With 20 years of leadership experience in the IT industry across Ukraine, Europe and the U.S., Dmytro Shymkiv joined the National Reforms Council following the Revolution of Dignity, and since then has taken a technocratic approach to policy implementation, bringing together stakeholders to drive through reforms. Here, he discusses the progress made in creating a new Ukraine
What brought you to the National Reforms Council and how does your professional experience inform your approach to the role?
It all started during the revolution. I was in business and I never had dreams or plans for a career in politics. The president called me after his inauguration, and he asked me to his office, and he offered me a position in his team helping him in coordinating the reform initiatives. You don’t very often get a call from the president asking you to join his team and work in a high position, so I said yes. It was a pretty quick transition from the international corporate world into politics.
One of the ideas was to establish a structure that would allow coordination of different reforms agenda between the main stakeholders. So, the National Reform Council is the place where the president, prime minister, speaker of the parliament, leaders of the coalition, the full cabinet of ministers, and the representatives of civil society, sit at the table. The objective is to have a discussion, not just for discussion’s sake, but actually to make sure the policies are getting through the process and are being implemented. That has enabled us to pass a lot of reforms. We are at a 79 percent completion rate on the tasks assigned.
What keeps me in this role is, first of all, my responsibility to the state. I have experience and I have family savings so I can basically afford going into the government for a period of time. The second is my experience in Microsoft. When you are an executive in an international company, you are also to some extent involved in politics. Being at Microsoft where almost every company is your customer or partner in some form, gives you a full perspective on the different industries and backgrounds and companies in the country. My experience, my background and this network allow me to do what I do.
In the Council’s “Reformers Manual,” you said that the first assignment you were given by the president was to create a reform governance model. What are the key pillars of the model, and which best practices did you draw from?
It’s classical management. First, you need to get people around the table to discuss. There are a lot of policy debates. You can debate policies forever, but if you structure the policy debate into areas of disagreement, you gradually get people through the process of agreement naturally. One by one, you get issues resolved and compromises are found. This is important: the growth, the dialogue and the preparation for the dialogue is critical, and in order to do that, you need to have a team. You also need to build a framework similar to a business dashboard. I come from a high-tech business background, which is all about numbers and tracking, and it is important is to have a framework where you actually see what progress is being made.
I try to take a technocratic approach to policy development. Francis Fukuyama once shared with me that the concept is basically about creating a chimney effect. You set fire to the words so that the smoke goes up, but you need the chimney to get the smoke out. We also need to create windows of opportunity, meaning that the political environment and societal demand exist, so you must build a communication campaign and build consensus.
Building the framework is another monitoring pillar, and then making sure you go back and close the loop and make sure that things get done. The best example is ProZorro. ProZorro is an electronic procurement system that is considered to be one of the best in the world. It started at this table. There was a lot of resistance to changing our procurement system, so I proposed that we build an e-procurement system for everything below a certain threshold. We started building and designing it, and the concept was that if we started building it within the government, it would either die on its feet or go very slowly due to the bureaucracy and procedures that exist in any government. Therefore, we decided that the code and all the rights would be hosted by Transparency International. By doing this, we ensured that nobody could benefit from it in the future or claim a royalty for the product. We started recruiting a few first ministers. When the system was developed and achieved its first results, I approached the president and showed him that on the first tenders, we had been able to save 26 percent, which is a good amount of money. In order to build the system’s popularity, Max Nefedov, who joined the ministry of economy, started promoting the system outside when it was still a pilot. Within the year we passed a law so that everybody now has to use the system because by that time the system had been proved.
The concept was a classical start-up. We started with the concept, we went through the early adopters, we went through the strong push and peer pressure, and then we got to the mainstream users. It has now become a kind of flagship product for Ukraine. This is an example of a reform where you use different stages, different tools, different groups of people and different objectives, and reach one big objective which is building a system which is accepted.
ere are huge opportunities for investments, and now we have this good experience with General Electric (GE). We have plans to develop renewables; by 2019 we are planning to have one gigawatt capacity in solar and wind, which requires around a $1.1 billion investment. That is a huge figure for Ukraine and is only achievable thanks to trust-based relationships with our partners.
According to the Council’s recent Reforms Progress Monitoring report, in the past two years, Ukraine has made greater progress in implementing reforms than in the first 23 years of its independence. What would you highlight as the most important reforms from the point of view of the foreign investment community?
One which is most recognized by Ukrainian society and most visible is the security and military reform. Here in Kiev, nobody senses or feels that there is fighting going on in the country, and this is because we rebuilt and reshaped our military. And in doing so, we created investment opportunities for joint military projects. It is important for businesses to know that there is a security focus.
Another critical reform is the significant deregulation of businesses. This has meant reducing the influence of government into business activities by simplifying procedures. We have moved up in the World Bank ease of doing business rankings to the 76th pace, which is significant progress over a few years. Another area is tax. We have reduced payroll tax twice. Another big issue for a lot of businesses was around obtaining VAT refunds. Now it’s automatic and we’ve added transparency so you can go online and see information on how your competitors receive VAT.
Another reform we kicked off is judicial reform. The judiciary usually takes up to 10 or 15 years to actually go through a full transformation. We have a new High Court, selected in a fully transparent process. We had more than 600 applicants, but they have to go through a very rigid process. The judges receive one of the highest compensation packages in the country, but there are expectations around anti-corruption. We built anticorruption infrastructure with the National Anticorruption Bureau, and now we need to finalize it with building the anti-corruption court, which is critical so that the whole chain of anticorruption efforts can be addressed. Over the last years, we have already had more than 1,500 cases go through the courts. Some of them already have decisions. Some of them still pending. What is important is there is no immunity. If people violate the law, they will face charges.
Another big area is energy prices and energy efficiency. We managed to create a level playing field, so there is no non-competitive environment for a particular group of people or for particular companies. Decentralization is another area which is interesting for investors because it gives more empowerment to the regions. We want to extend and create more opportunities for regions to attract investment, but also to invest in the infrastructure in the regions. Previously, only 25 percent of the budget was going to the regions. Now, it is around 60 percent. The regions get the money, they invest, and the local budgets have all doubled.
Privatization is another big opportunity. We have more than 3,500 state-owned enterprises. We passed new legislation on privatization which allows for small privatization to be done online. For larger privatizations, we will be hiring international consultants who will be supporting and attracting people to participate in bidding for state-owned entities. Other initiatives that are going forward include a concession law. This is in parliament and will create an opportunity for concessions on ports, roads and infrastructure.
The final area is in the financial sector. The financial sector is critical, so we are cleaning it of banks which are insolvent, stabilizing the currency, putting targets on inflation, and through the fully independent National Bank of Ukraine, the country is increasing its financial stability and clarity, which gives investors further assurance.
The new Ukraine is led by the principles of market forces and a fair liberal economy. As a result, foreign investors have opened more than 60 plants for exports in Ukraine in recent years. We have the DCFTA with the European Union. We have an FTA with Canada, and we are negotiating others with Israel and Turkey. These all transform Ukraine as a hub for a lot of business activity with these regions, and that is what a lot of American companies are looking at; the possibility of using Ukraine as a hub for these markets.
To what extent do you see the whole of Ukraine pulling together to effect change, and how would you assess the collaboration between the public and private sectors?
When the Revolution of Dignity took place, it was a revolution against kleptocracy and it was the revolution of the middle class. It was for democracy. Business played a vital role because a lot of business people were on the streets as private citizens, and the whole idea was to create a fully independent democratic state in which businesses can flourish. That is why a lot of business people went to the government because with our knowledge and our experience we are trying to transform the country. Is it easy? No.
The role of civil society in the reforms has been extremely crucial. The media is extremely strong here which is also important because a closed society with very little opportunities to voice misgivings is a risky environment. Ukraine offers full transparency, so if any businessman is mistreated, they have a lot of ways to voice that. The business association is also an extremely strong voice. We always have the business association at the National Reform Councils, and they are also present at the National Investment Council. The president and prime minister meet three times a year with the business community to hear from them and report back to them, so there is direct connectivity between the government and the private sector.
We also benefit from having a president who was a former business person. He understands what the needs and concerns of business are and that business needs to make money. At the same time, he understands that there is a need for the government, so, finding the balance of this helps to advance a lot of policies.
Are the reforms happening fast enough?
I’ve been looking through a lot of historical parallels. I’ve looked at how it is being done in many other countries, and in the majority of the countries who went through a significant transformation took much longer. We are executing at a much faster pace, but the expectations are pretty high. Looking at where we started from: on the brink of bankruptcy and an almost collapsed state, and looking at where we are today, we have made great progress. Lots of businesses and investors are coming here, not just because we are transforming, but because there is great opportunity here. It is double-digit growth.
How would you assess the ties between the Ukrainian and American business communities, and what more needs to be done to create opportunities for business to business partnerships and to promote Ukraine as an attractive investment destination to U.S. investors?
A lot has been done. Ukraine recently started a partnership on the purchase and usage of American coal. This creates an opportunity for American business people. We also recently saw a big deal from General Electric for $1 billion, which implies 40 percent of production to be done in Ukraine, which also gives the multiplier effect because if you are a partner to GE and are certified to supply to other GE factories, you basically enter much bigger markets.
There are a lot of discussions in the pipeline, and the interest towards Ukraine is high, particularly in the port and import infrastructure. In grains, Ukraine is now number one on sunflower oil globally. We are in the top three of corn and wheat. In high-tech, George Soros made his first investments in Ukraine through the acquisition of the biggest high-tech company. Ukrainian IT exports have now reached $3.6 billion, and they are growing at the rate of more than 20 percent year over year. Google acquired a company here, Snapchat acquired a company here. People are coming here looking for talent with a lot of initiatives, a lot of ideas, and a lot of innovation.