The new Ukrainian government is making a generous gesture by extending a hand to business. What is in this hand and is there something “up the government’s sleeve?” This was the theme of a forum called “The Government and Business,” held last Friday.
“Business is always right.” President Viktor Yushchenko of Ukraine spelled out the new formula for the relationship with the entrepreneurial community and told the audience about his plans in his own inimitable style. Broaching the subject of businessmen’s social responsibility, the head of state tried to arouse feelings of sympathy in the forum participants. “You were born and raised in this land, where your umbilical cord lies buried. Aren’t you ashamed to bask somewhere on a sandy or pebbled beach, knowing that somebody else earns a wage of 240 hryvnias? Do you have sympathy or not? Are we citizens or not?” he asked the audience. By all accounts, sympathy for ordinary Ukrainians is to come from financial-industrial group leaders Viktor Pinchuk, Oleksandr Yaroslavsky, and Vitaly Haiduk, UMC president Eric Franke, members of parliament, and managers of large business associations, all of whom were spotted in the room.
Most of the entrepreneurs who attended the forum chose farsightedly not to turn away from the government: they also want to see the latter as their partner. The president set his own conditions and warned about possible penalties. “I oblige you not to bribe. I’m not begging you meekly, I’m obliging you! Should you continue to do these kinds of things, you will not be my partners and God will punish you. Please enter one revenue item into your 2005 budget: savings on bribes,” President Yushchenko said.
He announced that the government will be fighting bribe-takers within administrative bodies: “We are establishing the National Bureau of Investigations to concentrate in one office all the investigative functions to look into abuses on the part of class 1-3 civil servants.” President Yushchenko also made a firm promise: “Upon my word, officials will not be taking bribes.” He went on to recall the previous government, “Three families reigned supreme, trampling over the rest.”
Businessmen are not objecting to the president’s statements. In an interview with The Day, Vadym Bodayev, director of the local branch of the Sigma Blazer international investment company, said that business should play by the rules and then, if the two sides show good will, it will not be difficult to separate business from government and work to civilized standards. Natalia Sokolska, president of the Atek joint-stock company, said to The Day, “For the economy to function and entrepreneurs to demonstrate their talents and capabilities, the government should at least not interfere.”
The president’s promise to simplify in two or three weeks the procedure of registering new businesses was taken with cautious optimism. Mr. Yushchenko announced that today it takes an enterprise “18 months” to get registered because it has to formalize about 60 documents and dish out bribes, while in Moldova this procedure takes a mere 2 hours. Ukraine also intends to concentrate all enterprise registration elements in one office, where the new Ukrainian business will be forming. To ease the existing tax burden, the president decided to offer a gift. “Ms. Yuliya and Mr. Viktor should plug their ears,” said Mr. Yushchenko, turning to Prime Minister Yuliya Tymoshenko and Finance Minister Viktor Pynzenyk, “What about a three-year tax holiday for newly-established ones?” In his words, the budget can be fulfilled at the expense of existing enterprises. The president said that tax cuts would be a test for both business and the government if, naturally, nobody evades their taxes. Prime Minister Tymoshenko, who looked very assertive, backed up the president. What she spelled out were not ideas but action plans for the nearest future. She said the cabinet was now assessing the possibility of rescinding a number of taxes in Ukraine. Ms. Tymoshenko assured the audience that she hated the VAT “with every fiber of her soul” and it will be axed, as will the wages fund tax. What will be left intact is the tax on natural persons’ incomes (with a rate of 13%), the 7-10-% sales tax, as well as rents and excise taxes.
“We are also prepared for a fiscal, capital, and property amnesty, but you must first step out of the shadows and pay taxes on time,” President Yushchenko told the audience, “so that those who pay them do not know the tax inspector even by sight. But we will take a tough stand against adventurers.” After announcing this perk, the president promised that the government would not hinder business development, nor would it take into account the political views of businessmen if the latter fairly cooperated with the state. But, as Ms. Tymoshenko said wittily and unexpectedly, “now representatives of the old authorities are continuing to beat ‘orange’ businessmen, while the new authorities are begin to beat the ‘blue’ ones.” “We will see to it that these things stop in 2-3 days,” the premier added, recalling her own experience of business suppression.
The prime minister also seems to be modifying her views on re-privatization. “High governmental bodies are now thinking about how to seize large enterprises, medium-level bodies about how to seize medium enterprises, and local bodies about how to seize hairdresser’s shops,” she said. “We do not encourage this.” The premier emphasized that the new government had decided “not to grill people over the privatization of hairdresser’s shops, stores, and offices even if this privatization was done illegally.” If we recall “the list of 3,000,” these words look like self-criticism.
Supporting the premier’s efforts to spell out concrete plans for the future, Minister of Economics Serhiy Teriokhin promised a bit of liberalism. According to the minister, the National Bank is going to cancel compulsory sales of part of exporters’ hard-currency earnings. Along with other agreed-upon measures, this step will drastically strengthen the hryvnia’s rate. Besides, Mr. Teriokhin tried to play on the hryvnia’s revaluation right on the spot. “Dear friends, if you have surplus dollar reserves, please exchange them for the Ukrainian currency,” he suggested.
As for the businessmen, they also offered suggestions to the government behind the scenes. For example, Leonid Yakovenko, representing the Guild of Entrepreneurs in Zaporizhzhia, told The Day it was the state’s urgent duty to create favorable taxation and customs control conditions, while all that is required of business people is to obey the law.
