Ukrainian Prime Minister Mykola Azarov said today that a coming investment surge in 2011 could see the country achieve 10 percent economic growth, returning Ukraine to the level of 2007. Azarov was speaking at the conference “Ukraine: Reforms, Competitiveness, Investments” held by the Foundation for Effective Governance financed by Ukraine's richest billionaire, Rinat Akhmetov.
He said that 2011 could see as much as Hr 100 billion in investment in Ukraine, directed towards sectors where it would achieve the maximum short-term effect. According to Azarov, 30 percent of the amount, Hr 30 billion, would come from the state budget, with Hr 50 billion raised from domestic and foreign loans and the remaining 20 percent from private sector investment.
Azarov named four key sectors for Ukraine to invest in: agriculture, construction, aircraft building and ship-making. He promised “large-scale investment projects” for agriculture and said construction, which he put at 40 percent of its 2007 level, would be crucial for stimulating domestic consumption.
Azarov paid special attention to aircraft building, which he called one of Ukraine’s most advanced sectors, and, in conjunction with its suppliers, capable of raising the whole economy.
“Either the [aircraft building] sector revives in 2011-2012, or we will lose it forever,” he said. He said that Ukraine currently produces six planes per year, while it needs to make 150. He said the government would push on with production of the An-148 and An-158 regional jets designed by the state-owned Antonov design bureau. He said aircraft construction would be freed from profit tax for 10 years and also said Ukraine’s aircraft-building industry would develop in partnership with Russia.
He said that the government would also try and revive ship-building, although he acknowledged that the situation in the sector is even more difficult than in aircraft construction.
Economist Oleksandr Paskhaver, president of the Center of Economic Development, said that Azarov’s investment figures had more of a “mobilizational purpose” than reflecting reality, “just as was the case with Soviet plan targets.” Paskhaver said, however, that he admired the energy and ambition of the country’s leadership. But the neglect of small business, he said, showed “they regard the country as an economic entity, rather than a society.” Paskahver was pessimistic about the prospects for Ukraine’s recovery, calling Ukraine a country “suffering from two illnesses: lack of respect for property and corruption.”
In his speech and comments afterwards, Azarov appeared hurt by what he regarded as unjust criticism, and a lack of recognition for what has been achieved by his government. “In a short period of time, the government has stabilized the situation, and launched reforms,” he maintained.
Referring to new government legislation on a new tax code, new budget code, state procurement and the court system he repeatedly asked, “and is this not a reform?”
Answering journalists’ questions following his speech, Azarov called for more positive reporting. “My friends, let us work together to create a positive investment climate,” he said, adding that negative reporting by journalists was deterring investors. Referring to his opening of Kyiv’s new Darnitsky railway bridge over the Dnipro on Sept. 27, Azarov complained that some publications had said the bridge was useless. “The bridge took six years to build, it was a major construction project, and now we have finished it,” he said. “Is this not a positive event? Is it needed? Yes it is.”
During his speech, Azarov directly addressed head of the World Bank’s mission in Ukraine, Martin Raiser, who was attending the event. Referring to a World Bank assessment that the primary task for Ukraine’s government was fiscal consolidation and financial stabilization, Azarov told Raiser that “financial stabilization has now been achieved.”
Raiser commented later that he was pleased to know World Bank reports are read by the government. But he said it was still too early to see if reforms would be properly implemented, although there were promising signs.
“The biggest question for me is not whether the government is implementing World Bank recommendations, but is the government drawing up an economic reform plan and then moving on with it in a way that is credible and that is accepted by the citizens of Ukraine?” Raiser said.
Raiser disputed that a 50 percent gas price hike for households and utilities and a planned pension age increase for women, which the International Monetary Fund (IMF) made a condition for Ukraine’s receiving renewed financial support of $15.2 billion, have hurt the government’s popularity.
An opinion poll conducted by the Razumkov Center found support for President Viktor Yanukovych among Ukrainians had fallen to 22.5 percent following implementation of IMF conditions in July, compared to 39.7 percent in May and 40.9 percent in April. In his speech, Azarov said the IMF had been extremely tough on Ukraine this year, far tougher than anything experienced even in 1998 and 1999, but that the government had complied because the reforms were necessary.
Raiser said political leadership was required to lift the country out of crisis through reforms. “Simply giving up on something because it is unpopular is defeatist. It [reforms] requires leadership and some political risk.”
Raiser called for political leaders to think of their legacy rather than opinion polls. “Do you want to be known as the political leader, or group of leaders, that really brought Ukraine to a different level? That’s the question to ask, rather than do you want to be known as the politician who may win the next election.”
Kyiv Post staff writer Graham Stack can be reached at [email protected]
