Table Of ContentFostering Sustainable
Growth in Ukraine
Stephan von Cramon-Taubadel
Iryna Akimova
Editors
Fostering Sustainable
Growth in Ukraine
With 72 Figures
and 56 Tables
Springer-Verlag Berlin Heidelberg GmbH
Prof. Dr. Stephan von Cramon-Taubadel
Georg-August-University Göttingen
Department of Agricultural Economics
Platz der Göttinger Sieben 5
37073 Göttingen
Germany
Prof. Dr. Iryna Akimova
Institute for Economic Research
and Policy Consulting
Reytarskaya uliza 8/5-A
01034 Kiev
ISBN 978-3-7908-1464-4
Cataleging-in-Publication Data applied for
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Fostering Sustainable Growth in Ukraine / Stephan von Cramon-Taubadel; Iryna Akimova
(Eds.). - Heidelberg: Physica-Verl., 2002
ISBN 978-3-7908-1464-4 ISBN 978-3-642-57464-1 (eBook)
DOI 10.1007/978-3-642-57464-1
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Preface
by Anatoliy Kinakh, PrimeMinister ofUkraine
After a deep and long-lasting recession, the Ukrainian economy has for the past
two years demonstrated some very positive dynamics in its quantitative
development indicators. This is essentially the result of reforms, which still
require to be consolidated in order to engage the factors and mechanisms capable
of ensuring long-term qualitative and sustainable development in our economy.
How do we ensure sustainable growth, and realise the improvements in the main
macroeconomic indicatorstogether with serious and complex improvements at the
micro-level, which would allow us to achieve the urgently needed shifts in the
social sphere? These actual problems are the main priorities of macroeconomic
policy. Furthermore, the search for solutions to these problems ofour transitional
economy requires profound scientific analysis. The following presentations made
at the Conference on "Factors of Economic Growth in Ukraine" are serious
scientificcontributionsbyprominenteconomists in this field.
Today the Government of Ukraine carries out a pragmatic social and economic
policy, which is based on the principal constitutional program document: The
Annual Message ofthe President ofUkraine to the Supreme Rada. This policy is
aboveall centred onthe twomain prioritiesofthe national interest, includingtheir
precise comprehension and sustainability, which are to eliminate poverty and to
develop a civil society. A strategic issue ofgovernmental policy is to engage the
factors and mechanisms of qualitative changes in the development of the real
economy. This will stimulate domestic demand and, at the end of the day, will
improvethe livingstandardofthepeople. Here, wespeakaboutsomerealpositive
gains in the structure ofmaterial production, the development ofinnovations and
of human potential. The main goal of our society today is to gain certainty that
there are prospects for development, and that these positive changes are
sustainable and irreversible. It is therefore necessary to closely analyse the
influences of certain short-term and long-term factors on economic growth. All
economic and political risks and their possible destabilising influences must be
taken into account, to consolidatethe positive tendencies ofincreased savings and
ofinvestments in all sectors ofthe economy. We have to start profound structural
reforms and lay the foundations for an innovative model of long-term
development.
The factors ofgrowth, considered in this book, have a systemic character and are
extremely important for providing qualitative changes and development for the
Ukrainian economy. Most conclusions by the authors ofthis collection ofarticles
are useful and interesting for the realisation of an economic growth policy. The
VI
practical implementationofthese importantmeasures for sustainabledevelopment
- such as a systematic reduction oftaxes, a gradual phasing out ofthe regulatory
and fiscal factors sustaining the shadoweconomy, a comprehensive reform ofthe
systemofpublic finance, an activestructural and investmentpolicy -certainly is a
very important strategic priority aimed at increasing the efficiency of the
economic activities in all sectors of the Ukrainian economy. This book will
certainly be useful as a guide for the broad issues which the economists and
practitioners concerned with economic development problems in Ukraine deal
withonadaily basis.
InparticularI wouldliketo underlinethe importantcontributionto thepreparation
and realisation ofthis bookby the TRANSFORM-Program, which made possible
the realisation of many projects related to facilitating the development of mutual
relations betweenUkraineand Germany.
With thebestregards,
Preface
by Dr. Werner Muller, Federal Minister ofEconomics and
Technology, Federal Republic ofGermany
This year Ukraine celebrates the tenth anniversary of its independence. Its move
towards becoming a democratic and market-oriented state in Europe went along
with a drastic decrease in economic performance for many years. Only towards
theendof 1999 was itpossibleto putthe Ukrainianeconomy backonto a growth
path. Intheyears 2000and 2001,Ukrainerealisedimpressivelyhigh growthrates.
Strengthening democracy and market economy is necessary for Ukraine to make
economic growth a lasting and sustainable feature. Detailed analyses of factors
responsible for creating and sustaining such growth are therefore of greatest
importancefor Ukraine. Itis helpful for analytical purposes ofthis kind to include
into the discussion and decision-making processes the experience ofexperts from
internationalorganisations and ofinternationally renownedscientists. This bookis
meantto contributeto an intensivediscussionaboutthebestapproaches.
The Federal Republic of Germany has actively helped Ukraine along this path
from the date of its independence. Both sides attach high priority to bilateral
relations. Regular intergovernmental consultations between Chancellor Schroder
and President Kutchma as well as the German - Ukrainian Co-operation Council
bearwitnessto closecontactsatboththepolitical andeconomiclevels.
TheTRANSFORM programme provides the framework for German advice to the
Ukrainian Government and Ukrainian business. The German Advisory Group on
EconomicReform has beensuccessful through istactivities inUkrainesince 1994.
To place these activities on an sustainable basis, Ukrainian reform-oriented
politicians and the Advisory Group joined hands to set up the Institute for
Economic Research and Policy Consulting in Kyiv. This book reflects the co
operation ofreputed scientists, ofmembers ofthe Advispry Group, and ofyoung
Ukrainianresearchersfrom the Institute.
The authors of the book have reached the conclusion that sustainable economic
growth in Ukraine is only attainable through persistent efforts for continuing
reformpolicies.
The Government of the Federal Republic of Germany wishes to encourage the
Ukrainian Government to continue and to intensify its reform efforts for
democracy, social marketeconomy andthecreationofacivil society.
VIII
The Federal Republic of Germany is determined to continue its support to this
process inUkrainealso infuture.
Contents
Prefaces
)'V
AnatoliyKinakh
Werner Muller
Introduction 1
StephanvonCramon-TaubadelandlrynaAkimova
1 Background 1
2 Thestructureofthis book 3
3 Outlookandacknowledgements 9
PARTI: THEINTERNATIONALENVIRONMENTANDGROWTH 11
1 AchievementsorMissedOpportunities: FactorsofEconomic
Growth inRussia. WhatLessonsareRelevantto Ukraine? 13
EvgenyGavrilenkov
Some empirical facts aboutthe economic performance during
1999and2000 13
2 Growth, institutions, andthe exchangerate policydilemma 17
3 Growthandstructuralchanges 22
2 EconomicGrowth in Bulgaria and Romania 28
GaborHunya andRumenDobrinsky
1 Introduction .28
2 Comparativeoverview 28
3 Maincurrentfeatures ofeconomicgrowthinBulgaria 30
4 Maincurrentfeatures ofeconomicgrowthinRomania 33
x
3 Trade, Capital Flows, and Economic Growth in Developing
Countries .41
YilmazAkyuz
1 Liberalisation, externalconstraints, andgrowth .41
2 Private capitalflows: solutionorproblem? .44
4 NaturalResources and Economic Growth: What Is the
Connection? .48
Thorvaldur Gylfason
1 Introduction .48
2 Channell: TheDutchdisease andforeign capital .48
3 Channel2: Rentseekingand social capital 53
4 Channel 3: Educationandhuman capital 57
5 Channel 4: Saving, investment, and physical capital 60
6 Natural capital and economic growth 62
7 Concludingremarks 64
PARTII: SUSTAININGGROWTHOFTHEUKRAINIANECONOMY 67
5 Is the Economic Growth in Ukraine Sustainable? 69
Marek Dabrowski
1 Introduction 69
2 Shorthistoryofeconomic decline/growth in Ukraine 71
3 Decomposition ofgrowth trend bycomponents ofglobal
demand and bysectors 75
4 Hypotheses concerningsources andsustainability ofeconomic
growth. Experience ofothertransition countries 77
5 Concludingremarks 83
6 Is there Any Economic Growth in Ukraine? 86
ValeriyHeyets
XI
7 Economic Growth in Ukraine: What ifReforms and Economic
Recovery Had Started Earlier? 96
Oleh Havrylyshyn, BogdanLissovolik, MohammadShadman-Valavi
1 Summary 96
2 Introduction 97
3 Actual economic performance intransition 98
4 Methodologyofcounterfactual simulations 99
5 Results and interpretation 102
6 Policyrecommendations 104
8 Finance and Growth in Ukraine 116
Joachim Jahnke
1 Introduction 116
2 Availability offinance for investments 116
3 Howto improveavailabilityoffinance 119
9 Fiscal and Regulatory Causes ofUkraine's Shadow Economy 129
lryna Mel'ota andUlrich Thiessen
1 Introduction 129
2 A currency-demand-for-moneymodel to estimatethe shadow
economy 130
3 Comparison with estimatesbasedonelectricityconsumption 135
4 Conclusions 137
PARTIII: INSTITUTIONS,COMPETITION, ANDGROWTH 141
10 Enterprise Restructuring under Economic Growth in the
Byelorussian Republic 143
PavelDaneyko, SergeyPukovich
I Introduction 143
2 Conditions for economic growth in the ByelorussianRepublic.144
3 Restructuringofindustrial enterprises inBelarus 151
4 Conclusions 156
