$40 Billion annual road maintenance budget – Ukraine

The current budget for road maintenance in Ukraine sits at $16.9 billion – which sounds, and indeed is, a lot of money – and yet the state of Ukrainian roads resembles something like those of Berlin circa 1945 after the 363 air raids to which it was subjected by bomber command.

As such, Vice Prime Minister Oleksandr Vilkul has made very forceful representations to increase the annual road maintenance budget to $40 billion – almost a 300% increase.

He also proposes to reorganise the accountability of those responsible for road maintenance.  In short, the 117.7 thousand kilometers of regional roads will become the personal responsibility of the heads of the regional state authorities – thus removing the involvement of Ukrautodor, the State agency responsible for road maintenance, leaving it responsible for a paltry 52 kilometers of State adopted roads.

Naturally there is an increased opportunity for either direct theft of funds, or cronyism and associated kick-backs, but there is also a very clear area of responsibility and indeed personal responsibility for road maintenance within the regions – which is a good thing.

Odessa, March 2013

The above is a rather extreme example of holes in the road in Odessa I will grant – most are only ankle deep, but there are so many ankle deep holes that the 1.5 million residents of Odessa could all put a foot in each hole and there would still be more holes than feet to put in them!

The question relating to the solid lobbying for such a massive increase in funding is really whether it has been worked out on a cost basis for maintenance alone – or whether there is a percentage included for the undoubted graft that will occur at regional level to be plundered for personal gain, and yet still provide a significant and noticeable difference to the quality of the regional road infrastructure.

With no noticeable improvements over the decade I have lived in Odessa at $16.9 billion annually – what improvements will $40 billion annually get me?

A positive outcome will only be forthcoming if some regional authority heads are suddenly lopped off should road quality remain exceptionally poor I suspect – but  I won’t hold my breath for that to happen!

Ukraine – An energy hub – Be careful what you wish for

On Friday 3rd May, whilst I was enjoying my time off in the Odessa sunshine and taking in the beach life, Ukrainian Energy Minister Eduard Stavytsky had a meeting with the EU Energy Commissioner Gunther Oettinger (as well as Royal Dutch Shell and Exxon Mobil amongst others) in Brussels.

What became immediately apparent, if it wasn’t already clear before, is that Ukraine has decided that it can become a gas hub for the European continent and intends to pursue that strategy, making the most of its gas transport system and more particularly its vast underground gas storage facilities (50 billion cubic meters).

The infrastructure, whilst somewhat decrepit and thus in need of some serious investment, does at least exist already.

Very good – and an obvious goal to pursue given the soviet legacy Ukraine inherited.

But then there is the widely talked about “resource curse” to consider should Ukraine actually achieve its aim of both Black Sea Shelf and fracking production, transit and storage.  It may very well turn into an oil and (mostly) gas State.

Quite possibly a very good thing for the Ukrainian economy, GNI and indeed citizen income as well.

But at what social cost?

Of all 23 nations on the planet where 60% or more of GDP is derived from oil and gas – not a single one can be classed as a democracy.

Further all are very corrupt, almost completely unresponsive to the demands of their populations and have extremely low accountability amongst the political elite.

Looking at the Human Development Index which is a key identifier when it comes to identifying liberal consolidated democracies, almost all oil and gas States with 60% of GDP coming from those sources have extremely low HDI scores regardless of citizen wealth and GNI per capita.

That is not to say a low HDI score prevents democracy, of the bottom 46 ranking nations in HDI, 13 can be deemed a democracy of sorts and 2 of those, as liberal democracies.

Looking at the top 25 HDI scoring nations, only Singapore is not a democracy – and from the top 40 HDI scoring nations they are all democracies less Singapore and a few small oil and gas States (Qatar, UAE etc.)

Thus becoming an energy producing exporter and hub may well have dire consequences for an already “feckless” (per academic definition) political system in Ukraine.

One of the best ways to identify an effective and consolidated democracy seems to be to take the Freedom House score and multiply it by the World Bank anti-corruption score, and more often than not it closely mirrors the HDI position in the HDI league table – Spooky!

In fact, discounting the Islamic world, there is a very strong correlation between democracy, freedoms and any HDI score a nation has.

So becoming an energy producer and energy hub as planned will destine Ukraine to the usual fate of oil and gas dominant GDP nations with regards to democracy?

Well, not necessarily.

“Feckless” as the Ukrainian politics are and have been historically, there is nothing to prevent the current “feckless democracy” of Ukraine moving to a consolidated effective and possibly liberal democracy prior to the full  realisation of the energy producing/energy hub plan.  Should that movement to an effective and consolidated democracy occur prior to, or even simultaneously with the “energy plan”, then all may bode very well for democracy in Ukraine.

A very smart scholar named Przeworski has proven that (again removing the Islamic world from the equation) should the personal purchasing power of a nation reach a certain monetary figure (currently about $10,000, but a figure that needs to be index linked to remain relevant), then no democracy has ever crumbled.

In effect with a diversified economy and the average purchasing power per capita of $10,ooo or more, democracy is not only consolidated but invincible to the challenges of other governance models due to the middle class/ independent bourgeoisie.

Ergo, empirical evidence and academic works from the likes of Lipset, Prezeworski, Welzel and Ingehart etc, would all point towards the necessity of moving Ukraine’s currently “feckless politics” to an effective democracy whilst simultaneously trying to reach $X personal purchasing power and climbing the HDI league table if democracy is to survive any significant oil and gas increased share of the Ukrainian GDP.

The question is can the feckless political system stop being feckless before it leads Ukraine into the black hole of the resource cursed nations?  Looking at the entire Ukrainian political landscape and personalities within, that seems very unlikely without consistent external pressure and guidance.

All in all, an obvious and achievable plan for Ukraine – with very scary possible outcomes should it succeed.

Ukrainian EU perceptions

Nicely timed for my return to the blog after a week off, Eurobarometer has just released some survey results relating to the extent to which Ukrainians would like further EU involvement in Ukrainian affairs.

76% would like greater EU involvement in economic development.

69% would like greater trade with the EU.

64% would like greater EU involvement in human rights within Ukraine.

60% would like greater EU involvement in democracy in Ukraine.

Seemingly 53% of Ukrainians trust the EU more than NATO or the UN when it comes to external entities, and far more than the current Ukrainian government which has a 23% favourable rating, or the parliament and Ukrainian political parties with an 18% favourable rating each.

The full survey results can be found here – with my usual caveats relating to surveys and opinion polls naturally applying as they always do.

Nevertheless, caveats considered, some interesting indicators are apparent in this snap-shot of public opinion to ponder over during the next few days.

 

Is working in Ukraine as a foreigner about to get easier?

As it is my umteenth anniversary today, and thus via the “ball and chain” and the goodwill of Ukraine, I have permanent residency here, this entry really does not affect me in any way.

In fact it doesn’t affect anybody I know either.

It will undoubtedly affect some readers however – both currently and in the future.

It seems that the State Employment Centre has made assurances that the current (and no doubt overly bureaucratic) systems for granting work permits and temporary resident status (for the purposes of work) are going to be simplified – requiring far less documentation than currently is required – especially so as far as renewals/extensions are concerned, and which will subsequently be gratis if granted for those who have navigated the bureaucratic circus before.

They also state that consideration is being given to raise the duration of such permits from 1 year to 3 years.

A particularly good idea should the EU-Ukraine Association Agreement and DCFTA actually be signed – as not only will foreign confidence increase (to a greater or lesser degree) relating to entering the Ukrainian market at an SME/entrepreneurial level, those who want to do so, may actually stand a reasonable chance of navigating the bureaucratic hurdles that prevent so many currently.

It is necessary of course, to see just how the bureaucracy will be reduced – if at all – and I suspect not at all, other than the more expedited time line requirement for the bureaucracy to function and process applications.

Which documents will be subsequently scrapped from the current list will be far more interesting, as currently some of the documentation required is the barrier to entry – rather than the business environment itself!

Best guess thus far is here.

Failing to plan or planning to fail? United Opposition

I seem to be consistently critical of the “United Opposition” recently – not because I don’t like them, but because I despair at their lack of policy, lack of planning and lack of strategy.  Not to mention the whitewash over ideological differences that whilst in opposition may make little difference, but when in power will become significant and provide yet another dysfunctional government focused on internal division rather than governance in all probability.

All of these things need to be tackled robustly, quickly and without default to the lowest common denominator between the 3 major “United Opposition” parties.  Failure to do so now, well in advance of a presidential election, will not lead to the confidence needed to bring about a change in president – no matter how bad the incumbent is.

Personally I do not care which political party arrives at sound policy with effective implementation – all that matters is good policy is forthcoming and effectively implemented.

A few days ago I wrote about the “United Opposition” allowing the normal running of the RADA this week as four opposition motions were to be debated:

“The setting of an election date for the position of Kyiv Mayor.

A vote of “No Confidence” in the current government.

The abolition the new pension reforms.

The removal of the Articles of law under which Ms Tymoshenko is currently jailed.”

So far, two days ago, as expected they failed with the setting of a date for the mayoral elections of Kyiv – and with the Constitutional Court still considering the legalities of any delay or not, maybe that is no bad thing.  The court’s answer due no later than July as per the legal time frame allowed .

Nevertheless an unnecessary failure for the “United Opposition” with a Constitutional Court decision pending.  Far better to have tackled the matter once a court decision was known.

Next, when it comes to the vote of “No Confidence” in the current government, UDAR wanted the vote on 17th April (yesterday) and Batkivshchyna on the 19th April (tomorrow) – A sorry state of affairs when two of the three “United Opposition” parties cannot even agree a preferred date on a vote as potentially important as a vote of “No Confidence” in the current government.

However, perhaps the most damning display of failed “United Opposition” planning and strategy was laid bare in the vote relating to pension reform on 17th April (yesterday).  If there is one issue they were most likely to get any kind of result from per their list, pension reform was likely to be it.  It is not that popular amongst the ruling coalition either – though it is necessary.

Thus, whilst I firmly believe the reforms are necessary as the current pension system is simply unsustainable, this was also a matter that the “United Opposition” could have realistically won and come away from the week with a significant result – and significant result they need!

So how did they do?

They managed to garner 223 votes in favour of scrapping the planned pensions reforms.  To have scrapped the planned reforms they needed 226 votes (a RADA majority of one).

Now we may sit back and say it was a valiant effort and they came very close – but that is until we consider the fact that absent from the RADA for this vote were 7 Batkivshchyna MPs, 7 UDAR MPs, 1 Svoboda MP and 4 independent MPs who favour the “United Opposition” in most votes.

Ergo a total of 19 votes likely to have been cast in favour of the “United Opposition” motion to scrap the pension reforms were not cast because the MPs were absent.  Had they been present and voted as anticipated, the “United Opposition” would have scrapped the pension reforms by a fairly comfortable margin.

Having made the RADA unworkable for months in an effort to get these four motions tabled for a RADA vote, you have to ask why were there 19 “United Opposition” absentees from a vote that would have displayed to the public the fact the “United Opposition” are more than ineffective, feckless, window dressing had they won?

How did they not manage to rally all their MPs to be in the RADA for a week when their demands are being voted on?  Especially so on the day a vote on pension reforms occurs that they realistically could have won?

Where is the party discipline?  Where is the “united” discipline?  What sort of leadership allows that many MPs to be absent in a key “United Opposition” parliamentary week?

How do they explain to their supporters (plus the larger public and media) that they failed to scrap the pension reforms because 19 of their own MPs failed to turn up to vote?

Suffice to say, it is nothing short of a political disaster.  A distinct underlining of ineffective leadership and party discipline is laid bare for all to see.

What could have been a golden result for the “United Opposition” has turned out to be an absolute debacle of a magnitude it is difficult to overstate.

The chances of this feckless group getting 0/4 results from their demands must now be considerable – a result now proven to be delivered by their own ineptitude!

Planning and preparation prevents piss-poor performance – the “Rule of P”.

This is certainly an epic illustration of piss-poor performance, thus one can only presume there was either no planning or preparation, or it was ignored – raising serious doubts about the credibility and ability of the three leaders involved, even amongst their own troops.

Very disappointing that a chance of gaining real credibility was so easily squandered!

EU/Ukraine Mission DCFTA Workshop – 10th April 2013

For those of you who happen to be in Brussels on Wednesday 10th April, the Ukrainian Mission to the EU is holding a DCFTA workshop for business at the Press Club Brussels, 95 Rue Froissart, 1040 from 1500 – 1630.

Key speakers are the two main negotiators of the DCFTA Messrs V Piatnytskyi and P Cuisson.

Some may consider this somewhat hopeful given there are doubts the AA and DCFTA will be signed in Vilnius in November – however with the impending seemingly immediate release of Yuri Lutsenko, perhaps not.  His release will go a long way towards the “substantial progress” the EU has demanded over the issue of “selective justice”.  Possibly just far enough, as nobody really expects Tymoshenko to be released prior to 2016 and equally nobody expects much in the way of ratification before that date either due to German, French and EU parliamentary elections in 2013, 2014 and then Ukrainian presidential elections in 2015.

Who knows?  As is so often the case in Ukraine, it just manages to do enough by the eleventh hour – by hook or by crook – be it delivering a good Euro 2012 tournament on an international scale, or the tradesmen finishing and leaving a new shopping centre two hours before it is due to open domestically.

Whether the same time and effort will be spend within Ukraine making the same explanations to business and entrepreneurs  remains to be seen.  Perhaps it is felt better to leave that until any signing actually happens?  That said, signed or not signed, I fully anticipate mutually beneficial parts of the DCFTA to be implemented anyway – as is always the case with what is considered politically expedient to all concerned.  After all the framework is already agreed and initialed, sealing the framework.

I have to say, that despite my invitation to this event, I will not be traveling to Brussels for the sake of a 90 minute workshop – particularly one that is more focused towards the Europeans looking at the opportunities the DCFTA offers in Ukraine, rather than one aimed at Ukrainians and the opportunities it offers looking west.

If a traveling roadshow passes through Odessa attempting to educate on the specifics of the DCFTA and opportunities it offers Ukrainians looking west – then I will surely attend – just to let you know what was said!

Cyprus, Leveson and direction – Ukraine

Not that long ago in Ukraine, a very unwise MP called for a 25% tax on savings to assist Ukraine in its current financial and economic plight.

That MP was castrated publicly and immediately by the current prime minister, numerous business and bank leaders, NGOs both foreign and domestic, and several media outlets – Quite rightly.

Hardly a plan that would inspire confidence in either the current government or the banking system – not withstanding the morality and possible illegalities of such a proposal.

Naturally there are some differences between the circumstances of Ukraine and Cyprus when we consider the external factors and entities relating to the Cypriot decision, and the simply moronic thoughts of a RADA MP with no clue about the concept of casual effect.

However, Ukraine is not renowned for the intelligence of the vast majority of its parliamentary representatives.  As such, we can expect a large amount of folly – and indeed we get it – though fortunately much of that folly does not get adopted as social or economic policy.

However, the fact that Ukraine – given all its political and internal problems, and no small number of self-interested dullards sitting as MPs – immediately pooh-poohed the suggestion of a tax  (or if you are a Cypriot, a “levy”) on savings, would seem to show a far greater awareness for causal effect than that of the supposedly very clever EU “troika” and their original “deal” with Cyprus.

One is reminded of Albert Pike’s Morals and Dogma (1871) – in which he writes “Even the fool will sometimes hit the mark……..The finger even of the idiot may point to the great highway.”

Well, even the fools running Ukraine immediately shot down the idea of taxing savings and had the ability to recognise what the reaction of society would be if they even momentarily entertained – let alone carried out – such a proposal.

Now the EU “troika” has gone far beyond momentarily entertaining the idea – and have been roundly rebuffed by the Cypriot Parliament who have rejected the plan categorically – so we will now see just how far the causal effects will run if not necessarily in practice, then on the psyche of society.

Naturally any changes to the original deal to mitigate the casual effects will amply display the complete incompetence of those who formed the “deal” in the first place.

It has to be said, thus far it is only Wednesday, and with the proposed Eurozone sponsored Cypriot savings raid, and the truly awful attack on free speech in the UK yesterday as a result of the Leveson inquiry, I am – not for the first time – watching parts of Europe large and small, entity and sovereign nation, moving towards Ukraine rather than Ukraine moving towards the EU in significant areas of democracy, rule of law, human rights and media freedom.

Hmmm

A market opportunity for facilities management – or a privitisation disaster waiting to happen?

For those who do not live in Ukraine, one of the inherited legacies of the USSR that still continues, is that of the Zhek and its responsibilities for maintenance of common areas in otherwise now privately owned apartment blocks.

Quite simply put, whilst the last 20 years has seen a massive move to private ownership of apartments, stairways, lifts, common entrances, lighting and general maintenance of all common use areas has remained the responsibility of the Zhek in the vast majority of apartment buildings both old and new.

Needless to say that whilst paying the monthly Zhek bill, known as the “quadplata” is supposed to insure the cleanliness and functioning of all common areas in most apartments blocks around the country – and you have no choice but to pay – the actual maintenance rarely happens, and when it does it is hardly what can be called timely.

However, it appears that this responsibility is likely to cease in 2015 if the national action plan 2010 – 2014 (also known as “Prosperous Society,  Competitive Economy, Effective State”) is to become a reality.

That will theoretically open up a huge percentage of the national housing stock to facilities management companies – with an domestic occupancy well used to paying through the nose for little to no (timely) service – and in all probability, some serious profit margins.

One has to suspect that there will be a fair few people in the RADA having their closest friends and/or family opening facilities management companies in preparation for 2015 when they will suddenly be activated.

Tomorrow – something more interesting (at least for some).  Tomorrow, for the first time in a few years, the blog is going nuclear!