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Ruslan Vesnyanko: The sad holiday, the day of Ukraine’s independence

Photo: finance.bigmir.net

In 1991, the newly independent Ukraine was an economically developed, well-to-do nation. At that time, Ukrainians enjoyed a strong army with nuclear weapons, advanced space technologies, fertile soil and highly-educated human resources. And now, just 24 years later, they have none of these. A series of presidents and maidans have thrown them into poverty and corruption.

Some politicians believe that Ukraine needs a restart, but in just one restart, you can’t restore something you have been losing for decades. Ukraine’s government system constitutes a vicious cycle: it allows those in power to lie and to rob and then to use the robbed money to buy votes and to come back into power again so as to rob even more.

Fighting the shadow: a lost battle

Over the last two decades, the Ukrainian authorities have driven most of the national producers into the shadow. As a result, today, almost 2/3 of companies in Ukraine are using “black” or “grey” schemes.

You shouldn’t be an expert to know that in a country with a strong shadow economy tax revenues are low. As a result, the government of the country has no money for paying wages, pensions and social benefits, no money for building kindergartens, schools and hospitals, no money for repairing bridges and roads.

In other words, without taxes there is no state. The key problem in Ukraine is that its tax legislation is deficient. So, each new government deems it its duty to revise the tax code. But each new “rules” make things even worse: business is going deeper and deeper into the shadow.

Even (Prime Minister Arseniy) Yatsenyuk has admitted that he has already lost two battles to the shadow. Now, he is preparing for a new one. This time, he is going to cut the unified social tax (the tax an employer should pay for his employee).

But experts are skeptical as they know that every time the government in Ukraine grants privileges to one sector, it starts putting the screws on the others.

So, most of Ukrainians already have an immunity against the government’s promises. They do not believe in reforms. All they want is to see some real improvements.

National currency: record fall

Few people today remember that when UAH was first introduced, its exchange rate against USD was 1.76. Few noticed the decline to 5 UAH per 1 USD, but many remember the slump to 8 UAH per 1 USD in 2008. But what is going on the currency market today is real anarchy. Last year the UAH/USD exchange rate dropped by more than 2.5 times and in Feb 2015 it fell as low as 40 UAH per 1 USD.

As a result, the country went into hysterics. While people were taking heart drops and experts were blaming the National Bank for stupidity and incompetence, money changers were earning millions. 

The law says that the key mission of the regulator is to ensure UAH’s stability. They in the National Bank of Ukraine keep failing this mission, but nobody has been made responsible so far.

Prices and tariffs: unprecedented jump

The Ukrainians are a patient nation, but it seems that each new government wants to see if this is true. Over the last two decades we have already gotten used to growing prices, but 60% inflation is a bit too much!

The real prices are even more chilling as they have grown almost twice. And the new utility tariffs have become a real shock for the country – a sixfold rise in the gas price was something really unprecedented!

Yatsenyuk is deaf to protests and says that this is an economical tariff. But the problem is that utility tariffs should be not only economical but also fair and transparent. There was a way to reduce Naftogaz’s shortages – to start stealing less, to get rid of monopolies and to introduce energy saving technologies. But the authorities preferred “to raise the tariffs” option - as it will save them time and effort and will give them even more benefits.

Wages and pensions: below the poverty line

Social standards have not been raised in Ukraine since late 2013. Given the fall of UAH, this has resulted in a $41 minimum pension and a $53 minimum salary. This is lower than the UN-fixed poverty line of $5 a day or $150 a month.

Today Yatsenyuk is promising to raise the social standards on Dec 1, 2015. He says, “We have no money but we will try to find it.” It’s like he is going to accomplish some feat - a true “hero of our time,” isn’t he? But he seems to have forgotten that according to his own budget for this year, he is obliged to ensure such a raise. Besides, just a $7 raise to the minimum salary and a $5 raise to the minimum pension for the next two years is hardly something he can boast of.

And one more anti-record: as of July 1, 2015, Ukraine companies owed their employees a total of 2bn UAH. This sum would be even higher were it not for the State Statistics Committee’s decision to “check the statistics.” As a result of this “check,” the debt has been reduced to 1.32bn UAH.

Corruption: omnipresent

Corruption in Ukraine is like cancer – it has “metastases” everywhere. On Transparency International’s Corruption Perceptions Index 2014, the country was 142nd out of 175 countries with just 26 points and well behind Georgia, Moldova, Belarus, Russia and Kazakhstan.  

So, no surprise that the first thing each new Ukrainian government does is declare a war against bribery. In the acting government there was even a person, Sergey Kaplin, who suggested death penalty for corruption.

Experts see no reason in such punitive measures and suggest preventive methods, like cutting the number of public servants and raising their wages.

Such simple measures - plus close public control - could be a good weapon against corruption. But nobody will use them as the real goal of the acting authorities is not to destroy corruption but to declare a war against it and to do it as loudly as possible.

Ruslan Vesnyanko, analyst (Kiev), specially for EADaily

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