In Ukraine, thousands of companies are still owned and operated by the government — a legacy of Soviet central planning that bleeds money from the already strained state budget. With the country in economic crisis, there have been renewed calls for Ukraine to speed up its privatization process and sell these firms to private owners who can restructure them and run them more efficiently.
Ukraine’s former Minister of Economic Development and Trade, Aivara Abromavicius, recently made a well-reasoned argument for faster privatization on the Atlantic Council’s blog. Similarly, the IMF has also urged Ukraine to speed up the pace of privatization.
However, focusing on the pace rather than the quality of privatization will likely result in a botched privatization process — which will undermine the little bit of faith Ukrainians have left in the free market and state institutions, potentially leading to the growth of populist movements and destabilizing the current government.
Ukrainian state-owned enterprises (SOEs) remain a drag on the national budget. They serve as incubators for corruption and gray market deals and in some cases serve as piggy banks for Ukrainian politicians. While I agree with Abromavicius that “simplicity, clarity, and transparency,” must be maintained in order to successfully privatize Ukrainian state owned enterprises, his concept of creating a simplified privatization procedure (without advisers) through an online auction of over 1,000 smaller SOEs will likely lead to public anger over a process that would surely enrich insiders.
Without independent advisors overseeing the due diligence process and hiring independent auditors, bidders will not have transparent access to information about the companies listed. This would, in effect, be like buying from an unrated seller on eBay with only a vague description of what is for sale – something that would not inspire confidence in potential buyers.
A lack of independent advisors–and the transparency and investor assurances they would bring to an auction—can lead to lower realized prices for the Ukrainian government, attracting only those bidders with inside knowledge of the true status of the enterprises for sale.
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 by 10 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.
On February 21, Bolivians will head to the polls to cast a yes or no vote on whether the constitutional two-term limit for presidents and vice presidents should be amended. The outcome will decide whether Bolivia’s current president Evo Morales will be permitted to run for office again if he so chooses.
Recent polling (10/26, 11/4) indicates that the vote will be close, with the intention to vote yes ranging from 46-49 percent and no from 39-45 percent, with 9-11 percent undecided. The current Bolivian constitution, approved in 2009 when Evo Morales was already president, establishes that presidents are limited to two terms (i.e. one reelection). President Morales was first elected in 2005. He was re-elected in 2009 and then was granted permission to run a third time in 2014 on the grounds that he had only served one term under the new constitution.
Why does it matter if citizens in Bolivia vote to approve a constitutional change that would pave the way for President Morales to run for a fourth term?
In an op-ed published in October 28, 2015 in Los Tiempos newspaper, Bolivian economist Roberto Laserna reminds his fellow citizens that the February 21, 2016 referendum only indirectly questions the permanency of president Morales. Ultimately, the vote will weaken legal certainty and stability of the rules of the game – i.e. democracy and rule of law. Read the translated text of the article below.
Brent Ruth is a Program Officer for Latin America & the Caribbean at CIPE.
Participants at the Nangarhar PBA launch event.
A year after the impasse over the 2014 presidential election was resolved, Afghanistan finds itself at a critical juncture in its economic development. Given the dramatic reduction in foreign military presence over the past several years and the decrease in development assistance from the international donor community, concerns are mounting that Afghanistan’s economy will be unable to sustain itself.
A recent study published by the Stockholm International Peace Research Institute (SIPRI) and the International Council of Swedish Industry (NIR) draws attention to the problem. “In its current state,” the report notes, “the Afghan private sector is not the engine of economic growth or instrument of social inclusion it has the potential to be. Popular dissatisfaction with unequal access to economic resources, flawed public services and goods, the adverse security situation, and predatory government activity undermine an effective and sustainable private sector.”
President Ashraf Ghani and the National Unity Government have laid out a wide range of proposals to kickstart economic development, but security conditions and political infighting have made it difficult to implement many of these reforms. Nevertheless, hope for progress and success remains. The Swedish report, while painting a grim picture of the current outlook, provides a concrete set of recommendations to Afghan government policymakers, the international donor community, and other key stakeholders, for incentivizing private sector growth and boosting economic development, thereby improving prospects for peace and stability.
Chief among these recommendations is the need for the Afghan private sector to play a greater role in the policy making process. On October 28, over a hundred leaders of the Afghan business community, civil society, and media, as well as prominent provincial and national government figures, convened in Jalalabad for the official launch of the report of the Nangarhar Provincial Business Agenda.
Today is the International Day of Democracy, when the world celebrates the importance of democracy and democratic governance. But the role of the private sector in building democracies that deliver prosperity and opportunity to all citizens is often overlooked. That is why the contribution made by private sector participants at the 8th Ministerial Conference of the Community of Democracies (COD) is particularly noteworthy.
The Community of Democracies was founded in 2000 as an intergovernmental coalition specifically focused on promoting democracy and democratic ideals (at the time, only 68 of 189 UN member states were democracies; today the number has risen to 84). This year’s Ministerial, which took place on July 22-24 in El Salvador, gathered representatives of civil society, parliaments, the private sector, and youth in the capital of San Salvador. The leading theme for El Salvador’s 2013-2015 presidency of the organization was “Democracy and Development.” About 800 participants from more than 70 countries attended.
Major global trends are changing the way we approach international assistance and policy reform. Private sector-led growth has produced enormous opportunities, even as market freedom and access to opportunity remain uneven. Political upheaval has raised hopes for democratic freedoms, yet freedom too often is undermined by poor governance.
Governance reforms must adjust to these shifting circumstances. As a rule, effective reforms tap the power of free markets and the strength of citizen engagement. Each country requires distinctive sets of solutions that reflect local capabilities and needs. These solutions take shape through policy coalitions forged by local partners. Often, they benefit from international experience in convening dialogue and mobilizing support.
Strategies for Policy Reform illustrates CIPE’s approach to improving governance in cooperation with local entrepreneurial leaders. This international case collection shares program experiences and results achieved across CIPE’s four focus areas: Enterprise Ecosystems, Business Advocacy, Democratic Governance, and Anti-corruption & Ethics.
In light of the recent terror attacks in Tunis and Sousse, which have debilitated the tourism industry and sent investors scurrying to reconsider their options and assets in the country, it is more important than ever to look at the intersection between economic growth and transparent democratic institutions in Tunisia.
President Obama and Tunisian President Béji Caïd Essebsi, meeting during Essebsi’s May visit to the United States, published this article about consolidating democratic gains in Tunisia and spurring responsible economic growth. The discourse would benefit from a deeper understanding of the legal and regulatory issues that stifle job growth in that country.