UkraineAlert

The third Ukraine Reform Conference is about to kick off in Toronto on July 2, co-hosted by the Canadian and Ukrainian governments, and involving the participation of Ukraine’s President Volodymyr Zelenskyy and Canadian Prime Minister Justin Trudeau.

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For many years, Ukraine’s leaders recognized that the country needed more foreign investment to achieve robust economic growth, and its various governments attempted to promote investment. These efforts mostly involved trade outreach conferences where investment opportunities were presented to Western business audiences. The emphasis was invariably on Ukraine’s highly educated population, its tremendous natural resources, the country’s high level of under-investment, and the opportunities provided by its strategic European location.

Unfortunately, these efforts had a low level of success, and the inflow of foreign direct investment in Ukraine languished. Over the post-Maidan period, the average investment inflow averaged around $2.5 billion, representing only 2.3 percent of GDP. In comparison, Poland, a neighboring country with roughly the same number of people, has investment inflows of almost $16 billion; Canada, which is also a similar size, averaged $47 billion over the same period.

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Almost every image of eastern Ukraine involves suffering of some sort: old people waiting in endless queues for tiny pensions; internally displaced persons living in cramped temporary housing that is no longer temporary; Ukrainian troops operating with few modern conveniences. Since 2014, most people with education and means have fled the region. One could be forgiven for dismissing it as backward and hopeless.

The reality, however, is that the Donbas is changing—perhaps even faster than other regions of Ukraine because it is starting from such a low level of development.

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In his annual television marathon “Direct Line with Vladimir Putin” on June 20, the Russian president did something unusual. To my knowledge, this is the first time he specified the impact of Western sanctions on Russia, which he usually presents as having a positive effect on the Russian economy because of import substitution.

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On June 25, Russia was allowed back into the Parliamentary Assembly of the Council of Europe (PACE) as a full voting member, after being expelled five years ago for its aggression in Ukraine. Through an innocuous sounding measure that pledged to strengthen the assembly’s decision-making processes on credentials and voting, 118 parliamentarians agreed to let Moscow rejoin.

The decision to allow Russia to rejoin PACE despite its flagrant disregard for the Council of Europe’s statutes and international law is outrageous. It will further harm the meager international enforcement mechanisms that exist to punish Russia.

Why did PACE agree? The truth is sad and simple. Russia brings 33 million Euros to keep the august body in operation.

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With the Constitutional Court of Ukraine affirming the dismissal of parliament last week, new elections are moving ahead for July 21. Here are five predictions on what to expect.

First, President Volodymyr Zelenskyy's Servant of the People has a legitimate chance to form a one-party majority in the parliament. This would mark the first time since independence that one party controlled the entire government apparatus. The party needs 226 seats to form a majority, and with Ukraine’s mixed election system (50 percent of seats are allocated through party lists and 50 percent are single-mandate districts), Servant of the People is likely to take 130 party-list seats if its popularity continues; the party is polling at 45 percent. It would need to win about half of the single-mandate seats to form a majority. However, even if they formed a majority by themselves, mathematical realities are likely to force them to invite at least one other party into their government, to ensure sufficient votes to pass key issues. 

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The United States invented many things, but anti-trust laws and competition policy was arguably the most profound. These laws establish fair rules for the marketplace, and are why the country became the richest and most powerful on the planet. Without these, the United States would look like Russia or Ukraine: An impoverished populace and a moribund economy and political system owned by a few dozen oligarchs.

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“Some of the greatest Ukrainian patriots aren’t even Ukrainian,” the eminently quotable public intellectual Yevhen Hlibovotsky is fond of saying.

While he didn’t have John Sung Kim in mind, he might have. Kim, forty-five, is a wealthy Korean-American entrepreneur who built and sold two companies (one IPO, one all cash sale) in Silicon Valley before moving to Kyiv in 2016. He’s also an evangelist for Ukraine’s tech scene.

Kim is dead set on changing Ukraine by teaching engineers and entrepreneurs how to attract venture capital and build world-class startups. But that’s not all. He also wants to change the country’s mentality, from the short-term time horizons he sees everywhere to longer, big-picture thinking. When he can convince top talent to take a lower salary combined with equity in a company instead of just more cash, that will be a game changer for the country, he says.

There’s no shortage of raw talent in Ukraine. “The top 3 percent of talent in Ukraine is world-class,” Kim says over coffee in Kyiv. He says the country’s top engineers are good enough to work at Google and Facebook, and the second layer is outstanding, but with one caveat: “They lack soft skills.”

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June has been challenging month to keep up with Ukraine’s vibrant politics. Numerous new political parties—Servant of the People, Holos, Might and Honor, Ukrainian Strategy, and others—held party conventions and presented their candidates and programs for snap parliamentary elections slated for July 21.

Let’s take a look at the three most important newcomers to the race.

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“I obviously mistook the dress code,” confessed Viacheslav Klymov standing tieless onstage where Ukraine’s president sat clad in his Sunday-best in Kyiv, Ukraine, on June 20. The newly-elected president replied to the head of the Union of Ukrainian Entrepreneurs not to fret and instantly removed his own tie in front of the audience of seven hundred business leaders. As the president next welcomed me on stage, I inquired whether I should also detach my neckwear. President Volodymyr Zelenskyy teasingly replied: “It’s OK. Your tie is green.”  

Zeleny in Ukrainian means green. It was the color of the extremely successful election campaign that brought the new president to power one month ago with a whopping 73 percent of the vote.

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