Privatisation tug-of-war
01 May 2008
Published in
Inform
issue #69
See the full issue here.
President Viktor Yushchenko has taken the extraordinary decision to step up security at the State Property Fund (SPF). It comes in the wake of his long-running dispute with the government over the dismissal of the SPF head and his refusal to back the government’s privatisation plans.
The dispute arose on 6 February when the Cabinet of Ministers fired Valentyna Semeniuk, the Head of the SPF, charged with officiating the government’s privatisation programme. The sacked Ms Semeniuk, whose department has been dogged by allegations of corruption and cronyism, failed persistently to ratify the government’s plans, but was reinstated by a presidential decree a day later.
The government’s privatisation plan is laid out in the 2008 State Budget and aimed at generating budget receipts of $1.7 billion. Top of the list of companies to be sold is the Odessa Portside (chemical) Plant and UkrTelecom, the state’s fixed-line telephony company. Six regional energy companies are also slated for sale. Experts believe the privatisations will net considerably more than the conservative figure contained within the budget.
Ms Semeniuk objected to the privatisations on the grounds of their “monopolistic position.” Perplexed by this decision, Millennium Capital analyst, Bogdan Kochubey opined, “Odessa Portside Plant is not even the largest nitrogen fertilizer producer in the country, let alone a monopolist. The fact that the plant sits on the Togliatti-Odessa ammonia pipeline is not a reason to declare it a monopolist.”
The reason for Ms Semeniuk’s reluctance to press ahead with the government’s policies – and backing by the president – is seen widely as a ploy to deprive the government of funds for its popular bank deposits repayment programme.
See the full issue here.
President Viktor Yushchenko has taken the extraordinary decision to step up security at the State Property Fund (SPF). It comes in the wake of his long-running dispute with the government over the dismissal of the SPF head and his refusal to back the government’s privatisation plans.
The dispute arose on 6 February when the Cabinet of Ministers fired Valentyna Semeniuk, the Head of the SPF, charged with officiating the government’s privatisation programme. The sacked Ms Semeniuk, whose department has been dogged by allegations of corruption and cronyism, failed persistently to ratify the government’s plans, but was reinstated by a presidential decree a day later.
The government’s privatisation plan is laid out in the 2008 State Budget and aimed at generating budget receipts of $1.7 billion. Top of the list of companies to be sold is the Odessa Portside (chemical) Plant and UkrTelecom, the state’s fixed-line telephony company. Six regional energy companies are also slated for sale. Experts believe the privatisations will net considerably more than the conservative figure contained within the budget.
Ms Semeniuk objected to the privatisations on the grounds of their “monopolistic position.” Perplexed by this decision, Millennium Capital analyst, Bogdan Kochubey opined, “Odessa Portside Plant is not even the largest nitrogen fertilizer producer in the country, let alone a monopolist. The fact that the plant sits on the Togliatti-Odessa ammonia pipeline is not a reason to declare it a monopolist.”
The reason for Ms Semeniuk’s reluctance to press ahead with the government’s policies – and backing by the president – is seen widely as a ploy to deprive the government of funds for its popular bank deposits repayment programme.
In January this year, Prime Minister Yulia Tymoshenko
began a programme to repay savings lost by millions
of investors during the hyper-inflation that followed
the disintegration of the Soviet Union. The 2008
budget, which goes some way to delivering on a pledge
made by the prime minister during the recent
parliamentary election campaign, has earmarked UAH 20
billion (nearly $4 billion), comprising 60 percent of
the payments the government wants to pay this
year.
With the Bloc of Yulia Tymoshenko (BYuT) riding high in the opinion polls, and mindful of the 2010 presidential election, an irked presidential office has done its best to put the skids under the repayment programme by starving it of much needed privatisation receipts. Analysts believe that any failure of the repayment programme may dent Ms Tymoshenko’s popularity and so strengthen the president’s hand.
“It is all so unnecessary,” said the frustrated premier, “I have sworn two dozen times not to go into the election, but wasn’t believed two hundred times.”
What makes the president’s decision all the more unpalatable is the fact that in 2004 he supported publicly the call to repay lost savings. His 2004 election programme was emphatic on the issue: “I am against a re-division of property, but oligarchs will be made to pay a real price for enterprises that they grabbed practically for nothing and the billions of hryvnia will go towards repaying the stolen savings of citizens.”
Tug-of-War
The dispute reached boiling point when the president issued a decree that overturned the Cabinet of Ministers dismissal of Ms Semeniuk and the ruling that called for the sale of the Odessa Portside Plant. Ms Semeniuk was then reinstated.
On 17 April the Constitutional Court of Ukraine declared the president’s actions unconstitutional. Then on 24 April, the Okruzhny Administrative Court, taking into account the ruling of the Constitutional Court, suspended the presidential decree reinstating Ms Semeniuk and declared the SPF’s decisions not to privatise the Odessa Portside Plant as illegal.
On 25 April the government appointed Andriy Portnov as Acting Head of the SPF. A BYuT deputy and lawyer, Mr Portnov took up his role on Friday with a remit to put an end to the corruption that has plagued the department during the past decade.
Prime Minister Tymoshenko joined Mr Portnov at the SPF building and addressed the assembled employees using a megaphone. She said “Mr Portnov must do everything to finally end the wide-scale corruption in the Fund and organise honest privatisations with transparent procedures.”
The same day the president issued a decree (No. 404) to overturn the government’s decisions on the dismissal of Ms Semeniuk and the appointment of Mr Portnov.
Prime Minister Tymoshenko, backed by the Cabinet of Ministers, has ordered Mr Portnov to ignore the decree. With the Prosecutor General’s office now entering the fray in support of the president, a tug-of-war has broken out between the two branches of government.
If the dispute is not resolved, the big losers will be ordinary Ukrainian citizens deprived of the bank repayment and social welfare programmes that the privatisation programme was designed to underpin. What is galling is that the blueprint for funding these programmes was agreed by the president when he signed off the 2008 State Budget.
Yet the ramifications of the dispute have deeper implications. “I believe such division will hasten the move to a parliamentary republic,” remarked an American businessman living in Kyiv, “it’s crazy but Yushchenko’s fear of losing the presidential election has brought this on himself.”
year.
With the Bloc of Yulia Tymoshenko (BYuT) riding high in the opinion polls, and mindful of the 2010 presidential election, an irked presidential office has done its best to put the skids under the repayment programme by starving it of much needed privatisation receipts. Analysts believe that any failure of the repayment programme may dent Ms Tymoshenko’s popularity and so strengthen the president’s hand.
“It is all so unnecessary,” said the frustrated premier, “I have sworn two dozen times not to go into the election, but wasn’t believed two hundred times.”
What makes the president’s decision all the more unpalatable is the fact that in 2004 he supported publicly the call to repay lost savings. His 2004 election programme was emphatic on the issue: “I am against a re-division of property, but oligarchs will be made to pay a real price for enterprises that they grabbed practically for nothing and the billions of hryvnia will go towards repaying the stolen savings of citizens.”
Tug-of-War
The dispute reached boiling point when the president issued a decree that overturned the Cabinet of Ministers dismissal of Ms Semeniuk and the ruling that called for the sale of the Odessa Portside Plant. Ms Semeniuk was then reinstated.
On 17 April the Constitutional Court of Ukraine declared the president’s actions unconstitutional. Then on 24 April, the Okruzhny Administrative Court, taking into account the ruling of the Constitutional Court, suspended the presidential decree reinstating Ms Semeniuk and declared the SPF’s decisions not to privatise the Odessa Portside Plant as illegal.
On 25 April the government appointed Andriy Portnov as Acting Head of the SPF. A BYuT deputy and lawyer, Mr Portnov took up his role on Friday with a remit to put an end to the corruption that has plagued the department during the past decade.
Prime Minister Tymoshenko joined Mr Portnov at the SPF building and addressed the assembled employees using a megaphone. She said “Mr Portnov must do everything to finally end the wide-scale corruption in the Fund and organise honest privatisations with transparent procedures.”
The same day the president issued a decree (No. 404) to overturn the government’s decisions on the dismissal of Ms Semeniuk and the appointment of Mr Portnov.
Prime Minister Tymoshenko, backed by the Cabinet of Ministers, has ordered Mr Portnov to ignore the decree. With the Prosecutor General’s office now entering the fray in support of the president, a tug-of-war has broken out between the two branches of government.
If the dispute is not resolved, the big losers will be ordinary Ukrainian citizens deprived of the bank repayment and social welfare programmes that the privatisation programme was designed to underpin. What is galling is that the blueprint for funding these programmes was agreed by the president when he signed off the 2008 State Budget.
Yet the ramifications of the dispute have deeper implications. “I believe such division will hasten the move to a parliamentary republic,” remarked an American businessman living in Kyiv, “it’s crazy but Yushchenko’s fear of losing the presidential election has brought this on himself.”