29 



Mr. Allard. As an expert on Russia, c£in you tell the subcommit- 

 tee what the status is of the private sector in Russia, as you see 

 it, especially as it relates to agricultural production, processing, 

 and marketing? 



Mr. Kauzlarich. Well, the private sector generally in Russia is 

 just at its very beginning stages, and the privatization program of 

 the Yeltsin government has begun emphasizing small- and me- 

 dium-sized businesses and service industries. They have not tack- 

 led the obviously tougher questions of full privatization of large in- 

 dustries or of the agricultural sector as a whole, and I think that 

 with just really a little over a year's experience, it's very hard to 

 argue that there's been a radical shift toward the private sector in 

 the food processing industry. It still tends to be dominated by the 

 larger and still state-owned companies. 



What I would hope for the future is that both as the Yeltsin pro- 

 gram for expanded privatization — and in his March 20 speech, he 

 made clear that he did intend to expand the privatization effort — 

 that this would provide greater opportunities for private investors, 

 both domestic as well as foreign. 



I think, as some of the discussion earUer today has pointed out, 

 there are a lot of changes that have to be made in the pohcy frame- 

 work in Russia itself to provide the sort of predictability as well as 

 the clarity necessary for investors, whether they're domestic or for- 

 eign, to make the kinds of investments that will be necessary for 

 this sector to really show a dramatic involvement of private activ- 



ity. 



Mr. Allard. In the video that we saw this morning and in con- 

 versation over the phone with the Russian farmers, I got the dis- 

 tinct impression that they were looking for a way for d^ect inter- 

 action between our farmers and our agricultural processors with 

 theirs. Do we have in place the laws to allow that to happen in an 

 expeditious manner? 



Mr. Kauzlarich. Well, what we have tried to do in terms of the 

 United States' private sector's involvement there is to set a frame- 

 work of agreements with the Russians in the trade area, in the in- 

 vestment area, in the Overseas Private Investment Corporation as 

 well, so that we can lay in place the kind of framework that a Unit- 

 ed States investor would look at and say, "Yes, I'm comfortable 

 with putting my money in that process." 



Where we still have a lot of work to do is on the Russian side 

 itself in providing both Governments and their own industry and 

 farming communities with the sense of the need for a Western- 

 style legal and commercial environment that will allow these kinds 

 of investments to take hold. 



So we've addressed one element of the equation, but the other 

 element, which really is going to require an awful lot of technical 

 assistance from our side, will be helping the Russians themselves 

 at all levels to get their policy framework right so that private in- 

 vestment can work. 



Mr. Allard. The yellow light is coming on here, and I have a 

 Umited amount of time, so I want to editorialize a little bit. I hope 

 that we don't intervene too much in that marketplace, because I 

 think we slow down that — ^what I hope is we open it up so that 

 there can be a free exchange between the Russian farmer and the 



68-443 0-93-2 



