The system of state property management demanded a fundamental reform. Being launched in 2015, after a more than 10-year suspension, this reform stage is not the first attempt to privatize state-owned enterprises (SOEs) and make their management efficient and transparent. As of now, the process of SOEs’ evaluation and privatization has started, and the State Property Fund of Ukraine regularly informs about its progress.
The largest part of SOEs is concentrated in the energy sector. The biggest companies that are state owned, and therefore are considered to be the most important objects of the reform: NJSC “Naftogaz of Ukraine”, PJSC “Centrenergo”, “Energoatom”, “Ukrzaliznytsia”, “Ukrposhta”, International Airport “Boryspil”, infrastructure of Ukravtodor, state coal mines, PJSC “State Food and Grain Corporation of Ukraine”, “Ukrspyrt”, “Antonov”, PJSC “Turboatom”, PJSC “Sumykhimprom” and PJSC “Odessa Port Plant”. In 2014, subsidies for these companies amounted to about 2% of GDP, the amount of indirect subsidies – about 6% of GDP. Unprofitable NJSC “Naftogas of Ukraine” received the largest amount of the above funds.
The reform was launched in May 2015, after the approval of the Strategy for Improving Efficiency of SOE Management by the Cabinet of Ministers of Ukraine. Here are the main provisions of the approved strategy:
➤ increased transparency of the activity of business entities (disclosure of information by business entities, audit of financial statements of business entities by independent auditors),
➤ strengthening of budgetary surveillance,
➤ separation of functions of the Cabinet of Ministers of Ukraine and ministries as a subject of state property management and a regulator,
➤ improving corporate management of business entities,
➤ alignment of interests of managers and owners of business entities,
➤ introducing supervisory councils and independent directors,
➤ preparing detailed plans for restructuring of business entities subjected to major fiscal risks.
According to the Strategy, a SOE can remain state-owned only for reasons of preserving particularly important objects of infrastructure, national security protection, etc.
Reform expert – Volodymyr Dubrovskyi, economist at the Center for Social and Economic Research “CASE Ukraine”
➤ Creation of a Supervisory Council of SOE reform, June 2015.
➤ Development of the Concept of National Holding Company.
➤ Appointment of new heads of strategic state enterprises.
➤ As of summer 2016, 23 of 45 largest state enterprises were audited.
➤ In 2015, 102 objects amounting to UAH 145 million were sold, in 2014 – 100 objects amounting to UAH 443 million, and in 2013 – 203 amounting to UAH 1 billion 476 thousand.
➤ Imposing prohibition on sale of SOE to companies registered in the aggressor state.
Measures to be implemented:
➤ Sale of state stakes of ten regional power distribution companies and “Centrenergo”, four central heating and power plants, Odesa Port Plant, Ivano-Frankivsk Locomotive Repair Plant, “Sumykhimprom”, “Turboatom”, “Electrovazhmash”, State Food and Grain Corporation.
➤ Reduction of the list of state companies prohibited for privatization to 705.
➤ Auditing of another 119 large SOEs.
➤ Transformation of all state enterprises (except enterprises created for operational management of public property) into corporations.
➤ Privatization of the land fund.
Key laws adopted under the reform:
➤ The Cabinet of Ministers’ Decree of Approval of the Strategy for Improving Efficiency of SOEs Management.
➤ The Cabinet of Ministers’ Resolution “On Some Issues concerning Audit of SOEs”.
➤ The Cabinet of Ministers’ Resolution “On Competitive Selection of SOEs’ heads”.
➤ The Law “On Amendments to the Law of Ukraine on State Property Privatization”.
➤ The Law of Ukraine “On Amendments to Some Legislative Acts of Ukraine on Protection of Investors’ Rights”.
➤ The Law “On Amendments to the Law of Ukraine on the List of State Property Objects that are not Subject to Privatization”.
➤ The Law “On Amendments to Some Legislative Acts of Ukraine concerning the Management of State and Municipal Property”.
➤ The Cabinet of Ministers’ Resolution №588 (from Aug. 31, 2016) “On Amendment to the Resolution on Transparent and Competitive Privatization in 2015-2016”.
Laws to be adopted:
➤ The Law “On State Privatization Program” (under development; the law of 2000 is still valid).
➤ The legal framework for the implementation of corporate management in state enterprises.