On July 15, 257 members of the Ukrainian parliament supported law #4572 on privatization reform. This is a huge step towards implementing the legislative provisions key to Ukraine’s gradual transition to a market – -run economy. #4572 is a crucial part of the set of draft privatization laws we at the Office of Simple Solutions and Results developed together with the State Property Fund aimed at developing Ukraine’s economy, attracting investment, and creating jobs.

State-owned enterprises are costly, and the longer Ukraine continues to sustain them, the larger the losses are. There is hardly a more wasteful way to spend taxpayers’ money than by channeling them into the funding of enterprises that do not produce any value and hence only take from the economy, without giving anything back. In 2019 alone, these losses amounted to 170 billion hryvnias. COVID-19 has taken a toll on our economy, and, as we are all recovering, we cannot afford to pay for inefficient and non-transparent bureaucrats.

As of now, there are about 3,500 state enterprises, and they lay dormant without bringing any economic benefits. The vast majority of these companies are at various stages of bankruptcy and therefore are not attractive to investors. The added value isn’t being created, and most state enterprises don’t pay taxes. Moreover, behind every state-owned enterprise, there is a deeply-rooted corruption interest. For comparison, in Poland, the number of state-owned enterprises is about 63 times lower, and in Sweden – 76 times lower.

Every Ukrainian consumer has had to deal with state bureaucracy at some point in their life, and the frustration that brings is unbearable. While general governance has improved, in particular thanks to the Diya app, state enterprises remain stagnant. Inefficient public administration of these, high risk of creation and existence of corruption schemes demonstrate the urgent need to invest in these enterprises to modernize their outdated technological processes and restructure their management using international best practices.

Ukraine is hardly the richest country in the world to be able to invest in state-run enterprises. On the contrary, we are in dire need of foreign investment that – among many other reforms that we at the Office of Simple Solutions and Results advocate for – can only be encouraged through making privatization more accessible.

#4572 eliminates artificial bureaucratic obstacles and accelerates the privatization procedure and lease of state and communal property. It also ensures openness and transparency of processes, as well as allows the launch of large-scale privatization through electronic auctions. Privatization implies a transparent and open transfer of state-owned facilities into the hands of efficient private owners. Incentivized by profit, private owners will seek to make the most out of the newly obtained objects. This will result in job creation and more fillings of the state budget, and that is why we need privatization now.

The said law also ensures that the local budgets get 10 percent revenue out of small-scale privatization. Once the law is passed in its entirety, privatization of non-core government facilities, burdened with the seizure of property and debts will also be unblocked.

Privatization implies a transparent and open transfer of state-owned facilities into the hands of efficient private owners. Incentivized by profit, private owners will seek to make the most out of the newly obtained objects. This will result in job creation and an increase in the state budget income, and that is why we need privatization now. Every hryvnia spent on the acquisition of a privatization object will attract Hr 4-6 of further investment in the future.

I would like to thank the Office of the President for submitting this crucial draft law to an extraordinary session of Verkhovna Rada and thank all the members of parliament for their decision. I truly hope our privatization package of laws will be fully endorsed, and #4572 will get even more support in the second reading. Privatization is key to Ukraine’s economic success, and the overwhelming support for #4572 is the step in the right direction.