Saturday, November 27, 2004

a look into the future

It now looks like that there will be a third Presidential election. The probable changes in the format will be no absentee ballots, open access to election observers in all election locations, and access to the major national media outlets. This should solve many of the problems that previous elections in Ukraine have had. The absentee ballots issue alone cost Yushchenko the election, possibly in both rounds. Looking too far forward, let’s look at what a Yushchenko presidency will look like.

There will be better relations with Europe and North America. The ties with Poland will become much stronger. This is not just historic ties but more importantly, Poland is seen as an example to follow. Many of the economic burdens that have tied up country should be relieved. The privatization programs will not need to be targeted solely to certain political clans. It is quite possible that some of the more questionable recent privatizations will be revisited. There is a chance that economic ties with Russia will weaken. I actually expect the opposite. The Donbass area has always fought moves by Russian industrialists to move into the region. I do not view Yushchenko to be anti-Russian but more pro-Ukrainian.

If the region does lose some political clout, as it should, these barriers will weaken. Tourism should begin to grow and develop. Ukraine has many cities that would be quite wonderful for visitors from the rest of Europe. Ukraine’s harsh visa regime and the lack of appropriate hotel facilities hinder the development of tourism. The entire country could use better marketing of its unique recreational possibilities. A major marketing campaign targeted to the Russian market featuring the Crimea would play immediate results.

It should be expected that many of the non-economic barriers to doing clean business will begin to fall. This will take time but there are many towns and cities that have started to clean up their business registration operations and reduced the opportunities for bribery. This trend should be expected to move into larger Ukrainian cities. As Ukraine is now a low-cost neighbor to the European Union, it should begin to see investment by manufacturers hoping send into Europe. Western Ukraine has begun to seen some of this investment but it needs to grow. Most of this investment will have to be in green-field type opportunities, Ukraine’s manufacturing infra-structure is badly out of date.

The downside of a Yushchenko presidency is that expectations will be very high and these expectations will not be met. There are still thousands of bureaucrats in place and these will remain in place. The needed reforms in the police, military, customs service, and government regulators will take time. It will be a long process. The illusion of a sudden turnaround of the economy will undermine Yushchenko.

I expect that the growth in the GNP and trade surplus that Ukraine has seen the past few years will continue. The national economy is growing and this is truly a national trend, it is not just certain regions. The removal of some of the governmental jack-boot should increase this growth. In many ways, the eastern industrialists will be better off with a stronger, broader Ukrainian economy. I could never understand how wealthy Ukrainians, and there are more every year, could fully enjoy their wealth. The legal basis for their lives was shaking, the opportunities for the enjoyment of their wealth was limited and bounded by the developmental limits of the economy. A broader spread of the country’s wealth would only increase their opportunities. It has always seem that people schooled in the Soviet system saw that there is only a finite amount of wealth and so it needed to be controlled and hoarded. The idea that wealth could be increased and broadened never was entertained. Of course, the concept that the commonweal would increase wealth and personal freedom is the central basis for the space that Ukraine will now be entering.


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