Ukraine’s privatization efforts have been an overwhelming disappointment. But, on the plus side, there have been some success stories in regional development.
These were the conclusions reached by experts in a panel discussion on privatization and regional development at a New Ukraine Investment Conference, which took place at the Parkovy Center in Kyiv on May 17. The discussion was moderated by Kyiv Post CEO Luc Chenier.
Andy Hunder, president of the American Chamber of Commerce, did not mince words in his assessment of Ukraine’s privatization efforts: “We are very disappointed.” He said that the cause needs a champion and hopes the next head of the State Property Fund will be that person. Hunder advocated what he calls three-dimensional transparency in the privatization process in order to guarantee clear information about the buyer, the purchasing process and the assets themselves—some of which are toxic.
Last year Ukraine sold off only $12 million worth of state-controlled assets, falling dramatically of its goal of $607 million.
Pavlo Sheremeta, a former economy minister, said that the failure came because there is no broad coalition for reform. “There is a heritage of the Soviet mentality,” he said, “and anxiety about who will wind up owning the assets.”
Roman Waschuk, Canada’s ambassador to Ukraine, said the country needs a more candid discussion of the privatization issue, noting that many of these assets are already de facto privatized by actors that do not want to give up control. “Until there is an outside lever to push out the shadow management and put these companies out for truly transparent privatization, you’re going to have this atmosphere where things never quite happen.” In the meantime, he noted that talking about privatization without making any progress only damages a country’s credibility.
Panelists were more upbeat when the discussion shifted toward regional development, citing Mykolaiv as a success story and expressing high hopes for Ivano-Frankivsk, Vinnytsia and Poltava, three other oblast capitals.
Hunder said a city administration dedicated to creating a positive business environment is the key to success. “If you have good people, you have good things going on.”
Sheremeta agreed: “Whenever you have top leadership with an extractionist, predatory mentality, nothing happens, so look at the places with good mayors.”
Agriculture was a dominant theme at the conference, but panelists had some unorthodox ideas about what economic sectors could turn into economic drivers down the road.
Sheremeta said information technology was an obvious answer but also suggested medical tourism. “We already see some signs in dentistry,” he said, noting that well-run clinics have had some success in attracting European clients.
Hunder suggested that there was room for growth in less traditional agricultural products, such as blueberries. “Agro is a much wider spectrum than we think,” he said.
