An Open Appeal to President, Chairman of the Parliament and Prime Minister of Ukraine urging to change the economic policy in order to protect national interests, ensure economic development and improve the standard of living in Ukraine

1. Open Appeal
to the President, Chairman of the Parliament and Prime Minister of Ukraine
urging to change the economic policy with a view to protect national interests,
ensure economic development and improve the standard of living in Ukraine
Over the past 25 years, the Ukrainian economy has contracted by 35%.
According to the World Bank, it is the worst result in the world. Of the 166 countries
which had their GDP data available for the years of 1991–2014, there are only 5
countries whose GDP in 2014 decreased compared to 1991. Ukraine with its 35%
decrease has "outstripped" Moldova (-29%), Georgia (-15.4%), Zimbabwe (-2.3%)
and the Central African Republic (-0.94%). GDP of other countries increased: with
the slowest growth in Barbados (8.9%) and Tajikistan (10.6%). China's GDP
increased tenfold. We have lost a third of our real GDP, although in 1990 our GDP
per capita (PPP) had a better starting position than Malaysia, Poland and Belarus, and
was on the same level as Turkey and Romania.
This unprecedented economic downturn in Ukraine took place in the midst of
large-scale shadowing and monopolization of the economy, technological
primitivization of manufacturing and de-industrialization, deepening of the financial
and foreign energy dependence, flourishing corruption and formation and
preservation of an oligarchic and commodity-based system. Instead, countries that
have introduced the economy of entrepreneurial initiative and innovations, fair
market competition and new investment opportunities, economic output and export of
products with high added value, have been successfully developing. As a result,
Ukraine's real GDP per capita (in purchasing power parity) in 2014 was 8267 USD,
which is two times less than the GDP of Belarus, Romania, Turkey and three times
less than the GDP of Malaysia and Poland. Nominal GDP in Ukraine in 2014 was
3083 USD per capita.
Continued policy of market fundamentalism, one-sided focus on deregulation
and privatization as a panacea, "tightening the population’s belts" and fanatical fiscal
consolidation along with regular foreign borrowing and restrictive monetary policy of
the National Bank of Ukraine have conserved the economic model in which Ukraine
exports raw materials, low-tech products with low added value, talent and income
earned in Ukraine and imports expensive energy, finished products with high added
value and international financial aid.
As the result of military aggression of Russia against Ukraine, and such
dysfunctional economic and monetary policy since the beginning of 2015, the

2. industry has fallen by 13.4%, exports of goods from Ukraine decreased by 30.9%,
foreign direct investment fell by 3.8 billion USD, official unemployment rate reached
9.4% (according to ILO), or more than 1.6 million people. As a result, an updated
IMF forecast of GDP decline for 2015 is 11%, and according to the World Bank -
12%.
Ukraine plunged into economic depression, characterized by stable and long-
term negative dynamics of GDP, loss of investment, increasing of debt burden on the
budget, the decline in industrial production, exports, employment, household
expenditures, the collapse of Hryvnia exchange rate and inflationary price growth.
Instead of creating new prospects for development, the country is on the verge of
social destabilization, as millions of people fall below the poverty line, entrepreneurs
and young people increasingly migrate abroad in search of a better life. The situation
is increasingly becoming even more critical and complicated due to military actions
in the Eastern Ukraine.
The main economic challenges the country faces today that need a prompt
resolution are presented in Annex 1 ("Major Systemic Economic Challenges").
Considering the above, we call for an immediate change of government
economic policy and urgent implementation of the Anti-Crisis Plan of Economic
Development (Annex 2) well-coordinated between all branches of government.
Sincerely,
Leader of the Radical Party of Ukraine Oleh Liashko
Deputy Leader on Economic Policy
Radical Party of Ukraine,
Chair of the Parliamentary Committee on
Industrial Policy and Entrepreneurship Viktor Halasiuk

3. Annex 1
Major Systemic Economic Challenges
1) Low income of the population: after a shock threefold fall of the hryvnia,
personal income rolled down to the level of economically undeveloped
countries. The average disposable income in Ukraine dropped to $130 per
month, while the share of savings - up to 3.4%. This exhausts the economy and
destabilizes the social and political situation in the country.
2) High unemployment rate: according to official figures (ILO) it reaches 9.4%
of the employable population or 1.6 million people; however, due to "hidden
unemployment forms" (such as part-time employment, unpaid leave of
absence), it is even higher than that. Such unemployment rate weakens the
economic productivity and additionally depletes the purchasing power of the
population.
3) Investment deficit, including direct foreign, domestic private and public
investments. After years of downward dynamics of capital investment, the
level of gross fixed capital formation (investments into the future of the
economy) dropped to 12% of GDP (while 19% in the EU and over 25% in
developing countries).
4) Decline in production and exports, caused by military operations in Donbass
and loss of the Russian market, as well as by the lack of the targeted
governmental industrial and trade policy. During 11 months of 2015 industrial
production decreased by almost 15%, while merchandise exports fell by 31%
(despite the effect of EU autonomous trade preferences for Ukraine in the
framework of the Association Agreement).
5) Financial dependence and macro-financial instability, caused by a negative
trade balance over the past 9 years; shocking threefold devaluation of the
national currency; excessive burden of public and publicly guaranteed debt on
the national economy (80% of GDP in 2015, while the IMF considers 60% as a
critical maximum) and exorbitant budget expenditures on its servicing (14.8%
of expenditures of the state budget of 2016 - is the second largest item of
governmental expense).
6) Energy inefficiency and dependence on imports. The energy intensity per
unit of GDP in Ukraine is 2 times higher than in Czech Republic, 3 times
higher than in Poland and 5 times higher than in Singapore. At the same time,
Ukraine is dependent on imported energy for 33% of its energy needs. This
makes many of Ukrainian products uncompetitive on the international market.
7) Technological primitivism of production and export is reflected among
other things in a low share of manufacturing industry in the GDP (only 13% in
Ukraine, while 18% in Turkey and Poland, 21% in Slovakia, and 30% in South
Korea), miserable share of high-tech exports (only 6% of total exports of goods
in Ukraine, against 8% in Poland, 15% in the Czech Republic and 47% in
Singapore). This leads to a low value added created in the economy and,
consequently, low social standards in the country.
8) Excessive shadow economy and social injustice. More than 50% of the
economy is "in the shadow" and does not pay taxes. Consequently, the tax

4. burden falls on the shoulders of the least socially protected layers of the
population - teachers, doctors, soldiers, and now even working retirees.
9) The pervasive corruption in public institutions. Almost every Ukrainian
faces corruption. Most often, it appears in the courts, tax administrations,
customs, in the executive branch. Corruption destroys the trust of public and
business in authorities and puts the brakes on the economy.
10) The loss of human capital. For 25 years, the death rate exceeds the birth rate;
emigration keeps setting negative records - only in the first half of 2015,
411,000 Ukrainians left for work to Poland, which is almost 2.5% of the
economically active population.

5. Annex 2
ECONOMIC DEVELOPMENT ANTI-CRISIS PLAN
1. Radical institutional reforms and fighting corruption
1.1. Complete replacement of judicial and prosecutors manpower. The
selection of new judges and prosecutors in open competitions among human
rights activists, legal and other professionals who have the trust of society.
Tools: introducing amendments to the Constitution of Ukraine and adoption of the
necessary laws.
Effects: establishment of the rule of law, restored public confidence in the judicial
and law enforcement system and government in general.
1.2. Optimization of public administration system. Review and optimization
of the composition, functions, powers and staff numbers of government.
Selection of civil servants at open transparent competitions.
Tools: adoption of Verkhovna Rada Resolution on comprehensive civil service
reform in Ukraine under parliamentary supervision and adoption of necessary
acts by the executive branch.
Effects: ensuring effective public administration, restoring trust of the society in
government.
1.3. Establishing personal responsibility for officials and introduction of
public prosecution in criminal proceedings. The introduction of not only
disciplinary, but also a full personal property liability of officials for unlawful
decisions regarding individuals and entities. Providing citizens in courts with
the possibility of use of audio and video evidence of bribe demands.
Tools: adoption of relevant laws by the Verkhovna Rada.
Effects: real protection of interests of citizens and businesses before the government
and transformation of society into an "anti-corruption prosecutor".
2. Financial stabilization
2.1. Restructuring of public debt of Ukraine through negotiations with
international financial organizations and foreign government creditors of
Ukraine regarding the writing off of a substantial part of the external national
and government-guaranteed debt.
Tools: conduction of governmental negotiations with international noncommercial
lenders, followed by the ratification of the results by the Verkhovna Rada.
Effects: reduce the burden of government debt on the economy and reduce spending
on debt servicing, release of funds for public investment.

6. 2.2. Liberalization of the tax system, which provides for reduction of the tax
burden, especially on wages; simplification of the administration of taxes;
revision and narrowing of the powers of the state fiscal service.
Tools: adoption of amendments to the Tax Code by the Verkhovna Rada.
Effects: improvement of the business climate, legalization of the economy and
widening of the tax base.
2.3. Control of the economic border of the country, which involves
preventing smuggling at the customs by establishing a joint border and
customs posts with neighboring countries and accession of Ukraine to the EU
Computerized Transit System (NCTS), as well as prevention of the outflow of
capital from Ukraine through transfer pricing.
Tools: adoption of amendments to the Tax and Customs Codes by the Verkhovna
Rada and adoption of the necessary acts by the executive branch.
Effects: simplification of customs procedures, elimination of smuggling and
corruption at customs, de-offshorization of the economy and broadening of the
tax base, improvement of the trade balance.
3. Energy independence
3.1. Liquidation of national joint stock company "Naftogaz Ukraine" and
introduction of the transparent pricing in the natural gas market. The
liquidation of national joint stock company "Naftogaz Ukraine", a monopolist
intermediary, which is an artificial corrupt superstructure in the natural gas
market. Elimination of the unconstitutional National Commission for
Regulation in the Fields of Energy and Utilities (NCRFEU), adjustment of
prices for natural gas and introduction of transparent pricing.
Tools: adoption of the governmental decree on liquidation of NJSC "Naftogaz
Ukraine" and the distribution of activities (extraction, transportation) to
separate companies according to the requirements of the European Union's
Third Energy Package and the adoption of bill No.3386 regarding NCRFEU.
Effects: provision of legal and transparent pricing to the public on the natural gas
market, the elimination of corruption component and lowering tariffs for
natural gas for consumers.
3.2. Implementation of State program to increase production of natural gas
in Ukraine. Reduction of rent for natural gas production, establishing of tax
incentives for new extraction and production in the weakened extraction and
geological conditions. Development and approval of the appropriate programs
by government, including capital investments for exploration and development
of new fields of PJSC "Ukrgazvydobuvannya."

7. Tools: adoption by government of a state program with appropriate funding and
adoption by Verkhovna Rada of the package of laws to stimulate new
extraction of natural gas, including from low-yield, preserved, liquidated and
other inactive wells.
Effects: increase of domestic production of natural gas and full energy independence
of Ukraine from imported natural gas, improving of trade balance.
3.3. Implementation of the State program of large-scale energy
modernization. Development and approval of the appropriate government
programs, including co-financing and preferential loans of energy
modernization activities in the private and municipal sectors from the state
budget. Stimulation of the production of energy from alternative sources.
Tools: adoption of the state program by government with introduction of the
amendments to the state budget by Verkhovna Rada.
Effects: reduction of energy consumption and energy intensity of GDP, saving of
current expenditures of state and local budgets, reduction of energy
dependence on energy imports, improving of the trade balance.
4. The new economic policy
4.1. Establishment of a system of state institutions and mechanisms of
economic development. Enhancing the capacity of the country's transition from
decline and decumulation to investment growth, structural modernization and
stimulation of the economy, including by creating/providing tools such as:
a) Export Credit Agency - a special governmental financial institution that
promotes Ukrainian exports through insurance, guarantees and reducing the
cost of loans for export operations and provides information, as well as
analytical support for exporters;
b) State Bank of Reconstruction and Development - a special financial
institution that is an agent of the government which accumulates
international financial aid in order to provide affordable long-term loans,
co-investment in infrastructure and industrial projects (through public-
private partnership as well);
c) Industrial parks - a tool to attract investment through industrial sites with
ready-made engineering and technical infrastructure and temporary tax
incentives for new production and R&D enterprises.
d) Small Businesses Support Agency – a special state institution (similar to
SBA in the USA) that grants credits to small business on favorable terms,
promotes access to public procurement and provides comprehensive
consulting support.
e) Public-private partnership – a mechanism to guarantee the interests of a
private investor when implementing joint projects with the state or
municipalities.

8. Tools: adoption of the relevant resolutions by the government and laws by
Verkhovna Rada.
Effects: provision of the tools for effective, transparent and accountable accumulation
and use of budget funds and international financial support for effective
implementation of economic policy.
4.2. Acceleration of economic growth. Purposeful "warm-up of the
economy" by influencing the various components contributing to GDP growth,
namely investment demand, private and public consumer demand, exports and
imports; setting all the levers of economic policy on "the modernization
mode."
4.2.1.Investment growth, or increase of gross fixed capital formation, in
order to switch the economy to the mode of modernization, including by:
a) introduction of the effective tax, customs, regulatory and other
investment incentives to attract private investment in new production
(including tax holidays for small businesses; favorable duties for
domestic producers; release of reinvested profits from taxation;
industrial parks with ready infrastructure and tax preferences, lower
energy prices for new plants; additional guarantees for investors under
public-private partnerships, etc.);
b) design of the monetary policy aimed to increase the "financial
depth" of real economy (through allocating state budget funds and
international financial assistance to loans for small businesses, new
and high-tech industries; through implementation of state programs of
compensation of interest on loans to small businesses, industrial
enterprises, etc.).
c) considerable strengthening of the state's role as an investor who
can temporarily replace private investors until the restoration of trust
of the latter (including through large-scale development and
modernization of infrastructure; public procurement programs for
machinery and equipment for domestic production; public
construction programs; projects in public-private partnerships, etc.).
4.2.2.Promotion of export of Ukrainian products, including through the
elimination of regulatory restrictions for exporters; state guarantees,
insurance and cost reduction of loans for exports; signing of new bilateral
free trade agreements with countries promising for Ukrainian exports;
establishment of trade rep offices abroad.
4.2.3.Increase of purchasing power of population: not nominally but by real
increase of minimum social standards, combined with a reduction of the
tax burden and large-scale de-shadowing of the economy, as well as with
stimulation of production to prevent outflow of resources from the
economy through imports.

9. Tools: adoption of the relevant resolutions by the government and laws by
Verkhovna Rada.
Effects: accelerated rehabilitation of the economy, transition to the advanced
development and improvement of lives of Ukrainian citizens.
4.3. Accumulation of international financial aid and search for the internal
resources to finance the acceleration of economic development. State
promotion of investment demand, exports and the development of production
requires substantial funding that can be provided by the state through sources
such as:
a) optimization of current expenditures of the state budget;
b) overcoming smuggling at customs;
c) effective management of state property;
d) legalization and de-offshorization of the economy;
e) additional taxation of raw material economy;
f) targeted money emission to the manufacturing sector;
g) international financial aid.
It is crucial to attract international financial assistance to the real economy in
the amount needed to create an effective structure of the economy, a modern
Marshall Plan. It is necessary to stop consuming donor funds for the sake of
consuming and to start using it for growth through special institutions of economic
development as other successful countries do.
Tools: adoption of the relevant resolutions by the government and laws by
Verkhovna Rada.
Effects: resource support of the structural modernization of the economy and its rapid
growth (Economic Revival Plan for Ukraine).
5. Social development
5.1. National employment program. The fiscal stimulation of job creation as
well as realization of temporary employment programs to combat
unemployment (including for renewal of infrastructure of regions affected by
military actions; modernization and renewal of manufacturing, performance of
social works, etc.).
Tools: adoption of the relevant resolutions by the government and laws by
Verkhovna Rada.
Effects: increase of the employment level; reduction of the burden on social funds;
increase of purchasing power of households; provision of social stability.
5.2. National health program. The increase of funding for health, physical
education and sports through the Fund of Humanitarian Development (at the
expense of the lottery business, manufacturers and importers of alcoholic

10. beverages and tobacco products); state stimulation of the increase of birth rate;
promotion of healthy lifestyles.
Tools: adoption of the Law No. 3597 and No. 3598 "On Human Development Fund"
and the relevant regulations by the government.
Effects: accessible and high-quality health care, reduction of the rate of morbidity,
increase of birth rate, increase of the duration of healthy life.
5.3. National program of skills development. Learning English from
kindergarten and its introduction as the second language in universities, the
development of competencies for the future, creating the conditions for
cooperation "Business – Education/Science - State".
Tools: adoption of the relevant resolutions by the government and laws by
Verkhovna Rada.
Effects: improved quality of pre-school, secondary, vocational and higher education;
improved professional orientation; higher educational level and household
income; higher competitiveness of the economy.