Although the war goes on (and, unfortunately, there is no sign of its relatively quick end), more and more expectations and hopes are associated with the post-war reconstruction of the country. And there is growing confidence that the country "after" will be significantly different from the country "before".

Some expectations are even included in the Plan of recovery and construction of a new economy in Ukraine. In particular, it declares the need to reduce the state's role in the economy, and privatisation of enterprises, as one of the tools for such reduction, will provide a powerful impetus to the acceleration of the economy.

On Tuesday, January 17, 2023, an important event finally took place: a tender was held for privatisation of the first seaport, Ust-Dunaiskyi. Unfortunately, as expected, even before the start of the competition, and even more so after its completion, disputes and complaints about the results broke out. Among the numerous arguments about the need to cancel the tender (as in most tenders in previous years), it is often said that not all the company's assets were taken into account (which "understates" the starting price) or that privatisation in wartime is generally "inappropriately timed" (as well as it was "inappropriately timed" during the coronavirus years). However, firstly, the sale of the enterprise at a price three times higher than the initial one completely "offsets" certain "miscalculations" and proves the timeliness of inviting a private investor. Secondly, the longer the company remains inefficient, the lower its market value falls (and debts grow).

One should keep in mind that privatisation processes and their results often involve high expectations. Say, through privatisation, the government usually wants to solve the tasks of budget revenues, social security, employment, growth of production and exports. That is, they try to achieve many different goals with one tool, although economic theory and practice affirm the opposite: a goal may be achieved or a task accomplished only if there are several independent, but mutually coordinated tools (of economic policy). Instead, the stalling of privatisation means that none of the goals will be unattained. Moreover, privatisation losses and the budget deficit exacerbate other macroeconomic risks. Thus, due to the lack of funds from privatisation of state property, the Ukrainian government has to increase the amount of borrowings every year (in particular, domestic governmental bonds), which brings inflationary and debt risks.

When analysing economic gains, we often look at successful transformations in the neighbouring countries. One important conclusion is that successful privatisation and associated growth of investments, including the admission of international investors, are mutually supportive, while improving the country's business environment.

Today's investment needs of Ukraine significantly exceed the volumes that the state will be able to generate in the coming (post-war) years. In the current martial law budget, almost all expenses are rightfully spent on defence and social security. Therefore, there are simply no funds to finance unprofitable state-owned enterprises. Even with significant support from partner countries, the state will not have enough resources for large-scale fundamental industrial changes in the post-war period. Especially in the conditions where it is necessary not only to rebuild the country, but also to form a modern economic environment capable of meeting global competitive challenges.

Hence follows the growing role of the private sector, including with foreign direct investments. At the same time, enterprises with foreign investments are usually considered better integrated into international chains, more technological, they have more skilled employees, which allows them to maintain competitive advantages and facilitates access to the European markets.

It should be noted that activation of domestic and international capital in current realities presents not only an economic factor of development – it increasingly acquires a security dimension. Moreover, foreign investments provide the best protection of the country against the aggressor – the greater they are (primarily, from the leading countries), the more secure the country can feel from the uninvited imperial aggressor (a good example is provided by Kazakhstan, with billion-dollar investments from the United States and China).

Therefore, the state should bring the first seaport privatisation tender to a successful conclusion, and further on, proceed in privatisation from the announced principle: enterprises may stay in state ownership only to make up for possible market failures — to perform the function of a natural monopoly or another social goal.

https://razumkov.org.ua/komentari/pershyi-krok-do-vidkryttia-pryvatyzatsii