Privatisation ahead!

July 12, 2014

Next week sees a list a State owned enterprises being listed for privatisation in Ukraine – and not before time.

Whilst not quite privatisation with regard to Naftogaz Ukrainey, the RADA did manage last week to pass a vote allowing the behemoth’s dismemberment that provided for US and/or European investment and ownership of 49% of the Gas Transport System, whilst simultaneously making compliance with the EU’s third energy package a realistic proposition.  Russia was excluded from investing in the GTS.

Which State owned enterprises are on the list for privatisation is not known in its entirety at the time of writing – although Ukrspirt is certainly amongst them.

The reasoning for this privatisation is primarily given as part of an anti-corruption drive.  It follows theoretically, that if the State does not own entities notorious for their corrupt dealings historically, then there is less chance of being held accountable for any future nefarious activities – as long as any privatised entity interaction with the State from the moment of sale is transparent.

Perhaps a much needed boost to government coffers should any sale complete.

It also follows that any listed for privatisation that are currently subsidised due to gross inefficiency, even if sold for $1, removes the on-going liabilities from a very troubled national balance sheet.

Very much like the GTS system however, depending upon who the buyers will be, will ultimately define the level of reduction in corruption.  Simply flogging off State assets to the Russian and/or Ukrainian oligarchy is not likely to have the same corruption curtailing effects as selling to German, US, French, Swiss or British corporations for example.

If spreading the purchasing opportunities around to deter Kremlin meddling is also part of the thinking when identifying and accepting buyers – rather than simply accepting bids from who offers the most – a spread across US, European, Chinese, Korean and Indian buyers has its plus points if any interest from such regions can be mobilised.

If enough significant international corporate buyers can be found, then their governments are far less likely to tolerate Kremlin shenanigans in Ukraine that would threaten the assets of their major corporations – and pension funds that are tied to how well those corporations perform.

Just how clever the Ukrainian government will be when concluding sales with buyers remains to be seen.  Rather than simply moving corruption off the government books by privatising State owned entities, it may have the wits to actually insure the buyers are both varied and international, as well as those that work to the best international standards in an effort to reduce corruption in any particular business sector – and by extension society as well.

It will be interesting to see the a comprehensive list State owned entities targeted for privatisation next week – assuming that list is published next week as planned.

Something to watch for the future – as the who and how with regard to buyers may well define how serious the government are regarding tackling corruption.



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