Civil Society and Anti-Corruption Panel. 12th Annual Ukraine Investor Conference

Dragon Capital held its 12th Annual Ukraine Investor Conference on March 10-11 in Kyiv. The event gathered close to 300 guests—more than 100 international investors, local investors as well as top management of leading Ukrainian companies, who took the opportunity to gain fresh insights into the economic and political situation in Ukraine and communicate directly with government officials, representatives of international financial institutions and the country’s largest companies in order to make investment decisions.

Below please find highlights from civil society and anti-corruption panel.

Moderator:

Neil Buckley, Eastern Europe Editor, Financial Times

Speakers:

Mikheil Saakashvili, Governor, Odessa Regional State Administration

Geoffrey Pyatt, US Ambassador to Ukraine

Vitaliy Shabunin, Head of Board, Anti-corruption Action Center

Serhiy Leschenko, Member of Parliament

Svyatoslav Vakarchuk, Musician, Co-founder of People of the Future foundation and Center

for Economic Strategy

• Mr. Saakashvili said corruption and lack of rule of law was the major reason behind the Ukrainian economy still remaining smaller than what it was at the time of Soviet breakup. Key elements of any plan to deal with Ukraine’s deeply entrenched corruption should include transparent privatization of state enterprises, creation of a functioning land market, overhaul of the existing tax and customs services, and measures to create a law enforcement and judicial system capable of not just investigating but bringing to justice for high-level graft. Meanwhile, very little has been done in practice. As an example, he spoke of a recent criminal probe involving the fully state-owned Odesa Portside Plant, a fertilizer producer, which allegedly bought natural gas at inflated prices from foreign intermediaries. According to Saakashvili, the contract was canceled but none of OPP management was held liable.

• Mr. Pyatt said that while Ukraine achieved progress reforming a range of arrears, including the financial, energy and defense spheres, corruption remained a major challenge facing the incumbent politicians. Stepping up fight against corruption is needed for the authorities not to “snatch defeat from the jaws of victory”. He said the U.S. would continue to support Ukrainian civil society and help the country’s new anti-corruption institutions (e.g. the National Anti-Corruption Bureau is receiving assistance from the FBI and Internal Revenue Service), adding “battling corruption is about systems, not individuals”. In his view, creating a Westernfinanced top-up fund to finance salaries for Ukrainian government employees is a feasible near-term prospect.

• Mr. Shabunin, who was a member of independent selection panels for the Specialized Anti-Corruption Prosecutor’s Office and the National Anti-Corruption Bureau (NAB) said the two agencies’ first steps made him optimistic about their independence and ability to fight high-level corruption. He cited criminal cases recently opened by the NAB against Mykola Martynenko, PM Yatsenyuk’s ally, and a senior executive of Naftogaz Ukrainy. However, results would be more impressive if there were greater political will at the top to fight corruption more aggressively.

• Mr. Leschenko, who before his election to parliament in 2014 was a well-known journalist specializing in investigating government corruption (including in ex- President Yanukovych’s inner circle), said the ongoing political crisis is a reflection of entrenched corruption. PM Yatsenyuk’s surviving a no-confidence vote last month was a result in part of oligarch-backed parliamentary factions supporting him in exchange for further rent seeking opportunities. “For oligarchs, a weak PM is the best PM.” The current crisis will most likely lead to early elections. However, before going ahead with snap elections it is crucial that a new election law, based solely on open party lists, be enacted. Under the current electoral system, half of parliament is elected in single-seat constituencies, with winners there often being wealthy national or regional businessmen capable of bribing voters and who then use their parliamentary mandate to “recoup” their electoral spending. This means preserving the existing electoral system will only proliferate political corruption.

• Mr. Vakarchuk said developing vibrant civil society institutions throughout entire Ukraine was vital for the country to break with its bad legacies and succeed. He called it a bottom-up driver of change, which should complement the topdown movement, which is the emergence of a new generation of political leaders. “When these two currents meet”, it will be a breakthrough for Ukraine. In his view, Western education is one of the most effective ways to raise new civic and political leaders for Ukraine.

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