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Why the state needs to sell industrial enterprises
Why the state needs to sell industrial enterprises


Oleksandr Gladushko
February 05, 2020, 10:37
Oleksandr Gladushko, Acting Chairman of the Board of JSC United Mining and Chemical Company
To manage a business means to have a strategy, targets and tasks, but also to see your company in the market, at least for the next 10-15 years, be aware of the challenges that lie ahead and build the defense.
However, when government institutions are in charge of state enterprises, everything comes out somewhat differently. There is no strategy and vision of the company’s future in the market. As for the targets and tasks, they are: “increase tax payments…”, “reduce social load, increase profits…”, “shut down unprofitable units…”, “reduce expenses for social responsibility…” Right, there is also the latest task – “pay more dividends for the past year, which have already been paid…”
The state cannot have motivation to develop enterprises as business. It has different tasks and goals. Therefore, this raises a question – can an owner be considered effective, if they do not care that their company has access to credit financing, which it could use to upgrade production? If the owner does not care, whether their company has licenses and permits to develop new land plots, which essentially means preserving jobs for their employees? These are just a few questions that are not on the agenda of the government agencies, as managers and owners of state enterprises.
There is a multitude of similar questions, as there is a multitude of problems every private or state enterprise is faced with while trying to preserve good positions in their market. The majority of these challenges can be quickly and easily tackled, because the banks trust a private owner more, and a private owner is perceived differently by the ministries, society and investors.
Because a private owner strives to survive together with his employees, associates, his company, and is not just trying to hold on to his job. Conversely, a state owner just wants to survive on their own. This conflict of interest will continue and will further create problems with payments to the budget for as long as such rudiment of the Soviet era as the institute of state management of the state enterprises exists.
That is why I believe that if the company does not have substantial impact on the security of the state and its citizens, such company needs to be given an opportunity to develop its business and complete in the global market on equal terms with private owners. There is no other effective strategy.