Speech by President of Ukraine L.D. Kuchma at the scientific and practical conference
21 April 2004
21 April 2004
Dear participants of the conference!
Esteemed representatives of the diplomatic corps!
The work of our conference comes to an end. Meaningful talk that has been continuing for two days
enables deeper comprehending of the acquired experience concerning transformational reforms and,
that is more important, outlining their strategic perspectives.
As the discussion showed, we all have the same point of view concerning the fact that today in Ukraine,
like in the other CIS countries, there is being formed fundamentally new social and political situation
connected with actual completion of the preceding (initial according to its content) stage of the system
transformations and transition to the stage of practical implementation of the long-term strategy.
It happened so that in our country beginning of the corresponding stage coincides with holding the
presidential elections. Someone can ask in this connection whether we are trying to run a few steps
forward in this case and whether it would be better to put off the talk till the end of the elections. The
new president will come and dot his “i’s”.
Such scenario is possible indeed.
But I was guided by the other logic when being the initiator of the conference. I proceeded from the fact
that the society should beforehand form clear guide lines concerning future of our state and determine
electoral preferences according to them. I think that such approach is a manifestation of deep respect
towards electorate, is democratic enough and is aimed at making choice of the citizens more conscious.
As one of the outstanding thinkers of the last century English scientist Toinbee noted, history of each
separate country, as well as civilization in the whole, develops according to the “challenge –response –
challenge” principle.
“Development, – emphasized he, – has place, when challenge encourages successful response that, in
turn, causes further and other challenge”.
I am convinced that the question “Will Ukraine be or not be an independent state?” was the content of
the main challenge during the previous stage. Challenge system of the new period that has actually begun
is in the other dimension. It is a complex of interrelated political, economic, social and humanitarian
problems, settlement of which will determine shape of Ukraine not only in the near future, but during a
longer perspective or, perhaps, for ever.
In this connection we should have a more clear idea concerning content of the transitional period. The
matter concerns not only market transformation. The latter one is only one of the basic tasks of this
period. We have settled it for the most part. At the same time securing new standards of human
wellbeing and life, its sovereign rights and freedoms, strengthening main mechanisms of the innovational
development model, deep democratization of the political system and establishment of the civil society
are not less important.
Thus, the matter concerns understanding of the need in settling during the transitional period of not one,
but a range of the fundamental tasks that are organically interconnected and should be considered in the
complex.
I draw your attention to this extra important problem mainly because it directly concerns understanding
the content of the challenges of the new historical stage in development of our country, thus the ever
existing problem “What should we do?”, “How should we further build our policy?”, “What should we
determine as the priorities?”.
It is a question of a new wave of the system reforms, main aim of which should become implementing
tasks of such kind.
Now let me dwell on the separate basic priorities of the new stage strategy and express my point of
view concerning their content and mechanisms.
New accents of the social policy
I would like to inform you first of all about main accents in the social policy.
During the initial stage of the system transformations we justly concentrated our attention on creating
basic attributes of the national economy, overcoming the crisis and reforming the market. We should, of
course, further work in this direction, improve everything we have already done and correct mistakes
made and deformations. But now situation is being formed, under which basic priorities in the policy of
reforms should be changed. They should move first of all into dimension of the qualitative reforming of
the social sphere that remains unreformed in many aspects and preserves characteristics of the
preceding system.
We cannot but see that society faces the phenomenon of the indifferent person and effect of its
increasing indifference more often. There is evident explanation for it. People do not see perspective of
the tangible changes in the social sphere. The society put up with it during the stage of overcoming the
economic crisis and initial market reforming. But now, when there are no well-defined social
motivations, people begin to ask more frequently a proper question: “Where are we led by those, whom
we entrusted the power and who call themselves reformers?”
The other extreme of the issue raised is real threat of the absolutization during system reforms of the
purely market values and consolidation of their supremacy not only in the economic, but also in the
political and humanitarian spheres. Now these principles dominate mainly in the countries of the
peripheral area of the modern world. As far as countries of the so called civilization centre are
concerned, social and market values are basic there. Western Europe is a society that develops on the
principles of such values. Reforms of Ludwig Erhard in the post-war Germany are not purely market,
but also social reforms.
If we critically evaluate reforms that were carried out, we will see that we move at present not
towards consolidation of the social and market principles in development of the society, not towards
Europe, but in the opposite direction, in direction of consolidating value principles of the market
fundamentalism, where everything, in the social and political and humanitarian spheres including, is
measured by size of the profit.
We should change this tendency. It can be done only at the present stage of development, namely at
the beginning of the economic growth and overcoming the economic crisis, during which there should be
finally formed not only outlines, but also the structure of the society, in which we and our descendants
are to live.
In this connection period of 2004-2015, strategic tasks of which we have discussed, should
become a period of qualitative improvement of the whole architecture of the social and economic
system, development of the corresponding structure in such a way that each meter of its living space
worked for the man, was subordinated to his interests, creation of the corresponding comfort for him,
protection of his rights and freedoms.
There have been noted lately positive changes in development of the social sphere. I dwelt on it
partly in my welcoming speech at the opening of the conference. This question was also raised in the
speeches by D. Tabachnik, S. Pyrozhkov, E. Libanova, L. Novikova and others.
But I suggest that we should be careful when it concerns changes in the social sphere, where, as
practice of the last years shows, especially important are not only quantitative, but first of all qualitative
parameters, change to the fundamentally new standards of the vital activity of people in comparison with
those of the soviet epoch. It is the question of tangible expansion of the social transformation sphere,
organic integration of instruments of the economic and social policy into single functional mechanism.
Unfortunately, we have not yet reached such level of understanding of the social and economic
transformations. Superficial division of the corresponding spheres is nearly the most vulnerable segment
of the implemented reforms.
In this connection one of the key functions of the state should be its concern for humanization of the
production sphere, mainly of the property relations, bringing social content to them, consolidation of
mechanisms of the constructive interaction between work and capital, overcoming antagonism
manifestations that accompany them and become more influential.
We cannot regard as normal phenomenon, when private sector of the economy, which strengthens
its positions, moves away from settling a wide range of the social problems, when all social costs are
imposed on the state. In the western countries social investments of corporations and firms reach over
40% of their expenditure volume.
Situation that has been formed in our state should be necessarily changed.
Social and political stability constitutes a base for favorable business climate. It should be paid for,
including at the level of the private structures. I am convinced that representatives of the business circles
and of the large business, being conscious that a person cannot be rich and happy when there are the
poor and the miserable beside him, completely agree to such statement of the problem.
Especially topical for Ukraine is implementing of the efficient income policy, overcoming on its basis
of the deep property differentiation that makes progress and has a long time ago surpassed maximum
admissible level that defines threshold of the social stability.
The matter concerns one of the basic functions of the government, which is performed in our state in
a satisfactory way. We have let everything in these questions take its course.
Probably the most topical here is the problem of substantial increase, perhaps a tenfold increase, in
cost of the manpower – the highest value of a state. I am sure that there is no need in convincing
anybody that low cost of the manpower is a phenomenon inherited from the old administrative system.
Economy that is based on the low manpower cost does not encourage scientific and technological
progress, accumulation process, forming of the insurance funds, resources for the provision of pensions
and education. After all, such economy has no resources for sustainable growth.
During the period from 2000 to 2003 annual wages in Ukraine grew from 230 up to 462 Hryvnias.
At present it exceeds 500 Hryvnias, including in the industry – up to 654 Hryvnias, in transport – 772
Hryvnias. Average monthly level of wages exceeds 1000 Hryvnias at many plants, inter alia at the
Mariupol metallurgy industrial centre, at the “Krasnodar – Zahidna” coal mine, at the Mykolaiv
aluminous plant, at the “Slavutich” plant and others. It is good.
But everything we have done should be regarded as the first steps. Our task is to create during the
near years objective preconditions for raising wages, as a minimum, up to $ 300 per month.
Calculations show that it is within our capabilities. High levels of increase in labor efficiency
constitute a basis for it. We want to establish ourselves as a European state that has tangible economic
potential and aspires to take a worthy place in the civilized world. That is why we should understand
that high manpower cost is a calling card of the modern civilization.
In this context it is politically, economically and socially important to strengthen positions of the
medium class, weight of which should be doubled in the near perspective and brought, as a minimum,
up to 45-50% of the total population with simultaneous decrease in the number of people with income
below the living wage.
In general, there should be no place for reanimation of wage-leveling in the income policy.
Disproportions that have been formed are to be overcome not by the artificial limitation of the highest
income level of the rich, including the rich families, but by their legalization and bringing out of the
shadow, expanding strata of the private owners (including of the land) that are actively engaged in
business and receive profit from it.
I would like to reiterate my stance: I am against hunting the witches. A new cycle of redistribution of
property in Ukraine is inadmissible. It is a very dangerous stance. On the contrary, we should go the
way of increasing the strata of the private owners. Encouraging people in possessing private property
and its efficient protection are fundamental priorities of the income policy.
Employment problem needs maximum attention. In this issue we have positive developments.
During the four years of economic growth unemployment level fell by 27, 8 percents. Employment
structure has substantially improved.
At the same time excessive employment remains at different plants and organizations, especially in the
state sector. It restrains growth of wages. Should such situation be preserved? Should we probably
make decisive steps in the opposite direction: substantially raise level of labor remuneration, its material
motivation and at the same time deliberately increase to a certain extent unemployment level?
I wish that the society would understand that there does not exist positive settlement of the problem of
encouraging highly qualified intensive work and production beside the dilemma.
It is vitally important to secure proactive development of the social institutes (education, medicine and
culture) and increase in the social investments directly aimed at development of people.
We should bravely switch to the system of the goal-oriented support of the families with scanty means,
which is to substitute for the existing socially unjust and extremely inefficient system of privileges, grants
and compensations. Addressness of the social support should become an efficient instrument of
reducing the poverty level.
Substantial acceleration of the tempo in developing the modern non-governmental social infrastructure
and active usage of the world experience in it can become an efficient instrument of the social policy. It
concerns, first of all, reforming of the social insurance system and holding the pension reform.
The same can be said about reforming health care system, introducing mechanisms of multichanneling in
financing medical industry, securing regulated development of the paid medical service, introduction of
the state social medical insurance, optimal ratio between rendering medical services and freedom of
choosing them.
In this sphere functions the same rule as in the pension system: it is impossible to overcome, on the basis
of the existing mechanisms, crisis in the sphere of medical care of the population that deepens all the
time.
Secondary and high schools need concentrated attention of the society. I am convinced that it is high
time to concentrate all existing economic potential of the society on settling problems in these spheres,
first of all on strengthening their material and technical basis, qualitative improvement of the studying.
We must do everything possible and impossible to achieve tangible results within the undertime. I do not
want to justify myself, but it was impossible earlier. At present financial position of the state is quite
different.
The accumulated resources need concentrated usage. They should not be dispersed. The Cabinet of
Ministers and the Verkhovna Rada must determine themselves in this question.
We should proceed from the fact that level and content of education is one of the main factors that
secures free development of the individual on the one hand and innovational progress , independence
and security of the state on the other hand. By the biggest standard we managed to establish ourselves
as a powerful and authoritative state owing to high educational potential of our people.
At present this potential needs tangible modernization and strengthening.
Today such issues are put on the agenda as radical reorganization of the housing policies, namely
implementation of the urgent housing reform and forming of the efficient competitive environment in the
sphere, securing of the whole complex of conditions for tangible expansion of the house building,
including at the expense of the mortgage lending.
Someone can ask me whether it is not late to raise these issues.
I can frankly say that many of these problems became especially topical only now, when problems of
the long-term strategy move into dimension of the real practice. Tough policy of overcoming the
economic crisis that dominated earlier could not be directly connected with corresponding tasks.
Transition of economy to the growth stage creates objective conditions for introducing substantial
changes into this sphere of social development.
It is the question of not only tangible strengthening of the social orientation of the reform course, but also
of its transformation into an important instrument of speeding-up the economic growth, strengthening
harmony and understanding in the society.
Tasks of the innovational development
Transition to the innovational way of development that is to be based on the active investment policy
and modernization of the whole economic sphere constitutes together with deep reorganization of the
social sphere the priority tasks.
It is important to take into account that implementation of the proactive development strategy is possible
only on the basis of consolidation of the efficient innovational model. If earlier this issue could be
regarded only as a strategic perspective, now its implementation belongs to the every-day policy of the
government. It was reviewed in the report by the Prime-Minister, in speeches by Semynozhenko,
Negoda, Kinach, Kuhnaryov, Boguslaev and other participants of the conference.
I would like to make one more fundamental reservation. We should overcome the illusive idea
concerning possibility of securing postindustrial transformation of the Ukrainian economy already at the
present stage of development. It is pure romanticism. In fact, it should be the question of the urgent
industrialization of the production potential, before implementation of which the soviet economy
stopped. It is impossible to jump over this stage.
The case in point is industrial modernization that is to comprise introduction of the modern intensive
energy- and resources-saving technologies, to secure further tangible rise in intensity of labor and at the
same time to become a basis for developing potential of the economic growth. We have all necessary
preconditions for that.
The fact that increase in the machine-building production by a factor of two was secured mainly at the
expense of developing production in the science intensive industries convincingly proves that scientific
and technical complex of our state is not only efficient, but also to a great extent compatible.
The matter concerns potential of not purely internal renewal of the existing productive capacities (their
exhaustion exceeds 60 percents), but, that is more important, meeting corresponding needs of the
external market. Postindustrial countries do not have such a segment in economy. They have liquidated
it to a great extent. Their specialization is postindustrial production.
However, the countries of peripheral zone (which is more than four fifths of total global population),
including CIS countries, require primarily the products of industrial modernism. Our machine-building
complex is able to work in order to fill the relevant niche to the maximum.
The attention paid today to the industrial and hi-tech potential of our state by other countries, in
particular by China, India, Middle East and Latin America countries, is an indisputable evidence of
correctness of such a conclusion. Last year alone, the Ukrainian export of machinery grew by 38.3%.
Similar tendencies may be seen in other CIS countries.
Ukraine is gradually turning into a machine-building center of relevant area. This tendency should be
stimulated by relevant state policy. Accession of our country to the WTO may broaden such
opportunities.
The said does not mean that attention should be decreased to the high-tech areas that possess quite
a weighty potential. In aerospace sphere alone, Ukraine wields 17 of 22 basic technologies known in
the world. We have at our disposal powerful fundamental science and globally recognized scientific
schools of major areas of modern scientific and technical progress. This was discussed by speakers.
Hence it is evident that our economic policy should be based on dual basis – support of industrial
modernization and active state stimulation of high-tech potential.
In solving the whole complex of tasks of innovative development, we should proceed from the need
for organic combination of market methods of stimulation of scientific and technical activity and
measures that would ensure a significant strengthening of the role of the state.
In this regard, let me remind you that when the Ukrainian industry and its leading spheres were
being put on the track of growth, the presidential decrees and relevant laws of 1998-1999 on
stimulation of metallurgy, agricultural machine-building, shipbuilding, aircraft manufacturing, light and
industries, tank production and others, along with macroeconomic regulation, were exceptionally
important. We were accused of acting contrary to the market principles. But we did our job, and
obtained tangible positive results.
Without exception, all ministries, agencies and local authorities must become subjects of
implementation of innovative policy. If we really want to achieve the necessary progress, we should
adjust functional duties and structures of relevant institutions, and concentrate their attention primarily on
strategic tasks. When ministries deal with routine problems only, there’s no need for innovative policy at
all. These are rudiments of administrative system that we have not overcome until now.
I believe it is necessary to return to the idea of recreation of the state committee on science and
technology.
The functions of vice prime ministers should be adjusted accordingly.
Integration of education, science and production, consolidation of industrial, banking and trade
capital into powerful structures able to produce high-tech and competitive goods and services should
become the crucial factor of innovative development. We saw that these issues are not resolved
automatically. We should work on creation of relevant legal base and other preconditions.
I am speaking about state promotion of creation of financial/industrial groups, including transnational
ones, as well as horizontal and vertical holdings, scientific/technical centers, techno-cities and techno-
parks. In the future, they should become the core of scientific/technical and innovative process. Some of
these structures may be formed using free economic area mechanisms. However, they should be
cleansed from speculative business for that.
At the same time, the government should take concrete actions aimed at support of venture
companies and small innovative enterprises, elaboration of state policy of privatization of scientific and
technical institutions, development and deepening of international cooperation in technology transfer,
primarily with CIS countries.
A state policy aimed at stimulation and protection of domestic high-tech market should become an
important factor of innovative progress. The process of intensive replacement of production assets,
which is in fact already underway, creates favorable conditions for that.
Once again I state: Ukraine has possibilities to ensure up-to-date modernization of manufacturing,
basing to a considerable degree on its own scientific/technical and human potential, capabilities of
domestic industry, deepening of its cooperation with industries from other countries, and development
of joint enterprises with foreign investors.
An example of such policy may be found in intensive technical and technological retrofitting of
transport infrastructure that is performed by branch ministry on the basis of domestic machine-building
complex. Last year alone, the volumes of production in science-intensive areas of transport machine-
building grew more than by 20 percent.
Further increase of the volume of investments and their efficiency should be the key element of
realization of the policy of innovate growth.
In the course of last four years, the volume of investment into fixed capital grew more than by 90
percent. These rates should be consolidated.
According to relevant calculations, GDP growth by 2.3-2.4 times (until 2015) will require at least
quadruple increase of investment. Average rate of growth of investment should be 12-13 percent, and
their total amount should grow by $120-150 bln.
At least four basic conditions must be met for this.
Firstly, greater rate of total accumulation of fixed capital must be ensured. In our country it stands at
20% of GDP, while most leading South East Asia countries it is above 30% and even 35%.
Secondly, we should decrease considerably the tax burden and accordingly the level of state
consummation. In 1999, the revenues of consolidated budget, Pension Fund and funds of state social
security amounted to 34.6% of GDP, growing to 38.8% in 2002 and to 40.5% in 2003.
Only countries that have developed economies may allow such a level of state consummation. In
leading counties, which ensure 6-7% annual growth, the rate of state consummation does not exceed
25%. We have considerable reserves in this regard. The results of economic growth should not be
“eaten away”, they should be reinvested into economy. This must become the golden rule for the
government, if it really cares about the prospective.
The third, basic, point deals with state investments. Countries with developed economy consider up
to 3% of GDP to be the optimal figure. In this country, state investment potential has been decreased to
a minimum – below 1 percent. Even the financial resources obtained from privatization are spent to
increase the consummation fund.
The fourth point is related to engagement of foreign investment and on its basis, of new equipment
and advanced technology. We expect that accession of Ukraine to WTO will considerably promote the
improvement of Ukraine’s investment image.
According to the existing forecasts, foreign direct investment in Ukraine should grow by 4 to 5 times
in 2015 as compared to 2003, amounting to $1.5-2 bln. per year. Last year, foreign investments grew
by almost $1.2 bln., so I am speaking about quite realistic prospective.
We have accumulated a weighty experience of macroeconomic stabilization – the basis of
investment attractiveness of Ukrainian economy.
The participants of the conference know the sharp criticism of the President regarding the basic
provision of economic strategy of our state presented back in 1994, which is the priority of
macroeconomic stabilization.
This was the most difficult question from the point of view of practical implementation.
Let me remind you that, because of transition to world standards, oil prices in Ukraine grew 24.500
times, petrol prices grew 64.700 times, diesel fuel prices grew 73.800 times and natural gas prices grew
21.600 times.
These are official data provided by the State Statistics Committee.
For your information: during the global energy crisis of the 70’s, global oil prices grew almost four
times, which became probably the worst test of global economy in the post-war period. As we can see,
here relevant increase may be evaluated in thousands.
It is even hard to believe that we’ve managed to overcome such cataclysms.
Even now, Russia and Byelorussia have not switched to global prices of energy. We did that in mid-
90’s.
Nowadays, macroeconomic stability in Ukraine is one of the most reliable ones, not only in the post-
Soviet space, but among all other transitional economy countries as well. Foreign experts recognize that
as well. In my view, the reason of considerable slowdown of annual economic growth of Central
European countries, which used to be the leaders, lies in many unresolved problems of macroeconomic
stabilization.
It should be noted that for the last four years annual inflation in Russia was twice the inflation in
Ukraine.
We should be consistent in this regard as well. Strong currency should remain determinant attribute
of the national market, a weighty factor of its attractiveness for investment, efficient tool for increase of
competitiveness of domestic producer and modernization of the economy, savings and increase of
income of the population.
We should not exceed the inflation threshold of 5-6 percent, gradually approaching the European
standard of 2 percent.
The policy of state budget deficit could be more flexible in my opinion. According to international
standards, budget deficit up to 3% of GDP is positive for the economy. I speak about the situation
when relevant funding is not spent on routine consummation, but used as an additional source of funding
of the state investment programs.
In this regard, a moderate increase of deficit and budget spending aimed at economically justified
goals, may become quite an efficient instrument not only of growth policy, but also of innovative
reconstruction of economy. This will promote activation of stock market and improve the structure of
monetary circulation, which remains probably the most vulnerable point of monetary system of our state.
A couple of words about our banking system. It evidently progresses. Mr. Tygipko and Mr.
Sorokin told us about that in detail in their speeches.
At the same time, many unresolved matters remain. If we believe that the most important activity of
banks is promotion of the strategy of proactive growth, in particular, participation in formation of
investment resources, we may come to a conclusion that the most important parameters of Ukraine’s
banking system do not meet the set requirements yet.
The share of investment credits of commercial banks was below 7% of the total sum of investments,
which is significantly lower than the relevant figures of Central European countries with economies in
transition. There are many other problems primarily related to the capitalization of commercial banks
and improvement of efficiency of banking system. Coordinated policy of the NBU and the government,
as well as of the State Commission for Securities is needed for their solving. I am speaking about the
matters that require immediate solution.
Increasing state efficiency
In the context of the matters discussed above, it becomes evident that one of the pivotal problems
of the new stage is the increase of the role and efficiency of the state.
This is my economic credo, a principal position, to which I was trying to adhere during all the years
of my presidency.
This problem exists not only in the Ukrainian society. Restoration of efficiency of the state, making it
stronger without reanimation of the old administrative system is the task faced by all post-soviet states
without exemptions.
Let’s be frank: we and other CIS countries have no recipes for settlement of this extraordinary
complicated problem. In this connection, we primarily should use the accumulated experience and
understand that “the less state is the better” policy, widely advertised in the West, suffered total defeat
in the CIS. For a society in transition, such policy became one of the most destructive factors. We
faced the phenomenon of total misunderstanding, and maybe deliberate ignoring, of these problems by
the western politicians. Hence are relevant controversies in assessment of social and political processes
that take place in our countries, including Ukraine. We should not ignore that and veil the said
discrepancies. The society has the right to relevant information.
In this regard, let me draw your attention to some most critical points.
Increase of state efficiency should be assessed primarily from the point of view of overcoming
corruption, de-shadowing and de-bureaucratization of economy. Global practice has proven that the
level of shadowing increases as the state becomes weaker.
In the recent years, the level of shadowing of Ukrainian economy decreased from 43.5% in 1997 to
34-35% in 2003. Naturally, we are speaking about approximate expert estimations. At the same time,
the figure is still too high. It exceeds the critical level.
The spread of shadow relations to almost all non-economic spheres is especially dangerous for the
society. We are speaking about shadow political and social markets, shadow political lobbying,
shadowing of election system, informal human resource policy, shadow markets of education,
healthcare, science, scientific dissertations made to order (bought) etc.
This leads not only to criminalization of the society, but also to considerable moral and ethical
losses, legal vulnerability of individuals and businesses, and establishment of a negative international
image of our state.
Experience shows that limitation of shadow economy may not be based on force methods only,
which give temporary effect. It should be an integral system of actions aimed primarily at extinguishment
of preconditions of this phenomenon. We need a new strategy for de-shadowing of economy and fight
against corruption. It should consist of primarily formation of a balanced legal field (as a matter of fact,
shadowing is rooted in this sphere), creation of favorable conditions for legal business based on
maximum taking into account the interests of business entities, decrease of bureaucratic barriers, and
implementation of clear economic rules and political procedures of interaction of business and
authorities.
In my annual Address, I proposed the government and the Verkhovna Rada to consider a possible
amnesty of individuals as regards legalization of shadow capitals. I submitted the relevant draft law for
consideration of the parliament. In this regard, it is very important to take into account the fact that
besides economic effect, amnesty of shadow capitals may become a step towards creation of
“economy of trust”.
Yet another key problem – ensuring the necessary legal and political support and reliable protection
of rights of private property, which is establishing its positions – should be viewed in the same context.
In the last decade, major accents in this sphere were made on quantitative transformations; today, when
the critical mass of private property has been created, putting it in order and providing real guarantees
of state protection and inviolability become our priority.
In this context, I attach crucial importance to the reforms of the system of corporate management.
The corporate sector, formed on the basis of privatization of state property, occupies the most
important place in the Ukrainian economy. It produces almost two thirds of GDP. However, during the
years of reforms, no necessary preconditions that would promote establishment of effective corporate
management mechanisms have been put in place. Transparency of joint-stock companies remains low,
their activities are deeply shadowed, corporate rights of shareholders, especially minor ones, remain
legally unprotected; sometimes their rights are openly and brutally violated. As a matter of fact, we’re
speaking about violation of property rights of, as I already mentioned, almost a third of the population –
almost 18,000,000 citizens who own large and small stocks.
I’ve already touched upon this problem before, but there are still no changes, which were
anticipated. Generally speaking, there’s a paradoxical situation in the government, when nobody deals
with the problems of improvement of ownership (which is a basic point of systematic reforms).
I rank the problem of logical completion of land reform and subsequent profound transformation of
rural economic, financial and credit relations among key problems in the mechanism of improvement of
property relations. I am speaking about resolving the whole complex of issues related to capitalization of
land relations – establishment of full-fledged market of land, relevant pricing mechanisms, and modern
land tenancy and hypothecary relations. We should be pragmatic – there are no other mechanisms of
realization of the powerful potential of agricultural sector of economy and its innovative transformation. I
fully support the position of Academician Sabluk.
Along with completion of land reform, the state must ensure the necessary institutional preconditions
for change of the position of consumer's co-operation, which has changed its position, adapted to the
market and preserves its niche in the economic process.
For Ukraine, it is extremely topical to establish modern mechanisms of protection of intellectual
property rights. This is yet another important function of the state. I want to underline this. We should
create mechanisms of commercialization of intellectual activity and ensure its protection from unfair
competition, illegal expropriation, counterfeit and limitation of other rights in manufacturing, scientific,
literature and arts spheres.
We have not learnt how to solve these issues, and suffer from that immensely.
There is an extremely important task of property reforms – transition to systematic privatization of
strategically important areas of economy, which critically influence structural and macroeconomic
processes nationwide. The goal is to generally complete privatization as a wide-scale social/economic
process of transitional stage of Ukrainian economy by 2008. I am speaking about decreasing the share
of state sector to 8-10%, which would facilitate more intensive flow of capital to Ukraine’s economy
and its growth.
At the same time I’d like to touch upon the problem I’ve mentioned before.
We should refrain from simplification in assessment of the processes of establishment of
industrial/financial capital, its concentration and interaction with the state in development of the national
economy. These processes are often sweepingly equated to oligarchization, which is absolutely wrong.
The future of Ukrainian economy cannot be tied to priority development of small and medium
enterprises only. Though, as you know, I am actively promoting their consolidation and do everything I
can to support and protect them. We should proceed from understanding that small and medium
enterprises in all the countries of the West have always been developing and is developing now in close
cooperation with large companies formed back in the industrial age.
I am speaking rather about intermediate structures capable to fill the gaps in economic space that
large companies cannot occupy because of their specificity.
Because of that, we must overcome the opposition of small and medium business to large capital
and large companies. It is purely parochial mentality. Id does not comply with the strategic goals of our
development; even more so – it contradicts them. We should proceed from understanding that only
large national capital, together with small and medium enterprises, may become the foundation of real
sovereignty of the national economy, its basic construction.
We experienced a lot of problems and difficulties in economic development because of too slow
formation and consolidation of national capital.
I believe that opposition to the need for close cooperation between the state and private capital is
also biased.
Let’s take a closer look into this important matter.
Private capital, irrespectively of its structure and volume, always requires state support and counts
on it. Economic and, especially, scientific and technical achievements came to life in the western society,
to a considerable degree, because of organic combination of private capital (including monopolies) and
state capacities is a joint functional mechanism. Why should we use different principles? It makes no
sense for me. In this connection I want those who’d like to see Ukrainian economy only as a
conglomerate of small handicrafts and hawkers to know that such a variant may undermine considerably
not only economic, but also political security of our state.
This may not be allowed to take place under any circumstances. Besides, we should take into
account the specificity of the structure of our economy, large share of basic industries, as well as the
specificity of the present-day industrial modernization. According to all canons of global experience, an
industrial society – and that’s where we are now – is a society of large corporations. We cannot be an
exemption. I am certain that this complex of problems related to improvement of property relations –
and I repeat that those are the basis of economic system of the society – should be rightfully ranked
among crucial tasks of economic modernization.
Deepening democracy and the political reform
The problem of state efficiency has yet another aspect – it is directly and immediately connected to
the task of development of democracy and consolidation of civic society. We’ve reached the point
beyond which the progress in development of the Ukrainian state and society may be possible only on
the basis of tangible democratic transformations.
We may say that there’s no alternative way neither for us, nor for other post-soviet countries. That’
s my principal position.
I don’t think that anyone can deny the evident fact: the previous period of development of our state
will (without any doubts) leave a noticeable trace in the systematic renovation of all spheres of social
life, including its democratization. By immense efforts, we’ve managed not only to destroy the
foundations of totalitarian system and put an end to one-party system and ideological monopoly, but
also to consolidate the main components of democratic elections: free elections, distribution of power,
multi-party system, ideological and political pluralism, independent media, regional and local self-
government.
All the above did not appear out of nowhere. Present-day “opponents” also know this well.
However, these are yet only institutional attributes of democracy, which should be filled with
constructive content. I realize this well.
At the same time, we should be realistic in this regard, and realize that we cannot immediately jump
into European-style democracy from totalitarian system (albeit any possible desires).
The case in point is another illusory view, in the captivity of which individual politicians, both individual
Ukrainian and foreign ones, are.
I doubt whether we should forget that the process of strengthening modern European democracy
had a long, over 200 years, history, that nowhere, even in the most successful countries it did not occur
in straight lines, that everywhere there were crises and recoils and, finally, that this process took on
steady and irreversible signs only after it had combined with mechanisms of civic society, when the
broadest stratum of the middle class had shaped, the stratum which is the basic social medium of
democratization, the guarantor of political stability. I doubt whether we, in this connection, should stress
that in some countries of the West, which are respectable now, both the establishment of the equal
electoral franchise and the overcoming of racial discrimination took place only in the postwar period.
It is also not by chance that Erhard combined the process of democratization with the practical
implementation of the principle "welfare for all." It is this principle that was determinative in the
strengthening of a social and market economy which became the basic prerequisite for the
democratization of German society.
All these things are organically interconnected.
As far as we are concerned, we are far from a complex settling of these questions. This is a task to
be fulfilled by the new stage of development which has just begun.
Taking into consideration this information, the political public and the broad public should approach
more weightedly and realistically everything concerning the democratization of Ukrainian society. We
have a bitter experience in the economy, which is indicative of the fact that when efforts to artificially
implement this or that form of a market infrastructure turned to be negative results for us.
We have no right to make a mistake in this matter as well. Democratization is a complicated way
along which society must walk. Democratization is not established with the use of a command to be
given from above and it can become constructive only if a firm foundation of it is built and the relevant
social and political prerequisite for it are created.
It is high time, at last, to understand that democracy can not come into being from anarchy. Only
strong power and the state which are able to function can be the basic subject of its strengthening. I was
guided by the very view when as early as 1999 I initiated carrying out a profound political reform in
Ukraine.
Making the relevant proposals, I proceeded from the fact that the president-and-parliament system
of power had played an important role at the initial stage of the creation of the state, especially in the
first years of our independence, ensuring the implementation of complicated system reforms, the reliable
stability of society and the state, civic peace and harmony.
The existing political system, however, has profound contradictions which now became a tangible
hindrance to social progress. One may not shut eyes to this. The modernization of the social and
economic sphere is possible only on the basis of the real modernization of power and society as a whole.
The case in point is the objective reality which should not be mixed with ambitions of individual
politicians and their foreign advocates.
In this connection I would like to draw your attention to the fact that a qualitative growth in the role
of representative institutions, above all the role of the Parliament, should become the basic matter in the
political reform, which will enable political forces, mainly parities, to qualitatively improve their role in
developing and implementing state policy, in ensuring coordinated and responsible activities of legislative
power and executive power, in democratizing all spheres of social life, in strengthening the basic
principles of civic society. In the long run the case in point is both the strengthening of the ability of the
state to act and taking root by such social conditions under which the democratic principles of
development of Ukrainian society will become determinative in political sphere and democratic
transformations will become irreversible.
It is important to take into account that the aims of the political reform directly correspond to the
European integration strategy of Ukraine – joining of our state to commonwealth of fundamental
democracies.
At the same time my propositions regarding the reform, transition to the parliamentary-presidential
republic and, on this basis, conjoint democracy, take into account peculiarities of social development of
the post-soviet space countries – neighboring states of Ukraine.
I stress once again – consolidation of democracy in new independent states – former USSR republics,
has nowadays great importance not only for successful settlement of the whole series of urgent
objectives of internal modifications, but for social development in Europe and in the whole world. In this
regard transformation of Ukraine into a hearth of democracy in the CIS must be considered as the
matter of common interest not only for the Ukrainian people, but for international community as well.
We have all preconditions to realize this important mission.
We all are conscious that such transformations must not be reduced to mere settlement of problems of
the highest bodies of state power. Creation of political system according to the European example
requires end-to-end solution of such scaled objectives as fulfillment of cardinal judicial reform and
reform of local government bodies, which will allow providing proper correlation of all three branches of
the state power. These issues are now under consideration.
I am convinced that deputy corps, Ukrainian politicians, will find strength to realize corresponding
objectives. They are, I repeat once again, evenly stipulated.
Foreign policy priorities
With determination of “The European Choice Strategy” which was given in my Address to the
Verkhovna Rada in 2002, the problem of realization of the European integration course of our state
moved from the political level to the sphere of practical solutions. On the present phase locomotive
fields are, on the one hand, solution of wide complex of problems connected with entry of Ukraine into
the WTO and creation of free trade area with the EU, on the other hand – activities concerning
obtaining full membership of Ukraine in the NATO.
Our state actively supports broadening of the EU, which opens new strategic prospect for Ukraine and
considerable possibilities to deepen policy of the European integration. I am convinced that existing
complications in this regard, connected with visa regime and movement of goods, have temporary
character and will be settled.
At the same time we have to comprehend creatively the experience of the countries of previous
European integration process wave, analyzing both positive and negative sides, and to avoid mistakes
made by the countries of the Central Europe. We are not to be integrated into Europe as “younger
sister”. We have already “passed” it. We have to cut short such appearances. Postponing for more
distanced than it was envisaged term of the realization of final goal – obtaining full membership in the EU
by Ukraine – this is our unfailing aspiration – should not become a loss for society, as soon as it is about
extension of the period of fundamental system transformations that must be performed. The matter
concerns:
- firstly, realization, within appropriate time limits, of the proactive development strategy that we are
discussing today and which has to provide increasing of GDP for 2,3 – 2,4 times more and tangible
overcoming of the gap between volume of GDP per a person in Ukraine and states-members of the
European Union on this ground;
- secondly, domination of the innovational model aimed at increase in competitiveness of the economy,
establishment of Ukraine as state with advanced technologies;
- thirdly, purposeful providing of reliable preconditions for shortening the gap in level and quality of
living standards comparatively with the EU countries, establishment of the middle class – basis of
political stability and democratic society.
In this regard we may talk about specific features of the Ukrainian way in the European integration,
where main attention is concentrated on fundamentality of the internal transformations. It is a question of
policy, which could be called policy of constructional European integration. Realization of the
Copenhagen criteria shall be fulfilled exactly on this basis. Hurrying here is inexpedient.
That is why I would like to reassure the EU officials, who too rigidity interpret the European integration
course of our state. We do not ask anyone for something and have never asked before. The declared
course concerns first of all European self-identification of the Ukrainian nation, strategic guiding lines of
the internal transformations, logic of deepening transformational processes, policy of new wave of
reforms.
Corresponding course is our internal objective, realization of which requires time and depends on
ourselves.
At the same time we have to realize that with broadening of the European Union new possibilities of
deepening economic and political cooperation with future new members of the EU are forming, first of
all with countries, which constitute the Baltic – Black-sea axis.
In this regard strategic partnership with Poland is gaining important meaning. This is our mutual
aspiration. I am convinced that the year of Poland in Ukraine will contribute to realization of the
abovementioned goal.
Ukraine has been, is and will always be objectively interested in all-round cooperation with the CIS
countries.
Implementation of the Agreement establishing Single Economic Space with participation of Belarus,
Kazakhstan, Russia and our state may play a positive role. The most principal for Ukraine at the present
stage of development is not a dilemma between integration alternatives now, but constructive mutually
beneficial economic cooperation. It a question of cooperation not only in energetic sphere, but, first of
all, in the matters of industrial modernization, domination of high technologies, what is decisive at the
present stage.
At the same time we are to do a lot to eliminate step-by-step existing problems in relations between our
countries, prevention of the threat of deepening of their asymmetric development.
Overcoming incredible difficulties, each of our countries as a matter of fact was proceeding on its own
way to consolidation of independence and sovereignty. It is worth to be treated with great respect,
understanding that we all are different, that each state has its own national interests, which should be
considered.
In this regard is necessary to consider final incompletion of “economic separation” of the former Soviet
republics, particularly the problems of division of assets of the Soviet property, including intellectual,
final delimitation of the borders, incompletion of forming of the national identity of the states etc. Without
comprehensive solution of these problems trust of our states towards each other can not be full, and
without this possibilities of real and – it’s the most important – parity rapprochement, are limited.
We must not close our eyes to this and pretend that such problems do not exist. Contributing to their
successful solution has always been and still remains an important policy priority for me.
I would like to address my opponents that artificially oppose western and eastern policy of Ukraine and
play their own political game on it. Such opposition is a full political ignorance. Ukraine is on the cross
of the geopolitical interests. These are not only difficulties, but also our objective advantages that one
should be able to realize.
Besides, deepening of the regional cooperation fully corresponds to the EU principles. At the basis of
these principles lies understanding that solely through cooperation and partnership with its neighbors
each separate country can maximally realize its own potential and secure national interests.
Strengthening of the integration processes between our countries can contribute to establishment in the
eastern part of the European continent of an area of stable social and political development and high
tempo of the economic growth, in which the European and world community is interested.
Our active stance in issues that are related to optimization of our relations with the Russian Federation,
moving them into the dimension of the real strategic partnership is in compliance with the course of the
European integration. The European community is objectively interested in such development of the
things, including in mutual coordination of the euro-integration policies of our states.
The matter concerns an important factor in expanding stability area in the European space, consolidation
of which is one of the most important priorities of the European Union. This fundamental stance was
supported at the “Ukraine – EU” Yalta summit that took place in October 2003.
In this context Ukraine supports ideology of the Greater Europe, inter alia creating in the perspective of
the single European economic space, organized according to principles of free trade, where neighboring
countries are regarded not as antipodes, but as interacting subjects equal in rights.
Our constructive interaction with Kazakhstan is especially promising because it is objectively interested
in the European vector of the new regional formation, intends to draw together with Europe through "the
four countries." To the same extent Ukraine is interested in mutually beneficial cooperation with the
Republic of Byelorussia.
The comprehensive intensification of mutually beneficial economic relations with Turkmenistan,
which remains one of the main trade partners of Ukraine, is important to our state. The volume of direct
Ukrainian investments in that country increases continuously.
At the same time, the establishment of the Single economic space cannot negate the participation of
Ukraine in other subregional integration formations, in particular in the GUUAM and BSEC. The
advantages of these vectors of international cooperation consist in the fact that our state acts in them as
a leader of and is the core of regional integration.
In the new situation the initiative position of Ukraine with respect to the intensification of interaction
with countries of Central Asia and the Caucasus, in particular in developing international transportation
and communication networks and in developing fields of carbohydrates in the Caspian region, takes on
special significance. The deepening of the relevant cooperation fully corresponds to the interests of the
European Union. In these and other matters Ukraine can become an important link between the East
and the West.
The renewal of a constructive dialogue with the United States of America directed towards the
development of our relations according to the principles of mutual respect, non-interference in internal
political processes, the removal of barriers to bilateral trade and investments I place to the credit side of
our foreign policy.
On the whole I always was consistent in the fact that the establishment of strong partnership
relations with the United States of America, especially in military and political sphere is of strategic
importance to us, in particular if one takes into consideration the European and Atlantic strategy of
Ukraine, joint positions concerning fight against terrorism and the strengthening of security in the East
European region and the Black and Caspian Seas region. We would like to be always fully confident in
the adequate attitude on the part of the American side as well.. We hope for it.
The political leadership of the state is well conscious of the existing realities of the world system, the
necessity to jointly counteract the newest global threats and international terrorism.
At the same time, Ukraine always advocated and with advocate the maximal use of the reputation
of the United Nations Organization in settling the most acute problems of collective security, the creation
of the objective prerequisites which would not only balance extremely dangerous destructive processes
of the modern world development, but also prevent them.
The case in point is, first of all, the joint search for the mechanisms the implementation of which
would ensure, in the global dimension, the rapprochement of states in terms of the standard of living.
The world in which the dangerous gap between the poor and the rich constantly increases cannot be
steady. The protection of human dignity, rights and liberties of every person like the real democratization
of social life are possible only on the basis of tackling the mentioned problem.
I am also firmly convinced that Ukrainian diplomacy should tenfold effectively work in the direction
of the further strengthening of our relations with China, Turkey, India, Pakistan, Iran and other countries
of the Middle East and Latin America. We have many common interests, and this is the basis for
economic interaction and mutual understanding.
* * *
I mentioned in detail problems of not only economic development, but also those of social, political
and foreign policy development, taking into consideration the fact that a key to a tangible social
progress at the new stage of our development lies in the plane of their complex resolution. It is that sort
of coordination that we did not have earlier for different reasons, in particular for lack of necessary
coordination between the Government and the Parliament.
In fact the scientific discussion at our conference confirmed inter alia this conclusion as well. I am
grateful for expressed opinions and proposals. I believe that mainly the Government, the Presidium of
the National Academy of Sciences of Ukraine should attentively analyze and generalize them.
And one more thing.
Comprehending ways of strengthening our strategy, the basic principles of which were
comprehensively discussed at the conference, we, and this is quite understandable, strive to draw on the
whole positive experience of western countries to the most possible extent and to use it.
At the same time, the world practice is eloquently indicative of the fact that not a single country
which achieved tangible successes in the development of its own state shifted to the blind copying of
other's experience, in particular in tackling urgent economic problems. As far as the well-known
countries with which the so-called economic miracle is associated, namely Japan, France and Germany,
as well as new industrial states are concerned I can state that each of them was maximally guided not
only by its own economic specificity, but also by historic traditions, genetic roots, distinctive features of
national character, culture of its peoples.
The same thing one can tell about such countries as Turkey, Egypt, Saudi Arabia, Thailand, China,
Vietnam and the others which at present make progress quickly.
And we, on the one hand, declare our intentions to develop a strong and sovereign state, and, on
the other hand, always go cap in hand to somebody, boast that we strive to be "like all," not to "differ
from the others."
There is a deep contradiction here. Over the years of independence we failed to acquire national dignity
and self-confidence that are extremely necessary for strengthening our state. Colonial past firmly holds
us, does not let draw ourselves up, raise the head and show ourselves. It is not the matter of our
originality or search for a fundamentally new Ukrainian way. We should understand the other thing: we
have only some decades to go through the things that the West has experienced during several centuries.
Politicians that do not understand these realities and for whom “standard matrix” sanctified by the
authority of the western official is above all would never have perspective. I do not consider myself to
be one of them.
Dear participants of the conference!
New presidential elections are to take place in October this year. Availing myself of the opportunity, I
would like to assure you, countrymen and high representatives of the world community that take part
in our conference, that I would do everything for the elections of the new Head of State to be held
civilized, on the democratic basis and in full conformity with legislation in force.
At the same time society has a clear idea of the processes that are to develop after the elections. The
matter concerns perspectives of deepening the already begun transformations, as well as the whole
complex of problems related first of all to further strengthening of the statehood and sovereignty of
Ukraine.
With due regard to it, securing succession of the state policy in the social, economic and political
spheres should become the key moment of this year elections. Polling carried out by the National
Institute of the Strategic Researches shows that greater part of the Ukrainian population shares the
abovementioned stance.
It can be explained. As a result of the complex of objective and subjective factors, including mistakes
made, the first decade of the independence was characterized by tangible contradictions, was
accompanied by great losses in economy and living standard of the Ukrainian population. At the same
time Ukraine has managed over these years to overcome to great extent the most critical problems of
the initial stage in establishing the independent state, radical reforming of all spheres of the social life and
of the economic system in the first place. There has been put an end to the continued and destroying
transformational crisis. During last straight four years there have been noticed rush economic growth.
Well-being of the population grows steadily, though slow. There takes place complicated process of
forming the Ukrainian political nation.
Certain achievements were noticed in the intellectual sphere as well. The state shows capability to
adequately react at new dangerous challenges of international character, to strengthen defensive
capacity and to protect sovereignty and territorial integrity.
In connection with it I would like to emphasize: we should do everything to secure succession of the
state course as a necessary condition of preserving positive achievements of the social development
when acknowledging inevitability of adjusting state policy to the program and ideological directives of
the future head of state.
It requires constructive approach and responsibility of all political powers for holding elections in the
favorable political atmosphere. The abovementioned concerns forces that belong to the present
parliamentary majority, as well as opposition. Oppositional political forces should be bearers of not only
flexible political slogans, but also of the alternative programs and ways of the social development.
I reiterate: it is quite just that society takes with great reservation any schemes of the pre-election
process, which are aimed at realization of purely own ambitions of the separate politicians. We have no
right to admit it.
At the same time we must prevent any attempts of the external forces to interfere in the election
campaign of Ukraine.
We should regard holding of fair, transparent and democratic elections of the President of Ukraine as
one of the key factors in speeding-up processes of the European integration, establishing efficient
relations with leading democracies, improving international image of the Ukrainian state. I am sure that
things will develop this way. I depend on wisdom and civic responsibility of everyone.
Thank you for attention.
Esteemed representatives of the diplomatic corps!
The work of our conference comes to an end. Meaningful talk that has been continuing for two days
enables deeper comprehending of the acquired experience concerning transformational reforms and,
that is more important, outlining their strategic perspectives.
As the discussion showed, we all have the same point of view concerning the fact that today in Ukraine,
like in the other CIS countries, there is being formed fundamentally new social and political situation
connected with actual completion of the preceding (initial according to its content) stage of the system
transformations and transition to the stage of practical implementation of the long-term strategy.
It happened so that in our country beginning of the corresponding stage coincides with holding the
presidential elections. Someone can ask in this connection whether we are trying to run a few steps
forward in this case and whether it would be better to put off the talk till the end of the elections. The
new president will come and dot his “i’s”.
Such scenario is possible indeed.
But I was guided by the other logic when being the initiator of the conference. I proceeded from the fact
that the society should beforehand form clear guide lines concerning future of our state and determine
electoral preferences according to them. I think that such approach is a manifestation of deep respect
towards electorate, is democratic enough and is aimed at making choice of the citizens more conscious.
As one of the outstanding thinkers of the last century English scientist Toinbee noted, history of each
separate country, as well as civilization in the whole, develops according to the “challenge –response –
challenge” principle.
“Development, – emphasized he, – has place, when challenge encourages successful response that, in
turn, causes further and other challenge”.
I am convinced that the question “Will Ukraine be or not be an independent state?” was the content of
the main challenge during the previous stage. Challenge system of the new period that has actually begun
is in the other dimension. It is a complex of interrelated political, economic, social and humanitarian
problems, settlement of which will determine shape of Ukraine not only in the near future, but during a
longer perspective or, perhaps, for ever.
In this connection we should have a more clear idea concerning content of the transitional period. The
matter concerns not only market transformation. The latter one is only one of the basic tasks of this
period. We have settled it for the most part. At the same time securing new standards of human
wellbeing and life, its sovereign rights and freedoms, strengthening main mechanisms of the innovational
development model, deep democratization of the political system and establishment of the civil society
are not less important.
Thus, the matter concerns understanding of the need in settling during the transitional period of not one,
but a range of the fundamental tasks that are organically interconnected and should be considered in the
complex.
I draw your attention to this extra important problem mainly because it directly concerns understanding
the content of the challenges of the new historical stage in development of our country, thus the ever
existing problem “What should we do?”, “How should we further build our policy?”, “What should we
determine as the priorities?”.
It is a question of a new wave of the system reforms, main aim of which should become implementing
tasks of such kind.
Now let me dwell on the separate basic priorities of the new stage strategy and express my point of
view concerning their content and mechanisms.
New accents of the social policy
I would like to inform you first of all about main accents in the social policy.
During the initial stage of the system transformations we justly concentrated our attention on creating
basic attributes of the national economy, overcoming the crisis and reforming the market. We should, of
course, further work in this direction, improve everything we have already done and correct mistakes
made and deformations. But now situation is being formed, under which basic priorities in the policy of
reforms should be changed. They should move first of all into dimension of the qualitative reforming of
the social sphere that remains unreformed in many aspects and preserves characteristics of the
preceding system.
We cannot but see that society faces the phenomenon of the indifferent person and effect of its
increasing indifference more often. There is evident explanation for it. People do not see perspective of
the tangible changes in the social sphere. The society put up with it during the stage of overcoming the
economic crisis and initial market reforming. But now, when there are no well-defined social
motivations, people begin to ask more frequently a proper question: “Where are we led by those, whom
we entrusted the power and who call themselves reformers?”
The other extreme of the issue raised is real threat of the absolutization during system reforms of the
purely market values and consolidation of their supremacy not only in the economic, but also in the
political and humanitarian spheres. Now these principles dominate mainly in the countries of the
peripheral area of the modern world. As far as countries of the so called civilization centre are
concerned, social and market values are basic there. Western Europe is a society that develops on the
principles of such values. Reforms of Ludwig Erhard in the post-war Germany are not purely market,
but also social reforms.
If we critically evaluate reforms that were carried out, we will see that we move at present not
towards consolidation of the social and market principles in development of the society, not towards
Europe, but in the opposite direction, in direction of consolidating value principles of the market
fundamentalism, where everything, in the social and political and humanitarian spheres including, is
measured by size of the profit.
We should change this tendency. It can be done only at the present stage of development, namely at
the beginning of the economic growth and overcoming the economic crisis, during which there should be
finally formed not only outlines, but also the structure of the society, in which we and our descendants
are to live.
In this connection period of 2004-2015, strategic tasks of which we have discussed, should
become a period of qualitative improvement of the whole architecture of the social and economic
system, development of the corresponding structure in such a way that each meter of its living space
worked for the man, was subordinated to his interests, creation of the corresponding comfort for him,
protection of his rights and freedoms.
There have been noted lately positive changes in development of the social sphere. I dwelt on it
partly in my welcoming speech at the opening of the conference. This question was also raised in the
speeches by D. Tabachnik, S. Pyrozhkov, E. Libanova, L. Novikova and others.
But I suggest that we should be careful when it concerns changes in the social sphere, where, as
practice of the last years shows, especially important are not only quantitative, but first of all qualitative
parameters, change to the fundamentally new standards of the vital activity of people in comparison with
those of the soviet epoch. It is the question of tangible expansion of the social transformation sphere,
organic integration of instruments of the economic and social policy into single functional mechanism.
Unfortunately, we have not yet reached such level of understanding of the social and economic
transformations. Superficial division of the corresponding spheres is nearly the most vulnerable segment
of the implemented reforms.
In this connection one of the key functions of the state should be its concern for humanization of the
production sphere, mainly of the property relations, bringing social content to them, consolidation of
mechanisms of the constructive interaction between work and capital, overcoming antagonism
manifestations that accompany them and become more influential.
We cannot regard as normal phenomenon, when private sector of the economy, which strengthens
its positions, moves away from settling a wide range of the social problems, when all social costs are
imposed on the state. In the western countries social investments of corporations and firms reach over
40% of their expenditure volume.
Situation that has been formed in our state should be necessarily changed.
Social and political stability constitutes a base for favorable business climate. It should be paid for,
including at the level of the private structures. I am convinced that representatives of the business circles
and of the large business, being conscious that a person cannot be rich and happy when there are the
poor and the miserable beside him, completely agree to such statement of the problem.
Especially topical for Ukraine is implementing of the efficient income policy, overcoming on its basis
of the deep property differentiation that makes progress and has a long time ago surpassed maximum
admissible level that defines threshold of the social stability.
The matter concerns one of the basic functions of the government, which is performed in our state in
a satisfactory way. We have let everything in these questions take its course.
Probably the most topical here is the problem of substantial increase, perhaps a tenfold increase, in
cost of the manpower – the highest value of a state. I am sure that there is no need in convincing
anybody that low cost of the manpower is a phenomenon inherited from the old administrative system.
Economy that is based on the low manpower cost does not encourage scientific and technological
progress, accumulation process, forming of the insurance funds, resources for the provision of pensions
and education. After all, such economy has no resources for sustainable growth.
During the period from 2000 to 2003 annual wages in Ukraine grew from 230 up to 462 Hryvnias.
At present it exceeds 500 Hryvnias, including in the industry – up to 654 Hryvnias, in transport – 772
Hryvnias. Average monthly level of wages exceeds 1000 Hryvnias at many plants, inter alia at the
Mariupol metallurgy industrial centre, at the “Krasnodar – Zahidna” coal mine, at the Mykolaiv
aluminous plant, at the “Slavutich” plant and others. It is good.
But everything we have done should be regarded as the first steps. Our task is to create during the
near years objective preconditions for raising wages, as a minimum, up to $ 300 per month.
Calculations show that it is within our capabilities. High levels of increase in labor efficiency
constitute a basis for it. We want to establish ourselves as a European state that has tangible economic
potential and aspires to take a worthy place in the civilized world. That is why we should understand
that high manpower cost is a calling card of the modern civilization.
In this context it is politically, economically and socially important to strengthen positions of the
medium class, weight of which should be doubled in the near perspective and brought, as a minimum,
up to 45-50% of the total population with simultaneous decrease in the number of people with income
below the living wage.
In general, there should be no place for reanimation of wage-leveling in the income policy.
Disproportions that have been formed are to be overcome not by the artificial limitation of the highest
income level of the rich, including the rich families, but by their legalization and bringing out of the
shadow, expanding strata of the private owners (including of the land) that are actively engaged in
business and receive profit from it.
I would like to reiterate my stance: I am against hunting the witches. A new cycle of redistribution of
property in Ukraine is inadmissible. It is a very dangerous stance. On the contrary, we should go the
way of increasing the strata of the private owners. Encouraging people in possessing private property
and its efficient protection are fundamental priorities of the income policy.
Employment problem needs maximum attention. In this issue we have positive developments.
During the four years of economic growth unemployment level fell by 27, 8 percents. Employment
structure has substantially improved.
At the same time excessive employment remains at different plants and organizations, especially in the
state sector. It restrains growth of wages. Should such situation be preserved? Should we probably
make decisive steps in the opposite direction: substantially raise level of labor remuneration, its material
motivation and at the same time deliberately increase to a certain extent unemployment level?
I wish that the society would understand that there does not exist positive settlement of the problem of
encouraging highly qualified intensive work and production beside the dilemma.
It is vitally important to secure proactive development of the social institutes (education, medicine and
culture) and increase in the social investments directly aimed at development of people.
We should bravely switch to the system of the goal-oriented support of the families with scanty means,
which is to substitute for the existing socially unjust and extremely inefficient system of privileges, grants
and compensations. Addressness of the social support should become an efficient instrument of
reducing the poverty level.
Substantial acceleration of the tempo in developing the modern non-governmental social infrastructure
and active usage of the world experience in it can become an efficient instrument of the social policy. It
concerns, first of all, reforming of the social insurance system and holding the pension reform.
The same can be said about reforming health care system, introducing mechanisms of multichanneling in
financing medical industry, securing regulated development of the paid medical service, introduction of
the state social medical insurance, optimal ratio between rendering medical services and freedom of
choosing them.
In this sphere functions the same rule as in the pension system: it is impossible to overcome, on the basis
of the existing mechanisms, crisis in the sphere of medical care of the population that deepens all the
time.
Secondary and high schools need concentrated attention of the society. I am convinced that it is high
time to concentrate all existing economic potential of the society on settling problems in these spheres,
first of all on strengthening their material and technical basis, qualitative improvement of the studying.
We must do everything possible and impossible to achieve tangible results within the undertime. I do not
want to justify myself, but it was impossible earlier. At present financial position of the state is quite
different.
The accumulated resources need concentrated usage. They should not be dispersed. The Cabinet of
Ministers and the Verkhovna Rada must determine themselves in this question.
We should proceed from the fact that level and content of education is one of the main factors that
secures free development of the individual on the one hand and innovational progress , independence
and security of the state on the other hand. By the biggest standard we managed to establish ourselves
as a powerful and authoritative state owing to high educational potential of our people.
At present this potential needs tangible modernization and strengthening.
Today such issues are put on the agenda as radical reorganization of the housing policies, namely
implementation of the urgent housing reform and forming of the efficient competitive environment in the
sphere, securing of the whole complex of conditions for tangible expansion of the house building,
including at the expense of the mortgage lending.
Someone can ask me whether it is not late to raise these issues.
I can frankly say that many of these problems became especially topical only now, when problems of
the long-term strategy move into dimension of the real practice. Tough policy of overcoming the
economic crisis that dominated earlier could not be directly connected with corresponding tasks.
Transition of economy to the growth stage creates objective conditions for introducing substantial
changes into this sphere of social development.
It is the question of not only tangible strengthening of the social orientation of the reform course, but also
of its transformation into an important instrument of speeding-up the economic growth, strengthening
harmony and understanding in the society.
Tasks of the innovational development
Transition to the innovational way of development that is to be based on the active investment policy
and modernization of the whole economic sphere constitutes together with deep reorganization of the
social sphere the priority tasks.
It is important to take into account that implementation of the proactive development strategy is possible
only on the basis of consolidation of the efficient innovational model. If earlier this issue could be
regarded only as a strategic perspective, now its implementation belongs to the every-day policy of the
government. It was reviewed in the report by the Prime-Minister, in speeches by Semynozhenko,
Negoda, Kinach, Kuhnaryov, Boguslaev and other participants of the conference.
I would like to make one more fundamental reservation. We should overcome the illusive idea
concerning possibility of securing postindustrial transformation of the Ukrainian economy already at the
present stage of development. It is pure romanticism. In fact, it should be the question of the urgent
industrialization of the production potential, before implementation of which the soviet economy
stopped. It is impossible to jump over this stage.
The case in point is industrial modernization that is to comprise introduction of the modern intensive
energy- and resources-saving technologies, to secure further tangible rise in intensity of labor and at the
same time to become a basis for developing potential of the economic growth. We have all necessary
preconditions for that.
The fact that increase in the machine-building production by a factor of two was secured mainly at the
expense of developing production in the science intensive industries convincingly proves that scientific
and technical complex of our state is not only efficient, but also to a great extent compatible.
The matter concerns potential of not purely internal renewal of the existing productive capacities (their
exhaustion exceeds 60 percents), but, that is more important, meeting corresponding needs of the
external market. Postindustrial countries do not have such a segment in economy. They have liquidated
it to a great extent. Their specialization is postindustrial production.
However, the countries of peripheral zone (which is more than four fifths of total global population),
including CIS countries, require primarily the products of industrial modernism. Our machine-building
complex is able to work in order to fill the relevant niche to the maximum.
The attention paid today to the industrial and hi-tech potential of our state by other countries, in
particular by China, India, Middle East and Latin America countries, is an indisputable evidence of
correctness of such a conclusion. Last year alone, the Ukrainian export of machinery grew by 38.3%.
Similar tendencies may be seen in other CIS countries.
Ukraine is gradually turning into a machine-building center of relevant area. This tendency should be
stimulated by relevant state policy. Accession of our country to the WTO may broaden such
opportunities.
The said does not mean that attention should be decreased to the high-tech areas that possess quite
a weighty potential. In aerospace sphere alone, Ukraine wields 17 of 22 basic technologies known in
the world. We have at our disposal powerful fundamental science and globally recognized scientific
schools of major areas of modern scientific and technical progress. This was discussed by speakers.
Hence it is evident that our economic policy should be based on dual basis – support of industrial
modernization and active state stimulation of high-tech potential.
In solving the whole complex of tasks of innovative development, we should proceed from the need
for organic combination of market methods of stimulation of scientific and technical activity and
measures that would ensure a significant strengthening of the role of the state.
In this regard, let me remind you that when the Ukrainian industry and its leading spheres were
being put on the track of growth, the presidential decrees and relevant laws of 1998-1999 on
stimulation of metallurgy, agricultural machine-building, shipbuilding, aircraft manufacturing, light and
industries, tank production and others, along with macroeconomic regulation, were exceptionally
important. We were accused of acting contrary to the market principles. But we did our job, and
obtained tangible positive results.
Without exception, all ministries, agencies and local authorities must become subjects of
implementation of innovative policy. If we really want to achieve the necessary progress, we should
adjust functional duties and structures of relevant institutions, and concentrate their attention primarily on
strategic tasks. When ministries deal with routine problems only, there’s no need for innovative policy at
all. These are rudiments of administrative system that we have not overcome until now.
I believe it is necessary to return to the idea of recreation of the state committee on science and
technology.
The functions of vice prime ministers should be adjusted accordingly.
Integration of education, science and production, consolidation of industrial, banking and trade
capital into powerful structures able to produce high-tech and competitive goods and services should
become the crucial factor of innovative development. We saw that these issues are not resolved
automatically. We should work on creation of relevant legal base and other preconditions.
I am speaking about state promotion of creation of financial/industrial groups, including transnational
ones, as well as horizontal and vertical holdings, scientific/technical centers, techno-cities and techno-
parks. In the future, they should become the core of scientific/technical and innovative process. Some of
these structures may be formed using free economic area mechanisms. However, they should be
cleansed from speculative business for that.
At the same time, the government should take concrete actions aimed at support of venture
companies and small innovative enterprises, elaboration of state policy of privatization of scientific and
technical institutions, development and deepening of international cooperation in technology transfer,
primarily with CIS countries.
A state policy aimed at stimulation and protection of domestic high-tech market should become an
important factor of innovative progress. The process of intensive replacement of production assets,
which is in fact already underway, creates favorable conditions for that.
Once again I state: Ukraine has possibilities to ensure up-to-date modernization of manufacturing,
basing to a considerable degree on its own scientific/technical and human potential, capabilities of
domestic industry, deepening of its cooperation with industries from other countries, and development
of joint enterprises with foreign investors.
An example of such policy may be found in intensive technical and technological retrofitting of
transport infrastructure that is performed by branch ministry on the basis of domestic machine-building
complex. Last year alone, the volumes of production in science-intensive areas of transport machine-
building grew more than by 20 percent.
Further increase of the volume of investments and their efficiency should be the key element of
realization of the policy of innovate growth.
In the course of last four years, the volume of investment into fixed capital grew more than by 90
percent. These rates should be consolidated.
According to relevant calculations, GDP growth by 2.3-2.4 times (until 2015) will require at least
quadruple increase of investment. Average rate of growth of investment should be 12-13 percent, and
their total amount should grow by $120-150 bln.
At least four basic conditions must be met for this.
Firstly, greater rate of total accumulation of fixed capital must be ensured. In our country it stands at
20% of GDP, while most leading South East Asia countries it is above 30% and even 35%.
Secondly, we should decrease considerably the tax burden and accordingly the level of state
consummation. In 1999, the revenues of consolidated budget, Pension Fund and funds of state social
security amounted to 34.6% of GDP, growing to 38.8% in 2002 and to 40.5% in 2003.
Only countries that have developed economies may allow such a level of state consummation. In
leading counties, which ensure 6-7% annual growth, the rate of state consummation does not exceed
25%. We have considerable reserves in this regard. The results of economic growth should not be
“eaten away”, they should be reinvested into economy. This must become the golden rule for the
government, if it really cares about the prospective.
The third, basic, point deals with state investments. Countries with developed economy consider up
to 3% of GDP to be the optimal figure. In this country, state investment potential has been decreased to
a minimum – below 1 percent. Even the financial resources obtained from privatization are spent to
increase the consummation fund.
The fourth point is related to engagement of foreign investment and on its basis, of new equipment
and advanced technology. We expect that accession of Ukraine to WTO will considerably promote the
improvement of Ukraine’s investment image.
According to the existing forecasts, foreign direct investment in Ukraine should grow by 4 to 5 times
in 2015 as compared to 2003, amounting to $1.5-2 bln. per year. Last year, foreign investments grew
by almost $1.2 bln., so I am speaking about quite realistic prospective.
We have accumulated a weighty experience of macroeconomic stabilization – the basis of
investment attractiveness of Ukrainian economy.
The participants of the conference know the sharp criticism of the President regarding the basic
provision of economic strategy of our state presented back in 1994, which is the priority of
macroeconomic stabilization.
This was the most difficult question from the point of view of practical implementation.
Let me remind you that, because of transition to world standards, oil prices in Ukraine grew 24.500
times, petrol prices grew 64.700 times, diesel fuel prices grew 73.800 times and natural gas prices grew
21.600 times.
These are official data provided by the State Statistics Committee.
For your information: during the global energy crisis of the 70’s, global oil prices grew almost four
times, which became probably the worst test of global economy in the post-war period. As we can see,
here relevant increase may be evaluated in thousands.
It is even hard to believe that we’ve managed to overcome such cataclysms.
Even now, Russia and Byelorussia have not switched to global prices of energy. We did that in mid-
90’s.
Nowadays, macroeconomic stability in Ukraine is one of the most reliable ones, not only in the post-
Soviet space, but among all other transitional economy countries as well. Foreign experts recognize that
as well. In my view, the reason of considerable slowdown of annual economic growth of Central
European countries, which used to be the leaders, lies in many unresolved problems of macroeconomic
stabilization.
It should be noted that for the last four years annual inflation in Russia was twice the inflation in
Ukraine.
We should be consistent in this regard as well. Strong currency should remain determinant attribute
of the national market, a weighty factor of its attractiveness for investment, efficient tool for increase of
competitiveness of domestic producer and modernization of the economy, savings and increase of
income of the population.
We should not exceed the inflation threshold of 5-6 percent, gradually approaching the European
standard of 2 percent.
The policy of state budget deficit could be more flexible in my opinion. According to international
standards, budget deficit up to 3% of GDP is positive for the economy. I speak about the situation
when relevant funding is not spent on routine consummation, but used as an additional source of funding
of the state investment programs.
In this regard, a moderate increase of deficit and budget spending aimed at economically justified
goals, may become quite an efficient instrument not only of growth policy, but also of innovative
reconstruction of economy. This will promote activation of stock market and improve the structure of
monetary circulation, which remains probably the most vulnerable point of monetary system of our state.
A couple of words about our banking system. It evidently progresses. Mr. Tygipko and Mr.
Sorokin told us about that in detail in their speeches.
At the same time, many unresolved matters remain. If we believe that the most important activity of
banks is promotion of the strategy of proactive growth, in particular, participation in formation of
investment resources, we may come to a conclusion that the most important parameters of Ukraine’s
banking system do not meet the set requirements yet.
The share of investment credits of commercial banks was below 7% of the total sum of investments,
which is significantly lower than the relevant figures of Central European countries with economies in
transition. There are many other problems primarily related to the capitalization of commercial banks
and improvement of efficiency of banking system. Coordinated policy of the NBU and the government,
as well as of the State Commission for Securities is needed for their solving. I am speaking about the
matters that require immediate solution.
Increasing state efficiency
In the context of the matters discussed above, it becomes evident that one of the pivotal problems
of the new stage is the increase of the role and efficiency of the state.
This is my economic credo, a principal position, to which I was trying to adhere during all the years
of my presidency.
This problem exists not only in the Ukrainian society. Restoration of efficiency of the state, making it
stronger without reanimation of the old administrative system is the task faced by all post-soviet states
without exemptions.
Let’s be frank: we and other CIS countries have no recipes for settlement of this extraordinary
complicated problem. In this connection, we primarily should use the accumulated experience and
understand that “the less state is the better” policy, widely advertised in the West, suffered total defeat
in the CIS. For a society in transition, such policy became one of the most destructive factors. We
faced the phenomenon of total misunderstanding, and maybe deliberate ignoring, of these problems by
the western politicians. Hence are relevant controversies in assessment of social and political processes
that take place in our countries, including Ukraine. We should not ignore that and veil the said
discrepancies. The society has the right to relevant information.
In this regard, let me draw your attention to some most critical points.
Increase of state efficiency should be assessed primarily from the point of view of overcoming
corruption, de-shadowing and de-bureaucratization of economy. Global practice has proven that the
level of shadowing increases as the state becomes weaker.
In the recent years, the level of shadowing of Ukrainian economy decreased from 43.5% in 1997 to
34-35% in 2003. Naturally, we are speaking about approximate expert estimations. At the same time,
the figure is still too high. It exceeds the critical level.
The spread of shadow relations to almost all non-economic spheres is especially dangerous for the
society. We are speaking about shadow political and social markets, shadow political lobbying,
shadowing of election system, informal human resource policy, shadow markets of education,
healthcare, science, scientific dissertations made to order (bought) etc.
This leads not only to criminalization of the society, but also to considerable moral and ethical
losses, legal vulnerability of individuals and businesses, and establishment of a negative international
image of our state.
Experience shows that limitation of shadow economy may not be based on force methods only,
which give temporary effect. It should be an integral system of actions aimed primarily at extinguishment
of preconditions of this phenomenon. We need a new strategy for de-shadowing of economy and fight
against corruption. It should consist of primarily formation of a balanced legal field (as a matter of fact,
shadowing is rooted in this sphere), creation of favorable conditions for legal business based on
maximum taking into account the interests of business entities, decrease of bureaucratic barriers, and
implementation of clear economic rules and political procedures of interaction of business and
authorities.
In my annual Address, I proposed the government and the Verkhovna Rada to consider a possible
amnesty of individuals as regards legalization of shadow capitals. I submitted the relevant draft law for
consideration of the parliament. In this regard, it is very important to take into account the fact that
besides economic effect, amnesty of shadow capitals may become a step towards creation of
“economy of trust”.
Yet another key problem – ensuring the necessary legal and political support and reliable protection
of rights of private property, which is establishing its positions – should be viewed in the same context.
In the last decade, major accents in this sphere were made on quantitative transformations; today, when
the critical mass of private property has been created, putting it in order and providing real guarantees
of state protection and inviolability become our priority.
In this context, I attach crucial importance to the reforms of the system of corporate management.
The corporate sector, formed on the basis of privatization of state property, occupies the most
important place in the Ukrainian economy. It produces almost two thirds of GDP. However, during the
years of reforms, no necessary preconditions that would promote establishment of effective corporate
management mechanisms have been put in place. Transparency of joint-stock companies remains low,
their activities are deeply shadowed, corporate rights of shareholders, especially minor ones, remain
legally unprotected; sometimes their rights are openly and brutally violated. As a matter of fact, we’re
speaking about violation of property rights of, as I already mentioned, almost a third of the population –
almost 18,000,000 citizens who own large and small stocks.
I’ve already touched upon this problem before, but there are still no changes, which were
anticipated. Generally speaking, there’s a paradoxical situation in the government, when nobody deals
with the problems of improvement of ownership (which is a basic point of systematic reforms).
I rank the problem of logical completion of land reform and subsequent profound transformation of
rural economic, financial and credit relations among key problems in the mechanism of improvement of
property relations. I am speaking about resolving the whole complex of issues related to capitalization of
land relations – establishment of full-fledged market of land, relevant pricing mechanisms, and modern
land tenancy and hypothecary relations. We should be pragmatic – there are no other mechanisms of
realization of the powerful potential of agricultural sector of economy and its innovative transformation. I
fully support the position of Academician Sabluk.
Along with completion of land reform, the state must ensure the necessary institutional preconditions
for change of the position of consumer's co-operation, which has changed its position, adapted to the
market and preserves its niche in the economic process.
For Ukraine, it is extremely topical to establish modern mechanisms of protection of intellectual
property rights. This is yet another important function of the state. I want to underline this. We should
create mechanisms of commercialization of intellectual activity and ensure its protection from unfair
competition, illegal expropriation, counterfeit and limitation of other rights in manufacturing, scientific,
literature and arts spheres.
We have not learnt how to solve these issues, and suffer from that immensely.
There is an extremely important task of property reforms – transition to systematic privatization of
strategically important areas of economy, which critically influence structural and macroeconomic
processes nationwide. The goal is to generally complete privatization as a wide-scale social/economic
process of transitional stage of Ukrainian economy by 2008. I am speaking about decreasing the share
of state sector to 8-10%, which would facilitate more intensive flow of capital to Ukraine’s economy
and its growth.
At the same time I’d like to touch upon the problem I’ve mentioned before.
We should refrain from simplification in assessment of the processes of establishment of
industrial/financial capital, its concentration and interaction with the state in development of the national
economy. These processes are often sweepingly equated to oligarchization, which is absolutely wrong.
The future of Ukrainian economy cannot be tied to priority development of small and medium
enterprises only. Though, as you know, I am actively promoting their consolidation and do everything I
can to support and protect them. We should proceed from understanding that small and medium
enterprises in all the countries of the West have always been developing and is developing now in close
cooperation with large companies formed back in the industrial age.
I am speaking rather about intermediate structures capable to fill the gaps in economic space that
large companies cannot occupy because of their specificity.
Because of that, we must overcome the opposition of small and medium business to large capital
and large companies. It is purely parochial mentality. Id does not comply with the strategic goals of our
development; even more so – it contradicts them. We should proceed from understanding that only
large national capital, together with small and medium enterprises, may become the foundation of real
sovereignty of the national economy, its basic construction.
We experienced a lot of problems and difficulties in economic development because of too slow
formation and consolidation of national capital.
I believe that opposition to the need for close cooperation between the state and private capital is
also biased.
Let’s take a closer look into this important matter.
Private capital, irrespectively of its structure and volume, always requires state support and counts
on it. Economic and, especially, scientific and technical achievements came to life in the western society,
to a considerable degree, because of organic combination of private capital (including monopolies) and
state capacities is a joint functional mechanism. Why should we use different principles? It makes no
sense for me. In this connection I want those who’d like to see Ukrainian economy only as a
conglomerate of small handicrafts and hawkers to know that such a variant may undermine considerably
not only economic, but also political security of our state.
This may not be allowed to take place under any circumstances. Besides, we should take into
account the specificity of the structure of our economy, large share of basic industries, as well as the
specificity of the present-day industrial modernization. According to all canons of global experience, an
industrial society – and that’s where we are now – is a society of large corporations. We cannot be an
exemption. I am certain that this complex of problems related to improvement of property relations –
and I repeat that those are the basis of economic system of the society – should be rightfully ranked
among crucial tasks of economic modernization.
Deepening democracy and the political reform
The problem of state efficiency has yet another aspect – it is directly and immediately connected to
the task of development of democracy and consolidation of civic society. We’ve reached the point
beyond which the progress in development of the Ukrainian state and society may be possible only on
the basis of tangible democratic transformations.
We may say that there’s no alternative way neither for us, nor for other post-soviet countries. That’
s my principal position.
I don’t think that anyone can deny the evident fact: the previous period of development of our state
will (without any doubts) leave a noticeable trace in the systematic renovation of all spheres of social
life, including its democratization. By immense efforts, we’ve managed not only to destroy the
foundations of totalitarian system and put an end to one-party system and ideological monopoly, but
also to consolidate the main components of democratic elections: free elections, distribution of power,
multi-party system, ideological and political pluralism, independent media, regional and local self-
government.
All the above did not appear out of nowhere. Present-day “opponents” also know this well.
However, these are yet only institutional attributes of democracy, which should be filled with
constructive content. I realize this well.
At the same time, we should be realistic in this regard, and realize that we cannot immediately jump
into European-style democracy from totalitarian system (albeit any possible desires).
The case in point is another illusory view, in the captivity of which individual politicians, both individual
Ukrainian and foreign ones, are.
I doubt whether we should forget that the process of strengthening modern European democracy
had a long, over 200 years, history, that nowhere, even in the most successful countries it did not occur
in straight lines, that everywhere there were crises and recoils and, finally, that this process took on
steady and irreversible signs only after it had combined with mechanisms of civic society, when the
broadest stratum of the middle class had shaped, the stratum which is the basic social medium of
democratization, the guarantor of political stability. I doubt whether we, in this connection, should stress
that in some countries of the West, which are respectable now, both the establishment of the equal
electoral franchise and the overcoming of racial discrimination took place only in the postwar period.
It is also not by chance that Erhard combined the process of democratization with the practical
implementation of the principle "welfare for all." It is this principle that was determinative in the
strengthening of a social and market economy which became the basic prerequisite for the
democratization of German society.
All these things are organically interconnected.
As far as we are concerned, we are far from a complex settling of these questions. This is a task to
be fulfilled by the new stage of development which has just begun.
Taking into consideration this information, the political public and the broad public should approach
more weightedly and realistically everything concerning the democratization of Ukrainian society. We
have a bitter experience in the economy, which is indicative of the fact that when efforts to artificially
implement this or that form of a market infrastructure turned to be negative results for us.
We have no right to make a mistake in this matter as well. Democratization is a complicated way
along which society must walk. Democratization is not established with the use of a command to be
given from above and it can become constructive only if a firm foundation of it is built and the relevant
social and political prerequisite for it are created.
It is high time, at last, to understand that democracy can not come into being from anarchy. Only
strong power and the state which are able to function can be the basic subject of its strengthening. I was
guided by the very view when as early as 1999 I initiated carrying out a profound political reform in
Ukraine.
Making the relevant proposals, I proceeded from the fact that the president-and-parliament system
of power had played an important role at the initial stage of the creation of the state, especially in the
first years of our independence, ensuring the implementation of complicated system reforms, the reliable
stability of society and the state, civic peace and harmony.
The existing political system, however, has profound contradictions which now became a tangible
hindrance to social progress. One may not shut eyes to this. The modernization of the social and
economic sphere is possible only on the basis of the real modernization of power and society as a whole.
The case in point is the objective reality which should not be mixed with ambitions of individual
politicians and their foreign advocates.
In this connection I would like to draw your attention to the fact that a qualitative growth in the role
of representative institutions, above all the role of the Parliament, should become the basic matter in the
political reform, which will enable political forces, mainly parities, to qualitatively improve their role in
developing and implementing state policy, in ensuring coordinated and responsible activities of legislative
power and executive power, in democratizing all spheres of social life, in strengthening the basic
principles of civic society. In the long run the case in point is both the strengthening of the ability of the
state to act and taking root by such social conditions under which the democratic principles of
development of Ukrainian society will become determinative in political sphere and democratic
transformations will become irreversible.
It is important to take into account that the aims of the political reform directly correspond to the
European integration strategy of Ukraine – joining of our state to commonwealth of fundamental
democracies.
At the same time my propositions regarding the reform, transition to the parliamentary-presidential
republic and, on this basis, conjoint democracy, take into account peculiarities of social development of
the post-soviet space countries – neighboring states of Ukraine.
I stress once again – consolidation of democracy in new independent states – former USSR republics,
has nowadays great importance not only for successful settlement of the whole series of urgent
objectives of internal modifications, but for social development in Europe and in the whole world. In this
regard transformation of Ukraine into a hearth of democracy in the CIS must be considered as the
matter of common interest not only for the Ukrainian people, but for international community as well.
We have all preconditions to realize this important mission.
We all are conscious that such transformations must not be reduced to mere settlement of problems of
the highest bodies of state power. Creation of political system according to the European example
requires end-to-end solution of such scaled objectives as fulfillment of cardinal judicial reform and
reform of local government bodies, which will allow providing proper correlation of all three branches of
the state power. These issues are now under consideration.
I am convinced that deputy corps, Ukrainian politicians, will find strength to realize corresponding
objectives. They are, I repeat once again, evenly stipulated.
Foreign policy priorities
With determination of “The European Choice Strategy” which was given in my Address to the
Verkhovna Rada in 2002, the problem of realization of the European integration course of our state
moved from the political level to the sphere of practical solutions. On the present phase locomotive
fields are, on the one hand, solution of wide complex of problems connected with entry of Ukraine into
the WTO and creation of free trade area with the EU, on the other hand – activities concerning
obtaining full membership of Ukraine in the NATO.
Our state actively supports broadening of the EU, which opens new strategic prospect for Ukraine and
considerable possibilities to deepen policy of the European integration. I am convinced that existing
complications in this regard, connected with visa regime and movement of goods, have temporary
character and will be settled.
At the same time we have to comprehend creatively the experience of the countries of previous
European integration process wave, analyzing both positive and negative sides, and to avoid mistakes
made by the countries of the Central Europe. We are not to be integrated into Europe as “younger
sister”. We have already “passed” it. We have to cut short such appearances. Postponing for more
distanced than it was envisaged term of the realization of final goal – obtaining full membership in the EU
by Ukraine – this is our unfailing aspiration – should not become a loss for society, as soon as it is about
extension of the period of fundamental system transformations that must be performed. The matter
concerns:
- firstly, realization, within appropriate time limits, of the proactive development strategy that we are
discussing today and which has to provide increasing of GDP for 2,3 – 2,4 times more and tangible
overcoming of the gap between volume of GDP per a person in Ukraine and states-members of the
European Union on this ground;
- secondly, domination of the innovational model aimed at increase in competitiveness of the economy,
establishment of Ukraine as state with advanced technologies;
- thirdly, purposeful providing of reliable preconditions for shortening the gap in level and quality of
living standards comparatively with the EU countries, establishment of the middle class – basis of
political stability and democratic society.
In this regard we may talk about specific features of the Ukrainian way in the European integration,
where main attention is concentrated on fundamentality of the internal transformations. It is a question of
policy, which could be called policy of constructional European integration. Realization of the
Copenhagen criteria shall be fulfilled exactly on this basis. Hurrying here is inexpedient.
That is why I would like to reassure the EU officials, who too rigidity interpret the European integration
course of our state. We do not ask anyone for something and have never asked before. The declared
course concerns first of all European self-identification of the Ukrainian nation, strategic guiding lines of
the internal transformations, logic of deepening transformational processes, policy of new wave of
reforms.
Corresponding course is our internal objective, realization of which requires time and depends on
ourselves.
At the same time we have to realize that with broadening of the European Union new possibilities of
deepening economic and political cooperation with future new members of the EU are forming, first of
all with countries, which constitute the Baltic – Black-sea axis.
In this regard strategic partnership with Poland is gaining important meaning. This is our mutual
aspiration. I am convinced that the year of Poland in Ukraine will contribute to realization of the
abovementioned goal.
Ukraine has been, is and will always be objectively interested in all-round cooperation with the CIS
countries.
Implementation of the Agreement establishing Single Economic Space with participation of Belarus,
Kazakhstan, Russia and our state may play a positive role. The most principal for Ukraine at the present
stage of development is not a dilemma between integration alternatives now, but constructive mutually
beneficial economic cooperation. It a question of cooperation not only in energetic sphere, but, first of
all, in the matters of industrial modernization, domination of high technologies, what is decisive at the
present stage.
At the same time we are to do a lot to eliminate step-by-step existing problems in relations between our
countries, prevention of the threat of deepening of their asymmetric development.
Overcoming incredible difficulties, each of our countries as a matter of fact was proceeding on its own
way to consolidation of independence and sovereignty. It is worth to be treated with great respect,
understanding that we all are different, that each state has its own national interests, which should be
considered.
In this regard is necessary to consider final incompletion of “economic separation” of the former Soviet
republics, particularly the problems of division of assets of the Soviet property, including intellectual,
final delimitation of the borders, incompletion of forming of the national identity of the states etc. Without
comprehensive solution of these problems trust of our states towards each other can not be full, and
without this possibilities of real and – it’s the most important – parity rapprochement, are limited.
We must not close our eyes to this and pretend that such problems do not exist. Contributing to their
successful solution has always been and still remains an important policy priority for me.
I would like to address my opponents that artificially oppose western and eastern policy of Ukraine and
play their own political game on it. Such opposition is a full political ignorance. Ukraine is on the cross
of the geopolitical interests. These are not only difficulties, but also our objective advantages that one
should be able to realize.
Besides, deepening of the regional cooperation fully corresponds to the EU principles. At the basis of
these principles lies understanding that solely through cooperation and partnership with its neighbors
each separate country can maximally realize its own potential and secure national interests.
Strengthening of the integration processes between our countries can contribute to establishment in the
eastern part of the European continent of an area of stable social and political development and high
tempo of the economic growth, in which the European and world community is interested.
Our active stance in issues that are related to optimization of our relations with the Russian Federation,
moving them into the dimension of the real strategic partnership is in compliance with the course of the
European integration. The European community is objectively interested in such development of the
things, including in mutual coordination of the euro-integration policies of our states.
The matter concerns an important factor in expanding stability area in the European space, consolidation
of which is one of the most important priorities of the European Union. This fundamental stance was
supported at the “Ukraine – EU” Yalta summit that took place in October 2003.
In this context Ukraine supports ideology of the Greater Europe, inter alia creating in the perspective of
the single European economic space, organized according to principles of free trade, where neighboring
countries are regarded not as antipodes, but as interacting subjects equal in rights.
Our constructive interaction with Kazakhstan is especially promising because it is objectively interested
in the European vector of the new regional formation, intends to draw together with Europe through "the
four countries." To the same extent Ukraine is interested in mutually beneficial cooperation with the
Republic of Byelorussia.
The comprehensive intensification of mutually beneficial economic relations with Turkmenistan,
which remains one of the main trade partners of Ukraine, is important to our state. The volume of direct
Ukrainian investments in that country increases continuously.
At the same time, the establishment of the Single economic space cannot negate the participation of
Ukraine in other subregional integration formations, in particular in the GUUAM and BSEC. The
advantages of these vectors of international cooperation consist in the fact that our state acts in them as
a leader of and is the core of regional integration.
In the new situation the initiative position of Ukraine with respect to the intensification of interaction
with countries of Central Asia and the Caucasus, in particular in developing international transportation
and communication networks and in developing fields of carbohydrates in the Caspian region, takes on
special significance. The deepening of the relevant cooperation fully corresponds to the interests of the
European Union. In these and other matters Ukraine can become an important link between the East
and the West.
The renewal of a constructive dialogue with the United States of America directed towards the
development of our relations according to the principles of mutual respect, non-interference in internal
political processes, the removal of barriers to bilateral trade and investments I place to the credit side of
our foreign policy.
On the whole I always was consistent in the fact that the establishment of strong partnership
relations with the United States of America, especially in military and political sphere is of strategic
importance to us, in particular if one takes into consideration the European and Atlantic strategy of
Ukraine, joint positions concerning fight against terrorism and the strengthening of security in the East
European region and the Black and Caspian Seas region. We would like to be always fully confident in
the adequate attitude on the part of the American side as well.. We hope for it.
The political leadership of the state is well conscious of the existing realities of the world system, the
necessity to jointly counteract the newest global threats and international terrorism.
At the same time, Ukraine always advocated and with advocate the maximal use of the reputation
of the United Nations Organization in settling the most acute problems of collective security, the creation
of the objective prerequisites which would not only balance extremely dangerous destructive processes
of the modern world development, but also prevent them.
The case in point is, first of all, the joint search for the mechanisms the implementation of which
would ensure, in the global dimension, the rapprochement of states in terms of the standard of living.
The world in which the dangerous gap between the poor and the rich constantly increases cannot be
steady. The protection of human dignity, rights and liberties of every person like the real democratization
of social life are possible only on the basis of tackling the mentioned problem.
I am also firmly convinced that Ukrainian diplomacy should tenfold effectively work in the direction
of the further strengthening of our relations with China, Turkey, India, Pakistan, Iran and other countries
of the Middle East and Latin America. We have many common interests, and this is the basis for
economic interaction and mutual understanding.
* * *
I mentioned in detail problems of not only economic development, but also those of social, political
and foreign policy development, taking into consideration the fact that a key to a tangible social
progress at the new stage of our development lies in the plane of their complex resolution. It is that sort
of coordination that we did not have earlier for different reasons, in particular for lack of necessary
coordination between the Government and the Parliament.
In fact the scientific discussion at our conference confirmed inter alia this conclusion as well. I am
grateful for expressed opinions and proposals. I believe that mainly the Government, the Presidium of
the National Academy of Sciences of Ukraine should attentively analyze and generalize them.
And one more thing.
Comprehending ways of strengthening our strategy, the basic principles of which were
comprehensively discussed at the conference, we, and this is quite understandable, strive to draw on the
whole positive experience of western countries to the most possible extent and to use it.
At the same time, the world practice is eloquently indicative of the fact that not a single country
which achieved tangible successes in the development of its own state shifted to the blind copying of
other's experience, in particular in tackling urgent economic problems. As far as the well-known
countries with which the so-called economic miracle is associated, namely Japan, France and Germany,
as well as new industrial states are concerned I can state that each of them was maximally guided not
only by its own economic specificity, but also by historic traditions, genetic roots, distinctive features of
national character, culture of its peoples.
The same thing one can tell about such countries as Turkey, Egypt, Saudi Arabia, Thailand, China,
Vietnam and the others which at present make progress quickly.
And we, on the one hand, declare our intentions to develop a strong and sovereign state, and, on
the other hand, always go cap in hand to somebody, boast that we strive to be "like all," not to "differ
from the others."
There is a deep contradiction here. Over the years of independence we failed to acquire national dignity
and self-confidence that are extremely necessary for strengthening our state. Colonial past firmly holds
us, does not let draw ourselves up, raise the head and show ourselves. It is not the matter of our
originality or search for a fundamentally new Ukrainian way. We should understand the other thing: we
have only some decades to go through the things that the West has experienced during several centuries.
Politicians that do not understand these realities and for whom “standard matrix” sanctified by the
authority of the western official is above all would never have perspective. I do not consider myself to
be one of them.
Dear participants of the conference!
New presidential elections are to take place in October this year. Availing myself of the opportunity, I
would like to assure you, countrymen and high representatives of the world community that take part
in our conference, that I would do everything for the elections of the new Head of State to be held
civilized, on the democratic basis and in full conformity with legislation in force.
At the same time society has a clear idea of the processes that are to develop after the elections. The
matter concerns perspectives of deepening the already begun transformations, as well as the whole
complex of problems related first of all to further strengthening of the statehood and sovereignty of
Ukraine.
With due regard to it, securing succession of the state policy in the social, economic and political
spheres should become the key moment of this year elections. Polling carried out by the National
Institute of the Strategic Researches shows that greater part of the Ukrainian population shares the
abovementioned stance.
It can be explained. As a result of the complex of objective and subjective factors, including mistakes
made, the first decade of the independence was characterized by tangible contradictions, was
accompanied by great losses in economy and living standard of the Ukrainian population. At the same
time Ukraine has managed over these years to overcome to great extent the most critical problems of
the initial stage in establishing the independent state, radical reforming of all spheres of the social life and
of the economic system in the first place. There has been put an end to the continued and destroying
transformational crisis. During last straight four years there have been noticed rush economic growth.
Well-being of the population grows steadily, though slow. There takes place complicated process of
forming the Ukrainian political nation.
Certain achievements were noticed in the intellectual sphere as well. The state shows capability to
adequately react at new dangerous challenges of international character, to strengthen defensive
capacity and to protect sovereignty and territorial integrity.
In connection with it I would like to emphasize: we should do everything to secure succession of the
state course as a necessary condition of preserving positive achievements of the social development
when acknowledging inevitability of adjusting state policy to the program and ideological directives of
the future head of state.
It requires constructive approach and responsibility of all political powers for holding elections in the
favorable political atmosphere. The abovementioned concerns forces that belong to the present
parliamentary majority, as well as opposition. Oppositional political forces should be bearers of not only
flexible political slogans, but also of the alternative programs and ways of the social development.
I reiterate: it is quite just that society takes with great reservation any schemes of the pre-election
process, which are aimed at realization of purely own ambitions of the separate politicians. We have no
right to admit it.
At the same time we must prevent any attempts of the external forces to interfere in the election
campaign of Ukraine.
We should regard holding of fair, transparent and democratic elections of the President of Ukraine as
one of the key factors in speeding-up processes of the European integration, establishing efficient
relations with leading democracies, improving international image of the Ukrainian state. I am sure that
things will develop this way. I depend on wisdom and civic responsibility of everyone.
Thank you for attention.
Since December 2002!
| Embassy of Ukraine in the Republic of Singapore |
| Посольство України в Республіці Сінгапур |