Soviets OK Leasing to Private Firms

Soviet lawmakers, in a major step to decentralize the country’s economy and implement President Mikhail S. Gorbachev’s reform program, voted Thursday to permit entrepreneurs to lease state-owned land, factories, equipment and other property to develop private businesses.

The new law is the first to be adopted out of a package of five basic reforms. It is intended to end the state’s monopoly of more than 50 years on the management and use--though not the ownership--of the principal means of production, and thus to break the stranglehold that the government and Communist Party bureaucracy now have on the economy.

Under the measure approved overwhelmingly by the Supreme Soviet, the country’s legislature, “work collectives” may lease state-owned assets, effectively taking over state enterprises, and may operate as private companies, paying agreed fees for the use of the property.

In practice, the work collective may consist of a few managers, even one or two, who are willing to assume the burden of running the company. The legislation is intended to encourage those managers with entrepreneurial skills and a readiness to take calculated risks to take over potentially profitable state businesses.

The collectives are also authorized to raise the money initially required for the lease or the expansion of their operations by borrowing from banks, issuing bonds or selling shares of stock, effectively establishing a small capital market.

“The principles of this legislation constitute the first real step toward the transfer of economic authority to work collectives,” Sergei Alexeyev, chairman of the legislative committee for legislation, said. “Leasing will lead to the formation of market relations, and that will make it possible to change the economic situation in the country for the better as soon as next year.”

Pavel Bunich, a leading economist, said during the debate over the legislation that the economic effect of the law would be to tie workers’ pay and benefits to an enterprise’s profitability, thus increasing productivity. Managers or groups of workers would be tempted to take over even marginal operations in the hope of turning them around and making large profits.

Only the most efficient enterprises would attract good managers and risk capital and thus survive, he said against a background of complaints that unemployment will inevitably increase. “Well, so be it,” he told a deputy from Uzbekistan, a republic in Soviet Central Asia that has a high rate of joblessness among its youth.

But Soviet officials hope the law will permit the country’s farmers to take over by the tens of thousands the land on which they have been working as members of a collective farm or employees of a state farm, in a major drive to boost agricultural production.

The law, which goes into effect Jan. 1, provides the legal foundation for a practice that began two years ago in agriculture, and it has subsequently been expanded to include the retail industry and selected trades.

After more than two months of debate, the Supreme Soviet decided to extend leasing to all branches of the national economy, rather than limit it to agriculture, commerce and small industrial plants, as advocated by conservative deputies.

The deputies also eliminated the veto that local and middle-level government agencies now have over the transfer of state property to leaseholders.

On collective farms, officials have often prevented farmers from leasing land for private agriculture and, if they did obtain a leasehold, then have barred access to farm equipment, local markets and bank loans.

The leasing law is just one in a package of five bills that were submitted to the legislature in September but were held up as the country debated the nature and course of what it calls “market socialism.”