Text 2. Read this article and give Russian equivalents to the underlined expressions.

ANATOMY OF NEW RUSSIA'S PRIVATISATION

Communism - state control - nationalisation. Capitalism - free market control- privatisation. It all sounds pretty simple and indeed since 1990 and the collapse of communism, news reports from Eastern Europe have often taken on the tone of evangelism. A country has 'made progress' in so far as it has privatised state companies, or it has 'stagnated' in so far as it hasn't.

But in Russia, at least, it's been a bit more complicated than that. Reforming officials like first Yegor Gaidar and then Anatoly Chubais identified at least two different kinds of privatisation from the beginning.

First, there was 'corner shop privatisation' which dealt with the hundreds of thousands of small enterprises such as neighbourhood shops, hair-dressing salons, petrol stations and so on. Then there were huge industrial concerns, vast sprawling inefficient factories and industrial complexes that became almost emblematic of the communist Eastern Europe. The first were much easier to deal with than the second.

In the middle of 1992, the State Committee for the Management of State Property started to sell off small-scale enterprises, which were defined as those having 200 or less employees. In most cases, those companies, usually shops or services were sold to their employees. One year later, some 72,000 firms had been privatised - over half of the country's small companies were in private hands.

Larger industrial ventures were much more difficult. The government started to sell them off in 1993, having issued late the previous year privatisation vouchers to all Russian citizens. ZIL, the car and truck manufacturer and maker of the Soviet limousines, was among the first companies to be auctioned.

By 1995, 80% of the economy was estimated to have moved at least partly into the private sector. But many of the larger concerns suffered what were called 'insider privatisations' where the former Soviet management and workforce combined to take a majority of the shares and to prevent real change.

These companies continued to operate in a web of mutual debt, producing things that weren't needed, selling to bankrupt customers and waiting for the bank system to bail themout by issuing them with cash to meet their obligations - such as salaries - against the

value of debts owed to them that were never going to be repaid. That was the way it had always worked in the good old days.

Business academics and political scientists have been fascinated by the phenomenon of state enterprises going private and continuing to act the same way as they did before. In 1994 and 1995 some two thirds of the privatised large manufacturers were found to be in the hands of their former managers and workforce, who often together made sure, for example, that there were no lay-offs or modernisation that might cost jobs, and would limitthe ability of any outsider to buy a stake in the business.

Managers typically held about 20 percent of the stock of these former companies, while workers held 40-50 percent. So between them, they could often keep a stranglehold on the direction of the company. Recognising this, the government changed tack in 1995 and launched a cash-privatisation drive instead of the voucher scheme.

This involved bringing in Russia's new commercial banks that could be guaranteed to be more sharkish than the previous management. Under the 1995 scheme, the government borrowed money from the banks in return for equity and the right to manage a given company for a three year period. The state would retain ownership of the company unless it defaulted on the loan it had from the banks, but the banks would get a share of anyincrease of value they created under their management - and often in practice first right of refusal to buy the shares when the companies were finally privatised.

The banks were also sinking some of the enormous profits they had made on foreign exchange and treasury markets into moulding new industrial and commercial groups.

Another law "On Privatisation" was passed on July 21, 1997. Major changes concerned tender sales of large enterprises. Previously, large companies were privatised either through investment tenders (bidders’ promises to invest in the company were evaluated) or commercial tenders with investment conditions (a minimal level of investments was established and then the company was sold to the highest bidder). In 1997, the latter was abolished, and the concept of the former was clarified. In addition, a new type, commercial tender with social conditions was introduced. This meant that the new owner should maintain a certain level of employment and refrain from reducing workers’ benefits or changing the area of the enterprise operations.

 

 

Task 1. Answer the following questions:

1. Explain the problems that were caused by ―insider privatisations‖.

2. What did the Russian government do when it introduced a ―cash privatisation drive‖ in 1995?

3. What does it mean to keep a ―stranglehold‖ on the direction of a company?

4. What is your opinion about privatisation in Russia? Has it been good or bad for the country?

 

Text 3. Study a UK expert’s speech at a conference in Japan in which he describes the main aspects of privatisation in the UK. Give Russian equivalents to the underlined expressions:

I am going to look at privatisation from three angles. The first is to consider what actually happened in the UK. The second is to suggest what from this is most relevant to othercountries, and what perhaps is less relevant. The third is to suggest a few lessons that might be learned - not only from success stories, but also from mistakes we made in the UK. I hope it is clear even from this introduction that none of us would argue that the UK

privatisation programme was perfect. There are some things we did well that we hope you may want to follow or adapt for your own circumstances. But we recognise that many things could and should have been done differently.

It is important to start by considering the objectives of the ministers who were leading this process in Mrs Thatcher’s Government. The Government was doing anything it could to raise money as a result of budget deficits in the late 1970s and early 1980s.

The Government saw the greatest long-term value for the UK economy in improving the quality of service and the productive efficiency of the economy, by subjecting businesses and their management to more competitive forces.

It is not difficult to see why. In the early 1980s the UK was in the grips of its worst recession since the 1930s. The strategy of Mrs Thatcher’s Government was that short-term stimuli to the economy, even if they would be effective, would not be sensible. What was needed was long term reform to improve effectiveness. One look at our economy against its European neighbours made it obvious. Our GDP per capita was around 20% below that of France and Germany. The British Steel Corporation was producing 35% less steel per person than its French and German competitors.

If this situation was going to be turned round it was vital for reform to take place in the public sector. Public industries represented 25% of the economy by output and over 30% of employment, and public expenditure represented 45% of GDP. The public sector dominated large areas of the service industries. Its under-performance was a daily disappointment to UK consumers and industry – 50 days or more to get a new telephone line, for example, compared with less than 10 days now.

Against the background of this policy framework I would like to give some examples of the decisions which we took about specific industries.

The programme in the UK had clear phases. The first phase, broadly from the initial sale of shares in British Petroleum in 1977 under the Labour Government until 1984, was the sale of industries operating in competitive market places. These were relatively straightforward sales, involving little restructuring and without too much public debate.

The second stage began in 1984 with the first sale of British Telecom shares, the first monopoly utility industry to be privatised. It was this that paved the way for the later sales of Gas, Electricity, and Water - and which really began the debate about privatisation in the UK. These utilities were all entities that had scope to improve their performance. But they were already selling their output at economic prices and making operating profits. With the exception of BT, they were all sold as a series of local monopolies. But the market over which they had monopoly power was often destined to reduce over time as competition was introduced. These companies were also subject to strong economic regulation. As a result, even in these early sales of monopolies, the Government was not maximising proceeds – it was seeking to maximise competitiveness.

We did not always get the details right. Sometimes the incentives didn’t work all that well in detail. But the fundamental point was that management had to get on with running a commercial business. Publicly accountable regulators were responsible for looking after the public interest.

The third phase, after this regulatory regime had been established, is where it got more difficult. Government turned to entities that were not only strategic but also not inherently unprofitable, and that required continued public support. The Transport sector, both rail and buses, are examples of this. These industries were restructured to create a number of new entities that would compete against each other - because they were not natural

monopolies and competition rather than regulation seemed to best way to secureimprovements in performance.

The other point to be mentioned here is that the UK programme consisted of four different

Types of sale.

1. The most important was undoubtedly the public share offer, usually at a fixed price per share. This was the method used for sales such as British Petroleum and to the major utility privatisations of electricity and gas. It gave immediate access to the capital markets for the businesses and allowed the general population to participate in the process. But there were other forms of sale.

2. The second was trade sales to strategic investors, without a public offering. Examples include the coal industry, Jaguar, and British Rail Engineering Limited, the manufacturer and maintainer of trains. This technique was mostly used where it was thought of particular importance to introduce new management or provide a strategic investor willing to fund a major investment programme.

3. A variant of the trade sale was the management or management and employeebuyout.

Examples of this occurred particularly in our transport industry, for instance the National Freight Corporation but also the Bus industry. This technique was typically used where the industry did not require very heavy capital investment, and where the workforce was very important. It helped to introduce the concept of employee shareholdings, which played a small role in incentivising reform even in the utility sectors, as part of their initial public offerings. A similar approach was used for institutions like research bodies such as the British Technology Group, where the management sometimes set up non profit making trusts.

4. Finally, some of the sales were of companies based on concession contracts, where the entity being sold is given a concession to operate particular services for a period. This has typically been used where the system is not profitable and the public sector needs to go on supporting it – for example in the rail sector. Government awards the concession contract to the company which bids for the smallest amount of subsidy.

So how successful was this programme which built up gradually during the 1980s? There is no doubt that the privatisation reforms played a large part in meeting the Government’s first objective of improving quality and efficiency. British Telecom spent over £15 billion on the network between 1985 and 1990, twice as much as in the previous 5 years. This was money that really had to be spent to improve the technology base of the industry and which could not have been afforded in the public sector.

These changes played a significant part in gradually transforming the position of the UK economy. There was a significant improvement in competitiveness. No one would argue that this was solely to do with privatisation. But most people in the UK would agree that the reform and restructuring of the state sector made a large contribution, not just because these industries represented such a large proportion of the economy when the programme started, but because they were in areas of the economy that were critical engines for growth.

Also, the launch of the Privatisation Public Offers led to a massive change in the involvement of the UK population in share ownership. Between 1980 and 2000 the number of private individuals holding shares rose from 3 million to 9.5 million, representing 20% of the adult population.

This introduction of the general population to share ownership has led to improved awareness about economic performance. Many of these shareholders are also employees or former employees of the industries that have been privatised.

Finally, although I have stressed how the Government gave greater weight to these objectives of improving competitiveness and reforming the economy than to the proceedsfrom sales, there were also striking benefits for the public sector finances. The major privatisation sales generated £68 billion of proceeds, about two thirds of which went directly into state revenues, the remainder funding investment in the enterprises which would otherwise have been supported by the state. There was also a significant turnaround in the state’s finances on a continuing basis. One statistic from the Treasury is very striking. In 1980, the public sector corporations as a group required nearly £3 billion a year from the taxpayer. That’s £60 million a week. By 1995 almost none of them were receiving subsidy, and on a net basis they were actually contributing nearly £60 million a week to the state budget through taxes on their profits or value added. So the focus on reform has led pretty directly to substantial financial benefits for the Government and a reduction in taxes on individuals. Again, a virtuous circle.

 

 

Task 1. Answer the following questions:

1. Describe the financial problems that the British government was experiencing in the late 1970s and early 1980s.

2. Briefly explain the three phases of the British government’s economic programme related to industry.

3. Compare and contrast the four types of sales described in this text.

4. Has the economic programme launched by the British government in the 1980s proved to be successful? Why or why not?

 

 

Task 2. This article was written in 2001. It describes the results of the 10-year transition period in the Russian economy. Has much changed since then? Give a free oral translation of the text using the following expressions:

To lose one’s savings, to be in short supply, to be freely available, to fall apart at the seams, shock therapy, freeing prices, to buy up enterprises, shares-for-loans auctions, budget expenditure, default of foreign debt, to collect taxes, to scare away, to reap the fruits

Десятилетие реформ

Когда в России начались экономические реформы, мало кто представлял себе все трудности, ожидающие страну. Для миллионов минувшее десятилетие стало сплошным кошмаром. Россия потеряла статус сверхдержавы; миллионы людей потеряли все сбережения; все, что можно было украсть, было украдено; больницы, школы - вся инфраструктура лежала в руинах; талантливая молодежь уехала на Запад. О былой гордости и достоинстве советской эпохи не было и речи.

Но многим стоит позабыть на время ностальгию и вспомнить, что собой представлял Советский Союз в 1991 году.

25 декабря 1991 года Михаил Горбачев, первый и последний президент СССР, ушел в отставку, Союз официально прекратил свое существование.

Некогда великая держава разваливалась на куски, даже в Москве стало не хватать самых необходимых продуктов питания. Почти два века власти прилагали особые усилия к тому, чтобы накормить жителей столицы. Однако в 1991 году в магазинах Москвы в свободной продаже не было ни мыла, ни яиц.

В отдаленных регионах ситуация была еще хуже - страна стояла на краю голода. Экономика страны, 80% бюджета которой шло на военные нужды, трещала по швам.

Не стоит забывать и о политическом хаосе: российские законы вступали в противоречие с советскими, да и те, которые работали, имели мало отношения к тому, что происходило на улицах.

Еще больше усугубляя ситуацию, бывшие советские республики ввели в обращение свою валюту, но одновременно использовали рубли, которые печатались в Москве. Как сказал один из аналитиков, Россия была похожа на мужчину, 14 бывших жен которого продолжали платить его кредитной карточкой.

Именно в таких условиях к власти пришла группа экономистов, возглавляемая Егором Гайдаром, который был назначен премьер-министром в ноябре 1991 года. Пришла эпоха "шоковой терапии".

В первые недели 1992 года на российском рынке началась либерализация цен. Словно по мановению волшебной палочки, через несколько месяцев полки магазинов были забиты товарами.

Либерализация цен наполнила прилавки магазинов, но опустошила кошельки простых россиян. Большинство населения просто не могло позволить себе ничего купить.

Затем правительство начало претворять в жизнь еще более противоречивый экономический план - приватизацию. Властям было не важно, кто скупал предприятия. Они считали, что рынок рано или поздно расставит все по своим местам.

Но на деле получилось, что ведущие промышленные компании перешли в частное владение бывшим советским аппаратчикам и "новым русским", имевшим высокие связи в Кремле.

В результате "продажа века", как называли российскую приватизацию, была менее открытой и прозрачной, чем, скажем, в Венгрии и Польше.

В 1996 году рейтинг президента Ельцина стремился к нулю, на предстоящих выборах вполне могли победить коммунисты. Команда Ельцина приняла предложение группы могущественных промышленников и банкиров, так называемых олигархов, о помощи взамен на заключение выгодных сделок.

Правительство организовало залоговые аукционы: самые доходные государственные предприятия перешли в частные руки за символическую стоимость, не имевшую никакого отношения к реальной рыночной цене. Одновременно парламент, в котором преобладали коммунисты, вынудил правительство увеличить расходную часть бюджета, заставив тем самым влезть в еще большие долги.

Азиатский экономический кризис 1997 года, совпавший по времени с падением цен на нефть, стал последним ударом.

Крах российской экономики пришелся на август 1998 года. Рубль почти сразу же потерял  75%  своей  стоимости.  Россия  объявила  дефолт  по  внешним  долгам.

Российский фондовый рынок, в период с 1995 по 1997 год выросший в пять раз, за полгода "сдулся" на 93%.

Однако катастрофа оказала оздоровительное действие на российскую экономику. За три года после кризиса ситуация изменилась кардинальным образом. Высокие цены на нефть и дешевый рубль помогли экономике возродиться.

Новый президент Владимир Путин, забирая по частичкам власть, отданную ранее олигархам, заручился беспрецедентной поддержкой парламента. Депутаты приняли ряд важнейших законов - в казну начали поступать налоги, рубль оставался стабильным.

Впрочем, драматичное десятилетие не изменило полностью российскую экономику. Благосостояние страны зависит от цен на нефть и цветные металлы. Бюрократия и коррупция мешают встать на ноги малому и среднему бизнесу. На смену старым олигархам обещают прийти новые. Запутанные законы отпугивают иностранный капитал от инвестиций в Россию. И до сих пор многое в России действует по принципу "неважно, что ты знаешь, важно, кого ты знаешь".

И самое главное - слишком много лежит на плечах одного человека, президента Путина. Когда вся власть сосредоточена в руках одного, никто не может с абсолютной гарантией говорить, что страна не повернет обратно.

Через 10 лет после начала реформ почти 90% экономики находится в частных руках. И в то время как многие россияне продолжают горевать по СССР, большинство вряд ли хочет возвращения советских порядков.

Судя по недавнему опросу общественного мнения, впервые после 1991 года россияне говорят о будущем с оптимизмом. Возможно, именно сейчас Россия начнет пожинать плоды 10 лет сложных преобразований. Но даже оптимисты говорят, что впереди еще много работы.

 

 

Task 3. Complete the following expressions about time with the words from the list below:

art, date (2), edge, fashioned, forefront, forward, minute, past, times

1. up-to-           

2. a thing of the          

3. at the                 

4. old-           

5. state-of-the-                    

6. the way                 

7. out of                  

8. up to the              

9. at the leading             

10. behind the