Over only a few years, a bunch of young people managed by President Mikheil Saakashvili turned a postwar mafia state with water and electricity shortages into an investor’s heaven with rule of law and the ambitions of Singapore and Hong Kong.
Five years ago in the World Bank’s annual Ease of Doing Business, Georgia was in dubious company, along with many other former Soviet republics. This year, Georgia landed 11th, ahead of Japan, Sweden and Finland.
In a recent Forbes ranking, the Caucasian republic was named Europe’s most liberal tax regime and the world’s fourth after Qatar, Hong Kong and the United Arab Emirates. There are a cluster of other rankings that can serve as indicators of Georgia’s progress. In a report devoted to Georgia, the U.S. Agency for International Development recently concluded that reforms in Georgia were “the broadest, deepest, fastest business climate reforms of any country in the last 50 years.”
Georgian workers perform renovations in a disused car factory in Georgia’s western city of Kutaisi on June 12, 2009. Standing amidst a wasteland of abandoned and rusting factories, Mohammed Refat represents the new, and unlikely, face of foreign investment in ex-Soviet Georgia. (AFP)
So what’s in it for Ukraine?
What lessons can we, a vast European country of a disillusioned 46 million, learn from a tiny Caucasian republic of 4.5 million?
I have decided to break my observations into eight simple points.
Size doesn’t matter. The most frequently quoted obstacle in the way of reforms in Ukraine is its sheer size. Well, you could maybe use that excuse if someone actually tried to carry out reforms and it didn’t work out. But let’s face it: nobody did. And nobody even tried. My French friend, a political consultant, describes this ubiquitous Ukrainian fear, size may matter when you are in bed. And only may. But it absolutely doesn’t matter if you are not even going to kiss. This unsophisticated comparison proves the point to even the most creative oppositionists to reforms, who quote centrifugal forces and multiplying effects or some other rubbish that will supposedly arise in the periphery, once we take the first steps.
In other words, difficulties may arise related to the size of the country. But they shouldn’t be used to justify doing nothing, which has been the case for the past 19 years.
The recipe for reforms is crystal clear. What the Georgians did is a pretty standard package. They just did it faster and more radically than other nations had. All countries from Singapore to Ireland cut red tape, fought corruption, lowered and simplified taxes. In other words, remove barriers in the way of capital, technologies and expertise. As a result, investment will soar, competition will grow. Living standards also go up as a result. It’s as simple as that.
Whoever is thinking of doing reforms should start with three things. First, deregulation. Georgians killed 85 percent of all licenses and permits, Ukrainians should get rid of at least a half. Second, or maybe first, replacing all government officials and reducing what the bureaucrats call “the state apparatus” by at least three to five times, and not 20 percent as President Viktor Yanukovych recently proposed. Georgians reduced the number of civil servants 20 times.
And third is exterminating corruption. Start by jailing kleptomaniacs – all of them, not only political opponents – and raising salaries to those remaining. I would raise pay about five-to-seven times, Georgians pumped it up 20 times. We are starting from a higher base.
Personalities matter. Georgians wouldn’t be able to conduct reforms if it wasn’t for Saakashvili and his associates. Whatever the pressure from the civil society, people in charge should posses a vision and political will. A reformer should believe in what he does and understand why. Ukraine’s two top government managers can’t do it. Not because of a criminal record but because there is nothing in their past that suggests that they can.
They don’t understand the outside world and how it works. In one of my previous columns written for Korrespondent magazine I wanted to jokingly suggest to Yanukovych to take his wife, and go to the United States, for example, and rent a car in New York and slowly drive the whole way to San Francisco. He might even take an interpreter with him. But obviously he opted for smaller distances – from his mansion outside Kyiv to the presidential palace in the center of the capital, at much higher speeds and with much bigger entourage than just a wife and an interpreter.
People with a vision are abound in Ukraine. But they exist in a parallel reality to the government. Brand managers, tax lawyers, marketing directors, PR specialists, investment analysts are all solid professionals, but they never associate themselves with the government here. There are two Ukraines: one with young and middle-aged, well-travelled professionals; and the one of senile, overweight, red-faced government officials who never ventured beyond Sharm-el-Sheikh or Pattaya at best. That may change. These parallel realities may cross and that would be the greatest breakthrough.
I don’t believe in gradual changes. I think it’s only possible for a group of people with a vision to come and push for reforms. Gradual rejuvenation of the government has so far led to the assimilation of newcomers and a multiplication of looters and kleptomaniacs.
Radical reforms should be conducted at the very beginning of the presidential term. This is a piece of advice not from me, but from Saakashvili. People might then feel an effect by the end of the first term and the reformer then has a chance for a second term. Informing the public and packaging the reforms for internal consumptions is also vital. That’s a piece of advice from the Georgian deputy interior minister who carried out an overnight overhaul of police. She’s a 31-year-old woman and was only 27 when she had begun to embark on reforms.
Ukraine doesn’t have its own way. Anybody who claims Ukraine should invent a wheel and ignore international experience in modernizing its economy is a quack. Yes, nuances may differ. But the essentials are the same (see point 2). So far Ukraine’s own way consisted of wealthy individuals monopolizing whole industries with 19th century technology that process raw materials with little or no added value. That comes with a mandate to the same wealthy individuals to rob the state by not paying taxes. Bureaucrats are called on to solidify the status quo by cutting any potential competition and keeping the cost of the workforce low. Ukraine’s own way works just fine! The question is for who? We have some of the wealthiest people in Europe and one of the lowest average salaries. When I interviewed ex-Prime Minister Yulia Tymoshenko, I asked whether she was planning to conduct reforms similar to those that the Poles and the Czechs did. She said no, we have our own way. Boom, that’s a scam. That’s when I fell out of love.
People in Ukraine need to start believing it’s possible. People see the obstacles, not the solutions. And that’s what I’m really sick of. Anybody I speak with about adapting Georgian experience, or just generally about pushing reforms in one way or another– and these are not bums down in Podil – says it’s not possible because “they will not let us do that,” “they will stifle everything” and eventually “it will get worse.” Who on earth are “they” and what are you for then, for God’s sake? Finding excuses for not getting down to business of upgrading and modernizing the country is a poor cover for inferiority, underachievement and provincialism.
A few years ago government officials and regular Ukrainians talked about irrelevance of Polish, Slovak or Irish reforms because of historical, cultural and God-knows-what other reasons. But now, after the most corrupt and rundown post Soviet republic did it over just five years, they don’t.
And guess what? There is a new success story brewing out there. It’s Belarus.
Yes, isolated, dictator-ruled and mocked by Ukrainians as Soviet, Belarus has left Ukraine far behind. The land of Alexander Lukashenko is now #58 in terms of the ease of doing business in the World Bank ranking. It’s the same list where Ukraine is #142. Moreover, Belarus this year was named by the World Bank as one of the top 10 reformers in the world.
Is everybody still looking for excuses?
Vitaly Sych is chief editor of Korrespondent, the leading Ukrainian weekly news magazine.
