Successful privatization shouldn’t remain just another “idea on paper”, say experts
Currently, the proper management of state owned companies remains an important challenge, as without that all the plans of successful privatization of energy facilities will remain just another promise. The ways of preventing that were discussed by experts at the round table “What Model of State Asset Management is Needed for Ukraine” held on February 10 with the support from the Committee of the Verkhovna Rada of Ukraine on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety and with the assistance of the British Government.
This is the third event in a series of discussions regarding the prospects of privatization in the energy sector of Ukraine. The first such discussion consisted in the committee hearings on the topic “Ways of Improving Privatization Process and Attracting Private Capital to the Fuel and Energy Complex of Ukraine”, and the second one – in the committee hearings on the topic “Prerequisites for Privatization: Reality and Investors’ Expectations.” During the events, the participants discussed the conditions which will enable the transparent and successful privatization of energy assets in Ukraine: in particular, what conditions would ensure that the business is more interested in the privatization, and what the government policy should be regarding this issue, and what new approaches to work with investors should be implemented.
During the round table, the experts discussed efficient energy assets management models, as well as successes and challenges of the first reforms in managing state owned companies.
In particular, Olha Belkova, Deputy Chairperson of the Verkhovna Rada Committee on Fuel and Energy Complex, said: “Unfortunately, I must say that the state is an inefficient owner. This is not a specific feature intrinsic only to Ukraine. Worldwide, both in traditional capitalist countries and in socialist countries (e.g. China), private capital and unbiased, independent of politics and professional asset management are recognized as much more advanced and effective than the state ownership of such assets. However, of course, as is evidenced by international practice as well, it is expedient to retain certain assets in state ownership for some time or even permanently. This primarily applies to the companies that are at the stage of preparation for privatization, which appears to be a complex and lengthy process (for example, possible privatization of Ukraine’s Gas Transmission System (GTS)), as well as strategic facilities which are of crucial importance from the standpoint of technology or national security (Energoatom National Nuclear Energy Generating Company, a State Enterprise), military and other facilities of special economic interest for the state. But for these companies it is very important how the state administration system is established, in order to minimize any political interference in the process. Ukraine has just begun reforming corporate governance of state owned companies, and this reform is one of those the results of which will dictate the evaluation of Maidan victory.”
In turn, Marina Petrov, Deputy Director of the EBRD in Ukraine, added that corporate governance system is a mechanism that makes it possible to form trust and balance the interests of various “stakeholders” of the company: shareholders, employees, creditors, suppliers, customers and others: “You can reinvent the wheel but the world has already got the proven model and its basic principles are described by the Organization for Economic Cooperation and Development (OECD). You can discuss the details of applying certain principles subject to the specific features of each country, but without taking basic goals and objectives Ukraine will not be able to access international markets and solve the problem of marginality of its economy. It is necessary to take into account that these principles have been developed not only by developed countries but also by developing countries that want to achieve economic growth and improve their investment climate for both domestic and foreign investors.”
However, according to Oliana Hordiienko, a member of the National Securities and Stock Market Commission, there is no single right standard with respect to corporate governance system: “High-quality corporate governance in the company is not about the “right “decisions, not about the Supervisory Board where the majority is held by independent directors. High-quality corporate governance is about decision-making and implementation of decisions in the company. The higher quality corporate governance means that the best possible decision-making process has been invented taking into account specific circumstances of the particular company. The best option for a particular enterprise depends on what drives the improvement of corporate governance and who the stakeholders are in this process.”
In his turn, Dariusz Marzec, Vice President of the Board of PGE Polska Grupa Energetyczna S. A., talking about the Polish experience in state asset management, added that Poland is ready to share its own best practice in this area with Ukraine: “Currently, Ukraine is facing one of the biggest challenges in its modern history: the transition of its economy to the Western European model. Poland has already started this work, so our experience may be useful in this process. That is why we will be happy to share some of our experience with our Ukrainian friends,” said Mr. Marzec.
Summarizing the above, Olexandr Dombrovskyi, Acting Chairperson of the Verkhovna Rada Committee on Fuel and Energy Complex, said: “If there are consistent rules and the corporate system operates properly, the results will certainly be positive.”