“Privatisation of the state enterprises stipulates the growth of the country’s economy” — experts

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Privatisation of the state enterprises would allow the attraction of investments, which would positively affect the pace of an economic growth. That has been the collective conclusion drawn by the participants of the panel discussion “Is there a public demand for the honest privatisation?” held in Kyiv today.

The event is the first in the series of the discussions dedicated to a progress and perspectives of the privatisation to be held in the coming months in Odessa, Kharkiv and Zaporizhia. It has given a start to the public events within the framework of the project supporting the fair and transparent privatisation currently being implemented by the Centre for Economic Strategy.
The event was opened by Dmytro Yablonovsky, deputy of the executive director of the Centre for Economic Strategy, who has presented the new study dedicated to perception of the privatisation among the Ukrainians — both employees of the enterprises to be privatized and those who are not related to such enterprises.

The new study “Expectations of the Ukrainians from the privatisation: possibilities and risks” demonstrates that: more than half of the respondents consider a private ownership more effective than a state one. In particular, the respondents mentioned higher profitability, more opportunities for modernization, new capital investments, higher specialists’ qualifications, human capital investments, reduction of the “inflated staff”. However, both employees of the enterprises to be privatised and those who are not related to such enterprises foresee a number of risks related to the privatisation, for instance, the risk of bankruptcy of the privatised enterprises without the state support, lesser budget revenues, vulnerability and reduction of staff, reduced social packages.

Acting Head of the State Property Fund of Ukraine Vitaly Trubarov stated during his speech that, currently, the privatisation is the only real instrument for attracting the foreign and national investments. “The demand for a fair and transparent privatisation is huge, as well as expectations towards the privatisation, which is currently perhaps the only fast instrument for attracting the investments to the real sector of the economy and GDP growth. While talking about the demand from the society for a fair privatisation, though, which is coming mostly from the employees of the state enterprises, it should be noted that they are talking about the privatisation being fair towards them, employees, in the first place, about fairness as a protection of their rights, preservation of their jobs and salaries”, he noted. In the opinion of the acting Head of the State Property Fund of Ukraine, the main purpose of the privatisation is the attraction of a strategic investor that could bring the enterprise up to a competitive level. “All of the preconditions for that have been created — from legislative point of view and considering the political will to conduct a fair, transparent and competitive privatisation”, he added.

While discussing the risks predicted by the Ukrainians, the first deputy of the Minister of Economic Development and Trade of Ukraine Maxim Nefyodov has mentioned the previous mistakes and illegal agreements, which would be relegated to the background by the first successful cases of the enterprise sale. Despite the potential interest from investors, however, it would be rather difficult to find the effective ones, since there are no “simple” cases among the state enterprises to be privatised. “I would consider it to be a success if we could conduct a one tender for large privatisation objects before the end of the year, I mean seeing it through to completion. It would be a success if, by the end of the year, we could appoint effective consultants for 10 large privatisation objects, and sell around 100–150 small privatisation objects, it would be a good result”, stated Maxim Nefyodov.

While talking about the experience of Slovakia, the head of the Strategic Advisory Group for Supporting Ukrainian Reform (SAGSUR) and Adviser to the Prime Minister of Ukraine, member of the CES Supervisory Board Ivan Mikloš has stated: “The Ukrainians and Slovaks have started to implement the new rules more than 25 years ago. At that moment, the situation in both countries was similar. Currently, though, the gap between the Slovakia and Ukraine is huge. One of the most quick and effective sources of investments is a quick, transparent and effective privatisation.” Ivan Mikloš has stated that in order for Ukraine to have a steady economic growth the investments should amount to more than 25% of GPD — currently, this figure is around 15%. “The direct foreign investments via privatisation are the largest and quickest source of investments. The absence of reforms and privatisation is one of the reasons for non-competitiveness of the Ukrainian economy”, he summed up.

Andriy Boytsun, member of the Strategic Advisory Group for Supporting Ukrainian Reform (SAGSUR), CES adviser has commented the CES study as follows: “As we can see from the survey results, the people are less interested in the sale price of the enterprises. They are more concerned about the effectiveness and fairness of the privatisation, attraction of a strategic investor, and preservation of jobs.” Andriy Boytsun has stressed that the privatisation should be launched as soon as possible, since the progress in this field is almost non-existent. “The leading Ukrainian power generating company Centerenergo should be the first in the privatisation list. Thus, we would demonstrate that the process is real, the sale price is normal, the strategic investor can be found’, he said.

In the course of the event, the deputy of the executive director of the Centre for Economic Strategy Dmytro Yablonovsky has also presented the analytical study “How to tackle the corruption at the state enterprises?”
“Only the 100% privatisation of the state enterprises is the key to tackling the corruption within. The privatisation would overcome the very source of corruption — the state ownership, not its consequences”, Dmytro Yablonovsky has stated.

The study’s authors have analysed the three methods to fight corruption at the state enterprises — involvement of the authorities, corporate governance reform, and privatisation of the state enterprises. Only the privatisation, however, allows avoiding political influence risks on the state enterprises in the long run.

“We are confident that the transparent and fair privatisation would become a source of investments, increased well-being of people, creation of new jobs; would allow getting rid of corruption at the state enterprises; increase their performance, as well as have a positive social effect from their sale”, has said Dmytro Yablonovsky, summarizing the panel discussion.

See more about the study «How to tackle the corruption at the state enterprises?». The study has been conducted within the framework of the project «Privatisation: Regional context».

The event has been carried out with the assistance of the European Union and the Centre for Democracy and Rule of Law (the project «Enhancement of RPR coalition») within the framework of the project “Privatisation advocacy with the focus on anti-corruption and regional activity at the locations of the large privatisation objects”, which is being implemented by the Centre for Economic Strategy.