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4/26/2019, “What is wrong with the Ukrainian economy?“ Anders Aslund, Atlantic Council
[Image: Ukraine map, via famous wonders] “Construction is booming in Kyiv, Ukraine, but not the rest of the economy. A major reason is that Ukrainians with some extra savings do not put their money into banks but buy additional apartments instead. Others keep their savings in cash. On average, Ukrainian MPs [Parliament has 450 members] keep $700,000 at home. Those who have a lot of wealth transfer it to offshore havens, where the money is safe.
Ukraine is now the poorest country in Europe. According to the International Monetary Fund, Ukraine overtook Moldova as the poorest country in Europe as measured in GDP per capita in 2018 at $2,963, 8 percent less than in Moldova. These numbers can be boosted in many ways. Probably half of the Ukrainian economy goes unreported in official statistics, and prices in Ukraine are so low that one gets much more for a dollar there then elsewhere. Still, the growth rate has been around 3 percent a year for the last three years, and the IMF predicts a similar rate even for the long term. A poor country with macroeconomic stability and open access to the large European market should be growing steadily by 7 percent annually.
What is wrong? Usually the discussion focuses on what the state does, but there’s a better way to understand how the economy really functions: follow the money.
Ukraine has a steady net capital outflow of about 4 percent of GDP each year. Foreigners see what is going on, and real foreign direct investment has been as little as 1 percent of GDP for the last five years [2014-2019]….
There is little or no financing available for business. By and large, business investment is based on retained earnings.Since 2014, the National Bank of Ukraine (NBU) has closed 100 of the then 180 commercial banks. In many cases, the owners of the bank had taken most of the loans, and large deposit holders lost their money. In other cases, the banks specialized in money laundering, and some functioned just like holding companies.
But the banking system has not been cured. Because of the many bank failures, state banks now account for 58 percent of all banking assets. Interest rates are prohibitively high. The NBU just cut its interest rate to 17.5 percent a year, while inflation is just over 8 percent. The lowest commercial borrowing rates in hryvnia are 22 percent, which means that the real interest rate is at least 14 percent a year. That is far too high for investment, so bank loans are not financing investment. In spite of very high deposit rates, banks do not attract many deposits either.
The banks’ primary problem is that their biggest clients do not pay. In total, non-performing loans in the Ukrainian banking system are more than 50 percent. The reason is that Ukraine has a few hundred people who consider themselves too superior to pay, and unfortunately the Ukrainian judiciary agrees. In particular, 427 members of parliament enjoy legal immunity and probably two-thirds of them are businessmen. Others have simply very good relations with the relevant parts of the law enforcement apparatus. European elites behaved like that in the 18th century. It was only in the 19th century when the playing field was levelled that Europe started growing.
Herein lies the critical shortcoming of the Ukrainian economy. First, parliamentary immunity has to be abolished. People should join the parliament to become politicians, not businessmen.
Second, Ukraine needs to redo the failed judicial reform so that all Supreme Court judges can be verified as honest people. The same is true of the general prosecutor’s office. The Security Service of Ukraine (SBU) must no longer deal with economic crimes. Its 8,000 or so officers that work in that department should be laid off. Most of them have earned more than they will need for their retirement.
Third, the best collateral for a bank loan is land or real estate. However, today agricultural land cannot be used as collateral, because of the moratorium on private land sales. If that is finally lifted, the banks could give far more credit to agriculture, which could double its output.
Then, banks could start to function normally and attract both capital and deposits. The market would bring down interest rates. The state banks could attract investors and be privatized. If property in Ukraine would be deemed safe, capital outflows would dwindle and instead be invested in the Ukrainian economy. Foreigners would see the transformation and want to join the Ukrainian growth party.”
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Added: In Dec. 2013 US Senator McCain traveled to Ukraine to lead an anti-government “regime change” protest:
[US Senator McCain said,] “And of course Ukraine is the crown jewel.…Russia, without Ukraine it’s an eastern power, with Ukraine it’s a western power."
12/15/2013, “John McCain backs opposition leaders telling Ukraine protesters: ‘America stands with you – Ukraine will make Europe better’,” AP report via Daily Mail
“U.S. Senator John McCain met Ukrainian opposition leaders in Kiev on Saturday and voiced support for protesters [calling for overthrow of government] camped out for weeks in the capital.”
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Above, 12/13/2013, McCain in Kiev promoting overthrow of Ukraine government, AP, UK Guardian, AP
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Added: We’re all mobsters now. Thus, NATO is giving fellow mobsters in Ukraine $44 million. Per above article there’s zero chance this $44 million in taxpayer dollars will be spent as allegedly intended or with the slightest respect for taxpayers who earned it, and 100% chance a lot of it will end up in offshore accounts. After decades of claims that Ukraine “corruption” will be cleaned up, there hasn’t been the slightest improvement. Article describes that judiciary partners with rich criminals in treating the country like garbage. The 2014 “regime change” and installation of a US puppet government-–“Yats is the guy"—has created worse suffering for ordinary people and better than ever lives for oligarchs.
11/1/19, “NATO allocates 40 million euros [$44 million] for support of Ukraine,” 112.international/ukraine
“The money allocated for support in the spheres of a combatant command, cyber security and medical rehabilitation.”...
Below, new NATO swimming pool, open to media in May 2018. via Assar architects....$1.23 billion taxpayer dollars spent on lavish new NATO hq in Belgium, “conceived in 2005.”
US should move its 10s of thousands of homeless living on US streets to the spacious NATO hq and let them take a swim in the new pool.
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Added: Ukraine has become another Mexico, a huge percentage of its population provides cheap labor for other countries and sends scraps from their paychecks home to relatives as “remittances.” Ukraine is the top recipient of remittances in Europe, with a staggering percentage of its population migrating abroad in search of work.”…
10/14/2019, “DC’s Atlantic Council Raked in Funding from Hunter Biden’s Corruption-Stained Ukrainian Employer While Courting His VP Father,” Consortium News, Max Blumenthal
…………………………………….. Added: Ukraine has become another Mexico, a huge percentage of its population provides cheap labor for other countries and sends scraps from their paychecks home to relatives as “remittances.” Ukraine is the top recipient of remittances in Europe, with a staggering percentage of its population migrating abroad in search of work.”…
10/14/2019, “DC’s Atlantic Council Raked in Funding from Hunter Biden’s Corruption-Stained Ukrainian Employer While Courting His VP Father,” Consortium News, Max Blumenthal
Added: Russian President Putin urges Ukraine eastern regions to remain part of Ukraine:
6/6/2015, “Vladimir Putin Urges Donetsk And Luhansk To Remain Part Of Ukraine,” International Business Times, Christopher Haress
“This is a fundamental issue.”…
Added: Russian President Putin fully endorses Minsk agreements: 6/6/2015:
6/6/2015, ”Putin: self-proclaimed republics’ readiness to remain in Ukraine is precondition for talks,” unian.info
““I would like to stress that Russia is interested in and will strive to ensure the full and unconditional implementation of the Minsk agreements, and I don’t believe there is any other way to settle this conflict today,“ he [Mr. Putin] added.”…”The leaders of the self-proclaimed republics in eastern Ukraine have publicly stated that under certain conditions-meaning the implementation of the Minsk agreements-they are ready to consider themselves part of the Ukrainian state, Russian President Vladimir Putin said in an interview in an Italian newspaper on Saturday.”…
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Added: In 2014, Donetsk region of Ukraine declared its independence and asked to join Russia. While respecting the will of Donetsk citizens to declare their independence, the Russian government didn’t invite Donetsk to join Russia, instead advised dialogue with Kiev:
May 12, 2014, “Ukraine crisis: Donetsk region asks to join Russia," UK Guardian, Shaun Walker in Donetsk and Oksana Grytsenko in Luhansk
“Instead of previous statements saying it would protect people in the regions with troops if need be, the Kremlin called for dialogue between the government in Kiev and the south-east regions of the country.
“In Moscow, we respect the will of the people of the Donetsk and Luhansk regions [to declare their independence] and are counting on practical implementation of the outcome of the referendum in a civilised manner, without any repeat of violence and through dialogue,” the Kremlin said.”
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Comment: If Ukrainians believed for a minute that John McCain, any US government official, or any self-proclaimed US "democracy" advocates on the ground in Ukraine wanted a better life for ordinary Ukrainians, they deserved the shock they got. To begin with, US massively sponsors Islamic terrorism, (including child beheaders). Congress even refuses to pass the "Stop Arming Terrorists Act."
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