ENERGO: Improving Ukraine’s corporate governance will be key to attracting billions in investment

Ukraine needs to raise hundreds of billions of dollars of investment to rebuild its economy after the war is over. While just how bad corruption in Ukraine remains disputed, no one denies that Ukraine has a bad corruption problem. The government has its work cut out for it, unless it can convince investors it has made enough progress in improving corporate governance amongst its biggest state-owned enterprises (SEOs). Minimising the risk of corruption has taken on new urgency, the Centre for European Policy Analysis (CEPA) said in a paper reviewing corporate governance in Ukraine.

“Embedding proper corporate governance practices into Ukraine’s SOEs has been key to cementing reforms made since the Revolution of Dignity in 2014, such as the deregulation of energy markets or the liberalisation of the banking sector,” CEPA said.

CEPA studied four of Ukraine’s biggest SOEs: Naftogaz. GTSOU, Ukrenergo, and Energoatom. Based on these case studies, CEPA concluded:

• Tightening up corporate governance rules in energy SOEs, which are likely to attract large funds, should be a priority for the Ukrainian government and international donors.
• Some important steps have been taken, but corporate governance safeguards in Ukraine’s largest energy SOEs remain weak. The sector is witnessing a concentration of political power – arguably justified by the current extraordinary security concerns and the imposition of martial law – even as the influence of some oligarchic interests may be receding. 
• However, recent developments at Ukraine’s top energy SOEs and interviews with Ukrainian and Western stakeholders suggest that rather than guaranteeing the security of the sector, the increased political interference may put it at risk, potentially leaving it ill-equipped to receive international assistance.
• Civil society, domestic and international energy companies and international financial institutions continue to push for more transparency and accountability, and for tighter corporate governance rules and practices.