1991 – 1992 - Minister for Investment Policy and Construction of Ukraine
1987 – 1991 - Deputy Chairman, Council of Ministers of Ukraine
1981 – 1987 - Minister for Installation and Special Construction Work of Ukraine
1979 – 1981 - First Deputy Minister for Capital Construction of Ukraine
Member of Verkhovna Rada (Parliament) of Ukraine from 1981 to 1989
Deputy of Supreme Soviet of the USSR from 1989 to 1991
The USSR and Ukraine State Prize winner
Chairman of Constructors’ Union of Ukraine
Market is many-sided by its nature. Over the years, the most successful companies gain their unique business and life styles and philosophy.
Ukrainian Financial Group (UFG) is a well-known Ukrainian company that has gained through over 10 years of operation on the Ukrainian and international market its own unique style and vividness distinguishing it among other Ukrainian businesses. At first glance, the way UFG does business contradicts fundamental principles of any business, which are pragmatism and selfishness. It should be noted that idealism is severely punished in business. However, the uniqueness of UFG’s experience is that the company manages to reconcile quite incompatible things, still being a success story of Ukrainian business.
The company’s uniqueness can be described in quite a simple way: in many cases UFG has been guiding itself by the interests of entire Ukraine and Ukrainian people rather than selfishness. This has been the company’s inherent feature from the very first day, as UFG was actually founded with the view to perform a very important function in the national economy, the function that later developed into a critically important factor of the Ukrainian economic reform in early 1990’s.
As I was personally involved in these events, I would like to share my memories and views thereon.
Within 1990’s, “reform” became the key word in Ukraine. This makes no surprise, as the country’s economy needed a fundamental, radical reform.
In particular, Ukraine needed a mechanism to replace the Soviet centralised procurement system with the market for material resources. The efficiency of such a mechanism was critical for reforming individual industries and the national economy as a whole.
At that time, market-based commodities and raw materials exchange was viewed as a primary alternative to the centralised distribution system. The problem was tremendous, as it could not be diminished to isolated changes, but needed a radical change of routine practices, organisation and, most significantly, human attitude. For decades of the Soviet era, both senior officials and personnel were brought up in the atmosphere of socialist central planning system, when even minor, low-level decisions had to be approved on higher tiers of power. Therefore, in broad public the concepts of an independent decision-making and private enterprise, brought with the rise of the Ukrainian market were viewed as an enormous unjustified risk.
However, the new reality could not be ignored, as the market requirements were getting increasingly rigid day after day.
I would like to make a reservation: praising or criticising any economic system goes beyond the scope of my task. Therefore, I will just make a point that both capitalist and socialist economies have their strengths and weaknesses. Therefore, in my view, a success of an economic reform depends on taking proper advantages on both of them. The star-rocketing pace of Chinese economic reform that combined the strengths of both economic systems provides us with a perfect example of a successful reform strategy. The role of a state regulation of critical economic processes is significant even in the US, Japan and West European economies despite its certain purely socialist origins and methods.
In the early 1990’s, Ukraine was also trying to deploy the best international economic practices for the purposes of the market reform. Furthermore, the government’s goal was to facilitate a smooth transition from central planning to the market economy, in which context the replacement of the centralised resources distribution system with market mechanisms in all industries came to the foreground. At the same time, a strict discipline in the executive branch at all levels could be used as a positive factor to facilitate the process in a consistent and smooth manner.
Another problem was to find right people for the job, as Ukrainian specialists lacked expertise in the commodities exchange business. To compound the problem, we lacked support from the state, as government agencies, for instance, the State Procurement Agency, were unlikely to clear the way to a competition without a battle. Conservative thinking was another obstacle. It makes no secret that many top managers and specialists at all levels have got accustomed to administrative methods and mechanisms. To put it honestly, many people were quite sceptical to market reforms and believed that sooner or later everything would fall back into place. The collapse of the Soviet Union and the Communist system was something unthinkable of for many.
Under such circumstances, a person, who was capable of weighing the consequences and risks of the new enterprise as fairly as he could, was needed.
Valery Babich was such a person.
At that time I was Deputy Chairman of the Council of Ministers of Ukraine and personally met many people who worked with this organisation. And of course, I often met Valery Babich while he was an executive officer of one of the Deputy Chairmen. Prior to that, he also worked as an aide to Chairman of the State Planning Committee. It should be also noted, that Valery Babich was one of the youngest Council of Ministers’ officials. At the time when the market reform began, he left his public service and started a private business.
The proposal to establish a commodities and raw materials exchange came from V.G.Urchukin, Deputy Chairman of the Council of Ministers of Ukraine of that time and one of the most vigorous advocates of the market reform in Ukraine. Valery Babich was enrolled as one of the most acceptable potential candidates for running this business. Also, there were certain doubts whether he would be able to manage such a complex enterprise. However, Mr. Babich removed all doubts and won the tender for Chairman of the Executive Board of the new enterprise titled Ukrainska Birzha (Ukrainian Exchange).
It should be noted that many experienced managers were involved in the Ukrainian Exchange project on the preparation stage in order to safeguard the organisation’s capability of performing the important functions supporting the Ukrainian market reform. The Supervisory Board of Ukrainska Birzha included Minister for Construction Materials Production A.M.ZOLOTAREV, Minister for Construction V.N.PLITIN, Minister ofor Installation and Special Construction Works G.G.NIKITENKO, Chairman of the Board of UkrPromstroibank V.P.MATVIENKO, Deputy Minister for Economics L.Y.KORNIENKO, General Director of Ukrainian Oil and Chemicals Processing Association M.L.NOTSEK, Deputy Chairman of Ukraina Association V.L.AVGUSTIMOV and other senior officials. I was appointed Chairman of the Supervisory Board.
Management and employees of Ukrainska Birzha got down to business immediately. It should be noted that by the time of being appointed Chairman of the Executive Board Valery Babich had gained a valuable practical experience in a rapidly changing economic environment that stood in good stead with his new position. By that time, many significant changes occurred on the Ukrainian market, and the commodities exchange filled in the void right when the need became ripe.
A significant attention was paid to providing a maximum transparency of the operation. In fact, Ukrainian Exchange eliminated the quotas and licenses for the resource distribution that used to engender the corruption, boost the price increase and purposefully obstruct the production sector’s resources flow. Instead of such quotas and licenses, Ukrainska Birzha offered a classical demand-and-proposal based mechanism enabling a prompt and efficient exchange of commodities to meet the needs of the Ukrainian producers.
Furthermore, exchanges are interested in a timely and comprehensive market data analysis and sharing due to the nature of their business. As a result, they inevitably develop into information and advisory centres boosting the adjacent industries. It was important for the fledgeling Ukrainian market to make informed decisions in order to avoid serious mistakes.
I would not take your time by analysing Mr.Babich’s and his colleagues’ arguments, as they were reflected in the media many times. Furthermore, the Ukrainians became aware of the specifics of the exchanges, as they became users of their services. I would only remind that this was a large-scale project that envisioned, not only the commodities and raw materials exchange, but also a commercial bank, a research centre, a trading house, a freight and insurance company, and a few consulting firms under its roof to meet the growing needs of the domestic market. For instance, Ukrainska Birzha hosted 288 entities. In 1991 its annual turnover exceeded 400 million roubles, and in 1992 – 1.5 billion roubles.
Over the time, the scope of the project expanded from purely commodities and raw materials exchange to a much broader scale, resulting in a foundation of Ukrainian Financial Group as a multi-faceted investment company that capitalised on the experience, cadres, finance and resources gained from the legacy project to successfully achieve its business goals.
It should be noted that similarly to Ukrainska Birzha, Ukrainian Financial Group was established with a primary focus on Ukraine’s vital need for investments to resolve the country’s economic problems. UFG sought investment extensively both domestically and abroad and successfully met its goals.
Today Ukrainian Financial Group is celebrating its 10th anniversary. On this great day I would like to send my cordial congratulations to all those people who invested their effort, time and expertise in the development of Ukrainian Financial Group and will contribute to UFG brand in the future. Thank you for your great job, honesty and love to Ukraine, and may all your future plans come true.