Archive for February 18th, 2011

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Privatisation or State Entity

February 18, 2011

Well dear readers, what State owned assets do you privatise and which do you keep?

If we started from a situation of planned economy and State owned monopoly across every sector of business, what does the State privatise and what does the State keep as “in the interests of the nation”?

Take for example airports.  The State will privatise the airport, but not the runways in case of war and needing them for the air force.   All well and good to have a well run airport, but no so good when the runway looks as though it has been used for bombing practice as the private airport owner is not responsible for the runways?

Are the runways more important than a communications system or a monopoly nuclear power company etc?

Will the State be held ransom by the private sector if everything is privatised at some point in the future?

What about golden shares and/or the ability to legislate?  A clause in a contract sale relating to force majeure  and guarantees to the State perhaps, guaranteeing infrastructure during such time?

More often that not, State run entities are not run efficiently and are often less than transparent.  It normally removes large liabilities from the public purse when these entities are privatised.

It is of course a question of balance, economics and mind-set of a sitting government to privatise or keep as a State owned entity.

The current Ukrainian government seems set on privatising as much as possible in Ukraine.  This will undoubtedly lead to investment by the EBRD with stakeholders buying such currently State owned entities as the EBRD does not like to be a shareholder in a State run/owned/majority held asset.

Such sales do not remove the monopoly of course but can simply move control of the monopoly from State to individual.

Interfax-Ukraine
The Ukrainian parliament has not supported the inclusion of Turboatom, Energoatom and Ukrtelecom in the list of state-run companies that are not subject to privatization.

A total of 178 out of 420 lawmakers registered in the session hall on Feb. 16 supported at first reading amendments to the law on the list of -run companies that are not subject to privatization.

The Regions Party, People’s Party factions and some lawmakers who do not belong to any faction did not back the draft law.

The draft law proposed to include Turboatom, Energoatom and Ukrtelecom on the list of state-run companies that are not subject to privatization. The draft also said that the reorganization (merger, joining or division) of state-run companies such as Turboatom, Energoatom and Ukrtelecom is banned. According to the draft, the amortization of state-run property, their transfer to concession, leasing, using them as collateral and their transfer to the statutory capitals of other companies was also banned.

One of the draft law’s authors, Volodymyr Bondarenko (the BYT-Batkivschyna faction) said that the fact that the parliament did not support the draft law was evidence that parliament was abandoning the interests of the state.

In a nutshell, what would you privatise and what do you keep control of?

What is strategically important to a nation and what is not?

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