Publication: Monitor Volume: 6 Issue: 45

On February 22, Ukrainian President Leonid Kuchma delivered the first annual state of the nation address of his new term, making it quite clear that he is satisfied with the recent center-right coalition’s taking control over parliament (see the Monitor, February 3, 16). For the first time since threatening that body with dissolution by setting a constitutional referendum for April 16 (see the Monitor, January 21), Kuchma hinted that he may drop the idea of early elections: “The next parliamentary elections,” he said, “are far ahead and the presidential ones are even further.” This statement was met with an ovation by lawmakers. Kuchma may really believe that the center-right majority is viable and that a decade-long stubborn opposition between the Ukrainian governments and parliament is over.

With no elections in view any time soon, Kuchma could afford to speak pragmatically and with less conciliation than he otherwise might. He rather ostentatiously repudiated those elites who contributed most to his re-election, but who are nonetheless a major stumbling block to one of his stated goals–Ukraine’s transformation into a modern European democracy with a developed market economy. Kuchma said also that the old generation of state officials will be replaced with “a new generation able to act in a modern market-oriented way”. In a market transition such Soviet-era administrators, disciplined but lacking initiative and any understanding of market mechanisms, are a decided liability. Kuchma courageously and for the first time admitted that all attractive enterprises “have been divided into spheres of influence between clans.” At the same time, it can be said that he admitted his own “guilt,” because intrinsic to such a division is assistance from the government he steered and steers.

Kuchma focused most heavily on the government’s vision of Ukraine’s transition to the market economy, reiterating that “there will be no turning back” on the road of economic reforms and summarizing the main points of his economic and social policy. The full document of the strategy was published in full in newspapers across the country in January. The primary goal: an accelerated economic growth at the annual rate of 6-7 percent. Kuchma has admitted that is higher than the world average. His plan suggests that the economy should grow by an expansion of the domestic market at the expense of an increasing purchasing power of the population. Purchasing power is to increase through development of private enterprise, stimulated by low taxes, with emphasis on agriculture, energy-saving technologies and fundamental scientific research. In industry, the strategy leans heavily on high-tech productions–including airspace, shipbuilding and tanks based on the former Soviet military-industrial complex enterprises, and without doubt in better shape than the rest of Ukrainian industry. To remain strong, such industries require substantial investment injections, and Ukraine still has one of the worst investment climates in Central and Eastern Europe and its internal investment resources are meager. The program looks too ambitious for a country whose GDP has been steadily falling over the past decade and whose economic potential has, as Kuchma himself admitted, been halved since independence (Uryadovy Kuryer, January 28, UT-1, February 22).

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