New Ukrainian government must start with education reform – British financier

British financier Neil Smith advises that Ukraine`s new government must start with education reform for ensuring sustainable growth in the country.
”In the long term, Ukraine should cultivate its human capital. Young Ukrainians, with a new mindset is what will lead the country to success. The Ukrainian education system today suffers from corruption with exam results often coming down to money in an envelope and the majority of teaching materials already outdated. I know this firsthand because I work in Ukraine and have to hire the most recent graduates. Even if the education system is reformed, the consequences of such corrupt practices will keep Ukraine behind for decades. This situation must be resolved at any costs starting immediately to bring long term economic prosperity to Ukraine. Ukraine needs educated managers able to make balanced decisions that benefit all of their stakeholders,” Smith wrote on Facebook on Wednesday.
No less important is a reform of the banking sector, which will have more immediate impact, according to Smith. The banking system of the country has huge systemic problems, Smith writes. The regulator has allowed the banks for many years to artificially inflate their capital through loans to companies owned by the bank`s shareholders. It is therefore no surprise that about 70 Ukrainian banks have collapsed in the past two years, the British financier notes. The population does not trust the banking system and hides its savings, amounting to half the country`s GDP, under the mattress, according to Smith.
He notes that the International Monetary Fund has recently estimated Ukraine`s fiscal multiplier to be below 1. This means that every government dollar invested in the economy, increases its GDP by less than one dollar. ”A truly shocking achievement,” Smith says.
According to him, the new government needs to create a new banking system, in which the money of depositors does not flow out of the country, and starts working productively inside the economy. There should no more 5-6 major banks that are allowed to take retail deposits under full guarantees from the state. This would be a good first step to restoring confidence in the nation`s banks, according to the financier. If the personal savings of Ukrainians will be invested into the national economy – the GDP of Ukraine should double, Smith predicts.
British financier Neil Smith is a graduate of the University of Cambridge. Until 2004, he was in charge of alternative investment at Morley Fund Management in London (currently Aviva Investors) where he managed over $6 billion of client funds.
Since 2004, he has been known as a fund manager active in Russia and CIS region. In 2011, he became the owner of Eastern Beverage Company, one of the world`s largest producers of alcohol products. In Ukraine, his business is represented by Beverage Eastern Trading (trade marks Medoff, Na Berezovykh Brunkakh, Nasha Marka, Ridna Rosa, LONGmixER).

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