Custom term paper on The impact of poor governance and institutional arrangements on the economic development in Ukraine

In recent years, the state has increasingly been making attacks at the shadow economy, at the same time destroying the small and medium business, while large enterprises get under the control of financial industrial groups (Smallbone 63-77). In economic terms, Ukrainian business clans are sovereign entities, receiving for their “service” to the authorities the opportunity to do business at their sole discretion, including not paying taxes, getting free government resources, energy, etc. However, in case of violation of rules of the game, either as a result of the machinations of competitors, the FIGs can be quickly eliminated from the markets. Taking into account the political influence of state apparatus, such reshuffling of FIGs in the modern history of Ukraine occurred very frequently, leading to the constant redistribution of market, revision of privatization, and ultimately, to the slowdown of the process of full-fledged FIGs formation.
The major clans and major cash flows are placed in the regional centers. It is also significant that the two clans, which had almost taken control over the entire country – Zvyagilsky clan (1993-1994) and Lazarenko clan (1996-1997) – had regional origin (respectively, Donets’k and Dnipropetrovs’k) (Bubnova 134-36). Nowadays, the most powerful FIGs are also regional ones: the Donets’k FIG and the Interpipe group (Dnipropetrovs’k), as well as Surkis group, “Finance and Credit” group, “PrivatBank” group (Dnipropetrovs’k), UkrSibbank (Kharkiv), etc. The sphere of the interests of Ukrainian FIGs is clearly limited by metallurgical engineering (and related industries), chemical industry and energetics, plus oil refining and, more recently, food industry. Companies of other industries rarely get in these schemes (Maksymenko 75-99).
The regionalization of economic life enshrined in the long term finally leads to the absence of a developed national market. Often the region is more closely connected with foreign partners than with businesses of neighboring areas. As a consequence, the regional authorities often have much greater influence on the economic processes in the country than the central ones (Bubnova 141-47). Recently, there has been marked the formation of distinctive regional holdings managed jointly by regional FIGs and regional authorities. Such holdings almost totally control the lives of entire regions and, most importantly, close the intra-regional financial flows (Smallbone 63-77). However, this situation is also a kind of state’s payment for the loyalty of regional elites.
Besides, the predominance of basic industries, which are export-oriented or related to export production, lead to the situation that in cases of fluctuations in world markets, the financial system of Ukraine will inevitably experience the crash, the macroeconomic, social and political consequences of which are difficult to predict.
Meanwhile, the problem of non-payments in the Ukrainian economy and, in particular in the energy sector, is, in essence, the problem of institutional character lying in the field of macroeconomics. This problem is quite intractable with tightening government control over the calculations and the elimination of parasitic trader structures. But the disproportionate consumption of imported energy resources together with worsening of external economic environment for Ukrainian exports could lead to serious consequences for the economy and its financial stability. The last two points are primarily related to unfavorable investment climate in Ukraine, whose cornerstone is the inefficient management of the state apparatus (Zon 153-5).
Thus, currently, the Ukrainian economy is highly dependent on many external and internal factors beyond the control of the government, which prevents the state apparatus from regulating the economy effectively. Specifically, they include: 1) total dependence from the stable work of exporter companies; 2) necessity to attract foreign investment; 3) huge external debt; 4) high energy intensity of the economy and the dependence on energy products imports; 5) presence of influential FIGs whose activities are outside the legal field of the state; 6) presence of large shadow sector; 7) significant impact of regional elites. Meanwhile, the state management in Ukraine is not effective and the responsibility for this is fairly relied on the authority.

custom term paper
Taking into account the critical crisis in the Ukrainian economy, it is necessary to create economic conditions for the strong impetus of the motivational factor for the development of entrepreneurship and labor market. It also important to strengthen market solvency through streamlining the systems of remuneration, taxation, credit, monetary and financial regulations, etc.
The foundations of a new economic strategy of Ukraine could be: 1) economic interest to free enterprise, development of commodity production and market provided by concrete owners producing goods and services of quality and value required by consumer; 2) scientific and technological progress with active innovation, investment and structural policies; 3) transition to the entirely new economic model of macro-and microeconomic level, equitable functioning of different forms of ownership and management competitive on the domestic market; 4) knowledge and ability to implement contemporary business on a sound economic basis, to manage this complex process, using the laws of reproduction and market competition; 5) high culture, organization and discipline in all spheres of human activity.
The radical economic reform has two crucial directions. The first direction is the reform of monetary and credit systems. It includes the introduction of convertible currency; active implementation of a set of anti-inflationary measures; overcoming budget deficit, uncontrolled emission of money, and economically unjustified domestic and external debt in order to ensure the sustainable rate of the Hryvnia. At the same time, it is important to subordinate monetary policy to encouraging entrepreneurship, provision of supply and demand balance in commodity markets, and to accelerated development of market economy.
The second direction of the reform is the implementation of radical change into economic and sectoral structure, forms and methods of management with focus on the needs of a changing market. The economy, in which the industry of so-called group “A” makes 70% and the industry of group “B” makes only 30%, is artificially deformed. However, the restructuring is not possible without the initial capital, powerful economic incentives, investment, advanced technologies and clear system of economic management at the micro-and macroeconomic level.
Overcoming severe and protracted economic crisis in Ukraine and accelerating its transition to the new cyclical phases of economic recovery and growth remain the priority for the contemporaneity and the future of Ukrainian people, for the strategy and tactics of Ukraine’s socio-economic and spiritual development.

Works Cited:

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Lewis, Colin M., Harris, John, and Janet Hunter. The New Institutional Economics and Third World Development. Routledge, 1997. Print.
Maksymenko, Svitlana. “Fertility, Money Holdings, and Economic Growth: Evidence from Ukraine.” Comparative Economic Studies 51.1 (2009): 75-99. Print.
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Sen, Amartya, Stiglitz, Joseph E. and Jean-Paul Fitoussi. Mismeasuring Our Lives: Why GDP Doesn’t Add Up. The New Press, 2010. Print.
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Yekelchyk, Serhy. “Reforging the Weakest Link: Global Political Economy and Post-Soviet Change in Russia, Ukraine and Belarus.” The Slavonic and East European Review 84.2 (2006): 382-383. Print.
Zon, Hans. The Political Economy of Independent Ukraine. Palgrave Macmillan, 2001. Print.