Phantomization of State Assets: How Political Irresponsibility Enables Discount Privatization in Ukraine

In a recent public statement, Danylo Hetmantsev, head of the Verkhovna Rada Committee on Finance, reported that 72% of Ukraine’s state-owned enterprises (SOEs) are either inactive or outright “phantoms.”
 Meanwhile, the same report by the Accounting Chamber notes a 247% over-fulfillment of the privatization revenue plan, despite mounting wage arrears, operational losses, and a lack of financial planning across the State Property Fund’s portfolio.

This confluence of statistics suggests not merely a crisis of management, but a deep structural breakdown of political accountability in the governance of state assets.

❖ From Productive Assets to Phantom Shells: The Demobilization of Public Capital

Ukraine’s state sector includes over 3,000 enterprises, of which:

• 70% lack approved financial plans;
• 93% do not pay dividends;
• aggregate losses exceed UAH 6.4 billion annually;
• wage arrears amount to UAH 685 million;
• the average lease price of state property dropped by one-third.

Crucially, many of these enterprises were profitable as recently as the 2000s and 2010s, operating in sectors of strategic importance such as energy, infrastructure, and heavy industry. The transition from asset to liability has not occurred naturally — it has been administered.

❖ From Phantomization to Fire-Sale Privatization: Replaying the 1990s

The current model of state asset governance is not merely inefficient — it is institutionally extractive. Its functional logic rests on three pillars:

1. Degrade the enterprise into non-functionality;
2. Impose debt or synthetic losses to justify devaluation;
3. Create a formal pretext for underpriced privatization.

This facilitates the conversion of public goods into rent-seeking private assets, typically cleared of obligations, liabilities, or expectations of public return. What’s unfolding is a repetition of 1990s-style privatization, this time under the rhetoric of “efficiency” and “budgetary optimization.”

❖ The Missing Names Behind the Failures

Perhaps most alarming is the lack of any institutional discourse on accountability. No actors from the following levels:

• SOE executives and board members;
• civil servants responsible for oversight;
• appointees within the State Property Fund;
• public auditors or controllers;

have faced any sanctions, inquiries, or public scrutiny for the collapse of state enterprises. Meanwhile, oversight bodies such as the Bureau of Economic Security, the State Audit Service, and the State Bureau of Investigations remain publicly inactive, if not structurally indifferent.

❖ Phantomization is Not an Economic Outcome — It’s a Political Strategy

Given Ukraine’s wartime context — where industrial capacity, logistics, and technological production are critical — the dismantling of state production capacity should not be viewed as an economic consequence. It is a deliberate policy choice.

The narrative of “inefficiency” is not the cause — it is the cover.
 Phantomization is not a byproduct — it is the instrument.

❖ What the State Should Do Instead of Selling Off Assets

A reform agenda aligned with public interest would begin not with fire-sale privatizations, but with restoration of accountability. Specifically:

1. Audit every SOE with sustained losses, identifying key decision-makers, contracts, and the chain of approvals;
2. Pursue criminal investigations into suspected asset stripping, mismanagement, and deliberate bankruptcy under the Criminal Code;
3. Suspend privatization of strategic assets during wartime until institutional reforms are completed;
4. Enforce performance-based contracts (KPIs) for SOE leadership tied to budget transparency and annual reviews;
5. Reform the State Property Fund as a matter of national interest, with public disclosure of all enterprises designated as “phantoms.”

❖ Conclusion

State-owned enterprises are not burdens if they are not managed as shadow liabilities.
 If most of them are now loss-making, the problem is not the economy — it is the state’s abandonment of its fiduciary obligations.

True reform does not begin with liquidation.
 It begins with consequences.
 And until each phantom enterprise is linked to a public name, an institutional failure, and a legal consequence, what is marketed as “privatization” is simply the final stage of theft.