A national project?

The president of Ukraine has published a list of top priority national projects. The basic principle is based on Putin’s Russia. Meanwhile, the source of financing differs essentially: we do not have “oil dollars,” and everything is to be made at the cost of private investors. These have to be brought in by one of the representatives of the former “orange” team, the founder of the NGO Pora Vladyslav Kaskiv.

He has already submitted quite a few projects dating back to Tymoshenko and Yushchenko’s times for presidential approval. Surprisingly, Yanukovych liked almost all of them. What are the reasons for the president’s unusual benevolence, and should we expect any “great construction projects” in the near future?

TEN STEPS TO MEET…

The first two projects concern the energy sector. The main one (listed as No.1) is the construction, on the Black Sea coast in the Crimea or near Odesa, of a liquefied gas terminal with a capacity of 10 billion cubic meters. The construction of this terminal is supposed to solve the key problem of Ukraine’s energy security, by getting rid of our dependence on the monopolist importer of natural gas.

Great. Now, let us consider the threats. The project is supposed to take four years (until a symbolic date of 2015), and its calculated cost is one billion dollars. Its capacity is five billion cubic meters of gas at the first stage, and ten billion at the second. Alongside with the construction of the terminal, the project provides for the construction of tankers to transport liquefied gas.

The resource base is obviously the Azerbaijan gas field Shah Deniz-2. At present, gas from this field goes via Georgia, where they are building their own terminal for liquefied gas. Both Azerbaijanis and Georgians consider Romania as their major consumer. Only very swift construction deadlines can save Ukraine. Four years is out of the question, we can afford two at the most. Actually, this terminal may also be used for the export of Ukrainian gas after launching the development of the Black Sea coastal fields.

The construction is supposed to follow the scheme of public-private partnership tested in Russia. The investor builds the terminal itself, while the state requests the gas holders to expand the carrying capacity of the pipelines. As a result of the implementation of the project, its authors maintain that the cost of imported gas will be reduced by 15-20 percent. The recoupment period is five to seven years.

Thanks to the project, Ukraine will get liquefied gas at 190 dollars per thousand cubic meters compared to the present 250 dollars, maintains Yurii Boiko, minister of fuel and energy of Ukraine. Many experts agree that a project like this will allow to reduce not only the gas prices, but also the dependence on gas supplies from Russia.

“Taking into account Ukraine’s dependence on gas supplies from Russia, we are capable of increasing domestic production by ten billion cubic meters per annum. We can extract mine gas and biogas as well. Also, Ukraine should have the technical possibility to get gas not only from Russia, but from other sources, too. The terminal will allow us to do this,” said Oleksandr Todiichuk, ex-director, Ukrtransnafta.

Other countries like Algeria, Libya, and Egypt, may also be interested in the project. Boiko’s previous visits to Africa suggest that it is quite possible to arouse the interest among local investors. However, the bright prospects may be frustrated by big politics.

It is not quite clear to what extent the project is tolerated by the Kremlin. If it is not, and if Yanukovych has signed something that can jeopardize Gazprom’s interests, the project can either remain on paper, or be as stillborn as the Odesa-Brody pipeline. It is Moscow that will claim the Shah Deniz-2 gas. The Balkan states integrated in the Nabucco project are also after it.

However, if the project is lobbied by Boiko and Dmytro Firtash, it all means that the control over energy supplies to Ukraine will be limited to one financial group. Even having built the terminal, which will allow us to obtain gas from sources other than Russian, Firtash and his buddies remain in control of all gas supplies to Ukraine. This is more than dangerous for the nation’s strategic development.

The other project involves the construction of wind and solar electrical power stations, which will be able to produce 2,000 MW of electricity. Such power stations are supposed to be built mostly in the Crimea and Zaporizhia oblast. The project costs three billion euros, it is the most money-consuming one on the list. This project, dubbed “The Energy of Nature,” is designed to pay back investments in seven years, and will have a capacity of 26.8 billion kWh per annum.

Is this a properly national project? Sun and wind energy can be used effectively only in the southern oblasts of Ukraine and in the Crimea. It was assessed back in the Soviet years that the potential of solar energy in the northern Black Sea steppes is roughly 1,400 kWh per square meter, comparable to the level of such active users of solar energy as the US, Germany, and Sweden.

The proponents of this project are also known, basically. They are Rinat Akhmetov’s and Andrii Kliuiev’s groups. Last year Akhmetov decided to go in for wind energy and even started a company for that, Wind Power. Kliuiev already owns a facility manufacturing solar panels for power stations. Hence, no need to worry about the implementation of this project.

Projects three to six may be qualified as social. They are social housing construction programs, with prices of three to four thousand hryvnias per square meter; the “Clean City” project is about the construction of state of the art complexes for household waste recycling; the program dubbed “Quality Water” provides for the construction of 23,000 drinking water supply systems at pre-school facilities, schools, etc. There is also the program “New Life,” improving the quality of maternity and childhood.

Let us consider the prospects of implementing these projects, which are vital for our citizens. It is with them that the success of the new regime will be measured. The project “New Life” is not finalized at present. Obviously, there are no eager investors… So, let us move on.

The cost of “Clean City” is assessed at 4.83 billion dollars. It is a four-year project, supposed to be recouped in six years. “Clean City” provides for a “gradual implementation in cities of the technology of garbage separation and further recycling via the constructing of 10 hard waste recycling complexes.”

Such kind of waste recycling is supposed to reduce the harm caused by landfills and fumes that are emitted into the atmosphere during incineration. However, it is not mentioned where exactly such facilities are to be built. In reality, the problem is universal. Garbage disposal problem pesters Ternopil and Odesa, Donetsk and Kyiv alike. Which of them will be chosen?

Conversely, the project “Quality Water” is more detailed. Its cost is assessed at 3.7 billion hryvnias. According to the authors, the opportunity to sell purified water locally at the prices which will be lower than those in retail trade, will be incentive to the investor. It is also stipulated that the socially disadvantaged population, educational facilities, and hospitals will get the water free of charge.

This mechanism is most likely to be employed in several south-eastern oblasts. The situation with drinking water supply is really bad there, and each single water supply system will be accepted as an epic achievement. So as a whole, with all the understanding of difficulties with drinking water in the Crimea, southern Donetsk oblast, etc., this project is also a regional one at best. It is quite feasible for the local governments. However, the state budget will cut down budget expenditure for communities, at least in 2011, so they will have to rely on the central government again.

“Affordable Housing” might qualify as the most vital project for millions of Ukrainians, had it been really meant for millions. Or at least hundreds of thousands. However, only a mere 40 thousand are supposed to get the lucky ticket. This alone makes one doubt its significance. The project provides for the construction of social housing on preferential terms to certain categories of citizens. These include public sector employees, the military, civil servants, and also the Crimean Tatars, for good measure.

How are the lists going to be compiled? Will there once again appear a host of “kith and kin” who are most likely to get the apartments (if they are ever built)?

However, the promises are beautiful: the apartments are to be either free, or sold to those entitled to benefits at 30 to 50 percent of their cost, while the difference is to be covered by the state budget. And here is where we come to a halt. Where do the budget funds come from? Housing can be made cheaper only in one case: if local governments deal with communications. It is also up to them to allocate the land for construction sites, and transfer it (with all the pipelines, etc.) to the building contractor.

And were does the major part of taxes from local governments go? Right, to the central budget. Flimsy, to say the least. Although the project does provide for investments of 12.3 billion hryvnias over five years, it is not sure that even half will be alloted. Of course, the Regionals, after they subjugate most local municipalities, will want to show some progress in this program, critical for their social image. Its implementation will determine their results at the next presidential election in 2015.

Project No.7, “Open World,” addresses the sphere of information technologies and education. It provides for the creation of a national information and communications network based on 4G technology. The project will cost around 675 million dollars. It stipulates that 1,5 million schoolchildren will be provided with netbooks with Ukrainian educational software and Internet access.

This project is the strangest of all. What Internet is there to talk about at village schools, and schools in small towns, and distant neighborhoods in industrial megalopolises? The best they can hope for are new shingles on their rooves!

For each farm to have an Internet connection (and 4G at that), one has to build countless base stations. It is believed that the 4G revolution is lobbied by Viktor Pinchuk. If so, then state is virtually relieved of the problem of connecting schools and hospitals, especially in the more distant areas, shifting the responsibility to the private investor. The latter is relieved of the charge for frequencies, in exchange for connecting schools. To do this, Pinchuk (or any other project promoter) will “merely” have to privatize Ukrtelecom, and this can hardly been done without this monopolist’s amenities. Thus, intentions to privatize show through this “national project.”

Projects from eight to ten are about infrastructure and transportation. No. 8, “City of the Future,” is very vaguely formulated: the formation of strategic plans and projects for urban development, with the pilot project in Kyiv. The amount of investments is not yet determined.

No.9 is about Yanukokvych’s lifetime dream to host the Winter Olympics in 2022. For this, an entire development project for tourist infrastructure in western Ukraine needs to be elaborated. Logically enough this long-term sports project, whose idea was obviously copied off the Olympics in Sochi, Russia, will be developed by the Kolesnikov-Akhmetov group.

Finally, project No. 10 is the briefest and most concrete. It provides for a fast railroad service between Kyiv and the International Airport Boryspil.

Again, it is not clear why a local Kyiv project was qualified as a national one. The idea suggests itself that a business project, lobbied by an influential group, was pathetically dubbed national just out of vanity. This project leaves no doubt as to its implementation. It is known that China will be the investor here. The framework document, signed by the public company International Airport Boryspil and the Chinese National Corporation for Machine Engineering and General Contracts, enables Ukraine to get up to one billion dollars in loan, and provides for the construction of an eight kilometer railroad from Kyiv to the airport, four railroad stations, and electric trains. The funds for the railroad construction works will be given by the Chinese Bank for Development, and the Industrial Commercial Bank of China.

The project means that the airport, too, will be reconstructed. It has the longest breakeven period, 15 years, and the reconstruction of the runway must break even in eight years.

A SELECTION OF “CASTLES IN THE AIR”

By the way, there were other projects on the list of those submitted for Yanukovych’s approval. At least five more projects were not on the list, each of them looking as attractive for investors as some of the approved ones. Here they are:

1. “Cyclon-4” – the creation of a space rocket launch complex.

2. “Industry Parks” – the creation of regional industrial zones.

3. “Kyiv Belt” – the construction of a major circular belt road around Kyiv.

4. “Danube Auto Transit” – the construction of a highway Odessa-Reni.

5. “Traffic Corridor Five” – the construction of an international transport thoroughfare.

Each of them may produce big profits. However, considerations of political appropriateness come in. During the presentation some projects had to be replaced with socially-oriented programs, in order to demonstrate concern for citizens. Maybe, some of the postponed projects have caused strife between the financial groups, and Yanukovych did not dare publish them until the situation is clear.

In any case, a published list means that two categories of projects were included there: either those with an obvious lobbyist or investor, or social appendages whose mission is rather electorate-oriented. These projects will have to wait long for investors — maybe until it is nearly too late, and there is just a year or two before the election. Then, water supply systems will start being installed, and maternity hospitals reconstructed throughout the country.

By the way, these projects also need to go through some red tape: first at the economic reforms committee (Iryna Akimova), and then they will be handed over to the Cabinet of Ministers. At that point, some concrete changes are most likely to be made. Then, the projects will be snapped up by lobby groups. Thus, Yanukovych’s “beautiful ten” will leave the Cabinet, covered in the “flesh” of real figures and calculations.

Budget means will be involved in the implementation of the projects, but on a limited scale, not more than 20 percent. The main funds will come from private investors. The estimated cost of eight projects (the maternity project and research on town planning have not yet been estimated) is 10 billion dollars, i.e., nearly 80 billion hryvnias. The state is going to participate in all these projects via doing the preliminary feasibility study, engineering infrastructure, preference rates, and granting state guarantees.

The major body responsible for the implementation of such projects is the State Agency for National Projects Management (Ukrnatsproekt). The list of national projects will be approved at a meeting of the committee on economic reforms.

By the way, it is hard to qualify the presented projects as new. Incineration complexes and drinking water were named among Yushchenko’s targets back in 2004. The current list is mostly based on the one approved by the Tymoshenko Cabinet in December, 2009. However, there also were other projects, such as the construction of a blood fractionation facility and the completion of thermal power plants. The current list has evidently been edited to meet the major financial group’s interests.

RUSSIAN KNOW-HOW

Copying, and often cloning, Russian know-how is obvious in case of these projects. One needn’t look for examples of our regime’s encompassing intentions and prospective vision: the north-eastern neighbors have long invented everything.

National projects have appeared in Russian history twice. The first ones, authored by Putin, were made public on September 5, 2005. They concerned agriculture, medicine, education, and housing construction — touching upon all the most neglected branches of the post-Soviet economy barring roads and municipal services.

Propaganda praised the projects immediately, and then happened what the Ukrainian “planners” had better not do: each computer presented to a school in some faraway Siberian village was made to appear a part of “Putin’s plan.” By the way, after that the phrase “Putin’s plan” became anecdotical, while the officials’ arduous efforts to present local successes as a “steady realization of president’s national projects” only caused annoyance and ridicule.

By the year 2009, when the oil dollar influx came to an end, it became clear that “Putin’s plan” had eventually yielded very humble results. Screening rates in the population have grown somewhat, and mortality rates dropped by 10 percent. A few hundred Russian schools (out of tens of thousands) were equipped with computers. However, the social housing program was never fulfilled, allegedly due to the crisis.

Yet Dmitry Medvedev, who built his popularity among Russians by supervising national projects, made a point of continuing his predecessor’s policy, though not without some ruse. Perfectly aware of the situation, he somehow managed to hush up the results of the project’s implementation. Instead, no less than 38 major and minor programs appeared (they were no longer termed national projects, and the term soon fell into disuse) within the framework of paradoxical “conservative modernization.”

What can we see in Medvedev’s projects? By all appearances, our neighbors have no other problems besides mass equipping of homes with water meters (the project known as “Count, Save, and Pay”), replace traditional electric bulbs with energy efficient ones (“New Light”), computerize social services, etc. We can see almost forty such minor projects. In Russia, a considerable part of these programs is financed through the budget, so the officials in charge tend to be very influential.

All in all, Medvedev’s new programs are meant for three years, with an overall cost of 30 billion dollars. Is it too much? It might be for Ukraine, but not for Russia.

Andrei Bunich, chairman, Union of Entrepreneurs and Leaseholders, described Medvedev’s new projects: “No modernization can be made with that money. Serious upgrading requires trillions of dollars, not a couple of billions. Greece alone, a small country and already modernized, received 100 billion euros to mend its situation, and this is just the beginning. Russia is on an absolutely different scale.”

THE “WRONG” NATIONAL PROJECTS

You cannot embrace what is repelling. Perhaps due to the understanding of this fact, a large number of problems were left outside the list of Ukrainian national projects, although they are no less important for our country than the development of 4G technologies. Yet if one wants to copy Russia, one has to accept the failures of some of Putin’s global projects, which some in Kyiv thought quite reasonable.

Taking into account the fact that Ukraine cannot rely on the oil dollars or the notorious Stabilization Fund, and will make do with the money of certain investors from the Party of Regions, no one is going to invest in the modernization of the shabby municipal services, road reconstruction, or scientific research without clear results.

Russians also tended to overlook some of these problems at first, as they realized the impractical nature of reconstruction, say, of the municipal infrastructure. In Ukraine, they went even further, applying the pinpoint approach. Is the construction of the railroad to Boryspil more important than the reconstruction of some major national highways? Is the entire energy conservation program confined to the liquefied gas terminal and windmills in the Crimea and Zaporizhia?

The four year term of implementation for certain projects was also no coincidence. By 2015, the Party of Regions will have to come up with at least some results for the realization of these programs, or at least their parts. And it is no mere coincidence that in nearly each line of the national project programs one comes accross mantras like “according to the program of the president of Ukraine.”

The publishing of the concepts on the eve of the local election is also a PR move. These projects, embracing the east and the west, the south and Kyiv, are probably meant to consolidate the nation around the president who is thus presented as a major reformer, or at least the curator of reforms (he enjoys this role more).

As soon as in 18 months, if the election to the Verkhovna Rada is held on time, we will get another test of confidence in the incumbent party. Therefore, the first results of the projects have to be demonstrated before that deadline. However, if the election is put off till 2015, then there is no hurry with national projects: such violation of the Constitution makes winning the voters’ hearts an option.

One can ignore social programs altogether: the main trick will lie in the correct vote count during the election. However, the terminals and railroads will be built, anyway, which will obviously be the implementation of the program “Ukraine for People.” These “people” will belong to the top 10 Ukrainian oligarchs.