The team of “star” reformers is falling apart. Balcerowicz fled from Hroisman

Team of “star” reformers is breaking up. Balcerowicz fled from Groysman

“This reformist group resembles either a state liquidation commission or a commission preparing for a sale”

Reports the ANTI-COR portal, citing the media.

A year ago 18, Ukraine established the Strategic Group of Advisors to Support Reforms. At the head of the new body stood the architect of Poland’s “shock therapy,” former Finance Minister and head of the National Bank of Poland Leszek Balcerowicz, and former Deputy Prime Minister and Finance Minister of Slovakia Iván Mikloš. These well-known, respected economists were to serve as a kind of support for the Cabinet of the new Prime Minister Volodymyr Groysman.

From Groysman, who immediately promised to show everyone how to run the country, radical reforms in all sectors were expected, so such heavyweight consultants, it seemed, would be helpful to the former mayor of Vinnytsia. Moreover, the work of the group was fully funded by donor funds without burdening the state budget. But some cabinet members, in conversations with Glavkom, openly admitted that there were no traces of the Strategic Group’s activity for a year.

Among the group’s priorities were seven key directions: reform of public finances, privatization, land reform, judicial reform, reform of the prosecutor’s office, state administration, and state-owned enterprises.

In total the group numbers about a dozen foreign and Ukrainian specialists, but, as it became known to Glavkom, at the end of March it lost one of its pillars—Leszek Balcerowicz. The one-year contract expired, so he decided that was enough and returned to Poland. Although previously the economist was not in Ukraine permanently—about a third to a half of each month. Now rumors predict Balcerowicz to head the National Bank (though he does not formally meet criteria such as citizenship and residence in Ukraine), while Slovak Mikloš remained among the reformers’ stars as the sole “star.”

Results

Since its creation, this body spent nearly six months developing a reform plan, which in September was handed to the Prime Minister, the President, and the Verkhovna Rada and publicly presented in October. Among other things, it envisaged large-scale privatization, reduction of the share of state expenditure in the economy, and lifting the moratorium on land sales. The authors believe that diligent implementation of these studies by the government would ensure GDP growth of 5-6%. Iván Mikloš’s deputy in the Strategic Group, Pavlo Kuhta, asserts that some of these recommendations were taken into account in preparing the government’s action program for 2020 year.

Balcerowicz–Mikloš Strategic Group is not the first attempt to create a reformer background under the government and president. Under Yanukovych there was a committee of economic reforms headed by Rinat Akhmetov’s ally Iryna Akimova, but reforms never materialized. Although Akhmetov himself once commissioned a development plan from reputable international experts at McKinsey. After Petro Poroshenko’s victory, George Soros announced plans to create a strategic group of advisers to prepare reform plans for Ukraine. In December last year, the Benkudidze Center presented its own “Program of Radical Reforms” titled “Plan for Ukraine.” So there was no shortage of plans and strategies, but their implementation has been far from smooth. And the government’s plans for 2020 year also look Napoleonic and, in the view of many experts, unrealizable. Especially considering how the authorities themselves resist reform, and Poroshenko’s “decisive reforms” have long become a mocking meme.

At the start of its work in Ukraine, Balcerowicz stated that the development of the state is much better than the picture being drawn, so they should better show the achievements that are not always noticed in the West. Summarizing his work in the group, in an interview with NV he reported how much he managed to accomplish together with the government, and noted that critique should target not the president and government but populists who demand easy solutions. The Polish reformer praises the work of the head of the National Bank Valeriya Hontareva, whose team, he says, did a wonderful job of saving the banking system. He also points to positive shifts in the gas sector reform, fiscal policy, the introduction of electronic asset declarations, the ProZorro tender system, etc. At the same time Balcerowicz laments that Ukraine has still not launched the land market or privatization of state-owned enterprises.

It is telling that the same critique is voiced by the International Monetary Fund, so the group of advisers is effectively a second front of pressure on the Cabinet—in particular on land and pension reform, the solutions to which Kyiv pledged in a memorandum with the IMF. Although formally the group insists that they are only advisers and cannot significantly influence government decisions.

“Mostly we are in the Cabinet and in direct contact with certain ministers, – says group member Pavlo Kuhta. – The government does not set up with the group—we are not political leaders of the country, we only help the government achieve results. People like Balcerowicz and Mikloš understand how reforms are implemented, what to focus on, where to spend resources. It seems that communication with Mikloš is useful for the prime minister, because he can use the experience already gained by other countries.”

Successes

Kuhta recalls an example of recommendations from the group that the government implemented: “For example, the abolition of price regulation on food products, which severely hindered the development of the food industry. It was a politically very toxic issue, but we, with the Ministry of Economy, convinced the government to scrap this regulation. And if in autumn food prices rose in line with overall price growth by less than in 2016 year, now they have started to fall, so nothing bad happened.”

However, political scientist Vadym Karasyov believes that not all group advice has been beneficial: “I think in the case of the tariff increases the role of these advisers was quite significant. It’s Balcerowicz’s handwriting. By the way, not entirely successful, who is relentlessly criticized in Poland itself for giving Poland over to the IMF. So this group, if it contributed, did not always have a positive impact. But overrating their role is not worth it—we are different countries after all. Poland conducted reforms in exchange for EU and NATO membership, and all parties there were reformist, not populist. Therefore political conditions for Polish and Slovak reforms differ greatly from Ukrainian.”

Karasyov calls Balcerowicz and Mikloš “IMF agents in a good sense,” recalling that the group’s work is funded by Western donors: “That is how the West always did it when transformations were more in its interest than in that of the recipient country.”

Political scientist Andriy Zolotarov is not inclined to overestimate the group’s activity, viewing the strategists’ work as merely a pretty screen: “In our country the main reformer is the IMF and our external partners, so there is no basis to claim a serious role for the reformist group. The music is ordered by somewhat different structures, and reformers like Balcerowicz are given the role of decorations, the background of reform. Although I would not call what was done in the energy sector reform. It resembles either a state liquidation commission or a commission for preparing for reselling.”

The Strategic Group members told Glavkom that they would work as long as the government is interested. And it is hard to imagine a situation where the prime minister would try to opt out of this “voluntary-mandatory” assistance. But the real results of this Western reformers’ loudly advertised activity at the end of a year look quite modest.