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Tymoshenko's government faced the global crises of 2008. As Prime Minister she was extremely independent. The government of Mykola Azarov on the other hand was designed only to be instrumental in implementing Yanukovych's presidential policy. It looks as if the current Prime-Minister, and leader of the governing Party of Regions, either has no further political ambitions or is too preoccupied with economic objectives. The two year period from 2009 until the end of 2010 offers the prime opportunity for comparison of the Tymoshenko and Azarov's governments. So results were actually achieved by these two prime ministers?
People First Comment: The personalities of the past two governments of Ukraine could not be more different. The Tymoshenko government liked to talk a lot and implemented highly populist policies designed to enable Mrs Tymoshenko to compete with President Yushchenko for both air time and column inches. Prime Minister Azarov is the exact opposite saying almost nothing unless forced to whilst implementing highly unpopular but frankly necessary economic policies that hurt. Neither is ideal and both appear to be equally out of date in their political outlook. Both lack any form of fundamental ideology upon which to base their polices or long term strategies to deal with the nation's ever expanding list of issues and neither have teams of Ministers dedicated to the public good to implement their ideas. What does happen tends to be knee jerk reactions to immediate issues as opposed to well considered policies for the national good.
Programmes of reform
The government under Azarov is characterised by its reform activity. The adoption of the new Tax Code contributed directly to a decrease in the number of small and medium sized enterprises whilst releasing big business from social obligations. After initiating a hasty salvo of various reforms, cooperation with the IMF has been scaled down. The government has introduced a new, highly unpopular pension reform. But it is still unlikely that the country will receive any new loan tranche by the end of the year. IMF attributes this to the fact that Ukraine is increasing its internal gas prices for the population too slowly. This is unsurprising as this move may result in irreparably low ratings for the governing authorities. The parliament of Ukraine has also been recently presented with the drafts of new Labour and Housing Codes, which considerably curtail the rights of the population in managing their own property and provide more liberal rights to employers. The administrative reform initiated by the government has failed to optimise the number of state workers whilst the corresponding budget expenses have increased, in many cases by up to 20%. In summary, Azarov by his own positioning is the figure primarily responsible for all the reforms initiated by the governing authorities including any adverse events in the process of their implementation.
As for the reforms introduced by Tymoshenko and her government, it seems none were performed on a strategic basis but rather in reaction to individual economic issues when opportunities presented themselves; as confirmed by the former President Viktor Yushchenko, political observers and even her fellow party members.
People First Comment: Despite her rhetoric the Tymoshenko government was surprisingly short on any form of reform agenda. There was a lot of talk and a lot of blame but frankly no real action. Many would say that Mrs Tymoshenko was blocked by President Yushchenko but if that were the case then she should have done the honourable thing and resigned. Instead she dragged the country into what was a battle of egos. Azarov on the other hand has grasped the nettle and gone into an extensive reform programme. The only problem being that the reforms he is proposing do not address the fundamentals of the issues and seem designed to appease the financiers of Party of Regions as opposed to bringing about systemic benefit to the nation. This, more than anything, shows the inherent flaws of a system whereby the rich are able to buy power as in truly democratic systems the national interest would always override the personal interests of a select few.
Economy
Other negative impacts of the current government's activity in 2010 include the decline in the production of gas in Ukraine by 5.3%, of oil and gas condensate by 10.3%. The budget for 2011 increased the financing of hunting grounds and game-reserves by 50%, medical services for people's deputies by 82% and Prosecutor General's Office by 77%. At the same time nearly 30% of Ukrainians claim that they have barely enough money for food and 12.5 million Ukrainian citizens remain below the poverty line(1).
One of the main positive results of the current government's policy has been a growth of Ukrainian GDP by 4% in 2010. In 2009 under the government of Tymoshenko GDP declined by 14.8%. An increased demand for Ukrainian export (primarily for metallurgical products in India and China) was the principle factor that fostered economic development in Ukraine in 2010 and 2011. According to experts, the economy of Ukraine began to grow in early 2010 after foreign economic conditions improved and before Azarov's government managed to take any anti-crises measures. In 2010 the chemical industry grew by 24.4%, metallurgical production and manufactured metal products increased by 14.8% and machinery-production by 31.3%. Ukrainian light industry expanded in production capacity by 5.9% compared to the first half of 2009. The government of Azarov achieved a general reduction of state budget deficit in 2010 from 12% of GDP in 2009 to almost 8% in 2010.
People First Comment: The Tymoshenko government presided over a far more evenly balanced economy. Despite the impact of the world economic crisis of 2008 Tymoshenko managed to maintain a fairly even balance between the interests of big business and the SME sector. Looking benevolently Mrs Tymoshenko seemed to accept the fact that many SMEs were not paying taxes but their survival was preferable to a clampdown that would have massively reduced the job pool at a critical time. The Azarov government is almost the opposite. The tax evasion clampdown has cost Ukraine literally thousands of companies and tens of thousands of jobs as small traders preferred to close their businesses rather than face what is wholly punitive taxation. This government clearly does not understand the role played by SMEs in the market driven economic model. Disincentivising SME entrepreneurs through excessive taxation may have created better looking revenue figures for this year but it will create a massive hole in years to come.
Investment
Capital investments decreased by 7.4% in 2010 compared to 2009. In 2010 investors reduced their business investments in response to the Azarov government's assurances of economic growth in Ukraine. The statistics on basic food production went down as well. Both experts and media report that milk production was reduced by 350 thousand tonnes in 2010 compared to 2009 and that production of bread and vegetables dropped by 100 and 220 thousand tonnes, respectively. 2010 also demonstrated an increase in imports of plant products (24.1%), vegetables (67%) and grain (47.7%). This has been marked by an increase of food prices by 10-25% in early 2011, with specific items including buckwheat and wheat flour in short supply.
It is worthwhile to say that Ukraine has experienced considerable losses in investment attractiveness. Investment has dropped to th same level as the 3rd quarter of 2009 - when the country was in the middle of an economic crises. According to Anna Derevyanko, Executive Director of the European Business Association, the current decline in investment attractiveness is a reflection of the lack of investor confidence in the Ukrainian economy and market. "The deep rooted corruption, rising pressure from the authorities on business and the insufficient effectiveness of reforms are some of the main internal reasons"(2). This huge weakness is the common legacy of both governments.
People First Comment: Investment flourished in the wake of the Orange revolution and as a result of Tymoshenko's policy of transparency in the privatisation of state assets however it started to tail off dramatically as the extent of the ego battles became obvious. Under this government international investors have voted with their feet and simply found less difficult places to invest. The ‘National Projects' programme would appear to be a serious attempt to woo back serious investment but it will be a long uphill battle if the government keep shooting themselves in the foot with protracted politically motivated court cases.
Infrastructure
In terms of infrastructural development, the volume of investment in construction decreased by 5.4% in 2010 compared to 2009. Building operations have reduced by 4.8% whilst construction completion operations dropped by 9.8%. The overall volume of construction during the first six months of 2010 amounted to 83.3% of that of the same period of 2009. As can be seen from the above data, the government of Azarov has not managed to speed up construction in Ukraine, including in the promised area of social housing.
People First Comment: Notwithstanding the current government's $12.9 billion investment in Euro 2012 the level of infrastructural development in the nation is falling. Whilst bridges, roads and railways particularly in the capital have undergone massive development, it appears to being completed at the expense of the rest of the nation and in particular the public housing sector. Private investment particularly in property has also all but stopped as a combination of lack of bank financing and political turf wars which disrupt the sector. This is a far cry of the post 2008 boom when forests of new apartment blocks were springing up all over Ukraine.
State debt
Let us compare the statistics for international debt under both governments. The government of Tymoshenko closed the year of 2009 with an international debt of 317 billion UAH (US$ 39.6 billion). In 2010 Azarov's government restored negotiations with IMF and increased the debt of Ukraine to 432.2 billion UAH (US$ 54 billion)(3).
People First Comment: What is strange here is that tax collection under the Azarov government has been appreciably more efficient than under Tymoshenko yet government borrowing has risen whilst the levels of government investment have fallen, state salaries and pensions have remained virtually static and most government services including the high ticket items of healthcare and education seem to be contracting. So where has all the money gone? There has never been a more pressing time for an independent National Audit Office and transparent government accounting.
Corruption and legislation
The new government tried to find proof of inefficiency amongst Tymoshenko's administration with the help of an independent audit of state financing and transactions from budgetary funds between 2008 and first quarter of 2010.
In the corruption perception index compiled by Transparency International in 2010, Ukraine received 2.4 points out of 10 and ranked 134th of 178 nations. It meaning that corruption is still one of the hottest issues for the Ukrainian nation. In 2009 under the government of Tymoshenko the situation was even worse. Ukraine was given 2.2 points and shared the same rating with other countries positioned between 146 and 153 places out of a 180 total. Experts note that the fight against corruption was initiated under the leadership of Tymoshenko in 2009 when parliament approved a number of anti-corruption laws and the government introduced a special committee, responsible for anti-corruption policy(4).
People First Comment: Tymoshenko talked a great deal about fighting corruption but achieved very little. The country inched forwards on the international corruption index but in reality it was another, post Orange revolution, lost opportunity. The current government also talks a lot about corruption but under their care Ukraine has fallen 7 places on the corruption index extinguishing the gains made in previous years. It would be fair however to report that the Prosecutor's office is amassing an impressive list of current bureaucrats who have or are about to be indicted on corruption charges. If this happens and is not political, it will be a major step in the right direction.
Conclusions
In summary than, the inefficient populism of Tymoshenko's cabinet was followed by the ineffective and complex strategy of reforms acted upon by the government under Azarov. As a result the population has become even more disenchanted with the authorities in general. The result of this is quite natural. According to a social survey conducted in September by TNS more and more Ukrainian citizens are losing their last remnants of confidence in the institutions of state power. No more than 20% of the population still trust the President, parliament, Cabinet of Ministers and judiciary. Kyiv International Institute of Sociology reports that up to 63% of Ukrainians believe that the state is heading in a wrong direction(5).
Ukraine's position in the Business Conditions Index of the 2012 Doing Business report, prepared by the World Bank and International Financial Corporation, summarises the collective performance of the Tymoshenko and Azarov governments between 2008 and 2010. According to this report, Ukraine has fallen from 149th place down to 152nd place neighbouring Libya (151st) and Bolivia (153rd). Ukraine currently ranks 112th on the subindex 'Starting a business', 111th on 'Protecting investors', 44th on 'Enforcing contracts' and 24th on 'Getting credit'. In the 'Paying taxes' rating Ukraine is in 181st and remains at 180th in dealing with construction permits. The country is 166th on the 'Registering Property' subindex, 156th on 'Closing a business' and 140th on 'Trading across borders'(6).
People First Comment: The Tymoshenko government preached democracy but didn't practice it whilst the Azarov government uses democracy as a PR tool but then works against it. It is clear that neither government has any real grasp of the concept of democracy nor how democracy works in practice. The Azarov government has worrying leanings towards the former Soviet systems of authoritarian control which is hardly surprising looking at the average age of his Ministers. Whilst Tymoshenko cannot be accused of being authoritarian she can be accused of doing little or nothing to foster politics at a grass root level preferring to maintain the financial patronage of the party list system.
Democracy has suffered under both governments. Tymoshenko and Yushchenko could have reformed the whole electoral system in the wake of the Orange Revolution but chose to do nothing. Azarov and President Yanukovych seem intent on rolling back the past 20 years to create a pseudo-Soviet and divided nation consisting of a super rich minority and an incredibly poor majority. What is sad about both governments is that neither has been able to harness the real potential of the nation thus once again Ukraine can best be described not as ‘Opportunity Ukraine' but as ‘Opportunity Lost'.
(1) http://news.finance.ua/ua/~/2/0/all/2011/03/16/231308
(2) http://news.finance.ua/ua/~/1/2011/10/06/254360
(3) http://www.epravda.com.ua/columns/2011/03/24/279121/view_print/
(4) http://www.chp.com.ua/index.php?option=com_k2&view=item&id=9509:TransparencyInternational
(5) http://tyzhden.ua/Politics/31868
(6) http://www.pravda.com.ua/news/2011/10/20/6688957/
Quote of the week:
Let us think of education as the means of developing our greatest abilities, because in each of us there is a private hope and dream which, fulfilled, can be translated into benefit for everyone and greater strength for our nation.
John F. Kennedy
The 35th President of the USA
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