Ukraine’s richest got richer over the year, despite turbulent global markets and a world financial crisis, according to Korrespondent magazine’s third annual report on the issue.
Ukraine’s 50 wealthiest individuals saw their net worth almost double to $112.7 billion, owing to rising global energy and food demands, a robust domestic real estate market, and a construction and credit boom, the Kyiv Post’s Russian-language sister publication reported.
According to Korrespondent’s calculations, the capital the top 50 control is enough to finance the country’s state budget for two years and comprises 85 percent of Ukraine’s annual gross domestic product (GDP), whereas Russia’s richest can only boast of covering 35 percent of their country’s annual GDP.
“This is a very potential threat to civil society and the country as whole since this doesn’t give the middle class a chance to form,” said Viktor Stepanenko, a civil society expert at the Institute of Sociology within the National Academy of Sciences of Ukraine. “This kind of concentration of wealth marginalizes people and slows the formation of middle class values in society.”
Put another way, Korrespondent said the wealth of the richest 50 is triple what Ukraine has received in foreign direct investment since gaining independence in 1991.
The topheavy wealth concentration, experts said, is also a warning sign that a handful of oligarchs may have coopted the state. The danger is that the public interest will be subverted, experts said, with government adopting policies and laws that favor the elite at the expense of everyone else.
“The outcome of this for civil society is the public doesn’t control its interests,” Stepanenko said. “Its future is in the hands of a select few people who can act in their interests,” not in the country’s best interests, Stepanenko said.
Not many of Ukraine’s richest tycoons achieved their current positions based on entrepreneurial creativity or merit.
Indeed, at least 20 on the top 50 owned capital in Ukraine’s flagship, Sovietbuilt industries of metallurgy and energy. They acquired these assets during the roaring 1990s era of shady privatization.
“When you have a huge disparity between the 10 percent richest and 10 percent poorest in a country, this is an indicator that a country is unstable from the standpoint that society doesn’t view those with money as being legitimate, that wealth was acquired dishonestly,” said Mykhailo Mischchenko of the Razumkov Center, a Kyivbased think tank.
Another 10 in the top list amassed wealth in the banking sector, due mostly to Ukrainians’ fastgrowing demand for credit, Korrespondent observed.
Altogether, the list only saw six newcomers emerging from the construction, agribusiness, food and trading sectors some of whom tripled their wealth in a short period of time.
“What’s at stake here is not how much influence the richest have, it’s what they’re doing with their money,” said Jathan Tucker, a trader at Galt & Taggert Securities. “It’s good if they’re reinvesting their money in infrastructure, in modernization, in new plants but it’s also wrought with pitfalls if they influence politics and engage in capital flight by keeping money out of the country.”
If this trend continues, some warn, the pace at which crucial institutional reforms are made may continue slowly because change runs counter to the interests of the ruling elite.
“This means limited political competition, an impotent civil society, and high growth among those who control the country’s capital because they have all the advantages,” Stepanenko said.
But others see hopeful signs among Ukraine’s elite.
Tucker said Ukraine’s leading businessmen are getting more transparent and integrating into global financial markets.
“Many companies are now publicly traded so there’s a constant incentive to keep things transparent and viable for the longterm here,” Tucker said.
The annual Korrespondent rating is based on asset valuations calculated by Dragon Capital, a leading Kyivbased investment bank.
Far and away topping the list was Rinat Akhmetov, who has his hands in every key industry of the nation as System Capital Management’s controlling shareholder. His wealth is estimated at more than $30 billion.
Coal mining proved highly lucrative as Energy Concern’s three owners Viktor Nusenkis (7th), Leonid Baisarov (16th) and Gennadiy Vasylev (16th) all were promoted from being millionaires to billionaires.
Dnipropetrovsk’s Privat Group controlled by Ihor Kolomoysky (3rd), Gennadiy Bogolyubov (4th) and Oleksiy Martynov (6th) have a combined wealth of $17.7 billion and continue to integrate their enterprises by purchasing assets abroad.
High global food prices and fluctuating financial markets allowed bankers, builders and food growers and producers to increase their net worth. For example, megabuilders Mykola Tolmachev (38th) and Lev Partskhaladze (37th) doubled their wealth and Velyka Kishenya supermarket chain owner Roman Lunin (23rd) practically tripled his.
Although vodka producers took a hit last year, dairy producers profited: Ihor Yermeev (40th) and his companion Stepan Ivakhym (41st) nearly breached the billiondollar mark.
