Why Has the Unprofitability of State-Owned Enterprises Become the Norm in Ukraine?
If you don’t know why the unprofitability of state-owned enterprises (SOEs) brings more money to their managers, let me explain. It’s because they manage these enterprises within a new paradigm: the “economy of losses.”
Ukraine is a country where the public lives in the warm illusion that the government works for them—albeit with a bit of corruption. After all, why have a government if not to exploit it a little, right?
Wrong. The era of minor corruption is long gone. Over the past decade, Ukrainian officials have mastered the art of not just skimming from profits but thriving on losses.
What you consider an economic paradox—officials enriching themselves amid staggering losses of state enterprises—is no paradox at all. State-owned enterprises generate billions in losses yearly, thanks to the relentless efforts of their managers, who are rewarded with salaries so exorbitant they could make even the U.S. President envious.
Think this is a joke? Shall we cite examples?
Ukrposhta
Let’s start with a modern “hero,” Ihor Smilyanskyi, CEO of Ukrposhta. His salary is approximately 25 million UAH ($600,000) annually—double what Donald Trump earned as U.S. President.
Why does he earn such a high salary? Because, under his leadership, Ukrposhta reported losses of 796 million UAH ($19 million) in 2023 and around 594.8 million UAH ($15 million) in 2024.
Ukrzaliznytsia
Another example of mismanagement: Ukrzaliznytsia. Thanks to its powerful supervisory board, whose members earn about $15,000 monthly, the company reported losses of 20.3 billion UAH ($470 million) in 2023 and 12.6 billion UAH ($304 million) in 2024.
What’s surprising is that despite Ukrzaliznytsia’s higher losses compared to Ukrposhta, its CEO earns a mere 9 million UAH ($220,000) annually—a glaring injustice, don’t you think?
Boryspil Airport
Boryspil Airport, one of the country’s largest transport hubs, reported losses of 1.5 billion UAH ($36 million) in 2023. Meanwhile, its CEO received a salary of 5.18 million UAH ($124,000) in 2024. Perhaps Boryspil’s main innovation lies in maintaining such astronomical managerial salaries despite consistent losses.
State Food and Grain Corporation of Ukraine (SFGCU)
The SFGCU is another participant in this parade of paradoxes. In 2023, its losses amounted to 6.95 billion UAH ($167 million). Yet, its CEO earns 5 million UAH ($120,000)—44 times the company’s average salary. One might say this discrepancy represents the corporation’s “true harvest.”
Why Does This Happen?
The answer is simple: losses are the new metric of managerial success. The more a company loses, the more money flows to various parasitic contractors, the more taxpayer funds are squandered, and the more “grateful” the government becomes for such tireless efforts.
This gratitude is not unfounded. It’s not the first time officials have driven profitable enterprises into bankruptcy only to privatize them later, selling them for a pittance at auctions.
Thus, the deeper an enterprise sinks into the abyss of losses, the more money its managers earn. It’s a modern motivational system that deserves inclusion in economics textbooks under the chapter on the “economy of losses”—a paradigm in which we currently live.
How to Explain This to Ordinary Citizens?
This question is rhetorical. What’s less rhetorical is how long citizens can continue to sustain the appetites of a state that builds its economy on the frail back of a nation fighting a war of survival against Russian invaders.
Perhaps it’s time to reconsider these approaches. Because if state enterprises continue operating this way, what will be left of the country?