Russian Privatization Far Behind Schedule : Economy: Delays in selling off state-owned businesses threaten the attempt to develop a free-market system.

President Boris N. Yeltsin’s efforts to sell off Russia’s vast array of state-owned industrial and commercial enterprises are falling far behind his timetable, the Russian Cabinet was told Thursday, and the delays are jeopardizing the whole attempt to develop a free-market economy.

More than four months into the year, the government has managed to turn over to private entrepreneurs, worker collectives and management teams only 5% of the $720-million worth of the state holdings scheduled for sale this year.

Yet, without widespread private ownership, the concept of a free-market economy breaks down, the Cabinet was told, and the slowness in privatization, as the process is known, is sapping the reform effort of vital energy.

“We are lagging substantially in privatization, and this is a crucial area for the whole of the economic reforms,” said Alexei V. Ulyukayev, the Cabinet spokesman and a senior government economist. “While we are gaining speed, we are going at only a third of that we had planned on.”

Anatoly B. Chubais, who oversees privatization as chairman of the State Property Management Commission, won approval for a decree beginning the incorporation of some large state-owned enterprises as publicly held corporations and the sale of others to their workers and to ordinary citizens, who will be given government vouchers to buy shares in them.

The move, delayed from this spring until the end of the year, will also bring the formation of full-fledged stock markets trading in shares of the largest Russian companies, according to Ulyukayev.

“This will finally put us on the brink of capitalism,” another government economist commented later. “Until we have a market in capital, we will not have a free-market economy.”

The new decree will also accelerate the sale, sometimes by auction, sometimes through sealed bids, of stores and other enterprises owned by municipal governments.

But Ulyukayev, describing the steps as “half-measures” that fall well short of Yeltsin’s goal of a rapid and sweeping sell-off of state property, said he doubts that the year-end target of the privatization of 62% of state enterprises will be met.

“We are now putting off to the end of the year what should have been done in March and April,” a senior Russian official commented. “The reforms are in danger of stalling--things move more and more slowly. Our loss of momentum is disastrous.”

The Cabinet reviewed the next stage of the economic reform program, which will provide the framework for economic reform and growth for the next three to four years, but again deferred a decision, probably for a month.

“We have to choose between doing things right or doing them quickly,” Ulyukayev said in a virtual echo of the comments of Soviet officials explaining the slowness of fundamental economic reforms over the past five years.

Ulyukayev said that gradual tax cuts, incentives for enterprise-financed investment and investment-oriented savings are the main points in the new economic program outlined by Yegor T. Gaidar, the first deputy prime minister and the government’s chief economic strategist. The plan is aimed at boosting production, which fell more than 13% in the first quarter of 1992 after a steep decline in 1991.

“We want this program to be specific, to be constructive, to take into account the balance between different industries,” Ulyukayev said, trying to distinguish this program from the nearly 20 earlier reform plans over the past five years. “We want it to be calculated according to different models rather than being a compendium of generalities, wishes and political statements.”

But the delays are multiplying. Negotiations with the International Monetary Fund over conditions for $24 billion in aid pledged by the West are progressing very slowly, with major issues unresolved when IMF officials left this week. The transition to a convertible currency--another key element of the reform effort--has slipped from summer until late autumn.

Perhaps the most crucial issue, however, is the estimated $150 billion that Russia’s state-owned enterprises and banks owe each other as a result of continued production--often without orders--after increased prices made their goods harder to sell.

Instead of pushing the firms into bankruptcy on grounds that they are insolvent, the government has allowed the debts to grow to the point where, Ulyukayev acknowledged, even profitable firms are at risk. And Parliament has failed to enact legislation establishing a procedure for firms to be declared bankrupt and closed.