Ministry of Mines discusses privatization bill
Is it right to say that a ministry, as a central public administration body, is responsible for everything that occurs at the enterprises it controls? Even a few years ago, this would have seemed a purely rhetorical question. But now it is common knowledge that it does not befit a king (read: a ministry) to be responsible for the output of coal at every mine and mining association. The Ministry of Mines is supposed to work out s tactic and strategy of supplying the country with this very important variety of fuel, monitor the effectiveness of decisions, and introduce correctives in good time.
At the headquarters of the coal industry they seem to have understood at last, after years-long and not very successful attempts to increase coal production with the government’s help, that this is far from the best way. As a result, the ministry has drawn up a law on the development, privatization, and denationalization of coal-mining enterprises. As conceived by the drafters, the bill is expected to set in motion a relevant mechanism, create conditions for improving the investment attractiveness of mines, and encourage the involvement of non-governmental investments and small-to-medium business in this sector.
The process is likely to start with the certification of mines and related equipment. Then it is planned to restructure these enterprises and write off their debts, fix the original price of the facilities to be privatized, and define the features of the denationalization of specific enterprises and further post-privatization relations between these modernized enterprises and the state.
Before the start of a roundtable debate on this draft law, The Day asked Ukraine’s Minister of Mines Serhii Tulub whether the reduction of the value of electricity and increase in the value of coal are mandatory conditions for launching the privatization process in the coal-mining sector, since otherwise investors may refuse to come to the mines. The minister disagreed, stating that he has already met with many potential investors from various countries, who are interested in taking over Ukrainian mines - in the current conditions to boot. According to Tulub, what they are worried about most of all is whether there are coal reserves at the enterprises slated for privatization.
Meanwhile, as the participants of the roundtable pointed out, if the current rate of coal production continues, Ukraine’s reserves of coal will suffice for 450 years. Taking into account that the world’s deposits of oil and coal may be exhausted in the next 50 to 100 years, the attitude of potential investors is easy to understand. On the other hand, experience shows that the Ukrainian state does not have at its disposal adequate resources to update its coal-mining industry and raise it to world levels in terms of both coal production and occupational safety of employees. The roundtable debaters reached the conclusion that the sector is in dire straits, especially from the financial point of view. According to parliamentarian Viktor Turmanov, the sector needs another 600 million hryvnias.
Drawing from his own experience of privatizing coal mines, Pavlo Korzh, deputy chairman of the Parliamentary Committee on the Fuel and Energy Complex and former general manager of the privatized Pavlohradvuhillia association, reacted quite positively to the proposed bill, as did the other roundtable participants. At the same time, he noted that it should be passed only after the law drafted earlier by the coal ministry on boosting the prestige of mining work is adopted.
The debaters generally agreed that the course towards privatization is quite a well-grounded and promising decision. Suffice it to say that last year Ukraine produced 80.3 million tons of coal, as it did in the last few years. The share of state-run businesses is 46.4 million tons (58 percent), and their output fell by 3.3 million tons compared to 2004, while privatized mines have been steadily increasing their output without receiving a single penny from the state.
Yet, even the minister himself is well aware (he admitted this before discussing the bill) that the coal-mining sector is a rather risky area to invest in. Proof of this is the experience of previous “waves” of coal-mine privatizations, when buyers’ ill-considered social and investment-related commitments had a negative effect on the whole campaign.
The debate was not confined to lessons of the past. Representatives of the research community also said that they have come up with a number of rational proposals for the post-privatization period. Vasyl Stoliarov, director of the Institute of Physical Economics, said that everywhere else in the world the state only funds the building of new mines and the reconstruction of old ones and, if necessary, partly compensates end users for the price of coal. Stoliarov believes that what makes coal- mine privatization economically important is the separation of mines’ self-development funding sources from sources that fund major construction work in the sector.
Valentyna Semeniuk, head of Ukraine’s State Property Fund, also raised an important problem at the roundtable. In her opinion, every coal mine should obtain a land-management license from the state: otherwise, vested interests will be vying not so much for mines as for attractive plots of land, especially in densely-populated mining areas. At the same time, Semeniuk, who had nothing but praise for the ministry’s privatization initiative, used a turn of phrase that may discourage potential investors. “If fat cats have money, let them help build socialism in Ukraine.” This remark was apparently addressed to the Ukrainian left-wing electorate, which doesn’t quite understand what a socialist is doing at the State Property Fund, rather than to foreign investors.
Radical ideas also had an impact on the provisions of the debated bill. A ministry official, who was boringly explaining some novelties in his speech, suddenly said that the bill entails a mechanism for the out-of-court re-nationalization of enterprises in case a buyer reneges on his investment promises. This unconstitutional feature immediately encountered mild criticism from Volodymyr Riabchenko, director of the Privatization Institute, who also advised the law drafters to limit the instruments of privatization as little as possible. In particular, when a sale is underway, the stock exchange share should not be restricted to 10 percent because some businesses may find it more profitable to sell a larger share at the stock exchange.
The excessively academic debate on coal-mine privatization was somewhat livened up by a discussion between Riabchenko and Semeniuk on the term “reprivatization,” which various speakers mentioned when they were broaching the possibility of out-of-court re- nationalization of privatized property. The State Property Fund head stressed that she has read reams of laws and failed to find that word.
Ukraine’s main privatizer thus insists that this notion has never existed in our country. The falseness of this claim is clear to anyone who remembers the story behind the sale of the Kryvorizhstal steel mill. Riabchenko saw fit to remind his opponent that according to Soviet legislation there was no such thing as sex.
