You're reading: Planes, trains & automobiles minister big on future, less so on past crimes or criticizing obstructionist oligarchs

Infrastructure Minister Andriy Pivovarsky manages aviation, railways, roads, ports and postal services – just about everything that everybody in Ukraine uses.

It’s way too much for one person, which is why Pyvovarsky is aiming to decentralize and privatize parts of the massive structure that has created illicit fortunes for well-placed insiders for more than two decades.

But when it comes to corruption, Pyvovarsky is not looking back, only ahead.

“My philosophy is that I should do anything possible to prevent such things in the future and make those changes institutional so that when I am gone… it will be difficult to go back to the old performance,” Pyvovarsky told the Kyiv Post in an interview.

To achieve his goal, one of the strategies of the 37-year-old minister has employed is transparency. His ministry has one of the most modern and informative websites in the Ukrainian government.

It may be the best strategy for the times, but not a flawless one. He had difficulty providing the number of corruption cases filed with prosecutors and didn’t show much interest in following up about whether criminal charges were ever filed.

Since there is no way for anyone to manage the 600,000 state employees in his ministry, Pyvovarsky relies on key managers at state companies. He exercises more direct control over a 256-person analytical team that helps him identify problems and priorities.

“If there is a red flag then I know that there is something going wrong,” Pyvovarsky, who was the director general of the Continuum Group and a former managing director of Dragon Capital, an investment bank, said. “They do their job properly… I don’t need to push them around.”

The thought of losing good people is one of his top concerns. He promised his team a fair and liveable wage, but admits that the state has not been able to come up with a fund to provide decent public sector salaries.

“We just need to come out of the closet and start paying bureaucrats well on the budget level,” Pivovarsky says. “If we have competitive salaries, I can bring a lot talent from the street.” He said that an Hr 20,000 monthly salary should be the minimum.

Sector by sector, here’s a rundown of Pivovarsky’s current challenges and thinking:

Railways

The state enterprise Ukrzaliznytsia, with a bloated workforce of 285,000 people, makes up almost half of the ministry’s employees and is expected to end the year with Hr 50 million in losses. But he’s not going to seek privatization of the behemoth.

“There are quite a few bad examples of privatization of railways in the world,” Pyvovarsky said. “In case of Ukrzalizntysa, the infrastructure will never be private. It will be state-owned.”

His strategy is to streamline the management. “Corporatization will help us create a new structure, bring new people to the company that will be compensated fairly, will help us clean up the balance sheet,” he said.

Slimming the workforce would be a start, but Pyvovarsky said the reductions are not easy to carry out. “It’s a process,” he says. “Until we educate the people, there will be populists who will be killing me.”

Yet another move would be inserting a board of directors to make decisions, rather than one “monarch” deciding everything.

Curiously, news outlets such as ICTV and Fakty – both owned by billionaire oligarch Victor Pinchuk, whose Interpipe business is a big customer of the state railways – have been harder on the minister than many other Ukrainian media outlets.

Pyvovarsky says he doesn’t know why.

“It’s a very interesting situation,” Pivovarsky says, and one that he says confounds him since the Infrastructure Ministry has developed a mutually beneficial deal between Ukrzaliznytsia and Pinchuk’s wheel and pipe company Interpipe.

“They buy scrap metal from Ukrzaliznytsia at market prices. We buy wheels from them at very favorable prices.”

Aviation

Although most aviation exports put the blame for Ukraine’s uncompetitive airlines industry on billionaire Ihor Kolomoisky’s success in nearly monopolizing air travel through his Ukraine International Airlines, Pyvovarsky oddly has nothing bad to say about the oligarch.

Pyvovarsky even disputed the premise that Ukraine International Airline’s dominant role forces air travelers to pay more for less. He said that Kolomoisky is not an obstacle to the development of a competitive air market. Instead, the minister blames the recession and Russia’s war as the chief obstacles that limit choices.

“If you go to the website of Ukraine International, if you try to book tickets in advance, then you will see that in most cases it will be cheaper than any other foreign carrier,” Pyvovarsky says.

Not many aviation watchers agree with him.

Ukraine International Airlines operates 50 percent of aviation routes in Ukraine, giving it the right to fly 170 routes, with no competition in many of them, according to Oleh Marchenko, who consults airline companies as a partner with the Marchenko Danevych law firm. “In many cases, Ukraine International Airlines abuses its exclusive position by flying only half or less of the number of permitted flights, while others cannot fly since they do not have rights,” Marchenko says.

Evgeniya Satska, a spokeswoman for Ukraine International Airlines, said Marchenko’s figures are exaggerated. Satska says the airline operates only 37 percent of aviation routes in Ukraine and 113 routes.

The minister also defended Prime Minister Arseniy Yatsenyuk, saying that he was out of the picture regarding the temporary return as head of the State Aviation Service of Denys Antoniuk, a person known to be closely associated with Kolomoisky. Earlier, Odesa Governor Mikheil Saakashvili blamed Yatsenyuk for serving Kolomoisky’s interests by reinstating Antoniuk.

“The investigation was done, he was dismissed for the duration of the investigation. Then the investigation was finished and there was some time taken to file the report. But by law, since the investigation was finished, he returned to work,” Pyvovarsky explained. “The report was issued, it was made public… the Cabinet of Ministers decided based on my request to fire the guy, and the guy was fired.”

Ports

More has been achieved in the decentralization of Ukraine’s aging port infrastructure.

“We conveniently and strategically sited ports, and yet people were bypassing us. In some cases people were going to the Baltic states, and then through Ukraine by Ukrzaliznytsya, which is stupid,” Pyvovarsky said.

The main reason for this ludicrous decision-making is that the bureaucracy was pushing businesses out of the way. “A system was created that institutionalized bribery,” Pivovarsky said. “We deregulated the system.”

The second reason for the ports’ unattractiveness is the massive depreciation of the seaport system. “We don’t have enough storage facilities for grain, facilities for handling containers, storage facilities for ore, coal, etc.” Pivovarsky said. “That’s why we’re fighting for the privatization of the stevedoring activities, for attracting new investments, attracting professional investors in the seaports that would help us improve the terminal infrastructure.”

The ministry has been fighting for the privatization of the 13 stevedoring companies for months now. The approval for privatization will have to come from parliament. Most deputies with whom Pyvovarsky spoke are interested in pushing through the bill. It is mainly the local bureaucracy at the ports that is creating difficulties.

“We will have some hiccups, but we will get through,” Pivovarsky says.

If Ukraine does go through the privatizations, tens of billions of hryvnias will be saved, the minister estimates, since more freight will be transported by water, a more efficient form of transportation than roads.

Roads

Ukraine’s roads have been in awful condition since the collapse of the Soviet Union.

“Unless we fix the weight control issue on the roads we will not have good roads ever,” Pivovarsky says. During the past two months, at least five state transportation inspectors have been severely beaten by lawbreakers who had overweight trucks. To fix the situation, Pivovarsky wants to install electronic weight control to remove the human factor. “The penalties will be European,” the minister cautions.

Another systemic problem is low salaries for road inspectors.

“The average salary is Hr 1,200 per month and the guy can make it in one hour” in collecting bribes, Pyvovarsky says. The old inspection agency will be liquidated and will be substituted with a new one. “The Poles managed to resolve this issue, which means we can do it as well,” the minister says. “Compensation has to be fair for the inspectors.”

The minister envisions a three-stage process to improving Ukraine’s roads. First, it must be clearly defined which government or private body owns which roads. Second, money should be redistributed according to the owner. Third, Ukravtodor will be decentralized into local government bodies.

Ultimately, the state enterprise will simply be another service oriented customer rather than the inspector and controller as well, a recipe for corruption.

Postal service

Not many know, but Ukraine’s state post office Ukrposhta is under the infrastructure wing as well. It also competes for the title of most corrupt state enterprise. “There are lots of opportunities for corruption,” Pyvovarsky says, such as the delivery of private parcels for free by Ukrposhta’s trucks.

Pyvovarsky wants to corporatize Ukrposhta. Privatization won’t be the solution since there is a significant social component that the private sector will not serve. “More than 30 percent of Ukrainians live in villages. And the Ukrainian post office is the only way to provide the administrative services and connection with the world,” Pyvovarsky says.

Conclusion

The minister will be pleased if he meets, by the end of the year, these goals: a corporatized Ukrzaliznytsia and the beginning of a corporatized Ukrposhta; parliament approval of legislation for privatization of state-owned stevedoring port companies; a new Ukravtodor management to start decentralization; and, the adoption of European Union safety standards for automotive transport.

“My mood is that every single day is my last day in office, so I have to complete as much as possible by the time I am done,” Pyvovarsky says.

Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected] and Kyiv Post chief editor Brian Bonner can be reached at [email protected].