*112465*
Экономические науки/14.
Экономическая теория
T. Slyvka
Taras Shevchenko National University of Kyiv, Ukraine
Highlights: Interaction of Government and
Corporate Sector in Ukraine
In the
modern context, economically powerful corporations in developed countries have
a significant influence on a price situation and product quality, therefore,
on a competitive ability of a national economy. An important constituent of the
corporate sector are government-owned public corporations and government corporate
rights.
Interaction of government and
the corporate sector at large and particularly in Ukraine is studied in
research papers by, e.g., Y. Kindzersky, V. Mandibura, V. Semeniuk, V. Sirko,
and others.
A role
of government as an independent economic operator is different in various
countries. It is traditionally minimal in the USA and Japan (a share of the
government product in the US national income is 1-2%) and significant in
Western European countries (Italy – 12%, Sweden – 14%, and Austria – 26%) [8, p. 347]. It is worth
mentioning that the processes of nationalization and denationalization have a
cyclic nature in a long-term outlook, and they interchange each other with the
course of time. It is especially vividly manifested during economic depressions
in general and the 2008-2012 global recession, in particular, that a government
comes to the aid of big corporations by means of recapitalization and
refinancing. It is conventional that facilities having been nationalized at the
time of depressions are later denationalized under a favorable economic
situation.
Let’s
exemplify the specified information. The Federal Housing Finance Agency got
under a temporary control the biggest U.S. mortgage companies, on 7 September
2008: Fannie Mae, the Federal National Mortgage Association (a principal
operator on the U.S. secondary mortgage market) and Freddie Mac (the Federal Home Loan Mortgage Corporation).
Both the entities were private joint-stock companies, but according to their
charters they were government sponsored (not financed) corporations. Total
assets at Fannie Mae and Freddie Mac are estimated to be
USD 5.3 trillion, whereas experts evaluate the whole American mortgage market
in the amount of USD 12 trillion. So, upon bringing Fannie Mae and Freddie Mac under control, the U.S.
government commenced to control at least 44.2% of the mortgage market [4, p. 12].
Unfortunately, Ukrainian realities
represent opposite trends. The first underlying principle of privatization is
avoidance of government-owned property denationalization against the background
of an economic fall and social and political instability [2, p. 334]. Our national privatization
practices fail to abide by that principle. In this country, denationalization
of government-owned property became one of the first measures for solving
economic problems and the reducing the budget deficit, under the conditions of
economic and social instability and unfavorable international situation.
Economically developed countries prefer to pursue opposite actions: a
government increases its participation in the corporate business system by
buying a control stock in companies or even nationalizing them in full, in
order to protect corporations from bankruptcy, economic recovery and
restructuring thereof under unfavorable conditions.
The most typical
legal form of government-owned property in countries with a market economy are
public corporations that in come countries are called government corporations
(the USA) or national state-owned companies (France) [6, p. 73]. On the international market
transactions, they act – as private joint-stock companies do – under a full
commercial latitude, have a legal entity status, and are separated from a state
budget in property and financial terms. The country does not bear a direct
economic liability as for obligations of public corporations, and their
commercial relations with other manufacturing entities are regulated under the
civil law which features a formal equality and formal freedom economic and
commercial activities. However, they operate under certain restrictions.
Government bodies regulate economic activities of public corporations,
including management and use of a government capital. [5, p. 48].
Administration for
corporate rights by a government at mixed corporations of some countries is
exercised by special ministries that manage via an institute of
representations. In Italy and Spain, where governments own a major share of
property in many corporations, management of the state corporate property is
vested in state holding companies. In this case, a government exerts influence
on activities of economic entities through a participation system, i.e., by
applying equity rights and mechanisms for implementation thereof [7, p. 348].
In Ukraine, one of the conditions for privatization
was the retaining in state ownership of a controlling interest (50% and more)
and a blocking equity holding (at least 25%) in privatized companies. It was provided
for the corporations to abide by their social responsibility and to put in
place social interests by means of controlling corporate management by the
government. At the end of 1998 (just three years after the beginning of Great
Privatization), pursuant to a Decree of the President of Ukraine – on the model
of countries – there was established a specialized executive power body, the
National State Corporate Rights Management Agency of Ukraine. The Agency was
authorized to exercise administration over state corporate rights by itself or
grant management thereof to other entities [6, p. 79]. However, this institution
failed to implement its objectives. Because of some discrepancies related to a
distribution of powers with the State Property Fund of Ukraine, the Agency was very
soon liquidated. After that, management of state-owned share of corporate
property transferred to industry-specific ministries and establishments, the
State Property Fund of Ukraine and local state administrations which, in turn,
sub-delegated it to heads of corporations and private firms. Thus, the state
has actually lost control over its property in corporations.
As a
result of the specified processes, the following structure of corporate state
property has formed in Ukraine (see Fig. 1).
Fig. 1. Distribution of corporate state rights by the
state-owned share in authorized capital, as of 1 January 2009
Source: author
hereof, based on information contained in [1].
The
State Corporate Rights Register includes 811 economic entities, which authorized capital is
formed, partially or fully, by the government. The state represented by the
Government of Ukraine, the State Property Fund of Ukraine, ministries and other
central bodies of executive power exercised administration over corporate
rights of the state at 698 open and closed joint-stock companies, 83 limited
liability companies and 30 national joint-stock and state-owned holding
companies (NJSC and SHC) established in accordance with special resolutions of
the President of Ukraine and the Government of Ukraine. The share of the state
in an authorized capital of the economic entities corporatized with the
participation thereof was the following:
- 324 economic entities
(40% of the total quantity) have the state share in their authorized capital of
over 50% that enables the government to exercise control over operations; among
them, 172 economic entities (21%) have a 100-percent state share;
- 237 economic entities (29%) have the state
share in their authorized capital of 25% to 50% (blocking shareholding);
- 250 economic entities (31%) have the state
share in their authorized capital of
under 25% [1].
It
should be noted that the companies that are nominally retained in full or
partial government ownership, have actually been taken under full control of
high-ranking officials and businesses they are interested in [3, p. 124].
Thus, the structure of
state ownership that has been shaped in Ukraine is inefficient. Holding of
insignificant stock (less than 25%) prevents the government from controlling
corporation activities. Most companies that have a government share in their
authorized capital are unprofitable. For the corporate sector in Ukraine to
operate efficiently, it is essential to implement some measures focused on
streamlining state ownership corporate rights and establishing control over the
management of corporations with state ownership.
References:
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