The current state of the world financial markets is rather problematical and does not appear encouraging among the investors. And at this moment Ukraine can become quite attractive. Ukraine’s State Property Fund is going to sell the maximum number of objects in order to gain the planned 760 million USD by the end of this year, but it is unlikely that it will be able to succeed. And it's not a matter of time. The Cabinet of Ministers of Volodymyr Groysman should implement a fundamental policy. The key question is, why does the government conduct large-scale privatization of 2018-2020?
Now is the time to develop a real private market economy. Denationalization is an essential step in order to create a solid foundation for an effective market economy with a predominance of private property. But how can Ukraine do it practically? Does it have enough competence and political will?
For example, our local oligarchic strategist will not buy PJSC Centrenergo (power generating company, – Ed.) for 213 million USD, it is too much for him. PJSC Centrenergo is the leading producer of electricity in our country, its structure includes Trypilska Power Station, Zmiivska Power Station, and Vuhlehirska Power Station (their total capacity is 7665 MW or 14% of Ukraine's generating capacity). The company supplies electricity to the Kyiv, Kharkiv, and Donetsk regions.
Yes, the object of privatization with a 78.289% stake looks very attractive. However, the Ukrainian State Property Fund and the Antimonopoly Committee are intending to sell this absolute stake to one person again. Well, don’t you know that monopoly does not lead to anything good ?! In this regard, I want to remind you how in the mid-90s, MP Natalya Vitrenko was harshly criticizing the trust companies (TCs), as these TCs were the real vampires of Ukraine.
As a result, Vitrenko managed to create a loud and bright show with magnificent hype: in 1995, Ukrainian PMs not only hollowed money trusts out but also banned the licensed activities of trust companies in Ukraine. Soon, lawmakers changed the methods of privatizing state property, allowing commercial banks to mediate in this previously exceptional case (and of course, PrivatBank has received the first license). From that moment on, financial-industrial groups of well-known big capitalists from the current Forbes list started growing rapidly.
What should we do, how can we change the situation for the better? We urgently need to adopt the bill № 9035 "On capital markets" and to replace State Property Fund advisers attract in the process of organizing the placement of state-owned shares. It should be done by the investment firms with underwriting functions and with guarantees of redemption of the under-placed portion of shares. And, of course, Ukraine should put up stakes on the stock exchanges.
And the tender for the sale of the state-owned shares of PJSC Centrenergo, scheduled for December 13, 2018, most likely will not determine the winner, which means the initial price will become even lower. Is the process of such free privatization really irreversible? Yes, this is a serious problem, which undermines the credibility of Ukraine’s entire market. And we have just a lot of such negative examples, they specifically “kill” the investors’ confidence. And whenever I meet with businessmen, everyone talks about fraud in the public sector; everyone talks about corruption schemes at state-owned enterprises.
Now it is a real threat to both the State Property Fund and the potential investors. It should be somehow decided by Groysman’s Cabinet of Ministers. Of course, this is extremely difficult to avoid this. Recall the recent arrests, court decisions, and scandals, which took place before the start of the tender for the sale of Odesa Port Plant. And as a result, foreign investors refused to participate in this competition on the terms of the State Property Fund. In general, it is necessary for the government and the Verkhovna Rada to realize that the protection of private capital is of great importance.
In fact, we need to come up with mechanisms and ways, how to ensure not only capital protection in the new conditions of large-scale privatization, as well as to create Ukraine’s attractive profitability.
Foreign investors feel their strength, which is based on undivided financial power. Well, since the center of the world economy began to move to East Asia, to the east coast of the Pacific Ocean, the world finances are also moving there. These billionaires from China, work at several world markets at once (in the U.S., Europe, Asia, and other regions), extracting superprofits from the site, which seems to be the most promising at this stage. So they are carefully eyeing Ukraine now.
How can we, Ukrainians, derive great benefits from this situation? For example, for many years, the entire economy of China was built on the policy of low yuan rate. We should also make an attractive investment environment for us in Ukraine (especially during the privatization period 2018-2020). While we do not have a favorable investment environment, the protection of private capital is rather weak. And the main thing is that it is necessary to focus not on oligarchs, but on national joint investment institutions and private equity funds. The main investment objective of such investment funds is the increase in the value of privatized enterprises.
This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.