Ukraine Reformer Denounces Cabinet's Resistance to Change

Economists worry Ukraine's market reform program may flounder without its author

THE firing of Ukraine's top economic reformer last week raised new doubts about the leadership's intentions to move toward a free market.

Ukrainian President Leonid Kravchuk claimed the deputy prime minister in charge of economic reform, Vlodymyr Lanovy, had done nothing in his four months in office to implement reforms.

Many economists and political figures in Ukraine and the West worried whether the move would jeopardize Ukraine's economic re-forms. Fears have also arisen that his removal could harm relations with international institutions such as the International Monetary Fund and World Bank, which could offer key economic aid. Mr. Lanovy drafted the reform program accepted by the IMF in April.

Lanovy, who was appointed in March after pressure from the moderate opposition group, New Ukraine, had threatened to resign several times in recent weeks out of frustration with the resistance he encountered to his programs within the Cabinet.

Lanovy's removal followed two months of infighting between the parliament and the Cabinet, after which the government of Vitold Fokin survived a vote of no confidence.

"At the moment, both economically and politically, Ukraine reminds me of a house that is supposedly under major reconstruction, but only the facade has been renovated, not the house itself," Lanovy said in an interview with the Monitor last week.

"It was clear from the very beginning that they wanted to use me as a cover," he said. "I agree with those people who say that there was a renewal and progressive changes, although in reality there was only an imitation of reforms.... As soon as the moment approached to realize them this confrontation emerged.

"If the president has removed one of the few leaders of economic reforms in the government, then my conclusion is that he has no intention of realizing radical economic reforms," said Lanovy.

"In fact, I am certain that Kravchuk is not fully convinced that Ukraine's economy can emerge from its crisis using purely market methods," he added.

Lanovy was viewed by economists and political figures as a lone reformer in a sea of former Communist Party functionaries in the government, who along with a large number of conservative members of parliament have recently offered firm opposition to key parts of economic reform.

A coalition of these former Communists and populists severely weakened Lanovy's proposed privatization program for 1992 and undermined the stabilizing effects of the frugal 1992 state budget with an enormous new credit for agriculture, say Lanovy and Oleg Havrylyshyn, an American economist serving as Ukriane's deputy finance minister.

"There are attempts on many occasions to renew old command-administrative ways," Lanovy asserted.

"Their real goal is to support the existing economic system and by no means allow its transformation based on new forms of property ownership," he said.

"There is an inherent threat to the status quo this old generation so firmly clings to with privatization," said Oleksander Savchenko, an economist affiliated with Ukraine's National Bank, last week.

On the final day of the Ukrainian legislature's spring session, deputies ranging across the political scale, from the Socialist Party to a nationalist deputy, almost completely altered the 1992 privatization program submitted by Lanovy.

The modified program adopted limited privatization by leasing enterprises to workers' collectives with an option for purchase at a later date.

"What they have adopted is not privatization, it is collectivization," said a frustrated Lanovy after the vote. "Leasing is leasing, not privatization."

While President Kravchuk has repeatedly made public assurances, especially during his travels abroad, that he is committed to radical economic change the Ukrainian leader has revealed that he prefers a much slower pace than the shock therapy measures taken in Poland and now Russia.

When asked last week by American journalists why he hadn't proposed changes in the Cabinet, Kravchuk said he knew of few qualified replacements.

"We must primarily count on ourselves," he said.

Meanwhile many economists, including Lanovy, Mr. Savchenko, and Mr. Havrylyshyn predicted a deepening of Ukraine's economic crisis, rapidly falling production, spiraling inflation, and nearly daily devaluation of the country's coupon-ruble.

"The only solution in this environment is political change," said Savchenko, also a young, Western-trained economist.

"While Fokin and Kravchuk fear going too fast will cause social unrest, the deepening crisis combined with their half steps will cause people to lose all faith in economic reforms," Lanovy said.

Lanovy said he planned to continue offering proposals on economic policies, but now as a leader of the opposition group, New Ukraine.

New Ukraine and the popular movement Rukh have announced that they are working on forming a coalition of opposition groups to prepare for a joint campaign this fall to force changes in the Cabinet of Ministers and gather signatures for a nation-wide referendum on new parliamentary elections.

"A change in the Cabinet and Parliament would serve as a signal of the creation of the necessary political conditions for real change," said Lanovy.