When the European Business Association hosted Prime Minister Volodymyr Groysman on May 18, he came with a message: the Ukrainian government supports business.
“The Ukrainian government stands for business,” he said. “Decent conditions for business are a priority for us.”
What unfolded during Groysman’s visit showed that his “support for business” is personal and manual, belying the high rhetoric about a “new Ukraine” of reformed law enforcement and less corruption.
Businesspeople ranging from Dragon Capital CEO Tomas Fiala to Odesa importers used the meeting to lobby Groysman directly over their own private business problems.
“Except for you and the president, nobody can influence this situation,” said one entrepreneur who complained of harassment from local law enforcement.
Groysman appeared visibly displeased.
Frustration
The business community’s continued reliance on prime ministers, including the current one, as a “fixer” of specific problems shows how much distrust remains in Ukraine’s public institutions, especially law enforcement.
The tradition reaches back deep into Slavic history: in medieval Muscovy, peasants would travel to see the czar for supplication by beating themselves over their foreheads in a practice called “chelobitnaya.”
Oleksandr Banchuk, a criminal justice expert at the Center of Policy and Legal Reform, said that similar practices continued through to the Soviet Union. There, the General Secretary of the Communist Party would forward appeals to lower-ranking government officials with threats of results or punishment.
Banchuk added that the late 1980s “Glasnost” policy became another vehicle for the practice.
“One of the main principles of Glasnost was publicly airing problems,” Banchuk said. “It would force society to draw its attention to a certain problem.”
Prime fixer
Fiala was onstage with Groysman at the EBA meeting, and asked the prime minister two questions early on: one about pension reform, and another about an April 27 Security Services of Ukraine raid on Dragon Capital’s headquarters.
The SBU cited the cause of the investigation as the use of illegal computer programs, while others saw it as the result of an ongoing conflict between the investment fund and a close ally of President Petro Poroshenko.
“Over the past few weeks, unfortunately, I’ve gotten to know Article 359 very well,” Fiala said, citing the statute under which his company was investigated. He then called for Ukrainian law enforcement to be brought up to European Union standards, an effort that would cause “business to be satisfied, no more, no less.”
Groysman replied that “we will always insist” on the defense of business.
“We’re reviewing the law enforcement system from the perspective of competency, but we think that their actions should first of all be reasonable,” he added.
Then he changed the subject to tax reform.
Dirty laundry
Not only influential members of the business community like Fiala complained.
Another conference-goer, who identified himself only as Vitaly from an Odesa telecommunications company, complained that his company had “run up against the illegal actions” of law enforcement.
“Respected Volodymyr Borysovich (Groysman), why is the reason for raiding a business… an anonymous phone call, and a paid-for article on the internet?” he asked.
Groysman replied that he would look into it.
Such problems are widespread. Western ambassadors stationed in Ukraine frequently complain that they spend an inordinate amount of time trying to fix abuses against companies from their nations doing business in Ukraine.
“It’s one way of defending your business when going to the courts or prosecutors are ineffective,” said Banchuk. “It forces the top people to pay attention to the problem, and then maybe protect the investor.”
Public problems
The practice of appealing to top politicians persists because it works on a case-by-case basis, at least often enough. But it does nothing to solve the systemic problems hampering Ukraine’s investment climate.
In some ways, both sides win: Politicians feel more powerful because they can solve problems while aggrieved victims understand they can bypass abusive government bureaucracies if they go high enough up the political ladder.
Groysman has been successful in the past.
In September, Groysman intervened with customs authorities to allow a shipment of chemotherapy drugs to enter Ukraine after complaints from British nongovernmental organization Crown Agents that the cargo was being held up as part of a smear campaign orchestrated by a supplier.
In another, more recent case, a Naftogaz subsidiary responsible for managing a $3.65 billion loan offer from a Chinese state bank appealed to Groysman regarding inaction by other government ministries, causing the prime minister to demand that plans for the money be finalized in March.
Last April, after Ukrainian truckers blockaded the Odesa-Kyiv highway in protest over stricter load requirements, Groysman broke the strike in a day by ordering law enforcement to the site.
No big fix
Other institutions, like Ukraine’s business ombudsman, offer case-by-case fixes without addressing the corruption and impunity that cause the problems in the first place.
Banchuk blamed the issue on the lack of an effective legal system.
“It’s because of the weakness of the legal system in general and the inability of legal processes to solve problems,” Banchuk said. “It’s a way of making it a public problem, and not necessarily a legal problem.”
Banchuk added that the tactic essentially goads top officials into action by exposing the faults of government institutions.
“It’s a peculiarity of post-Soviet societies that when it’s clear someone won’t get a result through a weak legal system, they then use political or PR means of defending their rights,” he added.
At the meeting, Groysman put a bright spin on the situation.
“It’s important for us to engage with business,” Groysman said.
