Government comes under fire
Ex-Prime Minister Yulia Tymoshenko was recently denied permission to take a political trip to Brussels, the administrative capital of the European Union, by the General Prosecutor’s Office of Ukraine. Authorities consider her to be a flight risk. While the accusations – that she misspent public money with funds gained through the Kyoto Protocol – remains in dispute, the crippling effect of these investigations has led critics to cry foul play.
Although the decision of the General Prosecutor’s Office may be technically legal, the ramifications in the international political arena could prove severe.
The president of the European Parliament, Jerzy Buzek, has condemned the manipulation of the criminal code to oppress opposition in Ukraine. Carl Bildt, minister of foreign affairs of Sweden, termed the prohibition of Tymoshenko’s visit to Brussels as totally unacceptable.
People First Comment: Clearly both sides in this dispute are out to use the situation to maximum advantage. Tymoshenko is an expert at using her femininity and charm to great effect in securing national and international sympathy for what she says is political persecution. Let us not be fooled. This lady is, by all accounts, a very wealthy woman who expertly and ruthlessly used the law at the time to amass a fortune. As prime minister, she ruled her cabinet with a rod of iron and manipulated the media at every opportunity. Yulia is no Joan of Arc and the European elite should be very wary of supporting her so publicly as it could well come back to haunt them. On the other side, it is in Party of Regions interests to bring her down by all means possible and there may well be pressure on the prosecutor’s office and strong political motivation to the charges. The Japanese auditors have reported that the Kyoto protocol funds are still in the government account agreed for the purpose and have not been spent, which blows a huge hole in the prosecutors argument. The second investigation regarding ambulance purchases may well also be a trumped up charge, as it would appear to be normal for prime Ministers, on the advice of their experts to sign off purchases. Of the 73 cases in the current anti-corruption drive, do they really expect the public to accept that only one relates to a member of their party? In the middle are the prosecutors who have a public duty to view all cases strictly from the legal perspective. They should follow the law and the timings set down in the statutes to the letter as if they deviate in any way the public will have the fundamental democratic right to call for their dismissal. All three parties should note that the law is not a toy; it is the foundation of the Ukrainian culture and civilisation. They are playing with the very future of the nation.
Ukrainian economic growth prefers shade
The new taxation code for 2011 has delivered irrefutable growth; unfortunately it is localized solely in the non-taxable and unregulated shadow sector. Experts profess that close to 50 percent of Ukrainian salaries are now distributed under the table, saving enterprises up to 20 percent in wage expenses by way of pilfering billions from the state budget coffers. According to the estimates of the Ukrainian tax administration, 2011 will see a million individual taxpayers in Ukraine; 800,000 less than three years ago. The vast majority of these businesses are not dissolving, but merely slipping below the tax administration radar – evasion is survival under a tax code that directly persecutes the small-and-medium enterprise sector, heralding bankruptcy for the many.
The Donestk region and other areas in the eastern regions of Ukraine have suffered the heaviest losses, where anticipation of the new tax code caused entrepreneurs to give up their enterprises en masse, two months prior to the enactment of the code.
The Ukrainian banking system lost $6.1 billion in withdrawals during the last four months of 2010 – accounting for approximately 80 percent of the total volume of transactions for the year.
When considering this rush of withdrawals alongside the disappearance of 44 percent of the small-and-medium enterprise sector, it is not unreasonable to assume that the shadow economy is soon to receive a boost of activity. With such a weight of financial clout resting in the shadows we can only wonder as to the viability of governmental economic policy.
People First Comment: There are two schools of thought on this issue. The first is that the prime minister and his team are so schooled in the economics of the past and so blind to current world and, in particular, modern European macroeconomics that they cannot see that their policies can only lead to the destruction of the small-and-medium enterprise sector and to what has become a vital source of tax revenue. The other school of thought is that the policy is deliberate and it is the government’s intention to undermine the emerging middle class and to destroy what is rapidly becoming a major source of opposition. Some may consider this to be classic conspiracy theory. But by all accounts there are worrying moves to take over businesses using threats and violence. Their main priority would appear to be the destruction of the Ukrainian middle class – the people who secure our freedoms irrespective of the government in power. What is strange is that the authorities are making considerably more effort in their own heartland in the east of Ukraine to drive potential oppositionists to the wall. However, this policy may well have exactly the opposite effect of that planned. The small-and-medium enterprise sector has already withdrawn $6.1 billion in cash from the banking system going back to the former policy of keeping money at home. The impact of this on the banking system should not be underestimated. A move into a more cash-driven economy will mean that Ukrainians will once again use their creativity to undermine oppressive authorities. The tax revenue base will be severely damaged just as it was in the past and no amount of pressure will rectify this. What is worrying is that now their oppressors are not Czarists or Communists but the elected government.
European obligations
According to the Ukrainian media, the government has approved a decree that will tailor Ukraine’s policy to meet the conditional requirements set by Europe to facilitate financial aid during the recent economic crisis. On Jan. 12, Viktor Yanukovych issued a decree to the Council of Europe stipulating intentions to meet Ukraine’s obligations. The document echoed many of the policies promised, but never executed, by former President Viktor Yushchenko in 2006. Key features include: assurances of a newly independent judiciary, restructuring of the security services and the ratification of international conventions on human rights.
The decree also sets the scene for major legislative reform: bringing election law up to the requirements of the Venice Commission, reforming state controlled press and setting the parameters for the conducting of protest events; although opposition members claim this is a smokescreen for restrictions on freedom of assembly.
Yanukovych may yet demonstrate the political will, which Yushchenko lacked, to bring Ukraine up to the norms of its European neighbors. However, with such major reform programs, the focus should be on the quality of the delivered legislation, not on the quantity promised.
People First Comment: Anybody can sign a piece of paper and promise the earth. The real test is whether the signatories have the political and moral will to follow their words with real and concrete action. Unfortunately, to date, honesty does not seem to be the policy. Take for example the media situation. Neither the president nor the government have issued any published instructions to the security services or the media on what can and cannot be published and flatly deny any interference. But, since the election, journalists have reported a marked rise in editorial control in favor of the government to the almost total exclusion of the opposition.
Fight against corruption
The lackluster efforts to combat endemic corruption in Ukraine are slowing to an even more meager pace, contrary to recent promises to the EU. In December 2010 the Ukrainian Parliament vetoed an anti-bribery law that would have provided the requirement for the relatives of state officials to declare their income and expenses. The alternative law suggested by the president ignores requirements for family members of ministers and deputies.
Drago Kosa, president of the Group of States Against Corruption, recently pointed out that Ukraine’s commitment to fulfill its international obligations is undermined by the fact that the new anti-corruption law does not regulate the responsibilities of legal entities. Kosa went on to mention that if Ukraine fails to achieve significant progress against corruption, its position in negotiations over visa-free travel will be weakened further. It is unlikely that Ukraine’s corruption will be brought down to a manageable level whilst the penalties for corrupt practice remain so light and so few. In reaction to this, Yanukovych stated that prosecution of corrupt officials regardless of their rank and political affiliation is an essential condition of modernization in Ukraine.
People First Comment: It does not matter how much they twist and turn, how much they try to avoid the issue or how many promises they make, eventually the authorities are going to either agree both in law and in spirit to the collective understanding of the 27 nations of the European Union or accept that Ukraine will not be invited to join their club. These naïve and frankly childish games do little for Ukrainian credibility.
Viktor Tkachuk is chief executive officer of the People First Foundation, which seeks to strengthen Ukrainian democracy. The organization’s website is: www.peoplefirst.org.ua and the e-mail address is: [email protected]
