Early in December 2006, during Viktor Yanukovych’s visit to the United States, Ukraine and the US signed an agreement on Ukraine’s participation in the so-called threshold program directed by the Millennium Challenge Corporation (MCC). According to the terms of this agreement, Ukraine will receive $45 million to fight corruption. New financial vistas are opening up for us, as John Hewko, the vice-president of this US corporation, told The Day . Presenting his business card, he explained that his name is really Ivan Hewko. Although he was born in the US, his parents came from Ternopil oblast.
“The Millennium Challenge Corporation is an American state institution that was created in 2004. We are financed by the US Congress, which means that the money we have is provided by the American people. It is a financial aid program offered to the Ukrainian people by the American people. We provide financial aid to developing countries in the form of grants, so these funds do not have to be repaid. Our goal is to reduce poverty and destitution through sustained economic growth and to stimulate and encourage this growth. In November 2006 Ukraine was admitted to the Millennium Challenge Corporation as a full member, joining a group of 25 countries that have the right to submit proposals for financing development needs. Ukraine now has this right. The purpose of my visit is to meet with Ukraine’s political leaders in Kyiv, the heads of some oblasts, members of the press, nonprofit organizations, and the private sector in order to explain what it means to be a full member of the corporation, what it means to Ukraine, and to tell them about the grant application process.
We have two programs for financial aid. The first, so-called threshold aid, is given to fight corruption, and Ukraine has already received it. We allocated $45 million to your country for this purpose.”
Has the money already arrived?
“It’s coming. That is, this program is already starting to work. In Ukraine it is administered on our behalf by the United States Agency for International Development (USAID). I am in charge of the main anticorruption program, and I’m responsible for the 25 countries that now have access to the big funds from our main program.”
How does it work?
“Ukraine joined the program as a full member, which means that the country and its people, rather than the government, president, or parliament, have the right to apply to the corporation for funding. We are ready to finance any health, education, transport, energy, agriculture, or anticorruption program. It is up to Ukraine to decide what is needed. It is a very interesting program because we don’t come to Ukraine and say, “We have $100 million for such and such a purpose.” As a full member of the corporation, Ukraine has the right to submit a proposal for funding and choose what should be financed.”
Can these wishes apply simultaneously to various spheres or are they restricted to one, say, education?
“There may be various directions but we would like the application to be focused rather than disjointed — a hospital here, a school there, and a road somewhere else. An application can have various components, but we want them to comprise one coherent package that we will finance.”
“People should know in Ukraine that we will discuss Ukraine’s application only with one person. It will not be good or efficient if different groups have some influence on this. We are asking Ukraine to appoint one person to represent the president, government, and parliament in dealing with us at the political level. We are not ready to hold separate negotiations with them. Furthermore, we ask Ukraine to appoint one more person who will be in charge of the technical aspect of our cooperation. I think this will be an extremely difficult task. Not a political player, this person will have to be a good executive and manager, know how to develop the program at the technical level, and be able to maintain relationships with the political elite of the country, all the branches of power, and to direct all dealings at the horizontal level. Perhaps this will be a representative of the private sector. Or it may be a foreigner who is known and trusted in Ukraine.
“The main thing is that this person (his or her main work place will be Ukraine, more specifically-an organization in charge of this program) will have the right to speak on behalf of Ukraine, and this at the political level.
“At the same time a group of Ukrainian technical experts will have to be set up. We will provide Ukraine with a list of their qualifications. For them ,too, this will have to be the main job, and Ukraine will need to finance this group. The experience of other countries that have successfully cooperated with us shows that half a million to two million dollars are needed to finance this team. These are the first three steps.”
“Once this is done, we will have to meet with our economists to conduct a broad analysis of the obstacles that are hindering economic growth in Ukraine. Based on this we will hold a broad consultation with the Ukrainian people, i.e., with the regions, oblasts, the private sector, and nonprofit organizations. We will need to have a preliminary plan determining the extent and geographical distribution of consultations because we want this funding proposal that Ukraine has to prepare to really come from the people and on the basis of the broadest consultations with the people. I would like to emphasize that we are going to talk not only with ministers and regional authorities. We would like this proposal to reflect the thinking, needs, and priorities of the people.”
So you are building a democratic procedure into the foundation of this aid.
“That’s right. People will be able to come to us with their ideas, and on the basis of this the workgroup will make its decisions and put together specific projects. Let me repeat that this is not going to be the case of several ministers getting together and dividing the cake. This approach will not work with us. To summarize, the first step is to set up the technical team, and the second, most important, step is to conduct the broadest consultations. On the basis of this, Ukraine’s proposal to us will be formulated. Then we will flesh it out and our experts will analyze whether it will lead to economic growth and whether the requested funds are adequate, or whether less money or perhaps more is needed.”
So Ukraine’s proposal will be audited?
“Let us call this technical checking or technical expertise. Then on the basis of the proposal, if it has been approved at all levels, an agreement will be signed with Ukraine and the corporation will start transferring the necessary funds.”
What amount may be allocated to Ukraine?
“We do not set a minimum or maximum amount for a country. To date the largest amount was allocated to Ghana-over $550 million. In my opinion, this is also an approximate minimum amount for Ukraine. But I would like to emphasize that there is no minimum or maximum. It all depends on the quality of the proposal, i.e., it may be $500 million; it can be more, or less. We also take into consideration a country’s ability to effectively utilize these financial resources. This is a very attractive program because you know better what your country needs for its development. And we seek to provide funding for the things that you consider necessary and important.”
It seems to me that at this stage, when Ukraine has been allocated $45 million according to the threshold program, the US thinks corruption is the sole factor hindering Ukraine’s progress and the development of its economy. Is this correct?
“I would say that this is not the only factor, but you know, we choose countries on the basis of 16 indices that show whether the country is democratic, encourages market economy, and invests in its population. The most important one of these indices is the corruption index. So far Ukraine has rated poorly on this one. This year it became more positive and that is why Ukraine was chosen a full member of our corporation. The $45 million program is targeting specifically corruption, which is a big problem not only in Ukraine but in many other countries. Perhaps there are also other problems. Therefore, we have given Ukraine $45 million to fight corruption and are now ready to provide a much larger amount, this time for specific projects and programs.”
They’re supposed to target the struggle against poverty?
“Yes, they have to target poverty and be aimed at fostering sustained economic growth. That is, these two programs — the threshold program and the main, so-called pact, program — work together. Corruption has to be combated. This is very important and the people demand it, but at the same time money also needs to be invested in projects that will foster economic growth and reduce poverty and destitution. So the two programs complement each other.”
Are there predictions or fears in the US that the money channeled through the threshold program will end up in corrupt hands?
“We will be watching this closely and are setting up a mechanism for the threshold program that will guarantee that the money will get to the people who are supposed to receive it. I have already mentioned that the threshold program is administered by USAID and this organization holds all tenders and makes sure that the money is used properly.”
They are responsible for this?
“Yes, together with Ukraine they are responsible for the money being put to effective use and not ending up in the wrong hands. Together with Ukraine we will also create mechanisms for the pact program that will definitely ensure that the money is distributed properly- during transparent, open, and honest tenders. We will not sign the agreement or disburse the money until these mechanisms have been created and tested, which will guarantee that the money will not be stolen.”
Are these corruption-related requirements for Ukraine connected with the so-called Istanbul plan on monitoring anticorruption activity in our country? This is a European anticorruption plan.
“Our aid is not connected with this directly, but through our indices we are gauging corruption, and if Ukraine is cooperating with Europe in a serious anticorruption program, we will, of course, support these efforts.”
A double-standard approach to cases of corruption is commonplace in Ukraine. Some get away with it, while others, mostly little people, are taken to court. Does this program somehow direct its efforts at raising the level of fighting corruption?
“The purpose of my visit is to describe how the pact program is going to work and how money can be obtained for its implementation. As far as the threshold program is concerned, it has five components. The first component is monitoring anticorruption activity and getting the public and the press involved. The second one is increasing transparency in the judicial sector to help create an effective judicial system for fighting corruption. The third one is setting standards for the ethics of administrative procedures to make them clean and transparent. The fourth one is simplifying decision-making procedures and making them more transparent. The fifth component is battling corruption in higher educational institutions.”
You are a lawyer by profession, so I have a specific question about fighting corruption. A bill dealing with this issue is being prepared now. It contains a proposal to introduce legal responsibility for corrupt activities of legal entities. In your opinion, will this enable specific people who are guilty of committing crimes to evade responsibility, since it will be the corporation that will be held responsible and an individual will be able to hide behind its back?
“I will express my personal opinion. In the US, for example, there are three corresponding concepts. When a legal entity is involved in illegal activity, it can be held criminally responsible, but naturally it cannot be put behind bars. However, heavy fines and other administrative punishments may be applied. On the other hand, the guilty persons also have to be held responsible. Of course, Ukraine will make its own decision on the best procedure, but it seems to me that there also has to be criminal responsibility on the part of the actual perpetrators, so that individuals cannot avoid being held responsible for what the corporation did. Ukraine needs to fight against large-scale corruption where big money is involved, but at the same time small-scale corruption has to be battled. When Giuliani was the mayor of New York City, he advanced the so-called theory of broken windows. It means that various small violations, small defects in your house, city, or country create an atmosphere of chaos. When they started dealing with this in New York, it helped create an atmosphere befitting a rule-of-law state.”
So we are talking about raising the moral level of the whole society?
“Definitely.”
Monitoring by European experts shows that Ukraine has implemented 11 out of 23 anticorruption recommendations. If the same ratio also holds for the threshold program, will we receive funding from the pact program?
“We will not, of course, sign the pact unless we see that Ukraine is seriously working on the threshold program. This is a kind of test.”
