Jump-starting a process that has been stalled for more than two years, Ukraine’s Cabinet of Ministers on May 10 approved a list of 26 large state-owned companies for privatization.
The sale of the state’ stakes in the large companies is expected to bring in Hr 21 billion, or $800 million, to the budget this year- seven times more than privatization raised in in 2017.
In addition, the government also approved a “general” list of more than 700 enterprises that are to be privatized over the next three years, Economy Minister Stepan Kubiv wrote in a Facebook post on May 10.
“The lists will be available for familiarization with interested bodies after a short review period,” Kubiv wrote.
The initial list of 26 entities includes giant companies in the energy, mining, chemicals, processing and agriculture sectors such as: Azovmash, Turboatom, Zaporizhzhya Titanium-Magnesium plant, and Odesa Port Plant, along with five regional power distributors (oblenergos), and Kyiv’s President Hotel.
The general list of 700 enterprises includes two state-owned banks – Privatbank, the largest bank in Ukraine, and Ukrgasbank, according to Interfax news agency.
“This is a positive trend, since the last honest privatization was that of (steel company) Kryvorizhstal” back in 2005, Dmytro Yablonovskyy, deputy director at the Center for Economic Strategy, an independent policy think tank, told the Kyiv Post.
Kryvorizhstal is now a multi-billion-dollar private company called ArcelorMittal. But the major privatizations that followed the one in 2005 tended to conducted using “opaque schemes, and (the companies) fell into the hands of dishonest business people,” Yablonovskyy said.
This year’s sale of state-owned enterprises is expected to be more transparent, and could actually bring even more than expected to the state budget, as the estimates were calculated before the law on privatization was signed by President Petro Poroshenko on March 2, Yablonovskyy said.
According to the law, Ukraine now has two-tier system of privatization: large-scale and small scale. The privatization of large state-owned objects will involve an advisor, and will require a more lengthy process. For example, Big-Four audit company EY will be paid $3 million to prepare the privatization of Centrenergo, a major electric and thermal energy plant.
Smaller objects will be privatized via electronic platforms, and cannot be purchased by citizens from Russia, an aggressor state.
The Ukrainian state currently owns more than 3,000 enterprises, most of which are inefficient, underdeveloped, and are used as cash cows for corrupt schemes. The government plans to keep only 15 objects of strategic importance and an additional 360 enterprises for state-functions.
The privatization of Ukraine’s state-owned enterprises is one of the conditions set by the country’s major financial backer, the International Monetary Fund, which has suspended its funding of Ukraine due to the lack of reforms by the government.
Experts say that most of the state-owned enterprises should be liquidated or privatized, and a few should offered under concession deals. This will reduce corruption and increase investment, experts believe.
However, many ordinary Ukrainians are not convinced of the benefits of privatization.
According to a sociological survey conducted by the Center for Economic Strategy in November of last year, 80 percent of Ukrainians think that only oligarchs will benefit from the sale of state-owned enterprises.
