In front of me is the youngest prime minister of Ukraine, who carefully hides tiredness. Volodymyr Groysman is one of few government officials who can show his gradual, step-by-step political ascent: exemplary (by Forbes ranking): Ukrainian mayor - deputy prime minister - parliament speaker – prime minister.
GOVERNMENT HAS BALANCED THE BUDGET, THINKING ABOUT PEOPLE
- Volodymyr Borysovych, experts call the budget for 2017 as balanced, which is almost an exception in all our quarter-century government practice. However, some mechanisms of obtaining revenues raise concerns: like special confiscation, privatization. What are the mechanisms to solve these problems and how do you in general assess general budget risks?
- We conducted a dialogue with experts and the Ukrainian parliament for more than three months. The government has submitted quite a balanced budget for 2017, and it is very structured, it envisages certain priorities. This is the defense [sector], this is a twofold increase in the minimum wage up to UAH 3,200 (about $119). In 2017, for teachers – a rise will be to 50 percent of the salary, for doctors - 30 percent. The decentralization system and support for the agricultural sector, mechanical engineering, a large-scale road construction have been retained. We expect that a real growth of economy will total about 3 percent. My forecasts are absolutely and reasonably optimistic.
- So, you don’t see serious budget risks with pumping up the budget?
- It was a very painstaking and hard work. It’s not like you approve the budget and that’s all. We must work on its content. For example, we’ve get down to customs. Yes, we are far from the excellent order, but those our first steps have enabled us to receive UAH 1 billion (about $37.0 million) in August, and then UAH 2-2.5 billion ($74.0-92.5 million), exceeded plans to receive monthly budget revenues.
As for the risks, for example, regarding special confiscation of property received by the previous government in violation of laws... Please note that we’ve laid relatively small resource: if the amount of special confiscation is about UAH 40 billion ($1.5 billion), then we’ve projected only UAH 12 billion ($ 444 million) of them in the budget as compensation deficit. At the same time, we are optimistic about the future of special confiscation. Time is running out, the legal system is reaching the point, so all funds should be returned to the place where they were stolen from. And they were stolen from the budget and so they must serve the country and people.
- Have you managed to change the situation with state-run companies-monsters, which actually became symbols of corruption in a corrupt state? Has the invitation of Varangians-foreigners met the expectations? Now many people do stakes on Ukrzaliznytsia: will the railway mafia capture Balczun or will Balczun be able to resist?
- I believe that Balczun is a reformer. He is an honest man, he has experience in management, and it is very difficult for him to work in conditions where the old system resists, when it tries to save itself or even discredit him. I’m open here too. Balczun won a transparent competition; he was elected by an independent commission. I am ready to support any leader, regardless of whether this person is from Ukraine or not. The main thing is that these should be professionals, people who have relevant experience and are willing to work for the state.
State-owned enterprises have always been corrupt. But now you can see that we’ve turned many state-owned enterprises from a bankruptcy to profitability. Some say that this company has the income totaling tens of billions of hryvnias. And where will these revenues go? They will go to the state budget and they will serve Ukrainian citizens. For the payment of increased salaries, for the payment of pensions, the construction of roads and many other things.
Why were these companies previously unprofitable? And then I have a question: where were all these funds? The funds were in the pockets of various kinds of speculators and corrupt officials. We’ve changed this. This systematic approach of bringing state-run companies out of a crisis will contribute to national economic development, increasing resources in the budget. And one of the government’s tasks is to build a fair redistribution of resources in the name of people.
What is our biggest challenge today? The fight against poverty. We must fight poverty in our large country of 45 million people. On the one hand, reform decisions are needed, on the other hand, it is necessary to understand feelings of people, their biggest problems so that to take the steps which will make it possible to overcome this challenge. [The rise in] the minimum wage, increase in revenues for teachers and doctors – these are the first steps.
- Speaking about state-run companies in general, is there a plan to reduce state influence? Do you see any sense in privatization?
- I see sense. In fact, many medium and small enterprises are privatized so that they can work for the state, but not exploit it. But there are important state-run companies, for example, Ukrgazvydobuvannia, which in my opinion, should be public. Why? This is a strategically important company for gas production in the country and we have embarked on the course of gas production. So, why must we buy gas at high price for currency abroad? It also weakens our economy as well. Our general point is to consume less and at the same time have high quality heat and produce more [gas].
Ukraine in recent years gradually reduced gas production. I believe that this was done intentionally. Special conditions were established under which the national gas production was going down. Gas producing companies were prevented from development; instead, more and more conditions were formed for legal and energy dependence on Russia. It was such a long sale of our sovereignty to the Russian Federation, the deliberate policy of then ruling government. We’ve broke this. Our task is to develop domestic production, and it should be a state-owned company, reduce energy procurement abroad, and we can say that in 2016 we did not have minus but we had plus in our production. I’m glad about this so we’ve chose the right way. And in the new year we will produce more gas then at present, by about 500 million cubic meters of gas more.
Taking into account that we’ve also finally started to implement large-scale energy efficiency measures, by effectively reducing energy consumption - we actually will have a balance of energy production and consumption. And this energy independence, it is the development of economy, competitive ability of the state on international markets, in other words it will give us a very good result in the medium term outlook.
- You’ve mentioned a medium-term outlook. How thoroughly a plan submitted by Government describes this outlook till 2020 for the country?
- On the eve of New Year holidays, I presented a medium-term plan till 2020. It is a clearly structured document that includes the following priorities: economic development, and by what means will we provide it, appropriate governance, the rule of law, security and defense – these are the things that people currently are interested in. Finally, the most important priority is the development of human capital. These are five priorities, very clear and with specific tasks. In other words, these are all those things that will allow us to get the result in the medium term outlook.
Generally speaking, Ukrainian citizens expect from us a clear vision of where we are right now, where we are going and what is our future. We give them this answer, offering our strategy. This document is inclusive enough. We worked with ministries, experts from the ministries. And now we’ve suggested it for public discussion for a month. We want it to be a joint document of experts, society and government. Then it will be doomed to success, because all will be united by the idea to its implementation.
- One of the thorniest issue of the year 2016 is tariffs. Many politicians even predicted the third Maidan because of the tariffs’ growth. Have you managed to solve this situation, what is the current rate of payments for these services, which conclusions can be made and what should Ukrainians expect next year?
- We’ve destroyed, I stress this, we’ve destroyed the most corrupt scheme that operated for decades in the country. And those who led these schemes, they made a profit on this.
When you that someone robs others then there are two options: to help rob or stop the robbers. I believe that my task is to stop. I stopped the robbery. This is the first. Secondly, we’ve not only stopped the robbery, we’ve clearly defined a strategy for energy independence and started to deal with energy independence. We really tackle the tasks, which make it possible to say that Ukraine will become energy independent in three-four-five years. This is a huge contribution to our economy and stability. A huge one.
I’ve recently seen the analytics which shows that if produced own gas in Ukraine, but didn’t buy it for currency, against the background of all those problems that we have today, the dollar wouldn’t cost more than UAH 18.5 [today’s dollar exchange rate is about UAH 27]. Can you imagine the level of influence of this factor on the economy?
Now about the compensators. In fact, I clearly understand what we do. We must protect those who do not have high incomes. Why should I protect Ukrainian politicians, their 25-meter pools, large private houses that are heated with natural gas? Should they also buy cheap gas? And should the whole country pay more for them? No, it won’t do. And that’s why we have a price of import parity, which has been implemented and has the limit. On the other hand, each Ukrainian family with a small income has the right to receive a special personal discount that is called a subsidy.
If we now talk about the effect of what we’ve done, about the funds that the state has actually saved from the elimination of old, corrupt schemes, I think it's at about UAH 140 billion USD ($5.2 billion).
I’D LIKE TO SEE WHAT KIND OF A LAND MARKET IT SHOULD BE AND ONLY THEN I’ll OPEN IT
- Will you look for arguments to convince Parliament to vote for the opening of agricultural land market?
- Many people discuss whether we need the land market or not. This is a debatable issue. Let's discuss, I'm ready. But did someone explain what kind of a land market it should be? No, no one explained it. So let’s, first of all, develop a model, thoroughly discuss it, hold consultations with Ukrainian citizens, the owners of shares and then take coordinated decisions. This is the track of my thoughts. If someone wants abruptly lift the moratorium, buy all the lands in the country in three months, then I totally against this. It won’t do. And while I’m a prime minister, I’ll not let it happen. This a highly sensitive issue and it should be discussed with all sides. We had been discussing the 2017 budget during three months. And the future of Ukrainian lands is a serious fundamental problem. So we should transparently discuss this with experts, comprehend, explain it, and only then we should make a decision.
- Should your words be understood as a willingness of Government to initiate and seriously work on the law on land circulation?
- Absolutely. We work, we’ll find a model, and then we’ll have discussions and make a balanced decision.
NATIONALIZATION OF PRIVATBANK IS FORCED, BUT A FAIR STEP
- The nationalization of Privatbank has affected nearly half of Ukraine’s population. European financial institutions have welcomed this decision, some Ukrainian politicians called it a "robbery of people", because budget funds will be used to maintain the bank? What do you think about this decision? What did the first weeks after the nationalization of the bank show?
- We took the forced, but an fair step in relation to the Ukrainian citizens. I will not be engaged in political assessments. What was important for me as for the head of government? First of all, twenty million people. That’s all. Twenty million people have accounts there, money, credit cards and so on. I have agreed on this to protect these people. What have we done? We’ve decided to transfer the bank into state ownership, we’ve completed its capitalization. Now we’ve appointed the management. I believe that Oleksandr Shlapak, a former finance minister, is a highly responsible person. So, today the bank in terms of governance is in completely safe hands with reliable intelligence and experience. The bank has stabilized, the situation is normal. The law now guarantees a full return of deposits to individuals – bank’s depositors. In the bank's management board has only one task to develop the bank and make it more successful. I’m completely fine with that.
THE UKRAINIAN ARMY HAS BEEN REVIVED
- The question is about the defense. There are fears that when Trump assumes office, it will not be very easy for Ukraine, we will not get awaited "Javelins" and we will not get many other things. What Ukraine should do to be tenable under the conditions of war?
- I think everyone see that the Ukrainian army is reviving. I worked as vice prime minister in the government in 2014, I saw the state of our army then. When combat equipment was taken out of the reserve for military alert - it was awful. Everything was unserviceable. Now the army has been revived. In fact, the most important in the army is not tanks, the most important is a warrior. Our soldiers – they are really brave, you meet the guys and see their real strength, power and spirit. How strong and patriotic they are - it simply inspires. The government’s first task, which is envisaged in government's program priorities, is defense and security, both external and domestic. And we will do everything so that the army be provided with everything needed.
- What about investments into the country? What is in store for Ukraine this year?
- We must increase investment capital into the country, and I believe that we have limitless front of actions here. So we’ve set up an investment support office, which now is actively developing its work. Our goal as Government is that each hryvnia, which invested into Ukraine's economy, every dollar or euro must be efficiently used. Those who want to invest should know that it is safe, and we then will see new jobs, new products, new salaries for people, taxes into the state. We actively create mechanisms for this. And there are three issues here. The first one is investments and support of the investment process. The second is a revival of the Ukrainian industry, and I’m now dealing with this subject. […]The third position is gaining new markets. So we have an export strategy. It's not simple. In this work we count on our Foreign Ministry as well. We’ve increased the funding for our diplomatic missions abroad and this should give an opportunity, in particular to represent a worthy Ukrainian product on international markets. These are three components of tasks we are facing. And of course, the improvement of business climate in the country.
Oleksandr Kharchenko, Kyiv