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What should Zelensky's team consider if they want reform?

Author : Olexandr Honcharov

Successful modernization can be achieved in Ukraine in only two ways. First: the establishment of authoritarianism with all its negative consequences. Or the second: with a slow construction of a democratic system without an oligarchic structure
21:22, 20 August 2019

President of Ukraine Volodymyr Zelensky
Ukraine's Presidental Administration

The economy of the European Union countries has decelerated sharply, but in our country it has been the other way around: in the second quarter of 2019, Ukraine’s GDP growth accelerated by almost 2 times, reaching a record 4.6%!

And when we begin to implement a new investment strategy by adopting the draft law "On Capital Markets", the same long-awaited events and even more important ones are waiting for us ahead.

The new government has not even begun to squeeze embezzlers and corrupt officials, breaking their schemes, but Ukrainian markets have already begun to unfold upward.

According to foreign investors, the reasons for the increase were the decrease in inflation, sound monetary and fiscal policies. But the main thing is that you should not steal, and the economy will continue to grow at the same record rate.

I have no doubt - we still haven’t gotten away from the slight shock when we found out last month how much (!) money we taxpayers have to pull out of our pockets to pay for the obligations of our Ministry of Finance, which almost every week conducted the placement of Ukrainian government bonds.

My colleagues are smart and experienced people, so they were discouraged by profitability rates, for example, for one-year government bonds in dollars it is 6.5%, for two-years government bonds in dollars - 7%! Of course, now it’s nice to hear from the Minister of Finance that she is seeking to reduce such record percent interest rates, and, in particular, on Tuesday, August 20, the Ministry of Finance will place only hryvnia government bonds. However, there are more than $ 16 trillion of bonds with negative yields in the world!

Note that 7% of the yield on securities denominated in dollars we have in poor Ukraine, and in Germany this number is minus 0.002%. Okay, who cares about such craziness? Finally, who will repay these foreign currency debts? More precisely, is there any way out? These are not rhetorical questions; this is already a question of survival.

In this regard, I willingly believe that the actions of the president, the Verkhovna Rada and the Cabinet of Ministers are to be considered by the voters, from the point of view of the four "I":

First of all, ideas. Now the president, parliament and the Cabinet will be inspired by libertarian ideas, that is, a reduction in state intervention in the life of citizens.

Secondly, institutions. Most of the institutions that existed in Ukraine need to be reformed, or, more simply, dismantled.

Third, interests. The interests of a poor society are both a lot and a little. True, at the same time there are the interests of the oligarchs who will lose all at once after the reforms, but for now, they are well informed, organized, have powerful administrative, financial resources, therefore they will block the transformations that are most necessary for our population.

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Fourth. individuals. In order to effectively deal with the interests of financial and industrial groups of oligarchs, it is necessary to create a coalition of supporters of reforms, which would also include strong players of the Ukrainian market, interested in changing the situation, ready to appeal to national business, and investors, experts and the general public.

At the same time, Russia, playing the role of an external enemy, will also peculiarly contribute to reforms in Ukraine. Well, and what do I expect in the medium term from the libertarians of the ruling party "Servant of the People"? First of all, liberal entry of Western and Asian multinational corporations into the Ukrainian markets.

Secondly, the liberal reform of the Ukrainian energy sector under the idea of ​​Ukraine’s energy independence. Thirdly, liberal associations with the mobilization of young Ukrainians who have graduated from universities in Europe, the USA and China, whose ambitions for creating a new Ukraine have intensified.

Indeed, it’s enough to listen to the “older” brother, it’s time to look at the reforms not from the side of Russia, but through the eyes of Ukrainian business and even a foreigner - American or Chinese.

And working to achieve the goal, we must prepare for the fact that when land reform is being carried out the new government will encounter the resistance of the "fifth column" and part of the local bureaucracy. Well, the price of errors will increase.

Accordingly, the Servants of the People may begin to lose their leverage over the regional management, which will mean increased local self-sufficiency and self-government and will inevitably lead to irritation of the President’s Office.

This means that successful modernization can be achieved in Ukraine in only two ways. First: the establishment of authoritarianism with all its negative consequences, which for me personally is unacceptable. Or the second: with a slow construction of a democratic system without an oligarchic structure.

So, Zelensky has only two ways of carrying out sharp and hard reforms. Which one will he choose?

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