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The time has come for western firms to take Ukraine seriously

City A.M. Monday, 4 December 2017
The time has come for western firms to take Ukraine seriouslyFour years ago, Ukraine hit the headlines when millions of its citizens took to the streets.

They were protesting against their government’s decision to withdraw from signing a major agreement with the EU.

The powerful protest resulted in a new government, with a pro-EU agenda. Russia retaliated by annexing Crimea and steering a subsequent militant separatist movement in eastern Ukraine.

*Read more*: Lessons from Ukraine: What London can learn from Kiev

Today, Ukraine has all but disappeared from news, but the struggle for its European future continues. Ukraine fights not one major battle, but two.

Certainly, Russian aggression has undermined the territorial integrity of Ukraine, claiming over 10,000 lives and displacing around 1.5m Ukrainians.

Right now, Ukraine is just about holding its frontline against the further spread of instability, small-scale terrorist incidents, cyber attacks, and disinformation operations, which originate from Russia.

But Ukraine is also fighting its own internal corrupt system, which over decades has captured this resource-rich state in the centre of Europe.

Winning both of those battles is of paramount importance for Ukraine.

A lot has been achieved since 2015. On the eastern front, Ukraine managed to contain the corrosive spread of Russia-funded separatism and built defences along the contact line with the occupied territories.

Internally, thanks to a strong push from civil society, reformers in government, and western conditionality, Ukraine has managed to disrupt the corruption equilibrium that was holding back its development.

A combination of increased transparency and the elimination of the intermediaries have substantially limited the opportunities for corruption.

Public procurement was overhauled by setting up a digital trading platform for all central and local government agencies. Since its launch, the new system has saved over $1bn in public finance. All state employees were required to declare their assets, and these “e-declarations” are public. This move has discouraged many judges from renewing their contracts.

Corruption in Ukraine still remains widespread despite these efforts. But it is finally being exposed, thanks to the vibrant free investigative media and numerous high-profile investigations by the newly established National Anti-Corruption Agency. The social norms are slowly changing and tolerance to corruption is decreasing. Civil society is pushing for the establishment of an independent anti-corruption court that would deliver justice.

The stakes in the struggle for Ukraine are high. The prospect of a secure European continent depends on Ukraine’s ability to consolidate current gains, build a democratic rule-based state, and integrate its economy into the European common market.

The west could support Ukraine by exerting continued economic and political pressure on Russia. Sanctions should be periodically renewed and strengthened where necessary. Nato and the EU should launch security and law enforcement advisory programmes.

More importantly, the entry of more European – especially British – companies into Ukraine’s market could be a game changer.

Experts surveyed by Chatham House believe that foreign direct investment is the best remedy for Ukraine’s ills. It is a win-win strategy (at least for Ukraine and Europe, if not for Russia).

Western companies could profit from a developed infrastructure, cheap labour, and proximity to the EU market.

Ukraine, meanwhile, could grow its middle class, strengthen the demand for more accountable democratic governance, and modernise its economy.

Even under current challenging conditions, Ukraine’s economic growth has returned to the black and was on average two per cent in 2017. The country returned to the global financial market with a successful $3bn eurobond and the EU-Ukraine Association Agreement is fully in force.

Ukraine has gone a long way to prove its resilience and capacity to reform. Now it is time for its European partners to become part of the country’s prosperous future.

*Read more*: Ukraine: A country at war returns both to normality and the bond markets
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