SPF to Centralize State Property Management, Introduce Sovereign Fund and Land Bank

The State Property Fund (SPF) of Ukraine is developing plans to centralize the management of state property, including the establishment of a sovereign fund, a land bank, and a real estate investment fund. Rustem Umyerov, the head of SPF, revealed that the sovereign fund will house strategic state-owned enterprises that are not eligible for privatization, enabling effective long-term management and generating profits for future generations. While further details have not been disclosed, analysts speculate that a national wealth fund (NWF) model, similar to Singapore's Temasek, might be pursued.

Sovereign wealth funds (SWFs) are typically created to manage a country's reserve liquidity, often derived from resource reserves or foreign exchange reserves. SWFs primarily function as fund managers, investing in securities traded in major developed markets. In contrast, NWFs actively manage operating assets as a portfolio, aiming to maximize value through asset development, restructuring, and monetization. The success of such funds is contingent on robust corporate governance, as exemplified by the contrasting outcomes of Norway's highly successful GPFG and Venezuela's mismanaged FIEM/FEM fund.

Additionally, the plan involves centralizing all state agricultural land in a single entity for long-term lease. As of 2020, Ukraine possessed 750,000 hectares of state-owned agricultural land, with the largest agricultural company cultivating 363,000 hectares. The consolidation aims to improve oversight, as corruption scandals have plagued entities like the National Academy of Agrarian Sciences (NAAS). Notably, Ukrainian citizens have been permitted to buy and sell agricultural land since July 2021, but the sale and purchase of state and communal agricultural land remain prohibited.

Furthermore, the establishment of a real estate investment fund is intended to lease properties such as ports and infrastructure facilities. The exact operational model and revenue structure of the fund remain uncertain. With over 1 million real estate objects under the management of various entities, including state-owned enterprises and institutions, the value, terms of use, and leasing costs of these assets are currently undisclosed. Future developments in the centralization and management of state property will shed light on Ukraine's approach to maximizing the potential of its resources and infrastructure.

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