Victims of Economic Policy

We decided to illustrate this data in the course of an interview between The Day's reporter, Vyacheslav Kredisov, Chairman of the Coordinating Council, New Formation Businessmen's Association of Ukraine, and Mykola Heorhiyevsky, President of Enran Co.

  VYACHESLAV KREDISOV

Kredisov: It is true that despite our efforts to influence the economic situation in general Ukraine's business climate is worsening.

  MYKOLA HEORHIYEVSKY

Heorhiyevsky: We cannot assume responsibility for what is happening in this country, because we do not have the levers of power. For this reason, those acting on the principle of keeping away from those in power and as close as possible to where one can get money are absolutely right.

The Day: Are we to understand that money and power in Ukraine are in different places?

H.: Everybody able to do so has already positioned themselves next to money-power sources. No room is left there. Yet New Formation businessmen would not bother trying to elbow their way in; they operate completely different markets. We do not use energy resources or metals in our business, nothing, which is traditionally considered the domestic oligarchs' feedbag. Nor do we need budget money. In other words, we have nothing to do with what is going on at the level where state funds and other vital resources are allocated. After losing 30-40% of our assets in the aftermath of Russia's crisis last August and the following hryvnia fall, we fell prey to the government's economic policy. Yet I could bet there are certain structures that made quite some profit there. We all know that once there is lack of something at one end, there is surplus at the other end. This is especially true of the financial realm.

K.: I want to say that private business in Ukraine has made no progress, and that there is an alarming trend, for we all know that quite a few businessmen have received government posts of late. Now this is evidence that these people see no other alternative to protect and enhance their businesses but by accepting such appointments, thus receiving an additional opportunity to influence the process of dividing budget money. New Formation people have no access to budget money, so they are not so much prospering businessmen as victims of this economic policy.

H.: Rather, they are victims of a system that has taken shape and which does not protect the private sector at at any level. Just think of all those laws passed that the existing regime is unable to implement. Everything is now in the hands of bureaucrats handling such business starting at the administrative district level or city. No one can control these bureaucrats and they feel free to operate like medieval princes. And they have their superiors and the latter behave the same way; in other words, there is no limit to bureaucratic corruption. Take our licensing or tax concession system. After all has been said and done it is just an improvisation meant to supply the interests of certain financial-industrial groups and those of the bureaucracy.

The Day: Does this mean that the deregulation campaign has gone down the drain in Ukraine?

H.: I regret to say so, but it has. As an official of the State Business Development Committee, I am constantly confronted by bureaucratic arbitrariness in Kyiv. Of course, there are many shortcomings in current legislation, but how can I, a man with a law degree, be convinced that there should be special laws to correct today's situation? All it takes is the proper application of the laws that we have. Our laws would work if there were the political will. There is none.

The Day: Oleksandra Kuzhel, Chairperson of the State Committee for Business Development, believes that we have better business laws than Russia, yet business is better developed there. Why?

K.: She is right in the sense of how these laws are implemented. In this sense Ukraine is lagging behind not only Russia, but any other more or less developed country.

H.: Contradiction is the guarantee of progress in any given field. By contradiction I mean competition. By way of competition any society selects the best option out of the statistical multitude and proceeds to develop on that basis. Anyway, this is the underlying principle of the market economy and political democracy. In Russia they have strong competition among various oligarchic groups vying for power and access to power. In other words, they have the rudiments of democracy there. There are none in Ukraine. Ukraine is one big private joint stock company and its stockholders are generally known. So what kind of competition can one expect here? All of us off the stockholders' list cannot compete them. Thus, we cannot make proper headway, because in this country the final choice is not made considering all of the competitors, but just that selected company list, and in 90 cases out of 100 this choice does not reflect the interests of most members of this society. And so Russia remains ahead of Ukraine; even if a bill is passed in Russia lacking in length and depth it will be enacted more effectively due to competition and selection.

The Day: Is there no hope that the Ukrainian private joint stock company will ever become open to other stockholders?

K.: Much would change if our society overcame its stagnation. Besides, there is no way our general public can control the powers that be.

The Day: What about the New Formation? Couldn't this and other such organizations exercise societal control?

H.: Social control means public opinion and this is something the regime either reckons with or not. In the latter case there is no feedback, and without it any system is doomed. In this sense our society has sluggish feedback at best. Decisions are made belatedly and in most cases they are never carried out. The inference is obvious: those wielding power make up a structure totally isolated from the rest of society.