Alexander Vilkul
A modern manager capable of solving the country's festering socioeconomic problems. This is how Deputy Prime Minister Oleksandr Vilkul is portrayed in the same generic articles touting him as the best candidate for the post of prime minister in the new Cabinet. "DS" decided to analyze Mr. Vilkul's performance in his current position as Deputy Prime Minister for Infrastructure. It turns out that under his "sensitive" leadership, colossal sums are being misappropriated, disappearing into the pockets of the owners of companies close to him, while the implementation of projects important to the country fails to stand up to scrutiny.
Potholes instead of repairs
One of the first announcements made a year ago by newly appointed Deputy Prime Minister Oleksandr Vilkul concerned the country's road infrastructure. The "strong manager" promised not only to repair roads but also to build bypass highways in Kyiv, Simferopol, Donetsk, and other cities, equip all entrances to the capital with truck parking, and create the necessary infrastructure.
Specific deadlines for these accomplishments were even mentioned. For example, in March, the Deputy Prime Minister instructed the Kyiv Regional Administration, Ukravtodor, and the State Land Agency to establish parking areas for trucks at the entrances to the capital by summer. Mr. Vilkul chose to ignore the fact that there was neither the money nor the land to implement this idea (all suitable sites along the highways had long since been privatized). As expected, nothing came of this undertaking.
Road repairs have been a surprising story. On the orders of the Deputy Prime Minister, they were apparently being intensively patched all year, but potholes have only increased. This conclusion can be drawn from a statement by Oleksandr Kharchenko, Deputy Head of Ukravtodor, who estimates that 7,5 million square meters of roads in Ukraine are currently affected by potholes, while in 2012, this figure did not exceed 2,9 million square meters. In other words, in just one year of Mr. Vilkul's premiership, pothole rates on roads have increased 2,5-fold.
It is clear that the blame for the terrible state of the road surface was placed not on officials and their "tame" repair companies, who shamelessly embezzle budget funds, but on the drivers of heavy vehicles.
The "effective manager" quickly found a solution to the problem: he ordered the installation of 60 automatic truck weighing systems on major highways and charged drivers for "overloading," which would then be used for road repairs. However, to date, only one contactless weighing system has been installed in Ukraine, located at kilometer 24 of the Kyiv-Chop highway.
Another example of Oleksandr Vilkul's "fruitful" work is the construction of the interchange at Poshtova Square in Kyiv. The infrastructure prime minister set a clear deadline for completion: the end of May 2013. To date, the reconstruction of Poshtova Square is not complete, and officials cannot clearly state when the project will be commissioned.
Mr. Vilkul also has some completed road projects to his credit. This involves transferring local roads (regional and district) to the care of regional administrations, effective January 1, 2014. Funds for their maintenance will be transferred to local authorities from the road fund budget (based on the length of highways, the number of residents, vehicles, and the level of economic activity).
The management and maintenance of national roads will remain with Ukravtodor, which will act as the contractor for road repairs. The contractor will be the state-owned joint-stock company "Automobile Roads of Ukraine," which will be placed under the control of the Ministry of Infrastructure.
The quality of road repairs will be overseen by the Ukrainian Transport Inspectorate, which reports to the same Ministry of Infrastructure. In other words, the Ministry, or more precisely, the Deputy Prime Minister for Infrastructure, will assume sole control over the distribution of funds allocated for road improvements.
It's clear that all these changes won't improve the condition of Ukraine's highways, but they will help enrich companies close to those overseeing the road reform. And their financial demands are, to put it mildly, immodest. "To rectify the situation and improve the quality of roads, at least 40 billion hryvnias are needed annually," stated Mr. Vilkul. By comparison, the 2013 state budget allocated 7,3 billion hryvnias for these purposes.
There's no doubt that multi-million dollar road repair contracts will go to the right companies. At least, that's what's happening in Oleksandr Yuryevich's hometown of Kryvyi Rih, where construction tenders are regularly awarded to the same companies: Vestashlyakhbud LLC, part of the Vesta concern owned by the respected Odesa businessman Suren Sardaryan, and Kryvorozhindustrbud PJSC, founded by Mykola Zemlyany, a Party of Regions member of the Kryvyi Rih City Council. These companies have a long-standing friendship and shared business interests with the Vilkul family.
Your interests
Oleksandr Vilkul's image as a "robust manager" clearly belies his more than modest achievements in the housing and utilities sector, or rather, his complete lack thereof. Examples are plentiful. In January, the Deputy Prime Minister promised that "a detailed action plan to boost affordable housing construction in Ukraine's regions will be prepared within a month." As a result, affordable housing has become even more inaccessible.
There are currently five state housing programs in Ukraine, and none of them are being implemented. For example, the 2013 budget allocated UAH 300 million to finance the state program "Reducing the Cost of Mortgage Loans to Provide Affordable Housing to Citizens in Need of Better Housing," but by October of this year, the initially announced amount had been reduced by UAH 235 million.
Mr. Vilkul radically addressed the housing waiting list problem, reducing it by a quarter. By October 1, the Unified State Register of Citizens in Need of Improved Housing Conditions was created. Approximately 250 people were included on the list, while according to the State Statistics Service, as of January 1 of this year, 1,02 million citizens were on the housing waiting list.
Oleksandr Yuryevich also failed in such an important area of work as preparing the public utilities for winter. Kyiv is a case in point. Due to the early cold weather, the heating season in the capital officially began on September 30th, but in reality, all residential buildings were not connected to the heat until mid-October. PJSC KyivEnergo then announced that it was unable to independently finance the 2013-2014 heating season.
Due to budgetary debt to the company for tariff differences, as well as consumer debt, Kyivenergo is unable to pay its gas bills to Naftogaz Ukrayiny. It appears that Kyivenergo owner Rinat Akhmetov is using this method to blackmail Kyiv residents and the government.
And all this is being done with the tacit consent of the infrastructure prime minister, who is a protégé of Mr. Akhmetov. It wouldn't be surprising if Kyiv residents soon lose electricity, heat, and hot water, and after a while, the "smart" Mr. Vilkul proposes the optimal solution: raising utility rates.
The first snowfalls also demonstrated the "thrifty" skills of the government's housing and utilities supervisor. Despite rosy reports about tons of prepared reagents, salt, and sand, the number of operating boilers, and the number of heating networks repaired, the capital once again proved unprepared for the snowfall. The city became stuck in kilometers-long traffic jams, and the roads turned into skating rinks, unfit for traffic.
Apparently, Oleksandr Vilkul has entirely different interests in the capital, ones that have nothing to do with street cleaning or providing residents with heat and hot water. This is clearly demonstrated by the scandal that erupted in the Kyiv region's passenger transportation market. Following a tender, the right to operate the most profitable routes connecting the capital with its suburbs (Bucha, Irpin, Vyshneve, Boyarka, Vyshgorod, Brovary, Boryspil, and others) was awarded to Odesa-based PJSC Severtrans.
It turned out that the company had won tenders in various regions, specifying the same buses in their bids. Subsequently, the Odesans offered the local carriers that lost the tenders the opportunity to continue operating the routes, forking over 50% of the profits. High-ranking patrons helped Severtrans carry out the scam. This public joint-stock company is under the influence of Suren Sardaryan, a longtime friend and business partner of the Vilkul family.
Aggressive "Family"
Although Oleksandr Vilkul, a former manager of Rinat Akhmetov's company and former governor of the Dnipropetrovsk region, has not been seen in independent business, the same cannot be said of his father, Yuriy Vilkul, the mayor of Kryvyi Rih and a member of the Dnipropetrovsk Regional Council.
Vilkul Sr. was involved in the founding of the companies RudTrans (freight transport) and Kryvbasrudprom (forwarding services). The Vilkul family's land holdings are the envy of even farmers—directly or indirectly, through partners, they own 80% of the land in Kryvyi Rih.
The Vilkul family defends its business interests quite aggressively. The mass dismantling of small architectural forms, including newspaper kiosks, is worth mentioning. The Kryvyi Rih Union of Entrepreneurs stated that the task was to clear space for the installation of "Semeika" pavilions. The founder of this chain is listed as Svetlana Borovskaya, a business partner in the local advertising agency "DOR" of Valentina Temnik, the wife of Gennady Temnik, former deputy governor of Dnipropetrovsk Oblast and current Minister of Infrastructure, Construction, and Housing and Utilities.
Mr. Temnik, in turn, has a long-standing friendship with the Vilkul family. When the "Semeyka" chain was first being built, Yuriy Vilkul advertised it to city residents as social stores, and now these "social" pavilions are rented out. But while kiosk owners with signed leases pay 150 hryvnias per square meter per month, for a 20 square meter lease at "Semeyka," the owners demand a one-time payment of 18 hryvnias and a monthly payment of 8 hryvnias.
The Vilkul family has also demonstrated its love of sports. Admittedly, it was quite unusual. Initially, neither Yuriy Grigoryevich nor Oleksandr Yuryevich did anything to save the Kryvbas football club, which ceased to exist in June of this year after being declared bankrupt. Even though they had the opportunity to do so.
But soon the Vilkul family got their own sports club: in October, the creation of the public organization "Sports Club Kryvbas" was officially announced, incorporating the football, basketball, ice hockey, and figure skating federations. Yuriy Vilkul, the mayor of Kryvyi Rih, was "completely unexpectedly" elected honorary president of the Kryvbas Sports Club. The sports club, which has become the family's breadbasket, will be funded both from the municipal budget and through sponsors.
Money in the basket
During Oleksandr Vilkul's tenure as governor of Dnipro, many infrastructure projects in the region were implemented with the direct involvement of then-Minister of Infrastructure and Transport Boris Kolesnikov, who became famous for purchasing incredibly expensive and regularly breaking Hyundai trains.
Upon assuming the post of Deputy Prime Minister, Alexander Yuryevich decided to continue his senior colleague's work and promised to adapt the "capricious" equipment to Ukrainian conditions by the end of January 2013. However, he was unable to get the Hyundai to operate properly. For example, on December 10, Hyundai trains were stranded for several hours due to breakdowns in the Kharkiv and Donetsk regions.
Alexander Vilkul was more sensitive to another of Mr. Kolesnikov's endeavors—expenditure on enormous sums of money in preparation for sporting competitions. While Boris Viktorovich was solely responsible for organizing Euro 2012, Alexander Yuryevich was fortunate to be responsible for two events at once: EuroBasket 2015 and the 2022 Winter Olympics.
Judging by the volume of funding, the current Deputy Prime Minister has every chance of significantly outstripping his predecessor in the number of infrastructure projects launched under his participation.
According to the state program for the preparation and hosting of the EuroBasket 2015 tournament in Ukraine, 2,3 billion hryvnias will be allocated from the treasury of the pre-default state for the sporting event. And this sum will likely increase over time. This is evidenced by the disappointing experience of preparing for the football championship: initially, the treasury was planned to spend only 20% of the required funds, with the rest coming from investors.
In fact, total government spending, including state guarantees provided for Euro 2012 preparations, exceeded 80% of the total costs. According to rough estimates, UAH 65,34 billion was spent from state and local budgets on preparations for the championship over five years.
The true amount spent on Euro 2012 remains unknown. The Ukrainian government stubbornly guards this secret. Perhaps this carefully guarded information holds the answer to the question of why the government is so fond of hosting international sporting events.
"Until Ukrainians learn to hold officials accountable for every penny spent, they will happily submit bids for Euro 2012, EuroBasket 2015, the 2022 Winter Olympics, and so on. This is a good opportunity to 'master' the budget," asserts Andrey Kapustin, an expert on Ukraine's preparations for Euro 2012.
The squandering of public funds under the guise of preparations for EuroBasket 2015 is already in full swing. Initially, Mr. Vilkul announced that state funds would be used to build training facilities for athletes in the six cities hosting the basketball championship: Kyiv, Donetsk, Kharkiv, Lviv, Odesa, and Dnipropetrovsk.
Training complexes in Crimea and the Carpathians were added to this list some time later. One of the facilities will be built in Feodosia, near the Golden Beach. The right to develop 135,4 million hryvnias of budget funding was awarded to Donetsk-based Tornado SKV LLC, which had never previously won a tender. It's possible that a private hotel or luxury yacht club will soon appear on the Black Sea coast.
A training facility in Dniprodzerzhynsk (Dnipropetrovsk region) will cost the state 2,5 times less than a new building in Crimea—56,3 million hryvnias. The Kryvyi Rih construction group "Krost," managed by local entrepreneur Igor Babenko, will design and build the facility. Rumor has it that Oleksandr Vilkul's family is directly involved in this business.
The government's sports overseer could reap even more dividends from preparations for the 2022 Winter Olympics in Ukraine. Officials estimate that this project will require at least $12 billion. Although the site for the Winter Olympics will be selected at the International Olympic Committee session in Kuala Lumpur, Malaysia, from August 1 to 3, 2015, there is no doubt that Oleksandr Yuryevich will strive to utilize significant budget funds for the construction of "Olympic" facilities by the end of 2014.
After all, there are presidential elections coming up, and it will be difficult to predict the future of both Mr. Vilkul himself and the infrastructure projects he oversees.
Overall, during his year in the Cabinet of Ministers, the "strong manager" Oleksandr Vilkul has managed to fail in every area of work for which he is responsible. The only thing he's good at is misusing colossal budget funds allocated for dubious projects.
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