To make change, Ukraine needs political leadership more than anything else. Political instability leaves little room for long-term purposeful policies. The country’s political future cannot really be predicted, but assuming even a mild improvement over the increasingly autocratic and erratic Yanukovych regime, a possibility of concentrating on needed economic change might open in coming years. Three overarching tasks are evident. They are all wide-ranging, but detailed roadmaps on what to do already exist.
First, Ukraine can no longer rely on a terms of foreign trade windfall. Domestic prices must be set at a realistic level; much needed greater efficiency cannot come from explicit and implicit subsidies. To continue evolving Ukraine needs access to domestic long-term funding. The current combination of dependence on foreign funding and lost international credibility is nothing short of lethal.
Second, the weak and corrupt Ukrainian state must be reformed. Corruption and state favors are the greatest barriers to more free markets with healthier competition and a growing small and medium enterprise sector. Current pension and subsidy burdens put the state in an impossible position fiscally and indirectly force the growth of the shadow economy.
Third, the oligarchic structure of the economy can only be counterbalanced by an economy more exposed to foreign competition and investment. That can only be realized when the previous two tasks have been tackled in a credible and consistent way. As matters stand, Ukraine cannot really expect much foreign investment, nor can Ukraine really be recommended to most investors.
