It was in June 2018 that the legislative framework was formed, according to which auctions for the sale of public and municipal property began to be held through Prozorro.Sale. This simplified the sales procedure and, more importantly, made it open, transparent, and competitive.

The Prozorro.Sale system is built on the “everyone sees everything” principle. Data on lots, conditions of their sale, the course of electronic auctions, their participants and winners, concluded contracts — all this information is publicly available. Anyone can choose an object to their liking and try to buy it at an auction.

Key achievements

Equal access to bidding and transparency of privatization procedures contributed to the active participation of private investors. Since the introduction of the reform, more than 9,000 participants have competed for the right to purchase public or municipal property — an average of 3 at each auction. Such competition helped form a market price for objects — according to the results of auctions, the starting price of the sold objects increased more than twofold.

Among the successful cases of privatization are the sale of the Dnipro hotel (UAH 1.1 bln), the Kalush CHPP (UAH 801 mln), and the Lviv penal colony (UAH 377 mln), as well as alcohol industry facilities (more than UAH 2.3 bln).

The launch of the reform intensified the sale of not only public, but also municipal property. Of the nearly 5,000 successful tenders, more than 3,000 were announced by local self-government bodies. Notably, it was the communities that were the first to put their objects up for sale in the Prozorro.Sale system.

As a result, since the introduction of the reform, private investors have acquired almost 5,000 public and municipal property objects, as a result of which the state and communities managed to earn UAH 13.6 bln. The lion’s share of these funds — UAH 9.8 bln — were channelled to the state budget, and UAH 3.8 bln comprised the revenues of local budgets.

“Prozorro.Sale is one of the revolutionary initiatives and an example of how you can simultaneously improve the economic situation and reduce the space for corruption. Transparency International Ukraine joined the creation of this project, and after its transfer to the state, continued to support it systematically. We are pleased to have participated in the reform of small-scale privatization in this way,” said Ivan Lakhtionov, Deputy Executive Director of TI Ukraine for Innovative Projects.

Small-scale privatization during the war

Unfortunately, the full-scale invasion has affected the plans to implement the reform — the privatization was suspended. In July 2022, TI Ukraine called on the parliament to resume and simplify privatization, which could mitigate the impact of the war on the budget in the face of falling economic activity and a rapid decline in GDP.

Finally, in September last year, small-scale privatization was resumed under new, simplified rules — and the results met the expectations.

The figure of UAH 900 mln attracted to the national budget in the first quarter of 2023 was a record for the last 10 years. In just 10 months, small-scale privatization brought UAH 2.8 bln to the national and local budgets. At the same time, not only did the average number of participants in auctions for the sale of public property increase, but also the price — up to an average of two and a half times.

In addition, Ukraine sold a seaport for the first time for more than UAH 200 mln. The auction for the Hermitage hotel in the center of Kyiv caused a real stir. 39 participants took part in them, as a result of which the starting price increased almost 15 times and amounted to UAH 311 mln — a record figure since the resumption of small-scale privatization.

“Calling on the parliament to resume privatization, we were convinced that it could become an additional source of revenues. This applies not only to one-time injections from sales into the budget to partially cover the deficit and meet defense needs. Privatization provides further transformation of assets that will generate a constant income and stimulate the economic development of the country,” explains Andrii Shvadchak, legal advisor to TI Ukraine.

The success of privatization has shown that business has adapted to the realities of war and continues to seek for new opportunities. More than 3,200 enterprises remain in state ownership, of which every second is unprofitable or economically inactive. They do not generate income for the state, but debts to creditors, the budget, and employees and are a source of corruption. Therefore, TI Ukraine is convinced that despite the war, privatization should continue and benefit the restoration of the country.

 

This publication was prepared by Transparency International Ukraine with the financial support of Sweden.

According to a World Bank study, online auctions in Prozorro.Sale for land lease doubled financial revenues to local authorities.

The analytical report notes that the average land lease price at online auctions held from November 2021 to March 2022 in the system doubled from USD 157 to over USD 400 per hectare.

Let us remind you, Prozorro.Sale is an online auction system that helps the state and local authorities sell or lease property and real estate at a market price. 

TI Ukraine was also engaged in the creation of this electronic transparency tool — in this way, we helped make Ukraine stronger. Our organization as a co-creator is very proud that Prozorro.Sale contributes to the functioning of the land market and increases revenues in the national and local budgets. 

According to Klaus Deininger, Lead Economist in the Sustainability & Infrastructure Team of the Development Research Group of the World Bank, the transition from opaque offline auctions to full digitalization became one of the key components of land reform in Ukraine, which aimed to increase transparency and bring the land market closer to European standards.

Previously, land auctions in Ukraine were held offline and on the imperfect SETAM platform. The transition to a secure and transparent open-source system in land auctions at the end of 2021 doubled prices and reduced barriers to participation in auctions. 

By the way, this is not the first e-product to improve the state and reduce the space of corruption, which TI Ukraine helped to create and subsequently transferred to the state — these are also the Prozorro, Prozorro. Sale, eHealth, and Prozvit systems and the Register of Declarations. Read more about the organization’s achievements here — https://bit.ly/TI_Ukraine

If this mechanism was used immediately, starting from 2015, today the city councils would have had USD 500 mln in additional rental income per year. And this is especially important in the context of the post-war reconstruction of Ukraine.

For more than two years, the lease of public property in Ukraine has been conducted exclusively through electronic auctions in Prozorro.Sale. This has made the process faster and more transparent for all. The war has made some adjustments to the procedure, but the lease is still taking place through an electronic system. In this material, we explain how you can rent public or municipal property during the war.

Where to look for property for rent?

First of all, we advise you to look for an object to your liking among the rental announcements on Prozorro.Sale. To do this, click the Rent tab and apply additional filters, such as a region or a key word. These are the objects for which the auction date has already been selected.

If in this way you could not find the desired object, also look among the Lists of objects for which a decision to lease has been made.

When a lessee makes such a decision, they must include the object in one of the Lists for lease and publish it in Prozorro.Sale.

Basically, there are two types of lists:

1)    For property that can be rented through an electronic auction by anyone other than those who are prohibited from being lessees under article 4 of the Law. In particular, these are persons under sanctions, citizens or enterprises of the aggressor country, employees of the lessee.

2)    For property that can be rented without an auction and which can only be claimed by individuals defined by Article 15 of the Law. For example, public authorities, municipal institutions, museums, civil society organizations of sports or rehabilitation direction.

Recently, among the filters of the types of lists, a new one appeared in the system — “Relocation.” These are premises to be leased to enterprises that relocate their production from dangerous regions.

Unfortunately, not all lessees upload their lists to Prozorro.Sale. Therefore, in addition to the system, we advise you to search for objects for rent also using the site orenda.gov.ua and in particular its map, or on the websites of local self-government bodies.

If you like a certain object, you can apply for its lease. Then the lessee will start preparing the auction and publish an announcement about it. The auction itself during martial law should take place within 5-35 days from the date of publication of the announcement.

What if I want to rent a specific object, but it is not yet in the Lists?

Any person can initiate the transfer of property for rent. That is, if you liked certain premises or a building in your city, you know that it is not used, and would like to rent it — go to one of the accredited platforms and apply.

Previously, the management body had up to 40 working days to decide whether to lease the object. During the war, this time was reduced to 7 working days. At the same time, if the management body does not make any decision, it will be considered a consent automatically. When the decision is made, the balance holder must notify the applicant and the lessee. The latter must include the object in one of the Lists and publish the rental announcement within 20 working days after that.

However, these rules do not apply in areas where active hostilities have taken place or are taking place. There, the decision to lease the property is made by the military administration. The solution of the balance holder is not required.

What if I’m looking for an object to rent for relocation?

The most convenient way for business now is to apply for relocation. The state will help to choose premises in a safe region, and, if necessary, will help with transportation itself.

It is for this program that lists of objects for relocation have been created. They include not only municipal and public property, but also premises which private owners are ready to lease to relocated enterprises.

Another option is to look for the object for rent simply through Prozorro.Sale and participate in the auction with everyone. If you choose this path, we advise you to contact the regional military administration at the location of the desired rental object in order to obtain a petition to facilitate the production relocation. If you win the auction, present this document to the lessee, and you will be able to pay rent for the first half of the year at a preferential rate of UAH 1/m². Important: such a petition should be received no later than the day before the auction.

How is a rental auction conducted?

When you have selected an object on Prozorro.Sale, from its page, you need to go to one of the authorized platforms to submit your bid.

At the first stage, the property is put up for auction at a 100% cost. That is, in your bid, you must offer a price that is higher than this expected cost. Moreover, at this stage you need to pay guarantee and registration fees.

If the first auction did not take place — for example, there were no interested buyers or the buyer, who won the auction, refused to buy — announce the second stage. At the second stage, the property is offered with a 50% discount.

If the second auction did not take place either, the third stage is held — the so-called Dutch auction. The property is exhibited, as in the previous stage, with a 50% discount, but the electronic system automatically and gradually reduces its value until one of the participants stops the auction. This will mean that the participant is ready to buy the lot for this amount. After that, other potential lessors, if they wish, can offer a larger amount, and then the process takes place in reverse order, as at a regular auction. The winner is the one who offers the biggest bet.

What should the winner do?

Of course, sign the necessary documents. All the documents — the protocol on the results of the auction, the lease agreement and the act of acceptance and transfer — under martial law, can be signed with an electronic signature. Unless you want paper documents with a physical signature.

The winner of the auction also has to pay an advance payment and a security deposit. Previously, for public property, their amount was determined by the local self-government body, for municipal property — they were 2 monthly rents. However, at the time of the war, the advance payment and security deposit are paid in the amount of one monthly rent each. At the same time, state authorities and local self-government bodies, the Pension Fund, and budgetary institutions and organizations are exempt from paying these contributions while martial law is in force.

Read more about the benefits in the lease of public and municipal property during the war in the material.

In addition, for the period of martial law, all information about participants and winners of auctions is anonymous and will not be disclosed after the auction. Documents based on auction results will not be displayed until the end of the war in the system.

Today, two years have passed since the new law on leasing public and municipal property came into force.

Until 2020, the shadow market for leasing public and municipal property had been flourishing in Ukraine. This led to the fact that 28 million square meters of state-owned real estate either stood idle or were used under non-transparent schemes. This is the area of 200 Olimpiiskyi stadiums.

What has changed?

The selection of lessees of public or municipal property began to take place at electronic auctions in the Prozorro.Sale trading system under the rules of absolute transparency. Moreover, citizens finally got access to full information about public and local leases.

 

Key positive changes in the law:

* Lists of leased property are maintained in a single electronic system. Now, Ukrainians see how much real property is planned to be leased in their communities, and, in the end, with whom lease agreements are concluded and for how much.

* The lessee is selected through an open tender at an electronic auction, where the main criterion for choosing the winner is a high price. This creates full-fledged equal conditions for business and allows attracting more funds to the national and local budgets.

* All lease agreements are published on Prozorro.Sale. Thus, everyone can get acquainted with the texts and terms of these agreements in one place.

Therefore, another big corruption risk in the legislation on lease has been eliminated.

What do the numbers reveal?

During these two years, 64,200 lease objects were entered into the system and more than 32,000 auctions for leasing public and municipal property were held, of which about 75% were successful. Prozorro.Sale gathered more than 16,000 lessees on its platforms.

Due to the activity of the organizers, the income from leasing public property amounted to more than UAH 113 mln over these two years from more than 19,000 lease agreements concluded in the system. And this is with a total declared cost of UAH 79.77 mln. The average increase in the minimum price (completed auctions) is 42.62%.

By the way, the lease of municipal property accounts for UAH 57.88 mln of income from completed auctions.

955,300 square meters of public and municipal property were leased.

Leaders in lease

Most of the successful auctions for the lease of public property for 2020-2022 (953) were organized by the regional branch of the SPFU in Dnipropetrovsk, Zaporizhzhia, and Kirovohrad oblasts (614 of them were completed in the amount of UAH 4 mln, the total area leased was 63,200 square meters).

The Department for Work with Assets of the Dnipro City Council organized the highest number of completed auctions for the lease of municipal property for 2020-2022 — 503 procedures in the amount of UAH 1.8 mln. We are talking about 66,700 square meters of area.

Kyiv is the leader in the number of announced auctions for the lease of both public and municipal property: 3,479 auctions. The capital is also the leader in revenue: UAH 22.3 mln.

Anti-leader (except for Crimea) is the Ternopil oblast, which gained UAH 410,000 at 276 auctions for leasing public and municipal property.

It is important to understand that the transfer of public and municipal property for rent on the basis of transparency and competition directly influences the well-being of the community and the ability to improve infrastructure and comfort locally.

This reform was another impetus for the development of the field, and we hope that in the future we will be able to see a sharp trend of changes thanks to the adopted law.

The 7th Open Government Partnership (OGP) Global Summit was held in Korea on December 15-17. Its main topics: strengthening public space, fighting corruption, and promoting inclusive digital innovation.
TI Ukraine joined one of the discussion panels at the OGP Global Summit: “The role of open data and analytical tools to ensure transparent and efficient public property management.”
“Complex and closed communication with the state where there is an economic interest is a favorable field for corruption. To change this and create an uncomfortable environment for corruption, it is necessary to digitalize communication, open up information and access to markets through e-tools,” Khrystyna Zelinska said during a panel on public property at the OGP Summit.

The head of the department noted that Prozorro and Prozorro.Sale can be considered successful examples in Ukraine. These systems are based on the “everyone sees everything” philosophy, reduce corruption risks, and increase economic benefits for the country and communities.
“Each country should clearly understand what its strategic policy is for managing public assets. In recent years, we have noticed how supporting innovations that eliminate unnecessary actions and corruption works for the country’s economy,” she concluded.
Let us remind you that the Ukrainian system Prozorro.Sale received a European award of the Open Government Award. The project competed in the category OGP Impact Awards as the one changing the country, improving the quality of life in society, and making the actions of the authorities open to citizens.

The annual OGP Awards is scheduled to be presented on December 15 during the OGP Summit. Ukrainian Prozorro.Sale is among the nominees. We decided to collect the main facts about the system for our readers.

1

Prozorro.Sale is both the name of a state-owned enterprise and an electronic trading system that sells and leases public and municipal property, as well as debtors’ property. 

2

The main focus of the reform is a transparent, fast and efficient process of selling public and municipal property assets with a high level of public control and prevention of corruption. As they say in the SE, their goal is to make public sales of anything transparent.

3

It is built according to the values and principles of the Prozorro family. Prozorro.Sale is a two-level system. It combines information about all lots offered for sale and system users (first level) in a central database. The CDB does not interact with participants, but is only responsible for the smooth operation of the system itself. 

The organizers and participants “communicate” with the system through accredited electronic platforms that are connected to the system (second level). The goal of the platforms is high-quality advisory support for buyers and sellers, as well as access to sales procedures.

4

The value of the system lies in the open API of the system, a modern auction portal, a detailed analytics module, and everyone’s access to information about the disposal of public property. This increases transparency and trust in the markets, strengthens competition, and makes public control possible. 

5

In 2016, the Ministry of Economic Development, the National Bank of Ukraine, the Individual Deposit Guarantee Fund, and Transparency International Ukraine signed a memorandum to jointly build a transparent and efficient system for selling assets of insolvent and liquidated banks. 

The document stipulated that TI Ukraine should create an electronic trading system (ETS) for the sale of property of bankrupt banks and provide its support. The organization fulfilled its obligations, and the system created for this purpose was transferred to the Fund.

Subsequently, another database was created for other procedures – privatization, lease, etc.

During 2019, the civil society organization transferred two databases to state ownership.

6

The functionality of the service was constantly improved and expanded. Therefore, public and municipal assets, land, property of insolvent banks, licenses for the extraction of mineral resources, railcars of Ukrzaliznytsia, property of private companies, etc. are sold and leased through the system. It is on Prozorro.Sale that small-scale privatization takes place.

7

In 5 years of the platform’s existence, more than 430,000 auctions were held with 46,500 participants, having replenished the state treasury by UAH 59 bln. The average price increase is 36.6%.

8

The most expensive lot in the system was the Dniprovskyi Iron and Steel Integrated Works in a bankruptcy case. It was sold for almost UAH 8.4 bln.

Moreover, the largest auction in the entire history of small-scale privatization in Ukraine was held on Prozorro.Sale. The Dnipro hotel was sold for more than UAH 1.1 bln. The auction was held in three rounds. 29 potential investors took part. The starting price of the object was approximately UAH 81 mln. 

 

9

In December 2021, the Open Government Award will be presented, which marks the occasion of the 10th anniversary of the Open Government Partnership Initiative. Our country is represented by ProZorro.Sale in the OGP Impact Awards category as a project that changes the country, improves the quality of life in society, and opens up the actions of the authorities.

10

The Dozorro.Sale monitoring community started working in 2021. This is an association of civil society organizations that TI Ukraine will coordinate. Dozorro.Sale plans to monitor the accounting and use of municipal property and help local councils implement effective practices for managing community property.

Ukrainian system Prozorro.Sale received the Open Government Award. The project competed in the category OGP Impact Awards as the one changing the country, improving the quality of life in society, and making the actions of the authorities open to citizens.

Prozorro.Sale is an online auction system that provides openness and transparency in the sale and lease of public assets. It was created according to the ProZorro philosophy, where “everyone sees everything.”

This is one of the revolutionary initiatives that the country and the public have implemented together — Transparency International Ukraine, the Ministry of Economy, the Individuals Deposit Guarantee Fund, and the National Bank. The pilot project started with the sale of property of insolvent banks. Today, it is the largest platform for the sale and lease of public property (property, land, state-owned enterprises, and other assets). We like to call it “eBay for the government.”

Prozorro.Sale helps the country and communities earn money from privatization and lease through competition at auctions. As of December 2021, property was sold through the Prozorro.Sale system in excess of UAH 54 bln.

“Prozorro.Sale is a great example of how you can simultaneously improve the economic situation and reduce the space for corruption. Open data and equal access of business to auctions encourage competition, and society has the opportunity to evaluate and control solutions at all levels. TI Ukraine is happy to be a part of this victory,” noted Khrystyna Zelinska, head of the TI Ukraine direction.

This is the second victory of Ukraine on the Open Government Award. 5 years ago, the public procurement system Prozorro was awarded. The authors of the initiatives had to demonstrate the real results of transparent use of government data.

For reference:

Open Government Award is the most prestigious award in the field of open governance. This year, it is dedicated to the 10th anniversary of the Partnership.

On September 20, 2011, within the framework of the session of the UN General Assembly, 8 founding countries (Brazil, the United States of America, Indonesia, Mexico, Norway, the Philippines, South Africa, the United Kingdom) launched the International Open Government Partnership Initiative (hereinafter referred to as the Initiative) by signing the Partnership Declaration.

OGP now unites 78 member countries and 76 local members.

The Prozorro.Sale project is nominated from Ukraine for an international award Open Government Awards and has every chance of winning on December 15.

This is the most prestigious award in the field of open governance. This year, it is dedicated to the 10th anniversary of the Partnership, which unites 78 participating countries and 76 local members. Our project is competing for victory in the Impact Award category, as the one changing the country, improving the quality of life in society, and opening up the actions of the authorities.

In 2016, Ukraine with Prozorro, an e-system of public procurement, won the third annual award from the Open Government Awards.

For us, at Transparency International Ukraine, this was a key event of several years of work. After all, thanks to the interaction of the triangle “authorities-business-public,” we managed to implement the principle of “everyone sees everything” in procurement and demonstrate real results of transparent use of government data.

Since then, Ukrainian Prozorro has been an example for other countries. The system has grown from a pilot project of the public initiative into a truly irreplaceable part of open governance.

Prozorro.Sale is another revolutionary system that Ukraine, the Ministry of Economy, the Individual Deposit Guarantee Fund, and the National Bank initiated in 2016.

Today, it is the largest platform for the sale and lease of public property (property, land, state-owned enterprises, and other assets). We like to say that Prozorro.Sale is like “eBay for the government.”

What is so revolutionary about Prozorro.Sale?

Ukraine inherited many enterprises and property from the Soviets, alongside with opaque and inefficient management processes.

Now, not only the chosen ones, but everyone has access to assets! Foreign or Ukrainian investors, ordinary citizens or startups.

If someone had asked earlier if I believed that subsurface rights would be sold at electronic auctions, I would have answered: “Wake up!” However, now this is already a reality.

Prozorro.Sale publishes the lion’s share of information about public assets, their technical characteristics, and price in open data format.

This information used to be on paper in closed offices, or published fragmentary on the websites of local councils or in the newspaper “Bulletin of privatization,” for example, when the sale of public property was announced.

The most valuable element of the system is electronic auctions. To purchase or rent public property in Ukraine, businesses no longer need to negotiate under the table. Just register on Prozorro.Sale, choose an interesting lot, apply for participation online, and compete for the procurement of an asset. The winner is the one who offers the highest price.

Over the past 5 years, the system has launched many markets: the sale of assets of insolvent banks and property of bankrupts, subsurface rights, small-scale privatization and lease, and recently, the sale and lease of land as well.

When implementing the reform, we saw that the authorities at various levels have at their disposal wide expanses of real estate, abandoned buildings, unnecessary cars, and so on. Today, such assets are in the system with a declared value of UAH 1.45 trln. Imagine that! And this is not all the information about our national wealth!

Because there are dozens of electronic platforms (brokers) in the system today and the system is open, on average, the price per asset increases by 36.6% at the starting price at e-auctions. Over the past 5 years, the platform has earned almost UAH 59 bln.

Impressive, isn’t it?

Ukraine must win

Because this is a chance not only to show Ukraine’s ability to implement state-of-the-art IT solutions. For me, this is yet another argument why we are not a fail state, but a capable and resilient one. If we want to.

Therefore, it is crucial to demonstrate our achievements to the world and record our own success — for those who deals with reality in Ukrainian conditions on a daily basis.

On December 1, 2021, Transparency International Ukraine officially announces the birthday of the Dozorro.Sale community.

This is an association of civil society organizations that TI Ukraine will coordinate. We plan to monitor the accounting and use of municipal property and help local councils implement effective practices for managing community property.

Together with us, the Lviv Regulatory Hub, the Center for Public Monitoring and Research, the Khmelnytskyi initiative, the NGO Gidno, and the Political Sciences Association will control the field.

In recent years, Ukraine has grown a lot as an innovative country, public procurement and rental and sale of state and municipal property have been digitalized. However, good innovation systems are not enough for reforms to be implemented transparently and considering anti-corruption. No IT system itself will write complaints to supervisory bodies, and even more so will not go to court regarding a possible violation.

That is why in 2016 we created the DOZORRO project, and today we are starting the Dozorro.Sale. It’s time to move on, and engage Ukrainians in controlling not only procurement, but also property management.

The success of using public assets depends on the community’s engagement in monitoring. And our community will become an entry point for interested residents of communities.

“This is a significant step towards effective privatization and local leases. Our monitoring community of civil society organizations will stand guard over the fair rules of the game in auctions for the sale and lease of property. We hope that we will be able to contribute to economic benefits for taxpayers, and soon Ukrainians will feel the results of our community’s work,” said Khrystyna Zelinska, head of the direction.

Now, the community will work in eight regions. Residents of the Lviv, Chernivtsi, Ternopil, Rivne, Khmelnytskyi, Vinnytsia, Kirovohrad, and Odesa oblasts can contact Dozorro.Sale with a request to monitor a specific auction for small-scale privatization or lease of municipal property (dozorro.sale@ti-ukraine.org).

Let us remind you that more than UAH 57 bln worth of public assets were sold through the Prozorro.Sale system as of November 2021. Prozorro.Sale has become an effective tool for businesses and the public to control the public property market, gaining recognition in Ukraine and abroad.

On November 12, the abandoned and unprofitable Electronmash plant was sold for UAH 970 mln. Due to high competition, the starting price increased by 14.5 times. 

This is a good example of successful small-scale privatization, which gives new life to old public property and brings income to the budget — both immediate and, we hope, systemic (but later).

We decided to remind you what is small-scale privatization, and why love it.

Up to 2018, purchasing or renting state property in our country was historically considered the privilege of the elite — oligarchs, senior directors and people close to power.

However, in 2018, a turning point came — the Rada adopted the new Law “On Privatization of State and Municipal Property” which introduced transparent rules of the game. From now on, anyone can become the owner of public property. 

Privatization is the alienation of public property from the state or society in favor of private owners. In Ukraine, privatization takes place on a competitive basis through auctions. 

The current legislation defines two types of privatization with a clear set of procedures: large-scale and small-scale. 

Not all property can be put up for sale. For example, state-owned enterprises and objects that are necessary for the state to perform its main functions, to ensure the state’s defense capability, objects of property rights of the Ukrainian people, and property that forms the material basis of Ukraine’s sovereignty cannot be put up for sale. 

In particular, these are mineral resources, natural resources, property of law enforcement, tax, and customs authorities that are necessary for these bodies to perform the tasks established by law. This also includes the property of healthcare institutions, emergency medical care systems, military property, archaeological sites, museum property, and so on.

Before selling property, the state or society decides which of the entire property will be privatized and which will be leased. First of all, it is necessary to approve the list of privatization objects.

Enterprises, structures, and blocks of shares in companies owned by the state or local authorities are subject to small-scale privatization. Their cost does not exceed UAH 250 mln. Since August 2018, small-scale privatization has been conducted through electronic auctions on Prozorro.Sale.

One of the largest e-auctions in the history of privatization in Ukraine is the sale of the Dnipro hotel in the capital. The starting price at the auction was UAH 80.92 mln, and the winner of the auction paid UAH 1.1 bln. 

What is ProZorro.Sale?

Prozorro.Sale is an electronic trading system created on the initiative of the Ministry of Economy, Transparency International Ukraine, the Individual Deposit Guarantee Fund, the National Bank, and Ukrainian electronic platforms. It is built according to the values and principles of the Prozorro family.

Thanks to this platform, it was possible to open “hard-to-reach” data, transfer all procedures to “online,” and show the decision-making process itself. 

The system, which Ukraine has fully transferred to the state, sells and leases state and municipal assets, land, property of insolvent banks, licenses for the extraction of mineral resources, cars of Ukrzaliznytsia, property of private companies, and so on. It is on Prozorro.Sale that small-scale privatization takes place.

Prozorro.Sale — a two-level system. It combines information about all lots offered for sale (first level) in a central database. The CDB does not interact with participants, but is only responsible for the smooth operation of the system itself. The organizers and participants “communicate” with the system through accredited electronic platforms that are connected to the system (second level). The task of these platforms is to provide quality advisory support to both buyers and sellers.

Transparent rules at open online auctions based on the principle of “everyone knows everything” are an important component of the sale of state and municipal property. Thanks to this, competition at auctions increases, and therefore state and local authorities can lease or sell property at a price many times higher than the starting price. The interest of citizens in this is obvious: the more expensive the property is sold, the more funds will go to the budget, the money from which will be used for the development of the state or society.

Learn more about how to purchase public property in our educational material.

Transparency International Ukraine has transferred the ProZvit reporting portal of enterprises to the State. This is the fourth digital product that the organization has shared with Ukrainians. TI Ukraine has administered and transferred to the government such electronic systems as ProZorro, ProZorro.Sale, and eHealth.

The ProZvit portal allows getting acquainted with the basic statistics of the number of state-owned enterprises and their financial results. SEs submit financial statements to the database of the Ministry of Economy, which TI Ukraine visualized through the analytical portal.

The organization developed the online analytics portal of SE ProZvit together with the Reform Support Team of the Ministry of Economy and with the assistance of the international community, primarily the GIZ and the UNDP in Ukraine.

“In our opinion, openness and transparency of financial information should be one of the most important priorities in the activity of SEs. That is why I consider the transfer of the ProZvit portal to the state a landmark. This is like a signal that the government is ready to work transparently and responsibly with enterprises, in particular in matters of privatization and leasing,” stated Andrii Borovyk, executive director of TI Ukraine.

Moreover, because of the portal, every journalist or expert can check how unprofitable or profitable a particular enterprise is. This is an additional opportunity for public oversight over what is happening in our country.

As of September 2021, there are more than 3,500 enterprises in Ukraine, most of which are unprofitable. One of the ways to optimize their activity is through privatization. In this regard, the state began an active movement to sell illiquid assets several years ago. So, in just 9 months of 2021, 21 single property complexes of state-owned companies were sold for about UAH 509.5 mln

This year’s Open Government Award is held on the occasion of the 10th anniversary of the Open Government Partnership Initiative, in which Ukraine has been participating since the beginning of its work.

In the category OGP Impact Awards, our country is represented by ProZorro.Sale — an online auction system that ensures openness and transparency of the sale and lease of public assets and property: https://prozorro.sale/

Prozorro.Sale helps the state and communities earn money from privatization and lease through competition at auctions. As of September 2021, property was sold through the Prozorro.Sale system in excess of UAH 54 bln.

An open API of the system, a modern auction portal, a detailed analytics module, and access for everyone to the information about the disposal of public property increase transparency and trust in the markets, as well as strengthen public oversight.

 

Support Ukraine! Cast your vote for ProZorro.Sale until October 22 at the link: https://bit.ly/3BNobZc

How to do this:

1. In the list of countries, select Ukraine.
2. Enter your email address.
3. Click “vote.”

The winners will be awarded at the Global Summit in December 2021.

Transparency International Ukraine aims to support the reform in the sphere of the public property sale and develop an ecosystem of effective management of state and municipal property.

That is why TI Ukraine announces a competitive selection of regional civil society organizations for cooperation. The selected CSOs will contribute to improving the efficiency of public property management, in particular through public oversight over these processes.

Cooperation period: November 1, 2021 – March 31, 2022, with the possibility of extension

The selected civil society organizations will:

• monitor public procedures for small-scale privatization and lease of state and municipal property through the electronic trading system (ETS) Prozorro.Sale according to the monitoring methodologies;
• if violations are detected during monitoring, send appeals to the organizers and/or supervisory authorities regarding possible violations of small-scale privatization and lease procedures for national and municipal property identified during monitoring;
• control the accounting process of municipal property objects in certain regions of Ukraine;
• conduct training for auction organizers on how to successfully prepare state and municipal property objects for small-scale privatization and leasing;
• collect and communicate stories about the successful development of state and/or municipal property objects after privatization and lease, which were abandoned in the past.

Transparency International Ukraine experts will support selected civil society organizations to implement these tasks. In particular, after the end of the competition, TI Ukraine will organize 2 training sessions in Kyiv. Moreover, during the cooperation period, the selected civil society organizations will receive financial and consulting support for the implementation of certain tasks.

Requirements for competitive selection participants.

• A civil society organization that intends to take part in the competition must be registered in accordance with the requirements of the legislation of Ukraine and entered in the Register of Non-Profit Organizations.
• Previous experience in anti-corruption events or activity (advocacy of democratic or anti-corruption initiatives; introduction of e-democracy tools; working with open data; monitoring public procurement; monitoring the sale of state and municipal property) will be an advantage.

To apply for participation in the competition, please fill out the google form.

Submission deadline:

October 10, 2021

If necessary, TI Ukraine reserves the right to contact the applicant at any stage of consideration of the application by phone/email address specified in the application form as contact.

Contact person: Andrii Bohdanenko, regional coordinator of the direction bohdanenko@ti-ukraine.org.

For reference

Transparency International Ukraine is an accredited chapter of the global movement Transparency International with a comprehensive approach to development and implementation of changes for reduction of the corruption levels. 

TI Ukraine has administered and transferred to the government such electronic systems as ProZorro, ProZorro.Sale, and eHealth. Our center of innovation and expertise has also implemented such projects as City Transparency Ranking and is developing the DOZORRO community for control over public procurement.

Prozorro.Sale has become an effective tool for controlling the state and municipal property market for businesses and the public. How did the platform for transparent privatization appear in Ukraine, and what changes are expected in the future?

Preventing corruption and involving citizens in the fight against it are the strategic goals of TI Ukraine. We focus on innovative solutions that help minimize corruption risks in the public sector of the economy. Such the first important anti-corruption IT solution was the electronic public procurement system Prozorro, to whose creation we contributed.

In 2016, TI Ukraine joined the development of another revolutionary system, which today is the largest platform for the sale and lease of state property —Prozorro.Sale. It is also called “eBay for the government.” Thanks to this platform, it was possible to open “hard-to-reach” data, translate all procedures into the “online” mode, and show the process of how officials make decisions regarding the sale or lease of state and municipal property.

The key result is that these decisions are no longer related to the human factor, but depend on the results of an open and transparent electronic auction, where businesses compete to buy assets. In 5 years of the platform’s existence, more than 350,000 auctions were held, which replenished the state treasury by UAH 38 bln.

It is also important that Prozorro.Sale has become an effective tool for businesses and the public to monitor and control the state and municipal property market, which is already a significant step to combat possible abuses in privatization and lease procedures.

For the first 2 years, the project was implemented entirely under the leadership of TI Ukraine, and in 2018 it was transformed into the state enterprise “ProZorro.Sale.” We continued to administer two central databases of the system until the summer of 2019. All the time we were working closely with the Ministry of Economy and the Deposit Guarantee Fund (DGF).

It was important not only to technically support and develop the system, but also to control the auction procedures for the sale of property. In order for participants to report cases of injustice or violations of their rights, 2 commissions were created to consider complaints — under the DGF and the state enterprise “ProZorro.Sale.” Representatives of TI Ukraine were also members of these commissions.

After TI Ukraine transferred all the rights to databases of the electronic trading system to the state enterprise “ProZorro.Sale,” we continued to cooperate with government agencies to improve the system and translate new markets to the format of electronic auctions. Therefore, in the autumn of 2019, we announced that the sale of property of bankrupt companies, as well as the lease of state and municipal property, should take place in the Prozorro.Sale system. This opened up even more data and therefore reduced corruption risks in previously closed procedures.

Gradually, the functionality of the service was expanded and opportunities were created for the sale of property of state-owned joint-stock companies, subsurface and unprocessed wood use rights. The option for renting land plots will be added soon.

TI Ukraine is interested in sustainable anti-corruption changes, so we continue to delve into the development of state property management reform.

Today, our team has developed a methodology for effective monitoring of privatization and lease procedures. We are also starting to work on creating a monitoring network. This will encourage the sale of non-core assets and increase the ability of the state to conduct procedures professionally and without violations.

If our colleagues from other countries are interested in using our experience in implementing this reform, we recommend that you tune in to the “long game.” The experience of Ukraine shows that the “windows of opportunity” are not open for a long time. Reforms require not only political will, but also determination, perseverance, and mobilization of influential stakeholders.

At the same time, it is important not to aim exclusively for the opposition struggle, but to learn how to cooperate with various stakeholders and be able to find compromises. After all, the viability of anti-corruption changes is an equally important result of our work.