Economic outcome of G20 summit and its lessons for Ukraine

Author : Olexandr Honcharov

Source : 112 Ukraine

G20 summit embraced global economic growth in the context of globalization, World Trade Organization reform, current issues related to uncontrolled migration, and climate change
10:00, 5 December 2018


December 1, the G20 summit came to its end in the capital of Argentina, Buenos Aires, where a number of key issues were discussed - from global economic growth in the context of globalization and World Trade Organization reform to current issues related to uncontrolled migration and climate change. What can we conclude from the final document following the G20 Leadership Meeting?

First of all, we all have to admit that big politics has nothing to do with human feelings and does not take them into account. But no one wants to kill his illusions. Especially one’s optimism and hope that the attitudes of Donald Trump, Angela Merkel, and Emmanuel Macron to our authorities will not change. Yes, we all want to be protected and want to get that financial assistance. However, the likelihood that the White House, Germany or France would continue to tolerate our corrupt officials is too small.

In real life, we can see it soon, because, in Buenos Aires, the G20 leaders have approved the Anti-Corruption Action Plan for the next three years. Now we will actually know what does this austerity mode mean. And apparently, we have to go through this hard period of shock therapy. However, the agreements between US President Donald Trump and PRC Chairman Xi Jinping to suspend the introduction of new trade duties for 90 days still give hopes for preserving the stability of the global economy. Otherwise, the trade war between the two largest world economies threatens to have very dangerous consequences, especially for the emerging markets.

Related: Trump and Putin had "informal conversation" at G20 summit, - Sanders

And now, taking into account the fact that an important place the final declaration of the G20 summit was taken by the jobs creation, influence on the factors of migration crises, as well as the reform of the World Trade Organization, Ukraine should take advantage of these circumstances and significantly speed up the organization of Kyiv International Investment Hub with Universal Exchange (commodity, stock, and derivatives sections). We will not be able to effectively respond to the results of the G20 summit in Buenos Aires, further weakening of the hryvnia and inflation will become inevitable in 2019. In addition, huge foreign debt payments and political fears of election campaigns will play against our national currency.

But the most important thing is to destroy the monopoly-oligarchic model and build a truly competitive market economy in Ukraine, changing institutions and rules of the game. Thus, we need to carry out a radical break-up of this model in three directions: first, change the field of public administration and the decline of the bureaucracy; secondly, the privatization of the economy, its liberalization and almost unlimited privatization; thirdly, the total change of the old bureaucratic apparatus and reliance on young cadres.

December 3, we have witnessed an unbelievable event, namely, Ukraine’s Mykolaiv Shipbuilding Plant build in 1951 (land plot of about 101 hectares and the water area of 42 hectares) was auctioned off for 122 million 195 thousand hryvnias! This giant enterprise was equipped with modern production facilities supplied by well-known companies around the world, for 45 years from the beginning of its existence about 400 different ships with a total displacement of more than 3.6 million tons were built. The initial price was declared in the amount of 41 million USD, but in the end, it was sold for 4,35 million USD.

Related: Results of G20 summit in Hamburg

All we can do is set it off. Has it really come to the path of unfair “voucher” privatization, the results of which have led to the fact that less than 1% of the population has almost 60% of the assets in Ukraine.

Perhaps, the release of so-called infrastructure bonds for large private-state investment projects could be in demand during the auction in Mykolaiv. With all the risks, the redemption of these National Bank securities in the secondary market could be an additional source of liquidity in the real sector of the economy. Actually, the options and possibilities for solving similar problems in other countries, as well as the regulation of prices for hydrocarbons, agricultural products, and many other things were discussed at the of the G20 summit. Ukrainian politicians and top officials should study the final communiqué of the G20 leaders summit, especially the most topical problems.

For the 2017/2018 marketing year, which lasted from July 1 to June 30, Ukraine has exported almost $ 6.4 billion worth of grain, that is, Ukrainian agricultural producers and exporters delivered to the foreign markets 39, 4 billion tons of grain crops to Egypt (11.4%), China (9.3%), Spain (7.2%), Indonesia (5.9%), the Netherlands (5.5%), and other countries. We have long joined the WTO, which unites more than 150 countries, which account for more than 95% of world trade. Who benefited from this? Ukraine? Alas, only those states that have competitive political and economic models benefit from WTO membership.

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And what about Ukraine? Will we no longer sell grain and wood? After all, we are supplying to the international markets everything that has a very low commodity value. On the other hand, our uncompetitive industries will simply die out. What will happen to engineering?

So why do we need the WTO? The WTO should not be a one-way street for Ukraine. In addition, penalties and trade conflicts have a negative impact on world trade, as the head of the International Monetary Fund Christine Lagarde frankly noted at the summit in Argentina: “Their influence is obvious. In the worst case, the measures taken to impose penalty fees will lead to global economic indicators decrease by 0.5%. These are our estimates, which we are ready to share with all those who are interested in a trade."

When our foreign partners talk about competition, they mean fair competition conditions in our Ukrainian markets only. No one improves access to the foreign markets. For example, if you look at the protection of the European food industry markets, there are lots of barriers – quotas, import duties, and various technical difficulties.

Related: Kremlin explains informal greeting of Putin and Mohammed bin Salman

What should we do then? The most important thing is that there is no answer to this yet. That is why for the first time the G20 leaders announced an idea of the WTO reforming. Well, we need to closely monitor the changes and promptly improve our legislative and regulatory framework, defending the interests of national producers and market participants.

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This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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