Accessibility links

Breaking News

Privatization And A Box of Chocolate

Washington, May 24 (RFE/RL) -- Ukraine's privatization chief, Yuri Yekhanurov, tells the story of a chocolate factory to illustrate what is going right -- and where the effort is still lagging -- in Ukraine's program to privatize state-owned enterprises and move to a market economy.

The factory as a state-run enterprise produced boxes of chocolates which were little more than unmarked cartons. The plentiful chocolates were actually pretty good, he says, but the box gave no hint at its contents. If anything, it discouraged purchasers.

The plant was privatized and now, he says, it's boxes are beautiful -- colorful, tantalizing invitations to enjoy the wonderful confection. The only problem, he says, is that "when you open the box, you can hardly find the chocolates."

Yekhanurov, Chairman of the Property Fund of Ukraine, told the story to a gathering of American business people and journalists in Washington Thursday to show that while privatization has made progress, Ukraine is still learning how keep the box full while properly packaging it for world markets.

Ukraine needs foreign investors, but the flow of funds from around the globe has been painfully slow, says Yekhanurov, totaling only several hundred million dollars so far.

One big problem, he says, is that as a part of the Soviet Union, Ukraine got used to keeping what it produced secret from the world. "We have a lot of enterprises which have modern technologies," he says, but factory directors, often the same ones from 20 years ago, find it "difficult to overcome this psychological resistance" to publicizing what their factories do.

"To a certain extent," says Yekhanurov, "a lot of Ukrainian enterprises are still black (chocolate) boxes and nothing is known about what is going on in there."

The chairman pointed to another example, the factory where President Leonid Kuchma once worked. "They have counted that they have at least 460 technologies which are very advanced and at world levels, but they haven't been able to sell any of them," he says.

The major problem is the lack of market skills at all management levels. "They're supposed to know how to market (sell) their technologies, their production, and how to present their facilities," says Yekhanurov, "but they still do now know how to do that."

The problem is not confined to major enterprises, either, says Yekhanurov. Everyone in the country needs to learn the entreprenurial spirit.

Mass privatization of small enterprises will be completed by the end of next month, he says, but it is already clear that many of these new private businesses need support. To that end, Yekhanurov says he has reached tentative agreement with the World Bank for a proposed 310 million dollar loan for enterprise development.

If approved, the loan will be used to -- among other things -- support special small business assistance centers to be opened in all the major cities of the country. The first such center will be opened in June in Lviv, where the first privatization auction was held.

Not only do these new business people need a source of information and guidance for all the usual questions about operating a small business, but they need to overcome some basic inherited difficulties. "Under the former system, all those enterprises were supposed to do only one thing," explains Yekhanurov. "One small enterprises was supposed to cook food, another to serve it and so on."

Under privatization, however, he says, "they have to do everything and not all of them are really ready to do that." Overall, Yekhanurov says Ukraine has done well enough in privatization.

Yekhanurov says thirty-eight percent of business assets are now in private hands, while around 45 percent of all production is private. That means that 62 percent of enterprise assets are still in the states hands, he acknowledges, but says the goal is to have that figure below 50 percent by the end of this year.

The government is in the process of privatizing around 400 enterprises a month right now, he says and other than in the agro-industrial area -- a "pernicious problem" still caught in a dispute between the President and the parliament -- there is a "fortified foundation now in place to accelerate progress" in large enterprise privatization.