What Ukraine needs most now? Evidence from Slovakia Reforms
Ivan Mikloš (former Minister of Finance and deputy Prime Minister of the Slovak Republic)
I visited Ukraine for the first time in March, only a few weeks after the tragic and heroic events around Maydan. Since that time I have begun to intensively think about how to help Ukraine with necessary reforms. I spent almost all of my professional life preparing and implementing economic reforms in my country, Slovakia. The main aim was to change my country from backwardness and stagnation into a modern, competitive European state. We enjoyed mixed success, but in general we can say today that Slovakia has produced a successful transition. We are not only in the EU but also in the Eurozone (unlike neighbouring Visegrad countries, Poland, Czech Republic and Hungary). We have recorded the highest cumulative economic growth among all EU countries from the breakdown of the communism until now and we have been one of the world’s most successful economies in that period. At the time of independence in 1993, Slovakia had only 62% of the Czech Republic’s GDP per capita. Just this year, we caught up with our westerly neighbour on this metric. Twenty-five years ago Slovakia produced antiquated Soviet tanks and another heavy military equipment but not one car. Today we are the number one producer of cars in the whole world, per capita. The most important reason for that success is reforms. Let me illustrate this by comparing convergence success of the Visegrad countries from 2004 until 2008. Over those four years, GDP per capita in PPP in comparison with the EU average improved in Hungary by 1%, Czech Republic by 3%, Poland by 5% and Slovakia by 16%. These were the first four years of EU membership for all of these countries, therefore the big difference among their convergence progress has to have had different reasons. This reason is reforms.
Slovakia during 2003 prepared, and from the beginning of 2004 implemented, a very bold and complex package of deep structural reforms. In 2004 Slovakia was named the most reformist country globally by the World Bank. I am not writing this in order to praise my country or myself. I am writing this because of two main reasons. Firstly, it shows that reforms work. It shows that if country is able to implement a deep and comprehensive package of reforms it will bring relatively quick results. Secondly, I think that our experience shows Ukraine now has a real chance to achieve similar success and progress if necessary reforms are implemented.
Ukraine in comparison with Slovakia 10, 15 or 20 years ago has some disadvantages and some advantages but the urgent need for reforms is indisputable. During the last half a year I visited Ukraine three times. I attended conferences and spoke with dozens of domestic and foreign experts and I can say that Ukraine today has incomparably more domestic and foreign experts for preparing necessary reforms than Slovakia had years ago. But I am afraid that all these conferences, seminars, and initiatives are too focused on the technical and professional part of the challenge. Of course it is important to have well prepared proposals for public administration reform, judicial and police reform, tax reform, decentralization etc. It is also very important to have proper institutional infrastructure for effectively utilising all this domestic and foreign expertise and support offered from NGO’s, international institutions, donors etc. This is all important but misses something relevant in this debate and in the current Ukrainian reality. Today the content of reforms is not the major problem. There are a lot of both good and bad evidence for how to reform taxes, pensions, labour market, public administration etc, but much more important and difficult is the political part of the job. Reforms mean changes and people don’t like changes. People fear changes and this is the reality everywhere and it is also natural and normal.
Anytime I am asked what was the most important precondition for Slovakian reforms and what is also the most important precondition in general in any country, my answer is the same – political leadership. The more reforms that are needed the more and stronger political leadership is necessary. We all know that Ukraine urgently needs a lot of changes.
Political leadership means to have leaders with a strong and legitimate political mandate, vision, will and courage to do what is needed despite it being difficult and full of conflict, pressure and difficulties.
A strong political mandate can be created only by democratic elections. Therefore it is very important that Ukraine has just recently elected a pro-reform and pro-European president and the upcoming parliamentary elections are similarly vital.
A strong and legitimate mandate means commitment of the political parties to reforms and to change the country for the better. Political parties’ pre-election programs are the best platform for these pro-reform commitments and then after elections the program declaration of the new government which will be created as common denominator of the pre-election programs of the coalition parties. This is the normal, standard process how to not only gain a political mandate but also to have tools for enacting promises and commitments and fighting against populism and irresponsibility in politics. I know that Ukraine is not a standard developed parliamentary democracy but my own country also wasn’t and still isn’t. Despite this, or even because of this, for deep and comprehensive reforms to proceed, it is necessary and important to develop this mechanism of legitimate mandates, public control and political commitments.
Ukraine has a lot of capable, educated people and strong NGO’s. There is a lot of positive energy accumulated in favour of change and a better future. Now, a few weeks before elections it is very important to focus and use these capabilities and energy for strengthening political support for reforms but also to create enforceable commitments for politicians to implement necessary reforms.
I know that Ukraine needs most to save its sovereignty and integrity. But apart from this, and also as a precondition for sustainable sovereignty and integrity, Ukraine needs economic prosperity. And for this, reforms are essential.