Since 1991, the Ukrainian economy has remarkably transformed from its Soviet model to a modern and free market one. Still, thousands of enterprises remain in state and municipal ownership. The Government is interested in handing over publicly owned assets to effective private owners for future investment and development.
Today there are around 3,300 state-owned enterprises and one million real estate objects. The number of municipally owned facilities is even larger. Most of those assets are eligible for privatization, i.e. buy-out from the public domain to private investors.
After the full-scale russian invasion on 24 February 2022, the ongoing privatization in Ukraine was suspended. But when initial russian offensives were repelled, the Ukrainian Government renewed its course towards privatization. As a result, four landmark events happened in recent months:
- On 19 August 2022, the new Law No. 2468-IX on privatization entered into force. It relaunched auctions for small privatization under new conditions and changed the procedure for large privatization. The procedures were simplified, reducing all timelines while still abiding by transparency.
- On 7 September 2022, Mr Rustem Umerov was appointed as a new Chairman of the State Property Fund of Ukraine. Since his first day in office, Mr Umerov has repeatedly proclaimed his goal to make privatization as easy as possible for foreign investors.
- On 19 September 2022, the first privatization auction since the full-scale russian invasion took place. This event marked the renewal of privatization under new simplified terms.
- On 4 October 2022, the State Property Fund received another 800 state-owned enterprises under its control. According to the Ukrainian Minister of Economy Mrs Yuliya Svyrydenko, some of those enterprises may soon be allocated for privatization.
Two procedures: for small and large assets
Privatization procedures in Ukraine differ depending on the target value:
- assets valued below UAH 250 mln (approx. USD 6,2 mln) fall within the category of so-called small privatization, while
- assets over UAH 250 mln belong to large privatization.
Naturally, the privatization procedure for small assets is quicker and simpler.
The bidding usually starts from the asset book value, which is usually much lower than the actual market one. It gives an investor an excellent opportunity to buy good assets cheaply.
The Ukrainian Government has approved a List of 20+ state enterprises for large privatization. It is available on the State Property Fund's website with photos and information in English. This site allows filtering lots by region, starting price, auction date and other criteria.
The List of assets for small privatization is managed by the State Property Fund. The Fund's website categorizes thousands of such assets in several lists. Many lots are already cleared for auction and can be found on the Fund's privatization portal with photos and detailed descriptions.
Also, the Fund publishes monthly investor digests advertising the most attractive assets. For example, see the digest for October 2022.
Investor is King
Apart from the listed assets, an investor may initiate the privatization of any state or municipal asset under the respective statutory procedure. If there are no legal restrictions, the State Property Fund or a local self-governing body will include the target asset in the List and initiate the auction.
Ukraine has a useful tool – ProZorro.Sale – an online platform which ensures complete transparency and eliminates corruption-related risks. This platform arranges auctions even during the war. All announcements for auctions are published on Fund's privatization portal. Potential buyers can file documents, place bids and participate in the auctions online. With proper legal assistance, privatization in Ukraine is a convenient and investor-friendly procedure.
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Despite the war, now is the perfect time to invest in Ukraine. The new simplified privatization mechanism allows to make a bargain investment in the Ukrainian economy. It is a win-win for all parties concerned. The investor makes an advantageous investment in the market destined for growth. At the same time, Ukraine raises funds to support its economy during the war and ensure faster recovery after the upcoming victory.
Ronald Reagan once said: the future doesn't belong to the fainthearted; it belongs to the brave. Ukraine knows what real bravery is and welcomes brave partners and investors.
Authors: Volodymyr Igonin, Anatoliy Pashynskyi