The upcoming Oct. 28 parliamentary election is no reason for optimism, some entrepreneurs in Ukraine say.
Recent years have seen a fall in foreign direct investment, entrenched private-sector problems with state authorities and a rise in corporate raidership. Yet the competing political parties have so far been unable to produce a credible plan on how to get the economy moving again.
The investor sentiment index of the European Business Association, a pro-business lobby with 921 companies, is at a historic low of just 2.14 out 5 points, and prospects are grim. The German Business Club’s panel discussion on Oct. 16 captured the mood with the downbeat title of “Elections without any choice?”
Organized under Chatham House rules, which allow quotations but not their sources, the meeting saw businesspeople express worries about the prospects for the next parliament to address Ukraine’s biggest challenges.
Several company owners pointed to the fact that foreign investment was practically frozen. Some predicted that any meaningful change could take up to seven years.
Political parties have done little to ease those fears. At an open discussion with businesses, organized by the EBA in September, most economic experts sent by Ukraine’s main parties were unconvincing.
With the exception of Andriy Pyshny from the United Opposition – who promised rosy, Georgian-style reforms that would notably see the number of taxes cut from 137 to seven – the politicians came unprepared, people in attendance concluded.
In contrast to the opposition’s grandiose claims of leading an investment turnaround, the Party of Region’s Oleksiy Plotnikov said the current government would continue to do the same thing with the same people.
“That’s it,” Plotnikov said, summing up the program. “Pretty realistic, most can be implemented.”
Viktor Pynzenyk, a member of Vitali Klitschko’s Ukrainian Democratic Alliance for Reforms, limited himself to feel-good statements. For specifics, the business audience was left with: “We need to audit only those companies who don’t pay their taxes.”
Others were even further off target. Ukraine Forward’s Natalia Korolevska put in an effort presentation-wise, but her message amounted to: I am also a businessperson, you can trust me.
Svoboda Party’s Yuriy Levchenko said his economic plan would “protect Ukrainians.” The solution to corruption, he said, was to elect everybody, even police officers, and allow citizens to impeach any official they want.
Spiridon Kilinkarov from the Communist Party was hostile to the private sector, claiming that Ukraine’s problems were caused by business. “Why are politicians so corrupt? Because of businesspeople who corrupt them,” Kilinkarov said.
The electoral programs don’t carry much weight with foreign investors. With the exception of UDAR, which has no track as of yet, none of the major parties have proven to be able to follow through on promises, said Brad Wells, political analyst at investment bank Concorde Capital. “It’s the same thing as always,” Wells added.
What matters more, according to Wells, is that after the elections the hryvnia currency could devalue, and talks with the International Monetary Fund and gas negotiations with Russia might revive. As economic growth slows down, businesses first and foremost want to see these issues addressed.
“The broadly held view in the market is that the Party of Regions will retain a working majority in the next legislature which would be positive from the point of view of quickly negotiating a new IMF deal,” said Viktor Luhovyk, political analyst at Kyiv-based investment bank Dragon Capital.
One fear is that a new Party of Regions government could wield a two-thirds consitutitonal majority in parliament yet again. Such a development would increase the country’s perceived risk, Luhovyk explained, and could tempt Yanukovych to further consolidate his power.
But not all experts see the upcoming elections with such gloom.
According to Anders Aslund, a senior fellow at the Washington-based Peterson Institute, 2013 could see a an improvement in Ukraine’s business environment. With half of the 450-seat parliament getting elected from districts, the next batch of parliamentarians will be more responsive to local needs, Aslund said.
As a result, coalition-building could be more difficult. He likened the situation to 2002-2004 under President Leonid Kuchma, when firms were freer to operate and lobby, Aslund claimed.
“It was one of the best times for businesses,” Aslund added.
Kyiv Post editor Jakub Parusinski can be reached at [email protected]
