October 21, 2019- Privatization is seen as a key to addressing widespread corruption in Ukraine, where the state is the largest asset owner. The government is preparing a list of 800 state-owned assets for sale, a top Ukrainian official told a gathering of business and government leaders in Washington, DC last week.
“There are 61 central authorities running state-owned companies with no accountability whatsoever, and these guys are messing up the competition in every market you can think of,” Tymofiy Mylovanov, Ukraine’s Minister of Economic Development, Trade and Agriculture, told members of the U.S.-Ukraine Business Council in Washington, DC last week. “We have to get them under control.”
Mylovanov announced plans to list up to 800 of the 10,000 state-owned enterprises (SOEs) for sale. He spoke a group of about 50 governmental and business leaders, including representatives from the U.S. State Department, US Export-Import Bank, agribusiness companies ADM and Bunge, Westinghouse Electric Co., Koch Industries, Cargill, Phillip Morris International and Xtellus Capital Partners.
The U.S.-Ukraine Business Council hosted the meeting October 17 in the office of the BRG Group, a lobbying and public relations firm in downtown Washington.
State-Owned Enterprises and Civil Servant Corruption
Mylovanov said the economic ministry recently merged with the agriculture ministry, which he said was a bed of “surreal corruption” for civil servants.
The agriculture ministry was “nothing but a vehicle for the appointments of state-owned companies which command unbelievable amounts of state land and yet somehow generated huge losses for the government,” Askold Krushelnycky wrote in a news report of the meeting for the Kviv Post.
Only 90 of the 500 state-owned companies in the agricultural department are operational, the Kviv Post reported. Of those, it is not clear whether firms being listed for privatization would be available for foreign investors. While selling state-owned farm land is “a priority,” Mylovanov said, the government would likely restrict foreign ownership due to political sensitivities of foreigners owning land.
Meanwhile, the department is drafting legislation. One of the objectives is to provide antitrust and competition rules to prevent vested interests from controlling the economy.
“The best way to fight corruption is by allowing competition,” a report by the US-Ukraine Business Council quoted Mylovanov as saying.
Auction Sales Open for Bid
Ukraine is currently preparing several state-owned assets for auction. The list of assets for sale include a power-distribution company, an electric company, a bus terminal, and a hotel in Kiev, among others. While some restrictions apply, both Ukrainian citizens and foreign investors are allowed to bid.
Assets for Sale
Note: The GER is not endorsing the sales or attesting to the veracity of the online auctions. Please refer questions to the appropriate government agencies.
Privatization Needs Trust and Transparency
Organizations like the Atlantic Council, Transparency International and the Center for International Private Enterprise have been urging Ukraine to privatize state-owned enterprises.
An Atlantic Council researcher Anders Åslund recently published an article advising the government to transfer strategic assets away from government ministries to state holding companies and to auction off large non-strategic assets to the highest bidder. But he cautioned the government against hastily privatizing assets without ensuring transparency and trust.
“If people won’t trust it, then even a high price received for the asset will not be considered a success, because there will be no support for future privatization,” Aslund wrote.
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