The Verkhovna Rada of Ukraine supported in the first reading the draft law of Ukraine "On the Privatization of State Property" elaborated by the Cabinet of Ministers of Ukraine in synergy with international experts and approved by the National Reform Council under the President of Ukraine within the framework of the reform of state property management. 258 lawmakers voted for the aforesaid decision.

The bill constitutes the basis for creating a system for transparent sale of government assets, most of which were put into operation in the last century, and defines the main provisions of this process. In particular, criteria, terms and mechanisms for carrying out large and small privatization are singled out, the issues of bankruptcy of companies and protection of investors are outlined, the foundations of the functioning of the institution of advisers, the valuation of property and the determination of its starting price are stipulated for. The draft law envisages a procedure of establishing of ownership rights and control over the implementation of investment obligations. A landmark innovation of the document is the definition of the dispute procedure, which enables the possibility of appeal to the International Commercial Arbitration Court and the conduct of the case following the principles of the English law rules.

Present at the session hall, Prime Minister of Ukraine Volodymyr Groysman emphasized that there are currently 3.5 thousand state-owned enterprises in Ukraine and added that it is a nonsense for the country, because these companies are unprofitable for the state, however still being a feeding trough for some officials. Amendments to the legislation will make it possible to align the situation, to attract new owners and technologies and to create new jobs.

“This fact (adoption of the law) proves vital to ensure economic growth, and this will be our most resolute step towards pursuing of the anti-corruption policy in the country,” the Head of Government urged, “The public sector is the largest source of corruption in Ukraine. We have to acknowledge that and root it out. We are talking about the introduction of competitive and transparent procedures. Herewith, the sale of strategic enterprises is out of question. There we will guarantee effective management."

As a result of the discussion, parliamentarians and the Government members agreed to finalize the draft law to prepare for the second reading, in particular with regards to the definition of enterprises not subject to privatization, the definition of criteria for buyers and investors, the elimination of opportunities for any kinds of abuse in the privatization of communal property, as well as the conditions for returning enterprises to state ownership.

Background

To date, almost 90% of state assets have been put into operation 50-150 years ago. At that, the State lacks sufficient resources to carry out proper modernization of enterprises and stop their destruction and depreciation. Ineffective management leads companies to insolvency, and often serves a source of corruption. That is why transparent privatization opens for a number of such enterprises the way for the revival of production, leveraging of technologies and investment. Therefore, large-scale privatization has been determined by the Government as one of the vital reforms designed to change a model of economy and improve economy’s performance at the level of 5-7%.

Acting Chairman of the State Property Fund Vitalii Trubarov stressed, the mechanisms and procedures included in the bill would contribute to an increase in the investment climate and will allow the country to find efficient holders of assets.