The new government has not staged a revolution in the economy in spite of several months of work. Routine administrative work, if you go by what the insiders say, does not impress, either. Even the unexpected economic growth has turned out to be the merit of previous governments, as the President broadly hinted.
The conversation with Serhiy Tyhypko, Vice Premier in the Pustovoitenko government and Economy Minister in that of Viktor Yushchenko, it seems to us, shows the strong and weak sides of the new government. The reader will probably agree to our opinion that the new team has an indisputable advantage of having, in fact for the first time, no deep abyss between its strategy and tactics of government activity, which inspires optimism for the future.
But our first question to Mr. Tyhypko was not about this but about the changes in his duties after taking office as Minister of the Economy.
“The changes are fundamental. As time goes by, I become more and more convinced that Minister and Vice Premier are entirely different posts. A minister has a narrow sector of his own for which he bears complete responsibility, while a Vice Premier’s sector is far broader; he does not have such concentrated responsibility, and he essentially performs the function of a coordinator of the actions of ministries, state committees, and other executive bodies that deal with problems. His job is to put the ministries in gear and make decisions for the problems arising at the points where different interests meet. His second duty is to keep things in sight. He knows there are five to seven key directions in reforms: administrative reform, deregulation, privatization, pension reform, power engineering, and agriculture. So he must continuously keep track of and control the situation in these spheres, initiating and supporting changes.
“Conversely, a minister must look closely into very specific problems, see the heart of the matter, and see to it that the solution to it is brought to the notice of the regions and enterprises. This is very important. I cannot say I already feel completely at home in this ministry. You know, it is wrong to say it is enough to stay up nights for a month in order to see the way things are going. I can judge by myself: it takes at least six to eight months to really grasp the essence of an issue, provided you have a good background. But if you don’t have this background, it will take you one or one and a half years to start to understand something.”
“Is there any difference between the tasks set to the ministers of the economy in the governments of Yushchenko and Pustovoitenko?”
“The premiers are, of course, entirely different. Each of them undoubtedly has his own pluses and minuses, and the way they set tasks is, naturally, entirely different. I think it is clear to all that Mr. Yushchenko is a more ‘market-minded’ person, so he is drawing our attention today to fiscal and budgetary matters. Budget, budget, and again the budget: this is all we think of.”
“But formerly, too, the budget was always in the foreground...”
“Yes, but the methods are different now. To be more exact, the instruments were the same, but priorities were different. Do you remember the tough way in which Mr. Pustovoitenko tried to solve his problems at Ukrayina Palace? I, too, had to literally spend nights with factory managers in the Cabinet’s large conference room. Now priority has been given to economic and financial methods. For example, reciprocal accounting and government loan guarantees have been banned. I personally prefer this kind of approach, subtler and more effective.
“Another example. The previous minister dealt with Program-2000. He was assigned the task of working out a big serious long-playing program, while I was told to prepare a concrete 25-page government program. This clearly shows differences in the approach to drawing up such documents.”
“Practically all previous governments’ programs painted a very attractive and market-oriented future for this country. But in reality, there always was a deep gap between economic strategies and tactics, with everyday decisions often running counter to the declared strategy, which in fact only increased the distance from program targets. The current government also seems to have failed to overcome this drawback for which it is often criticized. What can you say to your critics?”
“First, we should always remember that politics is a continuous compromise. It is impossible to declare a certain pure idea and then stick to it without ever veering to the left or right. There are no eternal wins in politics. For instance, we have adopted our program. I saw the reaction of the press to this: look, the government has won! But if you have won in the program, you should immediately lose in something else, make concessions, and agree to compromises. You must understand the problems of certain factions which wanted something, and then, after you have understood this, think how you can make them such a concession. Why? Because tomorrow you will have to go to Verkhovna Rada, for we don’t have five or six laws we need for the resumption of the IMF program, further progress in cooperation with the EU, etc.
“Another aspect is a link between the things of today and tomorrow, between strategy and practice. I have worked in the government for over three years and so I can compare things: nobody is prodding me on now. I know that several strategic directions have been charted out today: administrative reform, privatization, bankruptcies, management of government shares, deregulation, tax and accounting simplification, pension and utility-charges reform, along the reforms of agriculture and power engineering, in the framework of which the government does its work. It seems to me the government manages to follow this strategy. When we deal, say, with the sowing campaign, this is everyday work we must do in any case because if we refuse to do this today, I am sure we will be accused tomorrow of having chosen a wrong strategy. They will say, ‘Why did you begin reforms, forgetting to sow grain? You’ve got no bread, so all your ill-conceived colossal reforms are wrong in essence.’ That’s why, in order not to lose our strategy, we have to deal with these tactical tasks.
“We have recently made a wise economic decision on oil products, and a three times larger than normal quantity of these products were supplied from April 16 to the end of the month. I am sure so much diesel fuel is now being delivered that it will suffice even for harvesting, while the agricultural enterprises will have undergone changes by then, and I hope the law on land will have been adopted, thus putting into motion the mechanisms of private land ownership. This will encourage investors. If we manage to improve the investment climate and resume the IMF program, investors would go to agriculture, like a car given a green light. In general, the ability to keep the target in sight is a complex affair referred to as strategic planning: you see the priorities without getting bogged down in the details.”
“Former representative of the IMF in Ukraine Alex Sundakov once pointed out technological limitations to strategic planning. He said, in particular, that the money distribution utilization of the budget which has always been the practice in Ukraine) makes it impossible in principle to implement any strategy.”
“Now we have in fact rejected this kind of practice. Minister of Finance Ihor Mitiukov, deals with budgetary planning once a week. The premier does not do this at all. We no longer have weekly sessions with the premier, where money is distributed. There are protected items, there is the Treasury, there are certain priorities, and, in addition, there are monthly budgetary targets we have to meet. What we must deal with is revenues and optimizing expenditures. Nothing else.”
“A few years ago, the Ministry of the Economy instituted a section in charge of economic analysis and forecasts. Are you satisfied with the performance of this unit?”
“No, I’m not. I must say that I, as a minister, have all but nagged them to death. The point is these services have had to carry out very many tasks lately: to work on the program, sum up the first quarter, and write analytical memorandums despite the acute shortage of computers and meager salaries. I am sure, though, that work done at the cost of tiring everybody out has no future. No one needs any all hand on deck type rush. I would be very glad if these people could come to work at nine and go home at six, in contrast to the situation when the program was being drawn up, when nobody had even a day’s rest, including March 8, and when they began work at 8 a.m. and ended at midnight. I think the problem of key experts is one of the main problems the government has not yet solved. These people should be persuaded to stay behind and offered decent work conditions.
“As to the quality of work, I can say it is increasing steadily. We constantly try to bring our executives closer to various analytical centers, both national and foreign; we try to do many things together. We have updated our staff quite radically, we have even lured several high-class experts from other state institutions. We hope very much that the fusion of youth and experience will yield good results. Even now, our work is qualitatively on a par with Western practice. But I think the future lies in something different. The ministry will never be able to keep all the best specialists available, although it must have experienced and competent ones. Yet, there cannot be many of them, naturally, for we won’t be able to pay all of their salaries.
“We must gradually use the services of analytical centers which work not only for the government. They require information and exchange of opinions, they are ready to receive small remuneration for that and put out a high-quality product. I suppose the Ministry of the Economy should go this way, the more so that such groups already exist here.”
“The President noted at the meeting to sum up the Cabinet’s first quarter performance that numerous lapses in economic policy threaten that the economy grind to a halt. Could you specify what exactly lapses the President was talking about?”
“First of all, we should carefully analyze the factors that caused economic growth. Indication of these factors is part of the answer to your question. We should not forget that the government has been working very much on the implementation of anti-monopoly measures. Adequate competition in a number of sectors is making itself felt, as does privatization. Small business, trade, public catering, the processing and light industries are all very highly-competitive sectors.”
“In other words, can we speak about the first results of lengthy and slow market reforms in Ukraine?”
“By all means. The first sprouts of the reforms many governments have carrying out are finally being seen. We are aware that a certain role was also played here by devaluation of the hryvnia, which made export and import substitution profitable. Also played its role the payment of wages in late 1999. The government even managed to exceed the budget deficit, thus creating additional demand which told on industrial production. However, all these factors are already losing ground. The 10% inflation rate in the last three months is a warning sign. I think the President meant this above all. We should not succumb to euphoria and stop. We should not forget that what is needed is a critical mass of changes which will lead to the economy functioning normally. The President can criticize the government for the way it conducts administrative reform, privatization, deregulation, bankruptcy reform, and pension reform. Pension reform should be started right now, while the economy is growing.”
