INTRO
Hello and welcome to this week’s episode of Ukraine Calling. I’m Bohdan Nahaylo for Hromadske Radio in Kyiv and as always we’re bringing you our feature interview followed by some new music from Ukraine. This week our guest is Oleksandr Danyliuk, who last week was dismissed as the Minister of Finance. We discuss with this internationally respected young reformer why he was removed and the state of the reform process generally.
FEATURE INTERVIEW: Oleksandr Danylyuk gives Bohdan Nahaylo his view on getting fired as Ukraine’s Finance Minister, and more.
Nahaylo: I am delighted to welcome you to our latest edition of Ukraine Calling on Hromadske Radio here in Kyiv. We are very fortunate to have as our guest this week Oleksandr Danyliuk. Until a few days ago he was the prominent Minister of Finance of the country, but suddenly had to leave, was “dismissed”, not of his own will. He made statements about the conditions in which he was forced out.
I hope therefore that today we can shed some more light on the actual circumstances in which the departure of this key reformer in the government of Ukraine happened and allow us to draw certain conclusions. Welcome! Shall I address you as you as Mr. Minister, Mr. Ex-Minister, or simply Oleksandr.
Danyliuk: Oleksandr is much better.
Nahaylo: Thank you, Oleksandr! Let me begin by saying that I looked at your biography to prepare for this interview. It’s very impressive. You come across as one of the younger generation of people who inspired hope after the Revolution of Dignity. Hope, that finally professionals and reformers had come to the helm. How did you move form the private sector, from academia, from your impressive background to become a Minister. Was it out of sense of duty, or simply because the job was there?
Danyliuk: Clearly, it was something inside me, something was calling me to come and work for the country at this important moment.
Nahaylo: And this was in 2016.
Danyliuk: Yes. Actually, prior to that I worked as Deputy-Head of the Presidential Administration. I worked on the reforms agenda. I was the President’s representative in the Cabinet of Ministers supporting the team of reformers in the government at that time.
Nahaylo: So, you were very much an insider.
Danyliuk: Yes. Not only professionally, but I also had very close, friendly, links to them because we shared the same values, goals. Naturally when the new government was formed, I informed the President that I do not see myself anymore with the Presidential Administration because it’s good to be a part of the team, but if I want to do something, I have to be where things are happening. That is how I was offered a position as Minister of Finance. Actually, originally it was Minister of Economy, but then Minister of Finance. I realised that this was my opportunity because I think the position of Minister of Finance is where if you do your job properly you can move reforms forward very quickly. And not only reforms in the Ministry of Finance, but help everyone in the government who wants to carry out the reforms, support them and move forward.
Nahaylo: Do I understand correctly that at that stage, 2015-16, you sensed the political will to get things done, to change the country, to engage in deep reforms?
Danyliuk: I was already at that time working on it in the Presidential Administration. So it’s not like there was something new involved in moving from the private sector to the government. For me it was not a question of looking for the right time. I believe there is never right time. If you look at my previous two years in the position of Minister, from day one I took an active position and was not trying to be calm, trying to make it easy, secure my job. It is important for me to make a difference. There is never a perfect time.
Nahaylo: As an individual, you have your ideas, and you have your ideals. The Ministry that you headed, was it still a kind of old regime, conservative body? Or was it already in the process of change in terms of mindsets and how things get done?
Danyliuk: It is somehow stuck in the middle. I cannot say that is an “old” organization, but there were people who had worked in it worked for 20-25 years.
Nahaylo: Has they adapted to the challenges of new times?
Danyliuk: They did very quickly. Why? Because one of the important roles of the Minister is to motivate people properly. Except if they are totally corrupt, whom you cannot motivate… The Ministry is a very professional ministry. Even if people have different views, if you work with them, you tell what you want, you give them responsibly, and they deliver. I created a motto “The Ministry of Finance is a driver of reforms” and they started to believe in this. Which means, for example, if we have education reform and it requires some money, do not say just “no”.
Nahaylo: Or medical reform…
Danyliuk: Yes, or medical reform. We just say “yes” and we help to launch it, to provide financial support, to think it through. And that would motivate people, because they would see the results, they are not just crunching numbers.
Nahaylo: Did you have the support that you expected? After six months, a year of doing your job, did you feel you had sufficient support from the Presidential Administration, from the government itself? Or at some stage, did you feel you had got stranded?
Danyliuk: When I came to my position as a Minister I had the right expectations. I did not have rose-tinted glasses.
Nahaylo: You were realistic?
Danyliuk: I was very realistic. And it was very important not to have naïve expectations. We were planning reforms. In Ukraine, it’s not going ideally, not the way how you wanted it to happen. So, when you plan something, you also plan how to ensure nobody will stop the reform. It’s not like you have a wonderful idea of doing it, and you create a perfect model for the health care, education, or budget reform. It’s not how it works. You need to have a perfect model, but you also need to think how to preserve it, how to implement it, and you know that almost everyone will be working against you. That’s a typical model in Ukraine, unfortunately. This is not just about being smart. It’s about being a fighter in moving things forward and having your team, your colleagues, near you, so you will be like an icebreaker to move things forward.
Nahaylo: Is this because of the mentality inherited form the Soviet period? Is this because of the vested interests and corruption? Wanting a piece of the cake before anything is done? Greasing the palms, as the Americans say? What is at the bottom of these obstacles to reforms?
Danyliuk: All of that. It’s not one. It’s clearly vested interests. That’s one of the biggest obstacles. Second is absence of desire to actually do things.
Nahaylo: Political will?
Danyliuk: Yes, political will… Sometimes what is claimed is not what you see in reality, publicly. And obviously another issue, which is very difficult to tackle even if you have political will, is the weak institutional capacity to implement things. We were moving on several reforms at the same time. And clearly we don’t have that many people capable of doing that successfully.
Nahaylo: And we are losing a lot of people because of the brain drain, or not?
Danyliuk: This overall brain drain from Ukraine – that’s true, it’s happening. But also if you look at the state sector: this is where it’s especially painful. Because you see people who actually can do things; they’re losing their motivation. And this is very painful, because you understand that with the rest you cannot do it. You need to have a critical mass of people who move ahead. That’s why I was very sad to see people from the previous government, reformers and that, leaving. And they don’t want to return. This is a very bad message. When I was sacked last week, for me it’s also very important not to send a message that that’s it. Because there are still people around who are doing things. Yes, we work together, we were helping each other, but they need to move on. Otherwise it’s a full stop, if not reverse.
Nahaylo: That’s a very generous and principled position, and that’s been noticeable in your behavior. Tell us about the importance of, or the impact, the weight of external, shall we say, motivation, the conditionality that has been built into providing credits and political support. To what extend was that a driving force rather than political will?
Danyliuk: Very good question. Short answer: that’s what drives changes in the country. It’s a short answer, but if you look at how it evolved in the last four years for example, initially if anybody like the, IMF or World Bank said something, it meant that it has to be done. Then approximately two years later, in 2016 when our government was formed, public got tired. They said, ‘”Why do we want a government if they do what others tell us to do?” And even if we understand it’s the right thing to do, publicly we couldn’t communicate this because people are just tired – why do we have a government then?
Nahaylo: It’s not just “We’re tired”, we have very widespread populism as a political weapon, and it’s very easy to dump on, to criticize, without providing alternatives.
Danyliuk: This is very true, but it is two different things. Populism, you’re absolutely right. I should have actually mentioned it first. But second is, Ukrainians want to have a government that are capable of doing things without outside pressure. So obviously we’re changing the rhetoric, we’re saying we’re doing it for the Ukrainians, and we did. But I can tell you as an insider: yes that’s how we’re communicating, but if it wasn’t for the external pressure, those [refoms w ould remain only in words, right? But really conditionality works. The Anti-corruption court, the of the law on it last week, happened only because it’s a condition for the next IMF tranche, period.
Nahaylo: OK, but for our listeners to understand, and some of them listen in Ukraine too, the proposals, the reform agenda that is given to Ukraine from outside, is it one that serves one hundred percent the interests of the Ukrainian people and the state for the future, or is it self-serving to some extent in terms of what is expected of Ukraine, in terms of its resources, in terms of where it’s seen to fit in to the economic model of relations. In other words, for those listening, is the support that is given to us as altruistic, as generous as it seems? Or are there some, shall we say more sinister elements connected to the conditionality? I’m asking this because you often hear this in the streets, people say ‘oh yes they’re giving us loans but we’ll be paying for twenty years or thirty years, and they just want to use us as a base for getting resources out of, etc.’ What would you say about this?
Danyliuk: Again, very valid question. Based on my experience, obviously, there is a genuine desire to support Ukraine. And especially the package of support, financial support that we are currently using, and it is expiring actually very soon in March next year, was formed at the most difficult time in our recent history. So it was 2014- 2015, when we, as a result of the war, the economic, military aggression, as a consequence of Revolution, obviously needed support. And that package was put in place, and there was a genuine desire to support the country. So I understand where all these messages come from, but they have no grounds.
But what should be expected from every government official who works with these organizations is to protect the interest of the country. I wasn’t an easy person [for them deal with]. I have excellent relationship with IMF, with the World Bank, with EBRD, but in each of these institutions had a very strong stance on some of the issues. I said no, that’s not going to work, we’re against that. Because we treat your money as money of our taxpayers. I don’t care: we should not waste money of our taxpayers, we should not waste your money, right? If it’s loan, so what? We’re going to repay it. So with them I was a very tough negotiator sometimes. But actually that attitude, that approach, builds trust. Because they see on the other side it’s not just weak people who are desperate…
Nahaylo: They see us as partners.
Danyliuk: And that’s what is important. Who you respect in your life, in professional life, is people who actually partner with you.
Nahaylo: But critics would say, and they do say that, and they ask, why have we not seen very substantial, deep, radical reforms? What we’ve seen are either a kind of lip service paid to external creditors and donors, and cosmetic changes. Or changes that at the last minute have the guts taken out by the people that are imposed to run the institutions, the bodies that are created in the so called reforms. This may be an exaggeration, but how do you see this?
Danyliuk: Another very good question. I was asking this question all the time, how to break this vicious circle. Well, reality is that as a result of revolution we didn’t have a radical change of elite, right? We have people who have been before, and didn’t deliver. Also, if it’s old people they also linked with each other, they are linked to the business elites. It’s again people, though they’re slightly younger, their mentality is similar. Obviously with the exceptions of some ministers who actually were coming out of the blue as technocrats, and they really were committed to carrying out the changes. So that’s one of the explanations. The second is, that those people, they like the balance. Ukraine is, I call it, a perfectly balanced country. Where it’s so difficult to change something because if you change something, immediately you pull the string that touches other people and they are trying to pull it back, to keep the balance.
Nahaylo: Some would say that “balance” equates “status quo.”
Danyliuk: Yes, so difficult to break, so you need to be – well, what can I say? A destroyer — but in a constructive sense, because those links need to be broken because there are still monopolies – the oligarchs impacting on politics, having an influence on the media.
Nahaylo: Are they as powerful as they were three or four years ago?
Danyliuk: They are less powerful…
Nahaylo: Particularly in the energy sector, or where are they less powerful?
Danyliuk: Look, just overall, they are less powerful, but they’re still very powerful. If you look at, for example, what is important for elections, right? It is financing, access to media…
Nahaylo: Control of the banks?
Danyliuk: Control of the banks… Yes, we’re past this, but I know what you are hinting at, but I think we resolved that issue. But look, the main media are owned by oligarchs and you can see how they position, who they support. This is clearly a biased approach, and new people will not have access, no way.
Nahaylo: And you’ve linked your own stance, a very principled one, to an attempt to take away from the control of the ministry, a key element that could provide political backing, financial encouragement, during the elections, that could be used for political purposes?
Danyliuk: That is absolutely true. Look, I understand that this is not just a job, to be Minister of Finance. I know what it means to do it professionally, and professionally, it means that I needed to be neutral. I needed to make sure that the money is spent efficiently and not misused, because it is not our money, it is tax payers’ money. But, I also understand that this is a historical time. I understand that this country, our beloved Ukraine, needs to change, and for that new people should come.
The balance needs to be changed as well. These new people with new values – they need to have access. At the same time, the old system could use money from the budget to secure those who are in power, or those who are currently in the parliament, because they use this money and then have a competitive advantage, right? They hade the administrative resources, and therefore a competitive advantage vis-à-vis the new people. This is not just a role of the minister of finance, and I’m just thinking, this is just unfair. We need to think about the country and what is necessary for it to change, and whatever stops it needs to be blocked at all costs.
Nahaylo: So, when was the moment that you realized that you could not put up with it anymore, that you had to speak out?
Danyliuk: Well actually, I was quite vocal. I was quite vocal throughout my tenure, actually. On the first day, I said that “I will be fighting very hard, no one will stop me on state fiscal service reform, on the tax police reform.” I was vocal but at that time, people thought I was not serious. Then, when it comes to decisions, I was the first to attack the corrupt Head of State Fiscal Services, Roman Nasirov. So many state officials said “Don’t do it, that violates the balance,” “Why are you dong it? Do you want him imprisoned?” And I thought, this is a club and I am not a member of this club. I am the Minister of Finance and this guy is head of an important state organization that collects taxes: he should not be a member of the club; he needs to work for people. He should not be corrupt, he should be professional.
Nahaylo: Club? More of a cartel than a club?
Danyliuk: Exactly, well, you said it, but yes, you’re right. And a similar situation with the Prosecutor General. Nobody ever, ever had conflicts with Prosecutor General in this country because he is very powerful. Well, I don’t care because I believe it is an outdated institution that keeps Ukraine moving slowly, and it suppresses businesses, civil society – that’s what’s happening people are talking about, and what I experienced in my job. So I would never accept just closing my eyes and keeping my position, and thinking about the security of my position, and ignoring things – no!
Nahaylo: You obviously weighted the risks and political price that you would probably have to pay for appealing to the G7 ambassadors and voicing your concerns. Was that to be interpreted as a plea for support and understanding from outside, or was it a broader signal, for society and people of your generation and reformers: “Look what’s happening, help, SOS, let’s try to mobilize and do something about the situation,” or am I reading too much into it?
Danyliuk: You know, actually, there is some background to it. We don’t have time to cover it, so I don’t want to oversimplify, but I will give you some insights. First, all of the ambassadors had a very direct relationship to the reform of the state fiscal services. This is the one I was moving forward and I was being pushed back, as it was blocked from all sides. They, being members of the supervisory board for that reform knew how I fought for it, how critical it was for me, and we used the money of those countries, donor money and technical support, loans, to reform the state fiscal service. So, it was my duty, first of all, to tell them what is happening: because of the state fiscal service: your money is being used and these things are not moving forward, and actually, I cannot move any further. That is A.
And B, I also have a very good relationship with the ambassadors and they know how difficult it was for me and they would tell me “You need to stick around and push things forward.” And obviously when they got the news that there could be a resignation, they were concerned. I wanted them to understand the real reason because; they rely on this, we had trust, so I had to do it. It was maybe a last resort because I had exhausted all other options. Okay, that was done, and I think it was the right thing to do.
Nahaylo: And you also said publicly “I will not resign.”
Danyliuk: I will not resign, because I will never give up. If someone wants to get rid of me then good luck, do it, but it is not because I am weak. I will be fighting to the end. Why? Because I believe that what I was doing, my team, my colleagues were doing, is very important for our country.
Nahaylo: Were you disappointed by the vote to dismiss you? The Prime Minister submitted the proposal to fire you on the same day that the law on the anti-corruption court was passed on its second reading. You were, kind of, slipped in through the back door: one issue went through, but the more contentious one remained with us. What did you feel? Were you disappointed that so many deputies actually voted for your dismissal, knowing your record?
Danyliuk: I looked around the parliament, and I know all of them: I know who is good, I know who is bad, and I wasn’t disappointed, no. Everyone reacted in the way they should have reacted, and that reflects the quality of the parliament and their principles.
Nahaylo: Did they react as per a scenario that was worked out for the voting?
Danyliuk: Everything was agreed in advance. That’s how the parliament works. No surprises. Everything is pre-agreed. Deals were done. If you vote for the resignation of the Minister of Finance, you will get such and such, either financial support, or something else, we will give you such and such a position. Unfortunately, it was like a bazaar. And I know how this type of market works. I want the parliament to be different. So, looking forward to the next election – that is important. That’s why I was blocking the use of state money to make the elections unfair. We have to do a lot as a country, to change the quality of our institutions, including the parliament, including the government. The country deserves better.
Nahaylo: Are you prepared to go into politics yourself to make the country better?
Danyliuk: Look, I have my rules, right? I know that when I’m tired I shouldn’t make any decisions. For many years I was thinking about returning to the private sector. That’s still an option. At the end of the day, I paid a very serious price from my life, and my family. But I am also committed to work for the country. So, I need to have a rest. I need to rethink everything. And then I will make a decision. I’m not avoiding the answer.
Nahaylo: Now looking back. It’s only been a few days since you left your Ministerial post. What do you see as your main legacy in those years that you were there? From April 2016 till June 2018, those two years. When you look back, say in five years time, what will you be proud of?
Danyliuk: We did a lot in terms of reforms. Mid-term budgeting. We fought corruption in the VAT refund area. We nationalized PrivatBank. That was a very dangerous and very complex move that everyone was shying away from, because it was so risky. And other things as well. But, I also understand that the question is, “where will Ukraine be in five years?” Because if there will be a reversal, I will not consider this as a legacy. It’s nothing. So, for me now, the real legacy is two things. First of all, it is that the Minister and the team learned how to work together, how to be motivated, how to change the country: this is now inside them. Nobody will take it away from them.
And second, I was from day one actively and vocally working against the system. And that actually motivates other people to do the same. And this is also, I believe, a legacy. I’m sure there will be more people like me. And there are people like me. And in such situations, usually if something happens against you, you just resign. No! We need to fight till the end. And that is the legacy. I want that to stay as a legacy, because that would help the country to change, and other people to behave in a similar way. You cannot be loyal to everything and expect the country to change. You need to break the rules.
Nahaylo: What do you feel personally, looking ahead as an economist, three, five years down the road: will Ukraine sustain this, even if it’s not a full-fledged, movement towards transformation, towards modernization, towards democratization? Will it stay on that trajectory? Or will it meander off somehow?
Danyliuk: I think even if we stay on this trajectory, and move slowly, as we are moving now, I think we are destroying our country. We are destroying the future. So, for me it’s the same. Even if’s a case that we reverse now, but then there will be a new momentum to go much faster; it may be even better than just moving slowly and telling people “we’re doing reforms.” Because that is what people hate us for. They want to see results.
Nahaylo: And two percent, or three percent growth.
Danyliuk: Yes, exactly. That’s not what helps our country, given where we are. Because we started at the same level as Poland, and now Poland’s GDP per capita is way ahead of us.
Nahaylo: Are there any obvious models for Ukraine to look at? Or should it just go its own way.
Danyliuk: I’ve been involved in reforms for many years. I can tell you that of course, solutions are important, models are important. But much more important is actually real desire, and commitment to change the country. That’s it. Because you realize that there are other models. But you do it for the benefit of the country. Not to keep your position. Not to keep your wealth. Not to secure your future. With that attitude no model will help. I think the commitment, and sincere desire to change Ukraine, to have the institutional capacity to do that, that’s what will change the country. And we need to move very, very quickly. Our people deserve it.
Nahaylo: And as a parting message, it can be to your listeners, it can be to your staff that you’ve left behind, what is your parting thought, or whatever you want to say?
Danyliuk: [Pause] You got me on this.
Nahaylo: It’s tough. I ask all my guests this.
Danyliuk: All I can say, is this is only the beginning. For all of us. It’s only the beginning.
Nahaylo: OK. That’s a powerful statement. This is just the beginning! I have been very, very pleased to have you, Oleksandr Danyliuk, who is, or was was until a few days ago, the Minister of Finances. Who publicly said, “I will not betray my country.” And who was prepared to fall on his sword, metaphorically, for the time being. And to set an example. Thank you for your position. Thank you for sharing your insights and your experience with us.
Danyliuk: Thank you. Thank you very much.
MUSIC
“We’re crazy, not mad, just free.” (Ми божевільні, не скажені, а просто вільні.) This is a line from the lyrics of Kyiv’s Vos’myi Den’ (Day Eight), a pop-rock band. It’s from their song called Вільні, which means Free. The vocalist is Oleksandr Viter. His last name means wind! The percussionist is Denis Balykhin. Enjoy!
LOOKING FORWARD
Join us again next week when we’ll bring you a topical in depth interview and some music. So tune in. And we would be happy to receive any feedback from you. Write to us at: ukrainecalling@hromadskeradio.org. This is Bohdan Nahalylo in Kyiv. Thanks so much for listening.
Interview transcribed by Marta Dyczok, Larysa Iarovenko, Nykole King, and and Caitilin O’Hare. Music by Marta Dyczok and Andriy Kulykov. Sound engineer Slava Polishchuk. E-mail distribution Ilona Sviezhentseva. Web support by Andrew Kobaliia.