One of 'Tomorrow's People'

How do you pull Ukraine back from the brink of economic collapse and change a system that's plagued the country for decades--knowing that all those before you have failed? That's part of the job Pavlo Sheremeta took on in February. It turned out to be even harder than he imagined.

By Steven Boyd Saum 89C 90G

Sheremeta

Photo courtesy of Kyiv School of Economics

When Pavlo Sheremeta 95MBA got the phone call on a Saturday in February asking him to serve as minister for economic development and trade as part of a “kamikaze” interim government for Ukraine, he didn’t plan to hold the position for long. 

The protests that had rocked the country for months reached a crescendo on February 20, when dozens of people were shot down in the streets of Kyiv. The next night, then-President Viktor Yanukovych fled the capital. His exodus offered a moment of shocking relief for many—and the prospect that one of the greatest European crises of the twenty-first century was coming to a close.

In the days that followed, an interim government was formed under Prime Minister Arseniy Yatseniuk and tasked with holding the country together until presidential elections in May. But there needed to be budget reforms to bring in emergency loans before then; otherwise Ukraine might just emerge from a political maelstrom only to have its economy, which had been on the brink of ruin for months, finally fall apart altogether. 

Why Sheremeta? After receiving his MBA from Goizueta Business School, he became well-known for his role as a business school leader and for his writings and talks on economic reform, and he brought international experience as a consultant. He was not a political veteran, nor was he beholden to the system. One side of that coin: He brought a freshness of ideas, a combination of energy and pragmatism that could help transform Ukraine’s troubled economic landscape. The other side of the coin: He brought no experience helming a hide-bound ministry of 1,300 employees that, in turn, is part of a government structure not known for its friendliness to business. 

It was a given that dealing with parliament would be an ordeal; the president’s departure in February wasn’t accompanied by a housecleaning in the legislature, dominated by supporters of the former administration. March brought the Russian annexation of Crimea. Summer brought a full-blown civil-cum-proxy war around Donetsk in Luhansk. 

For Sheremeta, a few months into the post there were reports of clashes with the prime minister—including, in August, over who should be appointed Sheremeta’s deputy to direct work on economic integration with the European Union. At a meeting of the cabinet of ministers, a candidate was approved for the post over Sheremeta’s objection—the same official who had headed EU discussions for two years for the Yanukovych government. 

To Sheremeta, this wasn’t the first line that was crossed. But, after half a year in government, it was the last. He submitted his resignation on August 20. The sense of frustration was clear enough in interviews and his brief post on Facebook the next day: “So, rather than continue to fight with yesterday’s system, I decided to focus on working with people of tomorrow who will create tomorrow’s system.”

I first traveled to Ukraine exactly twenty years ago, teaching at a university with the Peace Corps before directing academic exchanges for the US embassy. This past May brought me back as an observer with the Organization for Security and Cooperation in Europe, which judged the election as free and fair. At the same time, violence already roiled the areas around Donetsk and Luhansk and prevented voting, and few Crimeans made their way to mainland Ukraine to vote. But over much of the country, it seemed that political uncertainty at last might come to an end.

The process and results of the election carry, Sheremeta says, “a strong message that we are a mature democracy.” Then he purses his lips and he qualifies that. “A maturing democracy.” That’s far more hopeful than the dark questions previous months seemed to serve up.

Here’s a scene from the midpoint of Sheremeta’s term as minister. On a morning on the cusp of summer, he takes the metro to Independence Square in the center of Kyiv. He heads up the escalator and through the glass doors and out into the square the world came to know simply as Maidan: epicenter of peaceful and then violent protests that began in November 2013. Along with the remnants of tent encampments, there are memorials to the fallen and the missing, barricades of tires, burned-out carcasses
of trucks and buses, flags and candles, and a sense that the work of revolution is not done yet. 

From the square, the trim, forty-three-year-old Sheremeta hoofs it up the hill, climbing a street where protesters and riot police once hurled improvised explosives at his office in the hulking, gray building of the cabinet of ministers. At a breakfast meeting with his chief of staff, as Sheremeta is enjoying a view over the city and the broad-leafed chestnut trees in the park across the way—a bit of calm before the day’s inevitable storm—he proposes, “Let’s position this as a case discussion.” 

This one is epic: a country that’s been running a double-digit fiscal deficit and a trade deficit for years; a revolution; a president and government fled in disgrace, succeeded three months ago by an interim government tasked with cleaning up corruption, beginning sweeping economic reforms, and sustaining a sense of clear moral purpose in the work of governing forty-five million people. A positive development for the scenario—two days before, in a single round of elections, the Ukrainian people overwhelmingly elected a new president, Petro Poroshenko. Hope is in the air. 

For the case study, grappling with the economic and moral conundrum means, Sheremeta says, starting with a sense of detachment. Remember: “It’s not us. If we add our emotions, especially if we add ego and pride, we’re just dead.” Then ask the questions that need to be asked.

We were sitting in his office on Hrushevsky Street. Dark haired with gray-blue eyes, Sheremeta wore a pale blue shirt and dark slacks, his jacket draped over the back of his desk chair. Truth be told, he looked tired. But as we got into the conversation, his brow furrowed and his eyes picked up the intensity seen again and again when he’s speaking to a crowd; he spun a black pen in his fingers and tapped it on the table, demarcating a circle on the wood. His English is as rapid-fire as his Ukrainian or Russian.

After three months on the job, there was still a sparseness to the office that made it seem he had just moved in; hindsight is tempting now. An oval wooden conference table and brown, leather-padded chairs took center stage. Glass-doored cabinets lining one wall were all but empty. A few objects hung on the wall: an enormous topographical map of the country, photos of the holy Pechersk Monastery, a portrait of poet Taras Shevchenko (this year marks the 200th anniversary of his birth). But my eye was drawn to a framed set of portraits: the Nebesna Sotnya, the “heavenly hundred”—martyrs of the Maidan, many killed by snipers as the violence of revolution reached its apex in February.

“Maidan is still there,” Sheremeta says, echoing a phrase he used in a meeting with the European Bank for Reconstruction and Development ten days earlier. There meant not only in a physical sense, but also as a moral force and metaphor. 

“The people who turned out to Maidan and in other squares around the country, they didn’t come out for lower taxes, they didn’t come out for lower interest rates,” he tells me. “They came out because they were sick and tired. . . . The first thing was corruption, the second thing was European integration, but also that was in terms of values. So, what they wanted to have is democracy and human rights and rule of law.” 

How did that shape the agenda of the country’s top economist? This is where lofty ideals meet the fine print of legislation, with billions of dollars at stake: for starters, in developing a new corruption-free public procurement act. The landmark legislation was shaped in collaboration with public activists and vetted by the EU, the World Bank, and Transparency International. The bill was passed in March with a plurality of one vote. But the afternoon that Sheremeta and I talked, detractors were still nibbling at the edges of the legislation. 

Behind him on the wall was a sign from a conference about Polish and Ukrainian economic development. Poland, now a member of the EU, has a population of about thirty-eight million; Ukraine’s is forty-five million. But GDP per capita in Poland is triple that of Ukraine. Economically, the countries were on a comparable level in 1991, Sheremeta pointed out. But to reform its economy, Poland implemented shock therapy. Ukraine has instead had “shock without therapy for twenty years.”

Although Sheremeta was not a political player in Kyiv before, he did not arrive a stranger to government altogether. He’s advised the city administration in L’viv—a western hub known for attracting international investment, and where Sheremeta was raised and began his studies. While a student he assisted a member of the Ukrainian Parliament. He then started his MBA at the Central European University in Budapest before being offered the opportunity to complete the program at Emory. 

Sheremeta came to Emory and Goizueta in 1994 as an Edmund S. Muskie Graduate Fellow, a prestigious program that brings emerging leaders in key professional fields from Eurasia to the US for one to two years of graduate study. Jeff Rosensweig, associate professor of finance, teaches an MBA course in global macroeconomics, and remembers well Sheremeta’s sharp mind and keen interest in the subject.

“Pavlo was a mature individual and a serious student,” Rosensweig says. “His brilliance was apparent, and he had a real interest in digging deeper into subjects. Obviously I am delighted to see that he took some of what he learned at Emory and developed a distinguished career as a business school professor and leader before applying it to economic policy.”

In addition to completing his MBA, Sheremeta made lasting connections at Emory. Rosensweig recently heard from an alumnus who met Sheremeta for dinner in Europe a few years ago. During a conversation about fiscal policy, Sheremeta grabbed a napkin and sketched, from memory, an original economic model from Rosensweig’s course. “It certainly impressed us that he not only remembered it, but was able to apply it in novel ways to problem areas in the Ukrainian economy,” Rosensweig says.

While recalling Sheremeta’s time at Emory, Rosensweig is reminded of another Muskie Fellow who completed his MBA at Goizueta—Lado Gurgenidze 93MBA, an investment banker and entrepreneur who served as prime minister of Georgia from 2007 to 2008. He, too, was faced with steep challenges and initiated positive economic reform.

“I am proud that Goizueta trains people who, although not at all political animals, will step up and apply their knowledge, talents, and integrity when their nations need just those qualities,” Rosensweig says. “I feel certain that Pavlo would have been able to achieve similar economic reforms and success if the conditions could have warranted.”

Four years after graduating from Emory, Sheremeta founded the Kyiv Mohyla Business School, part of a university whose roots reach back to the early seventeenth century. In 2012, Sheremeta was named president of the Kyiv School of Economics. In between, he directed the Malaysia Blue Ocean Strategy Institute and served as economic adviser to the government in Kuala Lampur. He cites his experience in Asia when he talks about the need at home to improve the ease of doing business: for that, Malaysia is ranked number six in the world; Ukraine is number 112. 

Sheremeta has worked in St. Petersburg and Moscow, including teaching at the Russian Presidential Academy of National Economy and Public Administration—helpful factors in working with his Russian counterpart and earning trust with audiences throughout eastern and southern Ukraine.

Sheremeta

Photo courtesy of Ukraine Crisis Media Center

Sheremeta also understands the virtues of symbolic gestures, like taking the metro instead of being chauffeured to work. Early on in his tenure as minister, he cut the fleet of ministry vehicles
by 85 percent. On Sheremeta’s Facebook page, you’ll find charts and infographics on “Why Ukraine Needs Reform.” 

His 2012 TedX Kiev talk (in Ukrainian) is less the stuff of economic policy than of attitude, pacing off rules such as: Expect nothing (“nobody creates a vision for us,” “nobody gives us power voluntarily”) and blame no one (“world, crisis, country . . .parents, deans, professors”). He also advises fellow Ukrainians: “We need to teach our nation how to smile.” By that he means a genuine expression of welcome and joy—since cross-cultural social skills are part of an information economy that also values “critical and creative thinking.” 

In autumn 2013, Ukraine seemed on track to ink an association agreement with the European Union, bringing closer economic cooperation and, soon, visa-free travel in Europe. Understandably, the prospect sparked excitement across the country. But on the eve of the Vilnius Summit, where the signing was to take place, Sheremeta wrote (in Russian) in his regular column for Forbes Ukraine that a piece of paper didn’t automatically create conditions for economic growth. “It is not the end but only the beginning of a complex, tortuous path full of obstacles and unfriendly competitors,” he warned. 

At the summit, then-President Victor Yanukovych didn’t sign. Students and others came to Independence Square in protest. Sheremeta joined them in the cold on Maidan, microphone in hand on the night of November 23, speaking with encouragement and conviction about why, sooner or later, Ukraine would be in the European Union: “Ukraine is absolutely a European country. Kyiv is not in Africa or Asia or America, it is in Europe. . . .  Ours is a large country, a large market, a rich country, with people with talents that are necessary to Europe.”

When police forcibly disbursed the protests a few days later, people returned in greater numbers than ever. After the new year, the revolution came to a head; then Yanukovych fled. 

Sheremeta, who is married with two daughters, saw that as a chance to take a breath of fresh air following several intense months. “The kids had their winter vacations, and I said, ‘Let’s get out, and let’s bring some normalcy to our life.’” They left for skiing in Austria on a Saturday. Three days later, he got the phone call asking him to join the interim government.

“It was less than a week after all those terrible shootings.” Sheremeta pointed to the framed set of photographs near his desk. “These guys paid such a heavy price. Whatever we do is such a small, small, small thing compared to the price that they paid.”

Within Ukraine, Sheremeta soon learned, many people have expectations for economic reform that are much higher than those of international financial institutions. Though it’s those institutions—and US and EU economic aid—that have so far, and might still, help rescue Ukraine in the short term.

A man exchanges money

Photo by Valentyn Ogirenko/Reuters

In February, when Sheremeta took the minister post, Ukraine was running a double-digit fiscal deficit; trimming that in half was a condition for the IMF to disburse the first tranche of a $17 billion loan. 

But what about the austerity that comes with cutting government spending? 

“Those who were in business in Ukraine in the past three to four years and not connected to government know that was worse than austerity,” Sheremeta says. “You could not protect your property in the courts.”

The outlook at the beginning of the summer was bad, and that was before fighting in the east turned horrific. Nobody projects economic growth for 2014. But it’s not just economic growth that will serve as an important milestone for Ukraine, Sheremeta told me. “Marker number two—equally important—is that you come to our next presidential election and you say that what you have seen is a free, fair, and democratic election.”

What troubled Sheremeta most during our visit back in May wasn’t what might happen next. It was what might not happen. 

“My greatest fear at this point is that we wouldn’t have enough strength to break the system.” He tapped his pen on the table for emphasis. “It’s not even change the system. Change would not be enough.” He nodded toward the photographs on his wall. “Again, that’s something that we owe to these people.”

In July, the governing coalition of Ukraine collapsed, and Prime Minister Yatseniuk submitted his resignation. What played out was actually a showdown with parliament—forcing a confidence vote and enabling the passage of some reform legislation. parliament voted not to accept Yatseniuk’s resignation. August was a different story.

When Sheremeta submitted his resignation on a Wednesday, his wasn’t the first of the week; that Monday, the head of the national anticorruption committee, investigative journalist Tetiana Chornovil, quit her post, writing in a column: “There is no political will in Ukraine for an uncompromising, wide-scale war on corruption.” 

Although technically Sheremeta’s resignation didn’t take effect until it was approved by parliament, he made it clear that his work in the ministry was done; operations would be turned over to his top deputy. In a televised briefing, he cautioned, “The economy will never advance if the government continues to behave like
a predator toward business.” 

Since his resignation was accepted by parliament in September, Sheremeta has given a few talks at business schools. As for his own work on economic reform, many of his supporters hope it will continue. Like many things about Ukraine’s future, that remains to be seen.   

Steven Saum is editor of Santa Clara Magazine at Santa Clara University in California.

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