Tuesday, 17 May 2016

New Atlanticist: High Time for Privatization in Ukraine

New Atlanticist: High Time for Privatization in Ukraine

by Anders Aslund

"Last year, the Ukrainian government recorded 1,833 operating state-owned companies, and another 1,700 that were standing still. These 3,500 companies do not yield any profits; instead, they cause the government vast losses. Any profit is stolen. Sensibly, the government focused on cutting losses and improving corporate governance in 2015. Now, this obsolete junk should be privatized.

Ukraine’s privatization discussion has dealt with a few major enterprises of great value—primarily, the largest fertilizer manufacturer, Odesa Portside Plant, and Centrenergo, the only remaining electricity-generating company—in the hope of reaping large state revenues. However, anything sold just after a crisis will be cheap. Any aspiration to yield large state revenues fast is unrealistic.

Instead, the first objective of privatization today should be to improve the functioning of the economy, freeing it from excessive state interference. Second, the pervasive corruption within state companies must be halted. Third, due to national security concerns, strategic infrastructure and key armament companies should not be sold. Fourth, the few truly valuable state companies should be sold when the economy has normalized and asset prices have risen."

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