A round table on the problems of privatization in Ukraine took place at the office of the World Bank in Ukraine. The main issue on which the discussion was held was the real nature of the 2001 budget of 9 billion UAH to come from the privatization process. The participants came to the conclusion that without attracting foreign investors it will be impossible to do this.
Yuri HRYSHAN, Deputy Head of the State Property Fund of Ukraine:
This year started with the introduction of the new privatization model that was formulated in the decree of the president on the acceleration of the privatization process. The technology of privatization of strategic objects that refer to G group now is completely new. We are carrying out the preparatory work to be applied to these objects.
Currently the State Property Fund has transferred to the government and Verkhovna Rada a list of objects that are to provide income from privatization in 2001. The overwhelming majority consists of the objects that continue privatization and sell share packages. New enterprises of G group can be counted on your fingers.
If the decision on Ukrtelekom privatization is taken this year, the earnings from sales can come in December next year. The same is the situation with privatization in energy sector (19 oblenerhos are subject): in order to have money next year it is necessary to start the selection of the consultant not later than the beginning of December. Taking into account the fact that in 2001 the possibility of receiving the earnings from privatization of Zaporizhstal is excluded, the political decision was taken as to the decrease of earnings from privatization — from 9 billion UAH to 6.5 billion UAH.
Oleksiy KOSTUSIEV, Head of the Supreme Council Committee on Economic Policy:
A new legislative field for privatization has been created for Ukraine within a very short period of time. Not only the privatization program for the next three years has been adopted but also all the legislation has been brought into compliance with it. This is why the position of the government on further privatization of Ukrtelekom is not clear to me. Parliament has been frequently reproached that it does not adopt sufficient market laws, this especially referred to the laws on Ukrtelekom privatization. And now the law has been adopted, three months have already passed and there is no progress. So far the committee on the privatization of this company has not been created. If the government is going to work like this further on, we cannot hope to meet the 2001 budget. Taking advantage of the occasion, I want to inform you that this week I am to introduce my bill on the State Property Fund: if the government is dragging this issue, we have to take the initiative.
Oleksandr RIABCHENKO, Head of the Special Controlling Committee of the Supreme Council on Privatization:
2001 is interesting in terms of the new privatization ideology to be tested which is significantly different from what has been in Ukraine so far. But it is very complicated to transit to the new practice. The main drawback of the present stage of privatization is the absence of any foreign strategic investor. In my opinion, in the first turn this is connected with the development of the conditions for competition that provide for the fixed conditions of sales and qualified requirements toward the investor. This is precisely what creates a lack of transparency, and that is why it is useless to expect the arrival of foreign investors.
I will put forth the following example — competitions are being held on sales of shares of the oblenerhos. But their conditions are developed in a way that no foreign investors can participate in them. Is this an example of state policy? We are selling the losing companies called oblenerho. The first step was a mistake, when a part of Ukrainian investors came in as offshore investors. And now, if they are deprived of the possibility to come openly as domestic investors, they will again come with somebody else. Why do we need such sales? If the oblenerho had been sold already half a year ago, they would have an investor. And today we need to look into how the first sale will take place in February: whether the first six oblenerho will be sold there or maybe only the sales of only three will take place?
Surprising are the attempts to reduce in 2001 the volumes of financing of the national privatization program from 7% to 2%. If next year 98% of earnings will go to the budget and only 2% for the completion of the program, the fund will simply not be able to work, for it will not have the chance to bring the financial consultant. This is a purely Ukrainian situation that characterizes the lack of understanding in the power structures of what means the orientation at the strategic investor.
Yevhen HRYHORENKO, Head of Economic Department of Administration of the President of Ukraine:
In recent days the President will hold a meeting on the problems of privatization. I want to call your attention to the issues that today make the greatest concern to the President. We expect serious discussion of the fact that at the entrance to 2001 we will not have a sufficient number of the companies completely prepared for privatization. We can agree that the total sum of expected income to 2001 budget is to be reduced, however, when we sell state property we still need to have 9 billion UAH as the target sum. Dividing share packages has negative consequences: in this way approximately a third of the privatized enterprises is being sold.
I am concerned with the fact that the preparation for the privatization of Ukrtelekom is proceeding very slowly, for the schedules are being broken. Even bigger concern is caused by certain statements of the law on privatization of Ukrtelekom, which can lead to us either not getting a high price or not finding any partner. I mean that behind the back of the investor whom we should respect, an additional issuance will take place and its blocking package of shares will turn into nothing. Another issue is that the heat of the State Committee on Communications is traveling Europe and searching for a loan for Ukrtelekom, and the investor will have to pay it back. Undoubtedly, this frightens serious investors and leaves us face to face with dubious buyers.
Gregory JEDRZEJCZAK, Head of Representative Office of the World Bank in Ukraine:
World experience on privatization is quite well-known, this is why there is no place for any complications concerning the technology of how to privatize, what to privatize, under which conditions, how to evaluate the objects. The wheel need not be invented all over again. Privatization in Ukraine is first of all an issue of political support. Today all the branches of power have found mutual understanding in this process. But if we look from the point of view of the foreign investor, as soon as it comes to individual objects of privatization, discussions start: somebody is not satisfied with one decision, somebody else with another. In the long run investors feel that Ukraine is not a country where firm decisions are taken, in which the political will and support is present. Of course, it is possible to find an explanation for why 50% of Ukrtelekom shares are not offered for sale but 25%, however the strategic investor treats this as a problem and looks for another country where he will be able to buy bigger package. As a rational person I evaluate the chances to receive 9 billion UAH from privatization very skeptically, as it is impossible to increase the sum of earnings by 2.5 — 3 times within a year. If Ukraine managed to get six billion hryvnias from privatization in 2001 it would be a totally different country: the issue is even not the money but in changing the approach toward attracting foreign capital.
