Cabinet shake-up in Kyiv aimed at speeding up economic reform (03/02/97)

Cabinet shake-up in Kyiv aimed at speeding up economic reform

by Marta Kolomayets
Special to The Ukrainian Weekly

KYIV - Yurii Yekhanurov and Ihor Mitiukov, both market-oriented government officials, were named ministers of the economy and finance, respectively, in a major Cabinet shake-up initiated by Prime Minister Pavlo Lazarenko over the past week.

President Leonid Kuchma, who is currently vacationing in Truskavets, a health spa near the city of Lviv, signed a decree appointing the two new ministers on February 26. This move is viewed as an attempt by the country's top leaders to jump-start the pace of economic reform in Ukraine as well as to nudge the stagnant Verkhovna Rada into passing the 1997 budget and a necessary tax reform package - a parcel of draft laws labeled "Economic Growth 97" - before the spring.

Messrs. Yekhanurov and Mitiukov, the original members of Ukraine's 1995-1996 economic reform "dream team," which included Vice Prime Minister Viktor Pynzenyk and National Bank Chairman Viktor Yushchenko, may be President Kuchma's last hope in lobbying the Parliament to pass a balanced 1997 state budget.

The Ukrainian leader - whose working vacation includes preparation for his annual address scheduled for March 14 in Parliament - has said in recent days that he would not deliver his state of the state speech if Parliament does not pass a balanced national budget based on a new tax policy by that time.

Although President Kuchma stressed that he would not exceed his powers as outlined in the Constitution, he noted that he has the power to dissolve the Verkhovna Rada if it fails to resume debate on the budget for 30 continuous days.

Ukraine's number-one priority at this time is a balanced budget for 1997, something that only the Parliament can achieve. It is also something that must be done to strengthen the country's economic stability, according to Jeffrey Sachs, director of the Harvard Institute for International Development, who has recently taken an interest in Ukraine, serving as a consultant to the government.

"The appointments of Messrs. Yekhanurov and Mitiukov are a positive development in the continued attempt by the Cabinet and the Verkhovna Rada to come to terms on tax reform legislation and the 1997 budget," said Valerii Cherep, chairman of the Parliament's Committee on Industry.

Mr. Yekhanurov was the chairman of the State Property Fund from September 1994 until his new appointment on February 26. He also served on the Council on Economic Reform to the President of Ukraine and has been a member of the Monetary Crediting Council of the Cabinet. He has also served as the deputy chairman of the Kyiv City Administration and as Ukraine's vice minister of the economy in 1993-1994.

Until February 26, Mr. Mitiukov had served as Ukraine's special representative to the European Union, with the powers of vice prime minister. In 1993-1994, he was the deputy chairman of the board of the National Bank of Ukraine. Like Mr. Yekhanurov, he has served on the Economic Reform Council and as a member of the Monetary Crediting Council. He also served in the government as the vice prime minister in charge of banking and finance in 1994-1995.

However, despite such wonderful credentials, government observers such as Oleksander Razumkov, head of the Center for Independent Political and Economic Studies, told Intelnews that such government shake-ups are senseless.

"The big problems lie in the economy and a reshuffle won't change a thing," he said.

"It is a last-ditch attempt to get the ship on course, but it's a waste of time. It's the middle people who are slowing things down," a Western economist who asked not to be named told Intelnews.

Curiously, the February 25 sacking of four ministers - Finance Minister Valentyn Koronevsky, Statistics Minister Oleksander Osaulenko, Economy Minister Vasyl Hureiev and Machine Building, Military-Industrial Complex and Conversion Minister Valerii Malev by President Kuchma - was preceeded by a closed-door session of the Cabinet on February 21, during which Prime Minister Lazarenko, perhaps worried about his own fate, blamed his own Cabinet for the country's economic woes. He attacked the four ministers by name, as well as the work of the Ministry of Coal and state committees for the food industry and oil and gas.

While Ministers Koronevsky and Osaulenko were fired for "poor performance," Ministers Hureiev and Malev were dismissed in conjunction with their transfers to other jobs. Mr. Hureyev was named to his new post as minister of machine building, military-industrial complex and conversion on February 26; Mr. Malev's new position has not yet been announced.

Prime Minister Lazarenko blamed Mr. Koronevsky for the banking system's inability to satisfy even the short-term credit needs of the economy, reported the Kiev Post. According to the English-language weekly published in Ukraine's capital city, commercial banks have complained that the government's directives to lend to failing enterprises have saddled them with large portfolios of dud loans.

He also complained that the Statistics Ministry did not supply the government with a clear picture of economic conditions, because it tracked only about one-third of the enterprises working in Ukraine. The ministry acknowledged that it had gathered data from only about 5 percent of the approximately 200,000 registered enterprises.

Western experts blame the lagging reform process on middle-management government officials who can still be classified as Soviet bureaucrats who have not - or cannot - function in a free market economy.

And although Mr. Yekhanurov, 49, an ethnic Buryat who hails from Zhytomyr and Mr. Mitiukov, 44, a native of Kyiv, have proven that they are reform-oriented and committed to introducing a market economy in Ukraine, the million-dollar question is whether they will be able to do this in the short period of time allowed to get Ukraine back on the economic reform path.

Less than 10 days ago, President Kuchma had sacked Agriculture Minister Anatolii Khorishko, Deputy Transportation Minister Leonid Zhelezniak and the chairman of the Coordinating Committee on Corruption and Organized Crime, Oleh Lytvak, blasting them for lack of progress in their work.

Asked on February 26 whether the shake-up in the government was over, presidential economics adviser Vitalii Kriukov told the Kiev Post, "it will all depend on the government's performance."

Volodymyr Horbulin, secretary of Ukraine's National Security and Defense Council, who is also President Kuchma's closest aide, told reporters during a briefing at the presidential administration on February 26 that more dismissals could be expected. "These are essential changes, and these changes will continue," he said.

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