UKRAINE RAISES ELECTRICITY TARIFFS. The Energy Ministry on 20 April announced that electricity tariffs will increase by 22.5 percent as of 1 May, Ukrainian Radio-1 reported. "Low tariffs are in no way good for the population," Energy Minister Oleksiy Shebestov told journalists. In his opinion, low electricity tariffs lead in the long run to price increases and make domestic production uncompetitive, Ukrainian Radio-1 reported. JM
UKRAINIAN PARTY LEADER DEPRIVED OF PARLIAMENTARY SEAT. Nataliya Vitrenko, leader of the Progressive Socialists, has been deprived of her parliamentary mandate by a court in Konotop, Sumy Oblast, where she ran for the Supreme Council in the 29 March elections, Ukrainian Television-2 reported on 20 April. According to the court, Vitrenko gave information about the private life of her rivals and insulted state officials during the election campaign. The court also nullified the votes cast for the Progressive Socialists party list in Konotop, thus pushing the party's support below the 4 percent threshold for parliamentary representation. Vitrenko has called the court ruling a "revenge on the political leader and the opposition party," Ukrainian Television-2 reported. JM
The man who was the architect and driving force of Poland's radical shift to a market economy--Polish Deputy Prime Minister and Finance Minister Leszek Balcerowicz--says his biggest surprise during that process has been the pace of growth and the dynamism of the private sector.
Balcerowicz, a former university professor, came to prominence in 1989 to push Poland into what was the fastest shift from central planning to a market-based economy among all countries in East-Central Europe and Central Asia. The road has not been easy, and Balcerowicz was out of government for a period when the pain of the radical reform process made him a less than popular figure in Poland.
Now back in public life as both finance and deputy prime minister, Balcerowicz has lost none of his zeal for free markets, admitting that even he was not prepared for how dynamic the private sector proved in Poland and how well it has grown. "That was the most positive surprise of the whole thing," he recently told a few international financial journalists over breakfast at the Polish Embassy in Washington.
Balcerowicz was in Washington for the regular spring leadership meetings of the International Monetary Fund (IMF) and the World Bank as well as to participate in a conference on redesigning and strengthening the architecture of the international financial system. Finance ministers and central bank governors from the 22 countries--including Poland and Russia-- took part in that conference, which tackled, among other things, improving the transparency and accountability of national financial systems and strengthening the ability of global institutions like the IMF to deal with crises such as the most recent one in Asia.
Balcerowicz has clear ideas about what is wrong and how the global system can reduce the risk of future crises. First, there must be full information about what is actually going on in national economies and people must be willing to look at that information, he said. One question arising from the Asian crisis, he says, is whether bankers, lenders, and investors ignored much of the information they did have, preferring to look the other way while grabbing bigger profits.
Second, once assuring that as much information is available as possible, there must be incentives to act on what is known--and that, said Balcerowicz, means "punishment for bad decisions." If major international banks keep pouring short-term loans into potentially dangerous situations as they did in Asia, he says, they ought to suffer the subsequent losses. All parties--borrowers and lenders alike--must "share in the consequences, both good and bad," he commented.
Balcerowicz says that while he strongly supports liberal and open global trade in goods-- that is "beneficial to all sides"--he is willing to consider measures to have some controls available on the flow of short-term capital. Short-term capital refers to loans or investments for less than one year, often for as little as three months. Balcerowicz says the "size and speed" of the movement of this kind of money has become unbelievable in the growing global market place, a new problem for which he said he is open to "new ideas."
Reforms for the global system will find Poland in the midst of its own continuing reform, Balcerowicz commented. Warsaw is preparing to speed up large-scale privatization, especially focusing on transportation, railroads, coal mining, and insurance as well as wrapping up the privatization of banks. The release last week of $415 million from the multi-national Polish Bank Privatization fund will spur that effort.
But Poland needs to continue to expand all its reforms as it moves toward EU membership. "We must bring inflation down much further--it's currently around 11 percent annually--and we must reduce the budget and push ahead on privatization," he said. Experience has shown everywhere-- but especially in Poland--that "private owners are stronger" than public owners and work harder to produce economic growth.
Poland's border with Belarus, which Balcerowicz noted will eventually become the eastern frontier of the EU, is of some concern to Warsaw. Balcerowicz said that Poland is considering ways to further open the border. New Polish consular offices are to be opened in Belarus to make visas far more readily available and Warsaw wants to work with Minsk on easing current restrictions. "We don't want to turn our backs on anyone," he noted.
Balcerowicz sees an independent, market-oriented Ukraine as "absolutely strategic" to the success of the new relationship among East European countries. But at the same time, he is "concerned" about Kyiv's extremely slow pace of reforms and faltering economy.
As for Poland's membership in NATO, Balcerowicz says everyone in the region knows it is not an "aggressive" alliance and that once Poland joins, the issue will be forgotten. "Russian officials tell me privately they don't really care about Poland joining NATO but can't say that publicly for fear of being attacked" by the nationalists. And polls of average Russian citizens show it is not of any concern to most people, he added.
The cost of joining NATO is not prohibitive for Poland, Balcerowicz said. "We needed to modernize and revamp our military anyway," he commented. In the beginning, NATO is demanding only compatibility of systems, not massive upgrades.