Poverty and misery: what can Ukraine become in the nearest years

Author : Anatoliy Amelin

10:07, 16 March 2016

Poverty and misery: what can Ukraine become in the nearest years

Author : Anatoliy Amelin

During the next 14 years Ukraine's economy should grow by 11 times

10:07, 16 March 2016

Read the orixinal text at Hvylya

What happened to our country during the years of independence? Ukraine has gained independence in 1991. Rich in human and natural resources, independent country had the potential to be the most successful country in Europe. The resource potential of Ukraine is estimated at $ 860 billion., The country has a favorable geographical position, so to say, the transit potential. However, let us see how the economy of Ukraine has been changing during 25 years of independence.

In fact, we are still in 1992.

Related: IMF expects more efforts from Ukraine to fight corruption, - Vacher

Ukraine today suffers from poverty and misery. Over 25 years of independence, the country has reached its bottom. According to IMF estimates, on the basis of 2015 nominal GDP at current prices in Ukraine fell to the level of 2005, and the restoration to pre-crisis levels (2006-2007) will not happen before 2020. The average annual salary in the last year amounted to $ 176, below the level of Moldova. The average pension is at the lowest level among the European countries - less than 70 dollars.

At the same time, we have not lost a huge resource potential. Ukraine is the European leader in terms of reserves of uranium ore, the world's leading exporter of sunflower and sunflower oil, a European leader in terms of arable land. Ukraine is among the Top 3 European leaders in terms of reserves of titanium, manganese, mercury ore, shale gas, and coal. We occupy the second place in Europe in terms of capacity of the gas transportation system, the third largest nuclear power, and the third place in the world for the production of radars and radar technology. Ukraine is a country with high level of education. The number of PhDs in economic sciences in Ukraine is 15 thousand people.

Related: Ukraine increases IMF quota

What is the reason? Where have we made a mistake? Why are we moving chaotically, without clear priorities and goals? The lack of an effective development strategy was the main cause of the economic collapse in the country.

In order to change the situation, Ukraine should have its own economic development strategy, formulate goals, principles and tools of economic development. We must have a clear understanding of what is necessary to attract investments, to upgrade infrastructure and production, have a clear understanding of what the industry can become leading one in the next 5-10-15 years.

Of course, the development of such strategies has taken place for many times. Only in the last few years, it has been written more than 30 economic strategies. However, none of them did not become effective and has not worked. The reason is that the strategy was not acceptable to all stakeholders (the three main groups: citizens, business, and government).

Related: G7: Ukraine must fulfill commitments in negotiations with IMF, - Tombinsky

For politicians, the strategy acts primarily as s tool of lobbying the interests of the party sponsors. Business does not believe in the feasibility of strategies, preferring to have cash flows abroad. Citizens, in general, had no understanding of the benefits from the implementation of the strategy and the credibility of the political elites.

Strategy will be positively taken if each stakeholder sees his role and place in the strategy, its future opportunities and risks.

Economic strategy should take into account and integrate the interests of all participants in the process, which takes into account the interests and responsibilities of each group: citizens, business, politicians and officials.

Citizens must agree on changing the quality of their life as a result of implementing the strategy, the business should receive guarantees of private property protection policy - the guarantee of adequate social status.

Related: EU, IMF leaders positively assess course of reforms in Ukraine, - Poroshenko

What could be the aim of the economic strategy of the country, beneficial to all?

Basic principles:

  1. Creating the conditions for rapid economic growth. "At high tide raises all boats". Economic growth will lead to increased demand for labor, wage growth, export growth, increased revenue, social opportunities.
  2. The main focus is on the person, the quality of life, and increasing opportunities for self-realization.
  3. Self-sufficiency and independence of the economy. The rate of import substitution, energy resources, and export promotion.
  4. Maximizing the impact of basic industries. Increasing the degree of processing of the products, improving productivity and manufacturability.
  5. Development of new sectors with high added value: high-tech, services.
  6. To stimulate the increase of work places, development of entrepreneurship.
  7. Public-private partnership of infrastructure: roads, ports, social housing.

What does this mean for Ukraine?

This means the nominal GDP of $24 thousand GDP per capita in 14 years, which corresponds to today's standard of living in Slovenia, Portugal, Spain and other developed European countries.

Related: IMF: Ukrainian budget is good

What does this mean for the citizens?

The average salary will amount to EUR 1.0-1.5 thousand at current prices;

The average pension EUR 800;

High quality medical care, education and opportunities for children;

High social standards.

Related: Ukraine’s GDP decreased by 2.1 percent in January 2016

What does this mean for business?

Access to a long and cheap financial resources for business development;

Easy start of a business and tax reporting;

Low taxes.

What does this mean for civil servants and politicians?

High responsibility and respect in the society;

Social guarantees and market wages;

Politicians must have preservation in politics for a long time.

Related: Level of shadow economy in Ukraine decreased to 40% of GDP

Is it real?

During the next 14 years Ukraine's economy should grow by 11 times!

The experience of 'economic tigers' shows that this is impossible without attracting investments.

According to our calculations, in order to achieve this goal, the Ukrainian economy should involve in the next 15 years, more than $ 275 billion foreign investment (excluding domestic). Investment in the economy stimulates rapid economic growth. But is you want the investor to come, you need to create the conditions for this.

An analysis of the 'economic tigers' shows that the goal is more real than it might seem. History knows many examples of growth of the economy in 15 years, and 22 times (the experience of South Korea), 17 years (the experience of Azerbaijan), 12 years (the experience of Singapore).

Related: Ukraine's state debt to exceed 94% of GDP until the end of the year

A detailed analysis of the factors that made the backward countries 'economic tigers' allows you to select the 4 main factors that are inherent to them:

  1. The external threat. It was a powerful mobilizing factor of the nation and the elite.
  2. The authoritarian government of the country in the period of reforms.
  3. Control of an authoritarian ruler from the Anglo-Saxon world. The authoritarian ruler can easily slide into dictatorship and build North Korea.
  4. Money is the Anglo-Saxon world. The "economic tigers" were simply "pumped up" with money. South Korea obtained the billions of financial aid, Singapore, Taiwan, Hong Kong had billions of dollars of investments that allowed to build high-tech economy.

It's no secret that Ukraine is a country with great potential, but the question is how could investors be in Ukraine more comfortable than in other countries.

Related: Fitch forecasts slight economic growth in Ukraine in 2016

Related: Ukraine topped by Economic Growth Index in 4th quarter of 2015

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