Privatization in Ukraine
The process of privatization of state-owned enterprises in Ukraine is currently underway. The main goal of this is to increase the efficiency of the use of state property, and to privatize the assets that are not relevant to the state, in other terms to sell them at open auctions. There are more than 3.5 thousand state-owned enterprises in Ukraine. Many of them are not used effectively enough or are a “burden” for the state. State-owned companies are totally capable of generating significant gross revenues, but the financial outcome is now minimal compared to other companies in the same sector. This is due to the inefficient and even corrupt activities of the management of these enterprises. All the above factors justified the privatization of state-owned facilities in 2018.
The below are some of the main success indicators to be concerned when it comes to the Ukrainian privatization specifics, which are definitely worth noting:
1) Revolutionary new approach
The process of privatization of state property in 2018-2021 is significantly different from the privatization that took place during the previous years of Ukraine’s independence. Previously, the privatization of state-owned facilities was carried out by signing investment agreements between the state and private investors, subject to the implementation of the investment plan. Quite often such a privatization procedure failed, and neither the state nor investors have benefited from it. However, for the period 2018-2021, privatization takes place through the sale of property rights to the object and the new investor becomes the full owner of the privatized enterprise.
2) Bidding transparency
All stages of the privatization process are being currently realized using the ProZorro.Sales system, which is nowadays recognized as one of the most adequate and efficient digitalized selling platform in the world. Here, fair and open bidding procedure is ensured by conducting electronic auctions, which system contributes greatly in open and transparent auctions with no interference in bidding procedure.
3) Massive state-run companies list
The list includes state-owned enterprises to be sold through state privatization from various industries and businesses. Energy, transport, chemical, machine-building, tool-making, construction/building, agricultural, mining and many other industries are on the list for privatization.
4) Investment -attractive assets/facilities pool to choose from
Most of the state-owned facilities enjoy their developed infrastructure, highly-potential material and technical base, having preserved their scientific potential and qualified employees. These all require some more sophisticated approach and more efficient management. The telling story to confirm the fact could serve that of the JSC United Mining and Chemical Company. The latter, being manufacturer of titanium and manganese ores, after the change of management, increased its net profit by 6 times – up to UAH 600 million. This is just one example of how such advanced management approach affects the net financial performance of state-owned enterprises.
Privatization in Ukraine is not a permanent phenomenon, as the use of a transparent asset sale procedure creates a high demand for investment-attractive enterprises, and there is interest on the part of the state leadership to sell enterprises that are not of strategic importance to Ukraine. At the same time, privatization offers significant opportunities for investors from around the world not only to maintain their own investment capital, but also to increase it.