Igor Mazepa, Concorde Capital CEO, on privatization 2021: A huge step forward and two back

Igor Mazepa, CEO of Concorde Capital, believes that the government, despite being active in privatization this year, is continuing to increase its presence in the economy, and remains an inefficient manager

Igor Mazepa, CEO and founder of investment company Concorde Capital, believes that the state, despite actively engaging in privatization this year, is continuing to increase its presence in the economy, as it returns to state ownership a number of large enterprises. It remains an ineffective manager.

 

Following the results of less than 2021, the State Property Fund can be congratulated on the excellent results of privatization.

It seems that this year the state budget revenues from the sale of state property will exceed UAH 3.5 billion, which will be a record for Ukraine since the Revolution of Dignity, both in absolute terms and in terms of implementation of the plan.

That last figure, which is unlikely to exceed 50% this year, is a success. I also consider the beginning of large-scale privatization, which has only been discussed during the previous seven years, to be a great achievement.

But this year, the state can also be “congratulated” with immodest “acquisitions”. Let’s just mention the nationalization of the machine-building giant “Motor Sich”, carried out by a simple decision of the Security Council, and the return to state ownership of half of Zaporizhia Titanium and Magnesium Plant by court decision.

Another significant “acquisition” of the government was the assets of the coal company Dobropillyavuhilya, which were returned to public administration by a private tenant.

That is, it turns out that the state, despite more active privatization in 2021, in fact, is increasing its presence in the Ukrainian economy. And not just by acquiring property from private individuals for free, but also spending budget money or the money of state companies. So, this year the government is investing UAH 500 million in the creation of a national air carrier, and it is unknown how much more will have to be invested in the future.

In addition, Ukrposhta is very close to buying a private bank for UAH 260 million. According to the most modest estimates, just these three gifts and two new “investments” cost $550 million.

This is more than three times the amount of the sales of state assets by the State Property Fund this year. In fact, this is more than revenue from privatization over the past eight years.

 

And it would be good if the state proved to be an effective owner. I can’t even mention any examples of effective state-owned companies. But there are many examples of the state suffering losses from its “participation” in business.

In the last 10 years alone, Ukraine has spent UAH 206 billion (or about $14.6 billion) to support three state-owned banks (not including the nationalized Privatbank) and Naftogaz. This is more than all the revenues from privatization during the years of Ukraine’s independence (about $11.5 billion).

A new example of inefficient property management was the “acquisition” of Dobropillyavuhilya. After the transfer of management of the coal mining asset to the state in January 2021, in the first months of operation, it even showed an improvement in production. But since August, the figures have taken a tailspin. As a result, in October state-owned Dobropillyavuhilya reduced coal production by almost 40% compared to January.

It’s scary to even imagine what fate awaits the more technological “Motor Sich” under the leadership of state managers.

“Inefficiency in the management of state-owned enterprises affects the costs of the state budget. The growing presence of the state in the economy significantly reduces market opportunities for potentially more efficient private investors. And in addition – the risk of corruption. The result is a general deterioration of the investment climate, which limits the growth of the economy and, consequently, the well-being of all Ukrainians,” said Igor Mazepa.

“Inefficiency is only one of the problems of state management of enterprises, as it affects only the expenditures of the state budget. A much bigger disaster is the growing presence of the state in the economy – it significantly reduces market opportunities for potentially more efficient private business.

And if we add the risk of corruption, we will end up with a general deterioration of the investment climate, which limits the future growth of the economy and, consequently, the well-being of all Ukrainians.

Therefore, I would like to wish for all of us that the privatization initiatives of 2021 continue to develop in the coming years, and that they lead to a reduction in the state’s presence in the economy’, summarized Igor Mazepa.

Igor Mazepa, CEO and owner of the investment company Concorde Capital, as told in his column for  Economichna Pravda

Source: https://www. althoughda.com.ua/rus/columns/2021/12/20/680823

 

 

 

 

 

 

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