Revaluation better than reprivatization?

Economists are trying to predict the first steps of the new Verkhovna Rada, the economic bills that will be considered top priorities, whether there will be any cardinal changes to tax laws, and whether the ill-starred reprivatization process will be revived.

Meanwhile, all the signs indicate that the legislative process will acquire a new form. Former Minister of Economy Serhiy Teriokhin says that the main emphasis will be on bills submitted to parliament by the coalition government. He believes that bills that were not approved by the government should not be deliberated in parliament: “The paradoxical question is whether a parliamentarian as a member of the parliamentary majority has a right to table a bill separately or whether this right is vested only in the government.” Teriokhin predicts that most bills will be generated by the government. To this end the Yulia Tymoshenko Bloc is preparing to introduce appropriate changes to the standing orders.

Teriokhin says it is also necessary to revise the budget approval procedures, as those set forth in the Budget Code do not fit parliament’s new constitutional order. “If the majority that formed the cabinet doesn’t support the budget, something must be done. At least the government should be retired and the coalition dissolved, or it should form a new government.” He adds that the parliamentarians cannot introduce changes to the budget: “There can be one vote either to pass the budget bill as a whole or to reject it and subject it to revision.” He leaves no other options.

Apparently counting on its presence in the majority’s coalition, the BYuT is already discussing its ambitious plans concerning tax reform: to replace the VAT by a consumer tax and introduce a real estate tax. “Reprivatization,” the word that dealt such a heavy blow to Ukraine’s investment image, is no longer mentioned. Instead, Teriokhin says that a bill has been prepared on “the revaluation of illegally privatized enterprises.” This does not sound as frightening as reprivatization, but the mechanism of this revaluation still has to be figured out. True, not everyone believes that the government will not want to undertake another reallocation of property. Meanwhile, Vasyl Yurchyshyn, director of economic programs at the Razumkov Center, proposes a five-year moratorium on reprivatization.

The revaluation idea is supported by Oleksandr Riabchenko, the director of the International Institute for Privatization and Property and Investment Management. He believes that until a law is ratified to establish rigid rules of the game for all enterprises undergoing privatization, they are all in a state of “suspense” and have been that way since 2002. Their sales can be “contested in court, as was the case with Kryvorizhstal and like they are trying to do with the Nikopol Ferroalloy Plant.” All it takes is the go-ahead from the Office of the Prosecutor General.

Therefore, in choosing the lesser evil, Riabchenko believes that it would be better if these “suspended” enterprises made additional payments to the state. “However, the guarantees of such payments must be the same for all these enterprises, regardless of the proprietor. Therefore, I hope that an appropriate law will be enacted,” says the expert.

Many expect the new parliament to display a more systematic approach to deliberating bills. Oleksiy Kot, departmental director at the law firm Salkom, believes that the previous parliament and government made one serious mistake: before passing a bill relating to a certain sphere, they had to clearly define the legislative development strategy. Therefore, says Kot, the first step that the new parliament and government should take is to adopt a legislative development concept in individual sectors.

This concept should be coordinated with both the coalition and the majority of parliamentarians. Kot is convinced that this is the only way to put an end to the shilly-shallying in the legislative field. Banking legislation is most illustrative in this sense. “It is possible to state that the National Bank’s legal policy often depends on who is in charge there, and it has a tendency to change all approaches to its regulation,” Kot believes.

Riabchenko is also critical of what is happening in the banking sector. “You can freely buy Ukrainian system banks, while the National Bank remains aloof. I don’t understand why Europeans buy large domestic banks, while our people cannot buy a small Austrian bank,” this expert wonders. The most alarming aspect is the advent of big foreign capital to Ukraine within three years, as the inevitable result of Ukraine’s WTO membership. The remaining time must be used to thoroughly prepare for Ukraine’s entry into the world economy, warns Riabchenko, adding that preparations must also be made in the legislative sphere.

Ernest Hromatsky, president of the law firm Hromatsky & Partners, has strong doubts about the economic expediency of the first bills: “Here political aspects always prevail over economic ones after elections.” Domestic business is showing an even greater degree of skepticism. According to Ihor Burakovsky, director of the Institute for Economic Studies and Political Consultations, his institute has surveyed 300 small and medium businesses. His findings show that whereas in 2005, 40 percent of businessmen believed that legislation should remain unchanged for at least one year, today 78 percent support this idea. Shouldn’t our lawgivers give due consideration to this phenomenon?