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Kazakhstan: Ore Plant Faces Rocky Road To Privatization

Almaty, 12 December 1996 (RFE/RL) -- One of the major difficulties of the privatization process in the former socialist countries is that enterprises often arrive on the market beset by problems and in ruinous condition.

Finding a private buyer willing and able to pick up the pieces of these ravaged concerns and forge from them a viable free-market business is not easy. Indeed, it may not always be possible.

A troubled enterprise which is causing headaches to Kazakhstan's Committee on State Possessions is the Karagayli ore plant in the central Karagandy Oblast.

The plant, which processes iron ore, is in a perilous state economically, with figures for 1995 showing that for every tenge it earned, it lost two tenge.

Not only that, nearly all the workers at the plant reject the concept of privatization and want to remain state-employed.

A Kazakh-Russian joint venture called Aleksei Postovalov and Company acquired the plant in 1990 and invested the equivlent of $3.8 million to cover its accumulated debts. But it ran into trouble with deteriorating economic conditions and the reluctant work force.

As a result, the privatization deal was not completed, and the authorities gave the Postovalov company instead the status of temporary directors of the plant. By the middle of this year, amid rumors of impending bankruptcy, the plant was offered for sale again, with the support of the various Kazakh privatisation authorities.

Senior Kazakh officials estimate that some $7 million of investment over the next five or six years is required to get the plant into viable condition. Postovalov puts the estimates even higher, suggesting some $9 million is needed in investment, and a further $4.3 million to cover debts to creditors.

As for the staff, who comprise almost the entire working population of the Karagayli town, they have rejected any renewed sale, and have staged strikes, and hunger strikes to protest both the privatisation and their own deteriorating socio-economic conditions.

Our correspondent in Almaty reports that not surprisingly, given the circumstances, no brave investor has stepped forward to purchase the plant.

One of the main practical problems facing Karagayli is that the long-established Russian and Uzbekistani customers for its concentrated "barrit" ore are unable to pay any longer. As a result, the plant has had to try to engage in barter deals with these two states.

Our correspondent reports the most likely prospect now is that the Karagayli plant will soon be declared bankrupt. It's a classic example of an old-era concern proving unable to face the new era.