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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Artek: problems for adults

Stuck between the market and debts
3 February, 2009 - 00:00

SIMFEROPOL—Artek, an international children recreation center , has long had a chronic fever. Nearly every spring Russian media filled the informational space with “news” of its demise, and every time media people crowded Gurzuf and sent back increasingly pessimistic reports. Yet every year, with the coming of spring, Artek came alive to the benefit children and the adjacent businesses. Then the next fiscal year would come to pass and the same thing would happen again.

As the years passed, Artek became increasingly less active in coping with its problems, with the R&R activities still following the old Soviet pattern and frequent festival shows. Individual camps stopped operating, yet Artek remained afloat somehow. They thought 2009 would not be any different, but then the financial crisis broke out and the situation with the international children’s rest camp became critical. Artek is now completely closed, its staff is receiving no wages, and over 1,000 staff are under threat of being dismissed. Considering that Artek has never closed since 1930, not even during the Second World War (it was transferred to Altai in Russia), the situation is indeed grave.

This month the Artek staff has held a warning strike, demanding payment of three-month back wages and threatening a hunger strike. Borys Novozhylov, director of Artek, came to Kyiv to hold a press conference and go on a hunger strike. However, the latter move got him into hospital in Feofania. He wrote an open letter to Ukraine’s political leadership, explaining this decision: “The 2009 budget has placed the International Children’s Center ‘Artek’ on the verge of extinction. At present, Artek is faced with the necessity of dismissing some 1,100 top-notch specialists, discontinuing educational programs and international projects launched in cooperation with the UN, UNESCO, UNICEF, and other authoritative international organizations. This substantial weakening of Artek opens up vast opportunities for hostile takeovers of its land and property.”

No one explains the reasons behind this situation; the [central] budget is supposed to provide funds under any circumstances. An unbiased reader is bound to ask a lot of questions, including how Artek could have found itself moneyless, considering its popularity with children in Ukraine and across the world and places selling at 6,000 to 15,000 hryvnias. Thinking in terms of market economy, one comes to conclude that the state would sooner or later have to refuse to fund a project like Artek.

However, what the Artek advocates—Ombudswoman Nina Karpachova, other politicians, and entire parties—prefer to conceal is the fact that the state has not as yet refused to finance Artek. Then why is this fuss? The reason is that instead of 37 million hryvnias’ worth of budget appropriations slated for Artek before the crisis (by unknown individuals), the new budget envisages 19 millions’ worth of government contracts.

Furthermore, the Ministry of Family, Youth, and Sports has cancelled subsidies to children’s R&R centers from various funds, specifically from the payroll fund. Is it a normal step to take in time of crisis? It is. Why should schoolteachers, physicians, and other government employees suffer while Artek is squeezing out money for itself by force? Also, who has made the calculations to say that 19 million is too little or too much? Will you starve to death having 19 million in your pocket?

Experts believe that with its international reputation Artek can well earn the rest on its own, except that there will not be money left to squander. Artek, of course, does not like this situation because it is accustomed to luxury and refuses to part with it. Therefore, the current fuss — rallies, hunger strikes, and protests — is just the outward appearance of the backstage struggle for budgetary funds. We hear a lot about what Artek should be like today.

No one, however, has answered the question whether the Ukrainian state needs this kind of Artek. If it does not, then what kind does it need? The more you analyze what has happened, the more convinced you become that the situation that has developed was bound to come to this point—this kind of a crisis had to occur, sooner or later.

On the one hand, articles have appeared in print over the past five years or so, concerning the need to reorganize Artek — yet nothing has been done at the international children’s center or by the agencies involved in its management to bring this turbulent project any closer to the current market economy requirements. The only exception is, perhaps, its “under the UNESCO aegis” status obtained in late November 2007. This status entails financial and organizational aid from this international organization. In particular, UNESCO has undertaken to partially finance Artek’s own projects, such as children’s festivals, and help arrange them. Artek, however, took this not as a stimulus for reform and restructuring but as yet another source of income. In January 2007 the Ministry of Family, Youth and Sports asked to have Artek under its jurisdiction, but the idea must have been regarded as unfounded and the situation remained unchanged.

There are several reasons behind this conservative approach. First, this R&R center is very uncharacteristic of Ukraine. Artek and the principle of its organization were formed in accordance with the Soviet political tradition and command economy. Other health resorts in the Crimea have more or less adjusted to the resort market, while Artek has not, for a number of reasons. One of them is the habit of feeding off the stage budget. This is explained using clich s like, “It is for children, isn’t it?” All administrations have entertained the hope that this state of affairs will last long enough. This illusion was upheld by placing Artek under the jurisdiction of the State Affairs Management Service (DUS). This was thought to guarantee long cloudless existence of the international children’s camp at the expense of the state.

On the other hand, Artek is located in Ukraine’s best resort area and in conditions of market economy has remained an attraction for various political and business structures that have attempted to take it over by hook or crook. Every square meter of land in Gurzuf, between Ayu-Dag and the Adalary Rocks, are priced the same as in Monaco, and this gives many “privatizers” no rest.

As a matter of fact, you do not have to guess at the reasons behind the Artek crisis; they are laid down in a statement of the Audit Chamber, which checked Artek’s books not so long ago: Artek has fallen into arrears for the reconstruction done in recent years and suffered from inept management by the Presidential Affairs Chief Management Service. Considering that renovation arrears also imply mismanagement, there remains only one reason. In early 2008 Artek’s bills payable amounted to 36.5 million hryvnias. The Audit Chamber’s press service informed that the audit findings show that over the past five years 102.3 million hryvnias had spent on repair works. At the same time, the number of children accommodated by Artek had dropped by 36 percent as compared to 2002, while its liabilities had increased 40 times.

It is the auditors’ opinion that Artek’s decision to take out a 47-million-hryvnia loan for renovation was economically ungrounded. “It actually threatened the preservation of public property, threw this business into a financial crisis, and caused its bank and treasury accounts to be frozen,” says the Audit Chamber’s statement. Over five years the interest on the loans amounted to 21 million hryvnias, with almost 20 million hryvnias’ worth of debts, while Artek has no resources of its own to pay them. Despite all this, the Artek administration is using intermediaries to sell resort accommodations, which increases the prices 1.5-2.5 times. Losses incurred by the Morskyi Camp alone because of such indirect sales amount to 20 million hryvnias.”

In its turn, the Presidential Affairs Chief Management Service, which manages Artek, failed to secure compulsory registration of its property rights and title to the land it occupies, stated the Audit Chamber. The absence of duly set boundaries resulted in numerous lawsuits and the alienation of part of Artek’s property for the benefit of a third party. In the course of renovation Artek’s management made a number of unlawful payments. Thus, Koblenz Partner GmbH (Luxembourg) was paid €99,000 for installing kitchen equipment in the camps Hirsky-1 and Hirsky-2, but the equipment is actually nonexistent in Artek. The renovation equipment purchased by Artek for 15 million hryvnias was, according to the books and at the time of audit, being assembled by the contractors. Artek’s administration made no complaints about the missed deadlines or refunding. The Board of the Audit Chamber arrived at the conclusion that Artek’s ineffective performance and its financial crisis resulted from the Cabinet of Ministers’ failure to carry out the Verkhovna Rada’s recommendations concerning the approval of the long-term state program to develop Artek.

In May 2008 the Narodna samooborona (NS) movement published on its website an appeal to the President, the Verkhovna Rada, and the Cabinet of Ministers of Ukraine, as well as to the media. It was signed with the pseudonym Artekivtsi (literally, Artek people), and reminded that multimillion debts resulting from dubious renovation schemes are hanging over Artek like the sword of Damocles: “ In the past couple of years Artek has been standing nearly idle during the winter – fall season; at this time of year there are no children in Artek.” In summer entire resort buildings stand empty, although there are countless people wishing to come to this prestigious camp. “During the first shift in 2008, only four out of nine camps capable of accommodating 3,500-3,700 children will open. The rest will be empty. The situation with accommodations in the other shifts of the season remains unclear.”

The message criticizes Artek’s performance which “boils down to shows aimed at appearing on television screens and setting dubious records.” It further reads that Artek’s administration intends to place this children’s resort complex on a seasonal basis and change its name after the end of the summer season: “There is a short way from this to selling out Artek’s property to private owners.” In conclusion, the NU-NS authors suggested that a competent commission analyze Artek’s financial and business status and, in particular, ascertain the reasons behind the unjustifiably high accommodation prices, appoint a new manager, and set up a board of trustees and a public supervisory board to develop the children’s camp. However, nothing was done. Moreover, the international children’s resort complex called the information about its bankruptcy and liquidation discrediting and erroneous. Journalists were informed that Artek’s administration intended to sue the authors of this compromising information.

Artek’s administration has recalled that a new authority, a board of governors, was supposed to be established in 2007 to carry out Artek’s joint programs with UNESCO and that this authority was to include representatives of the children’s resort complex, UNESCO, and the Ukrainian government. This authority was never created, yet the very idea looks like a solution to the problem even today.

Novozhylov told the press conference in Kyiv that Artek‘s staff is discussing the idea of setting up a board of trustees that would be able to correct the situation. Artek’s press secretary Olena Mekh told journalists on his behalf: “All ministers and members of parliament understand and know about this problem, yet they can’t solve it for the time being; most likely we will propose establishing a board of trustees for Artek.” Meanwhile, Artek’s management has not contacted any international organizations, for example UNESCO, under whose aegis it is functioning, about getting the situation with Artek under control. Mekh added that the board of trustees may be open for all who will wish to join it: “I think that [some of] the influential individuals will be interested in becoming members of the board of trustees.”

They might be, but will they do it to pursue the interests of children or their own?

Be that as it may, one thing is apparent: reorganization is the only way to get Artek out of its crisis, although none of The Day‘s experts is sure about what kind of reorganization will do the trick. Neither Artek’s staff, nor its director, nor the state has a plan to reorganize the center. Will Artek’s current “patron,” the Presidential Affairs Chief Management Service, abandon it? If not, will the state find funds to save its face before UNESCO, among other things? If it is indeed abandoned, how should this children’s resort complex be privatized in order to avoid losing this “children’s republic”, if not for the world, then at least for the CIS? Will a joint stock company be established, like it happened to most Crimean resorts that have confidently penetrated the market? Or will one powerful commercial structure simply privatize it? In any case, this requires a real, detailed, market-based national program to reorganize Artek so that neither the children, nor the state (and hence the people of Ukraine) will suffer any losses. Experts say we should not be worried about who will buy Artek because he/they will clearly benefit, whereas our cumbersome government machine keeps failing to see how it can benefit from this, if only in purely economic terms.

At the same time, all experts agree that this reorganization can be carried out in any form except by dividing Artek’s land into small plots, or by privatizing it by parts, camp by camp. This would be the end of Artek, something no one wants, if one were to trust public statements.

The finale of this saga is obvious even now, whatever the outcome of the struggle for budget funds. Summer will come, and supposedly “dead” Artek will come alive and spend the new summer, as always, successfully, merrily and noisily—with festivals, songs, competitions, and high-ranking guests. At the beginning of the following year it will start dying again. Or this international children’s resort complex will be reorganized and turned into a successful independent business that will ask only one thing from the state: give us no money, but please let us exist and operate on our own. Then there will be no crisis shows like those we can see now.