By Vivienne Walt in Kiev
FORTUNE -- As anyone who's spent time in Ukraine will attest to, people in this country are fond of coffee. So it's not surprising that Nestlé S.A. (NSRGY) imports plenty of it, shipping it direct from Brazil to its coffee-packaging factory in the Western Ukrainian city of Lviv, one of four Nestlé factories in the country. Each month, an identical shipment of grinds arrives. "It's the same product, coming from the same factory in Brazil, with the same quality," says Gennadiy Radchenko, head of corporate communications and corporate affairs for Nestlé Ukraine LLC, sitting in his office in Kiev. As he continues, he lets out a sigh of frustration mixed with a sense of the ridiculousness of the situation the company faces. "Every two or three months, we get a letter or an order for an audit, from the customs office, saying that it is a different product and that they need to increase their customs fees," Radchenko says.
To executives like Radchenko, those irrational demands are simply part of doing business in Ukraine, familiar to every executive in the land. "It's an old, old tradition," he says, describing a system in which a thicket of bureaucratic requirements and capricious business regulations seem to have no other purpose than boosting government coffers, and often the pockets of officials as well. These kinds of demands accelerate during economic downturns—and negotiating with the government to remove or minimize at least some of the regulatory hurdles sucks up considerable resources, Radchenko says. Within Nestlé's Ukraine operation, "Citing laws is often a means of blackmail," he says. "In the last few years, these [officials] didn't need bribes. They needed money to go into the state budget."
On Thursday, E.U. officials met again in Brussels to discuss how to rescue Ukraine's precarious finances, thereby luring it away from its economic dependence on Moscow. On the table is a proposed €11-billion (about $15.1 billion) E.U. package, comprising mostly of loans and credits, which would almost certainly require Ukraine to implement drastic economic reforms and sign an agreement with the IMF.
The idea is nothing less than a financial shakeup in this huge country of 45 million people, where corruption and mismanagement have been the order of the day since the Soviet Union's collapse brought Ukraine independence in 1991.
Consider just Nestlé's experience.
Radchenko says that as a major multinational corporation, Nestlé has been largely sheltered from the murky gray economy that has governed much of Ukraine's business world. But even so, the company has encountered several issues in recent years that appear to be attempts to squeeze more money from the company.
In the late 2000s, Ukraine demanded that Nestlé pay taxes on royalties for the brand names of its noodles and other foodstuffs it manufactures in the country. Nestle resisted, claiming it already pays royalty fees to Nestlé's head office in Switzerland. As part of its case against Nestlé, Ukraine's government opened a criminal investigation, which was finally dropped—though not before hefty legal expenses for the company.
Then came years of uncertainty over immigration laws, during which time the families of Nestlé's expat employees were left effectively status-less in Ukraine as officials in the Foreign Ministry and immigration office were deadlocked over the rules, according to Radchenko. "It was like ping pong back and forth between them," he says. "We were not the only company like this."
With billions in Western aid about to flow into Ukraine, shaking up entrenched habits is suddenly urgent. And so now, two weeks after the bloody climax to Ukraine's uprising, another revolution—this one financial—is slowly taking shape.
And the man leading the charge could hardly be more different than the leaders driven from office by the violent clashes in Kiev's Independence Square.
At 42, Pavlo Sheremeta, Ukraine's new Minister of Economic Development and Trade, has American credentials in the form of an MBA from Emory University in Atlanta and executive courses taken at Harvard Business School. He speaks flawless, rapid-fire American English. In Kiev, he's already gained huge praise for taking the subway to work and logging his movements around the capital on Foursquare.
On Thursday, he bounded into a hotel conference room on Independence Square to explain to journalists how he aimed to remake Ukraine into a corruption-free, modern economy.
With hundreds of protesters still encamped in the sodden, barricaded square outside, Sheremeta—just eight days into his job—outlined a future for a radically different country. An online register of public tenders will open up bidding—a far cry from former years, when multibillion-dollar infrastructure projects were awarded to those with connections to the top.
Another urgent task, Sheremeta says, is to drastically streamline government regulations. He wants to make Ukraine among the world's top 10 easiest countries in which do to business. "We never had this before," he says.
He says he was shocked at the backward habits of the government when he took office on February 27. He was asked to write his professional resume by hand—not on a computer—and was quizzed about whether he had relatives living abroad, a holdover from the old Soviet system. "The state apparatus is in the 16th century," he said.
Whether Sheremeta can pull any of this off, of course, is another question. Bringing Ukraine's ancient, wasteful economic system into the modern age is an enormous task. But Nestle's Radchenko, for one, has hope if for no other reason than the protesters on Kiev's streets have won their revolution. "This was a revolution over values," he says. "People had just had enough of the system."
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