Ukrposhta, Ukraine’s state-owned postal service, was the first to resume operations in the country’s recently liberated cities and villages, delivering packages and much-needed pensions to the most vulnerable. The company is continuing to grow, expand, and digitize its services.
Ukraine’s state-owned railway company Ukrzaliznytsia transported 25 million passengers in long-distance trains in 2023, many from front-line zones that are subject to incessant Russian attacks. With Ukraine’s airspace closed since the start of the full-scale war, Ukrzaliznytsia’s trains are often the only means of reaching safety. It has also supported Ukraine’s wartime economy, helping to purchase needed fuel, opening more routes, and overcoming challenging export logistics.
In spite of Russia’s targeted attacks, Ukraine’s state-owned electricity transmission system Ukrenergo repaired and maintained the country’s energy infrastructure amid the harsh winter and blackouts in 2022.
What unites these companies is their commitment to corporate reform. All three of these companies have established supervisory boards, which has in turn bolstered trust. These independent bodies are selected on a competitive basis and are often composed of foreign experts with extensive knowledge and networks.
Svitlana Romanko
With their reforms have come a spike in their investors and partnerships. Ukrzaliznytsia’s annual revenue jumped from $2.17 billion to $2.35 billion after it established its supervisory board in 2018. In 2023, Ukrzaliznytsia earned a record $3.55 billion.
Ukrenergo’s reforms, and the increase in trust that followed, meant that it could attract low-interest loans from the European Bank for Reconstruction and Development (EBRD), KfW Development Bank, the International Bank for Reconstruction and Development (IBRD), and the Netherlands. Before it became a private joint-stock company, Ukrenergo only received loans from the Ukrainian government. With donor funding, the company is able to restore destroyed infrastructure and build new strategic electricity transmission lines.
Ukraine has, over the past eight years, systematically built up this trust through corporate reform. Last year, Ukraine corporatized the nuclear energy company Energoatom and the Gas Transmission System Operator of Ukraine (OGTSU), and it is currently working to corporatize the company Guaranteed Buyer. The Ukrainian government has also conducted competitions to select the members of Ukrposhta and OGTSU’s supervisory boards.
The changes in Ukrzaliznytsia, Ukrposhta, and Ukrenergo can become the practice for all other state-owned companies, as the improvement of corporate governance is now a state policy.
Michael Ignatieff
The Ukrainian government launched its comprehensive corporate reform in February, when Ukraine’s parliament passed a bill on improving the rules of corporate governance for state-owned enterprises. This bill gives supervisory boards more authority, ensures that its chairman and other members of the board cannot be unjustifiably dismissed, and mitigates political interference by the state.
The government will also determine which state-owned companies will remain as such, and which will be privatized. Indicators for the biggest companies will be set regarding profitability, liquidity, and solvency. These supervisory boards will now be responsible for approving financial, strategic, and investment plans based on ownership policies and letters of expectation, as well as have the authority to appoint and dismiss company executives. An internal control system will be established and, instead of audit committees, compliance, risk management, and internal audit instruments will be implemented.
But with great power comes great responsibility. The government will develop procedures to regularly evaluate the supervisory boards’ performance and approve remuneration and dividend policies. The remuneration of the heads of state-owned enterprises and supervisory board members must be justified and based on market-level rates. The bill also provides a clear list of grounds and procedures for dismissing supervisory board members.
These steps lay the foundation for increasing trust, accessing affordable financing, attracting investments, hopefully creating new jobs, generating more profit, and paying more taxes. They turn reform into a tangible tool for supporting the stability and resilience of the economy. And, of course, they also demonstrate that, even in the midst of war, Ukraine is working to systematically implement reforms.
Editor’s Note: The opinions expressed in the op-ed section are those of the authors and do not purport to reflect the views of the Kyiv Independent.
