However, for a country currently in a "state of war," privatization of enterprises faces considerable challenges, and many Ukrainians fear that the sale of these assets could be influenced by the corruption endemic in the country.
After the collapse of the Soviet Union in 1991, Ukraine took over many state-owned enterprises that were mismanaged and and are now full of debt. Ukraine has about 3,100 companies, of which less than half are operating properly and only 15 percent are making a profit. Last year, the five least profitable companies cost the population more than $50 million.
Ukraine has a long history of corruption, and faces both petty and grand corruption. Petty corruption is widespread, and is accepted as almost inevitable by a large part of the population. Citizens “often justify their participation in such petty corruption by noting that high-level officials and oligarchs are involved in graft on a much grander scale” Experts have estimated that huge amounts – in the tens of billions of dollars – are lost annually as a result of corruption in Ukraine.
The Russian-Ukrainian conflict, which lasts from Feb. 24, 2022 to the present, has consumed a large amount of troops, money and resources on the part of Kiev.
As the Russian-Ukrainian conflict drains the treasury, the Ukrainian government hopes to sell a number of state assets and privatize enterprises to achieve two things: provide more money for the armed forces and stabilize the weakened economy by attracting investment, according to a report in the New York Times on June 12 local time.
One investment expert lamented, "If we don't sell our houses now to raise the money, soon we will have nothing left to sell."
However, for a country currently in a "state of war," privatization of enterprises faces considerable challenges, and many Ukrainians fear that the sale of these assets could be influenced by the corruption endemic in the country.
According to official figures, Ukraine today has about 3,100 enterprises, of which less than half are actually operating and only 15 percent are making a profit. The Ukrainian government's ultimate goal is to maintain control of only 100 companies.
Hotel Ukraine, which has stood in the capital Kiev for 60 years, has witnessed some of the "great moments" of Ukrainian history. The square in front of Hotel Ukraine witnessed both the collapse of the Soviet Union, when the square was named Independence Square, and the regime change after the country's "color revolution."
Today the Hotel Ukraine will be auctioned off for a starting price of $25 million as part of a plan to sell off some of the country's major state assets to fund the military and boost the economy.
Today the Ukrainian economy has been hit hard by a brutal conflict that has depleted the country's coffers.
Beginning this summer, the Ukrainian government will auction off some 20 state-owned enterprises, including Hotel Ukraine, a major commercial center in Kiev, and several mining and chemical companies.
The Ukrainian government is pushing for the privatization with two main goals: to raise funds for a $5 billion shortfall in military spending in this year's state budget and to boost Ukraine's ailing economy by attracting investment. Officials hope that, in time, these investments will make Ukraine more self-sufficient.
"The budget is in deficit." Oleksiy Sobolev, Ukraine's deputy economy minister, candidly said in an interview, "We need to find other ways to get money to keep the macroeconomic situation stable and help the military win the Russian-Ukrainian conflict."
However, fearing corruption in the real estate divestment process, the public wants such privatizations to "stop."
Ievgen Baranov, managing director of Kiev-based investment firm Dragon Capital, believes that privatizations will work only if the government acts as a "responsible seller," able to offer guarantees and compensation to potential buyers.
The Ukrainian government has set a "modest goal" of selling at least $100 million in assets this year, as investors may be deterred by the conflict between Russia and Ukraine.
This amount pales in comparison to the billions of dollars in military aid packages provided to Ukraine by the West.
Ukrainian officials and experts acknowledged that, given the risks posed by the Russian-Ukrainian conflict, assets could be sold at a lower price than they were before the conflict. However, they remain confident that privatization will help boost the economy by creating more jobs and tax revenues, as well as bring in more investment, "because the situation is urgent." "If we don't sell and raise funds now, soon there will be nothing left to sell because the properties will be destroyed or occupied."
The New York Times describes how, after the collapse of the Soviet Union in 1991, Ukraine took over many poorly run and debt-laden state-owned enterprises. Official figures show that today Ukraine has about 3,100 companies, of which less than half operate properly and only 15 percent make a profit. Last year, the five least profitable companies cost Ukraine more than $50 million.
Vitaliy Koval, head of the Ukrainian State Property Fund, which manages state-owned enterprises that he says are "a breeding ground for corruption and other illegal activities," is now "sorting through" them to determine which should be privatized and which should not, to determine which enterprises should be privatized, liquidated or kept under state control. He revealed that the government's ultimate goal is to retain control of only 100 companies.
The Ukrainian state-owned United Mining and Chemical Corporation (U.M.C.C.), one of the world's largest titanium producers, is one of the main government assets up for sale. Three auctions were canceled for lack of bidders before the outbreak of the Russian-Ukrainian conflict, and the Ukrainian government is now hoping that the fourth auction, scheduled for next fall with a starting price of about $100 million, will be held as planned.
Corruption in Ukraine
“State capture” by blocks of powerful political and economic elites that are pyramidal in structure and entrenched throughout public institutions and the economy has been seen as a specific feature of Ukraine’s corruption. Both the International Monetary Fund (IMF) and Ukraine’s government acknowledged the resistance that vested interests had shown to structural reforms.
"Grand corruption resulting from weak rule of law and widespread oligarchic influence runs counter to EU values, and is a major obstacle to Ukraine’s development. Grand or high-level corruption hinders competition and growth in the country, harms the democratic process, and is the basis for wide-scale petty corruption." - Special Report European Court of Auditors
Furthermore, investigative journalists have regularly published articles about oligarchs’ illicit financial flows (including money-laundering abroad), even in the EU. A report estimates the cost of tax avoidance through offshores at least one billion euros annually.
Although the EU had introduced several initiatives to reduce corruption opportunities, that grand corruption was still a key problem in Ukraine.
Bình luận