Head of Ukrainian State Property Fund: Resistance to transparent sale of state property


Kyiv, October 8, 2015. Attempts of the State Property Fund of Ukraine to start selling assets according to new transparent rules are meeting resistance, said Ihor Bilous, Head of the State Property Fund of Ukraine (SPF) at a press briefing at Ukraine Crisis Media Center within the Ukrainian Reform Media Center project. He added that trying to stop clean privatizations is harmful to Ukrainian national interests. The situation with the sale of the Research Institute of Electromechanical Devices forced the SPF head to go public with his concerns. On October 7, 2015, Deputy Prosecutor General of Ukraine, Military Prosecutor Anatoly Matios publicly accused the SPF of negligence in selling the company. According to Matios, it is a leading institution in developing and manufacturing military satellite communication facilities and components for the Ukrainian “Javelin” – a Stuhna anti-tank missile.
On September 30, the SPF sold the Research Institute of Electromechanical Devices SE to Ventilation Systems PAO for 16 million UAH following its initial worth of 15 million. 94.44% of shares were put up at the auction. This did not include the land where the business is located as it remains in Kyiv municipality ownership.
The SPF arranged the sale pursuant to the Resolution of the Cabinet of Ministers of Ukraine №271, according to which the SE was removed from the list of enterprises not subject to privatization. This Cabinet decision was based on the fact that the SE did not carry out activities according to its profile. In particular, for a long time it did not participate in public procurement to ensure the defense of the country. It has accumulated substantial arrears of wages, and ​​its key official financial activity was renting the premises. In general, according to Bilous, the SPF identified 41 tenants, including an organisation with a dubious reputation.
The SPF announced the decision to sell in early summer. According to Bilous, nine companies were interested in buying the SE. But just two participants reached the bidding, which was broadcast online. The winner, under the terms of the competition, should create 100 new jobs and invest more than UAH 30m in production. Thus, under these conditions, as well as the availability of information on the SE’s removal from the list exempt from privatization, the position of the chief military prosecutor, who accuses the SPF of negligence, is strange, to say the least, according to the SPF head. “Deputy Prosecutor General of Ukraine, Anatoly Matios, disseminated false information on sale of the Research Institute of Electromechanical Devices SE. Surprisingly, an official at this level does not have accurate and verified data that is publicly available, including on the Ukrainian government and the State Property Fund websites,” said Bilous.
He said that there are hundreds of similar objects in the country. And, in his opinion, if every sale is accompanied by similar scandals, significant activity of foreign investors in Ukraine is out of the question. “We have just started privatization under the new rules. It’s a small object, and we already have a lot of problems. And what will happen when we start to sell objects like President Hotel, regional power companies or the Odessa port plant?! Therefore, I urge everyone to join the investigation surrounding the sale of Research Institute of Electromechanical Devices SE, initiated by the prosecutor’s office. From our side, we guarantee maximum transparency for everyone to see what kind of object it is and what activity it actually performs. There are about 500 such objects. Let us think and define who and what blocks their privatization,” says Bilous.