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Action Ukraine Report

"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter
In-Depth Ukrainian News, Analysis, and Commentary

"The Art of Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World"

"THE ACTION UKRAINE REPORT - AUR" - Number 475
E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, TUESDAY, May 3, 2005

------INDEX OF ARTICLES------
"Major International News Headlines and Articles"

1. UKRAINE'S ONCE-MALIGNED HRYVNIA ROCKETS AGAINST DOLLAR
New Europe, Athens, Greece, Mon, May 2, 2005

2. BRITISH BANK RECOMMENDS BUYING NATIONAL CURRENCIES
OF RUSSIA, UKRAINE AND EGYPT
Interfax Ukrainian News, Moscow, Russia
Thursday, 21 April 2005

3. HRYVNIA GAINING WEIGHT VS USD ACCOMPANIED BY
GDP'S DECELERATED GROWTH
Uliana Kozhukh, Oleksandr Khorolsky, Ukrinform,
Kyiv, Ukraine, Friday, April 29, 2005

4. A REVOLUTION? WE'RE STILL WAITING
EDITORIAL: by Jed Sunden, Publisher
Kyiv Post, Kyiv, Ukraine, Thursday, Apr 28 2005

5. "CONSOLIDATING THE ORANGE REVOLUTION"
ESSAY: By Peter C. Ordeshook
Professor of Political Science
California Institute of Technology, Pasadena, CA
Published by The Action Ukraine Report
Washington, D.C., Tuesday, May 3, 2005

6. UKRAINIAN EXPERTS BELIEVE ERRORS OF FIRST 100 DAYS OF
WORK OF PRESIDENT AND CABINET WERE UNSYSTEMATIC
REFORMS, SITUATION WITH REPRIVATIZATION AND STAFF POLICY
Ukrainian News Agency, Kyiv, Ukraine, Sun, May 1, 2005

7. PROBLEMS PERSIST DESPITE YUSHCHENKO'S SUCCESS
Yushchenko's 100 days: international success, internal stress
By Anya Tsukanova, Agence France Presse (AFP)
Kiev, Ukraine, Monday, May 02 2005

8. 100 DAYS ON, TROUBLE HITS ORANGE KINGDOM
By Greg Walters, Staff Writer, The Moscow Times
Moscow, Russia, Tuesday, May 3, 2005. Issue 3158. Page 1.

9. FIRST 100 DAYS OF YUSHCHENKO'S PRESIDENCY HAVEN'T
BROUGHT ANY MAJOR CHANGES, ANALYSTS SAY
But he never promised he could transform the country quickly
By Taras Burnos, RIA Novosti, Moscow, Russia, Mon, May 2, 2005

10. DESTROYER OF OLIGARCHS
Yushchenko's first hundred days mark the start of a war on big business
By Marina Kozhushko, Nezavisimaya Gazeta
Moscow, Russia, Friday, April 29, 2005

11. OFFICIALS: LOCAL GOVERNMENT REFORM LAGS IN UKRAINE
Radio Free Europe/Radio Liberty (RFE/RL)
Washington, DC, Friday, April 29, 2005

12. POLISH INVESTORS WORRIED OVER NULLIFICATION
OF SPECIAL ECONOMIC ZONES
Yana Lemeshenko, Ukrinform, Kyiv, Ukraine, April 29, 2005

13. UKRAINE NEGOTIATES WITH DENMARK JOINT PROJECT
FOR PRODUCTION OF PORK
Plan to construct a model Ukrainian pig farm in each oblast
UNIAN, Kyiv, Ukraine, Monday, April 25, 2005

14. US KEEPS SANCTIONS AGAINST UKRAINE DUE TO INSUFFICIENT
PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
Ukrainian News Agency, Kyiv, Ukraine, Sun, May 1, 2005

15. EURASIA: PRINCIPLES DEMOCRACY
Seven central tenets to a code of conduct a democratic people must follow.
By Mikheil Saakashvili, President of Georgia
The Wall Street Journal Europe
Europe, Friday, 29 April 2005, A9

16. UKRAINE: COMMUNIST LEADER CALLS ON SOVIET ARMY VETERANS
NOT TO ALLOW FORMER OUN AND UPA SOLDIERS TO PARTICIPATE
IN MAY 9 GREAT PATRIOTIC WAR VICTORY MARCH IN KYIV
Ukrainian News Agency, Kyiv, Ukraine, Monday, May 2, 2005

17. "FIFTY YEARS AFTER STALIN"
Prof. James Mace, Ph. D., Consultant to The Day
The Day Weekly Digest in English, #8
Kyiv, Ukraine, Tuesday, 4 March 2003

18. RETURN TO THE SOURCE:
10th Annual Folk Art and Culture Tour of Ukraine
August 8-23, 2005, With Folk Art Specialist Orysia Tracz
Folk Art and Culture Tour of Ukraine, Orysia Tracz
Winnipeg, Manitoba Canada, Monday, May 2, 2005
=============================================================
1. UKRAINE'S ONCE-MALIGNED HRYVNIA ROCKETS AGAINST DOLLAR

New Europe, Athens, Greece, Mon, May 2, 2005

It happens a lot in former Soviet states. The government fiddles with
monetary policy, the exchange rate tanks, banks suddenly refuse to trade
foreign money, small savers panic, and black market currency traders make a
mint. Except that this time in Ukraine, the currency people are desperate
to get their hands on is the long-abused hryvnia, and the money no one wants
is the once-mighty US dollar.

Ukraine's most recent currency tremor, during last year's Orange Revolution,
was more conventional. The country appeared to be sliding towards civil war,
and so last November Ukrainians did what they always do when times are
tough: they dumped the national currency for something solid, US dollars if
at all possible.

The crises, both political and currency, were over fast. The pro- Europe
side of the political conflict took power in January. The hryvnia-dollar
exchange rate, jacked up on the black market in December to as high as
seven to one, was trading calmly at about 5.4 hryvnias to the dollar by the
end of the month. But now, only three months later, things are different. In
the smokestack-filled Donetsk province, the country's economic engine,
cash exchange points on Friday before last were refusing to sell hryvnias
at any price, especially for dollars, Interfax reported.

In the capital Kiev the cash exchange outlets that were open two weeks
ago were selling hryvnias at 4.9 to a dollar - confirming a full ten percent
revaluation of the Ukrainian currency against the American dollar since
January.

"And that's not the limit," declared Ukrainian Prime Minister Julia
Timoshenko during a Thursday evening interview on UT-1 television. The
hryvnia is overvalued against the dollar, it has been for a long time...and
every one knows it."

Ukrainians holding dollars disagree with Timoshenko of course. Typical of
small savers was Kiev appliance repairman Petro Pavlenko. My life savings
are in dollars, just like every else's," Pavlenko told Deutsche
Presse-Agentur (dpa). Only a fool puts his money in Ukrainian banks...and
now Timoshenkos games have made me about ten percent poorer since
the beginning of the year."

The US dollar is far more than just a foreign currency in Ukraine, a country
which during the mid-1990s saw Europe's worst hyper-inflation since the
Weimar Republic. Millions of Ukrainians, like Pavlenko, to this day believe
a wad of dollars is the best way to keep savings liquid, and away from the
tax mans eyes.

The government's official argument for powering up the hryvnia is grounded
in energy imports. Energy is by far the biggest expense in Ukraine's foreign
trade balance, and with the hryvnia buying more dollars - the price
denominator of Russian oil and gas exports - Ukraine pays less for Russian
energy, said Serhy Sapun, a Kiev-based energy industry analyst. We will do
what it takes to prevent (Russian) monopolists from dictating energy prices
to Ukraine," declared Serhy Teriohin, Ukraine Energy Minister, in a
Ukrainska Pravda magazine interview.

A better-concealed but still critical reason for the hryvnias skyward
trajectory, analysts said, lies in Ukraine's somewhat sobering economic
indicators for the first months of 2005, showing inflation running at a
worrying annual rate of 8.8 percent, almost double 2004. GDP growth is
down by almost as much, although still clocking in at a healthy 5.2 percent
annual rate, according to data made public by the State Statistics
Committee last month.

The solution is to attract Ukrainian-held dollars hidden under mattresses
and in offshore bank accounts into Ukrainian banks, where the money can
prime accelerated growth, wrote Andrey Voltornist, a monetary analyst for
Kiev-based IntelliNews.

The idea is to suck stagnant money from the black market, and turn it into
legal capital the economy can use," he said. "The government is trying to
convince people to put money in banks." Ukrainian exporters slammed by the
robust hryvnia unsurprisingly disagree, arguing a strong hryvnia is the last
thing the economy needs. This (revaluation of the hryvnia) is a path to
nowhere," fulminated Vitaly Mikulin, director of the Donetsk steel mill ARS.
It is a disaster for exporters...who are the heart of Ukrainian growth."

Mikulin and the country's industrials argue that Ukraine's strong growth and
falling unemployment rates are due to competitive prices for Ukrainian
industrial commodities like chemicals and steel which, because of the
hyrvna hike, are now more expensive. The government is cutting its own
throat," Mikulin said.

The administration so far is standing firm against protests of small savers
and big industrialists alike. It (the increased value of the hryvnia) is no
threat to the country," said Petro Poroshenko, Ukraine National Security
Council Chairman. People just need to get used to a weaker dollar."
=============================================================
2. BRITISH BANK RECOMMENDS BUYING NATIONAL CURRENCIES
OF RUSSIA, UKRAINE AND EGYPT

Interfax Ukrainian News, Moscow, Russia
Thursday, 21 April 2005

LONDON - The British bank HSBC Holding Plc has advised investors to
buy the national currencies of Russia, Ukraine and Egypt, whose economies
have a current account surplus, since a rise in the base rate in the United
States may have a favorable effect on the countries with emerging markets,
the Bloomberg agency said.

"The economy of these countries does not depend on constantly changing
capital movements," David Lubin, a London-based emerging markets
economist for HSBC Holdings Plc, says.

"The risk of falling of the 'surplus' countries' national currencies is less
probable, than the 'deficit' countries," he said.

For countries with a current account deficit, such as Hungary and Poland,
high interest rates are characteristics that attract foreign investors, as
well as the flexible currency rate and falling inflation, Lubin says.

Depositors won't be interested in purchasing national currencies of these
countries, if the U.S. Federal Reserve System raises the base rate. The
U.S.Central Bank has raised the rate seven times since June 2004.

In countries with a current account surplus, including Russia, negative
interest rates, stable currency rates and high and increasing inflation are
seen. These countries may allow the national currencies to rise to limit
the growing rates of consumer prices, Lubin said. -30-
=============================================================
3. HRYVNIA GAINING WEIGHT VS USD ACCOMPANIED BY
GDP'S DECELERATED GROWTH

Uliana Kozhukh, Oleksandr Khorolsky, Ukrinform,
Kyiv, Ukraine, Friday, April 29, 2005

KYIV - Economics Minister Serhiy Teryokhin told attendants of the
Government's April 27 session, the 2005's first quarter witnessed the
population's growing trust in the national monetary unit, along with the
decelerated pace of GDP's growth. According to the Minister, the
Government's socially-oriented policies in the first quarter resulted in
sizeable growths in wages, salaries, pensions, social benefits. In turn,
this led to greater spending on the part of the population. Thanks to
growing solvent demand, internal trade turnover increased by 18.6
percent in 2005's first quarter.

As the Economics Minister told the gathering, the population's savings,
kept on bank accounts, increased by 4.393 bn. UAH.

In February demand for the national currency increased. After the recent
sharp increase in the hryvnia's exchange rate versus the American dollar
demand for hryvnias has been steeply growing. This could be attested by
the fact that the population's savings in hryvnias increased by 20.3 percent
to stand at 50.1 bn. UAH.

However, the aggregate volume of credits, granted to business activity
subjects, somewhat decreased. In the first quarter of 2005 the index of
growths in prices in industries decreased to 4.9 percent versus 6.8 per
cent in 2004's first quarter. Inflation rates somewhat decelerated, as well,
Serhiy Teryokhin noted.

As Mr Terekhin admitted, in early 2005 there were certain disproportions in
the economy, which led to some destabilization. So, the rate of GDP's growth
decelerated from 12.3 percent to 5.4 percent. In Serhiy Teryokhin's opinion,
inflation processes were basically caused by objective factors of the
economy's ongoing restructuring. All these factors notwithstanding, the
Economics Minister noted, it would be inexpedient and unwarranted to revise
the Government's macroeconomic forecasts for 2005.

In accordance with the Economics Ministry's estimates, in 2005's first half
GDP will grow by 5.8 percent to 6 percent versus 5.4 percent in this year's
first quarter. In 2005's second quarter prices will grow by 2 percent to 2.6
percent, and by 6.5 percent to 7.1 percent in the year's first half.

According to Serhiy Teryokhin, 2005 may witness two variants of GDP's
growth. One of these, which the Government means to proceed upon,
envisages an 8.2 percent growth and an up to 9.8 percent increase in prices.

As Finance Minister Viktor Pynzenyk confirmed, in 2005's first quarter there
was some deceleration in GDP's growth in processing, treating industries,
transportation and the construction industry. Nevertheless, GDP's growth
was accelerated in agriculture, extracting industries, wholesale and retail
trade.

According to Viktor Pynzenyk, branches, in which situation with regard to
GDP remained unchanged, accounted for 23 percent of the total, whereas
branches, in which GDP increased or diminished, accounted for 31 percent
and 48 percent of the total, respectively. In April, the Finance Minister
predicted, GDP's growth will be highest in trade, light and food industries.
As far as the heavy industry in concerned, Mr Pynzenyk said, these will need
political decision making.

With a view of attaining the target yearly inflation rate of 9.8 percent,
Viktor Pynzenyk said, the aggregate yearly growth in prices must be kept at
under 0.6 percent. In April, he said, prices are supposed to grow by only
0.8 percent. Commenting on the hryvnia's revaluation, the Finance Minister
said the National Bank of Ukraine had become hostage to the previous
authority's monetary policies.

If the NBU had not revalued the hryvnia skyrocketing inflation would have
become uncontrollable. As the Finance Minister reassured the audience,
additional social payments will not cause any inflation upsurges. Next year,
the Finance Minister predicted, the Pension Fund will be able to pay
pensions solely from its own reserves. -30-
=============================================================
4. A REVOLUTION? WE'RE STILL WAITING

EDITORIAL: by Jed Sunden, Publisher
Kyiv Post, Kyiv, Ukraine, Thursday, Apr 28 2005

What if you had a revolution and nothing happened?

It has now been 100 days since the Orange Revolution officially ended,
sweeping Viktor Yushchenko into his rightful office as Ukraine's president.
Since then, Yushchenko has been feted across Europe and America as a
hero and, rightfully, opened a new chapter in Ukrainian foreign affairs.

The phrase "Orange Revolution" is now synonymous in the Western imagination
with democracy. But in terms of domestic politics, it seems things are much
the same as ever.

President Yushchenko joined the ranks of esteemed statesmen like Winston
Churchill, Lech Walesa and Nelson Mandela when he addressed a joint session
of the U.S. Congress. But did anyone actually listen to Yushchenko's speech?

In addition to praising both Ukrainian and American democracy and the
Ukrainians who struggled to ensure that free elections be held in Ukraine,
he said the following:

"Free and fair elections have brought to state office a new generation of
politicians not encumbered with the mentality of the Soviet past. These are
honest and professional patriots. We are working as one team in pursuit of
one goal: to lead our nation to success in the shortest time possible."
But while Yushchenko is making grand statements abroad, the rest of the
government does not seem to following his lead.

In his speech to Congress, Yushchenko calmly stated that "Ukraine has
agreed to waive the visa regime for United States citizens."

That's a simple goal that should not only stimulate Ukraine's moribund
tourist industry, but also make the country seem a bit more open to
investors. But as any American arriving at Borispol airport knows, a visa is
still required. A call to the Ukrainian Embassy in Washington confirms that
they have no instructions concerning getting rid of visa requirements for
U.S. citizens wanting to come to Ukraine.

By way of comparison, the Czech Republic went from Communist rule and
the Soviet yoke to visa-free travel for Americans in under 6 months.

Further on in the speech, President Yushchenko stated that "the new
Ukrainian government has, on an unprecedented scale, opened the
Ukrainian market, dramatically reducing customs restrictions," and that
"non-recognition of market-based economy status for Ukraine is an
anachronism."

While we are all hoping that Ukraine will attain market-economy status, we
hope that the Ukrainian government will actually allow the market to
function in Ukraine.

In late March, Yushchenko signed into law a bill passed by the parliament
earlier that month that envisages a reduction of import duties on clothes,
footwear, and food products that are not being manufactured or are
manufactured in limited quantity in Ukraine. While this is a step in the
right direction, Ukraine still needs to reduce customs restrictions on
hundreds of products to enter the WTO as it plans. In the meantime, any-
one who is planning to buy a foreign car this year will continue to pay
hefty customs duties, making foreign cars cost about 30 percent more
than the same cars do in Poland.

But while Yushchenko is making statements in Washington about aiming to
join the WTO fast and ensuring that Ukraine attains market economy status,
his ministers seem to be talking a different game.

Economy Minister Serhiy Teryokhin said on Feb. 17, "Keeping Kryvorizhstal
in state hands is more sensible than privatizing it again." And the
newly-appointed head of the State Property Fund (Valentyn Semenyuk, of
the Socialist Party) innocently asked Korrespondent magazine in its last
issue, "What's so bad about re-nationalization?"

Meanwhile, investors from around the world are waiting for both Yushchenko
and Tymoshenko to decide precisely how many companies which were
privatized will be reexamined. Twenty? Thirty? A hundred? Three thousand?
When and how? It's still unclear.

Back home, instead of making tough decisions to reform the economy, it
seems the new government is intent on raising pensions and public sector
salaries - exactly what they berated Yanukovych for in the run-up to the
elections. At a Cabinet meeting on March 9, Tymoshenko stated that average
pensions will be increased by 23.1 percent and public sector salaries by
56.8 percent. Not exactly an example of economic austerity.

An investor report on Ukraine distributed by Renaissance Capital sums it up
best in this way: "We find it surprising and somewhat disappointing that the
government is using the period when its popularity is at its highest not to
launch reforms of the public sector, but to boost social spending. In
addition, the increase in pensions will undoubtedly cause inflationary
pressure, and such a spending commitment is particularly difficult to
reverse in the medium term." Strong words from the normally sedate
investment bank.

Furthermore, tax breaks for private entrepreneurs have been revoked,
making it harder for everyone to do business. Last week, President
Yushchenko vetoed administrative reform, which might have made
government more accountable.

Which raises the question: Just what really is being done "to lead our
nation to success in the shortest time possible"?

100-DAY TEST

May 3 marks the hundredth day since Yushchenko's inauguration, which
ended the Orange Revolution. It seems that the administration is still
discussing when to begin reform. I am not sure if this is what brought a
million people into Independence Square.

Look what happened in Poland in its first 100 days after its revolution. On
Sept. 12, 1989, after the Round Table talks and free elections, Solidarity
became the dominant party in the Polish parliament. A month later, they
declared they would phase out the Soviet-style economy and adopt
capitalism as soon as possible. On Jan. 1, 1990, the new program was
implemented and price controls on all products were lifted.

Or take Franklin Delano Roosevelt after his election to the U.S presidency
in the midst of the Great Depression. Roosevelt got Congress to pass 15
major bills, massively reforming the American economy.

I, like most Ukrainians, still believe in President Yushchenko and his
ability to lead Ukraine to a better future. But we stood in the streets for
a revolution in Ukraine and a radical change in how Ukraine is governed.

This requires strong leadership and radical actions from President
Yushchenko, not only abroad, but at home.

I am pretty sure that millions of people did not stream into Independence
Square just to ensure that new pavement was laid on Kreshchatyk before
the Eurovision Song Contest. -30-
------------------------------------------------------------------------------------------------------
Jed Sunden is the publisher of the Kyiv Post.
------------------------------------------------------------------------------------------------------
LINK: http://www.kyivpost.com/opinion/oped/22644/
=============================================================
5. "CONSOLIDATING THE ORANGE REVOLUTION"

ESSAY: By Peter C. Ordeshook
Professor of Political Science
California Institute of Technology, Pasadena, CA
Published by The Action Ukraine Report
Washington, D.C., Tuesday, May 3, 2005

Nothing threatens Ukraine’s democratic consolidation more than that of
corruption. The question, however, is whether corruption can be controlled
by some upsurge of economic prosperity, by a promised integration into
the EU, by the administration’s admonitions for it to end, or as the
consequence of a new cadre of personnel in the government’s various
ministries?

Unfortunately, although each of these things can’t hurt, none, separately
or together, is likely to prove decisive. If the history of corruption in
places as diverse as Taiwan and the United States is any guide, only
political competition can impact matters decisively.

But not any form of political competition will suffice. An occasional
contested presidential election cannot close the door to future presidents
who are less committed to democracy and the transparency of economic
interests. And the competition for seats in a national parliament, as
Ukraine’s history since 1991 proves, is inadequate as well. So what is
required? Briefly, political competition must render fates of politicians at
national, regional and local levels interdependent.

The political process can be expected to control corruption if and only if
a corrupt elected official at one level damages the electoral success of
politicians at other levels and where the motive of reelection or
advancement compels politicians to sanction their corrupt counterpart
while seeking to uncover malfeasance among competitors.

The way to achieve this self-regulating system in a democracy is a
competitive party system whereby politicians at one level compete under
labels shared by politicians at the same and other levels. Because the
revelation of one person’s corruption tarnishes his label, compatriots have
an incentive to keep their common label clean. At the same time, members
of other parties will seek to uncover corruption among those competing
under different labels, knowing that if they can tarnish an opponent’s
label, the chances of electoral success is improved for all members of
their party.

But how to do we approximate this self-policing system? In all democracies
of which I am aware, the answer lies in institutions – those that establish
incentives to form and maintain parties and which encourage voters to use
party labels in deciding for whom to vote. Among other things, heads of
state (presidents) should NOT be legally barred from being the head of a
parliamentary party. In fact, they should be encouraged to link their fate
to the success of such a party.

This is accomplished, for instance, by simultaneous presidential and
parliamentary elections. Minimally, what needs to be avoided is the
"Russian trap" – presidential elections held soon after the parliamentary
contest so that that contest becomes little more than a means for
identifying the strongest presidential contenders. As Russia well
demonstrates, this does little to encourage a coherent and stable
party system.

However, even proper timing at the national level is insufficient. Voters
need an incentive to pay heed to party labels, and the usual route to this
end is filling a variety of regional and local offices by direct election.
And it is here that Ukraine’s current institutional structure falls woefully
short. With too few offices filled by direct election, voters focus on
personalities rather than on party labels (if, in fact, a candidate even
bothers to compete under a label).

Hence, the evident corruption of one person has little bearing on the fates
of others, thereby giving politicians little incentive to police each other.
On the other hand, with a multitude of offices filled at the same time by
election, voters, because they cannot focus on all contests simultaneously,
are compelled to use a shorthand in deciding for whom to vote – and that
shorthand in a democracy is the party label.

With few offices filled by direct election and with elections for different
offices rarely if ever occurring simultaneously, should we be surprised that
the stability of Ukraine’s party system is more akin to that of Russia than
of its central European counterparts, not to mention the more established
democracies of the EU? One might argue that Ukraine is merely a
developing democracy and that the requisite party system needs time to
evolve. That evolution, however, will not and cannot occur without
appropriate institutionally mandated incentives that are currently absent.

Interestingly, Ukraine might have moved inadvertently in the right
direction. The negotiations that ostensibly ceded presidential authority to
parliament can have unanticipated beneficial consequences. Some see these
agreements as a victory for those wishing to blunt the value of Yushchenko’s
election. But things can progress differently. With diminished formal
powers, presidents must rely less on overt power and more on persuading
the population generally and other political leaders in particular to common
purpose. Russia’s democratic promise, for instance, now seems a receding
dream under an autocratic regime in which its president possesses too much
authority.

Political power in a democracy, in contrast, best derives from things other
than formal provisions. Shorn of the ability to dictate events, a president
must command through leadership, and leadership requires skill at com-
promise and persuasion as opposed to threats, intimidation, and the jailing
of one’s opponents. Thus, one product of the Orange Revolution will be the
premium now placed on those who master the skills of leadership as
opposed to those of Soviet-era command and control.

But the promise of those changes cannot be realized absent other
institutional reforms; notably those that encourage a coherent party system.
Presidents can often mobilize a population to common purpose by virtue of
the fact that they are the uniquely nationally elected official. But
consistently exerting leadership over other elites takes something more, and
that something in a democracy is a party system wherein the president heads
a party that competes for office across all levels of government.

In fact, I would suggest that a further diminution of presidential authority
be considered ... namely, abrogating his authority to appoint regional
governors (provided that those governors are directly elected and that other
offices such as vice governors, ombudsmen, regional prosecutors, and so
on are also directly and simultaneously elected). This not only encourages
parties directly, but encourages presidents to facilitate the development of
parties of the requisite sort.

The consolidation of Ukraine’s democracy, the meaningful long term
reduction in the corruption and the development of an efficient market
system, the encouragement of Western investments, and redirecting to
good purpose any constitutional changes in presidential authority are all
of one piece.

All require some serious attention to things other than securing Western
aid, to refinements in economic policy and to admonitions to not offer or
take bribes.

Ukraine requires a serious reconsideration of its political institutional
structure, from deciding which public offices ought to be filled by
appointment versus direct election, the timing of elections, and (dare I
say it?) the authority of regional and local governments relative to their
national counterpart. -30- [The Action Ukraine Report]
----------------------------------------------------------------------------------------------
Peter C. Ordeshook, Professor of Political Science, California Institute
of Technology, Pasadena, CA; ordeshook@hss.caltech.edu.
=============================================================
6. UKRAINIAN EXPERTS BELIEVE ERRORS OF FIRST 100 DAYS OF
WORK OF PRESIDENT AND CABINET WERE UNSYSTEMATIC
REFORMS, SITUATION WITH REPRIVATIZATION AND STAFF POLICY

Ukrainian News Agency, Kyiv, Ukraine, Sun, May 1, 2005

KYIV - Analysts believe that errors of 100 days of work of the Cabinet of
Ministers led by Yulia Tymoshenko and President Viktor Yuschenko were
unsystematic nature of reforms they have started, procrastination with
privatization revision and staff policy. They said this at the round table
"Political Situation in Ukraine: 100 Days of New Power and Reforms
Strategy."

Political scientist Volodymyr Fesenko said that mistakes included absence
of clearly formulated reforms strategy, as well as hidden nature of many
decisions of the government. Fesenko believes that social and economic
policy contains too much adventurism and eclecticism; he illustrated this
with the example of abrupt stabilization of the hryvnia rate. "Not
everything is all right with transparency of discussion of draft decisions
of the government," he said.

He also considers that in approval of many decisions the government has
a very superficial attitude to the requirements of the law. Fesenko also
believes that actions of the government contain a lot of wish to obtain
visual effects. "Excessive passion for revolutionary rhetoric and political
PR moves," Fesenko said. He also believes that staff policy, especially
locally, is not always transparent.

Political scientist Volodymyr Malinkovych also considers that actions of the
government contain a lot of populist, and it wants to fulfill commitments
that are had to implement to make people like it, and this brings it to
administrative management. He also believes that many members of the
government are unprofessional, and the ruling team was not formed of
like-minded persons, but of those who were fighting against the old power.
"This is "contra," not "pro" team," Malinkovych said.

He believes that this has already showed itself in discrepancies inside the
Cabinet itself and in relations between Yuschenko, Tymoshenko and secretary
of the National Security and Defense Council Petro Poroshenko. Malinkovych
also believes that detention of ex-head of the Donetsk regional council
Borys Kolesnykov, problems with television channels NTN and TET may be
considered as wish to dispose of political opponents.

Among the drawbacks he also named revision of privatization and abrupt
increase of the hryvnia rate, which, in his opinion, resulted in reduction
of savings of the population by 7%.

In the opinion of political scientist Yurii Yaremenko, first collisions have
emerged in the power. He also believes that announced fighting against
corruption does not have any systemic nature, and announced publicity of
the authorities is not always organized well too.

Political scientist Andrii Yermolaiev believes that the governmental
decisions are produced in the lobby, and then are put on discussion, instead
of discussing them publicly from the very start. "Produced in the lobby
(followed by) significant PR-support," Yermolaiev said. Among shortcomings
he named staff policy with applied criteria of the old and new staff, and it
is not always correct. "You (new government) are not new staff either, you
have just transformed," he said.

All political scientists said achievements of the new government are
improvement of foreign policy with clearly indicated European vector.
Besides that, they said that a positive thing was the will to fulfill
election program to justify hopes of voters and preparedness for the
dialogue.

As Ukrainian News earlier reported, at the meeting of the Cabinet of
Ministers on Wednesday dedicated to 100 days of its work Yuschenko
said he is very happy with it and could put the highest mark to it.

Yuschenko also believes that during the mandate of the new power, which
will turn 100 days on May 3, this government managed to reinstate the
freedom of speech, justice and increase social payments. -30-
=============================================================
7. PROBLEMS PERSIST DESPITE YUSHCHENKO'S SUCCESS
Yushchenko's 100 days: international success, internal stress

By Anya Tsukanova, Agence France Presse (AFP)
Kiev, Ukraine, Monday, May 02 2005

KIEV - The first 100 days of Viktor Yushchenko's presidency of Ukraine
have brought him success on the international stage as well as record
popularity at home, but serious problems continue to plague the economy.

As the first 100 days come to a close on Monday, Yushchenko, who swept
to power last December on a wave of peaceful revolt, remains the country's
most popular politician, with a 60-percent approval rating according to a
recent poll by the Democratic Initiatives Foundation.

In a sign that he has been able to maintain a mostly positive outlook in his
countrymen, the same opinion poll found that 47 percent of Ukrainians
believe the nation is headed in the right direction. The number of those who
believe it is not heading in the right direction fell to 21 percent from 26
percent last September.

"Yushchenko managed to keep society's morale and hope for a better life
high," said Andriy Yermolayev, a political analyst at the Sofia Center.
Ukrainians appear to believe their new president has tried to keep his
electoral promises - a new budget adopted in March has 24 percent more
money earmarked for pensions and 57 percent more for public sector
wages, while maternity aid was boosted elevenfold to 1, 700 dollars
(Euro 1,322).

As a result, popular incomes went up by 25.1 percent in the year's first
trimester, a marked change in a country where average salaries rarely top
130 dollars (Euro 101). But the increase in social spending has also led to
inflation equaling 4.4 percent in the first three months of the year and is
forecast to hit 16 percent over 2005 by the International Centre for Policy
Studies (ICPS).

Meanwhile growth in the economy slowed to 5.4 percent between January
and March - compared to 10.8 percent for the same period in 2004.
Administrative measures taken by the government to counter the effects of
rising oil prices and food costs have come under fire from the opposition as
well as economists who say they are too aggressive and inefficient in the
long run.

In addition, a lack of clarity on where the government stands regarding
businessmen linked to the old regime and its apparent intent to reevaluate
dozens of privatizations has "scared away" potential investors, said Boris
Nemtsov, a liberal Russian politician who now serves as a Yushchenko
economic advisor. Kiev has yet to indicate which privatisation deals would
fall under review or how those deemed to have been conducted illegally
would be dealt with.

Yushchenko's pledge to fight corruption, which is pervasive in Ukraine, has
resulted in the launching of a number of criminal investigations, but all of
them against people close to the old regime, a trend that has elicited
concern. "Doubtless all criminals from the former powers must be put behind
bars. But I imagine justice also has a few questions to ask representatives"
of the new team, wrote the independent journal Korrespondent.

On the international stage, Yushchenko - who has devoted 29 days to 12
foreign trips since his ascent to power, managed a breakthrough in relations
with the West, which had ostracised his scandal-rife predecessor Leonid
Kuchma.

Accorded triumphant accolades in Europe and the United States, the
champion of "the orange revolution" reaffirmed Kiev's European and Euro-
Atlantic aspirations and ushered in, together with his American counterpart
George Bush, a new era in US-Ukrainian ties.

Ukraine hopes the European Union will grant it "market-economy" status by
June and it hopes to join the World Trade Organisation (WTO) later this
year. But the European Union has given Kiev no clear signal about its
readiness to accept Ukraine, noted the daily Segodnya, a newspaper close
to the opposition.

It also pointed out that while relations with Moscow, which plunged during
Yushchenko's election, now seem to have thawed, "the future of cooperation
is absolutely unclear". -30- [Action Ukraine Report Monitoring Service]
=============================================================
8. 100 DAYS ON, TROUBLE HITS ORANGE KINGDOM

By Greg Walters, Staff Writer, The Moscow Times
Moscow, Russia, Tuesday, May 3, 2005. Issue 3158. Page 1.

When Ukraine's newly elected president, Viktor Yushchenko, promised to
roll back regional tax breaks granted to business clans who supported his
predecessor's regime, Ukrainian businesses and foreign investors cheered.
But as Yushchenko passed his 100th day in office Monday, many were
grumbling that the sweeping changes were too sudden, too unexpected
and badly planned.

"We support the government, but we're against sudden changes in the rules
of the game," said Andrei Maysner, an adviser for Eurocar, a Ukrainian firm
that assembles Volkswagens, Audis and Skodas for sale on the domestic
market. The company was suddenly and unexpectedly stripped of a host of
tax privileges as a result of the changes in the tax regime, Maysner said.
"As a whole, their ideology suits us. Unfortunately, some of the realization
of this ideology hasn't worked out quite as planned."

It is not just tax policy where the government has ruffled feathers. Over
the last three months, the heroes of the Orange Revolution have morphed
from idealistic revolutionaries into the party of power. Along with that
change came the compromises, tough decisions and disappointments
inherent in running a country.

Today, the Ukrainian opposition can run through a laundry list of
accusations strikingly similar to those that Western governments hold
against Moscow: imprisoning political opponents; spooking businesses
with threats of renationalization; forcefully asserting the state's role in
the business sphere; and making policy without carefully considering
the consequences. Many of the government's biggest problems have
come in the economic field, as authorities have scrambled to fill a
gaping budget deficit and stamp out inflation.

Yet if the government's unifying orange glow burns less brightly, it is far
from extinguished. Much of the ebullience of last December remains in
Kiev, and foreign investors' interest in Ukraine rides sky-high -- even if
no new major investments have yet been inked.

One of the government's biggest problems has been an apparent lack of
coordination between Yushchenko and his hard-charging prime minister,
Yulia Tymoshenko. After Yushchenko said in February that a few dozen
questionable privatizations might be re-examined, investors gasped when
Tymoshenko was widely reported to have said the number might be in the
thousands.

Last week, after tough negotiations between Tymoshenko's government and
Russian oil companies over price caps on gasoline, former Ukrainian
President Leonid Kravchuk predicted Tymoshenko's government might not
last the summer. Kravchuk may be from the opposition, but even friends of
the administration say internal disorder has hampered the government's
ability to present a unified front.

Boris Nemtsov, the liberal Russian politician who serves as an adviser to
Yushchenko, said in an interview that "disorganization inside the government
[and] the conflict between government and big bureaucracy" were the most
pressing problems facing the authorities.

Nemtsov said the government's biggest problem was its inability -- or
unwillingness -- to close the book on reviewing past privatizations.
Mere days after taking charge, Yushchenko said the government would
soon publish a list of companies whose privatization was suspect and
would be re-examined by the courts. That list, once published, would
be final, and the question would be forever closed, he said.

Months later, investors are still waiting on tenterhooks for that list --
which Yushchenko said in late April would take a couple more weeks.
Some analysts warn the government appears to be turning the issue into a
political football for use in the enormously important 2006 parliamentary
elections -- after which the parliament, not the president, will choose the
prime minister.

"This is an attack on the oligarchs who were tied to power; to liquidate
their political influence by eliminating their economic resources," said
Vadim Karasyov, director of the Institute of Global Strategies in Kiev.
"But there is also an element of electoral populism."

The lack of a definitive list "indicates arbitrary rule," Nemtsov said, and
a willingness to bend to "political expediency ... even when that
contradicts the economic interests of the country."

Two other pressing economic problems -- inflation and a yawning budget
deficit -- have snowballed into political scandals as the authorities worked
desperately to solve them. In an effort to calm inflation, the government
slapped temporary price caps on gasoline that were duly ignored by oil
companies. Only after tough negotiations did TNK-BP and LUKoil agree
to temporarily lower their prices.

Persistent rumors in Kiev that the government bludgeoned TNK-BP into
obedience by threatening to renationalize its oil refinery were only
increased when Economy Minister Serhiy Teryokhin issued a statement
offering the companies a package of proposals, "not only about price
formation for oil products but also, for example, guaranteeing Russian
investors' rights in the oil and gas sector of Ukraine."

Analysts said that even the appearance of using property rights in
negotiations was out of place for a government that promised to create a
level playing field for all investors. "When I hear something like this, it
sounds stupid to me," said Andriy Dmytrenko, head of research at Kiev
brokerage Dragon Capital. "Property rights are guaranteed by the
constitution. Probably what he meant was a state guarantee of this
particular deal."

Threatening to renationalize a politically unfriendly company would fly in
the face of everything Yushchenko has promised his government would do,
Dmytrenko said. "If there was some wrongdoing, you have to investigate
and let the court see whether it was privatized rightly or wrongly," he
said.

A spokeswoman for TNK-BP in Moscow said the company had no reason
to believe its refinery might be seized and reprivatized.

Sergei Ossipenko, a communications adviser to Tymoshenko, said, "I think
it's a groundless rumor." On Friday, TNK-BP vice president Tony Considine
raised the stakes by telling the Ukrainian government that his company would
consider pulling out of Ukraine if the government continued to regulate
prices at the gas pump."If they make us hold prices too low, delivering oil
to Ukraine is not economically attractive," he said, Interfax reported.

In another controversial effort to quell inflation, last month the Central
Bank let the hryvna rise almost 4 percent in a single day -- a move that, on
the one hand, would help make imports cheaper for Ukrainians. But it also
took a chunk out of Ukrainians' savings. "It was shocking," Karasyov said.
"It didn't help faith in the government." On Thursday, about 1,500
protesters took to the streets of Kiev to protest rising prices and the
hryvna revaluation.

Yet despite the difficulties, the new government's supporters can also
point to a row of accomplishments.

Most analysts agree the media, once shackled under former President
Leonid Kuchma, has become freer. The government is readying a
complete, if temporary, overhaul of its visa policy for European and U.S.
citizens.

The government's reform agenda has inspired foreign investors to give
the country a closer look. But so far, besides portfolio investors, few have
made the plunge.

"No one that we're aware of has written a check," said Jorge Zukoski,
president of the American Chamber of Commerce in Ukraine. "But there
is a massive amount of interest. Everyone's still putting their ducks in a
row."

Larysa Denysenko, director of the Ukraine office of Transparency
International, lauded the government for ratifying the Council of Europe's
Civil Law Convention Against Corruption and for its new contraband policy.
But, she said, "Everything else, especially the president's calls to ban
officials from banyas or from going on hunting trips, brings to mind the
populism of Kuchma."

She also gave mixed marks to the government for its media policy. While
the media have been allowed far more freedom than under Kuchma, their
criticisms too frequently go unaddressed, and government has done a poor
job of explaining its policies to the public.

Perhaps the most sensational charge being leveled against the new govern-
ment is that it has used the legal system as a weapon against its critics.
The arrest of Borys Kolesnikov, governor of the eastern region of Donetsk,
on charges of extortion and conspiracy to commit murder brought thousands
into the streets of Donetsk in protest. Government officials said other
Donetsk officials might also be arrested.

But in a sign of how weak opposition to Yushchenko's presidency remains,
the protests fizzled out after a few days. Despite the problems and false
starts, most Ukrainians support the government. And even those who do
not seem prepared to stay off the streets and let the new government do
its job -- for now. -30- [The Action Ukraine Report Monitoring Service]
------------------------------------------------------------------------------------------------
LINK: http://www.themoscowtimes.com/stories/2005/05/03/003.html
=============================================================
9. FIRST 100 DAYS OF YUSHCHENKO'S PRESIDENCY HAVEN'T
BROUGHT ANY MAJOR CHANGES, ANALYSTS SAY
But he never promised he could transform the country quickly

By Taras Burnos, RIA Novosti, Moscow, Russia, Mon, May 2, 2005

KIEV - The first 100 days of Viktor Yushchenko's presidency have not
brought any major changes to Ukraine. Yulia Tishchenko, coordinator of
civil society programs at the Ukrainian Independent Center of Political
Studies, said so in a RIA Novosti interview Monday.

But the incumbent never promised he would transform the country
within this short period, she added. Opinion polls in Ukraine's provinces
show that the public there have become largely disenfranchised since
Yushchenko's election 100 days ago, Tishchenko said, citing recent
scandals over the appointment of two regional governors.

According to the analyst, more often than not, reshuffles made by Kiev in
regional governments are non-transparent and lack logic, leaving people on
the ground increasingly disgruntled. Such controversial appointments are
meant to reward those who supported Yushchenko's election bid, but the
candidates he now handpicks for regional governance are not necessarily
those whom local elites and people-on-the-street would really want to have
as their leaders, Tishchenko explained.

She pointed out, however, that it would be wrong to expect the promises
given by Yushchenko during the Orange Revolution to have been delivered
upon within the first 100 days of his incumbency. She categorized many of
those pledges as populist rhetoric, notably improving Ukraine's
international image and fighting against corruption. No high-profile
anti-corruption inquiries have been launched in Ukraine so far, she
remarked.

Many in Ukraine express displeasure at Yushchenko's current reform of
the presidential branch of government, but no one has come out with
harsh criticism at this point, Tishchenko said.

On the positive side, Yushchenko has made quite successful visits to
Russia, Poland and the United States, noted our interviewee. Moreover,
he has a chance to revive the potential of the GUUAM [an economic
alliance of Ukraine, Georgia, Ukraine, Azerbaijan and Moldova], as
leaders of many of its member states do trust him, she said. -30-
=============================================================
10. DESTROYER OF OLIGARCHS
Yushchenko's first hundred days mark the start of a war on big business

Viktor Yushchenko will celebrate the first hundred days of his
presidency on May 3. Ukrainian analysts differ in their assessments
of his achievements. The spectacular nature and unprecedented
scope of the war on oligarchs is the only point on which opponents
and supporters of the regime agree.

By Marina Kozhushko, Nezavisimaya Gazeta
Moscow, Russia, Friday, April 29, 2005

Viktor Yushchenko will celebrate the first hundred days of his
presidency on May 3. In fact, he is already summing up results of
the Orange Revolution. After listening to the Cabinet's report on
Wednesday, the president said that Prime Minister Yulia Timoshenko
performed brilliantly in the difficult first 90 days. Yushchenko
emphasized that he wholeheartedly supports the government's
economic and social policy and regarded it as fully expedient. "I
appreciate it," said Yushchenko, giving Timoshenko a kiss. "I'm
sure we will live up to nation's great expectations."

At a conference with regional leaders the day before, however,
Yushchenko admitted that the investment climate in Ukraine in the
last three months had improved. "By investment contracts and lines
of credit Ukraine got over 2 billion euros, more than in the
previous five years," he said. Yushchenko even mentioned the
matter of reprivatization that might deteriorate the situation again
and said that "We are but restoring justice."

Ukrainian analysts differ in their assessments of the new
Ukrainian regime's achievements. A similar difference of opinions
exists regarding Yushchenko's plans to have Ukraine join the EU and
NATO and on economic steps of Timoshenko's Cabinet. Some
analysts believe that the Cabinet's social obligations will stimulate
living standards and, consequently, economic growth. Others
disdainfully maintain that the Cabinet is doing is "wasting budget
funds" that may result in an economic crisis by the end of the year.

The spectacular nature and unprecedented scope of the war on
oligarchs is the only point on which opponents and supporters of the
regime agree. New criminal charges against representatives of Leonid
Kuchma's circles and Viktor Yanukovich's followers are pressed every
day. Some people known only recently as the wealthiest and most
influential Ukrainians are not summoned to the prosecutor's office
for the time being - but even they feel the pressure. People closely
linked to the oligarchs are witnesses in criminal proceedings; their
enterprises and companies are in the focus of attention.

Rinat Akhmetov, Viktor Pinchuk, and Grigori Surkis became the
first targets. News agencies report that Akhmetov (System Capital
Management CEO) and Pinchuk (Interpipe owner) spent these last
several weeks in Moscow, discussing the sale of their companies to
Russian companies. Viktor Rashnikov of Magnitogorsk Metal Combine
confirms that MMC is considering purchasing Northern Ore Mining and
Processing in Ukraine from Akhmetov. The sale of Pinchuk's
Ukrsotsbank to Alpha-Bank of Russia is being discussed in Kiev, off
the record.

The PR departments of the companies belonging to Ukrainian
oligarchs decline comments. A spokesman for the Shakhter soccer
club only said that club owner Akhmetov was on a lengthy business
trip abroad. It is known that he flew to Moscow and on to Spain as
soon as the news came that his brother Igor was summoned to the
Prosecutor General's Office in connection with the case of
Kolesnikov formerly of the Donetsk regional administration against
whom charges of extortion had been issued.

Before leaving the country, Akhmetov got all the dividends from
his companies in Ukraine for 2004. Ukrainian news agencies claim
that at all his companies and enterprises, urgently-convened
meetings of shareholders had voted to channel 20% to 90% of
profits into dividends. Auditors turned up at the metal combines
controlled by System Capital Management a week later.

Heads of Azovstal, Khartsiz Pipe Factory, Central Ore Mining
and Processing, and Northern Ore Mining and Processing at a joint
press conference announced that the teams of examiners headed
by officials of the prosecutor's office included (at once!)
representatives of the tax administration, police, Security Service,
State Property Foundation, Anti-Monopoly Committee, and Donetsk
regional price-control department. The companies practically
screeched to a grinding halt, unable to function.

Former president Kuchma's son-in-law Pinchuk once said he had
no intention of leaving Ukraine. Now Pinchuk is trying to defend his
ownership of Krivorozhstal, which the new authorities of Ukraine are
striving to repossess. In the course of the last several weeks
courts passed mutually exclusive and contradicting verdicts
concerning legitimacy of Krivorozhstal privatization last year.

In the meantime, the cabinet has already commandeered Oranta,
the largest insurance company in the country, from Pinchuk.
Timoshenko's government annulled resolution of its predecessors,
Yanukovich's Cabinet, that permitted a new issue of Oranta stock
several months before the presidential election in Ukraine.
According to Timoshenko, the new issue reduced the state
involvement in the company's share capital from 77% to 25%.

Another blow at Pinchuk took the form of statements on the part
of state executives claiming that TV channels belonging to Pinchuk
violate the broadcasting legislation. Some experts do not rule out
the predecessors that licenses of some of them may be annulled
soon.

Surkis has been fighting for the Dinamo (Kiev) soccer club
until recently. Ownership disputes degenerated into a scandal with
shares being frozen. These days, however, Surkis has other problems
to attend to. The matter concerns energy assets that belong to
offshore companies - owned, according to Ukrainian media outlets,
by Surkis. Poltava Regional Prosecutor's Office is investigating the
legitimacy of the sale and purchase of Big-Energiya bank stock by
Poltavaoblenergo.

Not even the Prosecutor General's Office or Interior Ministry
can say exactly how many prominent politicians are being summoned
for questioning in the capacity of witnesses. The Prosecutor
General's Office has already questioned Kuchma on two occasions.
It is looking for Kuchma's protege Igor Bakai, former head of Neftegaz
Ukrainy and former director of the State Directorate of Affairs.

Investigators don't rule out the possibility that criminal charges
may be issued against Kuchma himself - for appointing Bakai, a
foreigner, to a senior state position. As it turns out, Bakai is a
citizen of the Russian Federation. (Translated by A. Ignatkin)
=============================================================
11. OFFICIALS: LOCAL GOVERNMENT REFORM LAGS IN UKRAINE

Radio Free Europe/Radio Liberty (RFE/RF)
Washington, DC, Friday, April 29, 2005

WASHINGTON - A group of visiting Ukrainian local government officials
said reform is now lagging at the local government level, despite the
election last December of a reform-minded president.

The panel told a recent RFE/RL audience that a "paradox" exists because
the executive branch at the national and oblast (or regional) level is
dedicated to reform and decentralization of decision-making, while local
structures are unprepared for it.

Vladyslav Stemkovskyy, head of the non-governmental organization
(NGO) "Nasha Sprava," said the new national government plans "to give
maximum power to local governments within their competence." "Local
taxes will be specified" by the national government, however, and local
governments will not have the right to establish new taxes.

For example, according to Tetyana Neilenko and Valentyna Kukoba, budget
officers in the towns of Kremenchuk and Komsomolsk respectively, local
governments are responsible for providing a broad range of services
(transportation, sewage and water, education), but the income tax collected
at the national level is the major source of government funding. Local
governments are currently allowed to collect revenue from only a limited
number of licenses and fees.

According to Vyacheslav Kozak, a senior official with the Association of
Ukrainian Cities and Communities, the major challenge is "revenue and
budget reform." "The central government will have to give local
governments the power to find funding, he said, which involves
constitutional changes. But, according to Kozak, the key question is "when
to implement reforms at the local level -- before or after the 2006
parliamentary elections?" Although the presidential elections showed that
Ukrainians want change, Kozak asked, should it be implemented in a short
period through shock therapy or gradually?

Kozak noted that U.S. foreign assistance programs are helping to retrain
local government employees and "this is very important." Kozak, "as
an Easterner" from the city of Luhansk, said that he saw "no repression or
selective negative pressure" from the new central government. He was
worried about the new government's ability to "educate Easterners" about
the benefits of European Union membership and getting rid of "old Soviet-
era stereotypes."

Stemkovskyy also expressed concern about the future of reform in
Ukraine, because "the new opposition" still controls the media outlets in
the country and can undermine the reforms of the central government.
He expects "lots of those political technologies [i.e. dirty tricks in the
presidential campaign] will be played again in 2006" during the
parliamentary elections.

The officials were in Washington to participate in a Department of State-
sponsored International Visitor Leadership Program on Accountability
and Transparency in Local Government, administered by the Delphi
International Program of World Learning. -30-
---------------------------------------------------------------------------------------------------------
Radio Free Europe/Radio Liberty (RFE/RL) is a private, international
communications service to Central, Eastern and Southeastern Europe;
the Caucasus; and Central and Southwestern Asia funded by the U.S.
Congress through the Broadcasting Board of Governors. To hear
archived audio for this and other RFE/RL briefings and events, please
visit our website at http://www.regionalanalysis.org
----------------------------------------------------------------------------------------------------------
CONTACT: Martins Zvaners (202) 457-6948, Melody Jones (202)
457-6949, Radio Free Europe / Radio Liberty, 1201 Connecticut
Ave NW, Washington, DC 20036, tel: 202-457-6900, fax: 202-
457-6992, http://www.rferl.org
=============================================================
12. POLISH INVESTORS WORRIED OVER NULLIFICATION
OF SPECIAL ECONOMIC ZONES

By Yana Lemeshenko, Ukrinform, Kyiv, Ukraine, Fri, April 29, 2005

KYIV - The International Association of Polish Entrepreneurs in Ukraine
is worried over some bills' enactment, which virtually nullify special
economic zones.

This was what Polish businessmen said at a Friday conference in Kyiv,
which dealt with the new Ukrainian government's economic policies.
According to Polish Ambassador to Ukraine Marek Ziolkowski, the Polish
business community view the Ukrainian authority's move with apprehensions
as leaving then to wonder what the future has in store for them.

According to the State Statistics Committee of Ukraine, as of January 1,
2005, Polish investors' capital in Ukrainian businesses was evaluated at
192.273 M. USD. There are 942 businesses with Polish capital in Ukraine,
of which 580 are joint ventures. About 70 Polish businesses have production
facilities within Ukraine's special economic zones.

During the conference a letter by Economy Ministry State Secretary Jacek
Piechota was read out, addressed to Economics Minister Serhiy Teryokhin,
which says that the Ukrainian Government's move came all of a sudden and
infringes on the Polish investors' rights.

Nullification of privileges will lead to the Polish investors' bankruptcy
and will make them seek judicial protection of their rights, including
international judicial instances.

Though Poland was in a similar situation after joining the EU, Poland's
steps were gradual and involved consultations with the investors in
attempts to reach a compromise with the EU, the letter says.

At the conference an open address was made public by the International
Association of Polish, Entrepreneurs to Ukraine's state authority, which
petitions top-placed Ukrainian officials for legally regulating preservation
of the Ukrainian State's guarantees, which were given to Polish businesses
in Ukraine with regard to their privileges within special economic zones.
=============================================================
13. UKRAINE NEGOTIATES WITH DENMARK JOINT PROJECT
FOR PRODUCTION OF PORK
Plan to construct a model Ukrainian pig farm in each oblast

UNIAN, Kyiv, Ukraine, Monday, April 25, 2005

KYIV - Agrarian Policy Ministry of Ukraine is negotiating with Denmark
a joint project for production of pork in Ukraine, AP Minister Olexandr
Baranivsky [member of the Socialist party] told reporters on April 22,
according to AgriMarket.

According to him, the core of the project is to create impetus for Ukrainian
banking sector to invest funds into creation of Ukrainian pig farms under
Danish technologies.

"We want by the end of year to have constructed a farm under Danish
technologies in each oblast. We are preparing information for the
President on the issue and we hope for his support. Denmark is the
pioneer in this field", Baranivsky said, adding that for a start the
President's approval was needed for organisation of acquaintance trip
to Denmark of Ukrainian governors and bankers.

Baranivsky believes that thanks to the experience of Danes, it is possible
to introduce in Ukraine up-to-date technologies for production of cheap
meat. "The farm is operated by 3 or 4 people and produces thousands of
tonnes of pork", he said. -30-
----------------------------------------------------------------------------------------------------------
FOOTNOTE: We contacted several of the leading agribusinessmen in
Ukraine about the above program. The unanimous reply we received
was, "This is a stupid idea and should be killed quickly." Plans for
programs of this type can be found in the Soviet Agribusiness Develop-
ment Handbooks from the 1950's-1960's. We thought centrally planned
programs of this type implemented through regional governors died
once and for all during the Orange Revolution.

Agribusiness plans like this are flawed from the beginning, never did work
and will not work now. If a plan of this type ends up being recommended
to President Yushchenko we urge the President and his team to veto it.
Approving a plan like this sends all the wrong signals to the private
business community and to potential investors. [EDITOR]
=============================================================
14. US KEEPS SANCTIONS AGAINST UKRAINE DUE TO INSUFFICIENT
PROTECTION OF INTELLECTUAL PROPERTY RIGHTS

Ukrainian News Agency, Kyiv, Ukraine, Sun, May 1, 2005

KYIV - The US kept Ukraine on its Special 301 Report of countries having
problems with fulfillment of intellectual property rights (IPR) and
preserved trade sanctions with respect to Ukraine. Ukrainian News learned
this from texts of the US Department of State and the Office of the U.S.
Trade Representative (USTR).

In an April 29 news release, USTR announced publication of its annual review
of countries infringing IPR practices. As in 2004, USTR Special 301 Report
(a report concerning fulfillment of Article 301 of the US Trade Act) for
2005 lists a total of 52 countries or economies for IPR-related problems.

Moreover, Ukraine is the only country designated a "priority foreign
country" (showing highest level of infringements) and remains subject to
trade sanctions. "Ukraine was again the only country designated a "priority
foreign country" and remains subject to trade sanctions of $75 million a
year," USTR said in its statement.

Another fourteen counties are infringing intellectual property rights and
are put on "priority watch list." Those countries are: Argentina, Brazil,
China, Egypt, India, Indonesia, Israel, Kuwait, Lebanon, Pakistan, the
Philippines, Russia, Turkey and Venezuela. The US put another 36
countries on USTR's "watch list" meriting bilateral attention to under-
lying IPR problems.

As Ukrainian News earlier reported, Deputy Prime Minister for European
Integration Oleh Rybachuk expressed hopes that the economic sanctions
that the United States imposed on Ukraine because of its failure to resolve
the issue of protection of intellectual property rights would be
lifted. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
15. EURASIA: PRINCIPLES DEMOCRACY
Seven central tenets to a code of conduct a democratic people must follow.

By Mikheil Saakashvili, President of Georgia
The Wall Street Journal Europe
Europe, Friday, 29 April 2005, A9

TBILISI - In recent weeks, the political changes in the small Central Asian
state of Kyrgyzstan have once again reminded us of the power of democracy
and the universal aspiration for freedom. The "Tulip Revolution"
demonstrates that even the peoples of the former Soviet Union who for the
last 15 years have enjoyed independence without true freedom can choose
their own path to liberty. Clearly, no authoritarian regime, when confronted
by the will of its people, can hold back the forces of freedom in this
period of history.

A wave of democratization has swept around the Black Sea and is beginning
to cross the Caspian to Central Asia. It is also beginning to swell in the
Greater Middle East, where calls for political liberty now resound from
Cairo and Casablanca to Beirut and Baghdad. Something important has
finally begun in the most isolated societies in the world.

I believe that the Rose Revolution that began in Georgia some 18 months ago
and the Orange Revolution which played out in Kiev this past winter mark a
turning point in history. These twin and intimately associated revolutions
represent nothing less than the beginning of a third wave of democratization
affecting virtually all of Eurasia. It began with the collapse of communism
in 1989, and 15 years later brought down repressive and kleptocratic regimes
in my country and Ukraine, and now can spread beyond to liberate millions of
people in the rest of what was known as the Soviet Union.

Yet, while we admire the spontaneous outpouring of people power, we must
not forget that the challenges of rebuilding an economy and laying the
foundation for a democratic society require much more. Peaceful revolutions
may be necessary to break the lock of repressive regimes and to unleash the
potential of democracy, but popular uprising alone cannot construct the
tolerance and pluralism that are at the heart of democratic governance.

Presidents and prime ministers in the capitals of Europe and Washington are
struggling with the question of how to encourage the right kind of reform in
emerging democracies. What principles should be established and adhered
to?

How can political leaders protect the legitimacy of a growing movement for
change or of a new government taking office after the first free elections
in their history? How can elected leaders in Georgia and Ukraine protect the
integrity of our newly democratic countries and convince our friends in
Europe that we are ready to join what has been called the community of
shared values?

If a culture of tolerance and the institutions of democracy are to take root
in the countries of Eastern Europe and Central Asia, political leaders and
citizens alike must develop and adhere to an ethical code of conduct. For
while democracy can and must take different forms in different states and
cultures, there are common values and principles that form the core of our
politics and shape the way that we make judgments about what is right and
wrong in political conduct.

These principles are universally accepted and apply equally in Europe, the
Middle East and Asia. Together, these shared values constitute a democratic
code of conduct that, if adhered to, can transfer legitimacy from a
repressive regime to a democratic movement even in advance of free and
fair elections.

For all of us who have been active in the movement for democratic change,
and for those elected officials who bear the responsibility for protecting
the democratic credentials of their nation, there are seven central tenets
to a code of conduct a democratic people must follow.

-- First, a democratic movement must be the political expression of the free
will of people and must be motivated by a desire to free a nation and bring
its people closer to other democratic peoples.

-- Second, the movement must forswear the use of violence and be
absolutely committed to change by peaceful means.

-- Third, political leaders must be committed in word and deed to
transparency. Autocratic regimes are financially and politically corrupt.
Democratic movements and governments must root out the corrosive
cancer of corruption.

-- Fourth, a democracy must be committed to observance of all human
rights, including those of ethnic or religious minorities. There can be no
compromise on the commitment to building a society based on tolerance,
political pluralism and the rule of law.

-- Fifth, a democratic government must be prepared to share power and
responsibility with parliament, the courts, a free media and the
nongovernmental organizations of civil society.

-- Sixth, democratic leaders must convey a sense of responsibility toward
the nation's children, future generations and the most disadvantaged in
their society.

-- Finally, good intentions must be confirmed by a rise in prosperity and a
meaningful improvement in the lives of ordinary people and of the most
vulnerable members of society.

As my country moves forward with long overdue reforms and approaches
the beginning of membership discussions with NATO and the EU, our
elected officials hope to use these principles to guide their decisions and
their conduct. As we conduct our foreign policy, we will inform our friends
and neighbors that these principles define our relations with other states.

Where we find these principles firmly established we will seek closer
relations. Where we find these principles in development, we will offer our
friendship and support. And, where we find these principles absent and the
people abused, we will express our sympathy and seek the community of
democracies elsewhere. -30- [Action Ukraine Report Monitoring Service]
-------------------------------------------------------------------------------------------------------------
Mr. Saakashvili is president of Georgia.
=============================================================
16. UKRAINE: COMMUNIST LEADER CALLS ON SOVIET ARMY VETERANS
NOT TO ALLOW FORMER OUN AND UPA SOLDIERS TO PARTICIPATE
IN MAY 9 GREAT PATRIOTIC WAR VICTORY MARCH IN KYIV

Ukrainian News Agency, Kyiv, Ukraine, Monday, May 2, 2005

KYIV -The Communist Party's leader Petro Symonenko has called on
veterans of the Soviet army not allow former soldiers of the Organization
of Ukrainian Nationalists (OUN) and the Ukrainian Insurgent Army (UPA) to
participate in the march through Khreschatyk Street [in Kyiv] on May 9.
Symonenko made the call while addressing supporters of the Communist
Party at a May Day rally.

"Dear veterans, I call on you to protect Khreschatyk on May 9 from the
disgrace that they want to effect today," Symonenko said. The Communist
Party also called on veterans to remember how they defended Khreschatyk
during the Great Patriotic War. "Let us defend every inch of Khreschatyk as
will did in the way years and not allow this scum onto the sacred land of
our Ukraine," Symonenko said.

One of the organizers of the rally called on war veterans to come to the
Presidential Secretariat to participate in a protest against participation
of OUN and UPA soldiers in the march through Khreschatyk.

As Ukrainian News earlier reported, Parliamentary Deputy Yurii Kostenko,
who is the leader of the Ukrainian People's Party, recently expressed the
belief that the current Ukrainian parliament is not ready to recognize OUN
and UPA soldiers as participants in World War II.

In February, President Viktor Yuschenko stated the need for reconciliation
talks between fighters of the Organization of Ukrainian Nationalists and the
Ukrainian Insurgent Army and those who fought for the Soviet Army.

The Ukrainian People's Party had earlier urged Yuschenko and Prime Minister
Yulia Tymoshenko to support recognition of the Organization of Ukrainian
Nationalists and the Ukrainian Insurgent Army as war participants.

Parliamentary Deputy Oleksandr Ivchenko of the Our Ukraine faction has
proposed that the parliament recognize the soldiers and officers of OUN
and UPA as warring parties in the World War II. Meanwhile, the Lviv regional
organization of Ukrainian war veterans has called on the parliament not to
recognize the UPA as one of the participants in World War II. -30-
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17. "FIFTY YEARS AFTER STALIN"

Prof. James Mace, Consultant to The Day
The Day Weekly Digest in English, #8
Kyiv, Ukraine, Tuesday, 4 March 2003

Ivan Dziuba - once a model for the movement to defend human and
national rights in the Ukrainian SSR, now full member of the Ukrainian
National Academy of Sciences, and still the conscience of his nation -
wrote in Dzerkalo tyzhnia that fifty years after Stalin is not the same
thing as being without Stalin. As he rightly pointed out, today's Ukraine
is still with Stalin in the sense that it continues to bear the attributes
that he forced upon it.

Khrushchev might have removed the deceased dictator's mummy from
its place next to Lenin's, but he could only ameliorate the system he had
inherited from his predecessor, not fundamentally alter its essence.

For all the worship with which Stalin liked to surround himself, he remained
fond of modestly portraying himself as Lenin's pupil. He was a follower of
the Lenin of 1919 when the state first tried to control everything: taking
over industry, forcing peasants into communes (Stalin ameliorated this at
least in name to collective farms), viewing all who wanted to exercise their
officially proclaimed right of national self- determination as class
enemies, and keeping the whole thing going by means of the Red Terror,
which Stalin adapted as what one scholar once called a permanent purge.

Of course, it is impossible to control everything, and the system evolved
into one whose demands could not be met without breaking the rules of
the system itself. People evolved the survival strategy of thinking one
thing, saying another, and doing yet a third. Law was rehabilitated in name
and destroyed in fact. For what is law, if not a set of rules compulsory on
everybody and backed by the punishment of those who violate these
rules by the state?

Yet, when everyone is forced to be guilty of something and in theory
deserves punishment, who gets punished in reality (at least at the top)
ceases to be a matter of enforcing rules and becomes a matter of sheer
arbitrariness. Once Khrushchev stopped Stalinist mass terror and the
resultant universal fear, the structures and interests molded within the
confines of the system Stalin created could congeal into powers immune
to any official injunctions.

Under such circumstances it becomes misleading to even speak of
corruption and criminality, for when practically everybody breaks the rules,
the rules themselves lose any reality. In this way Stalin accomplished what
Lenin in 1919 could not.

Stalin's success in creating a Soviet people to supplant individual nations
has also left the Ukrainians (and not only them) with a deep crisis of
identity. Last week I took part in a memorial soiree marking seventy years
since the Great Manmade Famine. More and more are beginning to
become conscious of the enormity of the national tragedy suffered and
damage done Ukrainians as a nation.

Still, most Western scholarship of the period continues to view the period
of a single Soviet history just as nineteenth century German nationalists
condemned the Czechs and other "small" nations as being without histories
and thus without any future. In the Soviet context, this was called the
great friendship of peoples. Friendship is fine, of course, but when it
involves the loss of one's own identity it becomes transformed into
something else.

In short, while Stalin has long since ceased to be canonized and his corpse
gone from the Lenin Mausoleum, his legacy is still very much a part of
postcommunist reality, and the period of convalescence will remain long
and painful. -30- (Link: http://www.day.kiev.ua/260288/)
---------------------------------------------------------------------------------------------------------
NOTE: Professor Jim Mace died on Monday, May 3, 2004, exactly
one year ago, in Kyiv, Ukraine. Jim was only 52 years old. Jim was
a U.S. citizen who lived in Ukraine and worked hard to promote true
Ukrainian independence and self-respect as a nation. He spent many
years advocating, writing about and teaching the democratic ideals
which came together during the Orange Revolution.

He did not get to experience the Maidan and the resultant victory
but was one of the people who contributed so much to the development
of the foundation of strong Ukrainian citizens who ultimately rose up
and won the battle. We honor James Mace for his work. [Editor]
---------------------------------------------------------------------------------------------------------
FOOTNOTE: A special "Dr. James E. Mace Memorial Holodomor
Fund" has been established by the Ukrainian Federation of America
(UFA).

The special memorial fund to honor the life and work of Dr. James
E. Mace, is being administered as part of the program of the UFA, a
non-for-profit USA charitable and educational organization organized in
1991, according to Dr. Zenia Chernyk, chairperson of the Federation's
board of directors.

The UFA is dedicated to the preservation of Ukrainian culture and
heritage and providing assistance to Ukraine in its drive for full
democracy as well as social and economic advancement."

"Donated funds will be used to support the Holodomor Education and
Exhibition Program in Ukraine, that Dr. Mace has been involved in,"
according to Vera Andryczuk, UFA president, "and other projects to
honor Dr. James Mace's commitment to telling the truth about the
genocidal famine in Ukraine during 1932-1933, as approved by the
Federation in consultation with Dr. Mace's wife, Natalia Dziubenko-
Mace.

Donations to the "Dr. James E. Mace Memorial Holodomor Fund"
can be made by making out a check or other financial instrument to
the Ukrainian Federation of America, in US dollars, designating the
donation for the "Dr. James E. Mace Memorial Holodomor Fund,"
and mailing the check to:

Dr. Zenia Chernyk, Chairperson
Ukrainian Federation of America (UFA)
930 Henrietta Avenue
Huntingdon Valley, Pennsylvania 19006-8502
=============================================================
18. RETURN TO THE SOURCE:
10th Annual Folk Art and Culture Tour of Ukraine
August 8-23, 2005, With Folk Art Specialist Orysia Tracz

Folk Art and Culture Tour of Ukraine, Orysia Tracz
Winnipeg, Manitoba Canada, Monday, May 2, 2005

WINNIPEG - 10th annual tour. Museums, walking tours, lectures, artists,
folk art, shopping, traditional cuisine, Ukrainian hospitality. You don't
have to be Ukrainian to enjoy the trip. Interpreting into English at all
times.

Places: Kyiv, Kaniv, Ternopil, Kam'ianets'-Podils'kyi, Kolomyia, Lviv,
Carpathian Mountains (Kosiv, Yaremche, other villages). Visits to
ancestral villages arranged. Opportunity to stay a week longer on your
own (accommodations) for the same cost. $3,650 Canadian. (includes
air, hotels, meals, museum admissions).

Connections from other North American and international cities arranged.
Limited number of participants. We have had travelers from across North
America, and Australia, and many repeat participants.

For reservations and details: Irena Zadravec, Thomas Cook - Regent
Travel, (204) 988-5100, sblair@thomascook.ca. For more information
regarding tour contact Orysia Tracz: dorohy@hotmail.com -30-
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