Let the EBRD Envy Us
Now or never was the call issued at a roundtable discussion on the prospects of Ukraine’s innovative development by Volodymyr Ryzhov, board chairman of the Ukrainian State Innovation Company, when he spoke about the possibility of establishing a Ukrainian bank for reconstruction and development in the immediate future. He substantiated his viewpoint by the fact that this year’s state budget, unlike the 2003 one, provides at least some funds for this purpose. If the budget money is to be complemented with the innovation company’s free resources, this bank’s initial capital could reach an estimated UAH 50 million by the end of 2002, Mr. Ryzhov said. A small amount indeed, but a good beginning makes a good ending. Mr. Ryzhov thinks the bank would be capable of developing muscles and amassing UAH 300-400 million in authorized capital during the next two years.
Banking capital will also be required to implement another alluring idea — unfolding a network of regional innovative companies to be founded by the Ukrainian State Innovation Company. At first, there should be at least fifteen companies of this kind. According to Mr. Ryzhov, commercial banks based in Donetsk, Kharkiv, and Western Ukraine have agreed to take part in this project to implement innovations in the production process.
As expected, these rosy prospects left many wondering. Center for Socioeconomic Analysis (CASE-Ukraine) expert Volodymyr Dubrovsky cautioned against betting on financial resources alone, for this approach was already taken in the USSR and ended in failure. At the same time, he thinks most recipients of money injections will remain the same: inefficient Soviet-style research and production associations without any stimulus to innovate. According to Yury Pakhomov, director of the Institute of World Economy and International Relations of the Ukrainian National Academy of Sciences, an “innovation money tank” can only be set up in Ukraine by foreign banks if the latter are offered good terms. Only then, Academician Pakhomov is convinced, will the populace believe that the banks will not cheat them and short money will turn into long green without any pressure from the Cabinet of Ministers or National Bank.
Yaroslav Zhalylo, chair of the department of socioeconomic strategy and economic security at the National Institute of Strategic Studies, described the current situation in the innovation sphere as “very complicated” and even “in crisis.” The past few months have seen a drastic fall in the number of businesses that implement innovations: they now account for less than 1/6 of all Ukrainian enterprises. Also alarming is the tendency toward the reduction of the share of research organizations specializing in the technical sciences because, as Mr. Zhalylo noted, this impairs the economy’s ability to adopt innovations. Since research-oriented budget appropriation are always declining, the share of foreign investment in the Ukrainian research field has reached 25%, an all-time high for transition economies. “We therefore conclude that the Ukrainian ‘raw’ intellectual product is being exported abroad,” Mr. Zhalylo said.
Still dragging on is the establishment of a specialized state bank, one of whose functions is to issue loans for top-priority innovative projects. Meanwhile, the presidents message to Verkhovna Rada, “European Choice: the Conceptual Foundations of a Strategy for Ukraine’s Economic and Social Development for 2002-2011,” assigns the nation’s reconstruction and development bank a major role in implementing the innovation economic model. So will we have a BRD of our own?
