Business representatives are carefully watching what president-elect Volodymyr Zelenskiy and his team will do to preserve the independence of the National Bank of Ukraine, disavow oligarch influence, and help improve rule of law in Ukraine.
In the week after Zelenskiy’s landslide victory, business leaders and international partners have come forth with concerns and suggestions for the new administration.
The European Business Association released a list of seven steps it wants to see from Zelenskiy and hosted an event on April 25, to discuss the business community’s hopes and concerns for the next five years.
The American Chamber of Commerce also released a statement listing ten priorities for the future following its meeting with Zelenskiy on election night.
In addition, several business experts spoke to the Kyiv Post about their major concerns and what Zelenskiy can do to assuage them.
Clean nominations
Aivaras Abramovicius, a Zelenskiy advisor, told the assembled crowd at the EBA’s Thursday event at the Hilton Hotel in Kyiv that the future administration would have three priorities: “team, team and team.”
Business experts told the Kyiv Post that they want to see Zelenskiy’s nominations for major posts as quickly as possible. But more importantly than that, they want nominees to have no blemishes on their record.
“It’s important to recognize the appointments of people who lack a bad reputation,” said Anders Aslund, a senior fellow at the Atlantic Council said. “This is more important than the lack of experience. People want change and so does the business community.”
He added that two of the most important nominations are a new prosecutor general and anti-corruption prosecutor. Former economy minister and Zelenskiy adviser Oleksandr Danyliuk, said that current general prosecutor Yuriy Lutsenko needs to go. The role will probably go to an activist, according to Danyliuk.
NBU independence
The new president “must respect the independence of the NBU,” said Sergiy Fursa, head of fixed income sales at the Ukrainian investment firm Dragon Capital. “The business community is nervous about it because the key priority of the NBU is an important part of the institutional reforms.”
Zelenskiy’s team had previously talked about a possible NBU audit, which could include questioning the head of the central bank, Yakiv Smolii, due to slow pace of reforms. Dmytro Razumkiv, a Zelenskiy adviser, even suggested that an audit might lead to dismissals.
The EBA, Dragon Capital and the Center for Economic Strategies on April 25 released the results of an investor survey, which found that “Attempts to undermine NBU independence” would have a major negative impact on their investment decisions.
“It’s obvious that it would be a major mistake” to sack NBU officials, said Aslund.
However, Danyliuk told reporters that the new team will not only respect the NBU’s independence but strengthen it.
Oligarchs
Oligarch influence remains a top concern for many business leaders. Thomas Fiala, the head of Dragon Capital on April 25 characterized “oligarch monopolization” of key industries as a major impediment to increased investment.
The investor survey found that “reducing oligarch influence” was the number three priority, behind demonstrating anti-corruption efforts and appointing reformers to key positions.
“The elephant in the room is Mr. (Ihor) Kolomoisky,” Andy Hunder, the president of the American Chamber of Commerce, told the Kyiv Post. This oligarch and former owner of PrivatBank, has business ties with Zelenskiy, who attracted criticism as a result.
PrivatBank was nationalized in 2016, after it was found to have a $5.5 billion hole in its ledger, allegedly moved out of the bank by Kolomoisky through sketchy enterprises. Last week, a Kyiv administrative court ruled that PrivatBank’s 2016 nationalization was illegal, an important victory for Kolomoisky who wants to get it back. The case will now head to appeals.
Financial experts had told Kyiv Post that if Kolomoisky regains control of PrivatBank, the country’s financial system would approach collapse.
“If PrivatBank nationalization is canceled, the bank will go into liquidation and it will make a huge problem,” said Fursa. “It would destroy our programs with the International Monetary Fund and our international creditors.”
On April 25, the international credit rating agency Moody’s stated that if the new president aids Kolomoisky in the battle over PrivatBank, it would “badly damage” Ukraine’s credit profile. However, the agency also said “we attach a low probability to such a scenario.”
Abromavicius, seemed to blame the previous administration for some of the problems that the president-elect will inherit. These include the recent court decision about PrivatBank, as well as the Constitutional Court eliminating a law against illegal enrichment in February.
Rule of law
Fiala said that overly aggressive actions by law enforcement bodies dampen investment. Fursa added that one of Zelenskiy’s challenges would be to tackle some “siloviki” or law enforcement officials and reduce the pressure they exert on businesses.
Hunder said that rule of law was AmCham’s top priority. He said that the government should “guarantee real and effective judicial reform, rule of law, fair justice, transparent operations and selection of judges at all levels, including launching a full, operational High Anti-Corruption Court in the nearest term.”
The investor survey found that “lack of trust in judiciary” is the second most important problem perceived by business, followed by “widespread corruption.”
Danyliuk said that the National Anti-Corruption Bureau of Ukraine, or NABU, and the Special Anti-Corruption Prosecutor’s Office, or SAPO, must be relaunched.
Staying positive
Despite concerns, multiple business representatives told Kyiv Post that they have not seen negative investment flows related to the election.
Marina Petrov, the director of the European Bank for Reconstruction and Development’s Ukraine office, said that the bank plans to double its investments in Ukraine to $1 billion during 2019. She added that she sees investors ready to come to Ukraine, as long as the country doesn’t take any unexpected economic decisions that might scare them off.
Petrov added that she expected Ukraine to continue cooperating with the IMF, whose review of Ukraine is coming up in May. Danyliuk said the incoming administration is prepared to do so.
“We look forward to a successful review in May,” he said.
