The Economic Program of the New Ukrainian Government

IMGXYZ428IMGZYXOn November 1, 2005, the Carnegie Endowment for International Peace hosted a meeting entitled “The Economic Program of the New Ukrainian Government” with Yuriy Yekhanurov, Prime Minister of Ukraine. Anders Aslund, Director of the Carnegie Russian and Eurasian Program, chaired the session. Mr. Yekhanurov’s remarks are summarized below.

Eleven years have passed since Ukraine achieved independence and today our fledgling democracy faces new challenges. Our foreign policy is clearly oriented toward full-fledged integration into the European Community based on our shared democratic values. Ukraine’s ongoing integration into that community will promote civil society, the rule of law, and democracy in Ukraine.

With respect to Europe, our main priority is the Ukraine-EU action plan. More specifically, we aim for EU recognition as a market economy, a simplification of the visa regime, a Ukraine-EU free trade area, and cooperation in energy. The Ukraine-EU summit on December 1 will be an important milestone on the road to these goals.

Ukraine’s relationship with NATO is also vital to its future. We hope the meeting of the Ukraine-NATO commission in December, at the level of foreign ministers, will produce strong indications of Ukraine’s future membership in the alliance.

The Ukrainian government assigns particular importance to our strategic partnership with the United States. Combating tyranny is one of our top shared priorities. Most of the problems between Ukraine and the US are related to trade. We hope to resolve them and accede to the WTO by the end of this year. The US-Ukraine protocol is crucially important because it will send a strong signal to several other countries, particularly Australia. The principal remaining issues concern poultry, metals, and sugar cane.

People frequently ask about the change in government. [President Viktor Yushchenko sacked Prime Minister Yulia Tymoshenko and her cabinet in September.] The new team is pragmatic and realistic where the old had been eclectic and idiosyncratic. Unfortunately the old approach led to problems for the Ukrainian economy. The state of the pension fund is just one example.

But in August this year GDP stopped declining. Now the government is intent on creating a favorable environment for business. My appointment as prime minister is testimony that property rights are going to be honored and observed in Ukraine.

Our new economic policy is balanced, but we have to honor the commitments made by the previous government in the social sector, and we have to ensure continued growth. Deregulation, particularly at the local level, will be important to the development of small and medium business. President Yushchenko’s advisory council on business development and investments, which one might call the “council of oligarchs,” is also part of our growth strategy. We would like these businesspeople to become part of a true national bourgeoisie. On the international markets our key sectors will be mining, metals, aircraft construction, and machine building.

We look forward to the EU’s announcement that it has granted Ukraine market economy status. Likewise we look forward to the WTO summit in Hong Kong. Meanwhile we must conduct the Rada [parliamentary] elections in a peaceful, democratic atmosphere. The Rada has adopted the budget for next year and next summer Ukraine will form a new government in line with its amended constitution. I would like Ukraine to complete the first round of its economic and social transformation in 2006.

Q&A

Q: What will be your government’s policy toward the Lukashenka government in Belarus?
Yekhanurov: Two weeks ago, I made a visit to Belarus and met personally with President Lukashenka.  He made a very favorable impression on me.  He is a strong propaganda man.  And now, I realize why the German women were shouting so loudly in the ‘30s, “I want to have a baby from the Fuhrer.”  But, let me also tell you that about a year ago, I also met with members of the Belarus opposition, and I know personally Mr. Shushkevich.  And definitely, we would want to see the next elections to be held in a democratic fashion because we want Belarus to be our safe and reliable neighbor.  And we will do whatever it takes to have a common understanding, mutual understanding between our two peoples.

Q: President Yushchenko recently stated that the Orange Revolution inspired democratic forces in many countries, including Russia.  Is the Ukrainian policy towards Russia based on the assumption that similar events may happen in Russia in the near future?
Yekhanurov: Ukraine hasn’t got yet enough weight to influence the policies of our big powerful neighbor.  Well, Russia has a fairly sufficient democratic environment in which they have to identify their moves on how to develop further.  I am very glad that our relationships with the Russian Federation are becoming very pragmatic, and this is the way I would like for them to develop further.  You can ask me a question about Turkmenistan, which I also recently visited.

Q: What is the status of public administration reform?
Yekhanurov: The government will soon clearly discriminate between political and administrative functions. Ministers and their deputies will be political functionaries, while the others will be ordinary civil servants. Administrative territorial reform is more challenging, largely because of the vested interests of local civil servants. We won’t be able to launch that effort until after the parliamentary elections.

Q: How do you convince not just EU leadership, but the people of the EU, that better relations with Ukraine and maybe Ukraine’s eventual EU membership will be good for them?
Yekhanurov: We can only do this by bringing our living standards closer to those in the EU and adopting European norms and standards. One of the major obstacles to this modernization is our shortage of modern-style managers.

Q: Can Russia and Ukraine help each other accede to the WTO? Did you discuss that prospect in Moscow?
Yekhanurov: Russia can expect to join the WTO next year. If Russia joins before Ukraine, Ukraine will never be a member of the WTO. We have to join before Russia and we will do it.

Q: You have said before that reprivatization has to stop. How will it stop and which will be the legal means for stopping it?
Yekhanurov: The sale of Kryvorizhstal [a large state steel plant, purchased by Mittal Steel for more than US $4.8 bn] was the fulfillment of a promise made by Yushchenko during the presidential campaign. The stand of the government is as follows:  the process of reprivatization in Ukraine is over, full stop. 

Summary prepared by Matthew Gibson, Junior Fellow with the Russian and Eurasian Program at the Carnegie Endowment for International Peace.