Ukraine looks to foreign-born ministers to kick-start reform

Late last year, US-born Natalie Jaresko was in the Kiev office of the investment firm she founded in 2006 when headhunters came to call. Within days she was named as finance minister of war-torn Ukraine.

Raised by Ukrainian parents in Chicago, Ms Jaresko is just one of half a dozen foreigners or foreign passport holders recruited to senior government and official jobs since last October's parliamentary elections. A similar number have been given more junior or advisory roles.

They have been thrust into the front line of the other battle Ukraine is waging alongside the conflict with Russian-backed forces in the east - the struggle with recession and financial implosion and to reform the shambling, kleptocratic system that has existed in Ukraine since the Soviet collapse.

Ms Jaresko, a fast-talking former state department official who was appointed to the new US embassy in Kiev in 1992 and never left the country, is the highest-profile. She led negotiations on a $17.5bn IMF bailout, plus $7.5bn from other donors, agreed last month, and is negotiating a $15bn debt restructuring with creditors.

"I took this job out of pure patriotism," she told the Financial Times. "I had a great job before, I had a life. I took this job because I thought it was an area where I could add value."

The unorthodox decision to appoint so many foreign-born technocrats to Ukraine's government brings reform experience gained elsewhere to a country overwhelmed by war and economic slump. But it also aims to help achieve a clean break with a system long "captured" by billionaire business oligarchs.

"It's hard to find experienced Ukrainian managers without a past [involving] rent-seeking for one of the major oligarchic groups," says Adrian Karatnycky, senior fellow at the Atlantic Council think-tank.

The new appointments also include Aivaras Abromavicius, the economy minister, another former fund manager and investment banker. Raised in Lithuania, he lived in Estonia, the US and Russia before settling in Kiev with his Ukrainian wife.

But the biggest foreign contingent is made up of Georgians from the reformist team who served under former president Mikheil Saakashvili after the 2003 Rose revolution. While making enemies along the way - and ultimately being ejected by weary voters in 2012 - that team transformed a failing state into a top-10 country in the World Bank's Ease of Doing Business rankings.

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Mr Saakashvili himself has been made "outside adviser" to Petro Poroshenko, Ukrainian president, and head of a consultative council on reform. He left Georgia in 2013 and faces what he calls politically motivated criminal charges from the Georgian Dream coalition that has feuded with his party since taking power in 2012.

His appointment caused ripples with Moscow, for whom the pro-western Mr Saakashvili is a bete noire, and Tbilisi, which summoned Ukraine's ambassador to explain it.

But Mr Karatnycky says the new appointments have "worked reasonably well". Leszek Balcerowicz, architect of Poland's successful 1990s shock therapy reforms, has described the homegrown and imported cohort as the best government Ukraine has had.

<>It also faces the most intimidating challenges. Ms Jaresko has had to push through austerity measures demanded by the IMF, including unpopular budget cuts and increases in subsidised household energy prices towards market levels.

Opinion polls suggest ordinary Ukrainians - who saw dozens of compatriots mown down by snipers during the protests that toppled Moscow-backed president Viktor Yanukovich last year - are getting restive. Business people complain reform has been too slow.

Ms Jaresko insists "a lot has changed", pointing to early successes including sharp cuts in energy wastage and a crackdown on institutionalised corruption. She said tax cuts and restrictions on profit transfers to offshore havens should boost revenues while reducing the massive shadow economy and tax evasion.

"I feel the pressure of time, of reality and absolutely definitely of Ukrainian society," she says. "I feel the pressure personally."

The Harvard-educated finance minister says "real institutional changes" are coming that will transform Ukraine's system. Ukrainians, she adds, will soon feel them directly, for example through Ms Zguladze's planned shake-up of the notoriously rapacious traffic police.

Mr Kvitashvili has meanwhile fired all department directors at the health ministry, purging a bureaucracy long notorious for focusing more on squeezing bribes out of doctors for renewing their licences than on improving healthcare.

Ms Jaresko and Mr Abromavicius - whose tax returns showed seven-figure dollar incomes last year - acknowledge they can afford to spend some time helping their adopted country in return for ministerial salaries of a few hundred dollars a month.

For some, in particular the Georgians, according to a Ukrainian official, their motives may not be purely altruistic.

"They want to go back to Georgia some day, but not in a weak political position. So they're trying to demonstrate again to their own people how successful and internationally respected a team they are," says the official. "We're happy and lucky to have them."

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