It is a rare privilege to witness history in the making. When I arrived in Kyiv in spring 2014 as the newly-appointed European Bank for Reconstruction and Development managing director for Eastern Europe and the Caucasus, a popular uprising had just disposed of the corrupt ancien régime.The overriding challenge now was to start building foundations for a development which would finally allow the country to fulfill its potential – and for the many, not just the few.
For this, insurgents had to become institution builders. Ukraine has been good at revolutions. But its record on transforming movements of popular uprising into steady progress with good governance, efficient administration and transparent institutions has been less stellar. This is all the more disappointing as it is institutions that determine a country’s sustained economic and social development.
Ukraine, and particularly its court system, serves as a case in point. For too long the courts have not served as the places where justice was done. Too often they were extensions of political and economic power. Finally, this is changing.
Recently the country’s Supreme Court found in favor of a large foreign investor, who was the target of an extortion attempt by means of blatantly forged documents. It was a hard-fought victory: the lower level courts had ruled in favour of the extortionists, refusing to even consider the evidence submitted to prove the forgery.
Such incidents are not exceptional in some emerging markets. But what is striking in Ukraine is how frequent such cases of judicial abuse used to be and how often the perpetrators got off scot-free. A class has come into existence that for too long did not even pretend not to have their hands in the till.
The Supreme Court’s judgment is encouraging and it owes a lot to the bravery of the individuals involved. This is admirable, but not the way it should be. Here lies what constitutes, in my view, Ukraine’s most serious problem. When it comes to the rule of law, the country relies on heroes to deliver justice. And fortunately there have been plenty of heroes.
Such a reliance is, however, problematic, for three main reasons:
First, pushing one corruption case into the limelight may resolve it, but this merely displaces the problem. If the predators are not apprehended and punished, they will soon be on the prowl for another prey.
Second, heroes are human, mortal and subject to (career) change. Heroism is a great quality in revolutionary times but does not work as a sustainable form of government.
Third, only the few have the ability to mobilize public opinion: large foreign investors who can appeal to their embassies, clients of international financial institutions, prominent figures. Fair justice should not depend on who you know. Equality before the law is a universal concept, not an act of benevolence. As such it must be built into the system.
As Ukraine enters the next election period, it is important to remember that institution building is what makes the difference. To achieve prosperity, Ukraine needs investment, for there is no prosperity without increased productivity, which in turn depends on investment. Yet there is no serious investment without legal security. Investors, foreign and domestic alike, need certainty that their rights are being protected and can be enforced.
Since the EuroMaidan Revolution that sent President Viktor Yanukovych fleeing to Russia on Feb. 22, 2014, Ukraine has made extraordinary progress: the National Bank of Ukraine today is strong, confident and widely regarded as a successful example of transformation; the country has introduced e-government for procurement and value-added tax repayments; inside key ministries formidable teams of young Ukrainian professionals, with European Unionand EBRD support , are leading public administration reform; a small number of critically important state-owned enterprises now have professional governance; a business ombudsman, created by the EBRD with donor support, has been a great success in resolving issues between companies and the administration. Clearly, the business environment today is much improved. More and more investors have growing and profitable operations.
While there is always room for improvement, Ukraine arguably has not been in a more advanced position in its transformation process since the end of communism. The introduction of a new system has also been reflected in the language: It surely is not by coincidence that the words “biznesman” (businessman) and “reketir” (racketeer) entered the local language at the same time. This is a link that has to be broken. Ukraine has what it takes to do this – once and for all.
Francis Malige is the European Bank for Reconstruction and Development’s managing director of financial institutions and is based in London.
