Ukraine lived the first two weeks of January without a Minister of the Economy and European Integration. And although no major disasters occurred in the economic realm over this period, the parliamentary faction of the Labor Ukraine Party and the Party of Industrialists and Entrepreneurs, which has the exclusive right to nominate a candidate for this ministerial post, announced its intention to nominate Mykola Derkach, Ukraine’s ambassador to Lithuania, since, to quote Labor Ukraine Leader Ihor Sharov, he has the special training, practical experience, and good managerial skills.
Minister Derkach served as the first deputy chairman of the Dnipropetrovsk Oblast State Administration and before that as its chairman. Incidentally, the administration characterizes him as a skillful and strong-willed administrator and executive whom this administration would like to return to its ranks but has not done so until now only because of his possible career advancement.
Two questions need to be answered. Why was Premier Viktor Yanukovych forced to lie days before the New Year when he said that Khoroshkovsky had not submitted his resignation? And what are the actual reasons for Khoroshkovsky’s resignation? The answer to the first question is perhaps that in the last days of the year the president was still undecided whether to accept his resignation. Simultaneously, answers to both questions stem from the agreement signed between the government and parliamentary majority on the last Thursday of 2003.
Presumably, Khoroshkovsky’s resignation could be both a result of this second coalition agreement and something that could undermine it. Thus a short time-out was needed to somehow dampen the repercussions brought on by this situation that first showed itself as a certain friction within the government during the grain crisis. Then Khoroshkovsky lost the dispute, although, by all accounts, in terms of the market economy he was right in protesting, among other things, the excessive concentration of power within the government. Especially distressing for the former minister was his inability to make appointments (Khoroshkovsky spoke about this in an interview with The Day), while people were appointed against his will, who were instructed to bypass him and report to the top persons in the government. What kind of manager would put up with such an approach?
However, Khoroshkovsky, who is not suffering from a lack of ambition, would have put up even with this if decisions that were the exclusive province of the Ministry of the Economy had not been made known to him after the fact. The ministry still does not know and is only guessing as to who advised the president to veto a law on a nationwide program to adapt Ukraine’s legislation to that of the EU, a bill that the parliament passed. It is also a fact that of late the Ministry of the Economy has been learning about the decisions relating to the SES only from media reports.
Even the Russian press says that all drafts of economic agreements to be signed as part of the SES do not envision absolute liberalization of markets, which is the main interest of Ukrainian businessmen. Supposing that Khoroshkovsky represents their interests, this circumstance alone made his departure inevitable. Experts of The Day foresee that most probably Mykola Azarov will have to part with one of his posts in the government and pass the Finance Ministry to somebody else. In this case, Khoroshkovsky could triumph, since at one time he himself raised this issue. He also mentioned this in his resignation speech, in which he stressed that the government’s economic policy and the activity of the Ministry of the Economy in particular are in fact subordinated to the Finance Ministry.
“Subordination to the current fiscal tasks makes it impossible for the government to prepare long-term and strategic measures of the economic policy and form a long-term development strategy, creates discrepancies and incongruities between the economic policy and financial resources required to restructure industry and establish an investment-innovation model [of economic development] for Ukraine,” the former minister is convinced. In his view, as a result, “administrative intervention in the markets is beginning to prevail over economic levers of regulation and incentive.” Of special note is the worrying assessment of Ukraine’s economy aired by Khoroshkovsky: “Despite a series of positive signs the economy showed in 2003, there are serious threats to Ukraine’s economic development, which will significantly affect Ukraine’s economy in 2004. Today it’s not reasonable to speak about development — we are merely regaining what we’ve lost over the past decade.” He further stressed that unless Ukraine joins the WTO, it could find itself in complete trade and investment isolation, such that “relations with the EU will go no farther than political declarations, which could not only freeze the relationship between Ukraine and the EU but also jeopardize the creation of a free trade zone.” Khoroshkovsky also believes it is possible that the state will intensify its interference in the regulation of economic activity, in particular by means of price sett ing and suspension of privatization processes. He also thinks it is quite possible that there will be major shortfalls in the budget receipts as soon as in the middle of 2004.
The dismissal of Khoroshkovsky has shown that the government faces problems with developing the principles of its economic policy and perhaps with principles in general.
