Business in Ukraine

Over the last several years, we all witnessed the Economy Ministry losing its positions in the state hierarchy as it was edged out by the powerful and ambitious Finance Ministry. Economic forecasts made by the Economy Ministry were quite often altered; high-ranking officials were not interested in state programs on social and economic development drafted by the Ministry.

How will the Economy Ministry do now, after appointing a young new head who is not very experienced in public work, but as a famous scientist has his personal vision of basic economic processes? Will the new management of the Ministry manage not to be snowed under with paper work and focus on the main goals?

The new Minister of Economy, Bohdan DANILISHYN, is optimistic: there are good ideas and people in the Ministry, and if there is a necessity to strengthen some department then there are a lot of competent specialists in Ukraine. We offer the first interview with Bohdan Mykhaylovych as the head of the Economy Ministry to our readers.

— It is certainly necessary to solve present-day problems, but we shouldn’t forget that the main functions of the Ministry of Economy are implementing the state economic policy, defining long-term development strategies, and regulating foreign trade and integration processes, — says Danilishyn.

Bohdan Mykhaylovych Danilishyn was born on June 6, 1965 in the village Tserkvyna in the Ivano-Frankovsk region.

He graduated from the Ternopol State Pedagogical Institute and finished post-graduate course at the department of production potentialities studies at the National Academy of Science. He is a Doctor of Economics (1997), a Professor (2003), and a Corresponding Member of the National Academy of Science (2004).

Bohdan Mykhaylovych is the author of more than 150 scientific works.

He was in charge of the group drafting the small Ukrainian towns’ development program. He also took part in drafting the Conception of state regional policy and General plan of Ukrainian territory.

Before appointment to the post of the Minister of Economy on December 18, 2007, he was in charge of the department of production potentialities studies at the National Academy of Science.

There are a lot of interesting projects connected with transforming our economy and with obligations defined in the Kyoto Protocol as well as with stimulation of innovation activities. All current medium-term tasks are quiet ambitious. However, in order to have a realistic opinion about long-term prospects it is necessary to know at least approximately what the national economy should be like in 2030.

— Who will support you in this?

— I should note that the Prime Minister understands this. In addition to what is defined in the program on government’s actions “Ukrainian break-through is for people not for the politicians,” we plan to prepare a long-term development strategy for the period up to 2025 and resume medium-term forecasting.

— Does this mean that Danilishyn is trying to resume a state plan?

— I don’t want it to be a Soviet-type state plan like we had in the Soviet Union where state planning overstepped all possible limits. Nevertheless, it is very important for me to create an efficient system of forecasting. Plus, we intend to strengthen the Ministry’s role in the state rental policy and in the system of nature management.

We have much to do in the international business sector; we want to intensify our export potential, especially high technological export, and to harmonize the country’s foreign trade system on the whole. We are not satisfied with foreign manufacturers entering the Ukrainian market using illegal means.

— The main problem of all your predecessors was that the government practically neglected their programs on social and economical development of the country. They were always forced to tailor the programs to suit the budget when it actually should be vice versa. What gives you the grounds to consider that you will be able to fight the Finance Ministry?

— I don’t think that we need to fight with anybody. Every ministry has its own functions. We just need to define the authority and responsibilities of every department clearly and form a constructive system of cooperation between them.

Unfortunately, the Ministry of Economy has lost its key role in implementation and financing of the state programs over the past years. Notwithstanding the fact that it is the Economy Ministry that drafts, approves and controls the fulfillment of the general state strategy, the function of financing such strategically important components as the state programs is given to the other department. If we are responsible for some strategic task then we should have all necessary tools to fulfill this task.

As a result, there are about 200 state programs (including programs for development of regions, industries and the public sector), which are not connected to the key priorities of the state and are financed selectively. It is now necessary to review the entire program portfolio and make it comply with strategic goals of the state.

— It seems like we have returned back to 2000 or 2001 and are talking with Vasyl Vasyliovych Rogovoy – the matter concerns the same plans and programs: there are a lot of programs so they have to be optimized. Why don’t we make a decisive step and leave just ten state programs instead of 200?

— Ten is not enough. First of all, we should agree on the state’s long-term and medium-term priorities with civil society. And then, we should connect all the programs with these priorities and see which of the state programs it is necessary to abolish.

Concerning Vasyl Vasyliovych… He is not the only person who occupied the post of the Minister of Economy before me; there were some other ministers too. I want to use their experience as much as possible and move further.

— Are you going to reorganize the Ministry?

— No, we will use the existing structure. However, we plan to strengthen some departments.

— What are your ministry’s priorities for this year?

— There are five priorities for this year: the first is to join the World Trade Organization and to start the creation of a free trade area between Ukraine and the European Union. The second is to define the most important state programs for this year and to strengthen control over their implementation. The third is to fulfill the state policy on stock and insurance markets, namely to defend the rights of minor shareholders, to establish the fundamental basis for the normal work of the stock exchange and for the development of the insurance market. The fourth is to develop a favorable regulatory environment for business. The fifth is to form an effective rental policy.

— What changes should we expect regarding the rental policy?

— It is obvious that the rental component is insufficient in our country. Our state as an actual owner of resources receives less than it is due because intermediaries receive most of the rental payments.

I am sure that it is necessary to establish order in all spheres connected with natural resources. As a specialist in nature management I think that we have to strengthen this sector.

— Does this mean the Ministry of Economy will try to acquire the function of licensing the usage of natural resources?

— I wouldn’t lead everything to licensing since licensing is a part of the system of economic relations. The details of the rental policy are still to be discussed and made concrete. It is important to create such economic ground that would make this sector rational and transparent, i.e., as the Prime Minister of Ukraine says, to make the rules of the game equal for all the players.

— And how can all these things be done in practice? How can we overcome the resistance of the interested parties, which have their representatives in the Verkhovna Rada and the government?

— It is well-known that any idea is just an idea until it is supported by the masses. And we have always come to an agreement on different questions with the Finance Ministry so far.

— When did you come to an agreement with the Finance Ministry? The 2008 state budget was adopted without a program on the social and economical development of Ukraine. Is that an agreement?

— It is not only this year when the budget was adopted without a program on the social and economical development. We are working on this question now.

— What is your opinion about experts saying that the program on government’s actions “Ukrainian break-through is for people not for the politicians” doesn’t have any concrete plans and terms, only populism?

— I disagree. The program on government’s actions is first of all a political document that includes key directions for the state policy. It will be followed by a distinct plan of actions that will concretize the tasks stated in the program.

— So it will be possible to see the government’s activities in figures soon, won’t it?

— Yes, in the plan of actions. It is being prepared now, and we hope that it will be proclaimed soon after the Verkhovna Rada approves it.

— We are going to drink champagne to cheer Ukraine joining the WTO on February 5, aren’t we?

— Everything is practically ready for signing the necessary documents by February 5. I should point out that today, the level of tariff protection in Ukraine is more than 80% of the level necessary for joining the WTO. Additionally, our average import duty is 6.5% when in order to join the WTO it should be 6.28%. This means that Ukraine is practically operating according to the WTO rules today.

— Concerning inflation, Tymoshenko said there would be a number of anti-inflation measures…

— There is a packet of anti-inflation measures. And it is quite concrete. However, all anti-inflation measures should be structured distinctly; this should be a joint policy of the government and the National Bank.

— What is your personal opinion about land dealings: should the land be for free sale or not?

— Land dealings and land policy should be treated very carefully and prudently. We know that the laws and regulations necessary for making land dealings civilized are not drafted yet.

— There are two points of view on land matter: land rentals or free purchase and sale of land. What do you prefer?

— I would prefer land rentals.

— Should the money from privatization be used for reimbursement of devalued deposits with the USSR savings bank or be invested into the national economy?

— I think that an effective investment policy is very important. Our economy needs to be modernized; this is written down in the program on the government’s actions. We all know that the capital assets of Ukrainian industry are badly deteriorated.

— What do you think about the situation with public procurement in Ukraine?

— I think that the defects in this sphere were caused by the amendments to the law on tender passed in March 2007. Yes, it was necessary to establish order in the system of public procurement. But order should have been established without involving structures not related to this sphere.

— Visiting Davos, the President of Ukraine said that is was necessary to draft an anti-crisis program that would minimize the consequences of world stock markets’ collapse in Ukraine. Do you think that this problem is of current importance today?

— If there are orders then it is necessary to execute them.

— Who invited you to work in the government?

— Yulia Volodymirivna. She asked me to turn the Ministry of Economy into a centre of economic reforms.

— How do you choose your deputies?

— According to their professionalism. You should agree that Irina Kryuchkova is one of the best macro-economists in Ukraine. Valeriy Pyatnitskiy will certainly stay, as he is the best in questions on the WTO. First deputy Serhiy Romanyuk is managing matters of regional economy development. First deputy Anatoliy Maksyiuta is well aware of financial systems and will help us to counterbalance our relations with the Finance Ministry. And I think that Valeriy Muntyian can cope with economical questions on the military industry.

— What will Viktor Panteleyenko, ex-vice-president of consortium Industrial Group, do?

— He will be responsible for the industrial and transport sectors of the economy.

Tags: Opportunities //