Ukraine’s new generation of entrepreneurs dreams of ending the era of the oligarchs

01.12.2013 | Independence Square. “March of Millions” in Kyiv. A patriotic demonstrator sitting on a crane over a crowd of protesters. Photo by Nataliia Kravchuk 

Ukraine

Edited by: Sonya Bandouil

The Soviet Union collapsed, but left a legacy of trauma and scars which affected different areas of life. After its end, the wild 1990s saw the emergence of Ukrainian oligarchs. These two factors obstruct the development of business until now. However, the good news is that a completely new generation with a different mindset already exists, and it wants to end the status quo.

Read more in this material produced jointly with our partners at the Lviv Security Forum.

In Ukraine, there is only one privileged kind of business — that which belongs to oligarchs. Oligarchs invest money from their businesses into supporting political forces for elections. Further, these forces defend oligarchs’ interests in Parliament. Meanwhile, small and medium businesses often go through tremendous obstacles — many of which are created by the state. Still, there is a ray of hope: times are changing, and a new generation of entrepreneurs focused on development has already appeared. There are only a few things missing on the way to success — trust and unity.

Oksana Syroyid, leader of the Self Reliance (Samopomich) political party. Snapshot from the video blog So, What’s Next?

Oksana Syroyid, leader of the Self Reliance (Samopomich) political party, sat down with Anton Ruban to understand the process happening in Ukraine’s entrepreneurship. The conversation took place under the auspices of the Lviv Security Forum.

Anton Ruban is a representative of the young generation of Ukrainian entrepreneurs. His business is to import state-of-the-art technology, various equipment, and ingredients for the manufacture of chocolate, and export chocolate. Ruban invests lots of his efforts in training both his staff and beyond.

“We all want to live in a country that doesn’t yet exist, but it may still come to be. By investing in the education of people around us, we will change society in a good way.”

The country Ukrainians want to live in

Describing the country Ukrainians want to live in, Ruban envisions an example of Sweden meeting the United States – a much more equal country, like Sweden, and a much freer country, with fewer entrepreneurial barriers, like the United States.

Anton Ruban is a representative of the young generation of Ukrainian entrepreneurs.

Ruban agrees that freedom is very strong in Ukraine.

“However, freedom mustn’t be pitted against the order, against a certain degree of rule of law, or respect for social standards…,” he says.

Wild West period of Ukrainian entrepreneurship

The young entrepreneur calls the stage Ukraine is going through now a “Wild West” period, referring to the corresponding period of American history when lawlessness ran rampant, and laws to keep things at bay were slowly put in place over time.

“We’re going through the same stage now, except that we have to learn on the go because a big brother is watching over us and pushing us to the back. There are many big brothers – I mean there are Europeans, Americans… They invest in these efforts, and I am so grateful that they do. However, we don’t have the time that they had, because we want to become competitive as soon as possible. We, as a nation, want to compete for businesses and for people. So, if we take too long to learn, people will leave, companies won’t start, they’ll move to Poland, Germany, or elsewhere.”

Syroyid asserts that the country needs fair rules of the game when it comes to entrepreneurship. However, these rules have become warped because, during Ukraine’s independence in 1991, a small group of people who later became the oligarchs managed to accumulate the bulk of post-Soviet national wealth. Ruban in his turn is confident that first and foremost, people who have the resources, i.e. small and medium-sized businesses, are capable of restoring the balance.

“A lot of organizations have emerged that bring together entrepreneurs, and they’re in a position to make demands on society and big businesses because they have the resources, a strong sense of awareness, a great responsibility for their operations and their employees, and employees. Altogether, they represent a large chunk of society. That is why it seems to me that they may be the force that will drive change,” Ruban says.

However, so far the situation in the country is the following: entrepreneurs put their money in different baskets, betting on different political forces right before elections. Discussions on establishing fair rules of the game remain at the level of discussions only, and usually emerge when elections are not on the agenda.

Habit for corruption and easy solutions mindset

Ruban relates this habit of corruption to a simple way of thinking.

“We don’t even know how things should be done the right way, and whenever we take a step in that direction, we’re told: ‘Listen, you’d better pay a bribe and get the issue off the table.’ This is how it works at the level of a simple man in the street. With businesses, it’s the same thing, except that the costs of a mistake are higher.”

Therefore, Ruban sees changing mindsets as a priority, as well as ensuring that entrepreneurs are aware of extreme market dependence.

Compared to a 52-million strong nation we were back in the 1990s, with the 40 million we have now, at best, we’re facing a shrinking market. This affects us in many ways. We’re losing a lot from this loss already and we’ll lose even more in the future. People largely don’t understand that they need to take responsibility for these processes, and that they won’t be changed in any other way. This is why business owners keep betting their money on political projects.”

Breaking this vicious cycle has been a crucial issue in Ukraine for a long time, and it partly became a trigger for the Euromaidan Revolution. Back then, one could have hardly found a business that would not be controlled by the so-called “family” – the name that the corrupted inner circle of then-president Viktor Yanukovych received.

New generation entrepreneurs vs Soviet-born entrepreneurs

Anton Ruban and Oksana Syroyid. Shapshot from the video blog So, What’s Next?

However, according to Ruban, aside from the discontent of society there is another powerful changing force — the emerging new generation of entrepreneurs.

“We, our generation, mostly in our thirties, are different. We were born and raised in Ukraine. We didn’t get to see Soviet times, we aren’t limited by the Soviet clichés or, rather, we are, but to a much lesser extent. That is why, I believe, it’ll be easier for us when my generation gets older, when we’ll have a little more resources, it’ll be easier for us to work together because value-wise, ideologically, we are very different and we understand that this responsibility rests with us.”

Ruban explains how entrepreneurs of his generation and entrepreneurs who started building their business in the 1990s, or even in the early 2000s differ.

The difference is that when we started doing business, they said that everything was grabbed before us. We had to build and earn from scratch. And it was radically different.

What people did earlier, in the 1990s, was redistributing existing assets, whether public or private. This was a regular, natural process. However, when you don’t create a business, you don’t have an urgent need to somehow develop, invest, and think strategically. Only a handful of people can do it, and the rest bend their mind on how best to get control of assets to resell them later and… As a matter of fact, this is a tremendous difference in terms of mindset.”

Syroyid in her turn elaborates on the context of the older generation:

This feeling of mutual distrust is very much typical of the generation of entrepreneurs that emerged in the 1990s to the 2000s. In fact, it goes beyond business; it’s basically a hallmark of our generation, a generation that grew up in a colony, right? We were shaped by growing up in a Soviet colony, where there was no right to property, almost no freedoms, and a full-fledged rule of terror. All of that left an imprint of great distrust of each other.”

Post-Soviet trauma of distrust

The above-mentioned attitude can be visible better from the outside.

“When I trained in Sweden, Swedish businessmen told us that Ukraine, Russia, and Belarus have a shared trauma, and this is what you’re talking about, a crisis of confidence. Not only between entrepreneurs, but it goes all the way from the top to bottom, from entrepreneurs to employees,” Ruban says.

Ruban explains that when an employee is hired in Sweden, they have one hundred trust points out of one hundred. By contrast, when an employee is hired in Ukraine, they have zero trust points. Then they have to put in super-efforts to deserve basic appreciation.

The entrepreneur believes that Ukraine’s colonial legacy is at fault for such an approach.

“We survived the 1990s when there was a war of — essentially — a lot of frauds. All of that broke mutual trust. Today, just showing each other business numbers is really emotionally difficult. And the reason behind this distrust is trauma. The real problem, however, is that because of that trauma, every one of us loses.”

Today, Europeans offer the country training programs aimed at teaching openness, which unlocks an opportunity.

“This is not a threat. This is a completely different way of thinking.”

Negative narratives create a negative environment, new messages to be found

Ruban outlines another crucial trend — how Ukrainians perceive themselves.

“What do you think is a big problem with the perception of Ukraine even among people of my generation? We all took a Ukrainian literature course in high school. In nine out of ten cases, it was about horrors: famine, murder, death, oppression, and more along those lines. We got no positive messages. They just weren’t there, and people feel emotionally uncomfortable looking into the past.”

An answer to this, according to Ruban, can be disseminating the right positive messages, especially environmentally-friendly and creative ones.

One of the negative ones that exists within society is that the state is an enemy.

The message finds positive feedback with some entrepreneurs. And the surface reasons for such an attitude might be even fair.

Ruban explains that the number of state agencies helping people to do business in Ukraine and the number of agencies ripping businesses off is vastly disproportionate. As a result, businesses have this cliché that the state is a general problem.

“Personally, I don’t believe it. I think that the state plays a huge role in business… This is what I pay my taxes for and I’m grateful that I have this environment. You know, an environment is like a heart. If my heart works well, I don’t pay it any mind. Entrepreneurs who see the state as an enemy don’t realize that it is the heart and start noticing it only when it works very badly.”

Syroyid, however, also calls to hear concerns of the entrepreneurs who are dissatisfied.

“For them, the state remains some kind of a wicked stepmother, right? The state is about representation, because state institutions represent real people. Today state institutions represent monopolists. They don’t represent small, medium-sized, non-partisan non-oligarchic businesses. The state can’t transform from within by itself and start representing the business community.”

In his turn, Ruban thinks that the key question today is what kind of messages will strike a chord with most entrepreneurs in Ukraine. In particular, with small and medium-sized businesses.

“We know what the messages of big businesses are, because they implement them in the Parliament, in the Cabinet, pretty much everywhere. What we have to do as we grow and cooperate is to shape our messages.

According to Ruban, these messages could be:

1. Protecting private property.
“This is the basic fundamental principle without which everything else is futile, right? Everyone has to think about ways to achieve. It is an actual fact that today, private property isn’t safeguarded in Ukraine, and this is a key issue for any Western investor and anyone who wants to start doing business in Ukraine.”

2. Protecting fair rules of play

“We can say that the state has two outsized functions: first, it pokes its nose where it has no business and it tries to regulate what’s better left unregulated and second, it does nothing about existing monopolies that outweigh the interests of all other players, who are largely excluded from decision-making processes.”

In this situation, the entrepreneur names another problem — how society tolerates the current state of affairs.

How the political environment impacts entrepreneurship

Graphics: Ganna Naronina

Both Syroyid and Ruban outline another fundamental obstacle in the way of developing free and independent entrepreneurship in Ukraine — the judiciary.

“We’re back to the fact that, without changing the judicial system, no matter what we write, no matter what we put on paper or bills we vote into laws, – and they can be pretty excellent – we’ll always have someone who will greenlight the decisions made. Or not,” Ruban says.

According to Ruban, without public pressure, the MPs who make use of gaps in legislation for their own benefits can continue to reap the fruits extremely easily. In such circumstances, paying for the electoral campaigns for good political forces might seem like the easier solution.

Those who pay to get their parties into parliament have thousands of schemes. Most importantly, they don’t pursue any objectives other than [protecting] their property. If the healthy part of society, a clean part of society that wants rules of fair play to apply to everyone and not just a few, funds some of the parliamentarians, it seems to me that this would be the beginning of a completely different Ukraine.”

So far in Ukraine there are neither right-wing nor left-wing parties. Syroyid, who used to be a lawmaker herself, points out that, instead, most political forces represent monopolies.

“That is, they fake being right-wing or left-wing, but they only represent monopolists’ interests.”

Ruban supplements this thought by the fact that in Ukraine, only a handful of voters have a notion of ideology.

“Accordingly, many make electoral decisions not based on any clear platform, but rather for personalities or brands. The voters, 90% of them, have never so much as skipped through those agendas. One can promise anything: ‘Let’s make Ukraine great again.’ In fact, I think that the lack of political awareness and political education in the first place is a tremendous problem, because Ukrainians elect people into power who never keep their word on their promised agenda items.This is why they inevitably end up disappointed.”

Syroyid sees that the role of entrepreneurs can be crucial in this process. Ruban is confident that small steps can persuade them to take engaged: for instance, by convincing business owners that it’s possible to solve their problems by creating a healthy legislative field without corruption.e part in it

In conclusion, Ruban stresses that overcoming old Soviet traumas is a key issue for free entrepreneurship. The process has started already. Thus, the introduction of visa-free travel has made Europe more accessible and the fact that Ukrainians have started to actively travel to Europe, the United States, or elsewhere has had a tremendous impact.

This publication is based on the video blog So, What’s Next?, issued by Lviv Security Forum with the financial support of Hanns Seidel Foundation in Ukraine.

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Edited by: Sonya Bandouil

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