“Ukraine can achieve sustainable economic growth. To do this, everyone needs to do “homework” to a good quality”, says Mykhailo Reznik.
You were one of the founders of Ukrainian economic diplomacy. What did it all begin with?
— After the restoration of Ukrainian statehood in 1991, the Ministry of Foreign Economic Relations was established on the basis of the Ministry of Commerce. While working on the leading position of the new agency, I was responsible, inter alia, for the creation and operation of trade and economic missions that began to work at our foreign institutions since mid-1994. This step laid the foundation for the formation of the economic diplomacy “advanced echelon” of our country.
By the way, such an attempt already took place almost 100 years ago, when, after the proclamation by the Third Universal on November 7, 1917, the Ukrainian People’s Republic, one of the first measures was the opening of our first embassies and economic missions abroad.
The ministries and departments of Ukraine, since the mid-1990s, relying on diplomats and employees of trade and economic missions, have significantly accelerated the implementation of an important function — integration into the economic and financial institutions of the world.
Over time, trade and economic missions have been transformed into a service of economic advisers at embassies. To my deep conviction, this step was not entirely correct. After it, the reform of the diplomatic service stopped.
But the reform must be continued. Who should deal with this?
— Economic diplomacy of the country is carried out, first of all, directly by the Cabinet of Ministers through intergovernmental commissions, the relevant committees of the Verkhovna Rada and all without exception central executive authorities. The Ministry of Foreign Affairs of Ukraine only coordinates and analyzes the activities of the external economic vector. But, at the same time, the Foreign Ministry must also constantly change the format and functions of the economic diplomats. The time has gone when one or two diplomats at each embassy met the criteria for effective cooperation with the economic bloc of the Ukrainian government or departments.
Promotion and protection of the country’s economic interests, strengthening of contacts with the business of the country, being in conditions of limited financing — the Ministry of Foreign Affairs should strengthen the service through the following steps.
Identify by one basic regional embassy in the Baltic States or Scandinavia, as well as at the structures such as the Vyshegrad Group, and form, without increasing the number of positions of economic diplomats, relevant departments or sections of 3–5 employees. An adviser-ambassador should head such a structural subdivision of the embassy.
In addition, the need to strengthen the quantitative and qualitative composition of the economic diplomats of our missions at leading international organizations and their structures in New York, Vienna, Geneva, etc. has taken shape.
It is hard if not impossible to give positive examples of the participation of Ukrainian companies in tenders and various economic programs of these organizations. The impact of such structural changes can become tangible in the immediate future.
What else must be changed?
— An important factor is the target preparation of the economic service diplomats. I would like to emphasize the word “target” one more time. As an example, since 1991, the phrase “Ukraine’s dependence on energy resources of Russia” has been heard. Ukraine has never depended on the Russian Federation. It depends only on the situation at the world market for hydrocarbons. The very fact of recognizing such “dependence” is a losing situation at all stages of the negotiation process. Nowadays the United States consume 52% of all hydrocarbons produced in the world. But they never declare that they are dependent on the Arab world or the eastern countries. The second example: Ukraine is a maritime state; it is a member of a relevant world organization. Unfortunately, I can name just one or two surnames of Ukrainian diplomats who have qualitative training and experience in this area of activity. That is, it is necessary to prepare the personnel who really will have a competitive opportunity to discuss such important directions and to defend the economic interests of the state.
You have worked abroad for a long time. Can you compare the development of economic diplomacy in the United States, Korea, China and Ukraine?
— I would like to emphasize once more: we must change both the status and the level of training of our diplomats for work at the economic positions. When the heads of trade and economic missions were appointed at the first stage of their creation and development, they were deputy ministers from our economic departments or department directors, or civil servants with work experience in business. But simply filling out a vacancy, even via a competition, without high criteria for such diplomats, this is a direct way to a potential loss in a competitive environment, not only to colleagues from such countries as the USA or China, but also to Romania, Hungary or Poland.
From my own experience, I can say that Germany or Korea can serve as the most successful models for building an advanced “squad” of economic service abroad.
What depends on an economic diplomat?
— The main priorities of the activity are determined depending on the country of residence or their position in our missions. Functional responsibilities are approved for this. A general and unifying format of work is the disclosure of additional opportunities for our business to promote Ukrainian products or services, as well as the protection of the interests of domestic companies. Facilitation of investment possibility in Ukraine by foreign companies is an important aspect of the activity.
When our economic diplomatic service works at full capacity, how much will the situation improve?
— This issue can be supported by your wonderful magazine as well. On its pages, it is expedient to open a discussion on how to “reform” economic diplomacy as an important component in raising the competitiveness of our economy. It would be great to have a round table on this issue. I know that the editors of the magazine already have experience in conducting such events.
The next question to you as to the Honoured Economist of Ukraine: what should be done to improve the standards of life in our country?
— Since 2004, the positions of countries in the ratings on the ability of economies to sustainable economic development in the short term have been formed by the World Economic Forum. There are 122 criteria, which are taken into account and which are divided into 12 groups. Ukraine in different years ranked in the eighth place among 138 countries of the world, rising or, conversely, losing a few points. The rating assessment is based either on common sources available or through surveys. In fact, this is a “road map” for each government and parliament with information on weak positions in the country.
In different years, there were attempts to develop a number of programs for Ukraine, including the involvement of foreign specialists, such as the Blue Ribbon and others. Now, there is much talk about the so-called “Marshall Plan” for Ukraine in the press. But we should determine by ourselves the concrete executors and those responsible for each of these 122 criteria at the level of the committees of the Verkhovna Rada, the ministries and departments. The assessment and ability to work of each minister or chairman of the committee should be guided by the results of raising Ukraine on the rating levels, rather than focusing on populism or unsubstantiated statements.
In addition, to active social activities, you head the “Ukravtoprom” association. What is your opinion about the relations of power and business in the country?
— As exemplified by the machine-building sector of our country’s economy, we can unfortunately acknowledge the sharp decline in volume of production. So in the domestic automobile industry more than 59 thousand employees were employed in 2008. More than 400 thousand cars of all classes (buses, cars, commercial vehicles and heavy vehicles) came from Ukrainian conveyors. Over 7 billion hryvnias came to the budgets of all levels (the exchange rate of $ 1 to hryvnia was 1:5), while the share in GDP reached 4%. Ukraine ranked seventh among European countries in terms of volume of automotive production. From year to year, the wrong practice of weak and sometimes incorrect steps in reforming customs, tax and industrial policy was carried out by the governments. There were such conditions created when it was more profitable to handle export-import operations than production for businesses. The populism in lawmaking of the Verkhovna Rada and change of priorities not to the benefit of innovative industries that could create a large number of work places and 45–55% of value added in the final production killed the producer ultimately. The potential of automotive industry remains very strong and industrial enterprises are waiting for concrete steps by the government, increasing the purchasing power of our consumers and improving the investment climate in the country.
What is a panacea for the country then?
— Not to rely solely on international assistance. There are over 40 million of us. No one will do anything instead of us. Everyone needs to do “their homework” well. To work and to live in a way that our children are proud of their country.