2010

New Economic Reforms Will Not Be Effective

Blitz takeover of the state power by Victor Yanukovych, the Party of Regions and their allies requires doing some real deeds, and reforms are the most important. It is not only question of improving economic environment that it would become effective before the next elections or new rules in some economy sectors where the elections winners have their own business interests, like the fuel and energy or infrastructure sectors. It is also a question of cooperation with the international financial institutions. The relief from them is urgently needed to fulfil the state budget gaps.

So the new state power initiates the new reformist course. Its core think centre is the special committee of reforms, while all reforms to be done are subdivided into four directions, with respective responsible vice prime ministers or ministers. Key priorities include financial sector and economy in general (banking, privatization, taxation etc.), development of infrastructure and liberalization of the fuel and energy sector, reforms in housing and utilities as well as land use, and finally legal reforms (mainly court system). There is also the special taskforces to prepare such reforms. But the real problem is that any reforms will hardly be successfully completed by the new state power.

There are several reasons of that. There is no unity amid the competing groupings which got the power, intentions to revive old shadow and even corruption schemes, and finally, conservative approaches of the “traditional bureaucrats”, who are the mainstream on the new Yanukovych’s vertical line of power. Finally, reluctance of Yanukovych himself and his close supporters like Azarov.   

Despite reformist problems, there is also good news. Ukraine again becomes attractive location for foreign investors. Groupings in the new state power play multi-vector game and as a result Ukraine will build up pragmatic relations with partners from the West and East, without any serious dependence on any. Finally, requirements of the IMF and other international institutions are to be satisfied at least partly, so even partial reforms will be better than nothing. But, of course, one should not expect any serious breakthrough regardless any promises and declarations of the new state power.