When Ukraine’s Economy Minister Petro Poroshenko introduced Georgian President Mikheil Saakashvili at the Kyiv Post Tiger Conference in the Fairmont Grand Hotel on Nov. 27, it was a meeting of two reformers, one accomplished and one still hopeful.
Both politicians have similarities in the paths they have followed, graduating from the Kyiv Institute of Foreign Affairs and lobbying for pro-market agendas and closer ties with Europe for their respective states.
Both were at the forefront of peaceful revolutions in their nations – Georgia’s 2003 Rose Revolution and Ukraine’s 2004 Orange Revolution, respectively. But their paths have since diverged.
Despite having lost the recent parliamentary elections in Georgia, Saakashvili continues to be a powerful symbol in the post-Soviet region, having achieved wide-ranging economic and political reforms and bringing his country closer to Europe.
Poroshenko commented on the difficulty of carrying out such initiatives. He said: “The situation in Georgia demonstrates again that the way of reforms isn’t strewn with roses. This shows one more time that (implementing) reforms is an ungrateful (task).”
In his eight years as president, Saakashvili set an example for Ukraine and other former communist countries in easing impediments to development by reducing corruption and bureaucracy while creating a more welcoming investment climate.
Meanwhile, Ukraine squandered the window of opportunity after its color revolution, as change took a backseat to political infighting, leaving broken promises and dashed hopes.
Nonetheless, recent progress gives reason for modest optimism. The country jumped 15 places in the latest Doing Business report by the World Bank, from 152nd to 137th. It is also the highest position since the post-Orange Revolution euphoria brought Ukraine to 128th in 2006.
Of the 10 key criteria comprising the ranking, the biggest progress had been made in ease of starting businesses, thanks to simplified procedures and reduced costs. Registering property and paying taxes also saw considerable improvements.
Nonetheless, investor protection took a big hit, the report noted. Besides lagging on implementing new legislation, Ukraine has failed curb corporate raiding or improve its rule of law. “The improvement of the investment climate and pressure on investors will be one of the important issues we’ll pay attention to,” Poroshenko said at the conference.
He added the economy ministry has developed a plan to protect and attract investors to Ukraine. These include greater ease of doing business, aided by the newly adopted criminal code.
Other measures would lessen pressure from authorities, he added, by banning law enforcement agencies except for tax police from interacting with foreign investors.
Moreover, shareholders could be better protected by eliminating the right to transfer ownership on a local level. Instead, registering corporate activity would take place with the Ministry of Justice, according to Poroshenko.
Meanwhile, experts point to bigger problems for Ukraine. “You will never be able to do a comprehensive stable regime to attract investors if you don’t fix the judiciary,” said Jorge Intriago, partner at the auditing and consulting firm Ernst & Young.
In a ranking of 97 countries by the World Justice Project, set up by the American Bar Association, Ukraine ranks 10th from the bottom on their rule of law index.
“Ukraine ranks 87th in government accountability due to political interference, impunity and corruption,” the report states. “Administrative agencies are ineffective in enforcing regulations (ranking ninety-first globally and second to last among lower-middle income countries), and the courts, although accessible, are inefficient and corrupt.”
While acknowledging the gravity of the court system’s problems, Poroshenko said the justice system “is outside of my responsibility.” But he expressed hope in the Justice Ministry. “As far as I know they plan to make a second stage of court reforms,” said Poroshenko.
Doing so would “return trust to the courts and try to add transparency to the court procedures and give a possibility for investors to defend their rights,” he said.
Kyiv Post staff writer Maryna Irkliyenko can be reached at [email protected].
