Successes and failures

Prime Minister Mykola Azarov summed up his cabinet’s performance in its first year in office at a press conference held last week in Kyiv. He began by reminding that the government had succeeded in preventing negative economic phenomena and stabilizing macroeconomic indices, and that this preconditioned confident growth. He also criticized his predecessor and answered questions.

When asked about the increase in prices for certain products, Azarov explained it by the global economic situation and the previous administration’s mismanagement. He hastened to assure the media present — and through them the whole population — that there were enough foodstuffs stored by the government to feed everyone, and that there would be no record price jumps as in the case with buckwheat. He tried to calm the panicky flour consumers’ moods: “Should anyone feel like buying a sackful of flour, no problem. Buy it. But trust my word and think twice before you do. It will turn bad before you can finish eating it. This government is prepared to meet any needs of our fellow citizens in terms of flour supplies.”

When asked to comment on Business Insider’s Gregory White’s feature “The 18 Countries Most Likely To Default,” which placed Ukraine sixth, due to its staggering public debt and slow growth, Azarov declared that the forecast was wrong: “We are headed in the right direction and we will doubtlessly show good results.” He added that such good results couldn’t show overnight.

In an interview with a print media outlet, Azarov commented on reforms in Ukraine, saying they were being implemented “efficiently, quickly, and with minimum damage to citizens.” He also stressed that this year the government faces “a great deal of work […] We must carry out these reforms simultaneously and as quickly as possible, lest we make this fun last longer than we can enjoy it, as they say.”

One could assume that by enjoyment Azarov meant the pension and land reforms, as well as the enactment of the Tax, Housing, and Labor Codes, considering that the current Ukrainian administration has been promising to implement precisely these reforms.

If so, one can only hope the incumbent administration will take into account the sad experience of the Tax Code bill. Otherwise, there is the possibility of rallies chanting public grievances in front of the Verkhovna Rada and Cabinet of Ministers of Ukraine, culminating into another anti-Tax-Code Maidan (if not worse). Interfax Ukraine, quoting Research & Branding Group polls, informs that 48 percent of the Ukrainian respondents refuse to believe that they will witness mass antigovernment actions like those in South Africa and the Middle East; 40 percent don’t rule out the possibility. An alarming signal for the proverbial powers that be, of course. Hence the need to make every effort to forestall any such danger.

Time will show whether those at the political helm of Ukraine have learned from their mistakes. The Day asked some of Ukraine’s leading experts to comment on Azarov’s cabinet progress report — specifically, on the differences, if any, between this and the previous administration’s methods of economic management.

COMMENTARIES

Valerii HEIETS, director of the Institute of Economics and Forecasting, National Academy of Sciences of Ukraine:

“During its year in power the government achieved considerable successes in the economic sphere. But it’s too early to rest on one’s laurels, as mundane tasks become increasingly difficult due to the instability of the global economic situation. That is why it is necessary to roll up one’s sleeves and act. Pension reform is particularly urgent, but it provokes millions of questions. I consider the stabilization of macroeconomic indices (GDP growth, a lower level of inflation, etc.) to be a positive achievement. In addition, the share of innovative or research-oriented goods increased within the import structure. If the government manages to adhere to this trend, in two or three years the trade imbalance will disappear and the modernized economy will resume growth. However, the high dependence on export markets and vulnerability of the economy remain among its weaknesses. But this is the ‘merit’ of all governments. Therefore, this year the government should focus on maintaining stable macroeconomic indices, as well as a predictable monetary and exchange rate policy.”

Vasyl YURCHYSHYN, director of economic programs, Razumkov Center:

“In early May-June 2010 the president’s program of economic reforms was made public. Back then in my assessments I approved the stated mechanisms of reforming the economy. But looking at the realization of those declarations, I can’t name even one economic sector where positive changes took place since early spring of 2010, and which would at least partly correspond to the government’s declarations. There were no actual economic reforms. For example, last year’s inflation index, just like this year’s, is clearly understated, as it is calculated based on an outdated methodology. The consumer basket it assesses (a set of products) doesn’t reflect the real needs of an individual. The current consumer basket only partly ensures the possibility of people’s physical survival. Therefore only the intention to reform the economy can be considered positive.”

Oleksandr PASKHAVER, president of the Center of Economic Development:

“After the decision of the Constitutional Court of Ukraine the relations between all the branches of the government changed. Can one analyze the year of Azarov’s rule separately from the rule of Yanukovych? No, because Azarov today simply fulfills the directions of the head of the state. The foundation of the economic policy comes from the president. Therefore I wouldn’t highlight the personality of the premier. One can speak about his style of fulfilling entrusted tasks. In this case, in my opinion, Azarov’s style is invariable: energetic, with a prevailing use of administrative methods of influencing the economy. Vigorousness in management is good. But trying to direct the economy manually often leads to unpredictable consequences, and in the long-term perspective it is a very harmful solution. No doubt, the premier’s vigor, compared to the mutually destruction policy of the previous government, looks appealing because it led to some bureaucratic order in the economic system. This is a plus. Now regarding the started reforms. They are inspired by the president, not the premier. Therefore, most likely, economic reforms will become the assessment for the head of the state, not their executor. At present the realization of reforms is entrusted to the bureaucracy, which, actually, should be reformed. This shouldn’t be done. To carry out reforms successfully, one needs to establish separate structures, provide financing for them, and appoint politicians ready to bear personal responsibility for the reforms as heads of those structures. None of this was done. Therefore, for economic reforms to become successful, the style and methods of their realization should be changed in 2011. In addition, one should fight corruption, as it will doom any kind of reform.”