The nation’s ruling elite put on yet another embarrassing parade this week, offering more reasons why most of them should be replaced at the voters’ next opportunity to do so. The latest evidence of a corrupt, bankrupt power structure came with the privatization fiasco involving the Odesa Portside Plant, a giant export-oriented fertilizer and chemical manufacturer strategically located on Ukraine’s Black Sea coast.
The sale collapsed in farce on Sept. 29 during a live television auction. After overriding the objections of politicians who said that economic recession is not the time for government to be getting rid of assets, Prime Minister Yulia Tymoshenko cancelled the sale – even though the winning bid came in at $624 million, above the $500 million set as the minimum bid. Tymoshenko accused the three bidders of collusion, but she may have been simply unsatisfied with the price. The top bidder was billionaire Igor Kolomoisky’s Nortima company, which has promised to assert its ownership rights in court.
You would think that, 18 years after the Soviet Union collapsed, Ukraine would have learned how to properly privatize state-owned assets. It’s not that difficult to sell a public asset for the maximum price under the best conditions to a private investor. To do that, the sale and requirements (such as minimum bid, investment obligations) for purchase should be widely publicized in advance and the auction should be transparent. These are simple steps to creating a competitive bidding environment.
But privatization has never worked that way in Ukraine – or almost never, the single exception being the 2005 sale of the giant steel mill Kryvoryzhstal to world steel leader, Mittal Steel (now ArcelorMittal), for a whopping $4.8 billion. Most industrial jewels – Soviet Ukraine’s best factories and manufacturing plants – went to favored insiders for a fraction of their true worth. The well-connected few became billionaires not on the basis of the quality of their bids or their business acumen, but on the basis of their ability to exert influence on those in power. Much of the rest of the nation, meanwhile, languished in poverty – and still does. Unfortunately, ordinary people, so locked in their day-to-day struggle for survival, have not found the strength or unity to redress these monstrous economic injustices. This hijacking of national wealth to make a few fabulously rich still has damaging consequences today. The nation’s economic potential has never been achieved, partly because of the way the Soviet assets were sold. All sense of fairness and justice has been lost in society as people watched their collective riches pilfered in one scheme after another.
As this decade comes to a close, those in business and government power seats want the rest of us to forget what happened in the previous one. We won’t, nor should anybody. And the Odesa Portside fiasco provided a timely reminder that there’s still plenty of rot to clear.
