How to Privatize a State Enterprise

by Olha Povaliaieva
Friday, December 24, 2021
How to Privatize a State Enterprise

A share in large Ukrainian state-owned companies, such as Ukrposhta and Naftogaz, can, under certain conditions, be sold to private investors

This opinion was expressed by the head of the State Property Fund, Dmytro Sennichenko. According to the head of the SPF, a minimum number of enterprises should remain in state ownership, and almost all companies that have the status of a VAT payer should be privatized. Including the reason that the achievement of the main goal of the state, the receipt of profit from the activities of the enterprise, is easier to realize through tax collections than through dividends.

Meanwhile, there are three categories of enterprises, which, according to Sennichenko, partially or completely should remain under the control of the state. In the first one, there are natural monopolies, for example, operators of gas pipelines or railways. At the same time, there can be many companies engaged in passenger transportation, and they can be in private hands.

The second category is made up of enterprises performing the social function of the state. Partially, Ukrposhta belongs to them, since "is it profitable or not, a pension and a newspaper must be delivered to each village." However, the national postal operator has a mixed model — it can be efficient and enter markets with high margins.

"Therefore, it is probably impossible to sell Ukrposhta completely. But is it possible to attract a private investor there? I think yes. How much? This is already a controversial issue. You can leave a controlling stake in 51% of the shares to the state. Or leave the state 25%, a "golden share," and oblige the private owner, if he is so brave, to fulfill a social function, as well as to pay dividends. At the same time, it will be possible to cover losses from the social function at the expense of parcels and financial services," Sennichenko explained.

The third class of enterprises includes those that have unique technologies or access to unique resources. However, the state can, according to Sennichenko, privatize such companies with the condition of a ban on the export of some of the products from the territory of the country — for this, export quotas can be used.

According to the head of the SPF, the share of private owners can also be given to producers of raw materials. At the same time, everything that a private company extracts from there should be proportionally distributed between the state and this company.

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