Business community reacts to new Ukrainian cabinet

Business community reacts to new Ukrainian cabinet

Ukraine’s expatriate business community has shown cautious enthusiasm for many in the new government mixed with dismay at some of the new appointments made on Dec. 2.

For the first time in Ukraine’s history, the Cabinet also has three expats in its ranks, natives of America, Lithuania and Georgia. All three were granted Ukrainian citizenships by President Petro Poroshenko just hours of their appointments. They pledged to cancel their native passports to comply with local law.

The expats in the government have been reason for jubilation for the business community and the authors of some of the most inspiring pledges in the days since their appointment.

New Finance Minister Natalie Jaresko, a Ukrainian-American from Chicago and the founding partner of Horizon Capital equity firm, said she plans to restart negotiations with the International Monetary Fund immediately and produce a 2015 budget by year’s end.

Economy Minister Aivaras Abromavicius promised to come up with solutions for Ukraine’s money-sucking state monopolies before year’s end, and said that change will come swiftly. "To wait Lithuanian said

means to fail," the "We come from business, we will not tolerate inefficiency."

Alexander Kvitashvili, the new health minister from Georgia, said in an interview with delo.ua news portal that he planned to start cleaning up corruption in medical tenders that have plagued Ukraine for years. He also said warned against business as usual. "Come to me (with a bribe) and go to jail. Come again, and go to jail again."

The boldness of some of the choices impressed.

"There is a certain ’wow’ factor,’" says Andrey Bespyatov, managing director of Dragon Capital, adding that the appointment of technocrats and foreigners brings hope of "noticeable reforms" being put into place.

Jaresko, in particular, inspired confidence.

"Jaresko is a good option for the Finance Ministry. Investors trust her. It will be easier for her to persuade them lend money to Ukraine at a lower rate," said Denys Shchur, deputy head of corporate clients department at Netherlands’ Universal Bank operating in Ukraine.

Trust is an important elements of Ukraine’s economics policy, which is not only trying to encourage foreign investment at a time when Ukraine’s economy is contracting, but also to ensure the timely transfer of loans from the International Monetary Fund to replenish Ukraine’s dwindling foreign reserves.

Steven Gamelsky, CEO at Greentech Overseas, sees the bringing in of people frpm the investment community as a positive sign that the government is ready to work to work with business,

adding that they bring "transparency and effectiveness" with them.

Viktor Luhovyk of Dragon Capital says he knows the work of the new minister of infrastructure, Andriy Pyvovarskyi, from when he worked for them from 2006 until 2012. He says the new minister is "very bright" and "knows the system," though it remains to be seen if he and others from the financial sector can "change the system to function like the one they know."

Some, however, despite respecting many of the new people joining the government find it very unlikely that things will change and fear that backdoor deals will continue. "Nothing will change in the Cabinet. I’ve talked to some senior members of the government last night and they said they’re ready to ’assist’ in resolving any business issues," said Volodymyr Selsky, senior executive at LNK Energy, a U.S. firm that invests in biogas production in Ukraine.

The key issues remains whether people can turn their experience from the private sector into success in the public sector.

"The majority of ministers don’t have experience in the civil service," said Bespyatov of Dragon Capital. "Running a company and financing a country is another."

One of the new ministers who has caught a lot of criticism is Volodymyr Demchyshyn, the new energy minister. Demchyshyn was formerly head of the National Commission on Energy Regulation but is still a relative unknown in the energy sector. "I don’t know him at all," said Peter Clark, the Chevron manager for Ukraine.

"The new energy minister has no experience in the business aside from a short period of time with the NERC," said Robert Bensh, managing director and partner with Pelicourt LLC, a private equity firm with assets in Ukraine. "The new energy minister has a lot to prove and he has no time to learn."

The sentiment that the new ministers must prove themselves to the business community to show they are serious and capable of reforms that the economy needs is widespread.

"I expect him to work his ass off!" said Stefan Verbunt, the European Union mission’s expert on land market about new Agriculture Minister Oleksiy Pavlenko.