New Rules for Small-Scale Privatization
Ukraine’s Cabinet of Ministers has overhauled the rules for small-scale privatization, mandating open online auctions for the sale of leased state and municipal property that has undergone repairs or upgrades. This move is designed to eliminate the practice of non-competitive buyouts, which previously allowed tenants to acquire assets at artificially low prices without any auction process.
Previously, non-competitive buyouts were common: property was leased, tenants invested in repairs or modernization, and then they gained the right to purchase the asset without an auction and at a significantly reduced price. As a result, communities and the state lost out on revenue, noted Yuliia Svyrydenko. She added that under the new rules, prices will be determined by competition and market forces, while the tenant’s verified investments in inseparable improvements will be compensated or credited during the final settlement.
Economic Impact of the Reforms
According to estimates from Transparency International, the state was losing an average of 45% compared to open auction outcomes. Between 2021 and 2024, open auctions generated over 3 billion hryvnias in revenue. Under the updated regulations, leased state and municipal property with repairs or modernization can only be sold through open online auctions on the 'Prozorro.Sales' platform.
For context, Ukrposhta is set to receive more than 500 million hryvnias from real estate sales. Additionally, over 10,000 square meters of property belonging to the state-owned joint-stock holding company 'Kyiv Radio Plant' were transferred to private ownership at a reduced price. These changes to the privatization rules aim to enhance transparency and efficiency in the sale of state assets.
The reforms to small-scale privatization could significantly impact state and local government revenues, as open auctions promote fairer pricing and help prevent abuse. The adoption of these new rules reflects the government’s commitment to increasing transparency in privatization and combating corrupt schemes that have negatively affected the country’s economy.
These reforms not only apply to small-scale privatization but also reflect a broader shift in Ukraine's approach to asset management. For instance, recent changes regarding the sale of sanctioned properties aim to further streamline the auction process and enhance revenue generation. To learn more about how these new auction rules are set to impact the economy, check out the details in our article on selling sanctioned assets.