ALERT: Anticipating the Commencement of the “Large-scale Privatisation”
On the 13th September 2019 the Parliament of Ukraine adopted the draft law No.1054-1 “On Abolition of Law of Ukraine on List of Objects of State Ownership that cannot be Privatised” on its first reading.
Initially, there was another draft law No.1054 that was identified by the President of Ukraine as urgent.
However, in September the same MPs who composed the draft law No.1054 made changes and introduced the new draft law No.1054-1 to the public. Finally on the 2nd October the Bill No.1054-1 was adopted by the Parliament.
The law provides amendments to the following laws of Ukraine: On Privatisation of State and Communal Property and On List of Objects of State Ownership that cannot be Privatised.
Although the proposed amendments are very narrow compared to other current draft laws in the Ukrainian Parliament, this particular law is expected to be supportive to investment activity in Ukraine. Furthermore, it shows a clear shift from inherited aspects of the Soviet-era planned economy and a purposeful step closer to a free market economy in Ukraine.
Background
The main change introduced by this draft law will occur in the Law of Ukraine On List of Objects of State Ownership that cannot be Privatised (the “List”). The List, which will be abolished by this draft law, includes precise names and locations of public enterprises in Ukraine that cannot be privatised. The substantiation of the List is another Law of Ukraine On Privatisation of State and Communal Property that in article 4 contains criteria of state assets that cannot be privatised. Based on these criteria, the Ukrainian Parliament had adopted as a Law of Ukraine the list of specified public enterprises that cannot be sold to the private sector.
The List was first adopted in 1999 (with amendments) and includes terminals of seaports, airports, grain elevators, even airlines (for instance, Public Enterprise “Odessa Airlines”), radio centres and film studios.
Effect of adopting the draft law No.1054-1
The draft law proposes to abolish the List and make it possible to privatise such assets. However, it is only the beginning of the privatisation process. The State Property Fund of Ukraine will be responsible for the sale of state assets through an open auction process.
The draft law also amends the Law of Ukraine On Privatisation of State and Communal Property. It proposes amending the criteria of public enterprises that cannot be privatised such as military equipment manufacturers and sport infrastructure for international sporting competitions. Moreover, the draft law forbids the privatisation of state assets situated in temporarily occupied territories.
Every region has many state objects to sell (in the list you can find the most relevant examples), including a Regional Broadcasting Center, distilleries and grain elevators. Schedule 1 lists the state property that can be legally privatized as a result of this law.
Meanwhile, the State Property Fund of Ukraine this January approved the list of privatisation in 2019 that included electricity plants (Ternopil Oblenergo, Centerenergo, Kharkivoblenergo, Zaporizziaoblenergo) and Odessa Port Factory. This privatization has not occurred and a new list should be shortly prepared by the Fund and updated to reflect law No.1054-1 (as it was notified as urgent by the President of Ukraine).
Conclusion
To summarise, although the law No.1054-1 is very small in volume (only one page of a text), it determines an important aspect of state policy for coming years and aims to promote significant investment activity in Ukraine. The draft law represents a first step in the revamped process of privatisation. The decision to sell state assets remains the competence of the State Property Fund of Ukraine. Privatisation is seen a key priority among the supranational institutions supporting Ukraine and the law sends a signal to the international community that Ukraine serious about reforming its economy.
Schedule 1
Donetsk region (mines)
Central Bureau of Scientific Technical Information
The Dzerzinski mine
The Torezka mine
The Nova mine
The Pivnicna mine
The Artem mine
The Pivdenna mine
The Mechanical Repair Factory “Dzerzinskcoal”
The Dzerzinska factory
The Mariupol Seaport
Dnipro region (mechanical engineering, metallurgy, grain elevators, distilleries)
The Eastern Mining and Processing Plant
The Dnipro Regional Broadcasting Center
The Pavlograd Chemical Plant
The Southern Mechanical Engineering Factory
The Isotope Enterprise “Ukrmetalurgisotop”
The Pavlopil Grain Elevator
The Balivka Bakery
The Dnipro Stud Farm
The Dnipro Distillery Factory
The Dnipro Wine Distillery Factory
Ivano-Frankovsk region
The Company for Purchasing Liquefied Gas “Ukrtransgas”
Kyiv region
The Borispol Company on Petroleum Product Pipelines
The Central Company for Processing Radioactive Wastes
The Zuliani Mechanical Engineering Plant “Visar”
Lviv region
The Dashava Factory of Composite materials
Petroleum Product Pipelines Company “Druzba”
The Lviv Regional Broadcasting Center
The Special Production Factory “Lorta”
Kyiv
Naftogas of Ukraine
The Company of Technological Connection “Ukrnaftozviazok”
The National Expo Center of Ukraine
The Production Enterprise “Isotop”
The Special Production for Arsenal Factory
The Mechanical Engineering Firm Artem
Borispol International Airport
Publishing houses “Veselka”, “Dnipro”, “Zdorovia”, “Libid”, “Mistectvo”, “Muzicna Ukraina”, “Ukrainska Enciklopedia”, “Urozai”, “Tehnika”
Film studios “Ukrkinhronika”, “Ukranimafilm”
Vinnitsia region (distilleries, grain elevators)
The Kalinivka Production Factory
The Vinnitsia Alcohol Factory
The Bershad Alcohol Factory
The Bar Alcohol Factory
The Martinivka Alcohol Factory
The Chechelnitski Alcohol Factory
The Trostianecki Alcohol Factory
The Urkivecki Alcohol Factory
The Bdzilnianski Alcohol Factory
The Ovecacki Alcohol Factory
The Uladiv Alcohol Factory
The Nemiriv Alcohol Factory
The Gaisin Alcohol Factory
The Pishansk Open-Cast Mine
The Vinnitsia Distillery Factory
The Ladizinka Alcohol Factory “Extra”
The Brailov Juice Factory
Volin region
The Lutsk Distillery Plant
The Kovel Veterinary Plant
The Lutsk Bakery
The Volodimir-Volinski Bakery
Zaporizhia region
The Factory “Tramplin”
The Zaporizzia Electronic Mechanical Engineering Plant “Iskra”
The Zaporizzia Regional Broadcasting Center
The Berdiansk Seaport
Lugansk region
The Petrovski Chemival Plant
The Chemical Plant “Zoria”
The Workbench Factory
Mykolaiv
The Komunar Shipbuilding Factory
The Mykolaiv Seaport
Odessa region (seaports)
The Odessa Seaport
The Illichivsk Seaport
The Illichivsk Fish Seaport
The Reni River Port
The Izmail Seaport
The Southern Seaport
Sumi region
The Shostka Factory “Impuls”
The Shostka Factory “Zirka”
Kharkiv region
The Kharkiv Radio Factory
The Dzerzinsk Izum Instrument Making Plant
The Kharkiv Machine Engineering Plant “Fed”
The Production Union “Monolit”
The Kharkiv Aviation Production Enterprise
The Kharkiv Electronic Mechanical Plant “Hems”
The Production Union “The Malishev” Plant
The Kharkiv Plant of Electronic Equipment
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