FOR THE RECORD: Ukraine today and the journey forward (07/02/00)

FOR THE RECORD: Ukraine today and the journey forward

Bohdan Budzan has served since January 1997 as director general of the International Management Institute (IMI-Kyiv), where he also is senior lecturer and teaches upper-level management courses. Since 1993 he has been a member of the Academy of Sciences of National Progress of Ukraine. In 1996 Dr. Budzan completed the International Senior Manager's Program at Harvard University.

Earlier he served as head of the Department of Relations with International Financial Organizations of the Cabinet of Ministers of Ukraine, where he helped structure Ukraine's first institutional loan, working as liaison officer with the World Bank, European Bank for Reconstruction and Development, International Monetary Fund, U.S. Agency for International Development and the European Union. As head of the Department of Privatization and Entrepreneurship Development of the Cabinet of Ministers of Ukraine, he supervised development of the economic reform structures and promoted privatization and entrepreneurship. From April 1993 to December 1996 Dr. Budzan was executive director of the International Renaissance Foundation (the Soros Foundation in Ukraine).

Dr. Budzan spoke on May 30 at the Ukrainian Research Institute at Harvard University on the topic "Ukraine Today and the Journey Forward."

During his recent visit to the United States Prime Minister of Ukraine Viktor Yuschenko had a number of meetings with government and public officials, politicians and businessmen. Among them were: Secretary of State Madeleine K. Albright, former U.S. Ambassador to Ukraine William Green Miller, members of the Foreign Affairs Council, leaders of the International Monetary Fund and World Bank, the director of the U.S. National Economic Council, the editor of The Washington Post, U.S. Trade Representative Charlene Barashefsky, Treasury Secretary Lawrence Summers, members of the U.S.-Ukrainian Business Council (representing major U.S. companies operating in Ukraine), members of the U.S. Congress, National Security Advisor Samuel Berger, President Bill Clinton and Vice-President (and Democratic Party candidate for president) Al Gore.

U.S. business and political leaders were comprehensively informed on Ukrainian reforms and current problems. I think most of you are familiar with the results of the meetings and negotiations from accounts carried by the news media, as well as with information presented personally by the prime minister. Therefore I will not comment on Ukrainian economic indicators, except to say that positive trends and processes in Ukraine encourage both Ukrainians and Americans. The latter have demonstrated their will to support these processes and their improving attitude to Ukraine.

In my opinion, this is the most important thing for Ukraine: speaking in concert with the leading countries of the world. Their understanding and support are crucial for Ukraine, and especially now when for the first time in the 10 years of independence - people support the president's reform program, the state powers are not in confrontation, and the government action program aimed at improving Ukrainians' lives has been approved by the recently organized democratic majority in the Verkhovna Rada. Society has become consolidated as never before. It supports the president and Prime Minister Yuschenko's pragmatic government, its administrative reforms and dramatic changes in agriculture based on land privatization. The government is searching for crucial ways to improve the fuel and energy sector, and its planning and development adhere to sound budget parameters.

I am convinced that now is the opportune time for Ukraine to successfully resolve the historic problem it has long been facing. We should bear in mind that Ukraine is a young democratic country going through the very first development stage. It is bound to pursue two goals at the same time: (a) creating state institutions and the infrastructure of a civil society, and (b) radically changing the social and economical formation, pursuing an unprecedented transition from the centralized, plan-and-distribute economy of the socialist type to the contemporary competitive market economy with a strong social emphasis. Until now, the world has not witnessed a combination of these two tremendous tasks. Ukraine is practically the sole country in Central and Eastern Europe now proceeding down this challenging path.

With all the hope and expectations that accompany the millennium, Ukraine for the first time in its history is building a sovereign, independent and democratic state. It has never had this opportunity, neither while in the Russian Empire or in the Soviet Union. At those times, Ukraine was losing its best human and material resources - and this was certainly not to its advantage. However, the dream of unification and independence of the Ukrainian homeland had always shimmered among the people.

In 1991, when Ukrainians voted overwhelmingly for independence, it hoped to achieve economic growth through the effective use of the country's plentiful natural resources. Ukraine's hopes were grounded on the foundation of a powerful industry and agriculture, considerable natural supplies, qualified experts and labor force, and significant intellectual and R&D potential. Thus, quick and stable economic development seemed inevitable.

In practice, however, Ukraine's progression was very difficult. New strategies were paired with outdated organizational structures and 70-year-old industrial ties. Coupled with the lack of both qualified state administrators and experience in governing under market rules, this has led to drastic results somewhat comparable to the economic consequences following World War II. The outcome: Ukraine's 1999 macroeconomic indicators were 2 to 2.5 times lower than in 1990.

One of the major reasons for this was the need for critical economic restructuring. During the period of Cold War and confrontation between two world systems, much of the Soviet Union's economy served military needs, with 60 percent of Ukraine's capacity involved in the military industry, as some sources indicate. After the Cold War ended and changes in geopolitical priorities became more apparent, the powerful military complex became useless. Moreover, its operation fully depended on close cooperation within the former Soviet Union. Major structural changes caused by the military industry's downsizing have undermined Ukraine's economic indicators. It is also worth mentioning that Ukraine was the only country to elect to do away with its nuclear weapons. The liquidation of these materials proved to be extremely expensive.

For a better understanding of obstacles in Ukraine's economic transformation, I would like to draw your attention to the troublesome elimination of the socialist foundation in East Germany, which existed there for a period only half as long as they existed in Ukraine. Note also that the East German economic transformation is backed by the potential of West Germany, which was truly immense before the unification.

Naturally, we are happy to see statistical indicators demonstrating that the period of Ukraine's economic decline has stopped, and signs of growth have appeared. For instance, industrial output in January-April 2000 increased by 10.4 percent from the same period in 1999, and the pace of growth has surged steadily. These and other figures presented by Prime Minister Yuschenko while in the United States are reason for optimism. I believe that these expectations of stable economic improvement will come true.

In order to see this happen, Ukraine has to do much work and mobilize all available resources. However, it is also true that support and assistance from the outside is necessary. Relying only on our own forces would cost many decades. Instead, Ukraine must follow a sound course of economic improvement to ensure its competitiveness among the nations that lead today's global economy. Therefore, it is important to define exactly and maintain an optimal balance of those internal and external factors that determine the large-scale economic and political transformations in Ukraine, and to find ways to combine people's intense efforts with the necessary external assistance.

I think that the prerequisite for quick economic growth in Ukraine is the urgent formation of a new administrative elite, a critical mass of the new managerial generation able to combine the world's best approaches to political and economic transformation (that is, democracy and market economy) with the national peculiarities of Ukraine that have been determined by history and traditions.

Ukraine has to concentrate on awakening national awareness, which is characteristic of democratic societies, and the creation of a wide infrastructure providing for a close connection between citizens and power bodies at all levels, thus enabling all people to express their views and protect their rights. In my opinion, the achievement of this goal can be strongly facilitated through political, legal, economic and business education, as well as through wide dissemination of information that can support economic and political changes.

I think that the foreign policies of developed countries, and their initiatives supporting the development of new independent countries and Ukraine in particular, should not be driven by the narrow interests of leading states or financial groups. I am convinced that the United States, Western Europe and other developed states should not stand aside from the processes of development of emerging countries, including Ukraine. In time economic and technical support will yield positive results, which will be for the good of the recipient, as well as donor countries. Hence, as I strongly believe, the world community will significantly benefit both politically and economically from helping the new independent country Ukraine, because its successful growth coincides with the strategic goals of the world community.

In view of Ukraine's crucial geopolitical location, its quickest normalization, stabilization and further development are necessary, as only an economically and politically independent developed Ukraine without nuclear weapons can be a potent factor of stability and peace in Europe. I have no doubt that we can reach this purpose through joint effort.

Taras Shevchenko often said in his poetic voice that Ukraine is beauty and tradition and integrity. I may add to this that Ukraine is indeed beauty and tradition and integrity, and also that Ukraine is hope and enthusiasm for tomorrow.

Thank you for your time.

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