Parliament Fails to Check Shadow Privatization

The most unexpected news in this country’s economic life last week was Verkhovna Rada’s refusal to ban on shadow privatization. As few as 165 deputies voted to suspend the sale of state-run enterprises to pay their debts. To be passed, a resolution requires 226 votes. It will be recalled that this law was earlier vetoed by President Leonid Kuchma. Accepting the document’s idea as a whole, he recommended parliament exclude the article about a moratorium on the privatization of electric companies until the election. The deputies did not agree to this proposal, which has in fact given shadow privatization the green light in Ukraine.

The idea of suspending the sales of state-owned property to pay off debts came up last spring, when shadow privatization touched off a wave of scandals. The Bila Tserkva-based Rosava plant, the Donbasenerho, Luhanskenerho and Donetsenerho electricity companies were involuntarily sold by the state control after the controversial rulings of arbitration courts, while the budget did not get one red cent out of it. At that time, the Prosecutor General’s Office froze the transfer of property to new owners pending investigations. But now there is a new wave of shadow privatization. According to sources at Naftohaz Ukrayiny, bankruptcy suits are being drawn up against natural gas suppliers in the Donbas region. The current failure by parliament to ban selling state-owned property to pay off debts is only going to encourage the authors of shadow schemes.

The deputies also made another expected decision: they passed a law on the State Property Fund incorporating only one of the ten Presidential amendments. The stumbling block was again the problem of the Fund’s subordination. Oleksiy Kostusev, chairman of the Verkhovna Rada Committee for Economic Policy, believes that the law on the State Property Fund is again headed for a veto, which means that, on the eve of the elections, the process of privatization will be influenced by everyone who wants to.