UkraineAlert

In an interview last October, Ukrainian Prime Minister Volodymyr Groisman revealed that not a single x-ray scanner was operational at customs checkpoints in Ukraine, suggesting that corrupt customs officers had deliberately damaged the equipment to facilitate criminal activity.

The accusation speaks to the severity of entrenched corruption in the customs services of Ukraine, even amid a slew of post-Maidan reforms to improve the trade and investment climate. Perhaps no other economic hub captures this tension between vested interests and substantive change better than the Odesa ports on the Black Sea. The recent return of wholesale corrupt practices to Odesa ports demands attention: it underscores the necessity of sustained political will to implement reform and the ongoing threat to both economic prosperity and national security that corruption poses in Ukraine.

Odesa has been a key battle in the tug of war between reformers and spoilers in Ukraine. In 2015, President Petro Poroshenko brought on former Georgian President Mikheil Saakashvili to serve as governor of the Odesa region, with a young political activist, Yuliya Marushevska, selected soon after to head the customs office overseeing the notoriously corrupt Odesa ports. Their publicly declared mandate was clear: to weed out corruption and boost economic efficiency.

During their short tenure, the team succeeded in some meaningful ways, minimizing opportunities for corrupt behavior and increasing international trade through the port.

Read More

Ukraine just received a marginally better grade on the World Bank’s Ease of Doing Business Index, moving from 80th place in 2017 to 76th place in 2018. Kyiv reduced the cost of construction permits, strengthened minority investor protections, and reduced labor taxes. To put things in perspective, it’s easier to do business in Azerbaijan, Belarus, and Russia, and slightly easier in Greece and Uzbekistan. We asked Atlantic Council experts, UkraineAlert contributors, and businesspeople in Kyiv the following question: What five steps should the government undertake in 2018 to catapult Ukraine from its current place to the top 10?

Andy Hunder, President, American Chamber of Commerce: The fact that Ukraine notched up four spots in the World Bank’s 2018 Ease of Doing Business Index is a slow but sure step forward. Over the past year the Ukrainian government together with the business community has been working to overcome obstacles in infrastructure, investors’ rights protection, and paying taxes. Ukraine’s index performance is currently lagging behind in connecting to the electricity grid, trading across borders, and resolving insolvency. To boost these low rankings, Ukraine should simplify procedures, reduce time and cost to getting electricity, increase effectiveness of the single window at customs, and ensure the rule of law through implementation of full-scale judicial reform. A lot still needs to be done to make Ukraine’s regulatory environment more business friendly, but the country seems to be on the right track.

Peter Dickinson, Nonresident Fellow, Atlantic Council and Publisher of Business Ukraine: The key business challenge the country is facing remains the creation of a functioning court system. In the short-term, this means establishing an anticorruption court while the broader judiciary can be completely reformed. Financial law enforcement needs a total overhaul to rid the sector of ugly raiding tendencies, with the creation of a new state agency the only plausible solution. Banks need to receive far greater legal protections from bad debts and bad faith borrowers if they are to fuel the economic recovery. Attractive new conditions should be created specifically for the IT sector in order to build on Ukraine's strong position in this industry and attract talent rather than suffer further brain drain. Finally, agricultural land sale reform would be a huge step forward for the Ukrainian economy, but such an anti-populist move looks virtually impossible with presidential and parliamentary elections looming on the horizon.

Read More

Having admitted to a decade-old sexual harassment incident in which he touched a journalist’s knee at a party conference, British Defense Minister Michael Fallon resigned, stating, “I accept that in the past I have fallen below the high standards that we require of the Armed Forces that I have the honor to represent...I am therefore resigning as defense secretary.”

By contrast, Ukraine’s Interior Minister Arsen Avakov brought goons in camouflage to court to help his son avoid imprisonment. His son, Oleksandr Avakov, who potentially faces up to twelve years in prison if convicted of embezzlement of public funds allocated for the purchase of military backpacks worth 14 million hryvnias ($520,000), was recently released from custody. Both father and son claim the case is politically motivated.

The minister’s views on the high standards of National Guard soldiers, which Avakov oversees, remain a mystery.

With only a three-hour flight from the United Kingdom to Ukraine, centuries of evolution separate these two men. The only question is whether we can wait a couple of centuries to live like Britain.

Read More

Successful politics is about getting things done. By that standard, October was a successful month. Not only did the government pass sweeping healthcare reform, pension reform, and judiciary reform, it also staved off populist protests. In short, pragmatism prevailed over populism.

Each of the reforms passed was significant, but healthcare reform was the most far-reaching. This legislation will provide state insurance for all citizens and free medicine to those with chronic diseases; it also promotes the prevention of disease through healthy lifestyles, grants subsidies for internally displaced persons due to the war in the Donbas, and establishes patient-doctor contracts. The overall effect will be substantial: patients will receive better healthcare, the state will provide a safety net, and medical professionals will be able to earn a normal salary based on the number of patients they treat rather than receive a fixed subsistence salary from the state.

Pension reform creates an understandable and transparent system to allow workers to “catch up” after years of not paying into the system; more important, it raises pensions in the short term. Critically, the passage of pension reform is a key requirement for Ukraine to receive the next tranche from the International Monetary Fund.

Judicial reform is more technical in nature, but ultimately, the legislation makes the Supreme Court the venue for appeals, modernizes the system through the adoption of e-governance, and increases the role of official court fees in financing the system.

Were the reforms perfect? No, but they will positively and concretely improve the lives of ordinary Ukrainians.

Read More

Prime Minister Volodymyr Groisman welcomes the creation of an independent anticorruption court in Ukraine and says it will be operating in 2018.

“The debate was whether this court should be independent or a chamber. This was a waste of time,” he said in an extensive interview in Toronto. “From day one, I was in support of an independent anticorruption court.”

He said he has added the cost of the independent court to his budget for next year and has assurances from President Petro Poroshenko this will be a priority.

A “holistic system” is needed to eradicate corruption which includes the National Anticorruption Bureau of Ukraine, the anticorruption court, along with other reforms.

“We lost a lot of time and laws must be adopted to provide for judicial independence,” he said.

Read More

On September 10, Ukrainian Catholic University opened a 64,874 square foot world-class library and educational center in Lviv, Ukraine. Ukrainian Catholic University, the first Catholic university in the former Soviet Union, strives to provide an open, progressive, and democratic learning environment for its students and the community.

Canadian businessman and philanthropist James Temerty was the main funder behind the creation of the Metropolitan Andrey Sheptytsky Center.

At the consecration ceremony, Ukrainian Catholic University President Bishop Borys Gudziak presented Temerty with a symbolic gold key to the center, saying, “May this key open not only this building, but hearts.”

Read More

The most surprising thing about the thirty-one-page indictment of Paul J. Manafort, Jr. and his business partner Richard W. Gates III by Special Counsel Robert Mueller is that it hardly contains anything that was not known to people who have observed Ukraine. Manafort was the all-dominant political advisor to former President Viktor Yanukovych from the spring of 2005 until his fall in February 2014. Afterward Manafort continued to work for his successor party, the Opposition Bloc.

While Manafort worked in Ukraine, it was widely rumored that he earned $9 million a year. Now the indictment states that “more than $75 million flowed through [his] offshore accounts.” Earlier this year, Ukrainian MP Sergii Leshchenko unearthed a minor part of those payments from Yanukovych’s residence, providing hard evidence in the so-called “black ledger,” which Manafort of course denied. Since this money originated from the illegal funds of a foreign political party, Yanukovych’s Party of Regions, the US Foreign Corrupt Practices Act naturally applies to Manafort and his associates.

Since the money was dishonestly earned, any amount taken to the United States amounted to money laundering, and the indictment claims that Manafort “laundered more than $18 million.” The money that Manafort did not take to the United States he did not report to the Internal Revenue Service, which means a third crime, namely, tax evasion to the order of $57 million. A fourth alleged crime was that Manafort and his colleague lobbied on behalf of then President Yanukovych with US government agencies without registering as foreign agents.

Read More

The recent US debate about Russia has focused mainly on Moscow’s disinformation, propaganda, and interference in our elections. But Russia’s aggression against Ukraine remains the original sin and the biggest threat. It’s not just Ukraine’s survival as an independent, democratic state that is on the line, but the future of an international order based on the rule of law rather than the law of the jungle.

That’s why it’s good news that, despite fears that President Donald Trump might throw Ukraine under the bus for the sake of a reset with Moscow, the administration has taken a clear position that better relations with Russia are impossible without a resolution of the Ukraine crisis. Administration officials have developed a reasonably coherent strategy aimed at achieving a diplomatic solution, and they have appointed a capable diplomat, Kurt Volker, to carry it out.

Read More

It is easy to despair about Ukraine ever reforming and becoming a normal European state. Nevertheless, such despair would be a mistaken response to the flood of stories depicting obstructions to reform—even if they are true. While anyone who has dealt with Ukraine in the last twenty-five years has experienced the frustrations of trying to achieve innovation and reform there, that is only one side of the picture.

In fact, the passage of a new health care reform and the vitality of civil society, expressed in the unceasing pressure for reform and the recent round of demonstrations on the Maidan, signify that Ukrainians will not stand for the status quo. The impulse that began a generation ago under Mikhail Gorbachev continues today, despite multiple obstacles.

It is easy to posit that reform in Ukraine is hopeless, or that because of a “recidivist” political culture there, nothing is getting done. Worse yet, some may read the recent Chatham House report as indicating that an actual reversal of reform is possible. This report is alarmist, and there are many valid reasons for sounding the alarm. But it also shows where reform has been achieved, where the current struggle for reform lies, and how the country may move forward.

Neither Ukraine nor its well-wishers abroad can afford the luxury of despair over its prospects for reform.

Read More

It now takes only twenty minutes to register a business in Ukraine. Since March 2017, entrepreneurs have been able to open and close businesses through a new online portal that the Ministry of Justice and the State Agency for E-Governance are behind. The new service proved popular: in its first six months, it was used almost 4,000 times. On average, twenty applications are processed daily, with the number increasing monthly.

The new portal gets good marks from the business community. Andy Hunder, president of the American Chamber of Commerce in Kyiv, said the business community sees it as a “positive step forward.”

“The introduction of e-services is perceived as a transparent tool to mitigate corruption risks, as it eliminates direct contact with officials, and simplifies the procedures, minimizing the bureaucratic aspect,” Hunder said.

Registering a business is one of the most popular administrative services in Ukraine, but before the new system was put into place, it was an opportunity for corruption.

Read More