Business news from Ukraine

In 2023, small-scale privatization through Prozorro.Sale replenished budgets by more than UAH 3.3 bln

Revenues of budgets of various levels from small-scale privatization of state and municipal property in the state electronic trading system Prozorro.Sale amounted to almost UAH 3.3 billion in 2023, according to a joint press release on Thursday.

“In total, in 2023, businesses and citizens privatized almost 914 objects across the country. 350 of them are state property sold by the State Property Fund (SPF) and its regional offices through online auctions on Prozorro.Sale, and another 560 are assets sold by communities,” said First Deputy Prime Minister and Minister of Economy Yulia Svyrydenko.

It is specified that the state budget received more than UAH 2.6 billion, while the privatization of communal facilities brought communities more than UAH 650 million, and the price of the facilities increased almost threefold as a result of electronic auctions.

“It is important that privatization is not just a one-time revenue for the state or local budgets, it is primarily about attracting investment and economic development,” emphasized Svyrydenko.

CEO of Prozorro.Sale Serhii But noted that in total, more than 3.6 thousand participants competed for the right to purchase state and municipal property in 2023.

“The business demand for small-scale privatization objects in the second year of the full-scale war remains, with an average of more than three bidders. Factories, hotels, warehouses, outpatient clinics, car dealerships – these and other objects have found a new effective owner this year thanks to online auctions,” said Booth.

Head of the SPF Vitaliy Koval added that, in addition to development and modernization, job creation and mastering new markets, another important area of privatization auctions under martial law is the search for objects for business relocation. According to him, this is especially relevant for the hospitality industry (catering, restaurant business and hotel industry), agricultural, logistics and other sectors of the economy.

“That’s why the most popular real estate objects, which is 76% of the sold property, are industrial and administrative assets. Businesses are interested in the so-called brownfields – abandoned enterprises with communications. After all, it is enough to make repairs there and you can start your own business or expand an already running production,” explained the head of the privatization agency.

He said that the SPF plans to actively involve big business in privatization.

“We are already preparing a large-scale privatization. We also plan to open a transparent agricultural land lease market and sell the aggressor’s assets at auctions to compensate for the damage caused by the war,” said Koval, who previously announced a goal of over UAH 4 billion from privatization in 2024. Among the most interesting proposals for next year’s auctions, the SPF mentioned the UMCC, Demurinsky GOK, Centrenergo, Odesa Port Plant, Ukraina Hotel, and Ocean Plaza shopping mall in Kyiv.

According to the press release, the highest price for the privatization of state-owned facilities in 2023 was paid by the winning bidders for the Hermitage Hotel in Kyiv – UAH 311 million, the unified property complex (UPC) Volyntorf – over UAH 212 million, and the UPC of the State Enterprise Ukroboronresursy – over UAH 210 million.

It is specified that among the communities that actively worked with the small-scale privatization market, Dnipro was the most active – 35 successful auctions, Lviv – 32, and Kyiv – 23. The most expensive municipal privatization objects this year are the Zhytomyr Regional Cinematography Center – UAH 40 million, non-residential premises in Lviv with an area of 550 square meters – over UAH 25 million, and non-residential premises in Zhytomyr region with an area of almost 600 square meters – over UAH 22 million.

As reported, small-scale privatization in Ukraine was suspended with the start of full-scale Russian aggression in February and resumed in September 2022. In less than the last four months of last year, more than UAH 1.4 billion was transferred to the budgets of various levels as a result of more than 200 auctions.


Sanctioned property in Ukraine will be sold at online auctions in Prozorro.Sale

Sanctioned assets will be sold through online auctions in the state electronic trading system Prozorro.Sale, the relevant Procedure for the management of sanctioned assets was approved by the Cabinet of Ministers of Ukraine at the request of the Ministry of Economy at the end of November 2023.
“The government is consistently implementing the best practices of managing state assets through their sale at transparent and competitive electronic auctions,” commented Deputy Minister of Economy Oleksiy Sobolev.
According to him, the Procedure creates a comprehensive legislative framework for the management of various assets related to the aggressor country, as well as increases the confidence of potential investors in the public property management system and helps attract long-term investments, which is a priority for the coming years.
The Ministry of Economy reminded that the government approved this decision pursuant to Law 3137-IX, which has been in force since June this year, amending the sanctions legislation, and now the law and the Procedure determine the procedures for the sale of the recovered sanctioned property – assets owned by residents of states that carry out armed aggression against Ukraine.
According to these documents, the State Property Fund (SPF) will organize electronic auctions for the sale of sanctioned property in the Prozorro.Sale system, and the proceeds from its sale and lease will go to the accounts of the Fund for Liquidation of the Consequences of Armed Aggression.
“The SPF has been selling state property at online auctions in the Prozorro.Sale system for more than five and a half years, and during this time the state budget has received almost UAH 12 billion. The sale of sanctioned property through ProZorro.Sale will also allow for its transparent and competitive management in favor of the state,” said CEO of ProZorro.Sale Serhii But.
He reminded that the Cabinet of Ministers has already approved decisions on the sale of seized assets managed by the ARMA and confiscated Russian assets through the Prozorro.Sale system.
It is specified that participants in the auctions for the sale of sanctioned assets will be able to participate in them by registering through one of the platforms accredited in the Prozorro.Sale system, the current list of which is always available on the website, where all information on online auctions for the sale of sanctioned assets will be posted.
The function of the state electronic trading system Prozorro.Sale is to ensure that no one can interfere with the bidding process, that everyone has equal access to the auction, and that anyone can follow online auctions in real time, the release says.
Prozorro.Sale is 100% state-owned and subordinated to the Ministry of Economy, and operates an electronic trading system that hosts online auctions for the sale of public assets. For more than seven years of operation, Prozorro.Sale online auctions have helped to raise more than UAH 80 billion to the budgets of various levels.

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Antimonopoly Committee of Ukraine opens case against trading system ProZorro.Sale

The Antimonopoly Committee of Ukraine has opened a case on the fact that ProZorro.Sale state enterprise had established additional terms of the contract and payment for access by operators of authorized electronic platforms to the electronic trading system ProZorro.Sale.
“The case was initiated on the statements of one of the operators, who complained about the unreasonable increase in fees for the development of the electronic trading system and the provision of access to ProZorro.Sale only after additional conditions are met,” the statement on the official website of the Antimonopoly Committee of Ukraine reads.
It is indicated that the state-owned enterprise requires a certain fee for the development of the electronic trading system, however, the AMCU has reason to believe that its size is not economically justified.
The committee also found out that ProZorro.Sale state enterprise provides operators with access to the ProZorro.Sale trading system only if they fulfill additional marketing obligations that do not directly relate to the subject of the access agreement and aim to promote the trading system.
The AMCU noted that back in 2021, the committee began to study the situation on the market for providing services for access of operators of authorized electronic platforms to the electronic trading system, which is used to conduct auctions in normatively defined areas.
As a result of the adoption of control measures, recommendations were provided to ProZorro.Sale aimed at eliminating the above problems. However, the state-owned enterprise has not taken comprehensive steps to prevent possible negative consequences for the competitive environment.
Now, in case of evidence of the negative impact of the actions of ProZorro.Sale on competition in the market, the company may face a fine of up to 10% of income per year preceding the decision on the violation.
The net income of the state enterprise in 2021 increased by 2.7 times, to UAH 141.81 million, and its net profit increased to UAH 42.43 million from UAH 950,000 in 2020.
In the first half of 2022, the revenue of ProZorro.Sale decreased by 36.3%, to UAH 25.14 million, and its net loss amounted to UAH 6.92 million against UAH 550,000 of net profit for the first half of 2021.

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