Poland, Belarus & Ukraine Report: April 8, 2003

PRIME MINISTER PROPOSES EARLY ELECTION. Premier Leszek Miller on 2 April presented a "four-point political plan" that calls for Poland's integration into the European Union, consolidating pro-European forces before the accession referendum in June, restoring economic growth, and holding parliamentary elections simultaneously with elections to the European Parliament on 13 June 2004 -- that is, a year ahead of schedule. Miller's statement came after a reshuffle of his cabinet, in which he replaced the treasury minister and the health minister (see "RFE/RL Newsline," 3 April 2003).

"I held talks today with all of the remaining ministers," Miller said about his minority cabinet. "I asked them a question: did anyone else intend to resign from work in the government? And I hereby state: there will be no further changes in the Council of Ministers. After the changes today, only those are in the government who can, who want to, and who are capable of acting in their posts in the interests of Poland."

Regarding the early parliamentary election, Miller said: "The fourth aim [of my cabinet] is the assurance of clear rules and of a calendar in the face of historic events...in the face of Poland's entry into the European Union. As the prime minister and the head of the Democratic Left Alliance [SLD] I feel that on the threshold of this new reality a new democratic legitimation for parliament and the government would be useful. The next elections to the Sejm and the Senate could then take place on 13 June 2004, together with the elections to the European Parliament. A new situation requires a new shuffle of the pack."

President Aleksander Kwasniewski assured Miller that he fully supports the cabinet's four-point program, rejecting reports of a "war at the top" between the president and the premier (see "RFE/RL Poland, Belarus, and Ukraine Report," 26 March 2003). "I want to say 'yes' to the decision that will doubtless arouse the most discussion, that is the idea of parliamentary elections to the Sejm and the Senate taking place together with the European elections on 13 June 2004," Kwasniewski commented after Miller's statement. "I feel that it is exceptionally honest on the part of the government, on the part of the SLD, that it is presenting things in this way, that it feels that this new challenge and new situation should also be accompanied by a new shuffle of the pack. And thus: a verification of social support for particular political forces. I feel that, on this matter, the opinion of other parliamentary groupings will be very significant, but also the convincing of public opinion that this is the moment, after the entry of Poland into the European Union on 1 May [2004], when a new shuffle of the pack will be so very comprehensible. And I believe that it will also strengthen Polish democracy and also strengthen the Polish presence in the European Union."

All major Polish opposition parties except the Peasant Party (PSL) have supported the prospect of early parliamentary elections, as announced by Miller. PSL leader Jaroslaw Kalinowski instead said the proposal to conduct balloting in June 2004 is an attempt by the government to escape responsibility for the difficult period that Poland will face after joining the European Union. Meanwhile, the Civic Platform, Law and Justice, and Self-Defense were pleased by the idea of early elections. However, Civic Platform leader Maciej Plazynski also pointed to what he deems a negative aspect of Miller's proposal. "My major worry is that this [proposal], in fact, will mean a year of an election campaign with all bad effects -- like not making difficult decisions, putting problems aside, and pleasing voters," Plazynski noted. "It won't be good for Poland because the situation requires something else: making difficult decisions of a political nature."

The announcement of an early parliamentary elections is seen by Polish commentators as a sort of compromise in the allegedly ongoing conflict between Miller and Kwasniewski. Kwasniewski reportedly wanted Miller to quit the post of prime minister (see "RFE/RL Poland, Belarus, and Ukraine Report," 26 March 2003) but backed down after seeing that Miller is still strongly supported by his party, the SLD. There has even been speculation in some Polish media that Kwasniewski wants to create a new political party or even take over leadership of the SLD after his presidential terms ends in 2005. Kwasniewski seemed to address these speculations on Polish Radio on 4 April, when he said that he is no longer a member of the SLD and added, "I probably won't be a member of any party in my life."

Referring to his current relations with Miller, Kwasniewski said: "There is no war at the top but there are disputes and I can only hope that my arguments with the prime minister and other politicians are creative, that they contribute something and it is not only a struggle for ambition, positions, but that the issue concerns Poland, its people and progress, and that things will get better and not worse. And although arguments are possible, the line between a dispute and a war must not be crossed. Dispute -- yes, war -- no. Discussion - yes, damaging conflict -- definitely no." (Jan Maksymiuk)

MILLIONS OF UKRAINIANS WORK ILLEGALLY ABROAD. Ukrainian ombudswoman Nina Karpachova on 2 April reported to the Verkhovna Rada that the problem of illegal migration of Ukrainians in search of work and earnings has become of "state importance." She stressed that Ukrainians abroad belong to "the most-discriminated-against and least-protected category" of citizens. Karpachova noted that, according to various estimates, between 2 million and 7 million Ukrainians are working abroad owing to poverty and unemployment in Ukraine. She said she believes than no fewer than 5 million Ukrainians -- or one in five employable citizens -- may work seasonally abroad, and almost all of them illegally.

Official data about Ukrainians abroad exist only with regard to those citizens who work there legally, under official contracts. Thus, according to the Ministry of Labor and Social Policy, 20,000 Ukrainians worked temporarily abroad in 2002, primarily in Greece, Cyprus, Liberia, and Great Britain. At the same time, the Foreign Ministry estimated that from 1 million to 3 million worked in Russia, 300,000 in Poland, 200,000-500,000 in Italy, 200,000 in the Czech Republic, 150,000 in Portugal, 100,000 in Spain, 35,000 in Turkey, and 20,000 in the United States.

Karpachova said that, according to official data, 27 percent of Ukrainians live below the poverty line. The most difficult economic situation is in Transcarpathian Oblast (47 percent of people live below the poverty line), as well as in Crimea and the Khmelnytskyy, Kherson, Mykolayiv, Volyn, Luhansk regions (from 32-37 percent of people are below the poverty line). According to the International Labor Organization, unemployment in Ukraine in 2002 stood at 11 percent of employable population, which translates into 2.5 million jobless people. Karpachova cited the Ministry of Labor and Social Policy as saying that the number of unemployed Ukrainians may now exceed 3 million people.

Karpachova said the labor migration, along with the decreasing birth and increasing mortality rates within the country, deteriorates Ukraine's demographic situation. According to estimates by Ukrainian experts, if the current demographic trends are not reversed, Ukraine's population may decrease to 42 million in 2026.

Karpachova noted that the labor migration also has positive consequences, including an inflow of hard currency which not only improves the economic situation of particular families but also boosts the Ukrainian economy in general. She said Ukrainians abroad earn nearly $400 million per month, adding that most of this sum is transferred to Ukraine, although it is not known how much is sent through the banking system and how much is carried in pockets by people returning home.

Karpachova also told lawmakers that, since most Ukrainians work abroad illegally and avoid contacts with Ukrainian consular missions, the Ukrainian state has only limited possibilities to help its citizens protect their civil and human rights. According to Karpachova, the most common discrimination against Ukrainians abroad refers to their labor conditions -- they are often forced to work 10-18 hours per day and are poorly paid or even not paid at all.

The ombudswoman reported that currently 10,000 Ukrainian citizens are under arrest abroad and another 2,500 are serving their terms in foreign prisons. She also reported that 23,620 Ukrainians have been deported in the past two years, primarily from Turkey, Hungary, Poland, Slovakia, and Italy. (Jan Maksymiuk)

IS CAPITAL OUTFLOW A PORTENT OF CHANGE? In February, National Bank head Serhiy Tyhypko said $ 2.27 billion was taken in illegal flows of capital out of Ukraine in 2002, $898 million in 2001, and "only" $385 million in 2000. This massive capital outflow from Ukraine abroad during 2000-02 was half as much as the amount of direct investment into the Ukrainian economy over this period.

The progressive increase in the flight of capital from Ukraine abroad is a clear indication of the chronic illness of the Ukrainian economy, approximately half of which, according to experts' estimates, is operating in the "shadow," that is, outside legal regulation. The economic reasons for this situation are well-known. Ukraine's deformed tax system imposes harsh tax burdens on legal and effective businesses while simultaneously offering tax breaks to business clans that are loyal to the authorities and close to the Ukrainian political elite. Ukraine also possesses one of the highest ratings on the world corruption index; consequently, foreign investors are reluctant to work more actively in the country. These factors do account for the flight of capital from the country, but they do not explain all the reasons for the progressive dynamics of this trend.

The flight of capital is also characteristic of the unstable political situation found within the country, and it indicates mass distrust on the part of Ukrainians (including businessmen) toward the state, including such important financial institutions as banks. According to an annual representative poll conducted in the spring of 2002 among 1,800 respondents by the National Academy of Sciences' Institute of Sociology, only some 9 percent of respondents said they trust Ukrainian banks. The painful memories of a massive loss of savings in the former USSR, the unsavory experience with financial pyramids that were legalized in 1993 by Leonid Kuchma (then prime minister), and the bankruptcy of Ukrayina, one of the country's largest banks, have all added to citizens' pessimism and their distrust of the banking system.

However, the main factor of political instability that seems to have also stimulated the flight of capital from Ukraine abroad is the upcoming presidential elections in 2004. The long, "stable" epoch of the semicriminal economy, which has been developing for almost 10 years under the political authority of President Leonid Kuchma, is poised to come to an end in 2004 with the election of a new president. The incumbent, Kuchma, has no constitutional chance to remain in office beyond 2004. Viktor Yushchenko is considered to be the most realistic candidate for the next presidency, which is seen as alarming for powerful clans of oligarchs in Ukraine. In this context, the progressive dynamics of the flight of capital from Ukraine abroad can be seen as the clans reaction to the approaching possibility of political change in the country. This explanation seems quite plausible. The money accumulated by the powerful Ukrainian clans flows out abroad through a system of criminal centers of illegal currency exchange and legally questionable stock-exchange manipulations.

There may also be another motive for the powerful Ukrainian oligarchic clans to extradite their capital from the country. As testified by secret recordings of former presidential bodyguard Mykola Melnychenko, the "dirty money" from Ukrainian semicriminal and shadow businesses were used as financial support for Kuchma's presidential election campaign on 1999. The bad memories and the methods of violent financial extortion and pressure that were applied to businessmen by presidential election staff led by oligarch Oleksandr Volkov for obtaining contributions into Kuchma's election fund may have forced Ukrainian oligarchs to hide more of their money abroad and in offshore zones.

How effective and realistic can the countermeasures declared by Tyhypko and other top Ukrainian officials against the flight of capital be? Though the authorities are trying to demonstrate to the world in general and the Financial Action Task Force in particular their determination to the struggle against the shadow economy and money laundering in the country, these intentions so far look like a regular official PR campaign. Tyhypko's announcement publicizing a list of 20 Ukrainian banks allegedly involved in criminal financial activities has still remained only a declaration. Against whom should one fight? According to Melnychenko's tapes, Mykola Azarov, the current first deputy prime minister and former head of the State Tax Administration, reported to President Kuchma in the summer of 2000 that at least two Ukrainian banks were suspected of illegal financial activities. These were Intercontinent-Bank, controlled by the Medvedchuk-Surkis oligarchic empire, and PrivatBank, which was established and controlled by Tyhypko himself. Comment seems to be superfluous.

This report was written by Dr. Viktor Stepanenko, a senior research fellow at the Institute of Sociology, National Academy of Sciences of Ukraine, and director of the Center for Public Policy Development.

"Beer brewing means not only technology. Technology requires some barrels, pipes, and machines. But one also needs to put one's own mentality, heart, and soul into it. You are not able to replace the Belarusian soul and heart with the German ones [in beer brewing]. Therefore, leave them as they are there, because they are our own, Belarusian." -- President Alyaksandr Lukashenka to Belarusian beer brewers on 3 April, explaining why they will have to modernize their breweries without foreign investment; quoted by Belarusian Television.