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Russia/Ukraine: Privatized Firms Unwell

Hong Kong, 17 September 1997 (RFE/RL) - The International Monetary Fund (IMF) says that three-quarters of all the privatized formerly state-owned enterprises in Russia still need restructuring, that half are losing money, and that at least one-fourth should be declared bankrupt.

The fund says the situation in Ukraine appears to be even worse.

In its annual World Economic Outlook report released today, the IMF says that the wide dispersal of shares in the privatized firms, combined by manager domination of much of the ownership, has contributed to weak corporate governance, and that this has reduced the incentives to restructure.

The IMF report says that neither Russia nor Ukraine have yet been able to create a market environment in which private sector activity can thrive, and that the structure of government spending is still "tilted toward unproductive" spending.

The situation of both governments has been made worse by inefficient, non-transparent and onerous tax systems, says the fund.

The IMF is projecting that Russia will have its first economic growth this year -- about 1.5 percent -- but that Ukraine's economy is expected to suffer another loss of three percent.