The Ukrainian parliament has passed a law reviving large-scale privatization and enabling state property to be leased for up to five years to private entities. The law also allows the State Property Fund of Ukraine (SPFU) to manage sanctioned assets, SPFU said in a message on its website on May 30.
The SPFU will have the authority to reinitiate large-scale privatization, lease state property for a maximum of five years, and independently decide the fate of assets expropriated from sanctioned individuals and companies.
The SPFU will have the autonomy to make executive decisions concerning sanctioned property, such as privatization, sales, leasing, or management. All proceeds will be directed towards repairing the damage done by Russia’s invasion of Ukraine.
The new law also prevents sanctioned individuals and Russian or Belarussian citizens from becoming heads of state enterprises or members of their supervisory boards.
Before the war, the SPFU had the capacity to lease state property for up to 49 years. However, most contracts were agreed upon for a term of five years, with the proportion of five-year contracts amounting to 88.8% in 2021.
Following the invasion, fears arose due to low competition and overall uncertainty, potentially leading to an underestimation of lease prices. In response to that, Ukraine has limited the duration of new lease contracts to the duration of martial law plus 12 months.
“In recent months, Ukrainian businesses have gradually adapted to the challenges posed by the state of war,” the SPFU said.
“Term restrictions do not encourage entrepreneurs to participate in leasing auctions, leading to a lack of demand, with 38% of them currently not being realized.”
Once the new law comes into force, the SPFU expects a 20-25% increase in revenue from state property leases, equating to an annual increase of UAH 100 million ($2.71 million).
Additionally, the law aims to improve the condition of leased properties and enhance the SPFU’s managerial structure. The head of the fund will have the autonomy to appoint and dismiss deputies, with the 12 regional departments becoming structural units.
Previously, it was reported that the SPFU’s earnings from privatization in Q1 2023 hit a record high for the past decade.