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Subject: Ukraine Unveils Market Reforms;New Premier Says Economy Demands 'Building From
Date: Thu, 19 Nov 92 04:44:31 EST
Message-ID: <56.1992Nov19.044432@AmeriCast.com>

Ukraine Unveils Market Reforms;New Premier Says Economy Demands
'Building From Scratch'<By Chrystia Freeland=Special to The Wash-
ington Post=

KIEV, Ukraine, Nov. 18 - Ukraine's new prime minister won parlia-
mentary approval today for a U-turn in economic policy when he
unveiled an ambitious, market-oriented reform program.

Prime Minister Leonid Kuchma's call for a combination of tight
budget and wage control and swifter privatization marked a sharp
contrast with the inertia that characterized economic policy in
the country's first year of independence.

The second most populous former Soviet republic reversed its pol-
icy at a time when many in neighboring Russia, which introduced
reforms earlier, are balking at the high cost of change.

A new breed of leaders is calling for reforms in Ukraine.

They are not the committed free market intellectuals and dis-
sidents who pioneered economic change in Eastern Europe. Instead,
with the former director of the world's largest missile factory
at their helm, Ukraine's would-be reformers are hard-headed
managers from the old communist system who believe their fled-
gling nation has no alternative but to change.

Kuchma, who said the situation was "worse than I could have ima-
gined" when he took office a month ago, said Ukraine's runaway
budget deficit has exceeded 44 percent of gross national product,
wholesale prices have increased 22-fold since the beginning of
the year and GNP has plummeted by 18 percent in the same period.

"Words like perestroika (restructuring) are no longer appropriate
for our situation," Kuchma told legislators. "We must now speak
of building from scratch, as we did after World War II."

He blamed the collapse on "criminal mismanagement" and said that
"up until now we have had economic crime, not market reform."
Kuchma has launched a high-profile anti-corruption drive, which
has already led to the ouster of senior government officials.

Kuchma, whom parliament granted extensive authority to rule the
economy by decree, warned that a move to the market would create
bankruptcies and unemployment. In particular, Kuchma warned he
would cut government subsidies to inefficient state enterprises,
surprising some managers who thought that as a former factory
boss he would back the interests of the industrial lobby.

However, Kuchma said Ukraine could no longer afford the massive
bailout of insolvent enterprises, which has been financed by is-
suing 400 billion rubles in credits so far this year.

Kuchma, who has already raised the central bank's lending rate to
80 percent, said the government would no longer prop up faltering
factories with soft credit. He pledged to push through legisla-
tion that will make it illegal for the government to finance its
deficit by printing money.  The government's ability to issue un-
backed rubles was, in any event, cut off last week when the coun-
try withdrew from the ruble zone at Russia's prompting.  That
move, which forced Ukraine into full economic self-reliance, was
another spur to reform.

In the day's most surprising reversal, Kuchma promised to stimu-
late the development of a market economy with "forced" privatiza-
tion of both large and small enterprises, contradicting his pre-
vious assertions that it was premature to privatize mammoth state
factories.

Kuchma's program included some made-in-Ukraine details such as an
emphasis on reform of the agricultural sector, traditionally
Ukraine's strength and a proven engine of economic growth in Hun-
gary and China.

Kuchma also borrowed an idea from the campaign of President-elect
Clinton, calling for the creation of a "workfare" system that
would pay Ukraine's newly unemployed a minimum wage to work on
government construction projects.

Alongside market-oriented solutions, Kuchma plans a return to
stricter state control in some sectors, underscoring the differ-
ence between Ukrainian reforms and those led by committed free
marketeers in other parts of Eastern Europe.

In addition to a wage freeze in state-owned enterprises, Kuchma
warned their managers that they would be subject to closer
government oversight.

Kuchma said he will introduce strict exchange controls over all
foreign currencies, including the ruble, and said that as part of
his anti-corruption drive all Ukrainian enterprises would be le-
gally forbidden to hold assets in foreign bank accounts. He said
his government would impose high tariffs on some imports and
would restrict the export of crucial goods that are in short sup-
ply here.<02:42 11-19C9999-----

Copyright 1992, The Washington Post.  This story is from the
Washington Post's Capitol Edition On-Line and is not to be ar-
chived or redistributed.

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poration (usa@AmeriCast.COM)