Ukraine’s govt plans to reduce number of SOEs from over 3,000 to around 100 – Deputy PM

The Ukrainian government has adopted a new state property policy aimed at optimizing the portfolio of state-owned assets by conducting a triage process. This involves analyzing all state-owned assets and categorizing them into groups to remain state-owned, privatized, or liquidated, stated First Deputy Prime Minister and Minister of Economy Yulia Svyrydenko.

"The government plans to reduce the number of state-owned enterprises (SOEs) to about 100 from the more than 3,000 we have today. The goal of this optimization is to enhance the efficiency of state-owned enterprises, increase their contribution to the economy, and reduce the budgetary burden of maintaining them," she wrote in an op-ed for Interfax-Ukraine.

Svyrydenko emphasized that the policy identifies specific criteria for retaining state ownership of a company.

"This could include meeting public needs for specific services (Guaranteed Buyer), ensuring national interests (Energoatom, Ukrainian Defense Industry), providing affordable pricing (Ukrposhta, Ukrzaliznytsia), or operating as a natural monopoly (Ukrenergo)," she said, citing examples.

The policy also improves the functioning of supervisory boards. Appendices include guidelines on remuneration for executives and board members, as compensation has been a sensitive issue for society. Maximum remuneration for a board member is capped at 40% of the CEO's maximum salary, which is set at a market rate, Svyrydenko said.

"How is this level determined? The government commissions independent studies of salary levels across sectors with companies of similar size and focus," she added.

A significant innovation is the introduction of "letters of expectations," a new planning tool.

"This instrument allows the state to define specific objectives for companies – such as targets for profitability, liquidity, and other indicators – as well as the volume of state budget funding and dividend payments. Failure to meet these key performance indicators (KPIs) could lead to dismissal of management board members," Svyrydenko said.

She highlighted the policy's dividend strategy, clarifying that during martial law, state enterprise dividends account for 75% of profits. After the war, dividend calculations will factor in critical investments, such as recovery efforts.

"In the future, dividend amounts could depend on how effectively a company uses its funds (measured by ROE). Higher efficiency would mean lower dividend requirements. Other factors include the value of the company's assets, industry specifics, state financial goals, supervisory board proposals, and market competitiveness," Svyrydenko explained.

She concluded by outlining the next steps after adopting the state property policy: conducting triage, privatizing or liquidating redundant state assets, forming supervisory boards in select state enterprises, and distinguishing between commercial and non-commercial activities.