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Ukraine's direct way to bankruptcy: The country eats more than earns

Author : Olexandr Honcharov

23:09, 16 May 2017
Ukraine's direct way to bankruptcy: The country eats more than earns

Author : Olexandr Honcharov

No matter how bitter it is to hear from foreign partners and investors, our main distinguishing feature is offshorization of Ukrainian business

23:09, 16 May 2017

Read the original text at 112.ua.

cci.com.ua

In the last 10-15 years, the most popular appeal of the Ukrainian authorities is the implementation of structural reforms aimed at creating new jobs. But, unfortunately, not a single prime minister explained how to combine rigid fiscal discipline and workplaces creation without using corrupt schemes at the same time. Not only theory, but also today's practice shows that it is impossible to combine these things.

Everyone can see the outflow of capital to the offshores, reduction of social costs and income of Ukrainians automatically lead to job losses and increased unemployment. With our silence, for a short time, a whole class of offshore aristocracy was created. And now, none of the ministers can still clarify what is Groisman calling for.

Also, no one is going to say how much dollars were taken from Ukraine, I think, it's about more than hundreds of billions. If not more. Is this the reason of why the majority of our people are very poor in Ukraine? The industry is practically destroyed, and the government constantly begs for loans and financial assistance around the world, not knowing how to return these huge public debts. The same very wealthy politicians and big officials are rotating from one cabinet to the other, and all of them today want to please not the Ukrainians, but the president of the United States Donald Trump.

Related: Panama Papers: Poroshenko linked to offshores cooperating with Russian “Gazprom”

No matter how bitter it is to hear from foreign partners and investors, our main distinguishing feature is offshorization of Ukrainian business. Offshore institutions are especially popular in countries with high risk of losing business. And in Ukraine, as international investors note, it is high time to protect private property from raider seizures with the help of reliable legal institutions, as is customary in countries with high-quality economies. Also, not forgetting that the impoverishment of the population is fraught with the growth of social tension, protectionism and xenophobia.

Moreover, our foreign partners and analysts, having studied the macroeconomic indicators of a number of Ukrainian industries, emphasize that the growth of GDP is not necessarily related to economic growth. After all, if you cut jobs and wages, Ukraine's GDP will also grow, then with its growth, inflation will slow down, because Ukrainians have no money to buy goods and products. But poverty would really grow, and we are now witnessing this process.

Related: Happiness overseas: famous Ukrainians that have offshores

By the way, instead of the lower prices for imported and domestic goods promised by Groisman and Yatseniuk, we have faced an uncontrollable price increase. And instead of the promised curbing of the appetites of the oligarchs, who own natural monopolies, there is a process of sharp growth in utility tariffs and prices for energy resources. I think the oligarchs gratefully accepted this gift, for example, "Rotterdam +". How about ordinary people and international investors?! The ritual of Ukrainian officials has long become standard: stealing the budget money plus "targeted" sale of state property assets, which should be subjected to privatization.

By the way, the International Monetary Fund recently made a forecast of GDP growth of Ukraine by 2% in the current year 2017. In its regional economic survey in May, analysts of the Fund forecast the growth of our GDP in 2018, 3.2%. Next, the dynamics of domestic demand should be 4% in 2017 and 3.9% in 2018, while the real growth in exports in 2017 is 2% and in 2018, 3.4%.

Related: Grain replaced metal: Metamorphoses and paradoxes of Ukraine’s economy

However, a month earlier the National Bank of Ukraine, on the contrary, lowered its forecast for GDP growth in 2017 to 1.9% and raised it to 3.2 and 4% for 2018-2019, respectively. Yes, it is already very difficult to hide the fact that stocks of gold reserves are depleted, the country eats more than it earns, and this is a direct way to bankruptcy. Therefore, more than ever before, it is necessary today to talk about the possibility of doubling GDP over the next 5-10 years. At the same time, the structure of the Ukrainian economy, unfortunately, is increasingly changing from industrial-agrarian to agro-raw materials.

This policy of the government in the energy sector is particularly hard and even more painful for its consumers. It is known that the Ukrainian energy industry provides limited opportunities for doing private business and using foreign investments.

Related: Overcoming inner populism: 3 economic lessons from elections in France

In addition, the trends of recent years are directly related to the extent to financial and economic indicators of the production activity (whether the value of company’s business is growing or, conversely, the value of assets is reduced and they have to fix losses). And yet, what needs to be done to change the situation for the better? I am convinced that it is necessary to create the Ukrainian Development Corporation. The history of the active creation of development corporations in the world dates back to the 1950s and 1960s, and now there are more than 100 development corporations.

Finally, it is time for our business and the Cabinet to become more “understandable” for international investors. I mean to finish restructuring of the Ukrainian market infrastructure at the legislative level, to adopt the laws on markets. Now Ukraine seems to be the "Stone Age" for foreign investors.

Related: Restart of land market or "economic nonsense"?

Of course, the time of business relations of 90s (with raiding, murdering and kidnapping) has already ended. A period of transparent and civilized entrepreneurship begins. I have no doubt that in case of transnational corporations entering our market, their managers would quickly teach the Cabinet and Ukrainian business. Then the reform of the Ukrainian economy would begin and we would stop eating more than we earn.

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