topical issues in sector restructuring (including on relations with private employers), to maintain legal services in the coal regions, and to carry out monitoring and other activities of relevance to sector restructuring.

_<u>The Role of Technical Assistance</u>_ <u>. Technical assistance can be effectively applied to</u> help carry out most of the activities described above. In the case of the Russian coal sector, the World Bank’s technical assistance loan was used to finance such privatizationrelated activities as: a privatization expert on the staff of the implementing agency; business appraisals and initial price calculations for some coal companies; and the development of a pre-privatization restructuring program for a State-owned company (Intaugol). In addition, numerous technical assistance activities have been used to strengthen management capacity at both private and State-owned coal companies (e.g., a major management and financial training program) and to further the policy dialogue in ways that help secure the success of the State’s divestiture of its ownership interest in the coal sector (e.g., environmental audits at continuing mines and a review of the legislative/regulatory framework to make it more consistent with the industry’s present ownership structure and future needs.) Technical assistance was also used to finance stakeholder support programs and public relations campaigns, and these are invaluable in helping to inform the concerned public and to create a positive atmosphere for the execution of the Government’s privatization policy.

# **METHODS OF SALE:  STRATEGIC AND PRACTICAL CONSIDERATIONS**

This section reviews methods of competitive sale that have been used in the privatization of the Russian coal industry. While each method is described individually, in practice two or more methods may be used to sell the Federal package of shares in any given company. The advantage of a mixed approach is that it gives the Government greater tactical flexibility to achieve whatever particular strategic goal it has set for itself in deciding to divest its interest in a given company. The risk is that this tool will be used ineffectively, and will back-fire. In concrete terms this could mean that the Government fails to sell all of the Federal shares in a company, or will fail to maximize revenue from the sale, or will generally suffer from the loss of timeliness in completing the privatization transaction.

Before reviewing the methods of sale, a few words are in order about the conditions that prevailed in late 1997, when the Government adopted the policy of competitive direct privatization and the World Bank’s Coal SECAL 2 was made available to the Government. At the time, there was not (and there has not been since then) a “master plan” of companies to be privatized at a particular point in time or in a particular order. The only general principle that the Government adhered to was to divest first the most viable surface mines in Siberia. The World Bank supported this flexible approach, and the Coal SECAL 2 privatization targets were defined in terms of overall percentages of production by the private sector, not in terms of specific companies to be privatized. Another advantage to this approach is that it put the specific decision-making regarding privatization firmly where it belongs, in the hands of the Government.

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