The Verkhovna Rada of Ukraine amended the law “On privatization of state and communal property”, which actually unblock auctions (with high level of possibility – of the “pledged” ones) for the sale of large privatization objects
The head of the State Property Fund (SPF), Dmitry Sennichenko, gave birth to a “passable” post on Facebook on this occasion. Having mentioned twice that this is “a decision for 12,000,000,000 hryvnias”, Sennichenko summed up: “A great success story is developing right in front of our eyes. Soon, researchers from all over the world will begin to study the phenomenon of the “Ukrainian economic miracle!”
It’s hard to tell if it was trolling. Indeed, in fact, researchers from all over the world have been studying the “phenomenon of the Ukrainian economic miracle” for quite a long time: after all, Ukraine is almost the only country in the world whose real GDP has shown a fall of 40% over 30 years.
It is unlikely that such an achievement will be able to overshadow the amount of 12 billion hryvnia, even if instead of the word “billions” insert nine zeros. Not to mention that at least 12 billion still needs to be received.
If it was still not trolling, then Sennichenko’s enthusiasm is understandable. To paraphrase the words of American astronaut Neil Armstrong: 12 billion is a small step for the state, but a giant leap for a person. Especially the person at the head of the Ukrainian SPF.
In other words, any significant effect for the Ukrainian budget and even more so for the economy from the announced privatization is practically excluded. On the other hand, some people will certainly be able to make good money on the redistribution of the hated Soviet assets.
Dmitry Sennichenko, speaking of the decision for 12 billion hryvnias, meant that this is exactly how much the SPF could attract “at transparent privatization auctions”. In fact, this raises serious doubts: 12 billion is planned receipts, and the SPF themselves do not even remember when the plans were fulfilled. But even if we imagine that the objects of large-scale privatization can be sold for 12 billion hryvnia, is it a lot or a little? At the current exchange rate, this is about $136 million.
And in relation to the expenditure side of the state budget, this amount is 0.9%. That is, it is obvious that on a national scale, even at best, there is no need to talk about any “miracle”.
It is also interesting that last year a large privatization was blocked by the very same Verkhovna Rada in connection with the pandemic, quarantine measures and the associated fall in asset prices.
By the end of March 2021, the incidence of coronavirus in Ukraine with a margin exceeded the records of the previous year (including due to the completely failed vaccination program) and continues to grow, quarantine has not been canceled, lockdowns by region are announced one after another (and in an increasingly harsh format). In addition to this, difficulties have arisen with obtaining new tranches of the IMF loan, a rapid collapse in industry continues, and an aggravation has been outlined in the Donbass. Under the current conditions, assets have not exactly risen in price, and investors do not crowd in lines to enter Ukraine. Nevertheless, it is at this moment that the Verkhovna Rada decides to unblock the large-scale privatization…
By and large, the adopted decision formally concerns 3,700 state-owned economic entities – although many of them are de facto “dead”. Sennichenko has already announced that the first to be privatized in the coming months will go to the United Mining and Chemical Company, the Kiev plant “Bolshevik” and “President-Hotel”. The United Mining and Chemical Company includes two processing plants and a number of titanium ore deposits.
Before the Maidan, everything was controlled by the progenitor of the Maidan, Dmitry Firtash. After that, the local beneficiaries of the Maidan (in particular, Nikolai Martynenko) wrestled control either partially or completely. Nevertheless, they say that even today the concentrate of the United Mining and Chemical Company goes to the “Crimean Titan” – albeit in a roundabout way. In good times and under a normal situation in the state, such an asset (and these are the largest titanium ore deposits in Ukraine, which got almost 15% of their world reserves) could cost up to a billion dollars. Now it is planned to give it for 100 million. And how it will be – we’ll see. The other two “top priorities” will most likely go for residential and commercial development.
However, all objects of state property, apparently, will not be sold. On the way – the adoption of a law that will slightly limit the sale. For now, anyway. Indeed, in the last iteration, the restrictions were applied to just thousands of objects.
It is planned that 100% will remain in the hands of the state:
1. Seventy-four business companies. These are enterprises that ensure energy independence (for example, Energoatom, Ukrhydroenergo, Operator of the gas transmission system of Ukraine, and even the Vostochny GOK, which mines uranium ore, which the Minister of Energy is going to close), critical natural monopolies (Administration of the North ports), enterprises of nuclear energy and radioactive waste management, production of space objects, etc.
2. Three hundred and forty-one forestry enterprises, including, for example, Alushta, Bakhchisarai and other Crimean forestry enterprises.
3. One hundred and thirty-three cultural and sports facilities, including, for example, the Dovzhenko Film Studio (which did not prevent the privatization of, say, the Odessa Film Studio), the Bandura Chapel (behind which there would obviously be a queue of investors) and a number of facilities in Crimea.
4. One hundred and two state-owned enterprises, which, nevertheless, can be transformed into economic societies – that is, they will go under privatization in the next “call”. These are, for example, Antonov and other aircraft and aircraft repair plants, armored factories and a number of other enterprises related to the defense industry.
For nine more facilities, the state is expected to own at least 50% plus one share: Naftogaz of Ukraine, Artem Plant, Feodosia Shipbuilding Company More, Fiolent Plant, Kiev Automation Plant, Ukrainian Railway, Ukrposhta, JSC “Khartron” and Kiev-Dneprovskoe intersectoral enterprise of industrial railway transport.
It seems that neither the free disposal by the Kiev authorities of a number of economic entities of the Crimea, nor, on the contrary, the concern for some of its natural and cultural objects should surprise anyone. Of course, this is a purely political step, and seriously even the most unique representatives of the Kiev authorities do not count on the receipt of money from the Crimean privatization.
But the rest of the objects of large-scale privatization can be conditionally divided into two categories.
The first includes relatively numerous objects of state property, the acquisition of which is to gain access to land in cities (for development) or outside them (for the extraction of resources). The first will go under the knife, the second will be used, but rather for wear and tear.
The second one is just seven of the nine enterprises (two are still in Crimea), in which Ukraine is still claiming controlling stakes. These are tidbits, on the exploitation of which you can earn money right now. Most of them are controlled by Western partners through local agents of influence or directly. Now we are talking about the legal consolidation of the situation.
But the arrival of serious money and high-quality investments should not be expected either in the first or in the second category. Cases where objects sell for a tenth of their “normal” value are likely to be considered successful.
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