Kuchma names economic reform minister (04/13/97)

Kuchma names economic reform minister

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Serhii Tyhypko, director of one of the fastest growing banks in Ukraine and an associate of Prime Minister Pavlo Lazarenko, was appointed vice prime minister for economic reform on April 9.

Mr. Tyhypko, chairman of the board and a founder of the Dnipropetrovsk-based PryvatBank with which the prime minister is closely tied, succeeds Viktor Pynzenyk, whose resignation was accepted by President Leonid Kuchma on April 7, five days after he had submitted it and after a closed-door meeting between the former vice prime minister and the president. Sources close to the president said that Mr. Pynzenyk insisted that the president accept his resignation at the meeting.

At a press conference afterwards, Mr. Pynzenyk, in his first public statements since his resignation, explained that he had quit because he felt the government had stopped moving forward on reform and had even begun a backward slide. "Today, I believe there is no political will on the part of the government to push ahead with economic reform," said Mr. Pynzenyk. "I do not see the political potential to solve these problems in today's government."

He said that in today's Cabinet of Ministers too many divergent viewpoints exist as to how reforms should continue, which has caused paralysis. He suggested that in the energy sector, with which the prime minister is closely tied, there even has been a return to a command economy run by monopolies in a system of barter.

But the economist said most free-market mechanisms are in place for an economic upsurge, and that what is now needed is a balanced budget based on a new tax program to provide economic stimulation. He said the government's great failure is its inability to provide suitable conditions for large foreign investment projects, and that government policies and red tape have lately caused foreign businesses to leave the Ukrainian market. "It is tragic when a real or potential investor gives up on its projects," he said. Since independence in 1991 Ukraine has attracted merely $1.4 billion in foreign capital.

If a tax program and a balanced budget do get through the Verkhovna Rada, Mr. Pynzenyk said economic growth could still occur within a year.

Because of his close association with Prime Minister Lazarenko, who also hails from Dnipropetrovsk, Mr. Tyhypko may at least be able to gather a consensus on what has to be done to push the budget and tax reform forward. Mr. Pynzenyk said that in the last months he rarely had access to Mr. Lazarenko. The question remains, however, whether the Lazarenko-led government is committed to the economic reform path paved by Mr. Pynzenyk, which has been much influenced by the International Monetary Fund and the World Bank.

On April 9 Ukraine's Verkhovna Rada agreed to a proposal put forward by Mr. Lazarenko during a speech before the legislative body a day earlier that foreign investors should not be given tax breaks, a move that would dampen investor enthusiasm in any country, much less one where the investment climate is already frigid.

President Kuchma, who publicly had supported Mr. Pynzenyk in his efforts and his criticism of government inaction on economic reforms, took his first public slap at the former vice prime minister on April 5, when he told a group of reporters from regional newspapers that Mr. Pynzenyk was in part responsible for the inability of the government to get the Verkhovna Rada to approve a tax reform bill and a budget for 1997. "Since Pynzenyk was the leading figure [in the lobby effort], this is the expected result," said Mr. Kuchma, according to the Associated Press. Mr. Pynzenyk had earlier this month admitted that at times he had been uncompromising in his vision of reform and could have approached his lobbying efforts in Ukraine's Parliament differently.

The president's criticism on the failure to pass a budget previouly had been leveled specifically at Prime Minister Lazarenko for shabbily putting together the 1997 budget, which the Verkhovna Rada has steadily torn apart, and for not submitting a tax reform bill far earlier.

During his state of the nation address before the Verkhovna Rada on March 21, the president had criticized Mr. Lazarenko to the point that many observers believed the prime minister's days in his post were numbered. Now it seems that he has been pardoned and has even strengthened his position with the appointment of another representative of the Dnipropetrovsk business and political leadership, known in this country as the Dnipropetrovsk "mafia," to a key government post.

Both Mr. Lazarenko and President Kuchma have their political bases in that eastern Ukrainian city. However, today Mr. Lazarenko is thought to be the leader of the Dnipropetrovsk clan. Mr. Kuchma has sought a wider power base since he became president, although he has kept his contacts with the city and has many advisors from there.

Mr. Tyhypko, the new vice prime minister for economic reforms, has never held public office. He is a graduate of the Dnipropetrovsk Metallurgical Institute and has been associated with PryvatBank since its inception in 1992. The 36-year-old was once the head of the Dnipropetrovsk Komsomol.

The appointment of Mr. Tyhypko is the latest in a series of changes in the Cabinet, which has included the dismissal of the ministers of transportation and agriculture. President Kuchma has called for a restructuring and streamlining of the Cabinet of Ministers, which Prime Minister Lazarenko said is being developed.

Many thought the new structure would be announced when Mr. Lazarenko spoke before the Verkhovna Rada on the budget impasse. However, disagreement between the prime minister and the president on the new structure of the ministries has caused delays in final decisions.

President Kuchma has said he would like to see a "bloc structure," where ministers are wholly responsible for their sector. "Unfortunately, everything today is concentrated in the hands of one person, the prime minister," Mr. Kuchma said at his meeting with regional news reporters.

Meanwhile, the prime minister envisions changes that will allow him to retain his power, but would restructure the Cabinet to eliminate overlapping positions and reduce the number of ministries.

But, as Vice Prime Minister Vasyl Durdynets said on April 9, "We have a lot of work to do before an agreement is reached."

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