Ministry of Economy starts audit of 100 major state enterprises

Ministry of Economy starts audit of 100 major state enterprises
June 25, 2015.

Kyiv, June 25, 2015. Ministry of Economic Development and Trade of Ukraine prepared the first annual report of TOP-100 Ukrainian state enterprises as part of state enterprises reform. The report was a result of joint efforts with PrinceWaterhouseCoopers, Dragon Capital, the Soros Foundation and the Government of the United Kingdom, to support transparency of state enterprises. Currently only 40% of companies in the report are auditing their financial accounting and less than 10 enterprises do it according to the international standards. “The main problem is that many companies do not hold audit, so the Ministry of Economy launches a new initiative. We want to audit 100 major state-owned companies with the help of audit companies recognized by the World Bank and EBRD,” said Adomas Audickas, Principal Counselor of the Minister of Economic Development and Trade of Ukraine, during press briefing in Ukraine Crisis Media Center.

According to Adomas Audickas, there are 1,823 functioning state-owned companies in Ukraine and another 1,500 in the process of liquidation, which is far more than in other countries. For instance, there are about 300 companies in Poland, 72 in Germany, 69 in France and only 29 companies in the USA that undergo liquidation procedures. Such statistics is an illustrative sign that change of state property management has been long overdue.

Mr. Audickas said these changes aim at increasing quality of management and privatization of non-strategic enterprises. He named several factors as the key priorities of the reforms: increased efficiency of corporate management of state enterprises and change to a market-based salary policy of top management, which wound account the key performance indicators of the state enterprises; change in in terms of appointment of the corporate management – now they are elected on a competitive basis by a nomination committee made up from five ministers and five independent representatives of EBRD, World Bank and other institutions; privatization which should be conducted transparently and professionally.

Andriy Bespyatov, managing director and Head of Research Department at Dragon Capital, told that one of the goals that the list of TOP-100 state enterprises report pursues is to show that there is a great number of Ukrainain companies with lucrative assets, however, they only a small circle of individuals is aware of them.

A company’s profile was developed for each company. It contains company’s info, data on its operational and financial activity, analysis of the way the company works, its profitability etc. Independent analysis of 30 companies with a share of assets in TOP-100 exceeding 90% was conducted as well.

The report contains analysis of sectors the companies operate in as well, providing some conclusions and advice on their development. “Companies from the energy, oil and gas, transportation sectors make up almost 3/4 of the total value of all companies. NAK Naftogaz, Energoatom and Ukrzaliznytsya are the biggest state-owned companies; additional attention has been given to the analysis of these companies, as they are extremely important for the country,” said Andriy Bespyatov.

Anna Onyshchenko, director of PwC Ukraine said that apart from the citizens of Ukraine, the report may draw interest of potential investors since enterprises with ready-made decision on privatization have also been included into the report. It may also be interesting for the heads of companies, as analysis of every company is followed by recommendations on strategic improvements aimed to increase their efficiency and profitability. “This report is a kind of government communication on reforms as well as the mechanism which helps society control the course of reforms and control how the government complies to its obligations,” added Ms. Onyshchenko.

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