Kuchma tells conference private business is the key (02/15/98)

Kuchma tells conference private business is the key

by Pavel Politiuk
Special to The Ukrainian Weekly

KYIV - Private business must become the foundation for the Ukrainian market-oriented economy, and the country's leaders will do everything for its development, President Leonid Kuchma declared at a national meeting of businessmen held in Kyiv on February 10.

"We should understand that business is the foundation of the economy, and we must radically change the stereotype we hold," said Mr. Kuchma. "We must move from the question 'what have I done for the state?' to the question 'what have I done for myself and my family?'"

The president's comments marked the second time in the last week that Ukraine's government authorities have expressed support for its private business sector. The All-Ukrainian Council of Business took place several days after President Kuchma signed a decree aimed at speeding up deregulatory measures widely considered essential for a long-awaited economic revival.

Since obtaining independence in 1991, Ukraine's leaders have declared many times that the development of the business sector is a priority, but in 1997 the non-state sector produced only 10 percent of the gross domestic product (GDP), five times less than in Germany or Italy.

According to Ukraine's government, only 100,500 small and mid-size enterprises and 3,000 cooperatives operated in Ukraine in 1997. They employed only 4.6 percent of Ukraine's work force, including 900,000 businesspeople. This also includes 35,750 private farmers.

The president declared the government's support for the development of the private business sector and admitted that the government could do more to stimulate the country's economic potential. "There is a confrontation between the new tendencies developing in Ukraine's economy and the old bureaucratic apparatus," said President Kuchma, explaining one reason for the slow pace of economic reform.

Burdensome state regulations, according to the president, also inhibit business activity in Ukraine. His decree on deregulation calls for cutting the red tape that has discouraged both foreign investment and domestic businesses.

President Kuchma said the deregulation measures are the first step in a move to a market economy that will lead to the development of a Ukrainian middle class as the foundation of society and a "guarantor of stability."

The decree aims to limit bureaucratic interference in business, easing customs procedures and simplifying the Byzantine licensing and registration requirements that throttle initiative and prompt corruption.

President Kuchma first announced a program of radical economic reform in October 1994, but Ukraine's GDP has continued to drop every year since then. The single achievement of the three-year reform program has been the stabilization of the national currency that occurred in 1997.

Foreign and domestic advisors have repeatedly urged Ukraine to move ahead with structural reforms that have been largely stymied by inertia and conflict among the branches of government.

President Kuchma indicated that to expect economic stabilization without political stability is unrealistic. "We have not achieved success because of an absence of understanding between the branches of power," said the president. "For economic growth we need political consolidation and political stability."

The serious attention that the president and the government are giving private business lately has to do with the upcoming parliamentary elections. According to the Central Election Commission about 20 percent of the candidates are businessmen.

President Kuchma said that a more business-oriented composition of the Verkhovna Rada after the elections will lessen serious conflicts between the two branches of power.

"We can expect that the future Parliament will be more pragmatic," Mr. Kuchma told businessmen. "The state and business must hear one another and work together to build our house - Ukraine."

President Kuchma and Prime Minister Valerii Pustovoitenko, who also addressed the business conference, said that market changes that have occurred in Ukraine are irreversible and that the results of the parliamentary elections in March will not change the direction of market-oriented reforms.

"The market reforms in Ukraine have been set in motion. Today we must talk about improvements, not about initiation," explained President Kuchma.

The Ukrainian government earlier predicted that Ukraine's economy will finally begin to grow in 1998. Prime Minister Pustovoitenko has stated that the GDP will rise by at least 0.5 percent, which would be the first increase since Ukraine gained independence from the former Soviet Union in 1991.

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