Ukraine’s integration into the Global Economy examined at GMF
On Wednesday, January 24, the German Marshall Fund's Economic and Foreign Policy programs jointly hosted a panel discussion on "Ukraine's Integration into the Global Economy: The impact of Freedom House rankings and Millennium Challenge Corporation Threshold Agreements." The panel included Monica Kladakis, Managing Director of the Threshold Program at the Millennium Challenge Corporation, and Christopher Walker, Director of Studies at Freedom House. The respondent was Anders Aslund, senior fellow at the Peterson Institute for International Economics. John K. Glenn, Director of Foreign Policy at the GMF, moderated the discussion.
After Jonathan White, representing GMF's Economic Policy Program, made opening remarks, Christopher Walker began the discussion by noting that reform is best when driven by domestic actors and that international institutions can only encourage and provide incentives for reform. He continued with a brief explanation of the role Freedom House has played in Ukraine's qualification as a Threshold Program country, including their publications Freedom in the World and Countries at the Crossroads. Ukraine signed a two-year $45 million Threshold Agreement with the Millennium Challenge Corporation (MCC) to fight corruption on December 4, 2006. In November 2006 Ukraine qualified for Compact Program status, the result of increasingly positive scores in MCC focus areas: Ruling Justly, Investing in People and Encouraging Economic Freedom. The Threshold and Compact country scores are based on 16 indicators gathered from a wide variety of sources, including Freedom House.
According to Walker, Ukraine has demonstrated exemplary reforms, especially in contrast to the surrounding former Soviet Union nations. While qualifying for MCC Threshold Program status means that a "free" form of political governance has been established or is close to being established, it is the maintenance of those political and institutional reforms that proves to be the most challenging step for a transitioning nation. Freedom of press, political liberty and participation of the civil society are all areas in which Ukraine has demonstrated progress, especially in the recent elections. Slow progress was revealed in areas such as rule of law and accountability of public institutions. Walker emphasized the need for media freedom, while noting the significance of Freedom House reports being published domestically in Ukraine.
Kladakis followed with an explanation of the MCC program and the primary focus of the MCC's work in Ukraine; grants to civil society and organizations that fight corruption, transparency and reform in the judicial system, government ethics and administrative standards, enforcing and streamlining regulation in customs and transport, and corruption in higher education. She mentioned the many partnerships that enable the Threshold programs, like USAID and the Department of Justice (which perform the actual implementation of the Ukraine program), Freedom House (which as mentioned above provides feedback on prospective candidate readiness for programs and program effectiveness), and the Ukrainian government. She reiterated the point that Ukraine's Compact agreement was signed on December 4th of 2007, and therefore has not had much time to get off the ground yet.
Anders Aslund responded to these two informative presentations and emphasized the exciting stage that Ukraine has entered; a nation on the edge of becoming "free" economically and politically with a well-established set of checks and balances. He argued that Ukraine has seen a substantial decline in corruption, increasing integration into the global economy, and has made progress on WTO accession. The EU Action Plan with the prospects of an EU-Ukraine FTA and NATO membership also are positive developments. Given the provisions of the Rome Treaty, as a European nation Ukraine cannot be denied the opportunity to join the EU - to deny them that would require changing the law.
The latter advantages are extremely important, Aslund argued, as entrance into the international business arena requires a certain level of business transparency and accountability. If the Ukrainian government and the powerful industry oligarchs that control much of the economy want to be taken seriously by international business powers, their approach has to stem from a corruption-free domestic environment; which will in turn foster greater economic progress within Ukraine. Aslund's concerns regarding the Threshold program in Ukraine were related to the weak economic framework, namely property rights legislation, commercial law, and joint stock companies. On the positive side, he sees a relatively low threat from Russia as well as the oligarchs. Unlike Russian oligarchs, Aslund views these Ukrainian business leaders as competing with each other and comparable to the robber barons in the 19th century United States who overtime will take a stake in civil society.
This last point was discussed at length in the Q&A segment. Representatives from the international business sector, the Ukrainian Embassy, and the think tank community provided a lively discussion on the role of oligarchs, the challenges of the business climate and the details of Ukraine's progress. An interesting question was raised regarding the domestic perceptions of the Ukrainian MCC programs. Whether or not the program is liked, or even widely known, inside Ukraine is not clear at this point. John K. Glenn, moderator for the event, concluded that "clearly there is much more that can be done on the interesting intersection between development and democracy."