Monday, April 17, 2006

So, how many were there?

Hi all. From an investor point of view it makes no difference whether she said that her government would seize 3000 businesses or whether she said that there might be problems with the 3000. Re-privatization was always about a process anyway and her government would determine which ones would be reviewed under that. Investors were looking for some indication about what her government’s position would be on it. Saying anything about 3000 companies in that context put a cloud not only on 3000 of them, whichever those were, but the number was large enough to put a cloud an any other business in Ukraine.

Are there any lasting consequences? There must be because it keeps coming up and not only from her critics. But she can lay it all to rest now by simply saying how many she is going to inquire into when she takes the reins. I suspect she won’t/can’t do that because of her supporters. They want justice and who can blame them, a point I have made over and over here. The problem is that by getting that justice you may just drive off the very people who would be your friends. (Another point I have been making here.) As a case in point, Western companies that are here offer Ukrainian employees much better benefits and pay, on the whole, than their Ukrainian and Russian counterparts. Is that in the interests of Ukrainians?

And that’s the other problem with it. Discouraging Western investment doesn’t mean there will be no investment (though, it will always mean investment at much lower levels) it means that investment will come in from other areas. The chief candidate right now is Russia. Russians invest here now; they have more of a stomach for the risk (another point I have been making here.) But with Russian investment comes less transparency and less accountability. And it also comes freighted with Kremlin geopolitical ambitions. Russian businesses, to stay in business, have to bow to the Kremlin—pure business decisions must take a back seat to that. Some people might like that but is it the best for the country?

The same sorts of things can be said about going after the oligarchs and the other “bandits.” Will it serve the interests of Ukraine in the end? When they start lining up at the European Court of Human Rights making their case for persecution and framing it in ways that Europeans understand, let me know. (See here for something on this.) Will the Europeans have patience with it especially when it is remembered those Ukrainians took our natural gas? Maybe they won’t do it. But one of the markers of good governance should not be leaving an important flank exposed to the enemy.

A lot more can be said and maybe should be said, but won’t be said by me. I am out of the government critiquing business. I have to function here and don’t want that ability to be compromised in the future. So anything further to be said on the subject will be said to clients only from now on.

But I do wish them all success. I would like to see more Ukrainians better off than just the Mercedes and BMW owners around here. Of course, that may mean putting justice on hold-- and there's the rub.

1 comment:

Anonymous said...

I agree that the ambiguity and uncertainty associated with such a number was unwise and has tainted the issue.

I've appreciated your insights.