Kyiv, September 14, 2015. Book of Anders Aslund “Ukraine: What Went Wrong and How to Fix It” was presented at Ukraine Crisis Media Center. In his work the expert analyzes the reasons of Ukraine’s economic failures that have led to actual economic problems, provides recommendations for reforms that will help taking the country to a whole new development level. The expert also notes recent positive changes. Anders Aslund has been carefully following the situation in Ukraine for over twenty years. “Anders Aslund is a leading specialist on economics and politics of Eastern European countries with a particular focus on the Baltic states, Ukraine and Russia,” noted the Minister for Economic Development and Trade of Ukraine Aivaras Abromavicius. “The problems that the book narrates are covered absolutely correctly. Unfortunately we are dealing with the vast majority of them also today – we have not eliminated corruption, have not made enough for deregulation of economy, and have not privatized corrupt state-owned companies. It is all in our plans, and we are doing it all gradually now.” “It is a very interesting research for everybody who wants to understand the essence of what is going on in Ukraine. There are probably quite a few researchers studying politics and economics together as well as their mutual influence that leads to successes or failures,” noted Dmytro Shymkiv, Deputy Head of Administration of the President of Ukraine.
“The thing that inspired me most when I was reading the book is that Anders is not afraid to recommend bold steps. There is a widely used phrase “It’s not the time now” that we have to forget. In my opinion huge role of such experts as Anders is to honestly speak about what we got used to but what needs fastest possible and radical changes,” emphasized Glib Vyshlinsky, Executive Director of the Center for Economic Strategy.
Presenting the book, Anders Aslund said that the main reason hampering Ukraine’s development is that after its independence was proclaimed drastic and uncompromised breakaway from the Soviet past did not happen. As a result state mechanisms of little efficiency remained in Ukraine, favourable conditions for corruption emerged. In turn it causes ineffective use of budget money, impedes entrepreneurship development and flow of investment. “According to the World Bank statistics Ukraine’s GDP is 20% lower than in 1990. It is first of all the result of incorrect economic policy,” noted Aslund. In his opinion at that time the country should have made the political reform, reform of the state system and of the energy sector and should have secured financial stabilization.
At the same time the expert gives positive estimation of reforms that have happened in Ukraine over the past year. “Ukraine has adopted approximately 400 reformatory laws this year. It is more than ever in Ukraine,” noted Aslund while emphasizing that “the reforms need time so that their result becomes visible,” at this moment it is still too early to evaluate their results, it will become visible at least in a year. Aslund said that important factor for the successful reforms now – is the support of its Western partners who would not only be the model for best practices but who will also undertake steps enhancing Ukraine’s development. These steps include expanding access to the European market, financial and technical assistance. Europe needs to be the “reform anchor” for Ukraine, the expert notes, what Europe has done for Ukraine so far is not enough. “Since 2010 the EU has promised EUR 300 billion to Greece that has 10-million population, but only EUR 5 billion to Ukraine. These figures are very unfair, even though Greece is EU member state,” Aslund said. According to him Ukraine needs around USD 8 billion of financial assistance from the U.S. and the EU.
While listing the recommended steps that will help improve economic and political situation in Ukraine in the long-term perspective Anders Aslund pointed out the renewal of all authorities as the first and most important component. “First of all, you need leaders who want to conduct reforms,” the expert stated. He underlined that the composition of the Verkhovna Rada (Ukraine’s parliament) was partly renewed at the last parliamentary elections, but it is not enough. The government that will have political will to hold deep comprehensive reforms needs to make a series of important steps including those unpopular – to close down the state institutions that do not carry out vital functions, to hold serious cleansing of authorities (‘lustration’), tax and judicial reforms, cut the number of civil servants up to the necessary minimum. “For example out of the 19 thousand prosecutors four thousand need to remain, out of 10 thousand judges – 2 500 young professionals should take their place,” said Aslund. He emphasized that these are the corrupt practices within the judicial system that are backpedalling all reforms in the country and protract the moment when their result is visible not only to the experts but for businessmen and common citizens as well. Aslund recommended not to be afraid to make radical steps reminding of Estonia’s example where “everyone was fired” immediately and its corruption level is now lower than in any other EU country. Other necessary reforms are deregulation of economy, decentralization and reform of the energy sector including cancelling energy subsidies, introducing a unified price for energy, creating energy market and limiting dependence on the Russian gas to the minimum.
Anders Aslund noted that there are risks of derailing Ukraine’s positive scenario, not only because of Russia’s aggression but due to the complicated financial situation – lack of financing from Western partners, GDP decrease (mostly due to the events in eastern Ukraine). Unpopular steps that authorities are undertaking and that are to provide a positive result in the long-term perspective are not understood and meet discontent of the population. Dmytro Shymkiv emphasized the same aspect: “Populist socialism is gaining power, and that’s the main answer to the question why Ukraine’s Western partners are currently quite concerned. […] We need to step aside from populism and build the state based on the principles of economic development. To distribute something one needs to earn something. To earn something there needs to be a class of entrepreneurs,” said Shymkiv.