OBITUARY: Kakha Bendukidze, Georgian businessmen and minister, who became a reform guru

By bne IntelliNews November 14, 2014

Ben Aris in Moscow -


Kakha Bendukidze, a leading businessman in Russia turned star reformer in his native Georgia, has died in London at the age of 58.  He had recently undergone a heart operation in Switzerland.

The last time I met Bendukidze, a man of frenetic energy, was at the Free University of Tbilisi on the outskirts of town, where he was rector in 2008. Typically, I got the call from his assistant at 9pm on a balmy summer evening in the Georgian capital where he had returned several years before to head the country's reform drive. 

Bendukidze was a large man. He waddled into the room and collapsed into a seat, closed his eyes and began a long conversation in his deep rumbling voice on the goals and problems of reforming Georgia's body of law to make life easier for business. 

"There are too many laws, regulations and permits – this is a permissive society, not an entrepreneurial one: you need permission to do everything and if you want to do something new where there is no permit you can't do it. In the west if there is no rule preventing you from doing something then there is no restriction on it," Bendukidze explained in his sonorous voice. "We have to change the basic approach of how both government and business people think about how life should be organized." 

We drank tea and talked into the night about reform and the difficulties of changing the mentality of the Soviet-era bureaucracy; how to convince the bureaucrats that had been running these countries for decades, and were mostly still in place, to change their ways. 

Bendukidze slashed Georgia's red tape and transformed the country into the best place in the Commonwealth of Independent States (CIS) to do business during his tenure as first Minister of Economy and then Minister for Reform Coordination between 2004 and 2008. If there was no reason for a permit he nixed it, battling agains the bureaucratic inertia of a whole generation of Soviet-era pen pushers.

Even today Georgia remains near the top of the list in global business rankings. In bne's Ethical Business ranking released last month, Georgia not only ranks highest in the CIS, its score of 71.8 out of a 100 puts it on a par or ahead of most of the leading Western European countries. That was largely Bendukidze's doing. 

He has created the template that other countries with genuine aspiration to change look to. "We are going to do a Georgia," Sergei Tigipko the Ukrainian Economics Minister told a packed room of investors in Kyiv shortly after Ukrainian President Viktor Yanukovych took over as president in 2010, when hopes were still high that Ukraine would mend its ways. 

And it was no surprise that Bendukidze was back in Kyiv in October, called in by Ukrainian president Petro Poroshenko's new government to give advice on what to do next. True to form Bendukidze was blunt about the problems the country faces: "The patient's head is coming off, and there is a bucket of blood next to the bed," Bendukidze said. "What are the relatives doing? They are vaguely worried about what the neighbours might think," he told a Bloomberg journalist who door-stepped him in a Kyiv hotel lobby two weeks ago.

Bendukidze was born on April 20 1956 in Tbilisi, Georgia, and trained as a biologist. In 1988, as economic reforms launched by Soviet general secretary Mikhail Gorbachev took hold, Bendukidze opened a small business, producing biochemical samples for laboratory work before moving to Russia to make his fortune. 

Bendukidze sprang to prominence in the mid-1990s where he turned a collection of Soviet-era industrial assets into the Uralmash group and emerged as a leading industrialist. 

The first time I met him was in the early 1990s in the coffee hall of the legendary Russia Economic Forum summits held in London, across the road from the Palace of Westminster, until the Kremlin squashed it and forced the business elite to switch to the government-sponsored St Petersburg Economic Summit instead. 

Bendukidze was not untainted by the controversial privatisations of the mid-1990s, where he managed to take control of a swathe of heavy industry in the Urals region, with a total workforce near to 100,000. He consolidated the plants into the United Heavy Machinery Plants Holding, abbreviated to OMZ, which included the legendary Soviet-era engineering giant Uralmashzavod, producer of mining, drilling and metallurgical equipment. 

But those were heady days when everything was new and anyone with some entrepreneurial flare could become a multimillionaire literally overnight. But even in the 1990s Bendukidze was setting a benchmark for, if not quiet western standards of corporate governance, then at least making money from just doing business. He was never counted in with the seven oligarchs who sprang to prominence in those days and got rich from their ties to government. Bendukidze was the man to seek out in the coffee hall of the Russia Economic Forum for journalists as an exceptional example of a businessman that was trying to create something of value.

However, he sold up in 2003 and moved to Georgia in the wake of the Rose Revolution to join the newly formed government of Mikheil Saakashvili. While he never said explicitly why he left Russia, the opportunity to give something back to his motherland probably played a role, as did the rise of Putin: 2003 was the height of the Yukos scandal and a time when Russian President Vladimir Putin was taking full control of the commanding heights of the Russian economy – not the place for a liberally minded businessman who made a point of keeping his distance from government when it came to running his empire. 

In Georgia he oversaw the implementation of sweeping reforms that transformed Georgia from a war-torn failed state into a new paradigm for ease of doing business and coined the pro-privatisation slogan "sell everything except your conscience". 

But his close ties to Russia's business world aroused suspicion in Georgia, with allegations that he was trying to sell the country to the Kremlin, and in 2008 he left the post of economy minister to head the government chancellery, and then left government altogether, following Georgia's conflict with Russia in August 2008. He set up a new 'free university' in Tbilisi, and became a guru for reformers around the world.

In his last job Bendukidze pushed Ukraine for enactment of the same reforms he had introduced in Georgia - sweeping away legions of state administrators inherited from the Soviet Union, which he argued suffocated private business. And he was clearly frustrated by the lack of progress and commitment by the new government to changing its ways and embracing reform. 

"You have a monstrous state sector here in Ukraine," he said in an interview with in August 2014. "The state is involved in everything possible. It is physically impossible to create a police force, prosecutors, secret service, anti-corruption organs, able to monitor such a monstrously sized state."

"In Georgia, we eliminated a large part of state services, departments, agencies and committees etc. Until the number of state regulatory agencies is massively reduced, you will not be able to defeat corruption. Simply for physical reasons," Bendukidze warned in the interview.

Latterly Bendukidze expressed disappointment with the slow pace of reforms in Ukraine and the hesitancy and conformism of the new authorities. 

"I tell people in the government about eliminating the energy subsidies, but I hear back that the people won't be happy,"  he told Bloomberg. "Who needs them when the government's sole function these days is to take money from the International Monetary Fund and pass them on in payment for Russian gas?" he asks.

Bendukhidze's death, while depriving Ukraine of crucial advice, may at least remind Ukraine's government that time for action is very limited.

Additional reporting by Graham Stack in Kyiv


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