Azerbaijan's Parliament, after three years of often heated debate, has finally enacted the country's first privatization law, combining auctions and individual company sell-offs with a mass voucher plan to distribute corporate shares among the widest circle of adult population.

The law envisions the privatization process would last three years, with the first auction to be set for Sept. 1.U.S. officials reporting from Baku said, while the law is "friendly" toward foreign investors, the business environment in the country is untested. It advised U.S. companies interested in the Azerbaijani market to contact Price Waterhouse, Ernst & Young or other Western consulting firms established in Azerbaijan.

Aided by the World Bank, the Azerbaijani government devised a plan combining cash and voucher transactions. It envisions that small and medium- sized companies will be sold off largely to their management and employees for cash. The government plans to convert firms with more than 300 employees into joint-stock companies and sell shares for cash and vouchers.

Potential buyers for wine and cotton processing, which are among the country's key industries, have already been identified, but other bidders will not be excluded, the government said.

To prevent the transfer of shares to the collective ownership of the employees, thereby creating the form of socialized economy of former Yugoslavia, the government has limited employee ownership to 15 percent of the enterprise.

The government admitted it does not have the money or expertise to audit each enterprise, and said the value of each company is to be set in the auction process.

The privatization law states foreigners can buy state assets for cash. The law does not impose a limit on foreign holdings in any given company.

Vouchers will be distributed to each adult Azerbaijani citizen. The vouchers will be valid for up to three years during which time they have to be redeemed for company shares. The exact mix of vouchers and cash sales in the process is complicated and will vary from enterprise to enterprise.