Ukraine as a Business

Volodymyr Kish

I have just returned from spending two weeks in Ukraine and am more than a little troubled by what I saw there.  After twenty years of independence, there is a pervasive sense of unease and pessimism amongst the populace; a sense well justified by the events that have occurred since President Yanukovych got elected some two years ago.  To put it into some kind of understandable perspective, I would start by saying that the country does not have a government in the way we understand that term.  Ukraine, in effect, has become the victim of a corporate takeover by a well organized and disciplined group of Donbas businessmen who are running the country for their private benefit and profit.  The Government of Ukraine is in reality little more than a monopolistic business run by an amoral non-ideological elite.  Their sole aim is to achieve and maintain power for the purpose of enriching themselves. 

To this end, they have filled most of the positions of authority within all levels of government throughout the country with trusted cadres loyal to the Regions Party.  These appointees are then given license to enrich themselves through what is little more than tacitly accepted extortion.

It works essentially like this.  There are countless transactions and activities both at the business or personal level that require government approval, culminating in someone affixing a signature and official stamp on some document.  That signature and stamp will not be realized without an unofficial “fee” in the form of a specified number of dollars in an envelope being delivered to the responsible official or their designate.  That official will take his cut of this fee and pass the rest of it on upward to his superior, who does the same.  Depending on the importance of the transaction, the amount can be in the hundreds, thousands or even tens or hundreds of thousands of dollars.

There are many variations on this theme.  Securing a good job usually requires the payment of a similar fee.  For instance, if you want a job with the traffic police, it will cost you several thousands of dollars to get in regardless of qualifications.  Once in though, you can shake down motorists for on the spot “fines” with virtual impunity.  I witnessed this personally several times while in Ukraine.  Our car would be stopped by a policeman for a real or imagined infraction and the driver threatened with a large official fine.  However, for some lesser amount paid immediately in cash, we would be allowed to proceed on our way.

The same holds true for gaining entrance to any educational institution, securing decent medical care, arranging for an appointment, getting any kind of permit or licence, bypassing waiting lines and even getting on the party lists for securing a seat in Ukraine’s parliament.

The whole system is a vast pyramid funnelling money to Party of Regions loyalists.  It is remarkable how many mid-level government bureaucrats that officially make the equivalent of a thousand dollars or less a month in salaries are able to afford Mercedes cars and can build themselves residences worth hundreds of thousands if not millions of dollars.  The old political nomenclatura of Soviet times has been replaced by a rapacious oligarchic version within a bastardized and distorted free enterprise system.

This type of system, needless to say, creates a strong reluctance on the part of the victimized citizenry to pay taxes, so government tax revenues are totally inadequate to cover the government’s obligations.  As a result, the government has become dependent on foreign borrowing and IMF bail-outs.  Sadly, it has been long rumoured that most of the dollars and euros flowing in wind up in off-shore bank accounts, while the government prints more hryvnias.  Eventually, of course, this hidden inflation will surface with a vengeance, prompting a serious financial crisis.

The situation is undoubtedly dire, yet there are signs that the current regime’s days are numbered.  The blind allegiance of the Russified eastern part of Ukraine to the Regions Party is starting to erode as even there, the populace is starting to realize that they are being used and exploited and have received nothing in return for their political support at election time.

We are in for some interesting times indeed in the next few years in Ukraine.