The Governments of Germany and the UK continue to support of the reform of public finance management in Ukraine. After the successful launch of the public electronic procurement platform ProZorro, launch by 60% supported by Germany through GIZ, this system became a separate and self-funding state company. The project “Good Financial Governance” has now focused on another aspect of public finance management – revenues from sale of public assets.
ProZorro.Sale is a project aimed at ensuring a fast and effective sale of state and municipal properties as well as corruption prevention via the centralised data processing, civil control and a wider range of potential buyers.
The idea behind the project is to sell assets through online platform via system of online auctions, which enable everyone to participate and to monitor the process.
ProZorro.Sale started with cooperation with the State Deposit Guarantee Fund (DGF) in October 2016 for the sale of assets of insolvent banks. According to the decision of the DGF all assets of insolvent banks managed by the Fund shall be sold through ProZorro.Sale starting from February 1.
In the 8 months following the above decision, the Fund and ProZorro.Sale jointly sold assets making a profit of almost UAH 1.5bn for the state. It was only after the launch of the platform ProZorro.sale that the DGF topped the revenue of UAH 400m per month selling properties. The total revenue resulting from the sale of public properties in June amounted UAH 480m.
“Within 8 months this system managed to gain trust. The market does believe that this system can’t be cheated and you do not need to pay bribes to anyone, if you want to buy some assets – you just have to attend the auction and offer the best price. A quarter of our auctions are really highly competitive with more than two bidders participating and the price going up by 25% at the average – such auctions are attended by 5 bidders at the average. This is a very high performance. 25% of these UAH 1.5b we generated in such auctions. In some cases, we have more than 20 bidders eager to buy some piece of property. There were auctions when the starting price was like UAH 500.000 and ended up with the final prices 22 times higher”, said Oleksiy Sobolev, the head of the ProZorro.Sale.
In the course of the cooperation, DGF and ProZorro.sale managed to change the sale policy. There is a single platform consolidating the assets of the Fund. Commercial electronic platforms help sell by searching for buyers and providing advisory support to them from logging in to buying and preparing the necessary documents. The system has 39 such platforms.
The assets offered for sale range from equipment, cars and real estate to loans worth billions of UAH. For instance, the biggest lot in the system is currently the trade centre in pipeline in Kyiv with the starting price of 2.25 bn UAH. Everyone can participate in auctions; the process is transparent now.
What is the advantage? It is the “golden triangle” of cooperation between the state, business and citizens.
The state can analyze, control and ensure the full transparency of the sale process.
For business, it is a transparent, clear and secure system. ProZorro.sale lets make money and compete by creating a new market.
For citizens, it is about transparency and possibility to control the process by using the business analysis module http://bi.prozorro.sale
The State Deposit Warranty Fund and ProZorro.sale plan to implement a new sale model in September 2017 based on the Dutch-auction principle: the price will be reduced in the course of the day. It will help speed up the sale and avoid the devaluation of assets. The second innovation is to consolidate assets in one lot, if they could not be sold in several auctions.
The second activity field for ProZorro.sale is the sale of the assets of state-owned and municipal companies. Thus, big state-owned and municipal companies as well as cities will be able to sell their assets through the system.
On July 4, a draft law was approved by the Cabinet, envisaging that the so-called small privatization shall be pursued via ProZorro.sale. It means that all small enterprises can be sold through this system as well. What remains to be done here is to have this law adopted by the Parliament and to implement it.
Project efficiency was proved by international recognition. On June 13, in India, the project ProZorro.Sale won the competition CitiT4IChallenge and became one of the best anti-corruption start-ups worldwide.
ProZorro.Sale is the younger brother of the ProZorro family; it follows the principles and values of the “elder brother” – the public electronic procurement system ProZorro. This is a joint project of the Ministry for Economic Development and Trade of Ukraine, Transparency International Ukraine and the DGF.
The project is supported by Western NIS Enterprise Fund, the Governments of Germany and United Kingdom of Great Britain through GIZ as well as by the Government of Canada through EDGE.
The “Good Financial Governance” Project is realized on behalf of German and UK Governments by the federal enterprise Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.
As a federal enterprise, GIZ supports the German Government in achieving its objectives in the field of international cooperation for sustainable development. Germany’s international cooperation with Ukraine focuses on sustainable economic development, energy, democracy, civil society, public administration and decentralization as well as on the HIV and AIDS prevention, and helps to foster its crisis response capacity.