A helping hand in Ukraine


Progress: Through business classes and English lessons, Peace Corps volunteers are trying to help the country shed its reputation as a political and economic disaster.

November 18, 2003|By Sabra Ayres | Sabra Ayres,SPECIAL TO THE SUN

KHARKOV, Ukraine - David Arnoldy, a Peace Corps volunteer from St. Paul, Minn., teaches more than the art of making a profit in his class, Essentials of Entrepreneurship, at Kharkov Polytechnic Institute in this eastern Ukrainian city, 25 miles from the Russian border.

"We are not just talking about setting up a kiosk here to sell bread; we're talking about building a company or a corporation," says Arnoldy as he points to the checklist on evaluating business concepts that lights the screen behind him.

Arnoldy, 59, is one of 280 volunteers serving in Ukraine, now the largest Peace Corps posting in the world. Though the Peace Corps has closed its programs in most of Eastern Europe, volunteer numbers have increased greatly in Ukraine since operations began here in 1992.

Most of his 15 students are in their early 20s and barely remember when entrepreneurship was considered a crime in the Soviet Union, or when there was no such thing as a business plan, only government-ordered five-year plans of production.

In a year, this generation will enter the work force and carry some of these Western ideas to their new jobs as managers, small-business owners, financial analysts or bankers, Arnoldy says.

Despite recent good news - three years of economic growth, almost a year without a political scandal and a slight rise in foreign investment - the country is still struggling to present an image of stability in the West and shed its reputation as a political and economic disaster.

The Peace Corps is just one part of the American effort to assist. Since 1991, the United States has spent billions of dollars to help Ukraine develop a market economy and democratic institutions, and dismantle its Soviet nuclear weapons.

"The U.S. government has always regarded Ukraine as extremely important strategically for the security of this part of the world and for Europe," says Chris Crowley, director of the U.S. Agency for International Development in Kiev.

In 1999, Ukraine received $230 million, making it the third-largest recipient of U.S. A.I.D. funds behind Israel and Egypt. Next year, the amount will decrease because of U.S. commitments in Iraq and Afghanistan, but will remain in the top eight at $94 million.

But foreign investment in Ukraine still lags behind its neighbors, at $4 billion in the first 10 years since independence. In comparison, neighboring Poland collected $40 billion and Russia $18 billion.

Until the country's image improves, it is unlikely that Ukraine's prospects will change significantly.

"Western investors don't ask about the recent economic growth. They ask about corruption and Chernobyl, and if Kiev has a five-star hotel yet," says Andriy Blinov of the International Center for Policy Studies, a think tank in Kiev.

Some Ukrainians still see solutions in the past, not the future. This month in Kiev, about 1,500 people, most of them elderly, rallied in memory of the 1917 Bolshevik Revolution. Waving red flags and holding posters of Vladimir I. Lenin, they protested against the government and in favor of the free education, free medicine and cheap bread they once had.

While there is an emerging middle class in the capital and many of the larger cities are seeing cosmetic improvements, the average salary across the country is still $100 a month. Corruption, bribes and a lack of transparency in the courts are omnipresent, Western businessmen in Kiev say.

In a discussion after class, Arnoldy's students discuss a hoped-for future of better business, where they will hold their own as financial analysts and bankers.

They love Arnoldy's class because it is not just theory and lectures, it is creative and fun, says Polina Konstantinopolskaya. But some of the concepts on transparency and shareholders rights may be difficult to introduce to the older generation of business managers who still run things.

"Some of these theories we won't be able to use here in Ukraine," says Olga Tsybulnik, 21. "In a company that is owned by old directors of Soviet companies, they might be scared to be open about everything because they think they might lose what little money they have."

Still, investors who have been in Ukraine for the past three years say they have seen a change in attitudes.

"A lot of Ukrainian companies are starting to say, `I'm just not going to do it anymore,' when it comes to petty corruption, like paying bribes for registration and customs clearance," says Mark Iwashko, chief investment officer of the Western NIS Enterprise Fund in Kiev.

The fact that more Peace Corps volunteers are now assigned to rural regions is a sign of the country's progress, says Karl Beck, the program's director in Kiev.

"The novelty of having an American in a small Ukrainian town is not sufficient enough anymore," Beck says. "We are moving more and more into the rural areas to affect people that might be left behind as the economy continues to grow."

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