Following his appointment in late August, Ukraine’s youngest ever Prime Minister, Oleksiy Honcharuk, unveiled his government’s vision for a new era based on the values of freedom and justice. Using the building blocks of trust and open information, a new generation of elected officials is working hard to restore their country’s reputation and put people, not the state, at the center of their efforts
You bring a fresh perspective to the new administration as the nation’s youngest-ever prime minister. What main decisions have you taken to date and how are they going to shape the future of Ukraine?
This is a moment of change for the country. Before joining the government, I was in charge of the biggest think tank that appeared after the 2014 Revolution of Dignity and was the main driver of reforms. That was an excellent opportunity for me to go into the nuts and bolts of government operations and also to put together a team. I’m talking about 30 people who, after the Revolution of Dignity, left their private interests and businesses and joined the government. The revolution changed our country; the middle class realized that this was their nation and that they had to do something. But when we discuss the government, I don’t want to focus on my person but on the generation that came to take over the reins. We are seeing a complete generational change in government, and this is the main reason why we think that the changes are going to be sustainable. Our president, Volodymyr Zelensky, is a phenomenon, and the message from the new generation to the old one is that previous practices are not going to remain, but will be replaced.
How is the government going to boost economic growth?
We have to understand that the main resource of the 21st century is information and reputation, not oil or natural gas. If you have a good reputation, you are trustworthy and can have access to all the resources that you wish. That’s what makes so-called developed countries different from Ukraine – they have more reliable resources. The reason why we are different is very simple: nobody trusts Ukraine. So one of our goals is to restore trust in our country. Then there is information. I believe that information barriers are also to our detriment. Information should be open, and open data should become our religion. That creates excellent opportunities for the development of our economy. Open information provides opportunities for investors to plan their operations and project for the future, and that is something that empowers people very much. I think that Ukraine can be a leading nation in this empowerment process.
Does Ukraine have the human resources to carry out this change?
Information is also about technology and knowledge, because if you know how to manage and deal with open information, you are much stronger. That is why we are going to invest in human capital. For us, it is very important for Ukrainians to become more educated and have better access to state-of-the-art information resources. Internet penetration is a very important aspect of this, and it is essential to cover all the territory with an internet connection. That will enable us to bridge the digital gap and to close the divide between the urban and rural areas, where children have a disadvantage in access to high-quality education and information. Medical care is also an important ingredient because our life expectancy is low and people are dying much sooner than they should, either in car accidents or due to lack of sufficient emergency services to assist people having heart attacks, for instance. This might seem like a trifle, but we think that our emphasis on human capital will prove correct in the middle term. The most important capital we have is the people, and what we need to do for them is make them free and provide them with happiness. Free and happy people can make any country wealthy and prosperous.
You have asserted that the country cannot just grow at two or three percent, but must grow at five to seven percent instead. One of the strategies is to attract $50 billion in FDI over the next few years, a very ambitious target. How do you plan to do that, and how can the US participate in this growth?
Number one, by extending the rule of law. As other post-Soviet countries, there are groups of influence that would use the judiciary and court system as weapons in their wars against each other. These groups weaponized the courts. Establishing the rule of law is a pre-condition for attracting investment to Ukraine. The state and the whole system of government should carefully observe and enforce property rights and contractual obligations; all the judicial decisions in favor of property owners should be properly enforced, and we have a good team of people with a Western education and good ideas to carry out this change. I see judicial reform as a chief task and we are prepared to accomplish this.
Since taking office, 415 state enterprises have been transferred to the State Property Fund to start their privatization. The overall number of enterprises that is going to be transferred to the State Property Fund before the start of 2020 is 500. Another component for improving the investment climate is having interesting and exciting projects, and we are prepared to offer to our international partners a set of very interesting infrastructure projects. We believe that a few significant completed projects can send the right message across. In just two months of government, we have already managed to put forward laws for private-public partnerships (PPPs), which have now been adopted. Tenders to transfer two first seaports – Olvia and Kherson – to concession have also been announced. These projects will serve as a testing ground for the change to be implemented. We hope that this implementation will reinforce the Ukraine brand.
The third component is the municipal projects. We believe that our communities should become agents in their own right. In the near future we need to conclude the decentralization reform, and by next year we plan to have capable municipalities and communities able to attract investors with favorable conditions. To conclude, the overarching principles are the rule of law, the business climate in the broadest sense and cutting all the red tape. The second level is the state’s infrastructure projects. And the third level is capable communities as agents of change.
Ukraine’s relationship with the International Monetary Fund (IMF) has been called “crucial” to transform your nation into “an Eastern European tiger.” What kind of relationship does your administration hope to build with the IMF and other international development bodies to support Ukraine’s vision for economic prosperity?
Our cooperation with the IMF is very important to us. It is not so much about money as it is about trust. They are very knowledgeable of the situation and can really see what is happening in Ukraine. They are our most effective tool to restore trust in Ukraine internationally. In the near future we expect to get a long-term program from the IMF and we are already reconciling the key conditions. In half a month, we have had two visits already, and this frequency is the best token of our steady relationship with the fund. Our IMF colleagues have had the luxury of dealing with many different countries, and we hope to benefit from their expertise. I’m not sure I can divulge details of the program before it is announced, but my ideas of the contents is that it might contain relief of administrative pressure on the energy markets, hence we can expect a continued liberalization in this field. In the past, on the eve of an election the tariffs would be pushed down to make the people happy, but this was not substantiated by any economic rationale, and it was to the detriment of the national economy. It was also a scheme that allowed the siphoning of millions of dollars from the state. So market liberalization is a very important step.
Secondly, macroeconomic stability can be provided by the national bank as an independent financial regulator. Supporting the independence of this institution could be an important part of the IMF program. There are also essential elements of the banking sector that can be reconsidered. One of the peculiarities of our sector is that there are too many state-run banks, and good corporate governance is a big issue at these banks. We have to introduce good corporate governance to stop political figures from interfering with the operations of the financial sector through these large state banks. Recently we adopted a law expanding the rights of banks to regulate the financial actors, including companies that provide financial services such as insurance. Proper implementation of this law is of utmost importance and this could be an important part of the program as well. We of course have to continue with the reform of fiscal and customs services. For the first time in Ukraine’s history, young professionals with commercial backgrounds who are not corrupt and can be trusted to do their jobs are leading both agencies. The principles for reforming this area are also an important part of this future program. Another very important bloc is the anti-corruption bloc. Some anti-corruption bodies created in the last five years now function properly and have had some achievements. The law re-criminalizing illicit enrichment has just been adopted, and the National Agency for Corruption Prevention is being relaunched. Another driver of economic reform is land reform, privatization, and the PPP instruments. We might find some points of growth there that may be reflected in the new program.
How would you like US investors to perceive Ukraine, and what areas of opportunity do you see for them?
Most importantly I have to say that the US is an example of a country that had a late start compared with Old World countries, yet overtook the rest because the US was based on the framework of democracy. The US is value and justice oriented, and thus became a flagship of democracy and development in the world. I think that many investors should rediscover Ukraine – similar to how once upon a time America was itself discovered. Ukraine should become a land of freedom. To achieve this, we will base our strategy on human capital and that will reduce the risk faced by investors. Ukraine is a good investment option for many reasons. We are an excellent bridge between Europe and Asia. The state will put up with most of the risks. And we have interesting plans for investors and the first to come will get all the profits. I think that Ukraine should be viewed as a great place with exciting prospects for investment.