Public assets

Government rejects the idea of filling the budget through the sale of state property

Government rejects the idea of filling the budget through the sale of state property
Photo: Ukrainian photo

There is a very little chance that the sale of state property announced by the government will happen either this year or next year. In the draft budget for 2015 (Capital has a copy of it), the Cabinet of Ministers planned all of UAH 1.3 bn in proceeds from the privatization of state assets. This is the lowest planned indicator over the past 7 years, though it is the most realistic in terms of fulfillment. Since 2004 the government only once managed to over-fulfill its privatization plan in 2011 when it sold Ukrtelecom for an exorbitant amount.

Not selling for cheap

Back in March of this year Premier Arseniy Yatsenyuk informed that the government is preparing privatization of companies in the energy sector. In particular, the matter was about the sale of the assets on the balance sheet of Naftogaz of Ukraine. Also the sale of the remaining state-owned shares in other energy companies was expected. Somewhat later the premier announced “the most large-scale privatization over the years of Ukraine’s independence”. In connection with this, the Cabinet of Ministers even prepared a draft bill that would open a window of opportunity for selling to investors, for example, TurboAtom and a controlling share package in UkrNafta. The State Property Fund (SPF) were preliminarily appraised both assets at UAH 13 bn. A list of assets for privatization worth more than UAH 30 bn was included in the bill. But in the end, the government rejected the idea of selling the assets of the majority of enterprises having approved only a part of the initial plan. After that Yatsenyuk said that the date of privatization of the most valuable assets would be set when the price is determined. “We are perfectly aware of the fact that on the one hand, in today’s conditions the hole in the national budget must be filled by selling state-owned property thereby additionally financing expenditures on defense and rebuilding the infrastructure. On the other hand, the government will not sell state-owned assets for a dime,” the premier stressed. Now, judging from the budget draft the government decided to completely reject filling the state coffers in this way.

Overestimated figures

Experts asked by Capital said the indicator of UAH 1.3 bn factored into the national budget is fully attainable, while this year the chances of filling the state coffers through privatization are becoming much less realistic, particularly since the forecast for 2014 of UAH 17 bn was one of the highest in recent years. “It is now clear that this year nothing will be sold as to this day not a single major privatization tender has been announced. However, the indicator proposed for next year is even more astounding. Even by not conducting large-scale privatization that the minister spoke about, much more can be earned,” former chair of the SPU Oleksandr Bondar is convinced. He believes that according to the forecast indicator of proceeds in the amount of UAH 1.3 bn two variants are possible – either no major deals will be cut or the companies will be sold at a very cheap price.

So far, the SPU managed to transfer UAH 55.86 mn to the state budget in the period January-August and another UAH 648.3 mn was transferred from the leasing of state property. The non-fulfillment of the privatization plan is nothing new for the Cabinet. In 2013 the government also failed to fulfill the initially forecast indicator and at the end of the year amendments were made to the budget lowering the planned volume of privatization proceeds from UAH 10.9 bn to UAH 1.4 bn. A similar situation was observed in 2012 when the budget fell short of nearly UAH 3 bn from privatization. As a result, the government was forced to cover the shortage of funds by borrowings, having introduced amendments to the national budget’s plan.

The level of proceeds proposed in the draft budget may change, first and foremost, depending on the situation in the country and the resumption of the interest of investors in Ukrainian assets. As Capital was informed by the press service of the SPF with a reference to acting head of the fund Dmytro Parfenenko, the offer for 2015 regarding the proceeds from privatization to the tune of UAH 1.3 bn was indicated in one of the letters submitted to the Ministry of Finance. “This is the lowest indicator that we can rely on,” says Parfenenko. “In our latest letter to the Ministry of Finance we proposed calculations for UAH 17 bn, taking into account the assets that were specified in the Cabinet’s resolution on the list of the objects up for privatization and reduction of the list of assets not subject to privatization.”

The official said that the department is ready to accompany large volumes of privatization, but in this case the sale of state assets should not be the main objective. “The effect from privatization should inure to the maximum benefit of the state, companies and workers. Today the privatization resource that will help the economy of Ukraine is massive,” Parfenenko stressed.

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