What is privatization
Privatization is a sale of state-owned property to private individuals or legal entities.All privatization objects are divided into small-scale and large-scale privatization objects. Objects of small-scale privatization include not only state-owned enterprises and stakes but also objects of unfinished construction and socio-cultural purposes, separate movable and immovable property, the value of which does not exceed UAH 250 million. Such objects can be sold exclusively through government’s electronic trading system ProZorro.Sale, which is built on the principles of full transparency – the entire sale process takes place publicly and openly to avoid corruption. For entrepreneurs and companies, this is a good opportunity to buy something interesting for the development of their business and their community.If the cost of the object is higher than UAH 250 million – these are large-scale privatization objects. The sale process of such enterprises involves investment advisers, who gather all the necessary information, prepare the object for privatization and look for potential investors. Usually, large consulting, audit and investment companies become advisors for these objects.
What is the state of state-owned enterprises in Ukraine
There are 3,733 state-owned enterprises (SOEs) in Ukraine, out of which 1,261 are to be liquidated as they don’t hold any value, and 585 are located in temporarily occupied Crimea and Donbass region. Additionally, around 300 SOEs in Ukraine have strategic value and are not considered for privatization, including enterprises in the defense sector, natural monopolies, and those with high social value such as Ukrposhta (state postal service), Ukrzaliznytsia (national rail transport operator), Boryspil International Airport, and others. The remaining ~1,000 companies are potential subject to privatization.
More than 750 SOEs that are to remain under the state ownership will be transferred the so-called National Wealth Fund, the concept of which is now under development. 115 SOEs are managed by the National Academy of Sciences of Ukraine (NASU) and the National Academy of Agrarian Sciences of Ukraine (NAASU).
In 2019 alone, 530 enterprises were transferred to the Fund for further privatization, which is a significant increase in the Fund’s portfolio compared to 93 enterprises that were transferred during the last 10 years cumulatively.
What are the main goals of privatization
- To fight against corruption, which is common in SOE and when managing the state property, to increase transparency of such management.
- To attract direct investments and strategic investors, both from Ukraine and from other countries.
- To attract additional revenues to the budget both from sales and, subsequently, from tax revenues from new businesses.
- To improve the performance of enterprises or the quality of property use through an effective owner search.
- To modernize production or re-profile facilities and to create of new jobs.
What will not be privatized
- Enterprises that ensure the security of the state.
- Enterprises that are natural monopolies.
- Enterprises that are important to society or whose services/goods cannot be performed by private businesses.
The main legislature on privatization in Ukraine: