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Big privatization failed when we have no time for mistakes

Author : Olexandr Honcharov

These days the Chamber of Accounts has published the following impartial and alarming figures: for 9 months of 2017 only 14 state enterprises showed profit as a result of financial and economic activity, 20 - satisfactory work, 49 - inefficient. In fact, everything can be much worse
23:36, 19 September 2018

tusib.org

We need to grow. And grow at a fast pace. 3% of GDP growth in 2018 is the minimum for our country. However, there is a key question: what are the reasons for growing of the Ukrainian economy? Leading local and foreign experts are convinced that such economic growth can be ensured only through direct domestic and foreign investment. And we need the dynamics of such investments in the fixed assets of Ukrainian plants and factories. After all, on the vast majority of state-owned enterprises, fixed assets are worn out by more than 80%, and there are no long-term investment funds for their technical re-equipment and modernization.

True, in the ranks of our ruling elite there have always been strong enemies of the denationalization of large state property. And the current stage of its large-scale holding in 2018-2020 is not an exception. But I would not praise this factor so much, as it is impossible to continue living without risk management, and officials and professional participants of the capital market need to look not at opponents of privatization and market conditions but at their national personnel potential. After all, intrigues of opponents are not so terrible, as well as production and management mistakes of the privatized facility leadership. It is much worse when we face corruption and insolent fraud of top managers of state enterprises.

These days the Chamber of Accounts has published the following impartial and alarming figures: for 9 months of 2017 only 14 state enterprises showed profit as a result of financial and economic activity, 20 - satisfactory work, 49 - inefficient. In fact, everything can be much worse, since the financial and economic indicators of each second state enterprise are completely absent. At the same time, if the State Property Fund of Ukraine is going to put up the maximum number of objects for sale in order to get as much money as possible, it is unlikely that it will be able to implement such a plan.

Of course, the topic of big privatization is very complex for amateurs, and understandable and predictable for professionals. I do not want to get involved in a long account of the causes and consequences, but the fact is that from privatization in 2018 the state budget actually received for January-July of this year only 49.9 million UAH. It shows the failure of the new law on privatization and the inability of people's deputies to predict the expected effect of the adopted legislative acts, and secondly, the new leadership of the State Property Fund, widely spreading the supposedly unique significance of the new advisers, did not extract bitter lessons from the failure of their predecessors.

So what exactly should we do? First of all, it is necessary to change the plans for privatization of large corporatized state enterprises, envisaging at the first stage the sale of blocks of shares on stock exchanges with the passage of the listing procedure, thereby attracting not only strategic investors to trading platforms, but portfolio and qualified investors. And, of course, we urgently need to pass draft law No. 7055 "On Capital Markets and Regulated Markets" for the legislative consolidation of the activities of professional participants in the capital market and, first of all, for investment firms that could underwrite corporations with or without the sale of their stakes. Well, now our authorities are showing an unprofessional organization of large-scale privatization.

Or was it originally intended? After all, there must be a principled policy of the Cabinet of Ministers, and most importantly - a detailed and clear answer to the key question: why does the government conduct large-scale privatization of 2018-2020? For example, many Ukrainian and foreign investors are convinced that now is the time to build a real private market economy in Ukraine. And objects of privatization are not put on tenders and auctions to sell them or temporarily solve some social problems.

No, a large-scale privatization should not be conducted for such purpose. According to experts, the process of denationalization is necessary in order to create a solid foundation for an effective market economy with a predominance of private property. And yet, how to make all this real? В we have enough competence and political will? Plus, I repeat, this process has many powerful enemies and no fewer powerful supporters "at the top." I know many of them personally, because since 1994 I have managed the privatization of about 1000 state-owned enterprises, including the Mariupol metallurgical plant Azovstal. I also know those who yesterday were ardent supporters of the strengthening of state enterprises and companies, and today they suddenly stand for their denationalization.

Lately, we heard counterarguments in the government offices: why should we sell privatization objects, when the market has very low prices for Ukrainian assets? Maybe we should wait until better times, when the upward trends begin? To be honest, the opponents of these voices can be understood. We have already delayed the implementation of economic reforms and waited for better times. The time has come for us to hurry; we have to catch it, while in the world there is one technological zone, only the United States of America. But instead of benefiting from this, Groysman's Cabinet continues to report the losses and with even greater zeal begs for new loans.

At the same time, the Cabinet has not achieved a balanced industrial policy at the state level. True, it is fair to admit that some necessary decisions have recently been made, but their implementation is going quite slowly. This applies to infrastructure companies and agribusiness. Yes, here we make some right decisions, but all this requires systematic work, encouraging foreign investors to come to Ukraine. In a word, the right steps in a number of ministries and the State Property Fund are being made, but they must be put in a single system. And in this process effective and transparent privatization of objects of state property can help significantly. Otherwise, we definitely will not get the proper effect from the new economic model our government being created.

Finally, it is important not to be late. After all, large-scale privatization programs are being prepared in China, India and many other countries, which means that competition for investors only increases.

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