It is nice to be smart and critical. One can be eternally smart and critical in our imperfect world, seeing lots of unfair things, being disappointed and frustrated. We’ve seen a lot of such cases for the last five years. To me, even worst thing is however apathy and passiveness. Lots of Ukrainians are frustrated and dismayed. They are critical to current political elites. But they remain eager for changes and reforms, and this leads to political accountability of the current government, especially before the March 31 presidential election.
I therefore want to widen Professor Alexander Motyl’s blog at Atlantic Council and feedback with the Kyiv Post editorial.
Both pieces of reflections can be characterized as polarized. So let us continue discussion in a more comprehensive way, going deeper in the matters.
Motyl: “Ukraine’s problem is not that it hasn’t changed enough. It’s that it’s changed too much, too fast.”
Kyiv Post: No, the oligarchy remains. There’s still no justice or rule of law. There’s paltry foreign direct investment. Corruption and lack of competition reign in many sectors, including media. There’s no land market or increase in gas production, etc.
Ostap Yednak: The Ukrainian parliament adopted unprecedentedly huge amount of new pro-reformist legislation, challenging for changes almost all sectors: new law on gas market, new law on electricity market, new law on energy regulator, new law on corporate governance in state-owned enterprises, on privatization, new legislation on judiciary, on anti-corruption, on public procurement, on transparency of public finances, new legislation on primary/secondary/higher education, on public broadcasting, new legislation on environmental policy, new legislation on foreign currency market, new legislation on law enforcement and police, on healthcare system, social security and pension, on diplomatic service and on security sector reform, etc.
Main task of the laws concerning energy, natural resources and SOEs are dismantling monopolies of oligarchs and bringing market rules to Ukraine’s economy. Laws concerning transparency, competition in public procurement and anti-corruption are to curtail oligarchic influence on politicians and to restrain them from bad behavior.
These reforms are however getting implemented with huge resistance from oligarchic groups. Why? Firstly because they own significant part of Ukraine’s economy and its critical sectors. Further, in 2014 elections they managed to obtain serious influence in Ukraine’s parliament and therefore in government of Ukraine. Oligarchs own main TV channels, forming people’s opinion about politicians and reform process.
How the situation can be changed?
By further implementing changes, and by so to say “need of time.”
Let me explain on that.
Ukraine’s power generation sector needs tens of billions of dollars in investments in next 10 years — 55 percent of electricity is now generated by outdated nuclear power plants which will soon need to be decommissioned; the next 30 percent is generated by coal power plants belonging to oligarchs, but those are also extremely old and inefficient. With increased environmental requirements, as well as with upcoming integration of our electricity grid with European Union system, as well as with implementation of new electricity market rules foreseen by new legislation, the sector will be de-monopolised with still strong, but not decisive influence of oligarchs.
Similar situation is with renewables, where oligarchs are now gaining additional bonuses because of special tariff for green energy. With only 1.9 percent share, investment in renewables will only be possible with adoption of market rules for such projects, enhanced by EBRD and foreign investors.
Similar situation with oil/gas and extractive industries.
The National Anti-Corruption Bureau of Ukraine destroyed some corruption schemes on gas extraction and its sales. Biggest national oil/gas operator Naftogas has become biggest tax and profit payer to Ukraine’s budget, at the same time successfully suing Russian Gazprom in international courts, and undertaking un-bundling with its gas transmission system.
Ukraine has adopted super-advanced legislation on extractive industries transparency and reporting – EITI Law.
Additionally, we are making drastic changes in opening up geological information, making it digitalized and available to potential investors.
In the meantime, oligarchs and corrupt officials are still getting permits for tasty gas deposits, but those activities need both money and modern technologies, so sooner or later they would need internationally recognized investors, working transparently and paying rent to local and national budgets according to transparent rules.
Yes, land market and proper management and preservation of agricultural land is currently the biggest challenge in Ukraine. But at the same time agriculture is now number one in Ukraine’s exports structure, with investments into further value-chain, logistics and infrastructure.
Motyl: “Ukraine has built a highly competitive army and military industrial complex and stopped Russia’s aggression in the southeast.”
Kyiv Post: Like all patriots of Ukraine, we hope this is the case. Kyiv Post journalists are frequently at the war front with these brave defenders. But the truth is, we don’t know. Regrettably, when Russia goes on the offensive, by land, sea and air, Ukraine too often comes up short.
Ostap Yednak: The reality is still that Ukraine has the most skilled army among our European partners, with real combat experience of more than 250,000 soldiers. The costs of such experience are extremely high – the lives of Ukrainian soldiers. But at the same time, Ukraine is investing over 5 percent of its gross domestic product into the defense sector, which, indeed with high corruption risks, do improve situation with ammunition and equipment of the army. Unfortunately, security sector reform law was only adopted in the fall of 2018, with more than a tw0-year delay, with more legislation to be adopted, especially to transform Security Service of Ukraine and intelligence sector. It will take years to bring our security sector in complete compliance with best NATO standards, including transparency and control by civilians.
Motyl: “Ukraine has moved decisively towards integration with the West and the world, as trade with Russia has fallen dramatically and foreign direct investment, much of which is Chinese, has grown.”
Kyiv Post: Even though Ukrainians have shown decisiveness in moving to the West (for millions, unfortunately, literally), political leaders have obstructed major reforms. By doing so, they have delayed aid and scared off investors. Russia remains Ukraine’s single largest investor and trade partner. FDI hovers around a measly $2 billion annually in recent years. China is not pouring investment into the nation. Instead, it has offered mainly low-interest loan packages.
Ostap Yednak: We can also put it in a different way. Millions of Ukrainians are experiencing freedom of movement and labor due to visa-free with EU, sending to and spending in Ukraine over 10 billion euros of remittances annually. This creates scarcity/deficit of skilled labor force in Ukraine (especially western part of Ukraine), raising wages and increasing efficiency of Ukrainian employers. Ukraine has indeed delayed with many reforms, investors are still not seeing fair justice and rule of law, rules of the game are still not equal. But at the same time, the statement that Russia is Ukraine’s biggest investor and trade partner is highly manipulative if not false. In the meantime, we will see more and more foreign investment coming to transport infrastructure, energy and food&agriculture and IT & innovation sectors. Foreign aid has been in a bottleneck due to low absorption capacity – only around 30 percent of World Bank, International Finance Corporation, European Investment Bank, European Bank of Reconstruction and Development available funds were used, but the Ukrainian government and municipalities are getting better and better.
Motyl: “Important steps have been taken to curb corruption.”
Kyiv Post: Nonsense. Much has been done, instead, to obstruct and stall the fight against corruption. No one has been found guilty of robbing any of the billions stolen from Ukrainians. The big fish have gotten away and many of them are still in business. The presidentially controlled prosecution and Security Service of Ukraine are unreformed, along with the Interior Ministry. The new anti-corruption agencies are either unformed, have limited powers or are thwarted. Unfinished court reform is marred by manipulations designed to keep politicians (or the highest briber) in charge of deciding who goes to jail and who wins court rulings.
Ostap Yednak: It is really the Kyiv Post conclusion? Nonsense? Indeed? One of world’s best electronic public procurement systems ProZorro is saving billions annually. All public funds, registries and asset declarations of politicians, judges, prosecutors are open to the public. National Anti-Corruption Bureau was launched only by end 2015 – but during only three years it managed to bring about 150 cases to courts, with about $8 billion in damage to Ukraine’s taxpayers investigated. No single important case was lost so far in courts (yes, all of them are heavily delayed), and we stand good chances to have the Supreme Anti-Corruption Court up running in 2019, with properly selected independent judges. We still have lots of problems in this field as well – the National Agency for the Prevention of Corruption needs to be reset, as well as we need transformation in state prosecution system, security service and police. 2018 showed numerous attacks on civic society representatives, which unveiled very serious problems with regional business/political elites, organized crime and law enforcement being interconnected.
Kyiv Post: Not everything Motyl wrote is untrue, but the falsehoods are so numerous that business editor Ilya Timtchenko runs them down in a detailed online op-ed. Motyl also engages in illogical condescension: “Most Ukrainians will insist that ‘nothing has changed’ and that the country is moving in the ‘wrong direction.’ These views are contradictory.” No they are not, Motyl. Those of us who live here know what has changed for the better and what has not. Ukrainians are saying that too many of the fundamentals haven’t changed and, because of that, the country is still moving in the wrong direction. Motyl and a lot of people who share his deep disconnect from reality may be in for big surprises this year if Ukrainians get a free and fair chance to elect their leaders.
Ostap Yednak: Kyiv Post is brutal and … wrong! Ukraine is taking up unprecedented transformation in its modern history. The tragedy of this process is that Ukrainians are both benefiting, as well as suffering from this painful process. Part of society is enjoying benefits of decentralization reforms. Residents of Lviv, Ivano-Frankivsk, Khmelnitskyj, Vinnytsya, villagers many of amalgamated communities are enjoying renovation and improvements. But others like in Kharkiv, Odesa, Kryvyj Rih, Ternopil or Zaporizhya are losing time and chances for real change, suffering from their own mistakes in failing to elect proper local governors. Ukrainians hate corruption, but at the same time they do not trust court system and police, often preferring to solve the problem in a usual old terrible way. They hate politicians at the same time being reluctant to go into politics, or donate to political parties.
What Motyl’s perhaps false opinion is that the key to further continuous transformation of Ukraine is the victory of President Petro Poroshenko. This is only partially true, since 70 percent of reform success is due to the pro-reformist environment in the parliament and Cabinet of Ministers.
In the current parliament, as well as government, there are dozens of change-makers who, together with vibrant civil society and international community push for such positive shifts in Ukraine.
In my opinion, there is very serious risk that, after 2019 parliamentary elections, we will lose the game by dramatically decreasing the number of reformers.
Poroshenko will then have too many temptations and too weak true democratic opposition, and this can wrap down many reforms which I outlined.
Ostap Yednak was elected to the Ukrainian parliament in 2014 and since 2015 has been an independent member of the Verkhovna Rada. In 2018, he became a member of the Syla Lyudey political party.
