Ukraine essentially failed to achieve its privatization target this year despite the fact that 2015 was declared the year of the large-scale privatization, the State Property Fund’s Ihor Bilous wrote in a column on the liga.net website.
Neither the Odesa portside plant, the Centrenergo power company, the four combined heat and power plants, nor the six regional distribution companies was sold this year.
As a result, only UAH 145 million was generated into the budget from the privatization in the first 11 months of 2015 out of the planned UAH 17 billion. The situation was somewhat improved by rent, from which the State Property Fund generated a total of UAH 1.6 billion into the state budget, Bilous wrote.
According to him, there was practically a conflict of interests around each of the state enterprises. In addition, the situation was complicated by delays in adopting the draft law No. 2319a. "[This draft law] contains only three small but very important amendments: prevention of representatives of the aggressor country from participating in the privatization; granting the opportunity to involve advisers in the sale of major assets, including with the use extra-budgetary funds; abolition of mandatory pre-privatization sales of 5-10% of shares on the stock exchange," Bilous wrote.
According to him, the decision to suspend privatization until adoption of these amendments was informed and principled because the task of the State Property Fund "is not sales but conduct of transparent privatization" with the aim of attracting foreign capital into the country.
Bilous also said that statistics showed that state enterprises have doubled their liabilities over the past five years while their revenue growth has stopped. Their losses amounted to UAH 590 billion in 2014 and the number of unprofitable enterprises increased to 68% (among joint-stock companies).
Regarding 2016, Bilous said that the State Property Fund has already prepared a new privatization concept - it proposes dividing the approximately 4,000 enterprises remaining in state ownership into four groups. The first group will consist of regulatory state enterprises, which will be managed by the relevant ministries. The second group will consist of 1,300 state enterprises that have long existed only on paper, and these enterprises will be liquidated. The third group will consist of a small number of state enterprises (up to 100) that are of particular importance to the state. These state enterprises could form the basis for a new holding company. The debate on this issue is still ongoing. The fourth group will consist of all the other state enterprises that need to be privatized.
"I want to draw attention to the fact that privatization involves not just a sale. It also involves contractual management, concession, joint management, or partial sale. Undoubtedly, most of the assets should be sold," Bilous concluded.