Joint Ventures Failing to Lift Soviet Economy : Trade: Disillusion sets in as the country’s condition continues to disintegrate.

MOSCOW — Two or three years ago, Soviet-Western joint ventures were so hot that foreigners here joked about the emergence of a new form of Russian greeting: “Hello! My name is Ivan. Would you like to start a joint venture with me?”

Entrepreneurs on the prowl crammed Moscow’s hotels, and government officials touted joint ventures as the best way to let Western investment flow into the troubled Soviet economy without selling out the Motherland to greedy capitalists.

These days, joint ventures still are being created at the rate of several hundred a year.

But the mood has changed.

“In my personal opinion, everyone is disappointed with joint ventures,” said Gerald A. Manassov, a former official who followed them for the State Statistics Committee. “What do 3,000 joint ventures mean? That’s peanuts. Peanuts! They have no power.”

The popular business weekly Commersant predicts that joint ventures will end up nothing more than “an asterisk on the chart of the declining Soviet economy.”

Nikolai I. Denisenko, chief adviser to the prime minister on international economics, concedes that there is a growing consensus in the Soviet leadership that joint ventures, although multiplying rapidly, cannot attract the massive infusion of capital that the Soviets need. For that, he said, the Kremlin must open the country to foreign ownership, provide financial incentives for investors and offer government guarantees--all measures included in draft laws on privatization and foreign investment expected to be approved by parliament this autumn.

“We’ve been trying to explain to deputies that only direct private investment can work long term,” Denisenko said. “There are international standards for foreign investments, and if we are below them, no one will come.”

It is not only that joint ventures, now contributing an insignificant 0.2% of the GNP, are limited in scope; they have also failed to live up to the government’s vision of model factories using Western technology and management expertise to help satisfy ravenous Soviet consumers.

Instead, according to sharpening criticism in the Soviet media, many joint ventures are unholy unions between fly-by-night Western firms looking for a quick buck in slippery trading and Soviet partners hungry for foreign currency and eager to work under relatively liberal rules governing the enterprises.

“The joint ventures we have now are contemptible and must die--and will die,” said Elmar Guseinov, a reporter for the government newspaper Izvestia, who wrote a major expose of joint ventures last month. (The article had to be published in a separate weekly supplement, he said, because Izvestia itself is a partner in two joint ventures.)

Guseinov described a crooked world of rampant bribery and financial manipulation, aimed mainly at finagling permission to export cheap Soviet raw materials for enormous profit and then importing electronic goods to parlay gains even further.

“Joint ventures were born of perestroika, “ Guseinov said, “and they are the same sick and damaged children as other structures created by officials who wanted to change the country without really changing the country.”

Even Burda Moden, the popular German fashion magazine that struck a deal to print millions of Russian editions, ended up getting caught trying to export aluminum--a far cry from the activities described in its registration papers.

“It’s an easy way to get money,” Manassov said. “This is speculation. It’s illegal--well, it isn’t illegal, but we need tougher regulations at the same time that we have to open all the doors and windows.”

The Soviet government has, nonetheless, tried hard to court Western businessmen to enter joint ventures. It has softened the original, 1987 regulations by doing away with a requirement that a Soviet partner own at least 51% of the business. It now provides breaks so that joint-enterprise profits are tax-free for the first two years.

Some of the most visible joint ventures, from the famed McDonald’s on Pushkin Square to Occidental Petroleum’s $6-billion petrochemical project on the Caspian Sea, bespeak the great potential of Soviet-Western partnerships.

But for the most part, the West is not willing to buy in on any large scale. In fact, although joint ventures continue to pop up, the total foreign investment in them dropped by about 60% from 1989 to 1990, to a modest $850 million, according to Commersant.

Part of the Western reluctance stems from President Mikhail S. Gorbachev’s ever-cooler reception abroad and the growing disintegration of the Soviet economy.

The Western hesitancy has grown as major firms have watched the heroic struggle of small, experimental joint ventures as they scrambled, bribed and begged for phone lines, employee housing, permits and bank transfers. Many of the Fortune 500 concluded that for all the lure of the giant Soviet market, they are not such masochists.

The McDonald’s deal took 14 years to work out, and the Canadian partners finally decided that they could only solve the problem of undependable Soviet supplies by setting up their own farm and bakery. The Soviet magazine New Times told of a hapless joint venture that had to fight the bureaucracy for a year to get a rubber stamp needed for most official documents.

“There used to be a certain mutual euphoria about joint ventures,” said Grigory Povolotsky, deputy chairman of the Soviet Joint-Ventures Assn. But now, he said, it appears that joint ventures will end up as a transitional form, “a kind of a school for businessmen.”

And the difficulties of dealing with the Soviet bureaucracy pale beside the central problem for Western businessmen: How can they take out profits earned in nonconvertible Soviet rubles?

Soviet regulations say that Western investors can only take foreign currency out of the country if they have earned it directly--thus removing much of the incentive for joint ventures to manufacture goods that would be sold for rubles to Soviet consumers.

A representative of a major U.S. commodities trading firm who has been in the Soviet Union for months looking for investments said he had ruled out joint ventures, even those with barter arrangements or other clever deals for taking profits home. “They just don’t work,” he said.

The Soviet media were slow to go after joint ventures, afraid of appearing to be anti-capitalist and anti-reform. Guseinov said that after his article appeared he received a disconcerting call from university scholars seeking to explore the psychology of a man who opposes economic reform.

But with the mounting criticism have also come suggestions of how to make joint ventures better. The Moscow newspaper Couranty suggested that freeing up the registration process for joint ventures would remove the basis for widespread bribery of the officials who grant start-up permits.

Guseinov, however, took a broader approach, saying: “What we need in this country is real private business. That’s what Western banks and businesses want to invest in.”