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Where, why, and how long will Ukraine be moving?

11 June, 00:00

“European Choice: Conceptual Foundations of the Strategy of Ukraine’s Economic and Social Development in 2002-2011” is the title of the president’s current message to Verkhovna Rada, the text of which was distributed to the deputies last week. The head of state’s message to the parliament can be considered significant, for the very title allows analysts to say that Ukraine has officially dropped its multivector foreign policy. “Ukraine’s unequivocal and priority orientation toward integration with the European Union, obtaining the status of first an associate and then a full member, should be regarded as a basis for this country’s strategic economic and social development in the next ten years and for a longer term,” the message says. Laying real groundwork for achieving Ukraine’s principal political goal, EU membership, should become the linchpin of socioeconomic development. Judging by the number of pages and overall structure, Leonid Kuchma’s message to the newly elected Verkhovna Rada mainly concerns economic problems, especially concerning the requirements for prospective EU members, such things as de-bureaucratizing the economy, promoting private property, easing the tax burden, reducing the public debt, etc.

The presidential message sets a time frame for Ukraine’s integration into Europe: entry in the WTO in 2002-2003; negotiating and signing an agreement on Ukraine’s associate EU membership along with negotiating the establishment of a Ukraine-EU free trade area in 2003-2004; bringing Ukrainian law into line with EU legal requirements in the basic spheres in 2002-2007; bringing into force the Ukraine-EU association agreement in 2004-2007; negotiating and establishing a Ukraine-EU customs union in 2005-2007; fully implementing the Ukraine-EU association agreement and meeting the Copenhagen criteria for European Union membership in 2007-2011; and laying the real groundwork for Ukraine entering the EU in 2011.

The message emphasizes that Ukraine should be prepared to integrate with NATO as much as the member states themselves will be prepared for this.

As to relations with Moscow, it is noted that “economic relations with Russia organically fit in with our state’s course of European integration. These strategic relations should be based on the principles of good neighborliness, partnership, equality and mutual benefit... Both countries share the same goal of concentrating their efforts on practical implementation of the agreements reached, bringing their cooperation to the level of true strategic partnership, and imparting practical content to the political documents adopted.”

In the domestic policy area, the president emphasizes completion of the administrative reform and carrying out a constitutional reform to be based, he maintains, on implementation of the 2000 national referendum results. To integrate into European structures, Ukraine must also draw up and implement a regional management model in line with the principles of the European Union’s regional policy and thus promote new forms of cooperation in the “center-regions” format.

In developed democracies, the presidential message to parliament is an important stimulus for discussion, the objective being to reach a political consensus on immediate prospects of national development. Obviously, the main thing in these debates is not personalities but the principles and direction of policies. The Day asked some experts in economics, foreign policy, and international relations to comment on the basic points of the president’s annual message.

“RAW-MATERIAL STATE VS. INNOVATIVE DEVELOPMENT”

Oleksandr NARBUT, deputy chairman, Ukrainian Union of Taxpayers:

“In my opinion, what makes this annual presidential message to the parliament innovative is above all its changed nature and the inherent features of a strategic development program. The clearly stated movement toward the European Union makes it possible to map out a strategy in all branches of public life, including the political and socioeconomic spheres. The only question is at what expense and how fast we can afford to move in this direction.

“I also feel positive about the attempt to appraise all that has been done over the past decade.

“It seems to me nobody, including the authors, considers the message as ultimate truth. So I will not further dwell on its positive points. For we are all interested in a strategy free of not only mistakes and drawbacks but also of any kinds of holes.

“For example, the statement about an innovative model of economic development only looks like a tribute to fashion, for now any state closed to innovations, i.e., to capital, new ideas and technologies, will simply become outdated and lose its competitiveness.

“Also unconvincing are the message’s passages about economic growth rates, for the latter do not fit in with the stages outlined in the same document. For instance, the message authors think that the final formation of basic market economy institutions and a sound competition environment should be completed by 2004. But this immediately raises the question of how we can pay the expenses necessary for a high rate of economic development if the main institutional transformations and above all the structural reform of the economy are being put off until after 2004? Moreover, it is common knowledge that structural reforms in this country are a more than overdue problem, and ignoring this problem caused instances of disproportion that brought about the mentioned tendency of moving toward a raw-material state.

“One should also view critically the idea of switching over to so-called loan-free relations with the IMF. I personally take an entirely different attitude here. It is widely considered that only those unable to correctly utilize loans will not take any out. I believe this country still has too insufficient domestic capital and investment resources to drop borrowing from international lending organizations. This also runs counter to some clauses of the message that press the importance of increased foreign investment. Moreover, we will never be able to solve the problem of economic restructuring without attracting investments in certain industries. Thus, if the IMF is prepared to support us with loans (through commercial banks which will impose quite a strict system of responsibility on borrowers), our state will only gain, rather than lose, especially in what regards changing the existing balance between the raw- material and high-tech industries.

“What appears problematic and somewhat premature is the intention to introduce a floating hryvnia foreign exchange rate in 2003. On the one hand, this is a very positive point. For this generally means that a market economy is at the stage of effective self-regulation, when even aggressive attempts by foreign market players to test the strength of our national currency will not present any special danger to our financial system and do our national economy no harm. Yet, we do not seem to have achieved such a level (gold and hard- currency reserves or a stable foreign trade balance), which could mean playing risky games.

“What deserves a close analysis is an innovative approach toward energy strategy. Some of these innovations are quite controversial, for example, those based on the necessity to reduce natural gas consumption and increase the use of coal, a resource this country is fully provided with. But in this case one should not forget the high cost of these resources in terms of heating capacity. In this sense, gas is far cheaper. It would be quite wrong to stop using it only because it is mostly being supplied from abroad. It would make more sense to emphasize diversification of its supplies and a correct identification of resource and price-related parameters, so that certain sources could be frozen. It will be recalled that Ukraine once supplied the whole former Soviet Union with natural gas. The consequences of this are all too obvious now. I am afraid the same could happen with coal.

“Often message provisions are at variance with today’s practice, and the executive power will apparently find it difficult to meet set targets. Let us take the priority status of nuclear energy. There is no lack of words. But the situation with payments for the electrical power produced by nuclear stations shows there is no priority at all. Only 60% of the payments due have been made to the nuclear plants.

“This brings up the main critical question: can the message be practically implemented under current conditions? What inspires great hope is the intention to begin updating the managerial elite and attracting people with a new level of professional competence and initiative, cadres of the new generation, as the message says, to public administration and the real economy in order to respond to the new challenges.

“If these intentions do not remain just on paper and are put into practice in all spheres of public life, then it will be possible to implement and develop the official strategy, of which the message is the initial attempt. It is the accumulation of a critical mass of the new generation in all elements of public administration that will make possible an optimistic forecast for the years 2002-2011. Otherwise, the message will be shelved, continuing the list of many essays on this subject... But if the message, which sets out state strategy, is to operate at full force by the beginning of 2003, I am certain we will achieve very much in that year.”

THE FOREIGN VECTOR

Serhiy TOLSTOV, director, Institute of Political Analysis and International Studies:

“In general, this message aims to overcome the alienation between Ukraine and the EU clearly discernible during Leonid Kuchma’s second presidential term. If the executive power manages to overcome this alienation, Kyiv and Brussels will be able to maintain more harmonious and mutually beneficial relations. Moreover, these relations could even see the long-awaited constructive breakthrough. Otherwise, against the general backdrop of mixed attitudes toward Ukraine’s executive branch, all our Western and Eastern partners will continue to pressure the Ukrainian economy with sanctions and restrictions, thus forcing the Ukrainian leadership to swallow the bait of the Russian government which offers Ukraine membership in the Eurasian Economic Community.

“As to the preparedness of Ukrainian state institutions to follow the path of European integration, it should be noted that some of them, such as the Ministry for the Economy and the Ministry of Foreign Affairs, have quite long been working with European international structures and have intimate knowledge of the European integration processes. But at the same time these institutions have very little say in making crucial government decisions. These ministries, as well as the cabinet as a whole, coordinated a lot of policies concerning the relations between Ukraine, the EU, and NATO, including the implementation of government-sponsored programs of cooperation. However, it is not failure to implement these programs but other factors that keep Ukraine outside the European integration processes. It is of paramount importance that the degree of trust in Ukraine by EU institutions and the prospects of Kyiv-EU relations will depend on the nature of government policies rather than the content of programs. If such institutional transformations (Chapter 5) as a deeper market-oriented restructuring of the economy, a judicial reform, and the comprehensive development of local government were carried out in earnest, Ukraine would indeed come closer to European Union realities. As to the constitutional reform (including implementation of results of the 2002 referendum), the current parliament has no prospects at all to accomplish this task. Moreover, raising this question could provoke a political confrontation in Ukrainian society. What constitutes the main problem today in the relations between Ukraine and the EU is trust in Ukrainian government institutions, which can only be achieved by consistently bringing Ukrainian realities into line with those existing in the EU states. Chapter 10, “Foreign Economic Strategy,” generally repeats the stages outlined by the president in his well-known Khanty- Mansiysk speech, including Ukraine’s WTO membership in 2002- 2003, negotiating and signing a Ukraine-EU association agreement and establishing a free trade zone in 2003-2004, and complete fulfillment of the association agreement and meeting the Copenhagen criteria for EU membership in 2007-2011. Special emphasis is laid on establishing a customs union between Ukraine and the EU, which, incidentally, would bar Ukraine from joining the Eurasian Economic Community. The same chapter focuses on Euro-Atlantic integration. However, this paragraph repeats a not exactly clear phrase that we ‘must be prepared to go to NATO as much as the alliance member states themselves will be prepared for this.’

“The final conclusion is that the degree of success that Ukraine can achieve in the main direction of its foreign policy will depend on the seriousness of intent of the governing institutions that promote Ukraine’s European choice.”

REFORM OF THE STATE

Serhiy TELESHUN, Doctor of Political Sciences; president, Commonwealth Foundation:

“It is difficult now to say in no uncertain terms whether the fourth convocation Verkhovna Rada is likely to implement the national referendum results. For this depends on two, juridical and political, factors. The former consists in the concentration of a required number of votes, which makes it imperative to work with the opposition even today. Besides, should a hypothetical majority be formed in the parliament, it should be a politically stable, not just a floating majority. However, one must also take account of the danger that the subjects of a standing majority might fail to come to terms about implementation of the referendum results. There can be different visions of the directions of political reform, for while the referendum results envision reinforcement of the presidential vertical line of power, the reform of the political system calls for strengthening the parliamentary form of government in Ukraine.

“In addition, the presidential message deals with reforming the administrative and territorial division as well as the judicial and regional policies. The administrative reform is, of course, necessary today, but only as a whole, without politically tempting fragmentation.

“As to reforming regional policies, this implies, first of all, the concerted efforts of the center and the regions.

“Given a systemic approach, it is possible to implement all these reforms within two to five years. All will depend on when — tomorrow or after the presidential elections — the authorities will embark on the course of reform.”

Andriy YERMOLAYEV, director, Sophia Center for Social Research:

“It is very unlikely that the new parliament will implement the national referendum results, as this year’s presidential message hopes. In other words, it is just impossible to gather 301 votes, for which there are several reasons. First, it is not enough just to cast ayes and nays to solve the referendum problem. Secondly, it is highly doubtful that this would have any real result. And, thirdly, the way the referendum questions were worded mixed up the technical aspects of governance and the problems of conceptual development. It is the latter mistake that could provoke a constitutional crisis. Delaying implementation has in fact helped postpone such a crisis.

“As to the presidential message’s chapter on regional policies, I believe this kind of policy is undoubtedly necessary. The very expression, new regional policy, which was coined on the eve of the 1999 presidential elections, meant trying to form strong, self-sufficient but loyal and manageable regional elites. I am deeply convinced that the still pressing problem of regional policies can only be solved by carrying out a short-term dynamic reform of local government. Passing a local government law to complement the existing law on state administrations should be the first step in this direction. In addition, the budget reform must be completed. It is this package of problems that I think constitutes the political content of the new regional policy. As to how the latter will be pursued in individual regions, it should be noted that the most powerful economic regions currently continue to form local business strata and the related managerial corps. In this respect, the Donetsk region is the most illustrative example of how regional business is blending with the regional administrative elite. With this in mind, the problem of specific regional development should not be left to the local authorities. For this process should remain, first, manageable and, secondly, under the control of elected authorities. Apparently, this requires a serious debate between politicians, lawmakers, and researchers to map out the most promising directions of administrative and territorial development, taking into account the capabilities and priority status of each individual region.”

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