Will Ukroboronprom privatize state property?

Vadym Gryb, a representative of the shareholder holding 40.0753% of S.P. Korolov "Meridian" OJSC

Recently, during a meeting the Supervisory Board of Meridian, Ukroboronprom State‑Operated Corporation has raised a question about the enactment of a new regulation on the sale of non-core assets. The real point is that the companies — members of the corporations will be permitted to sell at their own discretion their assets not engaged in core manufacturing processes. Approximately 10% of the territory of our company is used in manufacturing processes, and the rest is let on commercial lease, and this situation is typical for the member companies of the corporation. If memory serves right, Roman Bondar, Deputy General Director for Transformation, mentioned in one of his interviews some unrealistic quantities of unused areas throughout the entire corporation. He underlined that “the total area of land plots operated by the member companies of the corporation is 5.5 thousand ha, and the size of real properties is 11.3 mln sq.m. In other words, the corporation is bloated with excessive assets that create extra burden and have negative impact on its performance indicators, and this is exactly why the second stage of the reform to restructure and optimize these assets has been launched”.

From now on, under new draft law No. 3822, the companies whose management is wholly controlled by Ukroboronprom will be able to decide independently which assets should be sold, and which should be kept. I would like to remind that these are state-owned assets, and until now the State Property Fund used to be the only specialized authority that had powers to sell such assets and an obligation to secure equal rights for potential buyers. In other words, Ukroboronprom will now deal with the privatization of state property. Although Prozorro is trotted out all the time, everyone who has experience with this system knows that it has a lot of gray areas. In fact, it is a strategy but not a trading platform that matters.

For instance, I had meetings with both Aivaras Abromavičius and his deputies (almost all of them, and there are ten of them), to discuss our company and asked them one question: “How do you see our company’s development strategy?” In our opinion, there are only three options for civilized development. Option one is to develop the company, option two is its privatization, and option three is to divide assets. We have written a gazillion of letters asking to decide on the strategy, but have received no reply so far. At the same time, Ukroboronprom’s management keeps asserting that a final decision has been made in connection with each company. Based on our experience, this is not true!

While making such statements, they are trying to lay their hands on the functions of the State Property Fund in connection with the sale of non-core assets and then dispose of the proceeds of such sale. A battle for cash flows has never stopped! Investment bankers who turned public officers surely make no exception. But they move even further, and the draft law provides that the money and assets can be transferred between companies, and state contracts (won in tenders, I suppose) can be assigned to other companies and subcontractors. I might be too pessimistic that it is such schemes that lead to total corruption. All the management is dependent, and those who disagree with the strategy implemented by Ukroboronprom’s management will be sacked. Can you prove me wrong?

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