Åslund Recaps Ukraine’s Victories and Failures at CUCC AGM

(L-R): Les Lucyk, CPA – Independent Auditor of CUCC; Zenon Potoczny, President, CUCC; Bohdan Leschuk, AGM Secretary, Director; John Moskalyk, Vice-President, Public & Government Relations, Director; Anders Åslund, Swedish economist and a Senior Fellow at the Atlantic Council. Mykola Swarnyk

Yuri Bilinsky, New Pathway – Ukrainian News.

In the four years that have passed since the Revolution of Dignity, domestic and global observers have been arguing, whether Ukraine is making progress in political and economic reforms. In Ukraine, public opinion about the government’s performance has been increasingly negative. In an April 2018 poll by the Kyiv International Institute of Sociology, President Petro Poroshenko had the worst result among all politicians — 10% approved of his performance while 71% disapproved (a 61% negative balance). In the same poll, Prime Minister Volodymyr Groysman had a 13% approval rating and a 44% negative balance.

One of the most prominent international experts on Ukraine and the post-Soviet space as a whole, Anders Åslund, a resident senior fellow in the Eurasia Center at the Atlantic Council, related his own conclusions about Ukraine’s progress in his speech at the Canada-Ukraine Chamber of Commerce (CUCC) AGM on May 9. He believes that Ukraine has had “very substantial achievements” in economic reforms and that a fundamental problem remains that is stalling the country’s development, namely, poor property rights protection.

Åslund, who visits Ukraine several times a year and talks to the decision makers in the government and Parliament, as well as to the expert community and civil society representatives, believes that, in Parliament, up to 60 MPs are really working hard for reforms. In the government, about half the ministers are working hard for reforms, while the other half “have somewhat different interests.”

Åslund sees “a very strong civil society in Ukraine.” He noted that, every day, there are two or three different protests going on in Kyiv. Normally, these are small and peaceful protests about specific issues, “and this is how a society should work,” he said. Åslund believes that it is a positive sign that “every single issue is contested and there are always good reformers that are standing up and wanting to get something done” in today’s Ukraine.

Ukraine seems to be quite special also in terms of the international community’s attitude to it. Having worked in transition countries for many years, Åslund has never seen that the international community has been so united as to their views about a particular country, as in Ukraine’s case at the moment. He provided an example of Georgia under President Saakashvili when “the European Union thought that Saakashvili was awful and should be stopped, while the U.S. by and large supported Saakashvili.” In Ukraine today, on the contrary, the US and the European Union have the same take on the situation, said Åslund. The major reason for this unity is Ukraine’s extreme transparency, believes Åslund: “It’s very easy to find something if one really wants to know what is going on. This is a great achievement. We can know who does what, who stands for what and where they are going.”

What is the current western agenda towards Ukraine? The dominant organization representing the West in Ukraine today is the International Monetary Fund. The IMF is not putting up too many demands on Ukraine, said Åslund, but it is putting up “a few excellent demands.” He singled out the areas of exchange rates, budget deficit, inflation and public debt where, he believes, there have been many achievements

But the problem remains in the property rights, repeated Åslund: “What the western community has now united around is getting an independent corruption court. You wonder, why corruption court, why not the general judicial system?” Because the big attempt at the judicial reform, which was completed last year, basically failed. About a quarter of more than 100 Supreme Court judges, who were appointed, are tainted by corruption allegations and, thus, there is no trust in the new Supreme Court, said Åslund.

Distrust of the legal system leads to low investment in Ukraine. Therefore, the international community has made ending corruption an absolute condition for assistance, said Åslund. Because there has been no progress is fighting corruption, the IMF has not given any funding to Ukraine for more than one year already. The second condition for IMF funding is currently raising the natural gas prices for households which have fallen behind in Ukraine, said Åslund. He blamed the system of regional gas distributors, owned by the oligarch Dmytro Firtash, for the discrepancies on the natural gas market.

The third condition for the IMF funding is legalization of the private sales of agriculture land. Åslund thinks that while the current price of agriculture land is at US$1,300 per hectare, it could reach at least $4,000/ha should the land sales be legalized. He believes that big agricultural holdings benefit from the current situation and that Ukraine needs smaller agriculture units such as big family farms. As poor access to capital is among the major problems of family farms in Ukraine, Åslund believes that land ownership and use of the land as collateral will ease this access. In his comment for the New Pathway – Ukrainian News, he said he did not believe that creating a government-owned land bank, which would provide family farms with cheaper debt financing to buy land and which some consider the only way to prevent accumulation of land in the hands of large holding companies, is a good idea. He thinks that the solution to the problem of high interest rates, which approach 20% in Ukraine and effectively deprive smaller farms of outside financing, lies in lowering the inflation and interest rates.

Åslund said that the current economic growth of around 2% in Ukraine is too low for a country that borders with the European Union and that the growth should be in the region of 7% annually. This kind of growth could in particular come from a deep and comprehensive free trade agreement with Europe, he said. But the current free trade agreement contains numerous European quotas for the most important Ukrainian export products, like agriculture products and steel. Åslund attributed the presence of quotas to Ukraine’s inexperience in trade agreement negotiations and said that the Ukrainian trade with Europe will grow over time.