“We can wonder why Ukraine did not start this reform earlier” — an Interview with Professor Anders Åslund

Professor Anders Åslund is Chairman of the CASE Advisory Council and Senior Fellow at the Atlantic Council

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Ukraine became an independent state in August 1991, yet the country’s social and economic development still lags behind Central and Eastern European countries. How can Ukraine catch up with its western neighbors? What are the most important reforms that the government should implement immediately?

The most important thing is to get real property rights now. If you travel around the former Soviet Union, you see a lot of modern enterprises that had been transformed into ruin because somebody had blocked their activities under the former owner, because he was not liked politically or because somebody wanted to take over the property. I have a good hope for this reform. Ukraine has a strong civil society, which is pushing for it, as are many parliamentarians and about half of the government. And the Western donors, who are interested in this reform, are also very important for Ukraine. Of course, we can wonder why Ukraine did not start this reform earlier. If you take for example Poland in 1989, there were millions of Poles who had worked abroad and knew life in the West from their own experience. In Ukraine, there were very few people who had known foreign languages or who had started something significant abroad.

Do you think that the crisis Ukraine is facing now can be seen as an opportunity to reform the country’s economy?

Reforms usually happen in a crisis. Ukraine has carried out very many reforms lately in the economic area but also in social areas, like health care, education and pension system, which are normally seen as second-generation reforms. But it is critical now also to reform law enforcement and the judicial system, and also the electoral system, which now we are seeing is being reformed.

It is a common concept in Poland that the Polish transformation can serve as a model for Ukraine. But are Polish and Ukrainian cases comparable?

In many ways this is true, in others not. Poland was quite corrupted in the 1980s, but it was not the same degree of corruption that we have seen in Ukraine. Also, the judicial system in Poland at the end of communism was more dogmatic than corrupted. These are the most important differences. But the economic structures of the two countries were quite similar: coal and steel industry, machine building, and a large agricultural sector.

According to the Democratic Foundation Initiative poll conducted in July, 77% of Ukrainians were concerned about price rises, 61% about unemployment, 12% percent were thinking about emigrating. Ukrainians think that economic instability is a bigger threat than military aggression (3%). Do you think that the government can convince people to stay and that is able to conduct reforms?

The fundamental issue is that the average salary in Ukraine today is about one quarter of that in Poland. For example, if you live in Lviv and if you move just a little bit you can earn four times more than in your country. Around 1.5 million of Ukrainians work in Poland, a few hundred thousand in the Czech Republic and Slovakia. There are 7 million people who are missing in the labor force statistics in Ukraine. Most of them probably work abroad. Can the government convince them to stay? If you have much lower salaries you will always have higher emigration. This is a general problem for Eastern Europe, especially when it is so easy to travel now. Can the Polish government convince Poles not to emigrate?

In your book Ukraine. What went wrong and how to fix it you advocate what you called a “Marshall Plan” for Ukraine. But is this plan possible after Trump’s “America First” foreign policy, the Brexit, immigration crisis in Europe, and the rise of populists and nationalists across the continent?

The amount of money that is needed is really quite minor. 5% of Ukraine’s GDP today is $5 billion. For international institutions and export credit agencies delivering this amount of money should not be a problem. Helping Ukraine should be a major issue also for the European Union, yet Frederica Mogherini [High Representative of the European Union for Foreign Affairs and Security Policy] has not been to Kiev for two years.

CASE — Center for Social and Economic Research is an independent, non-profit economic and public policy research institution, established in 1991 in Warsaw.

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