Ukraine set to privatise hundreds of state firms

The Ukrainian government has drafted a law that paves the way for the privatisation of hundreds of state-owned companies previously considered strategic, Kommersant-Ukraine newspaper reported on Wednesday citing a leaked draft document.

Ukrainian Economy Minister Petro Poroshenko said this week the government planned to remove about 1,200 enterprises from the list of strategic assets that cannot be privatised, Ukrainian media reported, but did not name any.

According to Kommersant, the draft law lifts the ban on privatising numerous coal mines, oil and gas pipelines, grain silos and other industrial assets.

The sell-off could provide extra budget revenues for the cash-strapped former Soviet republic and also harks back to 1990s moves that freed up business and drove development of the European Union's eastern member states.

"Should the new list pass through the Rada (parliament), it might pave the way for a new round of massive privatisation in Ukraine," VTB Capital said in a note on Wednesday.

"Carrying out the process in a transparent and competitive way would provide a significant boost to the state budget in the coming years, and to the overall financial position."

But, since President Viktor Yanukovich's election in early 2010, many privatisation auctions have been won by his campaign's main financial backers, industrialists Rinat Akhmetov and Dmytro Firtash.

Companies close to Akhmetov, in particular, have purchased stakes in a number of electric power companies while Firtash's group has won most auctions for regional gas distribution companies.

"...Examples of privatisation in Ukraine suggest that such (transparent and competitive) conditions are not always met in a way that maximises the benefits for the state," VTB Capital said.

"While no detailed list of the enterprises which have been cleared was provided, the companies mentioned might generate varying degrees of demand from both local and international (mostly Russian) business groups."

Kommersant said parliament, which is dominated by Yanukovich's Party of the Regions and its allies, could approve the law before the October 28 election.