Market Signals
It is very difficult today for an ordinary Ukrainian, as well as for a middle- sized businessman, to find his way through the contradictory macroindices of the Ukrainian economy and map out his plans for the immediate future. Here are some concrete examples. The Ministry of Finance tells us gleefully that Ukraine’s public debt dropped by $0.3 billion in nine months, while other governmental sources trumpet that industrial output rose 4.7% in October against the same period of the last year. Yet, the US- based Merrill Lynch has left us nonplused, downgrading the outlook for Ukrainian eurobonds from “market perform” to “underperform,” although this country has been dutifully paying interest gains on its eurobonds. Simultaneously, the State Tax Administration adds insult to injury by reporting that tax arrears rose almost twofold — to UAH 13.2 billion — in the nine months. On its part, the IMF is calling on Ukraine to radically speed up structural reforms, thus hinting that the latter are not yet a success and that this country badly needs them to consolidate positive results in the economy. But far from every individual has to turn to macroindices to know the condition of the national purse. The best indicator is his own pocket which cannot help feeling the impact of last month’s growing wage arrears. As the Ministry of Finance admitted, these rose by UAH 4.1 billion, or 2.4 times, in October alone, reaching 6.9 billion as of November 1. The arrears dealt a blow to education, health care, and culture. Thus the average individual, who may not have been personally hit by these vagaries of fate, hesitates whether to buy a new washing machine or to deposit money in a reliable bank. (Needless to say, it will not even occur to him to buy the shares of a profit-making national enterprise.) The entrepreneur also has to solve problems with many unknowns. He does not have a clear picture of the buyers’ consumer attitudes, a thing he is supposed to be guided by in a normal economic environment. Moreover, he often ignores this because he does not know a thing about the repeatedly promised transparent governmental socioeconomic policies. He does not know the level of future taxes and rent; nor is he aware whether the bureaucrats, on whom the entrepreneur is still strongly dependent today, will be more or less corrupt. This, as well as the circumstances, prompts him to decide whether to invest in the open or the shadow economy. As a result, the state budget can again lapse into suspended animation. Meanwhile, the government is trying to make the economic situation predictable. In compliance with the president’s decree, Ukraine will soon have a draft strategy for economic and social development until 2011. A state commission in charge of the strategy of economic and social development has been told to build this strategy on the basis of the president’s message to Verkhovna Rada, “European Choice: The Conceptual Foundations of the Strategy of Ukraine’s Economic and Social Development in 2002-2011.” The draft strategy is mainly developed by the Ministry of the Economy and European Integration, the National Institute of Strategic Studies, the Institute of Economic Forecasting under the National Academy of Sciences, and the National Technical University of Kyiv Polytechnic Institute. After being drawn up, the Strategy of Ukraine’s Economic and Social Development until 2011 will be duly scrutinized at this country’s research institutions and then put to a Verkhovna Rada vote, says Anatoly Halchynsky, adviser to the president and director of the National Institute of Strategic Studies. “I am thoroughly convinced this is an extremely serious thing, it is a document which can also be viewed as an important step toward societal cohesion. I know the president expects a positive effect,” Mr. Halchynsky says. According to him, the president’s strategy-drafting instruction clearly sets the top strategic priorities, such as laying reliable groundwork for a stable economic growth, implementing the innovative model of development, profound social reorientation of the economic policy, and providing prerequisites for Ukraine’s full-fledged European Union membership.
The experience of past years has brought about quite a skeptical attitude to this kind of document. For instance, Herman Schlomann, manager of the Ukrayina investment company, told The Day that what is at stake today is not so much new programs as the situation in parliament. Yaroslav Zhalylo, president of the Anti-Crisis Research Center, also emphasized to The Day that no one can be fully convinced today that, unlike the previous short and long-term programs adopted at the top level, this strategy will be effective. In his opinion, the developers have chosen a far-from favorable time, with the political situation taking a downturn. Simultaneously, Mr. Zhalylo says, this does not mean the strategy should not be worked out and adopted. According to the expert, this country undisputedly needs, if somewhat belatedly, a scientifically- grounded strategy of economic and social development.
