Ukrainian economy: disaster goes according to plan
Around the end of 2010, political analysts noticed a sharp change in the model of managing the economy of Ukraine. Not the most inaccurate description of the actions of the authorities was “how crazy they were.”The “pokrashchennya” policy turned out that the authorities turned against themselves not only political opponents, but also many former supporters, which showed that the “regionals” lost two million votes in parliamentary elections. Having received a blank check for at least the next five years (she already considers the 2015 presidential race of the year already won), the authorities concentrated on solving a known task to her.
Although a stake on the head of the Teshi
The most secret document of Ukrainian foreign policy before 2008 was the package of documents on the terms of Ukraine’s accession to the WTO. There was something to hide: in order to “catch up and overtake Russia,” the negotiators agreed to almost any conditions, acting to the detriment of the country's national interests. What proved a package of requirements for the revision of tariffs immediately on 370 types of products that turned out to be unprofitable for the country. Few people remember that when it was formed, the list of unfavorable tariffs was reduced three times.
The evidence of the bondedness of the commitments to the WTO is filled with the materials of the committee hearings held in May of this year in the Verkhovna Rada following the results of five years of the country's membership in this international organization. Instead of the booming growth of the Ukrainian economy that was advertised, virtually all domestic manufacturing industries suffered from foreign trade rules.
Numerous calculations of profitability for industry and agriculture of integration with the States of the Customs Union and frank warnings about the serious consequences of concluding an Agreement on a Free Trade Area with the EU only strengthened the authorities' desire to sign this agreement at any time in November 2013.
A series of articles by the author with an analysis of the English version of the agreement showed his murderousness, not only for Ukrainian statehood, but also for the economy. What today is confirmed by followers who actively criticize the document on the officially published Ukrainian version.
Even the most ardent admirers of European integration in the person of deputies of the All-Ukrainian Union “Freedom” recognize the damage of the agreement, its deadly effect on the Ukrainian economy. However, neither the authorities nor the opposition are going to give up the jump into the abyss upside down in November.
Global trend
2012 year was marked in the traditionally industrialized United States, European Union, Russia, the beginning of the restoration of previously destroyed industry. The United States has begun to build new production facilities instead of those previously destroyed, have reopened many oil wells, increased the production of industrial equipment, automobiles, parts, engines, and consumer goods.
European Commissioner Antonio Tajani insists on a new industrial breakthrough in Europe: the share of industrial enterprises in the gross national product created in the EU should "increase by 2020% by the year 20".
He is supported by energy commissioner Günter Oettinger: “We need this 20% breakthrough.”
The course towards the re-industrialization of Russia, proclaimed after the arrival of Vladimir Putin for the third presidential term, began with supporting the modernization of enterprises of basic sectors of the economy, as well as the state program for the reconstruction of roads, the effectiveness of which the author saw with his own eyes during a car trip to the Urals.
In just a couple of years, not a single blast furnace will remain in Russia: metallurgical plants will finally switch to modern technologies. Practically all the largest automobile companies in the world have created or are building their production facilities in Russia.
Rapid industrial development is observed in other BRICS countries. Turkey is turning into an industrial giant, whose business circles are seriously considering complementing the above abbreviation with the letter “T”. Significant industrial growth is observed in the states of the Customs Union - Kazakhstan and Belarus.
De-industrialization of the whole country
The picture in the economy of Ukraine is just the opposite. After regaining its position after the 2008 crisis of the year, the industry for the second year in a row shows a steady downward trend.
According to the State Statistics Service, in the first quarter of 2013 of the year, GDP fell by 1,3%, industrial production - by 5%. In 2012, export of metal-roll fell by 7%, its domestic consumption decreased by 15%. Total exports of ferrous metals in 2012 year decreased compared to the previous year by 17%. In January-May, 2013 of the year compared to the same period of 2012 of the year - by another 12,5%.
Stakhanov Ferroalloy Plant for January-June 2013 of the year reduced production by 45,2% compared to the same period of 2012 of the year. Its load is 25,5% of the design capacity. Over the 2012 year, the reduction in production was 19%. In January-June 2013, the production of steel pipes in Ukraine decreased by 24% compared to the same period of 2012.
At the same time, Ukrainian metallurgical enterprises increased imports of iron ore by 32% in six months (for 2012 a year - by 72,3%). From 1 August 2013, Ukraine removes restrictions on the import of certain categories of steel pipes, which will force the national pipe manufacturers out of the national market, in addition to the fact that in January-June 2013, the production of steel pipes has already decreased by 24% compared to the same 2012 period of the year.
According to the data received from the People's Deputy of Ukraine Vladimir Boyko, the loading of the Khartsyzsk Tube-Rolling Plant is only 20% of capacity, and that is thanks to Russian orders. But this will soon come to an end: Russia has already refused to extend the quota for duty-free supply of Ukrainian pipes.
Research Director of Metal Consulting Consulting, a Russian consulting company, Vladimir Terlova explains the drop in purchases on the domestic metal market by the domination of imports: “Today, the country satisfies all equipment needs, both consumer (cars, household appliances ...) and industrial. imports ... Today, sales of rolled products within the country are almost exclusively sales of construction metal products, but even in this segment, Ukrainian metallurgists compete with higher-quality imported rolled products. ”
But this is not the whole truth. The production of cars in the country in the first half of this year decreased by 54,2%, only ZAZ reduced the production of passenger cars by 52%, the production of buses - by 72%. The decrease in production at the enterprise in 2012 amounted to 30%.
In total, over the past five years, the production of cars in Ukraine has decreased by 6 times, and out of 36, thousands of people employed in this industry have remained half. According to the results of the first four months of this year, oil and gas processing plants reduced gasoline production by 2,1 times, diesel fuel by 1,8 times, and black oil - by 2,5 times. That is, there is a rapid process of de-industrialization of Ukraine.
From the materials of the committee hearings "Ukraine-WTO: Benefits and Challenges for the National Economy", which were held on 22 in May at the Committee on Foreign Affairs of the Verkhovna Rada, one can learn more generalized information. The total decline in production in 2012 was 1,8%.
At the same time, the mining industry “fell” by 3,7%, the production of machinery and equipment by 10%, the production of electrical, electronic and optical equipment by 11,6%, electric motors and generators by 60,9%, transformers by 11,5%, finished metal products on 5,2%, coke and refined products - on 26,4%.
Imports are growing at an accelerating pace. In 2011, the volume of imported products increased by 33,8%, in 2012, by another 14,7%. There is a steady displacement of Ukrainian products from the domestic market. In 2012, the share of such goods in stores was 58,9%, having decreased over the year by 3 points.
Production volumes in the light industry decreased by 40-45%, exports fell by 28,4% while imports grew by 45,9%, the negative trade balance increased 7,6 times. According to the Ministry of Industrial Policy of Ukraine, in the period from 2007 to 2012, the share of imports in the domestic market increased: in the furniture industry - from 41,2 to 75,6%, the supply of refrigeration and freezing equipment - from 77,7 to 83,1%, agricultural engineering - from 76,5 to 79,8% , passenger cars - from 41,1 to 82,8%.
Who benefits?
The “golden rule” of the Roman legal system was the thesis “look for who benefits”. However, it will not take long to search. The analysis of the International Center for Advanced Studies "Assessing the Impact of the Free Trade Agreement between Ukraine and the EU" states that one of the positive effects of the FTA Agreement with the EU will be the rapid saturation of the Ukrainian market with inexpensive, high-quality goods from Europe.
That is, the country is viewed by the European Union as a market for its consumer goods, which will cause (according to the ICMP analysis) increased competition of local goods with imports, a glut in the domestic market with imports, and liquidation of small enterprises due to external competitive pressure. That is, it is officially recognized that the FTA with the European Union is beneficial to Europe as a way to acquire a new sales market. At the same time, the Ukrainian industry will be destroyed, crushed in competition.
Quote: “De-industrialization, in any case, for Ukraine, the process is favorable. Industry is capital and labor. In the long term, precisely as an industrial country, Ukraine is unlikely to be competitive. Like all countries of the middle belt. Workers living in these countries have to pay more, if only because it’s colder here. In tropical and subtropical countries there is no need to spend money on heating and warm things. Consequently, they can provide labor-intensive production with cheap labor and will have more competitive advantages. Thus, Ukraine has neither cheap labor nor a favorable economic climate. The latter is fixable due to the rapprochement with Europe, and not with the countries of the Common Economic Space or the Customs Union. ”
This is not the private opinion of any student who has read European Union propaganda. This is the official position of the Center for Social and Economic Research "CASE Ukraine", voiced by its plenipotentiary. And this Center itself is a partner organization of the Ministry of Economy, Ministry of Finance, State Property Fund, State Tax Administration, National Bank of Ukraine.
This Center is responsible for the implementation of the macroeconomic reform project of the Harvard Institute, developed for Ukraine in 1990-s. The main customers of the Center’s research for the listed Ukrainian institutions are the European Commission, the United States Agency for International Development (USAID), the Ministry of Foreign Affairs of Poland, and the World Bank.
Among other recommendations, CASE Ukraine is everything that Europe and the USA have been demanding for many years: a free land market (including agricultural land), the possibility of selling land to foreigners, the elimination of protectionist measures against Ukrainian industry, access to oil and gas production, energy supply, utilities services of foreigners. And also - the elimination of certification of foreign goods, the licensing system in the construction industry, the separation of the railway monopoly and the privatization of railways, the elimination of natural monopolies and their transfer to private hands.
All this and much more can be found in the “Concept of Ukraine’s Economic Development in 2008-2015”, prepared by the Effective Governance Foundation, the most influential in government circles. Under whose dictation recommendations were written, it is well known - this is the former head of the Directorate General for Enlargement at the European Commission; former Senior Manager for European Affairs at the US National Security Council; Director for European Economic Affairs and Relations with the European Union; former director of the IMF and EBRD in Ukraine, director of Morgan Stanley Ukraine; ex-deputy director general of the European Commission's trade department; ex-president of the National Bank of Hungary; ex-prime minister of canada.
The only difference between the PMT document and the CASE Ukraine recommendations is that the document contains plans for economic recovery. However, the course towards Ukrainian deindustrialization, which surprisingly coincided with the course towards European and American reindustrialization, appeared much later. Nevertheless, the overwhelming majority of the remaining recommendations of the “Concept” no less surprisingly coincided with the obligations of Ukraine, enshrined in the Agreement with the EU.
Politics - a concentrated expression of the economy
Analyzing the composition of the committees of the Verkhovna Rada of previous convocations, the author came to the conclusion that by filling them with representatives of political forces, one can predict the main trends in the development of Ukrainian society. Including - the economic priorities of those in power.
So, the top three absolute leaders in terms of the number of parliamentary committees in the new convocation included the Budget Committee, the Tax and Customs Policy Committee and the Agrarian Policy and Land Relations Committee.
If the budget committee, which allows you to lobby for the allocation of budget funds in the interests of the industry, enterprise or region, as well as tax and customs issues, is clear, then the last committee in the top three is far from even the Industrial Policy Committee. Why did it happen?
Yes, with the fact that Ukraine will have to cancel the moratorium on the sale of agricultural land after signing the Agreement on a Free Trade Area with the EU. And if there is still a ban on the sale of Ukrainian lands to foreigners, then, according to the same agreement, Kiev is obliged to unconditionally comply with all EU directives and regulations, which will be adopted after its signing.
And although the agreement states that foreign citizens and enterprises will have to be allowed on equal terms with citizens of Ukraine and Ukrainian enterprises to any tenders, any competitive sales of state property, for organizing such equality for a rather long period. Which can be used in far from public interests. In the meantime, the court and the case, prepare the ground for everything to turn out quickly, accurately and inexpensively.
Man is what he eats
The promises that an independent Ukraine, if not tomorrow, then the day after tomorrow, will feed all of Europe and the whole world, have been feeding the people of the country since the end of 1980's. However, today she is not able to feed even herself.
After joining the WTO, the arithmetic average rate of import tariffs for Ukrainian agricultural products is 11,6% and is the lowest among WTO member countries.
For comparison: the protection of the EU agricultural market is 19,5%, Canada - 18%, Turkey - 41,7%, Switzerland - 43,5%, Norway - 55,8%. Poland, when joining the WTO, got the right to 52% tariff on agriculture, Hungary - 22%, and Romania - 98%.
The share of dairy products, a highly processed export product, declined in total exports of agricultural products from 5,8% in 2008 to 2,7% in 2012. Exported milk powder, which occupied 31,8% in the structure of dairy products, for the period 2008-2012 . decreased to 20,4%, and in the price measurement, and in all 2 times. At the same time, the production of certain types of dairy products becomes unprofitable.
The growth of export indicators give products of low degree of processing, the proportion of which is dynamically growing. While in 2008, their part in total exports was 62%, then by 2012, it rose to 71%. And the new export “skates” of Ukraine - sunflower, soybean, and rapeseed - deplete our world famous chernozems and lead to their degradation. Agricultural enterprises of Ukraine, with the exception of small ones, sold 2013 of the year for 11% less agricultural products in January-June than for the first 6 months of 2012 of the year.
Ukraine cannot provide itself with meat. Meat imports in 2012 increased almost 2 times, and in price terms - in 2,5 times, while pork imports in 2011 increased 2,3 times compared to 2007. The Ukrainian market seizes imported fat from Poland, Germany and Holland .
The same picture with fruit and vegetable products: in 2008-2012. imports of fruits and vegetables increased by one and a half times, and at the expense of cucumbers, tomatoes, apples, apricots, peaches, etc., traditional for Ukraine.
In January-June 2013, sales of crop production decreased by 23%. For the first six months, sales of wheat decreased by 48,3%, barley - by 2,8%, corn - by 14,6%.
Due to the nullification of import duties on alcohol products from January 2011, the production of grape wines for only 6 months decreased by 41,3%. Due to competitive pressure, Ukrainian sugar mills closed 50, Ukrainian producers lost 11% of the domestic market, and the total number of jobs lost in the sugar and pig industries was 500 thousand. According to sugar producers in the year 2013, sugar production will decline another third.
The end is someone's beginning
What Ukraine’s de-industrialization will lead to is well known: hundreds of thousands of people will remain without means of subsistence. This is not hidden by the guardians of European integration. For example, the ICMP’s analysis of the negative consequences of the entry into force of the FTA Agreement with the EU lists: increased unemployment due to bankruptcies, reduction in the number of employees, brain drain, loss of workers, and eventually a decrease in population. Not only and not so much because of the increase in mortality in an already gradually dying country. First of all, because of labor migration: people will simply have to leave to feed themselves and their families.
From the point of view of European integrators, this is correct! Today, too many people live in Ukraine, because of which it is impossible neither to feed Europe, nor to provide it with raw materials and energy.
The first steps in this direction are already being taken: in the press from time to time, messages about the interest of transnational agricultural corporations in the creation of enterprises in Ukraine skip. According to media reports, Saudi Arabia and Libya have already launched projects of agro-giants, designed to deliver all the manufactured products to these countries.
One of the world leaders in genetically modified products is expanding its production on Ukrainian black soil. The United States, through the mouth of its ambassador, declares that it is ready to purchase all the Ukrainian agricultural products produced in the event Ukraine signs the FTA Agreement with the EU.
Since the adoption of the Land Code, the Ukrainian embassies in Europe have attacked ten or two hectares of chernozem land for speculative purposes. What all this will lead to is known from the experience of Argentina, where, according to the recommendations of the IMF and the World Bank, most of the land was transferred at first simply to private ownership, and was soon bought by foreign agrofirms.
As a result of the introduction of intensive technologies by them, the majority of rural residents remained without work and were forced to eat bread, potatoes, vegetables and meat, which were not produced on their former lands, but corn tortillas. Since all of these products are exported from the country.
As for the industrial Donbass, on which deindustrialization will hit first of all, then there was a use for local lands that are unsuitable for agriculture. They are given to the British-Dutch company Shell for the eternal use of shale gas. Extraction of which, by the way, is prohibited in England, and now in France. Given away on such conditions that the government will force the property of Ukraine’s citizens to be taken away if Shell wishes.
No matter how monstrous the conclusion that the de-industrialization and depopulation of Ukraine are deliberately carried out, it is the only one that reasonably explains what is happening with the Ukrainian economy. Unless, of course, soberly assess the situation and do not assume that the Ukrainian politicians from both the government and the opposition have been massively crazy.
Information