The remaining large industrial assets to be sold

The State Property Fund of Ukraine is planning to finish the sale of some large industrial facilities this year. They are, first of all, such public companies as the Odesa Port Factory (OPF), Turboatom, Azovmash, and Sumykhimprom. These businesses are on the list of the 137 facilities the fund plans to sell in 2014. However, the OPF, Turboatom, and Azovmash can only be privatized at the permission of the Cabinet of Ministers, and Turboatom should also bring its performance into line with the law on joint-stock companies. The state still has in reserve the blocking shares (25 percent each) of power-generating companies, Kyivenerho, and regional gas distribution authorities, as well as the residual shares of power-supplying companies and a stake in a number of other, less attractive, industrial facilities.

The sales of state property are expected to fetch about 17 billion hryvnias to the budget. It will be recalled that privatization in 2013 could only earn 1.48 billion hryvnias, although the originally planned figure was 10.9 billion (the bulk of the earnings was expected from the sale of Donbasenerho shares).

Whether or not the plan of earnings in 2014 will be fulfilled is not in fact the crucial point. What is really interesting is whether privatization of the four abovementioned industrial facilities is needed at all. The Day asked Volodymyr LANOVY, president of the Market Reforms Center, former acting chairman of the State Property Fund, to assess the situation.

“Privatization has assumed the form of a private seizure of state-run businesses by some pro-governmental groups of people. Moreover, it is not a form of changing the property management structure at enterprises, when you can sell shares and attract investments. Nor is it a form of restructuring the old monopolistic entities in order to create conditions for competition. The current privatization has nothing to do with all these things. Nobody cares for that. We can just see the growing number of businesses in the hands of certain pro-governmental individuals.

“The current privatization is a way to have centrally-managed oligarchic holdings established by some individuals and to turn the entire economy into an aggregate of these holdings. This government will distribute the still remaining state-run facilities among ‘its own’ people. As a result of this privatization, the sold businesses will have no additional possibilities for development. For they will be run by the same managers and organize work on the old markets by means of the existing techniques. But financial flows will be distributed in a new way in line with the new owners’ concepts.

“There have been no instances in Ukraine when loss-making state-run businesses were privatized to save budgetary expenses for repaying their debts. For example, Kyivvodokanal is a loss-making entity, but Akhmetov bought it and continues to receive budgetary subsidies to offset these losses.

“But the four abovementioned facilities make no losses – just the contrary. Besides, they are unique industrial facilities that apply up-to-date technologies. In the current conditions, their privatization will result in the collapse, rather than reorganization, of the entire national economy, for these enterprises will soon be making losses and require subsidies.”