“The West expects implementation of wide, deep, and radical reforms”

Recently Ukraine saw a number of events that will undoubtedly compel it to make its foreign-policy “vectors” more concrete and, moreover, to make as soon as possible its final choice in the domestic political and economic standards it wants to achieve. We mean above all our President’s foreign visits, new tensions in the relations between Russia and the West, the European Union summit in Helsinki, and the establishment of one more Union, this time of Russia and Belarus. In this connection, the danger of Ukraine’s becoming the passive object of various influences is also mounting because the West has taken a wait-and-see attitude. It is waiting to see the confirmation of Ukraine’s Euro-Atlantic orientation. These points of departure in the attitude of developed democracies and world financial institutions to Ukraine were the subject of an interview with His Excellency Derek Fraser, Canada’s Ambassador Extraordinary and Plenipotentiary to Ukraine.

“This interview is being held in a time very important for Ukraine: the old-new political leadership continues to present itself in a new way to the world. What kind of steps does the West expect Ukraine to take?”

“In order to understand the West’s expectations Ukrainians should be aware of the international financial institutions’ analysis of the reasons for poor performance of the Ukrainian economy. They see three determining factors.

“The first factor is that value-producing sector of the economy is too small and the value-consuming sector of the economy too large. The second is that the government exercises too tight a control over the economy. This control has the effect of stifling involved in controlling the economy and has the effect of stifling the value-producing sector.

“The third factor is that the Ukrainian economy is too cut off from the rest or the world economy, with the result that it is difficult and unattractive for outsiders to buy Ukrainian goods and services or invest in Ukraine.

“The effect of these three factors is that for the last nine years the Ukrainian economy has been on a downward spiral, which has forced it to consumeits capital and seek international financial assistance to try to slow the decline. International economists who have taking a serious look at the Ukrainian economy don’t believe that this process will be reversed without wide-ranging, radical and deep economic and administrative reforms. For this reason, it is reforms of this nature that the international community will expect from Ukraine in return for further international finantial assistance. The purpose of the international financial institutions is not to subsidize decline; it is to support reforms.”

“What do you think should be the succession of steps, and what can be done realistically in the six months that could be an adequate time test to see whether or not reforms will be carried out?”

“While there are several initial measures that Ukraine could carry out they should be the beginning of a continuing program of radical and administrative reform. The international community will not understand if, for example, after certain initial steps economic and administrative reforms are put on hold so as to allow the government to proceed with other policies.

“The first indicative step might be to cut the size of the government. At present the government has 87 ministers. Many Western countries get by with less then a third that number.

“The international financial institutions will also be looking for a high quality budget for next year. It must be realistic and assist Ukraine in dealing with its serious internal and external obligations. It must also be one that can serve as a basis for implementing further reforms, for the creating a more competitive economy.

“In addition, there should be rapid movement on privatization, but it must be privatization that will be conducted in a clearly open and impartial manner and that will bring in strategic investors who will contribute to innovation and growth in the Ukrainian economy.

“As well as there should be rapid and effective mearsures to deal with corruption. Corruption is, according to the European Bank for Reconstruction and Development a major factor in blocking investment, in hindering the establishments of new companies, especially small and medium enterprises, and in preventing innovation and competition.

“Finally, rapid progress should be made in preventing the agricaltural and energy sectors.

“In presenting this list of priorities to you I am conscious of the fact that I have touched on many areas that were covered in President Kuchma’s wide-ranging and promising speech on November 30. My impression is that the international financial institutions will seek information on how the policies announced in the speech will be implemented when they consider Ukraine’s request for financial assistance for 2000”

“After the presidential elections, Ukraine faces the important problem of forming a new government. Could you comment on the influence the government’s composition and the figure of the future premier will have on the West’s willingness to support Ukraine’s reforms?”

“I cannot engage in a discussion of personalities. I think the international community will be looking at the government in terms of its ability to carry out the serious reforms that have been announced in the President’s speech.”

“And what are the criteria for assessing such ability or inability?”

“The ability of the government to carry out the reforms will be measured not only in the way it brings in the initial steps I mentioned but also by how it follows up with a wide-ranging and continuing reform program.”

“And should the results of reform differ from those expected by Ukrainians and the international community, will this, in your opinion, threaten Ukraine with isolation?”

“I would certainly hope not. Canada has put considerable effort since Ukrainian independence in trying to help Ukraine become involved in the international community. We have assisted Ukraine in developing closer relations with NATO, we have provided expert advice to Ukraine on how to become a member of the World Trade Organization, and we supported Ukraine in its election to the UN Security Counsel. Isolation is one thing, international financial assistance is another. The best way to obtain financial help for Ukraine is through radical reforms. Ukraine will find that reforms open doors of increased political support and can lead to increased credits.”

“Do you believe that this very tough stand by the West on Ukrainian reforms can create the temptation to join the different union established the other day in Moscow? This is the Union of Russia and Belarus, open to all without any preconditions.”

“My impression is that the Ukrainian people want to move towards prosperity and stability, not towards continuing decline and poverty.”

“How can you explain the West’s belated reaction to the fact that Ukraine has so far carried out no reforms?”

“I believe that many of the reform measures, if not all of them, have been proposed in the past by the international financial institutions; there is nothing new here. The international financial institutions, however, respected the request of the Ukrainian government that they should do nothing that might appear to be an interference in the most recent elections campaigns.”

“Earlier, this country’s political leadership declared Ukraine’s integration into Euro-Atlantic structures as its foreign political strategy. But the President of Ukraine spoke in his inauguration speech about such a goal as European Union membership. Do you see this as the dominance of the European vector over the North American one in Ukraine’s foreign policy?”

“It is entirely normal that Ukraine should seek integration with the countries of Western Europe. Ukraine is a European country. As far as Canada is concerned also there is a strong community of interests between North America and Western Europe. We are delighted to see Ukraine become more closely involved in the Euro- Atlantic world

“In taking the road of reform and integration into the Euro-Atlantic world Ukraine will be following in the footsteps of countries such as Poland, Hungary, and the Czech Republic. The reforms may appear to be tough, but they have resulted in situation in which Poland, that had an economy the same size as Ukraine ten years ago, now has an economy three times as large.”

“How would you forecast the influence of the developments in Chechnya on Ukraine? For when something is wrong in Russia, in Kyiv we feel it very fast.”

“I understand very well Ukraine’s concerns, and I think they provide an additional argument in favor of reforms. The European Bank for Reconstruction and Development last year published a detailed analysis, stating that the countries that have gone farthest in reform were the least affected by the Russian currency crisis.”