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In Ukraine, Expats and Romantics Are Out

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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The new Ukrainian cabinet, confirmed by the parliament on Thursday, is more interesting for the people it doesn't include than for those it does. Ukraine's experiment with bringing foreign reformers and private sector professionals into the government is now officially over, and it has failed.

President Petro Poroshenko tapped his long-time protege and ally, former parliament speaker Volodymyr Hroisman to form the government.  The result, for the most part, is a cabinet of Poroshenko loyalists; the unpopular businessman-president is consolidating power, much the way his hapless predecessor Viktor Yanukovych once did. Though, at several points in the negotiating process, Hroisman reportedly refused the prime minister's job unless his conditions were met, these reports should be taken with a grain of salt: Poroshenko wants Hroisman to look independent, not least in the eyes of Washington politicians who have been wary of Poroshenko monopolizing power.

Hroisman was a popular mayor in Vinnytsia, the base city of Poroshenko's  confectionery empire, Roshen. He fixed the roads, persuaded the Zurich city authorities to give Vinnytsia 100 perfectly serviceable streetcars that the Swiss city was replacing, made the bureaucracy friendlier to city residents and got Poroshenko to build a spectacular musical fountain in the middle of the Southern Bug, the river that flows through the city. But the Hroisman family also owns a large mall in Vinnytsia, built while Volodymyr already ran the city, and financed with debt the Hroismans never repaid. The new prime minister is a typical Ukrainian politician, wily and capable but at the same time always mindful of his personal interests. 

The new cabinet includes some of his old co-workers from Vinnytsia: One as a deputy prime minister in charge of the secessionist regions of eastern Ukraine, another as social security minister. It also includes plenty of seasoned Ukrainian politicians and bureaucrats who did fine under all the previous regimes, as well as a couple of  veterans from the 2014 "Revolution of Dignity" and a few allies of former Prime Minister Arseniy Yatsenyuk -- his reward for allowing Poroshenko to form a beholden cabinet and avoid an early parliamentary election. 

Gone, however, are the foreigners and investment bankers brought into Yatsenyuk's  government on the initiative of Poroshenko's chief of staff Boris Lozhkin, a former publishing magnate (disclosure: I worked for Lozhkin in Kiev in 2011 and 2012, before he went into politics). The chief of staff used headhunters to locate suitable professionals, and Poroshenko granted them Ukrainian citizenship so they could take up top positions.

“It was indeed my idea to infect the government with a different life form,” Lozhkin told me in an interview a year ago. “They have to have a different genetic makeup to change the system." Gone are Lithuanian-born asset manager Aivaras Abromavicius as economy minister and U.S.-born venture capitalist Natalie Jaresko. The health minister, a Georgian, was also cut from the team.

Ivan Miklos, the former finance minister of Slovakia, might have been the only foreigner in the Hroisman cabinet. Poroshenko's team negotiated with him and a  law was even initiated to allow him to keep his Slovak citizenship. Yet all Miklos agreed to is an advisory role.

Some Ukrainian private sector stars who went into public service after the revolution are also notably missing from Hroisman's cabinet. Absent is former infrastructure minister, financier Andrei Pivovarsky, who had been trying to reform Ukraine's antiquated, corrupt transport industry and who resigned in December following unsuccessful efforts to secure living wages for his team. Dmitri Shymkiv, the former head of Microsoft's Ukrainian operation who is Lozhkin's deputy on Poroshenko's staff, was offered the job of deputy prime minister for reforms but refused, saying he'd join a technocratic cabinet but not a political one. Lozhkin himself decided not to move to a cabinet role, though he had been offered one.

The only true star with a private sector background in the new cabinet is U.S.-educated former McKinsey consultant Oleksandr Danilyuk, the new finance minister, who was another Lozhkin deputy before this appointment.

The period from late 2014 to early 2015 was a romantic time for people with Western degrees and backgrounds in Ukraine. Well-compensated professionals were willing to interrupt their private sector careers and work practically without pay, while playing for the highest stakes possible -- Ukraine's future and their reputations. When I talked to the new appointees soon after they moved into government offices, they were appalled at the quality of management and pervasive graft in Ukraine's public sector, and they saw specific things they could improve.

Individually and collectively, they failed to change Ukraine's rotten post-Soviet system. They learned that Ukraine is a country where the political and bureaucratic establishment know how to make a stranger look and feel stupid;  they were no longer willing, or no longer able, to keep swimming against the current.

"There is not a single expat in the new government," wrote legislator Mustafa Nayyem, who joined the parliament on the same romantic wave that swept the foreigners into the Ukrainian cabinet. "They were pushed out for not wanting to play by the old rules."

Though he is optimistic that a dozen local public servants are now qualified enough to pick up the romantics' reform banner, I believe the optimism is misplaced. Those who run post-Soviet systems such as Ukraine's are no less smart or talented than the private-sector managers who seek to change things; they just serve themselves first, not the public good. That's such a powerful motivation that any reforms will backslide until selfless romantics constitute a majority in government -- a difficult picture to imagine -- or more advanced countries intervene to a greater degree than they are doing in Ukraine today.

After the Hroisman cabinet was confirmed, Poroshenko spoke on the phone with U.S. Vice President Joe Biden, who assured him of continued U.S. support. That support is now as misplaced as Russian President Vladimir Putin's backing of Yanukovych just before his ouster.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net