Fostering Sustainable Growth in Ukraine PDF
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Fostering 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 Die Deutsche Bibliothek - CIP-Kurztitelaufnahme 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 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Physica-Verlag. Violations are liable for prosecution under the German Copyright Law. © Springer-Verlag Berlin Heidelberg 2002 Originally published by Physica-Verlag Heidelberg New York in 2002 The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: Erich Kirchner, Heidelberg SPIN 10862315 88/2202-5 4 3 2 1 0 - Printed on acid-free paper 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
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