Ukraine speeds up its economic reform

Ukraine speeds up its economic reform

By Masriati Shobari

JAKARTA (JP): Leonid Kuchma, the Ukrainian president and
former head of a ballistic missile factory, arrived here
yesterday. His visit is merely to promote trade and commercial,
initiated to resume contact with the more prosperous ASEAN.

Ukraine is a big new force in Eastern Europe, a place the size
of France with 52 million people, and Europe's third-largest-
mostly still nuclear-armed army. Four years after its
independence in December 1991, Ukraine stands out as a country
with greatly enhanced influence in post-Soviet Europe.

However, critics still charge that the direction of economic
reform and the future of foreign policy in Ukraine are at best
opaque.

The first problem is the pain of Ukraine's economic
adjustment. Translated into economic terms, a reorganization of
balanced equity to efficiency proved hard. Privatized agro-
business (only 2 percent of farm land is not in the government's
hands), freeing internal trade and prices, and reducing trade
barriers are the country's utmost important tasks. Inflation,
over 7 percent, also is too high and severely criticized by
market reformers. Ukraine had failed to keep current on its
external debts and overshot its fiscal deficit target.

Ukraine, however, has made efforts, along with Western donors,
to speed up economic reform, seen as critical to economic
revival. Now, Ukraine is beginning to find its feet after five
years of economic collapse. Assistance from the EU through
Technical Assistance to the Commonwealth of Independent States of
approximately 52 million European Currency Unit (ECU) in 1995 is
the largest technical assistance program in the history of
international cooperation. The European Bank for Reconstruction
and Development approved projects worth ECU 303 million by the
end of last year. The World Bank has demanded Ukraine to
accelerate privatization before receiving loans. The
International Monetary Fund board considers a US$900 million
standby loan, the approval of which had been made conditional on
the new 1996 budget, passed by the Ukrainian parliament.

The second problem is political. Ukraine's foreign policy
might politely be described as ambivalent, and seems unable to
decide which way to go. Living next to a huge unstable neighbor,
it is necessary to be nice, and its priority is not to do
anything which might undermine Russia. Indeed, Ukraine's
departure from the Soviet Union marked the ebbing of the high
tide of the empire, and caused geopolitical earthquakes to
Russia. Losing Ukraine was hard for the Russians to contemplate,
since it was its traditional granary, where farming was 17.3
percent of Gross Domestic Product (to date the food industry
makes up 14 percent of Ukraine's economic output).

Ukraine and Russia's history goes back to the princess of
Kiev. These two east Slav countries have similar languages and
one person in five in the Ukraine is Russian. Now, Ukraine is
split between an industrialized more Russified east and a
nationalist, more rural west, which is virulently anti-Russian.
On the bottom line, Russia must accept the reality of respecting
the political sovereignty of the new republic of the ex-Soviet
Union.

At the same time, Ukraine's policy towards Russia is complex
and confused. Relations between both countries took a turn for
the worse when they hit an all-time low last month. The Russian
president canceled a trip to Ukraine for the Russo-Ukrainian
summit on the grounds that no agreement had been reached on the
status of the Russian Black Sea Fleet and its base in Sevastopol,
on Ukrainian territory. Even at the Summit of Commonwealth of
Independent States, Ukraine refused to sign the Tashkent Treaty,
the Russian-led military alliance within the independent states.
Hence, while the Belarussian leader is happy to reunite his
impoverished republic with Russia, Ukrainian authorities prefer
to keep Russia at arm's length.

Since then, Ukraine is feeling increasingly wedged between an
expanding NATO to the west and an assertive, complex and heavily-
armed Russia to the east. Aware of the growing importance of
Ukraine as a buffer state, both Russia and NATO are wooing it as
a military and economic partner. Yet, Ukraine is not seeking
membership of NATO, partly because it might strengthen the pro-
Russian camp in the heavily Russified Ukrainian army. Ukraine is
noticeably more enthusiastic about the American-inspired
Partnership for Peace, adopted by NATO leaders, designed to forge
links with Eastern Europe and the states of the former Soviet
Union. On the other hand, U.S. troops have carried out several
exercises with Ukrainian soldiers. And Ukraine is now the third
largest recipient of U.S. aid after Israel and Egypt.

So where does Ukraine stand? Western fears about Ukraine's
uncertainty still prevail. For a better future, let's hope that
Ukraine will not be left alone at the precarious frontier between
the stability in the west and the potential instability of the
rest of Europe to the east.