Ukraine will auction off large state-owned enterprises to ‘plug the gaps’ in the budget – NYT

Starting from the summer of 2024, the Ukrainian government will put about 20 state-owned companies up for privatization, including the Hotel Ukraine, a large shopping center in Kyiv, as well as several mining and chemical enterprises.

This information was reported by The New York Times.

The push for privatization has two main goals: to raise money for the state budget, which is short $5 billion for military expenditures this year, and to strengthen the economy by attracting investments that officials hope will eventually make it self-sufficient.

“The budget is in deficit. We need to find other ways to get money to keep the macroeconomic situation stable, help the army and win this war with Russia,” said Oleksiy Sobolev, Deputy Minister of Economy of Ukraine.

Journalists note that privatization is just beginning and faces significant challenges for a country at war, as many citizens fear that the sale could be associated with pervasive corruption.

Yevhen Baranov, managing director of the Kyiv investment company Dragon Capital, stated that privatization will only be effective if the government “acts as a responsible seller capable of providing guarantees and compensation to potential buyers.”

Aware that the conflict may deter investors, the government has set a modest goal to sell at least $100 million worth of assets this year. Ukrainian officials and experts acknowledge that given the risks associated with the conflict, the assets will likely be sold at lower prices than they would have been before the war. However, they hope that privatization will help support the economy.

“The state is desperately in need of money. If we don’t sell now and raise funds, soon there will be nothing left to sell because the property will either be destroyed or occupied,” said Mykhailo Lukashenko, a partner at the law firm Aequo.

The authors emphasize that the state currently owns about 3,100 enterprises, of which less than half are actually operational, and only 15% are profitable. Last year, the five most unprofitable companies cost the state more than $50 million. The government’s ultimate goal is to maintain control over only 100 companies.

Vitaliy Koval, head of the State Property Fund of Ukraine, considers state-owned companies “a breeding ground for corruption and other illegal activities.” The State Property Fund is currently conducting a “sorting” process to determine which enterprises should be privatized, liquidated or kept under state control.

Koval stated that Ukraine currently lacks enough weapons to prevent the destruction or capture of its plants by Russia and demands a rapid sale of assets to “buy more shells and air defense systems” for their protection.

One of the largest assets up for sale is the United Mining and Chemical Company (UMCC), one of the world’s largest producers of titanium. Three auctions were canceled before the war. The Ukrainian government hopes that the fourth auction, scheduled for the fall, will take place.

The Hotel Ukraine has accumulated a debt of $1 million. The aim is to sell it to help finance the army and support the economy. The starting price for the property is $25 million.

At the same time, Ukrainian officials and economists recognize that attracting investors during wartime will be a challenging task.

Vitaliy Koval has stated that the State Property Fund expects the large-scale privatization process to begin in the second half of 2024, covering assets valued at 250 million hryvnias (about 5,752,495 euros).