Key Minister Resigns in Ukraine, Casts Doubt on Economic Reform Progress

Photo credit: Lithuania Ministry of Foreign Affairs, Flickr https://www.flickr.com/photos/mfa_lithuania/20063595149

Photo credit: Lithuania Ministry of Foreign Affairs, Flickr

By Eric Hontz and Marc Schleifer

In a stunning announcement in Kyiv on February 3, Ukraine’s Minister of Economic Development and Trade Aivaras Abromavicius submitted his resignation to President Poroshenko). The Lithuanian-born Abromavicius cited several factors contributing to his resignation, including pressure to appoint questionable individuals to his team or to key positions in state-owned enterprises. In particular, he named Igor Kononenko, considered a Poroshenko ally in parliament. President Poroshenko has reportedly urged Minister Abromavicius to stay on, and has promised that the National Anti-Corruption Bureau would investigate his claims against Kononeko.

A public statement signed by10 ambassadors to Ukraine, including from the United States, the United Kingdom, Germany, and France, released hours after the resignation, emphasized deep disappointment and noted the importance of Ukraine’s leaders setting aside parochial differences and the necessity of putting the vested interests that have hindered progress for decades in the past. Minister Abromavicius had gotten several key elements of deregulation and economic reform moving during his time in the Ministry. He and his staff were encouraged by the International Monetary Fund, the European Union, and other leaders to institute far reaching reforms, including the transparent privatization of thousands of state-owned enterprises that weigh down Ukraine’s budget. Specifically, Minister Abromavicius sought to undertake reforms in state-owned enterprises to ensure transparency, impose corporate governance standards, and enlist professional managers in an effort to restrain rent seeking and back-channel arrangements that enriched a politically-chosen few, while depriving Ukraine of valuable budget income and distorting local economies. In his resignation letter, Minister Abromavicius noted that losses in state-owned enterprises were 100 billion hryvnias less in 2015 than in 2014.

At the same time, for the past several months, many of CIPE’s partners in the small and medium-sized enterprise (SME) sector in Ukraine have complained of the slow pace of reform, particularly in terms of fighting corruption and installing a clean judiciary, among other factors. The business community had been broadly supportive of the Minister’s agenda but felt that more could be done. Minister Abromavicius and his staff hold decades of experience in investment banking and asset management, yet the highly-qualified team still hit road blocks to reform so great that they have been forced to resign.

The resignation shines a light on challenges facing this important Ministry for Ukraine’s reform effort. Abromavicius is the second Economic Development Minster to step down following the EuroMaidan two years ago; his predecessor, Pavlo Sheremeta, lasted just six months, from February to August of 2014. In the past year, the Ministry has been restructured several times and has faced numerous staff layoffs. Moreover, a range of key deputy ministers also announced that they would leave, including Yulia Klymenko, who covered SME issues and entrepreneurship development. Many of CIPE’s partners have stressed that the Economic Development and Trade Ministry’s Department of Entrepreneurship Development and Regulatory Policycould have done more to support SMEs, such as approving a national plan for SME development.

The resignation has also touched off a storm of political intrigue and turmoil in Ukraine, as former Georgian President, now Governor of Ukraine’s Odesa region, Mikheil Saakashvili  voiced his support for Minister Abromavicius, saying that he too has clashed with corrupt forces in Ukraine. There is now open speculation in Kyiv on a range of topics including how Saakashvili might be aiming to create a new political party; he is growing his own popularity by traveling around the country hosting anti-corruption fora and criticizing the government Prime Minister Yatseniuk. Some say Saakashvili has an eye on becoming the country’s Prime Minister; that he has the support of Sheremeta, and wants to recruit Abromavicius to join him for a run in rumored snap parliamentary elections later this year. Even before Abromavicius stepped down, the “Samopomoch” party pulled one of its members of the government, Agriculture Minister Aleksei Pavlenko. Last year, another Deputy Economic Development Minister, Alexander Borovik, who had extensive private sector experience, left his post to join Saakashvili’s team, but has now reportedly joined the “Power of the People” party, a new economically-liberal bloc. This kind of political speculation is a further blow for the country’s stability, at a time when its economy is slowly starting to turn around, but it is still dealing with an ongoing military conflict with Russia in the East.

Minister Abromavicius’ resignation brings up uncomfortable questions for both the international donor community and the Ukrainian people, serving to highlight the difficulty of enacting meaningful, market-oriented economic reform and reducing corruption in Ukraine, Eurasia, and emerging markets more generally. The European Union, the United States and Ukrainians themselves have invested immeasurable time and energy in supporting reforms, some of which have been painful and burdensome for the average households (and therefore deeply unpopular).

What happens next with economic reform in Ukraine will likely influence the economic and political trajectory of Ukraine, as well as its neighbors Moldova and Georgia – which also aspire to make difficult reforms – in the next several years. Importantly, if Ukraine were to backtrack or stall on reforms, it could prove difficult for other countries in the region to follow through on investments toward reform, and would thus embolden entrenched interests and anti-reform voices in the region.

Eric Hontz is a Program Officer for Eurasia and Marc Schleifer is Regional Director for Eurasia and South Asia. 

Gagauzia: Another Obstacle on Moldova’s Path to Europe?

Welcome_to_Gagauzia

In 2014, shortly before the Republic of Moldova signed its EU Association Agreement, nearly 99 percent of the electorate in the little-known, autonomous region of Gagauzia in southern Moldova voted in a referendum to reject closer links with Europe in favor of joining the Russian-led Eurasian Economic Union. Moldova’s central government first tried to block, and then declared unconstitutional, that referendum. Gagauzia’s separatist inclinations, weak economy, and deep ties with Moscow could pose as much of a threat to Chisinau’s hope of drawing closer to the European Union as the unresolved conflict in Transnistria.

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Leveraging the Youth Bulge to Transform the Arab World

Syrian Economic Forum students learning civic education in Syria.

Syrian Economic Forum students learning civic education in Syria.

Last Thursday marked five years since Tunisian President Zine El Abidine Ben Ali was ousted from power in what has come to be known as the Jasmine Revolution. A well-waged campaign of civil resistance, provoked by the self-immolation of Mohamed Bouazizi, ultimately led to the upending of Ben Ali’s autocracy and catalyzed a series of protests across the Middle East and North Africa.

Five years after the first Arab Spring uprising, we have the benefit of hindsight. We can pinpoint, with relative certainty, the various elements that contributed to the revolutions occurring when and where they did. Five years on, and we continue to grapple with both the inspiring and heartbreaking implications of revolutions in Syria, Egypt, Libya, and Tunisia. A critical element that drove the protests, often mentioned in the early days but since relegated to the margins of the conversation, is the youth populations of these countries.

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Ten Years of Expanding Opportunity in Pakistan

Women entrepreneurs celebrating Global Entrepreneurship Week in Pakistan.

Women entrepreneurs celebrating Global Entrepreneurship Week in Pakistan.

How far has Pakistan come? And how much further is there to go? This month, we mark the 10th anniversary of CIPE’s office in Pakistan by asking these questions.

At the time that CIPE opened its Karachi office, then-President Pervez Musharraf had installed a technocratic government and had liberalized the media, setting the scene for change in Pakistan. CIPE recognized the opportunity for deep change, and made a commitment to supporting that reform process through a major new program working with the business community, civil society and media. CIPE sought to open space for the private sector and civil society to have a greater say in policymaking, and to hold the government accountable for its promises.

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Kuwait Needs More Young Entrepreneurs

Photo: Hanna Rhodin

Photo: Hanna Rhodin

By Hanna Rhodin

There is a long history of a bustling merchant culture in Kuwait. Since the 18th century, the country has been known for trade: whether in exchanging goods with India, boat-building, or its pearling industry. Wealth has come to be associated with certain families within the country, thanks to their past success in business that, in some cases, dates back generations. Today these families continue to dominate the private sector. However, according to the official statistics, nearly 85 percent of the Kuwaiti population is still employed by the government. While the last decade has showed a surge in entrepreneurial initiatives, roadblocks and barriers remain.

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Small Associations as a Way to Strengthen Financial Security

By Rosino (Flickr) [CC BY-SA 2.0], via Wikimedia Commons

By Rosino (Flickr) [CC BY-SA 2.0], via Wikimedia Commons

By Hanna Rhodin

How do you go about starting a business when you lack the education or financial means? The answers often depend on the region, country, or city you live in. In early 2015 I traveled to Beira, Mozambique to volunteer with Care for Life, an NGO working with a holistic approach to assisting families in low-income communities. Part of this approach was to enable individuals to take charge of their own livelihood by establishing a small family business. This included  their work with starting associations and mutual businesses — the latter being a 10-step process which many do not know how to undertake.

Registering a business should not take more than a few weeks (or, in more developed countries, a few days), yet during the two months I was working with these associations the process proved to take longer than that. For various reasons, several did not complete it and were still working on it as I completed my time there.

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Association Executives Strengthen Their Profession in the Philippines

PCAAE presented its 1st ‘Ang Susi’ Awards on December 3, 2015 at the Philippine International Convention Center (PICC) during the gala dinner and awards night of the 3rd Association Executives Summit.

PCAAE presented its 1st ‘Ang Susi’ Awards on December 3, 2015 at the Philippine International Convention Center (PICC) during the gala dinner and awards night of the 3rd Association Executives Summit.

By Octavio “Bobby” Peralta

The Philippine Council for the Advancement of Association Executives (PCAAE)* was created in 2013 to facilitate the work of association executives in managing their organizations, and to advance their profession through knowledge delivery, recognition and collaboration initiatives. The PCAAE is the only platform in the Philippines that puts associations and other membership organizations such as chambers, societies, foundations, cooperatives and the non-profit sector at large under one umbrella.

Last December, PCAAE held its annual flagship event, the Third Association Executives’ Summit (AES3), in Manila gathering association professionals, managers, and leaders. The Summit focused mainly on membership-management and governance issues under the theme “Compass to Excellence” and drew 120 delegates to the Philippine International Convention Center, an impressive turnout considering how many Philippine associations’ event calendars were disrupted by the nation’s hosting of APEC 2015.

For the first time, aside from the learning tracks, a table-top exhibition on association services was concurrently held as were the “Ang Susi Awards” that recognized the achievements and contributions of associations in national sustainable development.

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