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Banking

Ukraine: Problems and prospects for privatization

Since 2004, privatization in Ukraine has sought to follow an auction system but, as restrictions and requirements are placed on bidders, the winning bid is often poorly contested and so poorly priced. An example of this was seen when Luhanskteplovoz, a monopoly Ukrainian producer of locomotives and trams, was sold in March to a Russian bidder for $60 million in a non-contested auction.

Ukraine takes cautious steps down IPO road

The PFTS and Ukrainian World Bank advisers, among others, are debating the role of privatization in enhancing stock market liquidity. Andrei Kolomiets, head of information and analytics at PFTS, says: "We try to explain to the state property fund [the fund that acts as a holding company for all state companies] and the Rada that the privatization process needs to be altered so that more shares are released onto the exchange to help liquidity and drive investor interest."

By contrast, Martin Raiser at the World Bank says: "The privatization process should have one aim – to find the best investor who will run the company profitably and thus serve the interests of the wider economy. If it is possible to also help the liquidity of the local stock exchange at the same time then all the better but this should not be the focus."

The plans for privatization of Ukrtelecom, the country’s largest fixed-line telecom, look to satisfy both sides of the debate. The government has announced that a 37.8% stake of the remaining 93% of the company will be floated on international exchanges, including the London Stock Exchange, between August 1 and the end of 2007.

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