Ambassador to Austria and UK Permanent Representative to the United Nations and other International Organisations in Vienna
Part of UK in Ukraine
22nd March 2012
Ukrainian economic success?
I am frequently alerted by commercial contacts to difficulties with the Ukrainian business environment; and have often blogged on this subject. So it was interesting to hear from a leading independent economist recently the view that there had been some progress on macroeconomic reform recently. The economist said this had included:
– The 2011 Pension reform – a tough but wide-ranging reform which had long been a condition of support from the International Financial Institutions (IFIs).
– Amendment of the Budget Code to enable financing of municipal utility companies within prudent limits. This had enabled the launch of the so-called E5P (Eastern European Energy Efficiency and Environmental Partnership), a multi-donor €100 million fund for co-financing IFI projects and providing technical assistance.
– Cancellation of grain export quotas and reversal of a proposal for the monopolisation of grain exports.
– The implementation of motor fuel excise tax, which was important for the financing of roads.
– Successful fundraising, led by the EBRD, to secure funding for the new safe confinement and nuclear waste storage facility at Chernobyl.
– 5.2% economic growth in 2011, following 4.2% in 2010, and -14.8% in 2009 (all figures Economist Intelligence Unit.)
– Inflation down to historic lows in January 2012.
There is plenty to debate here, including the question of whether the Ukrainian authorities will make it possible for the construction of the facilities at Chernobyl to proceed smoothly and of whether new proposals may yet be brought forward further to obstruct the export of grain. I am also conscious that forecasts of Ukrainian economic growth in 2012 vary from 2.5.-3.5%, and that hard times may lie ahead. But I’m always keen to report good news about Ukraine as well as areas for concern; and was therefore intrigued to hear one expert’s assessment of progress on the macro front. I would welcome readers’ comments.
It is very sad to see what has happened to Ukraine. In many cities the school system is being shrunk, schools ‘consolidated’ (actually schools are being closed and teaching jobs eliminated). Smaller regional hospitals being closed in a ‘centralization’ program. Does anyone really believe that Arazov will not hike gas rates immediately following the 2012 elections? Recently leaked photos of President Yanukovych’s opulent new retreat, (financed in part by his oligarch friends)featuring 100k$ chandeliers are a testimony to the theft from the people of Ukraine by a deeply corrupted government. Friends tell me of disappearing jobs, shrinking salaries, lost hope. At every level the government is now squeezing the working person into a tighter and tighter economic circumstance. Meanwhile those in power holiday in Cyprus and pack the Lufthansa business class section on shopping trips to Frankfurt. I know this because I have seen it in person several times this year. Mr. Ambassador, do you really believe that all those luxury autos filling parking places in downtown Kyiv are paid for by ‘economic revival’? How does a low level government official drive a Rolls Royce Phantom on a salary of a few thousand Hryvnahs?
Until Ukraine can have a true democratic system of government, it’s people will continue to live with the depression that broadly affects the population. Perhaps you do not see this at the nice receptions you attend in Kyiv, but if you step outside and visit small cities and even villages you will not be able to understand how people have lost hope in this failed economy
Well… it’s not all good news – I’ve just been to a business event where the business people were pretty downbeat. But it’s good to try and give all sides of the story.
Dear Mr. Turnet,
I am glad to read that you keep optimistic outlook at my country Ukraine and keep informing blog readers about it.
Unfortunately, Ukrainian media prefers “cheap and easy-selling” negative news and your blog one of the rearest places in the Internet where I can read not only about corruption/violation/etc and also about small steps my country does.
Thank you a lot!
Maksym Tulyuk