Yuliia Svyrydenko, First Deputy Prime Minister — Minister of Economy of Ukraine 

 

For the first time in Ukraine’s history, an answer to this question is provided by an official instrument — the State Property Policy. The Ministry of Economy had been working on it for the past nine months, and the Cabinet of Ministers recently approved it. Rather than a mere bureaucratic formality, this marks the start of a new phase of reform that will determine the fate of more than 3,000 state-owned companies. 

Why is it so pivotal for the economy and what changes can we expect? 

The State Property Policy is the main instrument for the reform of state-owned companies after the Law on Improving Corporate Governance, which came into force in March 2024. 

For the first time, the instrument officially provides an answer to key questions of the state-owned enterprise reform:  

• Why does the State need certain companies? 

• What criteria are to be used to take inventory of the portfolio of state-owned companies and begin the privatization or liquidation process for any unnecessary assets? 

• Which companies are strategically important for the state and should therefore be kept in its ownership and introduce high levels of corporate governance? 

Adopting the policy is a step necessitated not only by the reform, but also by international obligations. This is an indicator of the Ukraine Facility Plan and a beacon of the memorandum with the IMF. The policy brings Ukraine’s state ownership system in line with the updated OECD Guidelines. As Ukraine seeks to become a member of this organization, adopting the State Ownership Policy will signal to our partners the prospects for long-term investments that our economy sorely needs. 

What does this policy provide for and what will change? 

Justification of the state ownership status. The policy determines the grounds for a company to remain in state ownership. These include meeting public needs for certain services (Guaranteed Buyer), safeguarding national interests (Energoatom, Ukroboronprom), ensuring affordable price levels (Ukrposhta, Ukrzaliznytsia), belonging to natural monopolies (Ukrenergo), etc. 

Optimization of the state asset portfolio. The policy provides for triage — analyzing all state assets and splitting them into categories: those that remain in state ownership, those that will be privatized or liquidated. 

The Government plans to reduce the number of state-owned companies to about a hundred, instead of the more than 3,000 that exist today. This optimization aims to strengthen the performance of state-owned companies, increase their contribution to the economy, and reduce state budget maintenance costs. 

Corporate governance. The policy introduces best global practices, delineating the functions of management, regulator, and owner. The instrument allocates powers and roles among state bodies and companies, as well as defines the mandatory criteria for the formation of supervisory boards. 

Incidentally, the policy also improves the work of supervisory boards: the annexes set forth a policy on the remuneration of managers and members of supervisory boards, as this issue has always been controversial for the public. No remuneration for a member of the supervisory board can exceed 40% of the maximum remuneration of the manager, which itself should be set at the market level. How can this level be determined? The Government commissions an independent study of salary levels across sectors where companies of similar sizes and portfolios operate. Studies like that are a common business practice. 

The Government must ensure transparent and reasonable remuneration, while attracting qualified professionals to supervisory boards and encouraging them to make decisions in view of long-term goals. According to the policy, state-owned companies are to disclose information on the remuneration of supervisory board members and justify it. 

Transparency and accountability. State-owned companies will also be required to consistently report on their operations and disclose information on finances. An important change is the introduction of Letters of Expectation — a new document in the planning system. This is a tool utilized by the state to define specific goals for companies, such as expectations for profitability, liquidity and other indicators, as well as the levels of funding from the state budget and payments to the state. Letters of Expectation are a type of KPI, and failure to fulfill them may result in the termination of the contracts with members of management bodies. 

Yet another major subsection in the State Property Policy is dividend policy. Its main goal is to find a balance between payments to the state and reinvesting profits back into the company for development. Under martial law, state-owned companies must pay 75% of their profits to the budget as dividends. Calculations of this percentage will factor in the funds that the company spends on important investments, such as reconstruction. 

In the future, the size of dividends may depend on how efficiently the company uses its money (ROE). The higher the efficiency, the less dividends will be paid. The value of the company’s assets, the nature of the industry, the state’s financial goals, the proposals of the supervisory board and the company’s competitiveness in the market will also be taken into account. 

The State Ownership Policy ushers in a new phase of the reform. This is a comprehensive document with a clear purpose — to make state-owned companies more efficient, transparent, and attractive for investment. 

We are anticipating the following important steps: conducting a triage, privatizing or liquidating assets the state does not need, forming supervisory boards in a number of state-owned companies, and uncoupling commercial activities from non-commercial ones. Some of these tasks are a continuation of our efforts under the Corporate Governance Reform, while others are new tasks that became possible thanks to the adoption of the State Property Policy. These changes are expected to enable state-owned companies to attract much-needed investments for reconstruction and development and become a driver of economic growth.