The economists telling us that Ukraine is facing an economic downturn (let them decide if it is a depression or recession) should hold no surprises to anyone with the two standard semester of Western freshman economics. Last year’s export-driven upturn was due to an exceptionally favorable situation for Ukrainian metals, a commodity made cheap because the energy needed to process it is from perhaps the most criminalized sector of the post-Soviet economy, and the West, faced with its own economic problems, has started to put up protectionist barriers, which Ukraine can really do nothing about.
Once again we hear of what a good place Ukraine is to invest in. Unfortunately, I personally know of a number of horror stories concerning persons of Ukrainian descent, who truly wanted to do something for their ancestral homeland, and their experiences indicate otherwise. Look at the empty Richard Building on Andriyivsky uzviz and ask me about the American of Ukrainian descent who walked away from $7 million because he could simply not take the bribery or, for that matter, the gentleman who sunk $2 million into a factory in Cherkasy, and cannot get a penny back. Need I go on?
The problem, as economist Oleksandr Paskhaver, one of the best I have seen here (which probably explains why he is not in government), explained is structural. Ukraine still lacks a market economy because of the formal and especially informal (shadow) role of state structures, monopolization (legal and illegal), along with the lack of any legal security for market transactions (supremacy of telephone law). An investor coming to this country from what used to be called the Free World simply does not know what he is buying, and if he thinks he can take control of it, he can be unceremoniously thrown out, handed back his usually devalued hryvnias, and bidden a fond farewell. Of course, in a competitive world, nobody with serious money is going to put it into such an environment. They will put it where they know what they are buying and that, once owners, they can change the management for those they think can do a better job. Until that is the case in the former Soviet Union, one can forget about serious Western investment. All one can do is wait to see how much others from the same environment can buy, bribe, and then take over well out of the public eye.
