There Is No Magic Pill For Business Pressure

Business pressure from all regulatory bodies continues to increase. Currently, the inspection situation is even worse than before Russia’s full-scale invasion of Ukraine. The other day, Rozetka co-founder Vladyslav Chechotkin and co-owner of Nova Poshta Volodymyr Popereshniuk once again emphasized this. They are not the first and not the last to highlight this. A few months ago, complaints from business reached President Volodymyr Zelenskyy. No one saw the shame neither in the fact that the problems of entrepreneurs with controllers should be solved by the president, nor in the magic pill for all problems — Zelenskyy’s promise to restart the Economic Security Bureau of Ukraine again, and also by the hands of Oleg Tatarov.

As early as this week, Economic Security Bureau of Ukraine may get a new leader. Another protege who will change nothing.

Economic Security Bureau of Ukraine needs real changes, not fake ones, otherwise it is better to eliminate it altogether, so at least there will be one less controller.

What’s wrong with Economic Security Bureau of Ukraine

The first competition for the head of the Economic Security Bureau of Ukraine was not real. The reason for this judgment is its results, according to which the former tax policeman Vadim Melnyk, who was a henchman of the mentioned Tatarov, became the director of the state body. He did not hide this even at the preparatory stage of the competition, presenting himself everywhere as Tatarov’s assistant.

The work of the Bureau under the leadership of Melnyk failed. Since April 2023, the Bureau was managed by the deputies: Eduard Fedorov and Vitalii Hahach. It’s convenient no matter how you look at it: no contests are required for the appointment of an acting director, and the acting director himself is ready for anything in order to be promoted to the coveted position of a full-fledged director. No independence. And no matter who is appointed now, it will be the same. After all, the new head of the Economic Security Bureau of Ukraine will again be an acting one as a temporary executive.

“Now nobody will hold a competition for the director of the Economic Security Bureau of Ukraine, as provided for by the law. Accordingly, no one will be appointed full-time director of the Economic Security Bureau of Ukraine. There will be another acting head, so his name is unimportant since Tatarov will still be in charge of the body. Acting director will consult with the president’s office on every issue. So, there won’t be a big difference from what happened,” says Yaroslav Zhelezniak, head of the Parliamentary Temporary Investigative Commission (TIC) for inspection and assessment of Economic Security Bureau of Ukraine activities.

Well, no matter what problems there are with the management, it is not acting head, but ordinary personnel who directly address the business. Moreover, according to the plan, these should be qualified analysts and investigators, who, unlike the rest of the security forces, should be able to sow economic machinations like seeds. And here is the problem. The low level of qualification of employees and zero motivation are other glaring problems of the Bureau.

“We at the TIC for the inspection of the Economic Security Bureau of Ukraine have studied their analytical reports – well, the Chat GPT writes better. We also studied the materials that were submitted to the Economic Security Bureau of Ukraine by tax service and financial monitoring bodies. According to the law, the Bureau cannot ignore these materials and must investigate the stated, as it is responsible for this. But they ignore both the materials and the law. In addition, quite often other bodies of pre-trial investigation investigate criminal proceedings under the jurisdiction of the Economic Security Bureau of Ukraine. For example, the National Police is investigating tax evasion, collected evidence, sent the case to court, and in court they say: the evidence is inadmissible because you are an improper investigative body and did not have the right to investigate. The Supreme Court has underlined this a million times,” says Zhelezniak.

By the way, according to TIC estimates, currently about 86% of offenses under investigation by the Security Service are investigated by other bodies. Although at the stage of the creation of the Bureau, society and business were promised that the Economic Security Bureau of Ukraine would investigate economic crimes. That is, with the appearance of the Bureau, the number of bodies that come to the business with inspections did not decrease but increased.

Indicators of reimbursements to the state budget are also disappointing.

“Under Melnyk, for the entire year 2022, the Economic Security Bureau of Ukraine reimbursed only 33 million hryvnias to the budget. When there was another change of management, the increase in income temporarily began, but it did not last long. In July, Economic Security Bureau of Ukraine reimbursed 50 million less than in June. Currently, the body is again without a leader, no one is responsible for the body again, so there is no one to ask for the income. The only thing the deputies are doing now is sharing power, they are not working, at least for the benefit of the state,” Yaroslav Zhelezniak added.

Another “analytical” problem of the Bureau is the inability to calculate even its own budget. So, since the beginning of the year, Melnyk, who understood that he was asked to fulfill the budget of the state body, set limited salaries – employees submitted applications for a 2-hour, and then even a 4-hour workday. Fedorov carried out a “reform” and returned everyone’s salaries – as a result, Economic Security Bureau of Ukraine currently has 30% of all funding left by the end of the year.

How it should have been done

A real reboot of the Economic Security Bureau of Ukraine should have involved the creation of an independent body headed by a person who cannot be influenced by the Office of the President, the parliament, or anyone else.

“The director of the Economic Security Bureau of Ukraine should be selected in a competition, where half of the competition commission should consist of international partners whose activities would not be politically colored, who can evaluate the competence, the candidate’s suggested strategy for the development of the body, etc. The appointed director then independently chooses his deputies and conducts re-certification of all employees throughout the year. Probably, 10% of those currently working at the Bureau may remain,” the TIC for the Economic Security Bureau of Ukraine inspection believes.

According to Zhelezniak, we don’t need to reinvent the wheel, there is a good example from the National Anti-Corruption Bureau of Ukraine. Everything worked there, because it was a requirement of international partners, accordingly, they controlled the process of selection and appointment of the head. On the other hand, international partners were not interested in launching Economic Security Bureau of Ukraine. Few people care about the requirements of business in our country.

The trouble has helped – the scandal of Economic Security Bureau of Ukraine did draw the attention of international partners to the problem. At least the adoption of the law on restarting the Economic Security Bureau of Ukraine (draft law No. 9080) is already prescribed as a condition in the Memorandum with the IMF for providing a new tranche. But we remember that 80% of success is not in the adoption, but in the implementation of legislation.

Experts believe that Ukraine has enough honest, ambitious specialists who are result-oriented and ready to try to build a new Bureau. But is the Office of the President ready for changes? Not at all. Other supervisors, who are comfortable with the current system, where every inspection is a means of pressure and extortion, are well aware of the risks of a quality reboot of the Bureau.

“Currently, it appears that we have built an anti-corruption infrastructure (the High Anti-Corruption Court of Ukraine, the National Anti-Corruption Bureau of Ukraine, and the Specialized Anti-Corruption Prosecutor's Office). Something like an island where everything is, give or take, normal. But they deal only with top-level corruption and have fairly limited powers. Therefore, in areas beyond the attention of these bodies, you can now do whatever you want. One honest law enforcement agency, which will work like the National Anti-Corruption Bureau of Ukraine in its field, will be able to break the entire criminal system operating now. Especially the body that will have the authority of the Economic Security Bureau of Ukraine,” says Zhelezniak.

Alternative

What if we eliminate the Economic Security Bureau of Ukraine? For business, this will mean minus one law enforcement agency, which has the right to conduct searches, freeze accounts, send the so-called letters of happiness to business partners, etc. The Office of the President will finally lose its ready-made answer about restarting the Economic Security Bureau of Ukraine to any objections from businessmen. We will also save some state funds.

Well, the reformers will be unhappy with the defeat. Well, systemic problems in the business environment will not be solved. But at least there will be an understanding that there is simply no such thing as a magic pill for these problems.

“There are complaints regarding all regulatory bodies. The first place is taken by the tax department. The law enforcement agencies that are involved in the investigation of criminal proceedings (the National Police, the Security Service, the Prosecutor’s Office) take the second place, says Andrii Bodnarchuk from the Business Ombudsman Council team, which regularly receives complaints from entrepreneurs. “Then all the others follow: the State Bureau of Investigation, the customs, the State Architectural and Construction Inspection of Ukraine, the State Food and Consumer Service and others. Now that the front line has moved a little further, the business has started to revive and the old problems in the business have started to come to life.”

These problems are not solved by promises at meetings in the Office of the President, transparent competitions, polygraphs, exorbitant salaries, etc. There are not and will not be any simple solutions here, because none of them will establish the rule of law here as if by a wave of a magic wand. This is painstaking daily work in a hundred directions, which will not be fruitful until the power, which is currently completely concentrated in the Office of the President, does not realize its expediency. At the moment, they are sure that passionate speeches and beautiful presentations to a Western audience are more important for investors than the SOS signals sent by local businesses.

Well, in some time they will understand that it doesn’t work like that.

Read this article in Ukrainian and russian.