Vitaliy Koval, Chairman of the State Property Fund of Ukraine

 

After the launch of small-scale privatization in September 2022, the results of privatization are already measured in hundreds of sold objects and billions of hryvnias in revenue. Thanks to the successful auctions conducted by the State Property Fund in 2023, Ukraine has received over UAH 2.69 billion for the state budget.

The overall economic impact of privatization on the country is even greater than the revenue figure. This includes the amount of VAT paid from privatization deals, which amounted to almost UAH 538 million. Additionally, new owners of state assets took responsibility for paying off debts amounting to UAH 602 million, including debts to the budget and salary payments to employees.

Therefore, the total economic impact of privatization in 2023 has already reached UAH 3.83 billion.

Achievements of Privatization-2023

As of December 31, the Fund has sold almost 371 objects, the same number of completed auctions. The total number of successful auctions by the State Property Fund last year was 431. Some of them are awaiting contract signing, fulfillment of conditions, payment, etc.

In 2023, the average increase in the value of sold assets compared to the starting price exceeded 2.7 times. Competition played a significant role in this, as it averaged 5.2 bids in auctions over 12 months. There were seven months when the level of competition exceeded this figure, with three months having more than 6 bids in auctions (April, July, November).

Certain privatization objects attracted so much market interest that they received over 30 or 40 bids. Among them are properties in Uzhhorod and Zakarpattia region, Kyiv, and Volyn region.

In total, among successful auctions, a dozen had competition from 20 or more participants (only their total income exceeded UAH 770 million). In almost 40 auctions, there were 10 to 19 bids.

This year, over 1,500 participants joined privatization auctions, submitting approximately 2,100 bids. Overall, more than 320 unique participants became winners of privatization auctions.

Among successful auctions, eight had revenue exceeding UAH 100 million. Another hundred had a final value from UAH 1 to 100 million. In over 160 successful auctions, the value of assets ranged from UAH 100,000 to 1 million. In other words, the state offered assets of various types, sizes, and accessibility for purchase by entrepreneurs of any scale.

Record-breaking auctions in terms of revenue, totaling UAH 311 million, were those involving the buildings of the "Hermitage" hotel in the center of Kyiv with a total area of over 5,000 square meters. The second-highest-value lot sold for UAH 212.2 million was a property complex of SOE "VolynTorf," and the third - a property complex of SOE "Ukroboronresurs" for UAH 210.6 million (the latter is not a strategic object but has unused warehouses).

Among successful auctions were those where the initial value of state assets increased by 500 or even 800 times. They were often offered for sale for hundreds or thousands of hryvnias (according to the book value because the state cannot revalue property during martial law). Participants, understanding the value of these objects, achieved their real market value during the bidding process.

Examples include a building in Bila Tserkva district of Kyiv region built in 1900 (initial price UAH 462, selling price UAH 402,000, price increased 870 times). Or non-residential premises in Uzhhorod (initial price UAH 12,200, selling price UAH 10 million, price increased 820 times).

As of mid-December, the most active regions in the privatization process were Lviv (over 60 successful auctions), Rivne, and Vinnytsia regions. Together, they accounted for a third of all successful auctions held during the year. However, Kyiv became the revenue record holder, having sold state assets for UAH 750 million as of December 15.

Why privatization is currently an essential component of state policy

Ukraine's state budget expenditures for the next year exceed UAH 3.3 trillion, of which UAH 1.7 trillion will be allocated to the security and defense sector. The deficit is over UAH 1.5 trillion. In a situation where our country is fighting for its existence and prioritizing support for the Armed Forces, it is important to ensure budgetary funding from all possible sources. Privatization is one of the key ways to achieve this.

The income and taxes state generates represent an obvious immediate effect. Globally, privatization helps the state get rid of assets that are deteriorating without proper support and may depreciate or be completely destroyed over time. Businesses buying state property acquire real estate in various parts of the country (administrative buildings, garages, warehouses), ready-made production sites where they can develop their business without massive investments, and more.

In 2024, the State Property Fund will continue to prioritize privatization. This year's result, reaching UAH 3.83 billion with taxes and debt obligations taken into account, proves that this is the right path.