Andry Mykselyuk and Dmytro Honhalskyy
Halytski Kontrakty, Kiev, in Ukrainian 29 Mar 04; p 32-34
BBC Monitoring Service, UK, in English, Apr 01, 2004

The following is the text of Yushchenko's interview with journalists Andriy Mykselyuk and Dmytro Honhalskyy, entitled "Viktor Yushchenko: 'There will be no redistribution of property'" and published in the Halytski Kontrakty weekly on 29 March; subheadings inserted editorially:

In his interview to Halytski Kontrakty, Yushchenko has first ever revealed his steps as the president in case he wins the election.

All opinion polls show that Yushchenko is standing the highest chance of winning the presidential election in October this year. The polls also show a gradual narrowing of the gap between Yushchenko and the candidate from the authorities (voters believe it will be Ukrainian Prime Minister Viktor Yanukovych). However, Yushchenko himself does not view Yanukovych as the main threat to his future as the president and is preparing a presentation of his strategic state development project after October 2004.

ELECTION RIVALS

[Correspondent] Mr Yushchenko, according to the latest popularity poll conducted by the Razumkov centre, Yanukovych is virtually catching up with you: the margin is only 6 per cent in the first round and 10 per cent in the second. How could you comment on these figures?

[Yushchenko] It is a bit inappropriate for me to talk about my own rating, but I am glad that Ukrainians have learnt to see through [media] coverage instructions and read between the lines. No doubt, one should not draw final conclusions from the current figures. There are many circumstances which can seriously influence the opinion of voters. One could speculate on how successful the moves by candidates from the authorities are, but I am deeply convinced that currently the authorities have no chance of winning the presidential election. It is no more possible to force voters to cast their votes for the nominee of the authorities or to take the path of rigging.

[Correspondent] Why are you ruling out the following possibility: if the wages and pensions increase and are paid regularly, public support for Yanukovych could grow even further and people will vote for him out of conviction rather than coercion?

[Yushchenko] We will force the cabinet to raise pensions and wages anyway. Resources are available to ensure the minimum wage at 237 hryvnyas from 1 January [2004] and its further rise as was planned at the end of last year. A huge sum has not been included in the [state] budget revenues - around 10bn [hryvnyas]. As for incentives for the voters, one should take a more sophisticated approach than that of assessing the current cabinet. The problem is that this country is heading for the worst standards in terms of social, economic and political criteria.

[Correspondent] You are so sure that the authorities will lose the election anyway that you do not consider Yanukovych to be a serious contender?

[Yushchenko] I will consider the opponent from the authorities as inevitable reality. However, any candidate from the authorities is not the main problem for our victory.

[Correspondent] What is the main problem then?

[Yushchenko] Fair election.

[Correspondent] In his interview to Halytski Kontrakty, the deputy parliamentary speaker, Oleksandr Zinchenko, predicted that the authorities would use radical scenarios to win the election, and that in terms of their impact on public opinion these scenarios could match the Tuzla crisis [island in the Ketch Strait which sparked a Ukrainian-Russian border row in 2003]. Are you prepared for such scenarios?

[Yushchenko] One can expect everything from these authorities - from total vote rigging or attempts to stage a crisis like Tuzla to physical threats. There have been persistent rumours of preparations for a coup or [other] scenarios which could radically affect the outcome of the vote. There is one actual problem: the state and the public have found themselves in the situation where living under constant threat to democracy is becoming normal.

ELECTION MANIFESTO

[Correspondent] What rules of the game will you offer at the election? What is the Yushchenko project about?

[Yushchenko] We want to bring the truth to politics. This encompasses all areas - from media freedom to business. Business, for instance, wants only one thing from politics - stability. As long as everything is based on bribes, cover-ups and shady agreements with tax officers, the businessman is a nobody in Ukraine. At the election, we will propose a comprehensive political programme with a new strategy for Ukraine. It will include political, economic and social components. Our Ukraine proposes that every move dealing with this country's future should be aimed at the consolidation of political forces and of the whole of the public.

If we have professional and public authorities, through polemics and dialogue we will manage to resolve all the problems which hamper the normal existence and development of the national market, business and media. The source of the conflict which has currently split political forces in the Supreme Council [parliament] is outside parliament - at the presidential administration. Now, one could ask a question: why should we, politicians, allow one political and economic undertaking to stage systemic crises in this country?

[Correspondent] You have been asking this question for many years. Have you received an answer?

[Yushchenko] The answer is not that short and simple. Having ignored the law and the outcome of the [2002 parliamentary] elections, persecuting the opposition for political reasons, the Ukrainian authorities are day by day getting closer to the regime which is authoritarian by its nature. However, authoritarian rule has failed to provide an answer to the question of how to settle problems in business, in the media or social problems, because it is these authorities that called these problems to existence.

First and foremost, in Ukraine we have failed to introduce an efficient democratic system which would make impossible any movement towards authoritarian rule, like the current political reform, which is a coup in essence. The same is true about property issues - dozens of people come to see me every day, asking for help in protecting their property. The nonexistent independent judiciary and the absence of the rule of law dashes hopes for the future for the public and business circles.

[Correspondent] Political pundit Anatoliy Hrytsenko has suggested that all presidential hopefuls answer a question: Which first five decrees will you sign if you are elected president? Are you ready to give an answer?

[Yushchenko] I would single out a few high-profile issues in Ukraine. First, the problem of poverty. The country is on the verge of implementing a set of social reforms which should protect all segments of the public. When I was prime minister, my team managed to clear wage and pension arrears in nine months. The main objective was to legalize the economy, due to which the state budget received an additional 9bn hryvnyas.

So I can see no obstacles to raising pensions and minimal wages in the current circumstances. Meanwhile, the authorities adopt a resolution to raise pensions, but immediately they review spending on pensions, which lowers the amounts of pensions payable. The cabinet has no clear social policy.

There is another issue which is closely related to the pervious one - legalizing shadow income. The main thing that encourages the shadow economy and cuts budget revenues is high taxes and the narrow tax base. This should be reversed - lower taxes but a broad tax base. Any expert will tell you that it takes two years to introduce this. However, all speculation about boosting tax revenues makes no sense if the regulations on VAT recovery change annually. We should define the direction of our policy once and forever.

We must not change the rules all the time, because this increases the mistrust of business circles in the authorities. When France decided to introduce VAT, the appropriate propaganda and information campaign lasted for five years. Businessmen believed their government, which resulted in an increase in tax revenues.

In Russia, for instance, President Putin did his best to assure the public that the flat income tax rate at 13 per cent will last for a long time, not for a year or two. Tax reform cannot be a success until people come to believe you.

The next step - creating a system of management which meets the requirements of modern society. It takes introducing effective local self-government and putting an end to the current practice of relations between the centre and the regions. Kiev should not be the distribution base for resources coming from the regions through various mechanisms.

Another point is public elections of local authorities. This will cut off bureaucratic connections between the districts, the regions and Kiev.

POLITICAL REFORM

[Correspondent] Do you think Ukraine will have a better chance of creating an efficient democracy if the reform of the current system of governance succeeds?

[Yushchenko] The opposition forces were the first to call for political reform because they suffered the most from persecution by the current authorities. Unless you sing praises to the United Social Democratic Party of Ukraine and to President Leonid Kuchma, you are an outcast in Ukraine. It seems that everyone has long realized: it is time for this country to live without a tsar or guru but with the normal (in terms of the amount of powers) president, the normal Cabinet of Ministers and parliament.

But what have the authorities proposed? First, they campaigned for the prolongation of the president's tenure with the simultaneous prolongation of the current parliament's tenure and replacing the [presidential] election by universal ballot with electing the president in parliament. When this scenario collapsed they began imposing another one - transferring the president's powers to the Cabinet of Ministers in the run-up to the presidential election. All this means manipulating the constitution and laws.

Or let us look at local self-government. Instead of democratic elections of local authorities, it has been suggested that the right to appoint officials of district level should pass from the president on to the prime minister. Obviously, local communities know much better than figures from the presidential administration or the Cabinet of Ministers, whom they should trust to govern themselves. For this reason, Our Ukraine does not support the changes proposed by the Medvedchuk-Symonenko draft law [on political reform. Viktor Medvedchuk is the head of the presidential administration and the United Social Democratic Party leader. Petro Symonenko is Ukrainian Communist leader].

[Correspondent] But if these changes are supported [by parliament], will President Yushchenko try to restore the pre-reform powers of the head of state?

[Yushchenko] I do not want to talk about this today. Much will depend on how far the current authorities go in their lawlessness and how deeply they violate fundamental principles of the constitution. I can guarantee 100 per cent only one thing: the political elite will be held responsible for the processes which are currently taking place in Ukraine.

[Correspondent] What is your forecast on political reform? Will it be implemented?

[Yushchenko] No. The reform is being implemented by such means that it will not be found legitimate. It is not possible to say that the reform will take place in Ukraine. Actually, a few high officials are tormenting themselves and, in addition, 48m Ukrainians. But even if we assume that the reform succeeds, it can be reversed as fast as it is moving forward. This is not political reform but a coup and a hasty revision of the constitution. Huge money is working in this area, which, coupled with the corporate interests of a few high officials, who are preoccupied with prospects for their employment, are determining the essence of this reform. In this context, it makes no sense to talk about the reform and its future.

It will backfire, believe me. I mean not just the process of voting in parliament or the introduction of the proposed changes. The constitution and political reform do not end on 31 October. So why should we be bound to the deadline set by the presidential administration head who says: unless the reform is supported by parliament by 16 July, this country will collapse? Why should we agree with the opinion that there is only one political force - the United Social Democratic Party of Ukraine - which can implement political reform in Ukraine? We do not agree with this.

[Correspondent] Many politicians admit: the main promoter of the political reform is the fear of a possible redistribution of property under the future president. They also say that they have long tried to obtain from you as the most likely winner some guarantees of their property rights after the elections, but to no avail. Are such guarantees possible?

[Yushchenko] Let us be sincere. The redistribution of property concerns just a few people rather than the whole of the business community. All the rest are far from thinking that they could have any problems with their property in the future. There will be no such problems. In case of my victory I will never initiate any revision of things of the past or any inventory of property acquired since 1993. It is not because many businessmen have breached no laws, but because Ukraine does has no time to waste on bygone issues.

The only correct answer in the current situation is to meet the challenges of today and tomorrow. To achieve this we should find a way out of the decade-long conflict between the authorities and business. I mean settling problems in the fiscal area, which accompanied the process of accumulating capital and distributing property. However, the implementation - beginning from a specific date - of transparent policy resting on mutual trust is an integral part of this solution. I mean, business should pay taxes without delay and in full, while the authorities should eliminate any possibility of persecuting businesses for political reasons.

[Correspondent] So, will Our Ukraine support the law on legalizing shadow income [submitted to parliament by Kuchma]?

[Yushchenko] This is one of our positions. This is an issue of our attitude to our past and, of course, there should be an amnesty and each person should be confident of his future. As a state, we will benefit from this much more than if we take time and make efforts to review the decisions which were made long ago.

The guarantees which business is to receive from the authorities should be initiated by the state's political elite. In parallel, some "political club" should be formed, which should unite the forces that have no differences on most of their positions. On the whole, Our Ukraine has similar views on economic issues, not only with the Yuliya Tymoshenko Bloc, but also with the Agrarian Party, the People's Democratic Party and People's Power. So I hope that we will find ways of consolidating them into a new majority which will sign strategic documents on general views about economic development, business and the social sector. CAMPAIGN TACTICS

[Correspondent] Ukrainian Socialist leader Oleksandr Moroz consistently supports the reform according to the Medvedchuk-Symonenko scenario. Moreover, he is preparing to stand in the presidential election. So there will be at least three candidates from the opposition - Yushchenko, Symonenko and Moroz?

[Yushchenko] I am aware of the situation inside the Socialist faction and I am concerned about the dramatic processes which are under way there. I would not like the Socialists to produce another [Progressive Socialist Party leader Nataliya] Vitrenko or another [former prominent Socialist Party member, currently the head of the State TV and Radio Committee, Ivan] Chyzh. Not all the Socialist MPs are unanimous in supporting the reform the way the Socialist leader portrays it. So I want to say: it is not over yet.

The processes which are under way in their local cells are prompting the Socialist leadership to consolidate their stand, particularly on the reform and on the single candidate from the opposition. I would not like to comment on every reason why the Socialist leader decided to support the reform in the Medvedchuk-Symonenko version and to take a stand which will complicate his future. I will not do it for only one reason - I do not want to lose a chance of reaching understanding. I will be the last to shut the doors on partners.

At present, it is difficult to talk about nominating a candidate from democratic forces - time has not come yet. I am not a player which will put obstacles to someone else's victory. However, democratic forces should meet a real challenge - the election in October 2004. I want to meet it adequately and with dignity, and not just personally as Viktor Yushchenko (although this factor cannot be discarded) but as a representative of democratic forces, which have different values. If democracy loses in 2004, the state will lose its future for many decades. I do not want this to happen.

[Correspondent] What progress has been made in creating a single party on the basis of Our Ukraine?

[Yushchenko] People in Our Ukraine understand that after October 2004 the issue of proportional parliamentary elections [due in 2006] will be the most important. To avoid a waste of time, we should prepare to meet this challenge today. To be honest, we will inevitably run into trouble if we try to create the party on the basis of any political force which is a member of Our Ukraine. We should create a new project which will incorporate everything possible from existing ones but which will get rid of the negative things which we have accumulated. Currently at issue is setting up an organizing committee which will specifically deal with the creation of the party.

The Yushchenko party will the party of Ukraine's middle class because economic wellbeing is not determined by big business: medium and small businesses account for 60 per cent of GDP in any west European state.

CURRENT ECONOMIC RISKS

[Correspondent] What do you think about the economic risks of 2004?

[Yushchenko] Lately, I met the National Bank head, Serhiy Tyhypko. We discussed the situation at financial markets. To my mind, the biggest danger for the economy lies in the state budget deficit. Currently, the dynamics of state debt growth and of GDP growth are the same. But as soon as economic activity slows down, the problem of servicing the state debt will arise, because it is impossible to stop state debt growth instantaneously. In fact, the really good performance of our exporters, which provide around 40 per cent of our GDP, is due to the favourable situation at external markets.

[Correspondent] You do not regard last year's 9.3-per-cent growth in GDP as the cabinet's achievement, do you?

[Yushchenko] What are their achievements? Is the state budget deficit an achievement? Is the 9bn hryvnyas of non-refunded VAT an achievement? These are not achievements but the slowing down of the economy. The cabinet should have borrowed this money at financial markets and invested it in the economy. But quite different processes are taking place instead. For instance, the introduction of accounts for VAT refunds.

I remember how much effort it took the National Bank to introduce a single account for companies seven or eight years ago, which makes it possible to boost the efficiency of working capital management. Now it is being suggested that the VAT account should be introduced in addition to the single account. What do you think the result of removing 9bn hryvnyas from circulation and putting them in the VAT account will be? The funds will be immobilized and companies will lose them. They will be managed not by businessmen but by the tax administration.

Why has VAT become a criminal tax in Ukraine? Why is the whole of the shadow economy and high state authorities working on bribes? Why could we not make ends meet with the tax which the economy should not pay at all? These are the questions to be answered. In addition, a change in the taxation regime will inevitably result in lower budget revenues. I would like those who has initiated the introduction of VAT accounts to tell how they are going to administer the tax on working capital in the state where millions of transactions are not controlled.

[Correspondent] Should we expect a sharp decline in economic growth after the introduction of the VAT accounts?

[Yushchenko] I am confident that the introduction of VAT accounts will result in a slowing down of the economy. This is an ill-conceived step and one of the most senseless decisions. According to my calculations, at least 6bn hryvnyas will be removed from the economy. This is approximately 10 per cent of Ukraine's budget.

[Correspondent] Why are the authorities in such a hurry to introduce VAT accounts?

[Yushchenko] The main reason is that the cabinet sees no way of removing a disproportion in VAT recovery over the past five years. It is clear to everyone that VAT has led to corruption and to the appearance of companies which closely cooperate with the tax administration. However, the authorities do not understand what causes this disproportion and have no political will to remove it. It is becoming politically dangerous to fight the consequences. Instead of taking professional measures, the cabinet has made political moves.

[Correspondent] Is there any danger of inflation or currency depreciation processes?

[Yushchenko] Without going into detail about managing risks in the banking system, one can say that the positive dynamics of monetary indicators can be observed in Ukraine. However, due to its high growth the banking system can run into big problems because of political instability, which can easily cause problems with guarantees against financial risks. The stability of monetary policy should be matched by the stability of the political situation. I mean insuring bank risks, the risks of depositors and accumulating hard currency reserves which could match the amount of payments on external obligations.

The problem of peaks of budget payments on state debt remains, as does the problem of relations between the National Bank and the Finance Ministry at the end of the financial year. The interests of the National Bank, not of the Finance Ministry, should dominate the bank's relations with the State Treasury. It seems to me that it is time for the National Bank to take smart measures to boost the immunity of the banking system.

[Correspondent] Do you mean control over banking activities?

[Yushchenko] Yes, among other measures. The high growth of monetary indicators stemming from positive developments in the economy could be the first victim to other processes which are beyond the National Bank's control.