Effective municipal property management is an important tool for supporting local budgets and stimulating the economic development of communities. However, with the onset of the full-scale invasion, this field faced unprecedented challenges.
Since 2022, the activity of local privatization processes has decreased by more than a third. This resulted in a significant reduction in revenues to local budgets. Revenues from privatization auctions decreased by almost 70% compared to pre-war 2021.
Under such conditions, it was necessary to adapt legislation and procedures to the conditions of martial law to restore and intensify the processes of municipal property privatization, ensure stable revenues to local budgets, as well as maintain transparency and efficiency of municipal resource management in times of a crisis.
This report provides a comparative analysis of the state of municipal property privatization since 2021. Particular attention is paid to changes in legislation, the level of competition in the market, the results achieved, the impact on the implementation of local budgets and ensuring transparency of procedures. The study allows assessing how wartime challenges have affected the efficiency of municipal property disposal, and which steps have been taken to minimize the negative consequences.
Summary
The field of municipal property privatization in 2021–2024 has undergone significant changes, largely due to the impact of the war and the adaptation of legislation to such conditions. If 2021 was successful in terms of record revenues from privatization (UAH 1.12 billion), then in 2022, the beginning of the full-scale invasion caused a sharp drop in privatization processes: the number of auctions decreased, and revenues to local budgets fell almost threefold.
The adoption of Law No. 2468-IX in mid-2022, which simplified procedures and accelerated the privatization process, provided a positive impetus for the resumption of privatization. However, despite the gradual growth of key indicators in 2023–2024, some of them have still not reached the pre-war level.
Among the positive trends in the field, it is worth noting the increase in the share of successful auctions (almost 45%) in 2023–2024 and a significant increase in the average price at auctions—from 63% in 2021 to 92% over the past two years. This provided revenues of almost UAH 1.8 billion to local budgets during this period. At the same time, the reduction in the number of auctions (by almost 32%) even in safe regions of the country and the drop in competition (to 2.01 in 2024) remain key challenges.
The partial restriction of local self-government bodies in initiating the privatization of municipal property, which affects their ability to manage community assets, is also of concern. The transfer of the initiative to investors provided for by law causes the dependence of privatization processes on external factors, which may result in irrational disposal of property.
According to the results of the analysis, it was possible to record a low level of ensuring the transparency of privatization processes in communities. Only 16% of local self-government bodies fully comply with the requirements for the publication of information on privatization specified by law. This situation not only reduces the trust of the public and potential investors, but also increases the risks of corruption, hindering effective public monitoring and control over the management of municipal property.
To increase the efficiency of municipal property privatization, we recommend:
- Enhancing the role of local authorities in the field of municipal property privatization. Local governments should play a more proactive role in privatization processes. They should restore the right to initiate the sale and, at the same time, they should be additionally obliged to analyze and identify property that is not used for its intended purpose, for its transfer for further privatization.
- Increasing the level of transparency in the sale of municipal property and coverage of privatization processes. LSGBs and local privatization bodies should enhance control over compliance with the requirements of the legislation on ensuring the transparency of privatization of municipal property and more actively spread information about auctions using available resources.
- Eliminating deficiencies and harmonizing legislation to improve the effectiveness of privatization. The Law on Privatization of State and Communal Property does not clearly define the time frame for making decisions on the privatization of municipal property. At the same time, the reduction in the time of objects exposition at auctions can adversely affect competition. The provisions of the specialized laws on education, health care, and other legislative acts are inconsistent with the provisions of the legislation on the privatization of state and municipal property.
- Approving procedural documents in the field of privatization. Local self-government bodies should review and, in case of absence, approve the regulations on the privatization body of the territorial community and the procedure for considering applications from potential buyers for the inclusion of municipal property in the list of objects subject to privatization.
- Applying transparent and competitive privatization procedures. According to the results of the analysis of municipal property privatization, it was found that the value of objects purchased at auctions exceeded the sale price of objects privatized through the redemption of leased property by an average of 45%. Considering the lower economic effect, it is necessary to amend the Law of Ukraine on Privatization of State and Communal Property to replace the mechanism of leased property redemption with the preemptive right of the lessee to purchase the leased property at the highest price offered during the auction.
The study was prepared with the financial support of Sweden. Opinions, conclusions, or recommendations are those of the authors and compilers of this publication and do not necessarily reflect the views of the Government of Sweden. Responsibility for the content of the publication rests solely with the authors and compilers of the publication.
