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Doing Business : Russians Consult U.S. 'Spin Doctors' : Public relations experts trek to Siberia to help factory workers learn how to invest in state companies, newly privatized.


NOVOSIBIRSK, Russia — When the Russian government handed every citizen a voucher last fall to buy shares of privatized state companies, Maria Medovna dreamed of investing in something solid like an auto factory, or practical like a beauty parlor.

But the retired factory worker had no idea where to take her voucher. And she feared a battle against some impenetrable bureaucracy once she found the right office.

"I didn't know what to do with this check at first," said Medovna, bundled up against the Siberian winter in a colorful Russian shawl. "We had no information. I was lost."

To fill the information vacuum, the Russian government turned to the bona fide experts on money and marketing: Americans.

A public education campaign run with the help of three U.S. firms aims to explain how Russia's 150 million citizens can participate in the vast privatization program and what risks are involved in becoming part owner of a business. Already, more than 46,000 small- and medium-sized enterprises have been privatized, and 100,000 more ventures are to be sold by year's end.

Many of the enterprises going public are risky investments because they are addicted to hefty government subsidies. When they go private and lose this support, some will go bankrupt, and Russian investors will lose too.

Russians also have to worry about fraud. Already this year, about 500,000 people in St. Petersburg were swindled by two fly-by-night investment firms that took their vouchers and disappeared. The vouchers have a face value of 10,000 rubles ($7.80 at the current exchange rate) but have been selling for about half that on the open market.

"It's unavoidable that privatization of large enterprises is highly risky for new investors," said Anthony Doran, manager of programs in the former Soviet republics at the International Finance Corp. (IFC), a World Bank affiliate that is advising the privatization program.

To ease people's doubts and make the selloff a success, "the communications aspect of privatization is being recognized as more and more important," Doran said. "We try to make sure people are as informed as possible so they can participate as fully as possible."

Hiring outside consultants not only allowed Russia to benefit from the experience of other countries that have begun privatization programs but also helped close the government's credibility gap. After seven decades of Communist propaganda, Russians are skeptical of what any government tells them.

To ensure a top-notch information campaign, the Russian government turned to two of America's top political and corporate consulting firms--Sawyer Miller Group and Burston-Marsteller.

But rather than dictate orders, the advisers say they are simply helping implement the ideas of the State Property Committee, known here by its Russian acronym, GKI.

"The message comes from GKI. It doesn't come from us," said Paul Bograd, director of Sawyer Miller Group's Russian operation. "We basically help them (GKI) do what they want to do. They reject advice all the time."

To complement the work of Sawyer Miller's 30 consultants, the IFC brought in the international public relations firm Burston-Marsteller to help sell privatization in five regions across Russia. A handful of Burston-Marsteller consultants are working on local educational campaigns here, in the heart of Siberia, as well as in St. Petersburg, Nizhny Novgorod, Tomsk and Volgograd.

Both Sawyer Miller and Burston-Marsteller use the same advertising firm--the Moscow office of Young & Rubicam.

The work of all three companies, as well as of several management consulting firms providing technical assistance on privatization, is funded by American taxpayers. The Freedom of Support Act, which provided $417 million in humanitarian and technical aid to the former Soviet Union last October, included funds for consultants' work.

The Burston-Marsteller effort in Novosibirsk, a city of 1.5 million and unofficial capital of Siberia, is an example of how the public relations campaign works on the ground.

A Burston-Marsteller team came to Novosibirsk more than a month ago and met with local officials for suggestions. "Our idea was to give as much information to people as we could," said Irina Vorhonskaya, a Burston-Marsteller consultant stationed in Novosibirsk.

Vorhonskaya and her colleagues designed pamphlets with basic information about privatization and had them slipped into the mailboxes of all 2.7 million residents of the Novosibirsk region.

Written in a clear question-and-answer format, the brochure deals with such mysteries as: "What is stock?" "How do I choose an enterprise?" "How can I participate in an investment fund?"

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