Is There Economic Growth in the Provinces?

Ukraine’s real gross domestic product has grown 13.5% in the past seven months of 2004 against 9.4% over the same period last year. What is more, inflation was running at a mere 4.3% in January-August as compared with 8.2% in the whole year 2003. At the most conservative governmental estimate, GDP is going to rise by 10,5% this year, with inflation ranging between 5.8% and 6.3%. Besides, the National Bank claims it will not let inflation gallop despite the booming economic growth. The impression is the economy will face no problems this year and people can feel sure about tomorrow. The Ministry of the Economy forecasts an essential slowdown of the economic growth next year as well as a reduced inflation rate, which is supposed to leave real individual incomes intact. But is the vision of Kyiv’s macroeconomists at odds with what is really going on in the regions? This is the question our correspondents put to regional administrators.

Ihor RAININ, deputy chief, Main Department of the Economy; chief, Department for Entrepreneurship and Market Relations, Kharkiv region:

“One can judge about the way Kharkiv region’s economic problems are being tackled by the ever-growing employment rate, wage and pension hikes, and the dwindling number of liquidated businesses. Industrial growth is at the level of 15-17% — quite a high figure indeed. We have in fact overfulfilled the budget in the past six months. You can spot a lot of positive things in all fields, although this does not always tell on the grassroots’ well-being. We can’t say we will have, in a month or two, pensions as large as in Germany. This is so far impossible, everything should take its own course. We are now on the point of drafting a life quality improvement program. We have identified more than fifty parameters. I want to note that no one else has done this work anywhere before.”

Volodymyr KULISH, Minister of the Economy, Autonomous Republic of the Crimea:

“A sizable growth in the number of vacationers over the past few years, already dubbed ‘post-Soviet holiday boom,’ is ample proof to the Ukrainian people’s growing well- being. In the first six months alone, retail trade has gone up 23%, which reflects a considerable increase in the consumption of foodstuffs, clothes, household appliances, and other goods. The real incomes of Crimea residents have jumped by 15-20% over this period. The Crimean Council of Ministers has drawn up an entirely new strategy of the region’s development until 2015. We have found that a considerable part of holiday earnings is being washed out of the Crimean budget by the firms that pay taxes to Ukraine’s other regions, as well as to Russia and other countries. This applies not so much to travel and hotel operators as to the producers of foodstuffs, clothing, furniture, telecommunications, transport, and fuel suppliers. This is why the strategy calls for restructuring aimed at indigenizing all kinds of production. It is intended to bring about a threefold increase in the Crimean population’s real incomes (average monthly wages will reach UAH 1200-1300), raise the number of industrial employees, and reduce unemployment to the minimum in the coming 10-15 years, relying on the geoeconomic potential of Ukraine and the Crimea itself — the autonomous republic will thus become the best region in terms of life quality.”

Mykola TYNDIUK, first deputy chairman, Odesa Oblast Administration:

“Odesa oblast has seen steady progress in all economic sectors over the past six years. The oblast is fifth best in Ukraine, as far as the budget-formation quality (at all levels) is concerned. Our region also shows the lowest level of unemployment in this country: only Kyiv and Sevastopol are ahead of us in this respect. Businesses are advertising for new personnel. The oblast has had no pension arrears since 1998, while back wages have dropped 24% to 23 million hryvnias in the past month alone — a small amount on the nationwide scale.

“Odesa oblast is implementing several large state-funded projects, among them restoration of the Danube-Black Sea canal and construction of a high-pressure gas pipeline in Bilhorod-Dnistrovsky and the Odesa-Kyiv highway. Each of these projects is giving a new impulse for the region’s socioeconomic development.

“A bountiful harvest of grain has also helped change the situation with bread and the related products. The output of cheap bread has risen one and a half times. The Odesky Karavai company has even decided to gradually drop bread prices. Moreover, overall prices of foodstuffs and industrial goods went 0.1% down in August as compared to July. Of course, we also have a lot of problems, especially in public utilities. So we are actively working to attract investments into this field.”

Anatoly BLYZNIUK, chairman, Donetsk Oblast Administration:

“The ongoing economic changes is quite a natural and logical thing. The past few years have been a crucial period for our region. Donbas has now ridden out the crisis and begun to gain strength. Industrial output grew by 18% in the first six months of this year alone — in the prices comparable to the level of January-June 2003. Donetsk oblast still accounts for 20-25% of the national economic potential. We have positive results in all industries without an exception. All this is being used to increase the well-being of every Donetsk oblast resident. Wages are rising in the region with breakneck rapidity. In August, average wages jumped over 770 hryvnias. Interestingly, this applies to all kinds of economic entities, not just to some individual sectors. Wage hikes are being accompanied by the increase of pensions: the latter have gone up to 243.1 hryvnias since May 2004 against 173 hryvnias last year. Our chief goals are to create new jobs and cut power and resource consumption, as well as to further boost the output and improve the environmental situation.”

Mykola SAVIUK, chief, Main Department of the Economy, Khmelnytsky Oblast Administration:

“Khmelnytsky oblast, like the rest of Ukraine, has embarked on the road of steady economic development. Accordingly, things in the social sphere are also looking up. Investments and civil construction are also on the rise. UAH 703.3 million have been channeled into fixed assets this year — twice as much as in the first six months of last year. I think the growing housing construction is a convincing illustration of social development. 851 242,700-sq.m. apartment houses were commissioned in 2003, up 20.9% of 2002. In the first six months of the current year we commissioned 435 apartment houses with a total area of 84,300 sq. m., up 4.5% on the same period of 2003. Rural housing construction is also booming: we have commissioned 24,200 square meters, 61.5% more than last year. At the same time, real wages show a pattern of steady growth, increasing by 24% in January-June.”

Stepan LUKASHYK, deputy chairman, Lviv Oblast Administration:

“Per capita average wages reached 546 hryvnias in July. This exceeds the official subsistence level for able-bodied people by almost 17% and the minimum wages level by 2.5 times. Compared to the same period of last year, wages in Lviv oblast have risen by an average 130 hryvnias. Still, real wages do not always meet the requirements of individuals. We cannot, of course, put up with this and are doing our best to boost the industrial output and attract investments into the oblast’s economy. Taking advantage of a borderline location, Lviv oblast has become one of Ukraine’s most investment-friendly regions — million were invested in 2003. In the six months of this year, the Lviv regional economy received .2 million in foreign investments and UAH 1.6 million from domestic sources. We expect a total 0-million-worth shot in the arm for our economy by the end of the year.”

Kostiantyn HRYSHCHENKO, chief, Department of the Economy, Vinnytsia City Council:

“There are ample grounds to claim there is a positive dynamics in most economic fields. Positive shifts are traceable, first of all, in construction, investments, public utilities, and the service industry. At the same time, I would characterize the region’s development situation as somewhat risky. There still are a lot of unsolved problems. For example, higher gasoline prices have adversely affected such a sensitive group of the population as veterans and the disabled. Also worrying is an insufficient level of budget revenues. Today’s budget of Vinnytsia covers the current expenses of public- sector institutions and allows paying wages at the minimal level only. Improvement is almost invisible because of unstable prices. To make the development steady, the local budget should be at least doubled. An effective investment policy could be a good source of funds, but the Vinnytsia City Council is unable to pay sufficient attention to investment projects aimed at a long-term economic effect because it always has to use budgetary revenues as a stop-gap measure. Economic development would also be more tangible if we could essentially raise public-sector wages.”

Oleh TORKUNOV, chief, Rivne Department of the Economy:

“Undoubtedly, Ukraine’s economic progress has a positive impact on our city. For industrial output rose 33.4% in the first six months against the same period of 2003. This also helped increase wages. In January- June 2004, average wages in the city reached 510 hryvnias, up 23.8% on the same period of last year. Budget revenues are also on the rise: 116.8% against the last year’s figure. Unemployment has dropped from 3.2% to 2.5%.”