The State Property Fund threatened on March 24 to suspend the planned spring sale of at least nine key government-owned companies slated for privatization.
The State Property Fund threatened on March 24 to suspend the planned spring sale of at least nine key government-owned companies slated for privatization, citing their “monopolistic position on the market” based on an Anti-Monopoly Committee ruling.
The Ukrainian government, led by Prime Minister Yulia Tymoshenko, planned in its 2008 state budget to raise about $1.8 billion in revenue by privatizing strategic state-owned companies such as Ukrtelekom, Turboatom, six oblenergos and the Odesa Portside Plant, whose tender was planned for early May.
With the Fund led by Valentyna Semeniuk, a presidential ally, the announcement is viewed by political observers as the latest obstacle thrown by President Viktor Yushchenko in the path of Tymoshenko, who is looking for funds for her ambitious social spending programs.
The situation is “rather serious” and Tymoshenko might not be able to raise the financial resources necessary for her social spending programs since “the Secretariat is ready to fight this issue until the very end,” said Mykhailo Pohrebinskiy, director of the Center of Political and Conflict Studies in Kyiv, which is financed by its private clients.
Ever since the Cabinet of Ministers dismissed Semeniuk on Feb. 6, accusing her of corruption, and tried to replace her with Tymoshenko ally Andriy Portnov, the Fund has been a key battleground in an ongoing struggle between Yushchenko and Tymoshenko.
The next day, Yushchenko vetoed the Cabinet’s decision to dismiss Semeniuk.
Yushchenko and Tymoshenko have “very different views on privatization policy,” Pohrebinskiy said. “The Presidential Secretariat will try to block the privatization of those assets.”
Meanwhile, “it will be nearly impossible for her to win since she practically has no allies in the current situation,” he said.
The risk of Tymoshenko’s government getting less financing this year is not a large threat, since she may choose to increase the budget deficit beyond its current 2 percent, or to increase tax collections from business, said Ildar Gazizullin, senior economist at the International Centre for Policy Studies (ICPS), financed by George Soros’ Open Society Institute.
The current situation could also affect international investor confidence in Ukrainian privatization, but “investors have already gotten used to such turmoil in Ukraine,” Gazizullin said. “Political risks are a part of investing in this country.”
ICPS forecasts about $3 billion would be raised from the privatization of Ukrtelekom and $1 billion from the Odesa Portside Plant.
