Ukraine and France are establishing a working group to formulate a strategy and principles for managing state-owned enterprises, incorporating best practices for centralizing owner's functions. The French experience in managing state-owned enterprises (SOEs) will be considered. The proposal to create this working group was announced by Yuliia Svyrydenko, the First Deputy Prime Minister and Minister of Economy of Ukraine, during a meeting with Alexis Zajdenweber, the head of the French State Participation Agency, in Paris.

“We are actively working on reforming approaches to the management of state-owned enterprises. We view these enterprises as the primary driving force for recovering from the Russian invasion. Consequently, we are striving to establish a system based on the OECD Guidelines (Organisation for Economic Co-operation and Development Guidelines), which will also align with our efforts toward European integration,” said Yulia Svyrydenko.

She added that the government has intensified privatization processes, is preparing a draft law on changes in the management of SOEs, and considers France's experience in this area to be useful.

“We are conducting small-scale privatization and plan to resume large-scale privatization when the conditions are right. The liquidation of non-operating SOEs will alleviate the debt burden on the state budget, settle wage arrears for employees, and pave the way for creating new enterprises utilizing the assets of previously loss-making enterprises,” said Yuliia Svyrydenko.

According to her, the systemic difficulties in managing the portfolio of strategic state-owned enterprises in Ukraine are currently related to the fact that they are managed by 89 different state institutions, whose functions and responsibilities are often overlapping and unclear. There is no overall legally binding and unified state ownership policy, which would include a justification of the state's need to own SOEs and clear objectives for their operation. Less than 10 SOEs have supervisory boards with independent members.

The head of the Ministry of Economy also reminded that about 120 strategic SOEs should remain in state ownership after privatisation and liquidation for effective management. However, their management system should be changed.

“We want to change the approach for them. The adoption of the draft law is one of the first steps in this regard. After that, we will appoint independent supervisory boards for strategic SOEs. We also need a system for assessing the performance of these companies and their supervisory boards. So, we are analysing options to have the best system for managing Ukraine's state assets, which would reduce the conflict of interest between the state as the owner of state-owned enterprises and the state as a policy maker and regulator. We want to promote competitive markets and minimise their distortions. France's experience will be useful in this regard, as the country has well-developed and effective approaches to managing state property," said Yuliia Svyrydenko.

Background

Agence des participations de l'État (APE, literally “State Participation Agency”), established in 2004, is the French agency responsible for managing the State's shareholdings in companies of strategic importance.

APE's shareholding strategy stipulates that the state should be a shareholder in three types of companies: strategic companies that contribute to sovereignty (defence and nuclear), companies involved in public missions or national or local common interests for which regulation would be insufficient to preserve the public interest and ensure public service missions, and companies in distress whose disappearance could lead to systemic risk.

Historically, Ukraine has managed a significant portfolio of state assets. As of the end of 2022, there were 3,293 SOEs at the central government level; of these, 1,058 were operating, 1,552 were inactive, 516 were problematic, and 167 were located in the annexed territory of the Autonomous Republic of Crimea. A significant number of enterprises in strategic sectors of the economy, such as energy, infrastructure, and defence, are currently state-owned. More than half of the banking sector's assets are state-owned.