State Property Fund chairman optimistic about privatization (06/16/96)

State Property Fund chairman optimistic about privatization

by Yaro Bihun
Special to The Ukrainian Weekly

WASHINGTON - Ukraine expects to receive a long-term $310 million World Bank loan to assist in its economic liberalization and privatization programs.

The chairman of the State Property Fund of Ukraine, Yuriy Yekhanurov, who discussed the proposed loan with World Bank officials in Washington, said the World Bank board of directors will make their decision on the loan June 27.

"And we fully expect them to approve it," he said on May 23, at the conclusion of his talks here. Ukraine would receive the first part of the loan as soon thereafter as the Supreme Council ratifies the agreement, he added.

Discussing the loan and progress in Ukraine's privatization program in an interview with The Ukrainian Weekly, Mr. Yekhanurov said the loan would be delivered in three tranches of $100 million each, with $10 million going for technical assistance. The first repayment on the 17-year loan would be made after four and one-half years.

Mr. Yekhanurov, whose State Property Fund is responsible for the privatization of state-owned enterprises, said he was satisfied with the talks. "Now, we are obtaining credits for concrete structural reform of our economy," he said, adding that it is also an indication that the reforms begun by President Leonid Kuchma in October 1994 "had advanced to a higher level."

The privatization process for small enterprises should be completed by the end of June, he said, admitting, however, that there are problems in the Crimea, where the process was started late, as well as in the Kherson Oblast and, to a lesser extent, in the Chernihiv Oblast.

"We'll do everything we can to ensure that Kherson and Chernihiv meet their goals, but the Crimea might take some time," he said.

The privatization of medium and large enterprises is more complicated, he said, because it involves the distribution and use of privatization certificates. These certificates (similar to the "vouchers" used in Russia) have to be distributed to the citizenry by the end of June, which has until the end of the year to invest them in any of the 400 or so enterprises being privatized every month.

Some 18,000 Ukrainian enterprises fall into the medium and large category, he said, but the Parliament has excluded 6,500 of these from privatization. Mr. Yekhanurov said the government is trying to convince the Parliament to decrease the exempt list.

Of those marked for privatization, some 7,000 are already either fully or partially owned by stockholders, he said. "I hope that by the end of the first quarter of next year we will complete this process for all medium and large enterprises."

"This is a major goal for us, and I think that we will reach it," Mr. Yekhanurov said.

Under the World Bank agreement, state enterprises that have sold off at least 70 percent of their stock are considered privatized.

Privatization certificates, however, do not provide an enterprise with badly needed new capital, he pointed out. It's merely a way of distributing government property to the citizens. And that is why the fund is laying the groundwork for future stock auctions, which would include foreign investors, Mr. Yekhanurov said.

"The most important and most difficult task facing us today is getting investment for our enterprises. We have neither the experience nor adequate procedures for this," he said, "and that is why we are working closely with our consultants, donor nations and international organizations in order to get this assistance for Ukraine."

Recent changes made in the privatization bill currently before Parliament were criticized recently by a representative of the International Finance Corporation, who said that the changes would undermine the process by giving employee collectives the power to decide the form of ownership and the method of privatization of their enterprises, and by making the State Property Fund subordinate to the Parliament rather than the Cabinet of Ministers.

Asked to comment on these changes, Mr. Yekhanurov pointed out that the amendments were made during the second reading of the bill. It's part of a long process, he explained, noting that a year had passed between the first and second readings of the bill.

He stressed, however, that "the government is decidedly against changing the rules of the game in the privatization process, and we will do everything in our power to ensure that this does not happen in the third reading."

Nor does Mr. Yekhanurov expect a new Ukrainian constitution to in any way hinder the privatization process.

"No, there will be no changes," he said. "The course set by the government is unchangeable; it's part of the government's program of action passed by the parliament," he added.

"We're only waiting for the right of private ownership of property, which already exists, to finally be codified within the constitution," he said. "In this regard, I'm an optimist."

| Home Page |