Audit of ENI"s strategy for managing its privatization and restructuring activities in Russia

The audit covers the period 1992-10/94. As of 6/30/94, 93 activities that appeared related to Russia"s privatization and restructuring had been or were being implemented under 13 projects. Of these, 21 were related to transferring properties from state to private ownership. Examples of these activities include: implementing a national public education campaign on privatization; advising the GOR on strategies and policies; and helping to develop a voucher program whereby citizens could acquire an interest in newly privatized enterprises. Of $74.7 million obligated for these 21 activities, about $48 million had been spent. The remaining 72 activities were related to restructuring the regulatory and commercial framework and specific enterprises, e.g., by helping lawmakers to develop a commercial and civil code, providing training in banking and finance, and initiating small business development activities; of $323.7 million obligated for these 72 activities, $99.1 million had been spent. As of 10/94, the GOR had reportedly privatized 16,315 medium and large enterprises, accounting for some 75% of the Russian industrial work force, as well as about 72,000 small enterprises. The GOR had also reported some progress in identifying and correcting impediments to the economic viability of the newly privatized firms. However, difficulties in data collection in Russia, along with the reluctance of some organizations to supply accurate information, raise issues concerning the reliability of these data. Also, generally the GOR continues to own the land these enterprises are on, as well as at least 20% of the shares in the newly privatized medium and large enterprises, and it remains unclear how soon they will become economically viable. Until these issues are settled, care is needed in describing program accomplishments. The audit also found that the ENI Bureau needs to better ensure that the TA being provided to Russia is effectively coordinated. Recommendations are that the Bureau: (1) establish specific objectives and both quantitative and qualitative indicators to measure program progress, especially in regard to restructuring; (2) establish adequate information systems; and (3) assign adequate staff to oversee and coordinate project activities.