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At the same time, it's quite clear that the ultimate objective in cases where enterprises provide households with heavily subsidized private goods is comprehensive privatization of corresponding services and subsidy elimination. However, due to existing political and social constraints, immediate implementation of such policies is considered as unacceptable by most governments in transitional economies. The whole problem of divestiture is derived from the necessity to design a procedure that would substitute enterprises by municipalities in a way which preserves continuation of basic services and takes into account major fiscal and institutional consequences of such a substitution. Therefore an appropriate divestiture policy must be seen as a transitional strategy that is accompanied by measures to push the ownership, financing, and management into the private sector.

While the importance of this problem for the Russian economy has been widely recognized (World Bank, 1994), very little empirical analysis has been done, and only recently has the situation begun to change. Among the recently prepared most detailed studies are the paper written by Simon Commander and Une Lee (Commander and Lee, 1995) devoted to the scope of social benefits which are typically provided by Russian firms, as well as the Report on Russian Enterprise Housing Divestiture prepared by the group of experts from the Urban Institute (Urban Institute, 1995). Both of these papers are based on enterprise surveys and interviews. A number studies of the problem with enterprise social assets transferral have been started recently with respect to other FSU countries (ADB, 1995; Cheasty, 1996; O'Keefe. 1995).

This paper is based on some additional sources of information, which include various macro and sectoral data provided by the Goskomstat and the Ministry of Economy of Russian Federation. It also includes data collected in the course of preparation of the World Bank Enterprise Housing Divestiture Project.<sup>2</sup> This survey of 24 enterprises was conducted in 10 cities at the end of 1994 and beginning of 1995. Respective municipalities were also surveyed. Though the study was primarily directed at enterprise housing issues, the problems of other social assets and benefits were also taken into account. Additional information on legal and financial framework of enterprise social assets functioning and divestiture was collected from eleven cities who competed for participation in the project through a number of interviews with city officials and enterprise managers.

This paper has the following structure. The first section describes the major trends in overall enterprise social spending over 1992-94. Section two discusses major factors influencing restructuring of enterprise social assets, among which macroeconomic, legal, and financial parameters. The third section provides brief summary of major potential directions of such restructuring, including newlyreconstituted forms of enterprise control over social assets, divestiture and privatization. Sections four and five discuss potential consequences, including financial impact, of social asset divestiture on correspondingly enterprises and municipalities. Section six is focused on barriers for divestiture, while the remaining section provides some recommendations to facilitate the divestiture process. A more detailed description of the enterprise sample is presented in the Annex 1. The second annex lists major government regulatory acts, which govern the divestiture process in Russia. Annex 3 describes the peculiarities of providing social services by enterprises in two specific sectors, agriculture and coal. Annex 4 presents a case study of Vladimir Tractor Plant, which demonstrates the scale of potential benefits from divestiture for a typical Russian manufacturer.

2 This information was partially used in the paper of S. Commander and U. Lee mentioned above.