Economic priorities

Ukraine intends to become one of the world’s top seven suppliers of agricultural pro­ducts, Serhii Liovochkin, head of the Presidential Administration of Ukraine, told journalist in New York last week. He was commenting on Viktor Yanukovych’s address to the UN General Assembly Session, particularly his statement to the effect that Ukraine is prepared to play a major role in the struggle against famine, mankind’s number one problem: “The President of Ukraine declared that a priority of his economic policy was progress in agriculture, and that government investments and reforms in the agrarian sector will allow Ukraine to at least become one of the world’s top seven agricultural producers.”

Where else can and must Ukraine take a leading stand in the world? From now on solving this problem is the responsibility of the Coordinating Council for Higher National Economic Competitiveness (CCHNEC), which was recently established by a resolution of the Council of Ministers of Ukraine. Presided over by Prime Mi­nister Mykola Azarov, this council is made up of leading businesspeople, scientists, and government officials. The CCHNEC Secretariat is headed by Dr. Volodymyr SHCHELKUNOV, Ph.D. (Economics), president of the Ukrainian National Committee of the International Chamber of Commerce. The Day asked him to describe the main characteristics, objectives, and powers of the newly established consulting body.

Dr. Shchelkunov, would you please give us a more detailed description of the newly established council? What is its strategic objective and role?

“Our main objective is to become a council capable of making practical proposals and taking actions. I have a great responsibility for preventing this council from becoming a populist body, to keep it pragmatic, so it can reach the stated goal of raising the competitiveness of the Ukrainian economy, saturating the domestic market, new industrialization, and so on. We must work out Ukraine’s Economic Development Strategy until 2020 as a nationwide project to help Ukraine become one of the world’s developed countries.

“As it is, according to the World Economic Forum, Ukraine’s economic competitiveness leaves much to be desired. This year we lost seven points in the global competitiveness rankings and are now down to the 89th place, and down to the 134th in terms of institutional development — the effectiveness of the performance of governmental and business structures — which is horrible! Ukraine follows the Republic of Cote d’Ivoire, which places 133th. Additional comments are superfluous.”

“However, there is a positive signal — the fact that the government has started taking concrete measures aimed at raising competitiveness. The fact that the council is presided over by the prime minister shows an understanding of the critical importance of this problem, essential for the very existence of the Ukrainian state. I might as well point out that similar bodies exist in most developed countries. In Russia, the Council on Competition and Entrepreneurship is headed by Prime Minister Vladimir Putin.”

What is your take on the Ukrainian economy, in light of the future changes proposed by the CCHNEC? What can be cured, and where should we simply cut our losses?

“Tests have to be run before a treatment is chosen. Thus, one of the top items on the council’s agenda will be an analysis of the existing situation and an action plan that the council will have to adopt and then propose to the government. That’s why this body is so representative. Among the council members are experts with a keen understanding of the Ukrainian economy and top-notch businessmen. All these people are accustomed to thinking strategically.

“As for the priority sectors of the economy that must be supported and developed, we have already made our decision: machine-building, the agrarian sector, energy-saving technologies, aerospace industry, shipbuilding, and nanotechnologies. By the way, the latter are already being developed at the National Academy of Sciences of Ukraine and other national research centers. These technologies are universally recognized and perceived as progressive, but cannot be listed among our priorities for lack of funds.”

How long will it take to implement the council’s proposals?

“Between one and five years, depending whether we are talking about short- or long-term projects and programs. Unfortunately, we can’t afford to spend any more time getting started and looking for a place in the sun. In other words, there will be concrete measures taken and economic results of the council’s re­commendations in a year’s time.”

What is your idea of a modernized economy, after the implementation of the council’s recommendations? What place do innovations hold?

“We intend to use the experience of countries like South Korea, China, Japan, Singapore and others that once showed innovative breakthroughs in basic priority sectors. We’ll use technological forecasting, strategic prognostication, and other modern means that will allow us to comprehend the top priorities for the Ukrainian economy.”

Who do you think should finance the development of new solutions, the state or business?

“There is the notion of public-private partnership. That’s how innovations should be financed. Within the country the state must take care of the strategic industries, but in partnership with private businesses, considering that today practically everything in Ukraine is in private hands. The main thing is for this partnership to remain on a parity basis and be mutually advantageous. Then we’ll see an innovative revolution.”

Your council is an advisory body, but the central and local exe­cutive authorities, enterprises, institutions, and organizations are under the obligation to consider each recommendation. Does that mean that they will have to simply read each document or actually comply with it? If the latter, who will make them do so and how?

“The council’s re­solution will be binding, considering that the chairman of the council is the prime minister, so there will be no problems with implementation. Besides, these resolutions will be the result of a broad consensus; they will be worked out taking into account considerations expressed by all the parties concerned.”

What competitiveness guidelines do you regard as the most important for Ukraine in the long run? In other words, which economic sectors will determine our distant future, say, fifty years from now?

“It is hard to predict technological progress. After all, fifty years back we had no idea about information technologies, genetic engineering, and many other discoveries that shape the new economy. One thing is certain: Ukraine must become [economically] efficient. Its businesses must realize the importance and role of the managerial solutions, otherwise all investments will be for nothing. The same is true of energy-saving solutions, considering that conventional resources will soon be exhausted and are becoming increasingly expensive, so that our steel and chemical industries occasionally find themselves in a spot. We have tangible achievements along these lines that are being implemented by the Committee on Renewable Energy and Environmental Investment. These can doubtlessly serve as a basis for the council’s reports in this sphere.

“I think that in the next fifty years Ukraine, as an exporter, can win its worthy place in the agrarian sector, aircraft manufacture, space exploration, research and development, nanotechnologies, alternative power engineering, and services sector.”

All the sectors you’ve just mentioned have already demonstrated their potential, to some extent. Will other sectors that are currently “in the shadow” — like light industry — show progress as well?

“I don’t think that our light industry will be able to compete with that of China or other countries. Too much time has been wasted, too many opportunities passed up, so there is no sense trying to catch up with, let alone overtake, those that have long been working systematically and effectively on the issue. It would be like trying to outdo Japan in the sphere of electronics. As a potential leader, Ukraine has lost these sectors forever. Nevertheless, it can retain its market segments here, but we must focus on leadership in the sectors I mentioned previously.

“It is also true that there are risks involved, namely what our competitors will look like in fifty years, their progress, redistribution across the world, and so on. We’ll have to use technological forecasts and strategic prognostication to ‘see’ the world’s future priorities, so that what we make competitive today will remain so fifty years from now.”

What is being done to lay those foundations?

“We’re working out the rules of the game, so they will be the same for all players. The most important thing is that there be a consensus between business and the authorities. Those in power must take care of problems faced by businesses, and businesses, accordingly, must take care of problems faced by the government. This cannot be a one-way street.

“The Tax Code is a graphic example, to be followed by the Customs Code, and so on. Practical rules of the game are being worked out.”

Well, small and medium businesses must have a different view, considering their protest rallies against the current version of the Tax Code in front of the Verkhovna Rada. What do you think?

“Indeed, small and medium businesses have a different view, but in this case one has to realize that the notion of a bona fide taxpayer isn’t germane to most of our entrepreneurs. Many of them cunningly exploited the loopholes in our legislation, discrediting the idea of simplified taxation procedures, giving the government cause to resort to harsh measures. Businesspeople must understand that those in power are for civilized relations.

“At the same time these innovative measures need finishing touches. After all, this is independent Ukraine’s first Tax Code. No one has been able to work it out previously. Therefore, achieving compromises is necessary. There were some 15,000 amendments to the draft code, among them substantiated business requirements as well as purely emotional statements like ‘give it to me cause I want it.’ Therefore, small and medium businesses should clearly determine their relationship with the government, understand its position, and seek compromise solutions in the systemic rules of the game. The current government has set the right goal of legalizing the Ukrainian economy, so everyone is urged to start paying taxes.”