Magonova and Partners

Freedom to prisons! Why we privatize correctional facilities?

Freedom to prisons! Why we privatize correctional facilities?

Anastasia Magonova in a column for "Ukrainian Truth" dispelled myths about the privatization of prisons:

The project for the privatization of prisons in Ukraine is an example of a tough case for a PR specialist who works with the public sector.

On the one hand, the distrustful attitude of Ukrainians towards the very concept of privatization of state property was formed back in the post-Soviet 90s. On the other hand, there is the negative in the information space caused by a wave of manipulations and fakes on this topic.

Despite all the difficulties, in early June, the State Property Fund held the first successful auction for the privatization of the Lviv penal colony.

This example is a good reason to understand how the myths about the privatization of prisons correspond to reality and why the state needs this project.

"Ukrainian prisons will become private"

News with such headlines was actively disseminated by the Russian and Ukrainian media, calling the privatization of prisons one of the stages of the transition of the penitentiary system to a commercial basis.

Some publications claimed that the Ukrainian colonies were already overcrowded with the prisoners, and therefore, after privatization, the convicts would be transferred to other correctional institutions, where the conditions of their stay would significantly worsen.

Some news convinced that on the occasion of the privatization of prisons in Ukraine, they were going to arrange a general amnesty and release all prisoners to freedom.

These fakes have nothing to do with reality.

Firstly, all institutions that are put up for auction are the mothballed objects. These are about 30 correctional facilities that the state declared unfit for use and closed a few years ago.

Secondly, human rights activists say that there are too many people in custody in Ukraine. To be precise, we are talking here about pre-trial detention centers, where the number of detainees is the result of an excessive number of decisions to arrest people before a court verdict is passed.

In the colonies, some of which are proposed to be privatized, on the contrary, there are more vacancies than necessary.

As for the possible deterioration of the already poor living conditions of prisoners, the "Big privatization" project was just conceived to solve the problem.

70% of the proceeds received from privatization will go to a special fund of the State Budget of Ukraine for the restoration of prison infrastructure – conditional improvement in places of detention and the construction of new correctional institutions that meet modern requirements.

We are not talking about filling the budget

Traditional mistrust of the authorities is a common problem of public sector communications in Ukraine. It is the cause of myths about almost every new government initiative.

As for our case, I have come across the following two versions. One is that the privatization of prisons began to "patch holes in the budget". The second is to "misappropriate" the funds received from the auction participants.

It must be explained that the current privatization process differs from what happened in Ukraine earlier.

Prior to that, the message about the objects put up for sale was published in the newspaper "Vedomosti Privatization", which had a circulation of 400 copies throughout Ukraine. This limited the number of bidders and created opportunities for corrupt practices.

But today an easy-to-use marketplace has been created with the ability to filter parameters, watch an online map, and choose what you want to buy from the state as conveniently as on the OLX website. For each object, a virtual room is created, where all legal and financial statements are uploaded.

As for the transparency of the auctions, they all go through the Prozorro sales system, which excludes the influence of the human factor or the possibility of rigging the results.

From a financial point of view, the privatization of the Lviv colony was not only the first successful auction in the framework of the Big Prison Privatization project but generally one of the most successful examples of small privatization.

The final price of the lot significantly exceeded the initial one and amounted to UAH 407.5 million which is one and a half times more than the proceeds for the whole of 2018.

In total, the State Property Fund expects to receive about 1 billion from the privatization of prisons. Of these, only 30% will go to the budget. This is not at all the amount to speak of any substantial filling of the state budget. But the project for the privatization of prisons from the beginning did not have such a goal.

The task of the State Property Fund is the efficient use of state property.

Today, the state has to spend up to 5 million hryvnias annually on the maintenance of each of the closed colonies. This is an example of very inefficient use of the property and a burden on the budget.

Privatization deprives the state of unnecessary expenses and frees up these assets for transformation from unproductive to productive ones. This gives much more than a one-time income to the budget - it attracts constant and strategic investments.

Old prisons and new opportunities 

The new owner of the Lviv penal colony is SoftServe. It is one of the largest IT companies in Ukraine, it has a staff of 10,000 and works with such giants as IBM, Cisco, and Panasonic.

On the site of the prison on St. John Paul II Avenue, SoftServe plans to build an office campus, which besides workspace will include facilities for recreation, talent development, and events.

Company officials say they are working on an office campus project with a renowned European architecture firm. Its name has not yet been disclosed, but they promise that the new complex will become a landmark architectural object for the city.

Thus, the entire district of Lviv will receive opportunities for development in the city, new jobs will be created, and the budget will receive additional revenue from taxes. Such an outcome should outweigh any skeptical arguments against privatization.

Hopefully, the next auctions from the list of "Big prison privatizations" will also be successful. After all, a modern powerful IT cluster on the site of a dilapidated correctional colony is a difficult, but really successful case for state PR in Ukraine.