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Dismantling of oligarchic economy main goal for 2018, say experts

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KYIV – Ukraine can expect to see its economy grow only modestly over the previous year by 2.9 percent, or to $113 billion, if declared, albeit muted, reforms continue, say three Kyiv-based policy centers and an economist in Washington.

Despite Russia’s unprovoked war that Kyiv has managed to contain, the country’s biggest internal national security threat remains corruption from within, they say. It includes existing quasi-monopolies that the oligarch-economic machine has managed to preserve, and a disjointed judicial system that enables the takeover of businesses and land from their rightful owners, domestic or foreign.

If the current model for running the country is kept in place for 2018 – or what economists refer to as the lack of “structural reform” – then the country will continue to fall short of its much-touted potential.

“Domestic and foreign investors lost their rising confidence in Ukraine,” Swedish economist Anders Aslund, a senior fellow at the Washington-based Atlantic Council, said on January 2, referring to the dashed hopes of the post-Euromaidan government. “Investors began to realize that the complex judicial reform that was under way would not cleanse the judicial system, and thus, reliable property rights would not materialize.”

It’s also partially why Ukraine got only $1 billion of the envisioned $4 billion in 2017 from the Washington-based International Monetary Fund’s economic bailout program. Significant “benchmarks” of the IMF, as the international bank refers to the conditions tied to the overall $17.5 billion program for Ukraine, weren’t implemented.

At issue is the establishment of an independent anti-corruption court – a body that could administer justice in graft cases. That’s something the existing judicial branch historically has failed to do, including after the 2014 Euromaidan popular uprising that saw the Moscow-backed former President Viktor Yanukovych abandon office and leave the state treasury dry and 100 civilian deaths in his wake.

Moscow illegally annexed Crimea in March of that year and invaded the two easternmost regions of Donetsk and Luhansk, severing 7 percent of Ukraine’s sovereign territory.

“Businessmen often complained that the Prosecutor General’s Office and the Security Service of Ukraine (SBU) engage in aggressive corporate raiding,” added Mr. Aslund.

Indeed, the two biggest pro-business advocacy groups in Ukraine – the American Chamber of Commerce and European Business Association – also complain of the persistent practice of “raiding.”

When it comes to battling bribery and extortion, the newly created National Anti-Corruption Bureau has only about 800 employees in comparison to the 15,000 that the static Prosecutor General’s Office has under the leadership of Yurii Lutsenko, who never attended law school.

Thus, amid a threefold drop in the national currency’s value to the U.S. dollar since 2014, the nation is “angry,” said Iryna Bekeshkina, a director of the Ilko Kucheriv Democratic Initiatives think tank.

“That’s why the successive realization of the variant that ‘let it be what it will be,’ is hardly possible this year,” she said in a column written on the group’s website on December 31, 2017.

Ms. Bekeshkina’s “baseline” scenario which underlines current trends foresees that Ukraine will “march in place” and maintain the status quo in 2018. The reason: the presidential and parliamentary election campaigns will start later this year, with both taking place no later than March 31, 2019.

She noted that the oligarchic-economic machine lost its “main beneficiaries” after the Euromaidan, yet has “come to its senses” and has “reanimated” old schemes.

“And as the situation on the military front has stabilized, it became increasingly clear that the number one enemy was corruption,” she continued.

Although the Donbas war has been static amid two truces that have never taken hold between Kyiv and Moscow, 192 Ukrainian members of the armed forces died last year, according to the Defense Ministry. That figure doesn’t include servicemen in the Security Service of Ukraine, the Border Guard Service, volunteer groups and volunteers.

Over 10,330 Ukrainians have died since Russian-led forces invaded Ukraine in February 2014, starting with Crimea.

To overcome the “crisis,” Ukraine can only do it by “achieving self-determination,” Yuriy Romanenko, director of political programs at the Ukrainian Institute for the Future, said on December 27, 2017.

Referring to the country’s wavering post-Soviet development, he said: “We all are approaching the rationalization of our everyday life… the rationalization of business – everything. That rationalization carries with it definiteness. Identity ends where Ukraine’s crisis ends. Every one of us must ask the question ‘Who am I?’ ”

His colleague Anatoliy Amelin said that Ukraine needs to rely more on its abundance of resources and not on others.

“Countries that don’t have a plan for development are a resource for those who do have their own plan,” said Mr. Amelin, before he presented a year-end summary for 2017 and a forecast for the next year.

This includes introducing “purely proportional [parliamentary] elections and the abolition of parliamentary immunity,” said economist Mr. Anders.

Otherwise, if Ukraine doesn’t continue to comprehensively change how the country functions, it misses out on the economy potentially growing yearly by 5-7 percent, say experts at the Ukrainian Institute for the Future.

Prospects for that to happen are slim in the near future, says Vasyl Yurchyshyn, director of economic and social programs at the Razumkov Center.

“Regarding forecasts for 2018, I’m not optimistic… No one will want to take risks and make unpopular reforms… This won’t happen. And this means we shall have postponed important matters for a later time,” he surmised.

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