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Oleksiy Plotnikov: There is an increasing sense of predictability and stability
10.11.2006, 12:43
November 10 marked the first 100 days in office of Viktor Yanukovych's Government. In the entire world, it is an occasion to sum up some results. The newspaper "Silski Visti" put some related questions to Deputy Chairman of the Parliamentary Committee for Economic Policy, Doctor of Economy, Professor Oleksiy Plotnikov.
Mr. Plotnikov, what has Yanukovych's Government done for the country during its first 100 days in office?
Oleksiy Plotnikov: To begin with, there is an increasing sense of predictability and stability, and it is easy to predict the actions of the Government, which earlier gained work experience in 2002-2004. It has been noted both by the domestic and foreign economic observers. This predictability is also clear for the Ukrainian people, too.
What is really happening with our economy? Some say about its upturn, some about its downturn.
Oleksiy Plotnikov: To my mind, there are no reasons for any downturn foretold by some opposition politicians. There are all preconditions in place in Ukraine for the increasing economic growth. I have an optimistic prognosis: The economic growth will gain momentum, and consequently other indicators will also improve. I suppose Ukraine will enter 2007 with inflation of about 10%, and GDP growth of almost 5%.
What would you say about settlement of the gas issue, which was the most painful problem? Will the Government's "gas" agreements influence Ukraine's foreign course?
Oleksiy Plotnikov: The price of $130 is undoubtedly an accomplishment of the present Government, in view of the fact that Belarus and Western Europe receive gas at much higher prices. In addition to this success at the talks, it is also an achievement of the Government that, in sharp contrast with its predecessors, it stopped the "cold war" with the neighboring Russia.
Since the gas prices will keep rising, one should soberly see the reality: Today we have got the best option, as compared to what we could expect. It would be naïve to expect that the gas prices will not rise by the year 2010. Certainly the gas prices will increase. The only question is how Ukraine will adapt to that, which will require restructuring of the Ukrainian economy.
In connection with the Government's agreements, I would not expect any change in Ukraine's foreign policy course in favor of Russia. And it is easy to explain Our Ukraine's accusations against the Government that the Government made concessions to Russia in exchange for the lower gas price. It is just a natural behavior for an opposition group to level charges against the power.
Mr. Plotnikov, what can you generally say about the "Russian vector" of the Government work?
Oleksiy Plotnikov: The Russian market is the most important market for Ukraine. It can absorb considerable quantity of our produce, which is so uncompetitive that it will never be able to penetrate the European Union's customs borders. Also the specialty of the Russian market is that we are connected by the common past and many other ties.
I advocate further expansion to this market, because even 15 years of independence is not enough to restructure the Ukrainian economy according to the world standards, and to switch to producing commodities which would find demand in the European countries.
Meanwhile, we can sell in Russia our goods which have no demand in the EU market. Now there is a chance to expand cooperation with Russia in different sectors: engineering, food, light industry, plus such traditional sectors as steel and chemical industry. We should develop cooperation with Russia to the maximum extent, especially as it is technically facilitated by the common border. The only sensible approach is to benefit from the existing trade opportunities.
Also I hope that trade wars between us will cease, as they had political rather than economic character from the very start. The "cold war" with Russia is practically over, and I am confident that Ukraine will not return to it under the present power. The country's economic development is determined by the political factors. It is an open secret that the Russian energy dealers reflect the Kremlin's interests.
Hence, the worse political relations you have, the higher prices are in this sector. However, if the country restores political stability, that certainly has a positive impact on the economic development.
Now Ukraine's bid for WTO membership is a topical issue, is not it?
Oleksiy Plotnikov: In the long run, Ukraine's accession to the World Trade Organization may have a positive impact on our trade and economic relations with other countries, primarily with the European Union, in particular, if various tariff restrictions and quotas are lifted. Also I have an optimistic outlook on the prospects of formation of the free trade area with the European Union.
I have some reservations about the related short-term and medium-term problems for the Ukrainian economy. However, I believe that in the long run Ukraine will benefit from its entry into WTO.
Expectedly, in the nearest future, the Verkhova Rada may consider WTO-related bills. One should also keep in mind that we have to settle some outstanding issues with Kyrgyzstan.
From time to time, they air an idea of synchronizing Ukraine's accession to WTO with Russia. I do not think that we should tie ourselves to Russia, and I believe that Ukraine, and not Russia will be first to join WTO. However, even if our neighbors join WTP first, it will not hamper Ukraine's movement towards WTO.
Can relations with Russia be viewed as kind of geoeconomic choice?
Oleksiy Plotnikov: There is no such choice for Ukraine whether to develop economic relations with the West or Russia. In any normal country there is no need to make such choices. We should use the existing opportunities and develop trade and economic relations with the neighboring countries now, without waiting, say, for our admission to EU. In this regard, in the present globalized world, no country should hobble its opportunities in the economic relations.
For example, Ukraine's relations with the U.S. are quite balanced, and frankly I do not see any preconditions for their improvement or deterioration, although something may change in the event of Ukraine's entry into WTO. For instance, there will be no more anti-dumping investigations against Ukraine, because Ukraine will obtain new rights.
Presently we have no major opportunities to increase the volume of our export or import. So, I do not expect any breakthrough in trade and economic relations between Ukraine and the U.S. As for exchange rate between the dollar and hryvnia, the National Bank has an adequate potential (as our gold reserves are quite large) to retain the present indicators, or to slightly "loosen" hryvnia's value against dollar. However, no shocks are in sight.
There are plans to privatize next year some large enterprises, for instance, "Ukrtelecom". Is it necessary?
Oleksiy Plotnikov: Unprivatized "Ukrtelecom" has become a national asset, like "Dynamo-Kyiv" or our national vodka "horilka". Over the past 15 years, there have been persistent attempts to privatize this enterprise. Hopefully it will happen next year. As for the plans to sell some other assets, I believe that it is time to wind up the privatization process to the maximum extent as soon as possible.
How would you characterize the state of affairs in the investment processes in Ukraine? They are talking about considerably increasing investments.
Oleksiy Plotnikov: Unfortunately there is no sharp upturn in investments. The earlier dynamics continues, similar to what we saw under President Kuchma. In 2005, Ukraine passed though an unfavorable streak, and it has not yet emerged from it. But now there is hope that situation will normalize in a short while. I would like to remind that some years under President Kuchma also were favorable in terms of stability, the start of growth, and high parameters. The same is expected to happen now.
What hurdles are on this way?
Oleksiy Plotnikov: It concerns legislation, political stability and some specific projects. Unfortunately Western investors do not yet regard Ukraine as an attractive country for investments. Everybody knows what and how has to be done to attract investments, and they are trying to introduce mechanisms for that, however, it does not work yet.
Hopefully several years without elections, political stability and explicit legislation will allow to attract investors to Ukraine. Plus political reform, as the Cabinet now closely works with the Verkhovna Rada, and it can speed up adoption of the necessary laws. It may also be favorable for foreign investments.
I would like to return to what I said earlier that in 2006 Ukraine received a predictable Government, which has a positive experience of economic growth. This Government has introduced stability and predictability to the national economy, which is a prerequisite to Ukraine's successful development.
Andriy Frolov, "Silski Visti", #131 (17962), November 10, 2006 | |
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