Large-scale privatization 2019 in Ukraine: Huge problems remain

Author : Olexandr Honcharov

Source : 112 Ukraine

We need to create an attractive investment environment in Ukraine (especially during the privatization period of 2019-2020), and for now we have a rather weak protection of investment capital. There is no long-term development strategy also
21:19, 16 January 2019


Open source

Today our officials literally can’t work without the recommendations of the International Monetary Fund analysts. From the very beginning of 2019, the representatives of the IMF and the State Property Fund of Ukraine during the business meeting discussed options for solving key problems that last year blocked the process of large-scale privatization under the new law adopted on January 18, 2018. In addition, the plan of the last year revenues to the state budget from the sale of privatized enterprises (21.3 billion hryvnia) was fulfilled by only 2%. But large privatization could give the country's economy a powerful impetus with new investment money and new investment ideas.

Well, it is clear that something must be done in this case. And the sooner the better. After all, according to the results of only 6 months of 2018, mentioned in the report of the Ministry of Economic Development, the 100 largest state-owned enterprises and companies received net income in the amount of 21.5 billion hryvnia, which is 41.9% (15.5 billion hryvnia) less than the same period of 2017. These impartial and very alarming figures indicate that it is impossible to continue living without risk management, and the Cabinet of Ministers and the State Property Fund should not so much focus on market conditions as look at the national human resources. And by and large, the production and managerial mistakes of the state-owned enterprises put up for privatization are not so terrible as corruption and insolent fraud of top managers of state-owned companies.

Moreover, at the beginning of 2019 there were 3,364 state-owned enterprises in Ukraine, of which only 1,594 worked. Why? At the same time, the sum of the assets of the 100 largest state-owned enterprises amounts to 93.3% (!) of the total value of all operating state-owned enterprises in Ukraine. What to do with it? This is a huge problem that undermines the credibility of the entire Ukrainian market. And we have a lot of such negative examples. This specifically undermines the credibility of the privatization process from both external and local investors. Of course, the head of the State Property Fund of Ukraine, Vitaly Trubarov, and the IMF Resident Representative in Ukraine, Jost Lyungman, could not help talking about this during a business meeting.

Of course, the mechanisms and methods of conducting privatization auctions and tenders, as well as the protection of investors' capital, are of great importance. Therefore, as Vitaly Trubarov wrote on Facebook: “We agreed with the IMF Resident Representative Lyngman to work together to solve problems that block the process of big privatization ... A clear requirement of the IMF is to start selling companies from the list of big privatization in 2019”. We would like to finally stop the flow of negative news from Ukraine. The same head of the State Property Fund Trubarov, sincerely complains that due to various lawsuits, consortiums of investment advisors selected at the competition 5 months ago cannot begin preparations for the privatization of a number of state-owned enterprises.

Related: Russia not to force Ukraine to refuse from using Kerch Strait, - Ukraine's Defense Minister

Thus, in particular, the head of the State Property Fund notes: "In fact, since last April, the Odessa Port Plant has been idle, and the investment adviser of Pericles Global Advisory in the consortium with White & Case LLP, Kinstellar, KPMG Ukraine and SARS Capital could not begin the process of preparing for privatization and restructuring of the plant’s debts, which would enable the enterprise to start production.” However, in this part I cannot disagree with Vitaly Trubarov. And here is the reason. Recently I saw a great interview with my longtime acquaintance Olexander Bondar, who from 1998 to 2003 was the head of the State Property Fund. In an interview he genuinely wondered why we pay a huge reward of $ 1 million to the adviser of the State Property Fund for the sale of the Odessa Port Plant, if this privatization object did not find its buyer even with a regular new starting price, which is 10 times lower than the initial sale price?

Also, it seems, we will have to pay $ 3 million to the investment advisor of the State Property Fund of Ukraine for the largest energy holding PJSC Centrenergo that was not sold on December 13, 2018. Next, we, the taxpayers of the poorest country in Europe, will have to pay very expensive advisory services to the State Property Fund in selling Oriana, Azovmash, Sumykhimprom, Ukragroleasing, privatizations of Kherson, Dnipro, Kryvyi Rih and Severodonetsk Thermal Power Plants and many, many other objects that most likely will not find their strategic investor. Accordingly, from the planned revenues from the privatization only some bits will fall into the state budget. And in this series of overt non-professionalism implicated in cynicism, a shocking example of receiving premiums of $ 46 million by the top managers of Naftogaz is also highlighted.

Honestly, I don’t remember such cynicism and lack of professionalism. Since 1994, with the help of investment-financial companies and funds created by me, I led the privatization of more than 1000 state-owned enterprises, including the metallurgical plant Azovstal. And it is absolutely clear that the new law on the privatization of state-owned enterprises involving investment advisors, adopted by the Verkhovna Rada on January 18 last 2018 is a bright symbol of illiterate economic policy in Ukraine. True, a year ago, Prime Minister Groysman, speaking in parliament, said that the adoption of a new law on privatization and the implementation of its provisions would not only restore the effectiveness of state enterprises, but also improve the lives of Ukrainians as a whole.

Alas, failure again. Why? Because economic policy today is conducted as if it will be no tomorrow. We need to create an attractive investment environment in Ukraine (especially during the privatization period of 2019-2020), and for now we have a rather weak protection of investment capital. There is no long-term development strategy, but people continue to wait patiently. Yes, it seems Ukrainians will soon have to enter the Guinness Book of Records as the most patient people.

Read original article at

Related: Former U.S. marine detained in Russia red-handed

Related: Russia warns Ukraine about its end as state

Система Orphus

If you find an error, highlight the desired text and press Ctrl + Enter, to tell about it

see more