NSC official criticizes slow reform in Ukraine (02/15/98)

NSC official criticizes slow reform in Ukraine

by Michael Sawkiw Jr.
Ukrainian National Information Service

WASHINGTON - The director of the Russia, Ukraine and Eurasia Desk for Economic Policy at the National Security Council (NSC), Carlos Pascual, spoke to a lunchtime audience at the Kennan Institute, a part of the Woodrow Wilson International Center for Scholars, on Monday, January 12. Speaking about the current economic and political reforms in Ukraine, Mr. Pascual stated that at the beginning of 1997 he was optimistic about the continued reform in Ukraine based upon the previous year's breakthroughs, but was sorely disheartened by the slow pace of reform. Adding, "I won't be surprised if 1998 ends up better then it begins," Mr. Pascual supported the notion that the main factor of continued change in Ukraine will be effective political leadership.

However, 1997 was not a year without its successes. A positive year for Ukraine's foreign policy, Mr. Pascual pointed to the signing of the NATO-Ukraine Charter in Madrid in July 1997 and the increasing presence of Ukraine as a central European state. These changes have eliminated Ukraine's previous image as a country in the "gray zone." The globalization of the world's economies has also affected Ukraine and spurred concerns regarding the increasing rate of inflation and lack of the ability to finance economic reforms.

Challenges for Ukraine in 1998 are quite numerous, according to Mr. Pascual. Providing his analysis of the six major areas on which Ukraine needs to focus, Mr. Pascual began with the easiest: opportunities to normalize relations with its neighbors and the rest of Europe. Ukraine's further integration into the European community provides the greatest opportunity for Ukraine to increase security in 1998. Given the U.S. perspective, increased military-to-military exchanges also are an important facet of "real and robust relationships."

Other challenges, however, remain more difficult and will require a tremendous amount of effort by the Ukrainian government. Most notably, Mr. Pascual highlighted the necessity of undertaking macroeconomic stability through tight control on expenditures and money. Cutting expenditures before the March parliamentary elections in Ukraine, may not be a realistic goal according to Mr. Pascual, yet "there is a clear-cut answer. Eventually they [Ukraine] will have to cut expenditures."

For an emerging democracy, one of the greatest challenges is effective leadership. Effective leadership will be needed to accomplish economic reform, including increasing investor confidence. According to Mr. Pascual, the common wisdom is that it is harder to do business in Ukraine without corruption prompted Congress to respond to lack of investor confidence by requiring the administration to certify by April 30, that business problems are subsiding in Ukraine, and certain investor disputes are being resolved.

A key element in the economic transition of Ukraine is small business development. Mr. Pascual provided a startling statistic: "less than 10 percent of the population [in Ukraine] work in the small/medium business sector." Ukraine must reduce the number of licenses required for business operations and adopt a new tax policy. Much U.S. technical advice is available to this end.

The privatization of the agricultural and energy sectors will lead to a more prosperous and rapidly changing economy in Ukraine, according to Mr. Pascual. Ukraine's potential lies in the vastness of its agricultural sector, which, with increased technology from the Western world, would once again rebuild Ukraine's capacity as the "breadbasket of Europe." In closing, Mr. Pascual accentuated that Ukraine's reform elements are within their grasp and the "U.S. is engaged to help, however, we [the U.S.] can only do more and be more effective if the Ukrainian government leaders follow the economic reform course."

In a question-and-answer session, a participant asked about U.S. government interaction with the Ukrainian American community. Mr. Pascual's response was genuine as he described relations between the U.S. government and the Ukrainian American community as playing "an invaluable role" in enhancing relations between the U.S. and Ukraine. During the past several years since independence, Mr. Pascual said he considers the frank talks and suggestions provided by the community as crucial for increased awareness of Ukrainian issues. He also acknowledged the value of various projects administered by Ukrainian American organizations.

Russian-Ukrainian relations were also discussed during the question-and-answer period. Mr. Pascual said Russia feels that, with the independence of Ukraine, it has lost its empire and territories, while the Ukrainian perception is that Russian dominance thwarted the country's cultural, economic and political life. Much has been done to address these problems, including the Treaty on Friendship and Cooperation, signed by Presidents Kuchma and Boris Yeltsin at the end of May 1997.

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