In late October, Ukraine re-privatized its Kryvorizhstal steel works in a live auction watched, apparently, by millions on television. The action was a reversal of the privatization that had taken place under the previous government. The old sale would have brought in $800 million. The new sale, to Mittal Steel Germany GmbH, will net $4.8 billion. Broadcasting the auction was a clear sign of transparency, a way of bringing crucial deals out of the back rooms and away from suspicion.
As the Wall Street Journal Europe noted on October 26, that sum is 20 percent of Ukraine’s annual budget. The sale increased total foreign investment in Ukraine since independence in 1991 by 50 percent.
Ukraine still has a long way to go to live up to the ideals of the Orange Revolution, and old structures are hard to root out. But this sale is one of a number of positive signs. Here’s hoping for more, as the first anniversary of the revolution approaches.
This is, iirc, one of a handful of really big reprivatizations that are coming. The next one, again iirc, is a huge chemical company that resides outside Donetsk. It’s expected to land mucho dinero there too. Though, it’s not as big as this one was.
One of the things about the Kryvorizhstal deal the first time around was that it was sold by Kuchma to a group of ‘investors’ that included, wait for it, his son. hmmmm. The other be privatizations were pretty much the same way under old Kuch.
Hopefully, Ukraine will go and pay off a lot of its debts (like the natural gas debt owed to various countries) and invest the rest in infrastructure. It desperately needs it. Roads, sanitation, and others are not in the best of condition at all.
Out of curiousity, does anyone know if the railroads are one of the companies that are intended to be privatized?
I’m all for revisiting some of the egregious privatization deals, but I couldn’t figure out why Mittal Steel paid so much for Kryvorizhstal. I agree that the previous sale was way under the value, but I wonder if the Orange are really good fast-talkers to get this much money out of Mittal.
Will Baird,
It was Kuchma’s son-in-law, not his son that was among those that benefitted. Chap by the name of Viktor Pinchuk, believed to be the 2nd-wealthiest man in Ukraine (the first being another east Ukraine industrial magnate, Renat Akhmetov)
As far as I am aware, the railways are definitely not intended to be privatized in the foreseeable future. And, frankly, they require a great deal to be done to them to drag them into some kind of market-economy world. It’s not that the infrastructure or facilities are bad, but the way the system is managed is, in most ways, very much in the Soviet scheme of things. Privatizing the railways in the Baltic States (esp. Estonia), which are obviously much smaller and much wealthier, has been pretty disasterous, at least in the short term.
I’m not sure there are that many really big reprivatizations on the way – Tymoshenko spoke in favour of that sort of thing, but Yushchenko and the new Govt have cut it down considerably. The reprivatization (in a frankly quesionable way) of the Nikopol Ferro-alloy plant, near Dnipropretrovsk, was one of Tymosheno’s last actions as PM, I think, and may well have been one of the reasons that prompted her dismissal. But I could be wrong here, I don’t have all the facts to hand.
One of the issues in the Baltics regarding trains is that the main lines are still pretty oriented toward Soviet priorities. That is, connections toward StP and Mos were much more important than intra-regional connections. At least that was the case two summers ago when I was biking through the region and looking for some shortcuts by rail. Latvia was the main exception.
That’s more of a long-term problem and not something that privatization can really help with.