The Centre for Economic Development


Proposals for Ukraine:
2010 - time for reforms

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Conditions of resuming and completing privatization in Ukraine

Analytical report and recommendations for the State Privatization Program

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Big Business Relations with Government and Society. World Experience for Ukraine

This Analytical Report was prepared in February through June 2007 with financial support from the MATRA KAP Programme (The Small Embassy Projects Programme performed with support from the Royal Netherlands Embassy to Ukraine).

The phenomenon of historically momentary emergence and active, at times even aggressive, development of Ukrainian big private businesses, that special social stratum the size of which is in reverse dependence from its impact on the national economy and politics, is an important factor in the life of the Ukrainian society.

A total negation towards big businesses felt among the residents and the lack of experience of building reasonably sound relations with the public and the Government among business representatives have become one of the agents prompting instability in the development of Ukraine.

Worlds developed economies have accumulated a considerable positive experience of assured sustainable development in conditions of high levels of capital concentration and free operation of market economy mechanisms throughout the time span of their historic development. This Analytical Report provides a parallel assessment of the international experience and related Ukrainian practices in the most important areas of big business contact with the Government and the public, specifically concerning:

  • Systems of lobbying big business interests;
  • Ways of big business new role implementation in the society;
  • Business making on the basis of social responsibility principles;
  • Legalisation of shadow income and corroboration of ownership title.

The Report aimes not only at finding specific solutions but rather at ascertaining new problems for Ukraine and drawing attention of the public, the Government and big business representatives to these. The authors see this their work as a kind of breakthrough introduction in this direction.

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2004 — 2005

A Survey of the Issues of Enhancing Manageability of Government Corporate Rights (State Property Fund of Ukraine)

The key reason of earlier faulty attempts to perfect the existing in Ukraine mechanisms of government corporate rights management has rooted in scrappiness (absence of any paradigm) in actions of various national governments. These days Ukraine lags considerably behind other post-Socialist countries in the development of conceptual approaches to the sphere. With a view of that, special attention was paid throughout the survey to studies of positive experience of Poland as well as of varied institutions and mechanisms that have formed historically in some developed countries (Austria, Italy, France, and Sweden). That allowed for developing some conceptual, country-specific approaches for Ukraine. A set of recommendations was suggested in respect of: ) optimising public sectors organisational structure (eradication of the post-Soviet form of public enterprise incorporation, restructuring of vertically integrated formations); b) identifying areas of corporate management mechanisms application for the assurance of government authority (i.e., limitation of such their application wherever other mechanisms of influence may be used); c) establishing government corporate rights managing institutions based on distribution of business performance management-related responsibilities with subsequent tweaking of their market behaviour; d) organising a system of incentives and responsibilities for authorised persons in charge various managerial functions; e) streamlining the government corporate rights portfolio through introduction of a golden share, transition towards retaining controlling interest in government property, use of accelerated methods of finalising the privatisation of flat and low basis stock. The methodological approaches were used for the elaboration of draft Laws of Ukraine on: the State Property Fund of Ukraine; on Making Changes in Some Legislative Acts of Ukraine (golden share); on Public Property Management; also in the Proposals to the Cabinet of Ministers of Ukraine in respect of streamlining the organisation and Developing the Management of the Public Economy Sector in Ukraine.


Methodological Issues of Sector-wide Privatisation (State Property Fund of Ukraine)

The issue of developing privatisation mechanisms which would assure advancement of the denationalisation process further into strategic economy sectors has come to be rather topical in the present phase of reforms in Ukraine. These sectors should use reliable mechanisms of accounting for the national interests, consumer rights protection within the domain of natural monopolies, aversion of social risks and adverse effects of markets monopolisation, natural environment and public health. The experience of developed and transition countries (the UK, Poland, and Russia) clearly indicates that such targets and objectives may not be effectively reached within the margins of asset-specific privatisation; instead, sector-wide privatisation is successfully used for these purposes worldwide. The survey suggests methodological approaches towards creating a sector-wide privatisation model which would be suitable in view of specific conditions of Ukraine. These: ) define model application area selection criteria; b) establish requirements towards key model elements: an economic sector analysis; development of a sectoral market transformation and privatisation programme, selection of measures of sector (enterprise) preparation for privatisation. Using the new model requires respective changes to be made in the system of managing and monitoring the process of privatisation intended for coordination of separate property transformation. Based on the suggested methodological approaches, proposals concerning the sectoral privatisation model application in two economic sectors: in the field of scientific researches and in aviation construction have been prepared. The test-running of the model in these two sectors quite different by nature has shown that the sectoral privatisation model may be applied to the real practice of Ukrainian privatisation.


Issues of Financial Industrial Groups Development in Ukraine (the World Bank)

One of the first in Ukraine analytical researches of financial industrial group (FIG) development. Unlike odious journalist and political publications on this topic, the project provided the framework for an assessment of the process of big capital formation as an objective background to assure nation's permanent future economic growth. The researches showed the big capital in Ukraine to pass through several stages of its development. On the first stage FIGs, having to work in conditions of economic crisis and weak government machinery, belonged to the shadow economy sector. They emerged on the rich soil of trading operations (non-equivalent trade in energy resources and metals) and bank capital (financial speculations) and soon attained features of corrupt clans managing whole regions for the benefit of bigger entrepreneurial structures closely linked with local authorities. Yet, despite such their nature, the FIGs objectively assisted the restoration of technological links and accumulation of national investment resources. The second phase of their development kicked off in 2000 when the government made it to overcome the barter burden and assume control over distribution of energy resources. Growing government control and efforts to streamline the tax and financial systems meant an era of safer business to unfold, and that created efficient stimuli for FIG activities legalisation. Year 2002 marked of another yet phase in FIG development when they commenced a 'civilising' process trying to get closer to European and international business standards. Other incentives for that process included the need to attract foreign investments in the Ukrainian FIGs and to provide access of the latter onto the world markets. Within the scope of the project, an analysis of FIG development in various economic sectors was carried out, and characteristics of the most important groups were given. The economic analysis was supported with a survey of FIG impact on politics and mass media.


Key Issues of Coal Mining Industry and Donbass Region Development http://www.worldbank.org.ua/

One ex-USSR heritage Ukraine received title to was the coal mining sector, by the time of Independence stricken by a deep crisis. Known reserves of the coal fields were depleted, and the mines, many of them out of operation, were largely stuffed with obsolete and worn out machinery and equipment. With assistance from the World Bank, implementation of the first phase of coal mining industry restructuring commenced in Ukraine in 1996. However, the economic crisis, lack of investments and mistakes with mine decommissioning hardly created a beneficial background for changing the situation in the sector for the better, leading rather to soaring unemployment, further reduction in coal production. The mining regions became the recession zone. The World Bank initiated a research in 2002 to estimate further perspectives of the national coal mining industry development. Centre experts performed the evaluation of perspectives of Ukrainian coal mining industry development with consideration to world trends of coal sector development, the status of the existing mine fund, known coal reserves and Ukraine's energy security requirements. In the outcome, a programme of further development of Ukrainian coal industry based on dissemination of market mechanisms, ownership reform and state sectoral support system. Special attention was paid to resolving social issues, specifically to move the mining regions out of the recession zone, to reduce unemployment, to form social infrastructure and to provide labour safety for miners.


Impact of Denationalisation on Economic Behaviour and Status of Enterprises on the Background of the economic situation in Ukraine (State Property Fund)

The research was carried out on commission of the State Property Fund of Ukraine within the framework of the tripartite agreement between the State Property Fund of Ukraine, Kyiv Consulting Group, the Centre for Economic Development, and the Group for Macroeconomic Analysis in Ukraine of the Harvard University of International Development. The objectives of the research were to evaluate impact of the privatisation on economic growth and to provide answer to the question of whether state property privatisation has, in the final count, assisted a transition towards positive dynamics and, if so, by which mode? Throughout the research, test factors of enterprise economic activities were defined, particularities in operation of enterprises of various ownership forms from the viewpoint of their economic behaviour outlined, and efficiency of mechanisms providing property transfer to the most efficient owners, as well as interrelation between the production volume growth a depth of privatisation on the sectoral level etc., were analysed. For the first time in Ukraine a positive influence of the privatisation on institutional changes in the national economy was measured and the privatisation was acknowledged as the decisive factor of businesses' efficient market behaviour.

Copyright (c) 2004 Center for Economical Development