Amid war and economic collapse Ukraine’s economy minister has a portfolio not many politicians would envy. Lithuanian Aivaras Abromavicius was appointed to bring international expertise to the government.
Implementing reforms required by an IMF bailout is among his toughest challenges. He spoke to Euronews’ Ukraine bureau chief, Sergio Cantone
SC:.What kind of reforms are you ready to implement ?
AA: The main reforms are about deregulation, making a level playing field for all businesses in the country, improving the investment climate so that we will start getting foreign direct investments. The second is the state-owned enterprises’ reform. We have 1,900 state-owned enterprises, many of which are run as private entities for the benefit of private individuals and not for the state. We have a comprehensive plan how to change that, how to change CEOs in a transparent way, how to make those companies accountable.
SC: One of the worst problems of the country, when it comes to reform it, is the blocking of public administration. All those people who were related to the past regime are blocking any kind of reform or transparency. What are you going to do?
AA: When it comes to current people working in the government, in the area of the public administration offices there is a big problem. There is a big problem with pay. With the current exchange rates salaries are below 200 US dollars a month, and this obviously creates room for corruption. When salaries are too low, you know, all the money that is circulating around is quite large and therefore we also want to pass administrative reform so that we will be able to cut down considerably on staff numbers and yet increase salaries for the rest. In my ministry we plan to cut 50% of staff this year and obviously we will be looking for ways to increase salaries for those that remain, so that over time we move to the level where people get decent salaries and they can provide, you know, for their families.
SC What are you going to do in order to get rid of this system of power, both economic and political, which is represented by the oligarchy, something that is common to many post-soviet countries?
AA: We no longer have serious oligarchs left in the country, because with this economic decline and currency depreciation oligarchs now only run small and medium sizes enterprises and so on…
*SC:*Yes, but most of their money is abroad and it is already in dollars…
AA: Yes, but with the declining economy many companies have obviously very large debt obligations and the equity is close to zero, so the influence of oligarchs is not limitless as it was in the past. We have got rid of middlemen in the gas trading business, right now we buy much more gas from Europe than from Russia, we have absolutely no middlemen there, it is done in a transparent way; there is no more RosUkrenergo, no more Fyrtash in this trade and obviously this is one of the good steps for society and businesses in this country. We no longer tolerate corruption in the gas trading business.
SC Could you remind us who Fyrtash is?
AA: I guess he is a notorious gas trader who was purchasing gas from Gazprom and selling it to Ukraine, and Ukraine is notorious for two sets of prices at least for gas, where the population gets it at a very low price, completely subsidized, and industry gets it at a market price, which creates massive room for corruption and obviously one of the key reforms is the energy sector reform, the unbundling of NaftoGaz, splitting it into at least three companies and inviting possibly foreign investments into the country. Obviously we will have to raise gas tariffs in the country which are very low.
SC: Why does it take that long to privatize the infrastructures of gas transport that are strategically very important to this country, to Russia as well as to the EU?
AA: I guess selling any asset to Russia is out of question at the moment, because we know the relationship between our country and Russia at the moment, society will not tolerate that and obviously government is not planning to do anything like that. When it comes to privatizing gas assets we understand that during a war asset prices will not be high enough to get substantial revenues into the budget. So we want to clean up state-owned enterprises, bring order to all of them, change the process, the way state-owned enterprises are privatized and when the right time comes, when market conditions improve, we will try to sell the companies to strategic investors.
SC: Minister, is it true that, according to the reforms demanded by international organizations the price of gas should be raised a lot, by 300%?
AA: Well, a gas tariff hike is going to be substantial that’s for sure. The final price will be set by the national agency for electricity and gas prices. The government position here is that the rich should not benefit from low prices, which is the current state of affairs. The position of the government is that we will raise gas tariffs as much as possible closer to the market levels and we will compensate the poor with subsidies. So the poor will have to do very little: income declaration and application for the subsidies, that’s all they will have to do and they will get a full compensation of the gas tariffs increase
SC: Could you tell us what, in your view, is ‘the poor’ and what is the threshold to define ‘the poor’?
AA: Yes. With the current economic decline of course the number of poor people in this country will increase and the number of those who will get subsidies will increase tremendously. So it will be quite a serious challenge for the ministry of social affairs to administer that, but we are ready for that and they will have more people and they will get more additional software and hardware to administer that and everyone who qualifies for the subsidies will get the subsidies.