's "voucher privatisation" operation will be remembered as the weirdest experiment ever conducted in the name of economic reform.

By June. 80 per cent of eligible citizens had participated in the operation, which was supposed to make everyone a property owner. But the official figure says nothing of the scheme's many absurdities and abuses.

Last October it became known that the St Petersburg shipyard Baltiisky Zavod had been sold for $150,000, and the huge Yekaterinburg Uralmash engineering complex- put on the market for two-and-a-half times the price of a babyfood shop.

Since then the most glaring example has been that of Russia's largest car manufacturer, the Lada-maker GAZ. snapped up by a front of 15 firms which accumulated 1.5 million vouchers for the purpose. Elsewhere, company managers were able to close purchasing bureaus before the appointed date in order to prevent enterprises being acquired by "outside" investors.

When privatisation was being prepared in 199.. Anatoli Chubais, chairman of ’he Committee for State Property, wanted it to be by direct sales. The government and President obliged him to accept a preliminary period of nerodnaya privatisatsia (people's privatisation). for political and ideological reasons.

A campaign was launched, financed by a United States pressure group for democracy and free enterprise, to explain privatisation. In popular imagination. privatisation became identified with" the Issue of vouchers, if people were tickled by the notion of proprietorship. 'disappointment soon came with the devaluation of. vouchers by rising prices and monetary Inflation at a rate the government had never foreseen.

Strapped for cash for living, many sold their vouchers to the touts lining every Moscow underground railway station. Those who held on to them fdund that by the time, the scheme ended the original value of 10.000 roubles (two week's average - salary) had

dwindled to the pried of nine kilos of tomatoes. One Russian sold his own and his parents' vouchers to buy a pair of shoes.

In the worst cases, owners were persuaded to put theft vouchers into shady "voucher funds" which evaporated or went into bankruptcy without paying ,a kopeck of interest. Not all funds were df this, kind. But of the 650 that came into existence only 100 or so will be left when the scheme ends, the survivors being funds that have discovered new forms of activity. such as the "Republika" fund, now Number 2 In the Russian share market, with a capital of 2.5 billion roubles.

The ending of the voucher phase will make way for the second stage of privatisation — "cash privatisation" which is supposed to last until the end of the year. In this stage, everything not sold in the first stage — that is. shares in the juiciest economic sectors, with the largest and most efficient enterprises, like gas and oil — will be sold by auction.

The second stage zwill include the remaining state share — usually 20 to 30 per cent — of enterprises privatised by vouchers.

But "cash privatisation" is as Ill-designed for the creation of a healthy economy as were vouchers for a nation of small owners. The problem comes from the limited amount of capital available in a country impoverished by the flight abroad of every convertible asset.

The government hopes to attract back the often criminally acquired billions lying in, foreign banks and investment funds. But there , is little ground for such optimism. Why should Russian capital-holders (especially those with plenty to hide) rush to sell "Safe foreign assets In order to buy into privatised Russian industry amid extortionate taxes and runaway inflation?

And the banks are more likely to stay .Interested in fi-naneial games, in which they can turn inflation to their advantage.

A further problem of capital ' shortage is the run-down state of Russian Industry. To start economic production it will be necessary to spend huge sums on machinery and equipment, training and reorganisation. Hardly any potential domestic buyers possess — or are willing to provide — the money for Such investment.

Everyone is waiting for It. to come from the government through special budgets. What .the state receives from the sale of its assets it will be expected to hand back to buyers. One thus faces the absurdity cf a government in quest of money ending up not as, a recipient but as a donor.

For disillusioned reformers the proper course would have been to skip vouchers and carry out privatisation, with realistic valuations, as quickly as possible, at the same time usihg the machinery for bankruptcy and operating a programme of social security for job-losers.

But the new law on bankruptcy has been found to

be unworkable, and no social security system is in place. The crowning folly is that cash privatisation is closed to foreign institutions, which alone have the resources for a productive long-term investment programme.

Without foreign capital the market will play games, prices will plummet for wan.t of offers. and the best that Russia can offer wall go for a song. Hence a growing but still unheeded demand to revise the privatisation law and put domestic arid foreign capital on t lie same footing.

Oppopents of foreign par-. ticipation in the privatisation programme predict an explosive reaction if people see outside capital flooding in to "buy up Russia."

Although this is unlikely in regions such as Tyumen where people are used to foreign investment in the gas and oil in-' dustry. the danger arises In places where foreigners are still a rarity. There, the way is open for picketing and protests backed by "patribtic forces." But- even in the back-' woods, sentiment must be tempered by the need of millions to see the wheels of industry turning.

Many Russians, including Prime "Minist-er Viktor Chermomyrdin, are convinced that without foreign invest-ment’there is rio escape from the deep economic crisis. Others say, we have wasted time and resources, but we have kept our economic independence; in a year or two conditions will stabilise, the conditions that have sent capital abroad will end and we shall see it coming home.

Even the opponents of foreign competition. notably in the banking sector, know that unless domestic and foreign investors are put on an equal tooting. Russians will use the protected terms of privatisation not to gear themselves for tomorrow, but to sit on their hands and continue the business of speculation. — Gemini News

The writer is a former Foreign Editor of the London 'Observer' and was for four years the newspaper's Moscow correspondent.