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.