If Ukraine’s corruption stands on metaphorical pillars, one of them is the country’s multitude of state-owned enterprises.
Instead of being sources of income for the budget, they are effectively prizes for those in power to give to their allies — the cash generators for the vested interests to tap in and embezzle millions of dollars.
The fastest and most realistic solution to this is to sell all the enterprises that don’t have to be owned by the state for any objective reason, such as security. It’s easy to guess that most of the state’s 3,000 enterprises fall under the “good to go” category.
But the privatization efforts have always stalled. While nearly every Ukrainian government declared they wanted to have a big sale of state property, strong behind-the-scenes opposition from those milking the state companies managed to stop it.
That is why the sale of the Dnipro Hotel in the heart of Kyiv was so eagerly anticipated. The auction that took place on July 15 was supposed to be a paragon of successful privatization. And it almost was.
The hotel was sold for over $41 million after a starting price of just $3.2 million. It was quickly declared a success.
But it wouldn’t have been Ukraine if there was no catch. The company that won the auction is a clean-slate, no-name firm. The phone listed for the company appears to be fake. The registration address is a run-down house in Kyiv’s suburbs. The owner’s name gives no leads whatsoever. The fact that the runner-up bid just $4 less is also suspicious.
We hope that the fog will clear and the real owner will show up soon enough — with both a plausible explanation for this deal and plans for the landmark hotel.
Other than that, the sale demonstrates that privatization of state property can and should be done effectively — and reminds us that it should be
transparent.
It was reminiscent of the biggest open-auction privatization in Ukraine’s history, that of the steel plant Kryvorizhstal in 2005. Back then, the international company ArcelorMittal bought it for $4.8 billion, after the previous privatization by oligarchs Rinat Akhmetov and Victor Pinchuk was canceled. The oligarchs had won the plant through an allegedly rigged auction for just $800 million — six times less than ArcelorMittal paid in the second auction.
Mass privatization was one of President Volodymyr Zelensky’s promises. So far it looks like he intends to deliver on it. The Dnipro Hotel belonged to the presidential administration’s managing company, and its sale sends the right message.
We hope that the same zeal is extended to more coveted assets that are up for privatization, such as the Odesa Portside Plant or state energy company Centrenergo.
