Business met with the Head of the State Property Fund of Ukraine

12/ 06/ 2020

Listen to online Stop   Yesterday, the business community of the European Business Association met with Dmytro Sennychenko, Head of the State Property Fund of Ukraine. During the meeting, there was a discussion of the plans and goals of the Fund for the privatization of state-owned enterprises, new procedures for privatization, and ways to attract investment in public projects. At the beginning of the meeting, Mr. S Sennychenko clearly stated the main goals of the state privatization policy. First, the implementation of privatization measures is aimed at attracting direct investment and new strategic investors. It is expected that private owners will be able to manage unproductive state assets more efficiently, thus making them more competitive. At the same time, with the reduction of the public sector, there would be fewer possibilities for corruption schemes. Transferring state property to private ownership will also attract additional resources to the budget, however, this is not a priority for the Fund. To accelerate large-scale privatization, the State Property Fund has radically changed its approach to work and made its services more customer-oriented. Thus, the Fund has developed an online portal where available proposals for privatization are published with the categorization of objects by their condition. Moreover, there is a virtual data room, where it is possible to get detailed information about the object of privatization, such as its statutory documents, and outstanding litigation or debts. The privatization procedure differs depending on the book value of the object. Thus, small-scale privatization applies to objects with a book value of up to UAH 250 million (small factories and ports, hotel complexes), the objects with a value of UAH 250 million and above are subjected to large-scale privatization. Small-scale privatization has a more simplified procedure which includes electronic auctions. It takes 3 to 5 months to prepare a small object for transfer. Large enterprises are privatized with the help of advisers who audit and prepare all the necessary documentation. In general, the standard duration of large-scale privatization is 11-12 months before the auction date. Currently, the State Property Fund offers 5 objects for large-scale privatization. It was noted that due to the introduction of online tools and open data, the number of auction participants has increased over the past six months. However, there are still problems with certain state structures in ​​privatization. First is the reluctance of some state-owned enterprises to cooperate. That slows down the preparation and evaluation of the object and hinders the work of the Fund with courts and law enforcement authorities. Second, litigation and auditing (legal, technical, and financial) are also complex and lengthy procedures. Meanwhile, the business raised some privatization issues in certain sectors of the economy. For example, when asked about plans to privatize agricultural enterprises, Mr. Sennychenko answered that several bakery factories are currently being inventoried for sale. The auctions are planned to be announced in early autumn 2020. It should be noted that in 2020 the European Business Association appealed to the Government twice on the need to improve the legal framework for the state and municipal property lease, so it supports the Funds initiative to amend the laws of Ukraine to properly regulate lease relations. The EBA experts are currently analyzing the draft Law of Ukraine On Amendments to Certain Legislative Acts of Ukraine Concerning Improvement of the State Policy of Management and Privatization of State and Communal Property, as well as Institutional Principles of the State Property Fund of Ukraine, published on June 9, and will provide suggestions and comments to it in the near future. At the same time, the business considers it necessary for the Government to approve the relevant bylaws to ensure the proper functioning of the mechanism provided by current legislation. On behalf of the European Business Association, we thank Mr. Sennychenko for a detailed explanation of the state’s privatization policy. We hope that the reforms in privatization procedures will help improve the countrys investment attractiveness and contribute to the growth of the national economy.        

Yesterday, the business community of the European Business Association met with Dmytro Sennychenko, Head of the State Property Fund of Ukraine. During the meeting, there was a discussion of the plans and goals of the Fund for the privatization of state-owned enterprises, new procedures for privatization, and ways to attract investment in public projects.

At the beginning of the meeting, Mr. S Sennychenko clearly stated the main goals of the state privatization policy. First, the implementation of privatization measures is aimed at attracting direct investment and new strategic investors. It is expected that private owners will be able to manage unproductive state assets more efficiently, thus making them more competitive. At the same time, with the reduction of the public sector, there would be fewer possibilities for corruption schemes. Transferring state property to private ownership will also attract additional resources to the budget, however, this is not a priority for the Fund.

To accelerate large-scale privatization, the State Property Fund has radically changed its approach to work and made its services more customer-oriented. Thus, the Fund has developed an online portal where available proposals for privatization are published with the categorization of objects by their condition. Moreover, there is a virtual data room, where it is possible to get detailed information about the object of privatization, such as its statutory documents, and outstanding litigation or debts.

The privatization procedure differs depending on the book value of the object. Thus, small-scale privatization applies to objects with a book value of up to UAH 250 million (small factories and ports, hotel complexes), the objects with a value of UAH 250 million and above are subjected to large-scale privatization. Small-scale privatization has a more simplified procedure which includes electronic auctions. It takes 3 to 5 months to prepare a small object for transfer. Large enterprises are privatized with the help of advisers who audit and prepare all the necessary documentation. In general, the standard duration of large-scale privatization is 11-12 months before the auction date. Currently, the State Property Fund offers 5 objects for large-scale privatization.

It was noted that due to the introduction of online tools and open data, the number of auction participants has increased over the past six months. However, there are still problems with certain state structures in ​​privatization. First is the reluctance of some state-owned enterprises to cooperate. That slows down the preparation and evaluation of the object and hinders the work of the Fund with courts and law enforcement authorities. Second, litigation and auditing (legal, technical, and financial) are also complex and lengthy procedures.

Meanwhile, the business raised some privatization issues in certain sectors of the economy. For example, when asked about plans to privatize agricultural enterprises, Mr. Sennychenko answered that several bakery factories are currently being inventoried for sale. The auctions are planned to be announced in early autumn 2020.

It should be noted that in 2020 the European Business Association appealed to the Government twice on the need to improve the legal framework for the state and municipal property lease, so it supports the Fund’s initiative to amend the laws of Ukraine to properly regulate lease relations. The EBA experts are currently analyzing the draft Law of Ukraine On Amendments to Certain Legislative Acts of Ukraine Concerning Improvement of the State Policy of Management and Privatization of State and Communal Property, as well as Institutional Principles of the State Property Fund of Ukraine, published on June 9, and will provide suggestions and comments to it in the near future.

At the same time, the business considers it necessary for the Government to approve the relevant bylaws to ensure the proper functioning of the mechanism provided by current legislation.

On behalf of the European Business Association, we thank Mr. Sennychenko for a detailed explanation of the state’s privatization policy. We hope that the reforms in privatization procedures will help improve the country’s investment attractiveness and contribute to the growth of the national economy.