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Ukraine's new law on privatization: Key consequences

Author : Olexandr Honcharov

January 18, the Verkhovna Rada adopted the law on the privatization of state property
11:28, 22 January 2018

Read the original text at 112.ua.

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January 18, the Verkhovna Rada adopted the law on the privatization of state property (No. 7066). But to avoid turning into a marginal country, it is necessary to effectively carry out the process of denationalization and effectively implement the modernization of privatized enterprises.

"This issue has a direct impact on the national economy," Prime Minister Groysman noted, stressing that the law allows creating tens of thousands of jobs and conditions for serious economic growth, which will have a qualitative impact on the economy and ordinary people's lives. And if conduct large-scale privatization of state-owned enterprises and modernize them, we will manage to fulfill this plan of the head of the government.

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And only then we will be able to make Ukrainian goods cheaper, not at the expense of the quality. Accordingly, the number of jobs should increase, the number of "growth points" in the real sector of the economy increase, the number of so-called zombie enterprises, which, in fact, are bankrupt, will continue to operate solely because of monetary support from the top officials. Targeted privatization can intensify structural transformations in the economy.

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Now people's deputies and major officials are trying to correct the imbalance by selling state-owned enterprises subject to privatization. Taking into account the ongoing armed conflict in Donbas, it is difficult to do this. But we will see price and terms, at which state enterprises will be announced for sale.

Therefore, today the key issue is which economic sectors do attract the investors? According to various experts, these are primarily agro-industrial companies, energy, infrastructure, military-industrial complex, and telecommunications. In addition, virtually nothing hinders the successful conduct of these privatization operations, the difficulties in the current legislation are easily avoidable, because the transaction would be carried out under English law in the offshore zones.

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As far as I am convinced, a lot of investors are also ready to invest in state property objects (subject to privatization), which have debt problems. However, here come the issues of fair market valuation of assets and oriented investment conditions of the State Property Fund of Ukraine. We should not forget about the prospects for scientific, technical and technological exchange. At the same time, it is necessary to take into account the fact that external conditions have become much more stringent, the price situation is worse, and the reserves of enterprises accumulated in "fat" years have long been spent.

No doubt, those state companies and enterprises that do not have free access to international capital markets would suffer more, because they would have no additional sources of revenue from the state budget. In addition, the majority of production costs have been reduced as much as possible, and a significant number of costly projects have been frozen. After all, if there is no inflow of foreign investment, especially from countries with quality economies, many of our production workers will suffer bankruptcy, which in turn will lead to a decline in Ukrainian production.

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There is no doubt that potential investors and buyers have drawn serious conclusions from the results of the so-called voucher privatization in Ukraine, the crisis of 2008-2009 and, of course, the prolonged recession. I am convinced that now there will not be no any uncalculated transactions, impulsive purchases (they say, let us buy an object, and then we will see what to do with it." Of course, investors became smarter. Also, there will be no immediate investments in real estate and the banking sector, which we observed 6-8 years ago.

Today, all the investors will be very balanced in approaching various transactions in order to properly create the right amount of business. After all, everyone understands that buying something cheap from the point of view of further development of the holdings or corporations is doubtful. So, we must constantly monitor the macroeconomic indicators of the Ukrainian economy, as all these transactions with privatization assets reflect the general trend that we see on the Ukrainian market. Still, national financial and industrial groups are a powerful driver of both growth and decline of the country's markets. They will continue to acquire various industry assets. I think, most of all they are aimed at infrastructure and energy facilities.

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And yet, apparently, these days, the investors create a new pool to participate in large-scale privatization. They come with new investment ideas and modern business models. Moreover, the Cabinet of Ministers of Volodymyr Groysman offered the market quite attractive assets. Therefore, it is expected that a lot of so-called strategic deals would be signed, when corporations will, in fact, use privatized facilities for dynamic development and consolidation of their business.

Today, Ukraine offers very attractive prices. There are interesting objects that are subjected to privatization program. The price did not rise, the purchase became more difficult thought.

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