Rigged games and compromises of the political elite virtually halted reforms - Igor Mazepa22 March 2016
Igor Mazepa is one of the few investment bankers who did not want to go to the civil service. But he cannot fail to engage in the processes. Being on good terms with the Head of the Presidential Administration Borys Lozhkyn, Mr. Mazepa frequently visited PA, where he gave advice on candidates for senior positions. We met the unofficial "recruiter" of the Presidential Administration on the day when the Parliament made a resolution on the Cabinet of Arseniy Yatsenyuk. Igor Mazepa makes no secret that he is disappointment with developments at the Verkhovna Rada.
Who is he:
Director General and founder of the Concorde Capital Investment Company
Recommended candidates for senior positions in government; ready to take part in the privatization
Recently, business leaders often criticize the government's actions - Zahoor, Taruta, Kardakov. Are you in the opposition too?
- I'm not in opposition, but I’m very skeptical about what is happening. Both the Prime Minister and the President share the responsibility for the state of economy and the business climate. A row of rigged games and compromises the political elite adopted in the mid-2014, led to a situation when no reform has been fully realized. Two leaders of the state did not find the political will to bring grist to one mill. Therefore, the reform is not the sharpest knife in the drawer.
But everyone is trying to please the electorate. They defend the low retirement age, but say nothing about the high mortality rate, turn a blind eye to the low productivity of the agriculture, but afraid to transfer even a plot of the agricultural land to private hands. And worst of all, all this is done by people who have to do opposite things. How may the Minister of Social Policy go public and say that he is categorically opposed to raising the retirement age? After all, he has to carry out the pension reform, in order to avoid the chronic deficit of the Pension Fund. At the same time, pensioners receive humiliatingly small pension of $ 45 per month.
Despite the criticism, Arseniy Yatsenyuk resists as the Prime Minister. Will something change for the better then?
- The situation with the resignation of the Minister of Economy Aivaras Abromavičius stirred up our political swamp. Public sentiment ran high, and the government is heavily dependent on it. Therefore, in my opinion, the situation now is better than three months ago. With regard to the Arseniy Yatsenyuk, I believe: the time has shown that he should not be the Prime Minister. I think by the end of the year, we’ll see one or two new Prime Ministers.
Do you see effective ministers in the Government?
- The Ministry of Economy, for example, has some achievements. First of all, it is the reform of public procurement and the launch of the electronic trading system ProZorro.
"Public sentiment ran high, and the government is heavily dependent on it. Therefore, in my opinion, the situation now is better than three months ago."
It seems to me, that the NBU Head Valeria Gontareva is good. She has a clear transparent vision of improvement of the banking system. They have removed the “left” banks from the market, which were engaged in money laundering or simply did not perform banking functions. NBU supports the remaining banks with a higher rate on their deposit certificates, and it helps them to stand the hard times. Of course, foreign exchange restrictions imposed by the NBU are challengeable, but it is impossible to cancel them given the current pressure on the national balance of payments.
In addition to Gontareva, there are some heads of state companies. For example, Andriy Kobolev at Naftogaz. Due to his efforts, the gas market began to take the civilized form. Finally, the country has diversified gas supplies, introduced market tariffs and subsidized the poor. Budget as saved on it a lot.
When resigning, Aivaras Abromavičius recommended the incumbent Minister of Finance Natalia Yaresko be appointed the Prime Minister. Is she a good candidate?
- It would be nice. Hypothetically, she could become one of the best prime ministers in our history. Although I put into question her administrative capacity to manage such a wide bureaucratic apparatus. And, of course, I would like her make more decisive steps in the tax reform.
The rate of the unified social contribution has been reduced by half, to 22%. Is it enough?
- The tax reform was short-sighted. The country lacks the tax culture. It's one thing when you pay your taxes and realize that this money goes to education and roads, and another - when you're sure that it will be stolen. Therefore, it was necessary to reduce USC even more, let alone other taxes, some of which have been even raised.
For example, we have a big concern about excise. All governments are stepping on the same rake when increase the rates. But it is an illusion that any hole in the budget can be patched with the excise tax on oil products, alcohol and tobacco. We calculated that for the recent 8 years the excise tax on alcohol increased for more than three times, and the budgetary revenues decreased by 3.8% . As a result, we have reached the point of 50% of shadow market. The same is true for the third part of petroleum and tobacco market.
You are considered one of informal recruiters at the Presidential Administration. How strong is your influence on appointments in the executive branch?
- I gave referrals on some people, such as investment bankers I know well. But I object to the definition of "AP recruiter”. I do not often go to AP especially in a past few months – I have been disappointed, there is nothing to do there. Romantic illusions that I can be part of the change process have been debunked.
Igor Mazepa: "A row of rigged games and compromises the political elite adopted in the mid-2014, led to a situation when no reform has been fully realized."
In interviews, you deny the interest in politics. But during the last parliamentary elections, you tried to go to the parliament from the list of Sergei Tigipko’s party. What for?
- I have denied and will deny the politics. Participation in the recent parliamentary election was a mistake. Now I understand that it was so. If the next parliamentary campaign carried out today, I would never take part in it.
And if offered a position in the Cabinet?
- No, I finished it. I’d better recommend someone (laughing).
For more than a year, the Presidential Administration has been nourishing an idea of the donor fund to increase the salaries of civil servants. Would you be a donor?
- For sure, yes. But for me, in view of my business, are more interesting regulators of financial markets. That is, I do not agree to pay salaries to any officials, but if it were a targeted donation for the NBU or the National Commission on Securities and Stock Market, then I would donate. I can spare $ 30 thousand per month.
Once, I was deeply impressed by the story at Savik Shuster’s, where Yulia Tymoshenko criticized Andriy Kobolev for having a salary of 30,000 hryvna in the country at war. Oh, what a bastard! But if the manager saves billions of dollars through diversification of gas supplies, his market value shall be millions of dollars.
You have joined the informal club of big businessmen "Ukrainian Business Initiative", whose members pledged not to finance the politicians under-the-table and to pay taxes honestly. Are these statements supported by acts, not only empty words?
- First of all, they are supported by the businesses reluctance to the public attitude towards the entrepreneur. We want the younger generation have the new priorities. They were not looking for easy earnings in a judges’ robe or a police uniform. Therefore, we are going to support development of private entrepreneurship and the plan to create a fund of about $ 10 million to fund a variety of programs. Thus, we would like to raise the status of a businessman. At the same time I understand that the Ukrainian Business Initiative is promoted by ordinary people. They are no saints. But for me, more important question is not where you but where you're going.
Igor Mazepa, "I object to the definition of "AP recruiter”. I do not often go to AP especially in a past few months – I have been disappointed, there is nothing to do there."
The government has planned the large-scale privatizations for this year. You will act as an adviser or a buyer?
- I think, both. Economy has reached the bottom, it's time to create. We are now interested in a number of areas, including the medicine and pharmaceuticals, energy conservation and power generation. We have IT book today, despite all the police raids. The agricultural sector has ambitious prospects. Ukraine in its working scenario may get the harvest of 100 million tons of grain (today about 60 million tons -. Focus) due to modernization. If you fly over the country, you will see that we have planted and processed literally every piece of land. But 70% of the machinery is obsolete, physically - even more. If you start to bring technology there, it will generate an organic growth in labor productivity up to 10% per year.
Now, we have a $ 40 million fund under control, and if privatization really starts, it will grow more. An asset may be resold profitably even faster than in 3-4 years. Many sectors of the economy have been consolidated because of the crisis, and that gives an opportunity for the rapid growth.
Did your earnings fall in a down economy?
- They have even grown. There are new industries to earn on. For example, the debt restructuring. According to our estimates, 70% businesses are now in such poor condition that even have problems with the payment of interest. In addition, quotations of Ukrainian Eurobonds currently vary greatly, and the volatility always provides an opportunity to earn.
Recently, they say that privatization in Ukraine is more interested for eastern investors than western ones. Is it true?
- Yes, investors who are less sensitive to the irrational regulation or corruption will have more consumer demand than the Western companies with high corporate governance standards. I do not rule out that the Odessa Port Plant will be bought by any Chinese or Indian investors.