18 August 2011

Ukraine - 20 Years as an Independent Country

Twenty years ago this week, there was an attempted coup to try to stop the reforms of Soviet President Mikhail Gorbachev.

The coup failed, but led to the end of the Soviet Union and over 70 years of the Communist empire.

As they say the rest is history. Russia, Ukraine and Belarus became independent states and so did the other 'states' from the former USSR.

Ukraine will mark its Independence Day on 24 August. This year it will 'celebrate' 20 years as an independent state. Maybe 20 years is not so long to assess how a new country has developed? My first daughter was born in 1991 and I can confirm that time seems to pass very quickly. Although she will be 20 years old this year, I still think of her as a baby.

Is Ukraine still a baby nation? Well it has certainly experienced lots of crying and kicking and screaming since 1991. Many people compare Ukraine with Poland. How has Poland managed to become so successful in the same time period and Ukraine is still struggling with a high level of poverty.

Poland was never a fully signed up voluntary member of the USSR. The poles were only too happy to break free and show the rest of the world how they could become an independent country free from the control freaks in Moscow. Today Poland is a member of the EU and is successful in attracting FDI to further develop its economy. A visit to Warsaw will confirm this.

Ukraine on the other hand was always a FULLY signed up member of the USSR. Russia and Ukraine have always been tightly knit together. Most of the USSR missile sites aimed at the rest of the world were based in Ukraine. The majority of armament factories, missiles, rockets and small arms, military equipment production was based in Ukraine. Ukraine was and still is today the home of large steel mills which produced large quantities of steel for the USSR. Moreover, Ukraine was considered the 'soviet breadbasket' with its rich farm lands producing a significant amount of grain for the whole of the USSR.

It was difficult for Ukraine to break away from the 'Moscow Influence'. Indeed, many would say, why would Ukraine want to break way? The Kyiv mentality was pretty much the same as the Moscow mentality.

But why has Ukraine not developed along the same lines as other former USSR countries like the Baltic states of Latvia, Estonia, Lithuania?

Ukraine is a very difficult country to try to understand. I must admit one of my favourite mottos is 'In Ukraine do not try to understand everything', knowing full well it will drive anyone crazy who really does try to understand how this country ticks. The editor of Forbes magazine recently produced an article showing Ukraine to be amongst the worst economies in the world.

See: http://www.forbes.com/sites/danielfisher/2011/07/05/the-worlds-worst-economies/

But any visitor to the capital city of Ukraine - Kyiv, is always amazed by the display of wealth on the streets including expensive cars, designer shops, expensive restaurants and the desire for the 'new rich' in Ukraine to display their wealth pretty much like the Arabs.
Unfortunately, visitors to Ukraine will eventually discover the massive differences between the have's and have nots in the country. Approximately just 2% of the population of the country control the vast amount of wealth generated since 1991. The majority of Ukrainians still live in poverty. The so called 'middle class' are small in number and live to serve the 2% elite class.
Many of the 'middle class', highly educated and multilingual still look towards western Europe and further to seek their opportunities in life. They do not see their long term futures in Ukraine.

Ironically, there are a few 'foreigners', myself included, who came to Ukraine, because we identified the great business opportunities in a 'developing country' without too much competition on the ground. During the boom days 1999-2009, both foreigners and Ukrainians enjoyed the incremental growth in the economy, particularly in the property sector.
Unfortunately those days are over.

Many would say there are still new opportunities in Ukraine and I'm sure they are right.
But many Ukrainians still think that the country as a whole has missed many opportunities.
Corruption amongst government employees and members of the government are still major hurdles that will not be overcome for many years. Currently the country is facing a few tests which will have major implications for how it sees out 2011 and welcomes 2012.
The UEFA 2012 Football Championships in Ukraine will be a major test, plus the on going 'trial' of former prime-minister Yulia Tymosheno will be perhaps the biggest test for Ukraine in 2011.

Perhaps the one good thing that the people of Ukraine can celebrate on 24 August is the fact that they do live in an independent country free from the control freaks in Moscow...maybe.


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