Head of Economic Programs at the Ukrainian Institute for the Future has commented in his interview for the UA TV channel on the Medium-Term Plan of Priority Actions for the Government until 2020, which was presented by the Prime Minister of Ukraine Volodymyr Groysman.
– If we begin with what’s realistic, the 4% is not enough. Starting from 2008 we have lost more than a half of the GDP. We must grow at 8-12% per year, so the corresponding 4% is too little.
If we speak about the steps (there are more than 300). What is their main complexity associated with?
– Firstly, the programs’ implementation provides for the resource availability, and moreover, neither the presentation nor the text of the program includes the estimated outcomes of these steps execution. If we take the 300 steps which are necessary to be implemented, what would I do? I would prioritize them and then decide where, for example, the resources should be directed. I would direct the resources in those areas which will generate maximum effect for the economy.
But the 5 top priority areas are named.
– The priorities are not specified in the plan which was presented. Moreover, it doesn’t include a more detailed analysis of what outcomes there would be in case certain decisions are implemented. Part of the decisions which are included in this plan implies the development of a program, the development of a concept – quite abstract things.
It is good that such a plan emerged; it is the first step of the actions needed to be performed.
It is important to understand one more thing. The economy does not grow by itself. Deregulation as one of the steps does not provide a possibility of economic development without investments. Investments are something that stimulates economic growth in the first place. There are many steps on attracting investment in this program. But what scares the investors today? It is the legal system and the lack of an effective system for private property protection. Yes, the judicial reform is underway, but it is not protected. Therefore, the whole program should be correlated with the private property rights protection system, with the system where everyone is equal before the law.
In other words, you think that these priority points announced by the Prime Minister should include “Reforming the judicial branch”, don’t you?
– The problem is that this is not the task of the Cabinet of Ministers of Ukraine. I’m saying that these programs and plans are good, but there will be no effect and no investments if there is no system of justice. Therefore, in this case we are talking not only about the executive branch of power as a key for economic growth; it is important that both the legislative and the judicial branches of power are interested in this.
4-5% GDP growth – is it realistic? And when?
– 4-5% GDP growth is realistic, if there are considerable investment attracted to the country’s economy. Last year, we raised about USD 3.5 billion and the country’s economy grew by 2% approximately, this was external investment. There was also some domestic investment, primarily capital investment on production reconstruction or maintenance in proper condition of those assets which were established earlier.
We can get 4-5% if, for example, about USD 5-6 billion is attracted to the economy of Ukraine this year.
How can we attract investments to our country?
– I can quote those foreign investors whom we are in a dialogue with. In Ukraine, there are many sectors that are very interesting.
This is, first of all, the whole agricultural sector; this is also the infrastructure projects sector (by the way, these sectors exist in the program which was announced by Groysman). From the point of view of the new economy, Ukraine is potentially attractive, but our infrastructure is poorly developed. We are of interest as a country of IT outsourcing, where young IT people can write codes, but the end product for which the codes are written is created not inside Ukraine, but in other jurisdictions. It is interesting.
We constantly say that Ukraine is a country of transit potential, but this potential has not yet been realized. And, probably, we can get the biggest effect from investments in power industry. Over the past 7 years Ukraine imported petrochemicals and gas amounting to USD 100 billion. This is more than the annual GDP of Ukraine. Herewith, Ukraine holds the third place in Europe in terms of gas reserves; we have more than 200 million tons of oil reserves. That is, it is enough for us to invest in ourselves, in our own resources in order to avoid import.
We are at risk – that is the construction of the OPAL pipeline.
There is no risk. We will provide ourselves with oil and gas. Today, we import. Ukraine imports more than 80% of petrochemicals. Where from? The most of oil comes from Belarus. Where does Belarus get the oil from? From Russia. We buy gas every year. Given that we have the gas under our own feet. Until the mid-1950s, Ukraine supplied the entire European part of the Soviet Union with gas. We are rich enough. And we can absolutely protect ourselves from dependence on imports: from the gas pipeline, from the northern, southern streams. Ukraine is self-sufficient.
In this context, I have not found the most important in the short-term action program. I would like it to include in writing that the key goal is to achieve self-sufficiency of the Ukrainian economy. We are talking about import substitution, first of all with regard to the energy resources, as well as consumer goods which we are buying.
How much does the Russian aggression deter investors from Ukraine?
– It deters. We are in dialogue with the US investors, and when they look at the world map, what do they see? They see that somewhere far away in Europe there is Ukraine, with a red button burning: the armed hostilities in the east of Ukraine with Russian militants. They pay attention to this. It is difficult to explain them that there is almost a thousand kilometers from Kyiv to the conflict zone, because they see the whole country.