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TAJIK PRESIDENT SWORN IN. Imomali Rakhmonov was sworn in for a second term as president on 16 November, Asia Plus-Blitz reported. Russian Prime Minister Vladimir Putin, the foreign ministers of Iran, Afghanistan, and Ukraine, and senior officials from China, India, and Uzbekistan attended the ceremony in Dushanbe. Rakhmonov said the most important objectives of his second term in office are creating conditions for political pluralism and media freedom, cracking down on crime, terrorism, and drug-smuggling, and making Tajik products more competitive on world markets. With regard to foreign policy, Tajikistan will continue strengthening ties with Russia, other Central Asia states, and the world community, he said. LF

Macroeconomic reforms--such as privatization, price liberalization and making national currencies convertible-- are not in themselves sufficient to overcome the corruption now holding back many post-communist countries, according to the European Bank for Reconstruction and Development.

In its annual report on transition economies released last week, the EBRD argues that such reforms have not had the effects on either relations between the state and the economy or hence on the level of corruption that both that bank and most other advocates of reform had expected.

And it concludes that post-communist governments must do more to promote fair and transparent laws, strong regulatory agencies, and efficient and effective court systems if they are to bring corruption under control, something the bank said few of these countries have been able to do so far.

In short, the solutions to the multifaceted problems of corruption are more often to be found in politics rather than economics.

In the past, the EBRD, like other international lenders, has tended to shy away from discussing corruption in these countries, typically treating it as a transitional problem certain to be cured by the kind of free market reforms it and other Western institutions have advocated.

But as the bank's report acknowledges, the high levels of corruption in these countries and, more important, the real sources of that corruption have prompted the EBRD to change its approach.

The level of corruption in many of these countries is staggering. According to the report, officials in Georgia extract in the form of bribes some 8.1 percent of the annual revenues of companies operating there. In Ukraine, that figure is 6.5 percent, and in the Commonwealth of Independent States as a whole 5.7 percent.

By adding to the costs of doing business, bribery keeps many firms from making a profit and thus dooms them to an early end. At the same time, demands for bribes discourage new investors from both within the countries involved and abroad.

Indeed, the EBRD found that newly formed companies in these countries had to pay almost twice as much of their revenues in bribes as did more established concerns--5.4 percent, compared with 2.8 percent. And thus bribes serve as yet another barrier to the establishment of new businesses.

Perhaps the most striking aspect of this year's EBRD report on transition economies, however, is its focus on what macroeconomic reforms cannot achieve by themselves. The bank noted that most post-communist countries have privatized many firms and reduced direct state intervention in the economy.

But those macroeconomic steps have not necessarily reduced "the overall level of intervention or the informal tax imposed on firms in the form of bribes and time spent dealing with government officials."

Indeed, the EBRD found that state-owned firms and privatized ones of the same size were forced to pay approximately the same percentage in bribes, an indication that privatization has not had the impact on corruption that many had expected.

Sometimes this appears to be because the new owners are the former communist-era managers, who have a special relationship with government officials. Sometimes it is because the firms or the government agencies with which they must deal have one or another kind of monopoly power, something privatization has done little to change.

Because economic changes alone have failed to overcome corruption, the EBRD argued that these countries must turn to political means instead. Indeed, in releasing the report, the bank's president, Horst Koehler, said: "I underline this twice. Weak institutions are the main obstacle to economic growth in a number of transition countries."

But in contrast to some analysts who have written off any chance for improvement in these societies, the EBRD notes that the fight against corruption can be won by leaders and governments willing to take the political risks involved in breaking with the past and building institutions capable of managing a modern, free market economy.

INTERNATIONAL OBSERVERS SAY UKRAINIAN ELECTIONS FLAWED. Observers from the OSCE and the Parliamentary Assembly of the Council of Europe (PACE) have criticized the Ukrainian authorities for voting irregularities and unfair campaigning in the 14 November presidential runoff in Ukraine. "The second round was worse than the first.... The elections were far from fair and democratic," Reuters quoted a PACE observer as saying. Simon Osborn, an OSCE observer, said his organization had seen voters being given more than one ballot and individuals voting for their families. The OSCE also expressed concern over pressure exerted on voters in prisons, hospitals, and educational institutions. Osborn added, however, that it was difficult to assess to what extent the irregularities affected the outcome. International observers also noted that the state media failed to provide balanced and fair coverage for both candidates in the runoff. JM

KUCHMA SAYS UKRAINE NEEDS DEBT PAYMENT RESCHEDULING. President Leonid Kuchma said on 15 November that Ukraine needs to reschedule foreign debt payments. Kyiv will soon begin negotiations on this issue, he added. As of 1 October, Ukraine's foreign debt stood at $12.9 billion, and the country is due to pay some $3 billion each in 2000 and 2001. Kuchma also told journalists that he does not see any barriers to cooperation with the IMF, including the resumption of the IMF's $2.6 billion loan program for Ukraine. He pledged to accelerate market reforms in the country, saying that by re-electing him, Ukrainians have chosen "a democratic way to build their country based on a market economy," according to Interfax." JM

UKRAINE'S SYMONENKO WARNS OF IMMINENT ECONOMIC WOES. Petro Symonenko, leader of the Communist Party and Kuchma's rival in the runoff, said on 15 November that the government will soon stop paying wages and pensions, prices will increase, and the hryvnya exchange rate will decline still further. "This will be one of the results of Kuchma's victory in the presidential polls," Symonenko said. He added that Ukraine "will [begin to] catastrophically lose its economic independence," and he blamed the centrist forces that "unambiguously" supported Kuchma in the runoff for that possible outcome. Symonenko noted that official reports on industrial growth in Ukraine this year are a "myth," noting that the World Bank forecast a 4 percent slump in Ukraine's 1999 industrial production. JM

HRYVNYA STRENGTHENS AFTER KUCHMA'S VICTORY. The Ukrainian currency rose against the U.S. dollar on 15 November, following Kuchma's triumph in the runoff. Kyiv street traders offered to buy $1 for 4.9 hryvni, down from 5.05 last week. On the interbank currency exchange, $1 was selling at 4.83- 4.86 hryvni on 15 November, and traders expect the hryvnya to stabilize at 4.7 to $1 "in two to three days," according to Interfax. "Many so-called presidential candidates have forecast that the national currency will fall after the elections. They should not rejoice. The hryvnya will be stable," Kuchma said the same day. National Bank Chairman Viktor Yushchenko also affirmed that the hryvnya will stabilize since "the political factor in pressure on the hryvnya exchange [rate] exhausted itself" on the day of the presidential runoff. JM

Macroeconomic reforms--such as privatization, price liberalization and making national currencies convertible-- are not in themselves sufficient to overcome the corruption now holding back many post-communist countries, according to the European Bank for Reconstruction and Development.

In its annual report on transition economies released last week, the EBRD argues that such reforms have not had the effects on either relations between the state and the economy or hence on the level of corruption that both that bank and most other advocates of reform had expected.

And it concludes that post-communist governments must do more to promote fair and transparent laws, strong regulatory agencies, and efficient and effective court systems if they are to bring corruption under control, something the bank said few of these countries have been able to do so far.

In short, the solutions to the multifaceted problems of corruption are more often to be found in politics rather than economics.

In the past, the EBRD, like other international lenders, has tended to shy away from discussing corruption in these countries, typically treating it as a transitional problem certain to be cured by the kind of free market reforms it and other Western institutions have advocated.

But as the bank's report acknowledges, the high levels of corruption in these countries and, more important, the real sources of that corruption have prompted the EBRD to change its approach.

The level of corruption in many of these countries is staggering. According to the report, officials in Georgia extract in the form of bribes some 8.1 percent of the annual revenues of companies operating there. In Ukraine, that figure is 6.5 percent, and in the Commonwealth of Independent States as a whole 5.7 percent.

By adding to the costs of doing business, bribery keeps many firms from making a profit and thus dooms them to an early end. At the same time, demands for bribes discourage new investors from both within the countries involved and abroad.

Indeed, the EBRD found that newly formed companies in these countries had to pay almost twice as much of their revenues in bribes as did more established concerns--5.4 percent, compared with 2.8 percent. And thus bribes serve as yet another barrier to the establishment of new businesses.

Perhaps the most striking aspect of this year's EBRD report on transition economies, however, is its focus on what macroeconomic reforms cannot achieve by themselves. The bank noted that most post-communist countries have privatized many firms and reduced direct state intervention in the economy.

But those macroeconomic steps have not necessarily reduced "the overall level of intervention or the informal tax imposed on firms in the form of bribes and time spent dealing with government officials."

Indeed, the EBRD found that state-owned firms and privatized ones of the same size were forced to pay approximately the same percentage in bribes, an indication that privatization has not had the impact on corruption that many had expected.

Sometimes this appears to be because the new owners are the former communist-era managers, who have a special relationship with government officials. Sometimes it is because the firms or the government agencies with which they must deal have one or another kind of monopoly power, something privatization has done little to change.

Because economic changes alone have failed to overcome corruption, the EBRD argued that these countries must turn to political means instead. Indeed, in releasing the report, the bank's president, Horst Koehler, said: "I underline this twice. Weak institutions are the main obstacle to economic growth in a number of transition countries."

But in contrast to some analysts who have written off any chance for improvement in these societies, the EBRD notes that the fight against corruption can be won by leaders and governments willing to take the political risks involved in breaking with the past and building institutions capable of managing a modern, free market economy.

RADIO FREE EUROPE/RADIO LIBERTY, PRAGUE, CZECH REPUBLIC


RFE/RL Poland, Belarus, and Ukraine Report Vol. 1, No. 24, 16 November 1999

UKRAINE

KUCHMA WINS PRESIDENTIAL ELECTIONS. With nearly all votes counted in the 14 November runoff, Leonid Kuchma had obtained 56.31 percent of the vote, while Communist Party leader Symonenko had garnered 37.76 percent, according to Reuters the next day. Interfax reported that some 27.6 million people (73.8 percent) took part in the ballot.

According to preliminary data, Symonenko beat Kuchma in 10 eastern and central regions: Crimea, Vynnytsya, Zaporizhzhya, Kirovohrad, Luhansk, Mykolayiv, Poltava, Kherson, Cherkasy, and Chernihiv (Kuchma's native oblast).

Kuchma's best results were in Western Ukraine: IvanoFrankivsk Oblast (92.30 percent), Ternopil Oblast (92.18 percent), Lviv Oblast (91.55 percent), and Transcarpathia (83.82 percent).

SYMONENKO DISPELS FEARS OF COMMUNIST RETURN. On 8 November, Petro Symonenko, leader of the communist Party of Ukraine and the incumbent president's rival in the 14 November runoff, spoke with RFE/RL correspondent Askold Krushelnycky and RFE/RL's Ukrainian Service. Below are excerpts from that interview:

RFE/RL: Why do you think a new Communist government would be good for Ukraine, when 70 years of communism brought economic ruin?

SYMONENKO: Concerning the years of ruin--and there were tragic mistakes--I have to hope that many who are not against us will look to the future and not to the past. Ukraine, after all, used to be one of the top four countries in Europe. Today, some organizations rank Ukraine as number 102 in the world. What's more, various foreign organizations say Ukraine has the most corrupt government. That is why I propose that a new government be composed of professional, honest, decent people, regardless of whether they are members of the Communist Party or not.

SYMONENKO: We stand for a genuine patriotic upbringing for our youth, not for some mongrel idea that prevails today in Ukraine. We are for the defense of common interests and the defense of our national culture. We are for the defense of mass media. You, as a citizen of Ukraine, know that freedom of information has been destroyed here. Therefore, there are very many problems that unite us. But this is the most important thing: We communists have shown that we are ready to enter into principled agreements with others to resolve our common problems.

RFE/RL: What kind of "fraternal union"--to use your term-- could Ukraine have with a chaotically capitalist Russia and a Belarus that is still stuck in Soviet times?

RFE/RL: In Soviet times, the Communists destroyed millions of Ukrainians and the country's elite. Communism took away freedom of information, forbade foreign travel, and was responsible for many other forms of repression. Why should voters believe the same will not happen again?

SYMONENKO: I openly say that we, as a party, condemn the tragic mistakes of the past. But we have to look to the future. I want today to know, if the current system is so open and there are no more dissidents, why Ukrainian literature has disappeared and where has the Ukrainian cinema gone? Why don't I see any new ideas or breathe new, fresh creative air that would inspire artists to new, highquality work? In the past there were, shall we say, tragic mistakes. We discussed these at the 20th congress of the CPSU. But today we should not scare people but, while giving them access to the full truth about our lives, we should work toward resolving those problems that will improve the quality of life for everyone.... Therefore, I propose a completely different model for the development of the country and different mechanisms that will today bring about the rebirth of our country.

ORTHODOX CHURCH (KYIV PATRIARCHATE) BACKED KUCHMA. Metropolitan Filaret, head of the Ukrainian Orthodox Church (Kyiv Patriarchate) issued a statement calling on all democratically orientated political parties and public organizations to support the candidacy of incumbent President Leonid Kuchma in the 14 November runoff, "Fakty" reported on 12 November. The statement says that the Church "in no way interferes with politics" but adds that the country's believers are "not completely indifferent as to who will be Ukraine's president for the next five years." For this reason, Filaret appeals to the Church's members as well as all believers "to show civic responsibility, stateoriented thinking, Christian piety, [and] patriotism and elect for themselves, for their families, [and] for Ukraine a future, not a return to the worse past."

SOME OFFSHORE BANKS UNWELCOME. Ukraine's National Bank has prohibited commercial banks from establishing various correspondent accounts in banks that are registered in Nauru and Vanuatu (island republics in the Western Pacific) and in Antigua and Barbuda, in the Caribbean. Moreover, the central bank ordered those Ukrainian banks that had earlier established correspondent relations with banks in the above-mentioned countries to cease using such accounts and to break relations with those banks altogether.

Quoting an unidentified source, Interfax reported on 11 November that 28 Ukrainian banks maintain correspondent accounts in offshore banks now prohibited by the central bank. According to the same source, Ukraine's National Bank introduced the ban because of the "lack of information about central banks in the said countries and about the state of banking oversight in them."

The decision came on the heels of the disclosure that former Ukrainian Premier Pavlo Lazarenko laundered a total of $80 million in an Antiguan bank. The government of Antigua and Barbuda said on 8 November that it has uncovered links between Lazarenko's accounts in that country and those he maintained in Switzerland and Ukraine. It also alleged that the money had been moved between those accounts to conceal its origin. The Antigua and Barbuda government advised the governments of Ukraine, Switzerland, and the United States about its findings, thus meeting their requests for such information.

Lazarenko, against whom Ukraine and Switzerland are conducting money-laundering investigations, is now in the United States, where he has applied for political asylum.

In an effort to trace Lazarenko's financial operations, Ukraine has supplied some governments with a list of companies owned by him and allegedly used to launder money. Lazarenko's companies were registered in Great Britain, the Bahamas, the U.S., the Cayman Islands, and the Virgin Islands.

"The economic collapse that is going to happen in Ukraine after the elections of the head of state will force this republic to join the Union of Belarus and Russia." -- Lukashenka on 9 November. Quoted by "Nezavisimaya gazeta" on 11 November.

"Somebody is stubbornly trying to persuade the Russian public that Ukraine intends to become a [NATO] member. However, neither Ukraine nor NATO is ready for it. This is understood perfectly well in Kyiv, Brussels, and, I think, in Moscow". -- Kuchma in an interview with the 10 November "Izvestiya."

"Possibly, Ukraine has seen the birth of the European tradition of political compromises. I am interested in extending this tradition to all authority levels." Kuchma's rival in the 31 October elections, Yevhen Marchuk, commenting on 10 November on his appointment as secretary of the National Security and Defense Council by the incumbent president. Quoted by the 11 November "Den."

"Today Ukraine has been drawn into the Baltic-Black Sea [alignment]. Do we not realize that by this, they tear away our Slavic unity, ruin our common spiritual heritage, destroy our Orthodoxy? And I, a Communist, [have to] struggle to defend the canonical Orthodoxy in Ukraine." -- Petro Symonenko in an interview with the 11 November "Vremya MN."

"The entire world has held its breath and is waiting for election results [in Ukraine]." -- Kuchma on 11 November in Donetsk Oblast. Quoted by Interfax.

RFE/RL Poland, Belarus, and Ukraine Report is prepared by Jan Maksymiuk on the basis of a variety of sources including reporting by "RFE/RL Newsline" and RFE/RL's broadcast services. It is distributed every Tuesday.