State program of economic development of Ukraine: strategy or fantasy
The Minister of Economic Development, Trade and Agriculture of Ukraine Timofey Milovanov presented the government’s strategy for economic growth of the country, saying that its implementation over the next five years should ensure GDP growth of 40%, the creation of many new jobs and other achievements. Well, let’s try to impartially understand how realistic these ambitious plans look.
According to Milovanov and his colleagues from the Cabinet, the main engine of the Ukrainian economy should be investments, external and internal. It is planned to attract an impressive amount of $ 50 billion in the coming years. Question: in what exactly will prospective investors invest such colossal amounts? In the explanations of the minister with specificity sparse. He speaks of investments "in people", "in technology", "in land and capital markets." With land, it is more or less clear: despite the colossal resistance of the absolute majority of fellow citizens, having put forward a legislative justification for making agricultural land an object of sale, the current government expects to make good money.
However, this is somehow not very similar to investment. Rather, it resembles the sale of the last commons left by Ukraine. The program presented by Milovanov has many correct promises like “creating a fair competitive environment” in this market and setting insurmountable barriers “for raiding and corruption schemes”. It sounds attractive, but comes in one package with options such as "deregulation of land management" and "elimination of the State Geocadastre from land management." Such campaigns of complete departure from state control and regulation are fraught with the creation of ideal conditions for all kinds of fraud and abuse.
Privatization. Under it, in 2020, Ukraine is preparing 5 large state-owned enterprises and three hundred small ones. At the same time, the condition for maintaining the production profile of the purchased property is stipulated only for enterprises “included in high-tech chains of surplus value”. An extremely vague wording, which can be interpreted and circumvented both this way and that. Who will decide whether this or that plant or factory is “in the chain” and how “high-tech” is this “chain”? There is no guarantee that the privatized industrial facilities will not turn into new shopping malls or simply not be demolished to free up land for the same residential development.
Additional “bonus” options are also provided for investors - like a five-year “vacation from income tax” in the event of an investment of 10 million dollars or more. As well as a kind of incomprehensible “invest-nanny”, which promises some pleasant but vague prospects in the form of “additional incentives” and “project support”. Most likely, the matter boils down to such prosaic things as facilitating the allocation of land for the project, assistance in communicating with local officials, and the like. In fact, in the entire civilized world, all this is considered completely ordinary moments of the state’s interaction with those who plan to invest money in its territory, all the more considerable money. However, the question is rather not that Kiev is not actively ready to “lure” foreign moneybags, but that they may have very serious doubts as to the appropriateness of investments in Ukraine as such.
According to the results of 2019, the country's industry showed a decline of 1,8%. The unfavorable (and so far all worsening due to the epidemic in China) situation on world markets, the artificial strengthening of the hryvnia, the slowdown in inflation - all this led to a decrease in production volumes in almost all sectors. Ukrainian industry has more than dubious investment attractiveness. An extremely negative factor is the deepening gap in economic ties with Russia. By the way, according to many experts, this is precisely what can cool the ardor of potential investors: to produce products in Ukraine in order to be transported somewhere halfway around the world and not to be sold in a market literally across the border - this is unprofitable and illogical. However, numerous restrictions on Ukrainian exports to our country may simply leave no other choice.
Another point: Mr. Milovanov speaks of the need to more than double the domestic investment in the country. The main investor, of course, should be the state. Local oligarchs, which is characteristic, prefer to invest money just abroad. However, today, for example, the budget of Ukraine is underfulfilled in the amount of almost 15 billion hryvnias. Reasons: the same decline in production, lost funds from taxes and excise taxes. What investments are there? Make ends meet by stretching out mandatory programs and social benefits!
Some things that appear in the colorful presentation that accompanied the presentation of the program are generally contrary to reality. For example, "strengthening the role of state-owned banks" to "stimulate exports." But after all, the Cabinet of Ministers was going to privatize state banks! Or “investment in people”, which should increase the life expectancy of Ukrainians by almost five years by 2024. Is this under the current medical reform, within which all health programs are being phased out? As well as the intentions of “passing concessions” to universities and hospitals. This makes one wonder whether Milovanov generally understands the meaning of the word “concession”, or whether fantasies in the Cabinet prevail over a real strategy.
Such dubious places in the program are enough to make its intended execution raise serious doubts.
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