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A New Minister of Finance in Ukraine Expectations and Risks
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Wednesday, 01 February 2012 11:22

 

 

On January 19, a new Minister of Finance was appointed in Ukraine. This is a former head of the Ukrainian security services, 43-year old Valeriy Khoroshkovskiy. One should not be surprised that the Ukrainian General has chaired the financial sector: first of all, he is known as a businessman and financial expert, as a top-manager.


Khoroshkovskiy started his career in business early and was always reaching great results in almost all the areas of his activities. At the age of 29, he became a member of the parliament and one of the leaders of the most influential party of those times – the People’s Democratic Party. At the age of 32, he became a Minister of Economy in the first government of Viktor Yanukovych. In 2005 – 2007, he was chairing one of the largest transnational corporations – “Evrazholding” with its headquarters in Moscow. Then he came back to Ukraine and worked as a deputy secretary of the National Security and Defense Council under President Yushchenko, he was chairing the Customs, and during the last two years – the Security Service of Ukraine.

Almost all the people who I have spoken to in Kyiv highly appreciate managerial talents of Khoroshkovskiy. “He is a liberal and a manager of the modern European style, a supporter of reforms and Ukraine’s integration into the European community”, the director of the Institute of Ukrainian politics Dr. Konstantyn Bondarenko says. “Khoroshkovsky is accompanied by luck in everything, and it was for a reason that President Yanukovych appointed him to be in charge of such a crucial field of ​​work: he knows the difficulties that Ukraine has faced during the recent time in terms of the economy, and understands that these difficulties are to be overcome by a type of people like Khoroshkovskiy, but not the economists of conservative and administrative type, who were managing the financial sector of the government before”.

Experts say that it will not be easy for Khoroshkovskiy to be in the government. The Prime Minister Mykola Azarov is a man of the old school of management. He is considered to be a “lame duck” in Kyiv, and they speak about his dismissal in the nearest future. This is the last year of Azarov being a Prime Minister: this year he turns 65, and according to Ukrainian legislature this is a maximum tenure of a politician in office. Khoroshkovskiy is mentioned among the possible contenders for the post of a Prime Minister after Azarov leaves. At his time, Khoroshkovskiy voluntarily left work in the government because of the conflict with Azarov. Now they will have to work together for some time, although the previous minister of finance, Fedir Yaroshenko, was Azarov’s protégé, and Azarov tried to postpone his dismissal.

 

Khoroshkovskiy traditionally has uneasy relationship with the First Deputy Prime Minister Andriy Klyuyev, with who he will have to work together now. Klyuyev has great ambitions. He is also a successful manager. Strengthening of political rivals is the least that Klyuyev’s group, which sets the tone in the pro-presidential Party of Regions today, is interested in. It seems that Klyuyev has his own plans in terms of the post of a Prime Minister. They say in Kyiv that Klyuyev’s entourage has close contacts with Russia and is trying to use this leverage.

Khoroshkovskiy will also have to break down the antagonism of the customs, tax authorities, and the national bank. These structures are headed by young leaders who occupy a special position and have repeatedly had conflicts with Valeriy Khoroshkovskiy previously. Now, their structures are formally subordinated to the Ministry of Finance, and experts do not exclude sabotage from their side. Khoroshkovskiy, being a head of the Security Service of Ukraine, has been successfully fighting against corruption, especially at the Customs. By the way, the Customs in Ukraine is the only office which is headed by a representative of the Communist Party.

Khoroshkovskiy is guided by maximum publicity in his work. He is not afraid of bold statements. As of today, Khoroshkovskiy is the only Ukrainian official who has openly said that he is not going to enter the Party of Regions – the largest pro-presidential force, the formal leader of which is the Prime Minister Azarov.

Khoroshkovskiy will have to solve the emergency needs soon, related to the financial sector of economy. 2012 will be much more difficult for Ukraine than 2010/11. The government will have to cut back the budget in the context of the approaching parliamentary elections and to seek additional sources to replenish the state budget. The main problems of the government are high social expenditures in relation to GDP, the slowdown in economic growth, inability of the government to implement a borrowing plan because of the crisis in the countries of the EU. The International Monetary Fund puts pressure on Ukraine, demanding to increase the tariffs for gas and utilities for the population, and sets this as a condition for the next tranches of foreign currency loans. Russia puts pressure on Ukraine by high prices for energy. Ukraine happened to be in a very difficult situation.

Although there are a lot of optimists in Kyiv. Ukraine has huge internal reserves in order to find funds. The program of privatization is not completed – in particular, the privatization of land and a number of important industrial facilities is doubtful. The global economic crisis has not hit Ukraine very hard, and today Ukraine is one of the islands of relative economic stability in Europe. This year, the GDP growth in Ukraine is predicted at the level of 3.9%. In the event of the investment climate improvement, decrease of corruption and bureaucracy, success of structural reforms, Ukraine can show positive results in the economy this year.

That is why the appointment of Khoroshkovskiy is regarded in Kiev as a landmark moment and they have high expectations with regard to him. President Yanukovych has demonstrated that he can do unexpected, but effective appointments.

Michael Goethlib

 

 

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