Enterprise Restructuring and Turnaround Management in Russia

Abstract

Summary After the wave of privatization has swept Russia, the crucial stage of enterprise restructuring begins. According to various circulating estimates, about half of large enterprises need to be reorganized if they are to prosper in the new market economy of Russia. Some of other enterprises need to be closed immediately so that they cease to drag the Russian economy down by subtracting value from it. On the other hand, there is evidence of fraudulent bankruptcies orchestrated by Russia's powerful managers and designed to strip existing enterprises of valuable assets which are then transferred to private pockets illegally or semi-legally. The Russian Government is trying to cope with these challenges under very difficult conditions of inadequate human and financial resources, unclear market structures (e.g., financial-industrial groups), underdeveloped markets for assets, and social-political pressures to maintain status quo which is not sustainable in the longer term. Legislative and other actions need to be taken to adopt decentralized, imaginative solutions which can bring results under Russia's particular circumstances. No ready-made solutions exist but the Russian Government sees quite a lot of good analogies in the new German Lacnder. Other potential solutions, like debt-for-equity swaps, vulture funds, etc., stem from the Anglo-Saxon or American traditions. All these solutions should be considered carefully. Some of them should be used domestically; others should give Western capital opportunities to assist in the enterprise restructuring and other transition processes in Russia.