Close examination of the 2000 privatization program shows it could affect group interests
The first hearing of the draft 2000 privatization program went peacefully and was crowned, despite predictions to the contrary, with a successful vote. Everybody was satisfied both by its exclusively money-based approach and declared shift in priorities: from the quantitative mass privatization to sales to quality individual owners, which implies consideration and maximum balancing of the interests of the buyer, the state, the enterprise, and its employees.
The draft program provides for privatization of 1,094 medium and large enterprises is anticipated to bring in UAH 2.5 billion in revenue.
“I do not see any big problems in fulfilling this program, which is supposed to bring in Hr 2.5 billion to the State budget,” maintains chairman of the Verkhovna Rada Special Supervisory Commission for Privatization Oleksandr RIABCHENKO. “We have enough salable objects for this amount. Of course, we will have disputes and differences during the sale. But it is good. Let them compete. It is pity we are losing time now: nothing is being sold. What is sold at the exchange (3% to 8% shares in electric companies) is next to nothing. I cannot see any serious sale that would indicate we are attracting investors. I do not understand what prevents us from selling controlling interests in enterprises now. If this is done, there will be no problem to earn UAH 2.5 billion for the budget. If we offer controlling interests, and they [the investors] really believe that we sell shares and are not going to take them away, the competition will begin.”
“Why the State Property Fund is acting so timidly now?”
“This comes from a conflict with certain interests. In the plants, there are some groups, which get money without having paid the state a penny. And now, all of a sudden, they have to pay for the same operations they can freely perform at a state-owned enterprise where all they had to do was to privatize its management, which is much more profitable than privatizing the enterprise itself. They install their own director and thus solve the issue; they don’t have to buy anything. The state ends up the loser from these semi-legal owners that nominate their managers. Hence for the SPF every sale involves unavoidable confrontation with tacit owners interested in preserving the status quo. Thus, it is easier to offer the so-called tails, or small packets of stock at the exchange, only sometimes surprising it with a block as big as 25%.
“Do we have enough buyers today”
“ Far too few. They are not exactly jumping over each other to get to Ukraine in general but for specific and best known facilities. They really are jumping over each other for those. However, it is only in this year that the a special program will be launched to present the best Ukrainian enterprises to the foreign public. Currently, they know only our energy sector, and their interest is not adequate, at that. Also, they know some individual enterprises like the Illich Plant, Ukrtelekom, etc. However, interest in the latter has dropped somewhat. The world is developing, some go forward, and it is important to keep pace with them, offering objects in timely fashion. In terms of technology, Ukrtelekom is already lagging behind, and I think we should hurry: as years pass its price will drop. It is bad we do not publicize successful investors, but on the other hand those who had problems are talked very much about. That was the policy. This year something can be seen already. For example, in Poland, where the attitude toward privatization was somewhat different from the very beginning, all funds thus received are channeled into pension reform. And the people know that these funds do not disappear nobody knows where but are spent for raising pensions. In public opinion such approach is very advantageous. We also should channel this money directly into our coming pension reform within the framework of the state budget.
COMMENTARY
Oleksandr ZAVADA, Chairman of the Antimonopoly Committee
The 2000 privatization program was agreed upon with the Antimonopoly Committee, and our proposals were approved. Our proposals to amend some laws provide for a simplified procedure for approving privatization decisions by the Committee. Currently, we are submitting for official registration amendments to our resolution on control of economic concentration. Jointly with the SPF and State Commission on Securities and the Stock Market, we issued the relevant order. Its main component is the so-called tacit consent, which is also included in the privatization program. This is a method which provides contact between the business and the state. If the state or one of its bodies does not respond to a request or report from an enterprise within one month, the action reported is considered one that can continue and is legal. One need not run after the bureaucrat.
The new bill on protection of economic competition that we have drafted appropriately prescribes the procedures preventing appearance of investors with evil intentions. In addition, the 2000 draft privatization program provides that in the sale agreement the owner should foresee and set forth all doubts concerning the future behavior of the investor along with corresponding sanctions. In this way we guarantee that investors will be putting [funds] into, rather than siphoning them out of enterprises, as some our investors into the energy sector did; moreover, they made their so-called investments on this basis.
