Viktor Pynzenyk lays out Tymoshenko's plans for Ukraine

By bne IntelliNews October 26, 2007

Ben Aris in Berlin -

Viktor Pynzenyk, former finance minister and senior member of the Yulia Tymoshenko bloc (BYuT), was out selling the Yulia Tymoshenko-bloc message to investors on Thursday, October 25 in a conference call organised by Concorde Capital. He was making an effort to reassure them the feisty former Ukrainian prime minister has put her polemical ways behind her.

It was a slick performance by Pynzenyk, who was on message to sell a transfer of power that should end in November with Tymoshenko taking control as Ukraine's new prime minister. An Orange coalition between BYuT and the president's Our Ukraine-Self Defence bloc party has not formally been announced, but Pynzenyk says it is a done deal.

"The coalition is a fact and although it is not complete de jura, it is already formed and legally it can be announced after the returns of the election have been formally announced. I can see no reason why this coalition could collapse," said Pynzenyk in a backhanded reference to a similar coalition that did collapse in 2006 after the Socialists jumped ship at the last moment, handing power to the current ruling coalition headed by the Party of Regions under Prime Minister Viktor Yanukovych.

"All the speculation on the new government will stop when the new government takes office and Tymoshenko is declared prime minister," said Pynzenyk.

The ruling Party of Regions, led by Yanukovych, won the most votes in the September 30 polls, but BYuT and Our Ukraine together won 228 seats in the 450-seat Rada, enough to give them a majority and so take up the reigns of power.

An open question is whether Volodymyr Lytvyn will add the 20 seats that his Lytvyn bloc won in the elections to an Orange ruling coalition and shore up its hold over the Rada.

"If Lytvyn is in the coalition, then it is up to him," said Pynzenyk not giving anything away. "Our leaders have declared a willingness to welcome him."

While senior Ukrainian politicians on both sides of the house are clearly wary of a Tymoshenko premiership, there now seems to little they can do now to prevent it.


However, investors seem a lot more sanguine about the prospect of a strong leader coming into to take command of the ship. Their biggest worry is that Tymoshenko will re-launch the re-nationalisation programme first floated by Yushchenko as part of the promise of the Orange revolution in 2004. Tymoshenko's version could turn into a pogrom of her political enemies such as the Donbass clique that are currently allied with Viktor Yanukovych.

Yushchenko won much support for promising to re-nationalise many companies that were subject to the most egregious abuses. However, the re-nationalisation programme was taken up by Tymoshenko after appointed prime minister and unsettled investors when it turned into a politically tainted witch hunt. Investors now worry that that the "gas princess" will use her power to take revenge on her political rivals - fears that Pynzenyk and the whole Tymoshenko camp are keen to dispel.

Tymoshenko is pitching a new pragmatic stance and has backed off from her fiery rhetoric of 2006. Pynzenyk says the new government will not re-nationalise companies, but some of the more blatantly fixed deals will be questioned in court. "There are no plans to revise the outcomes of the privatisations. Yulia Tymoshenko has no plans like these today. What we want to do it take corrective measures through the courts and challenge certain privatisation projects," said Pynzenyk.

To maintain her reputation as the lone standard bearer of the Orange Revolution, Tymoshenko needs to keep Yushchenko's promise, but she also needs to do it in a way that doesn't scare off the badly needed foreign investors so turning to the courts is the compromise.

"The goal is to give all the investors who are interested in buying facilities the chance to do so. We will also review the legislation to prevent the actions of corporate raiders in the future," said Pynzenyk.

At the same time, he committed the government to carrying on the privatisation programme. Pynzenyk promised a new Tymoshenko administration would open up the whole process of privatisation and the sale of licenses to investors, and fair competition.

It is a promise that will strike a chord with businessmen who worked under the previous regime. Tymoshenko is promising to sweep away the old system of crony capitalism with a clean-hand approach of open tenders and competition for assets put under the gavel by the state. Pynzenyk sited the upcoming privatisation of power generating companies, or "gencos," as an example.

"The gencos have to be privatised, and not only the gencos, but if we take too long to privatise the gencos, then someone will come and steal them," said Pynzenyk. "This sector is in need of huge modernisation and this can only be done with privatisation. I have never seen a government company that was well run."

Pynzenyk said this process will be supported by a general liberalisation of prices that will have the effect of reducing the amount of energy wastage - Ukraine is the most inefficient energy user in all of Europe.

Tax and investment

The new regime is selling itself as investment friendly. Pynzenyk promised that all taxes on investment will be abolished in an attempt to create an even playing field that will pull in significant foreign investment.

"No one will be eligible for tax benefits," said Pynzenyk, in an indirect reference to the widespread abuse of "specially economic zones" in the previous era of former president Leonid Kuchma, which effectively calved Ukraine up into a string of tax-free fiefdoms for the leading oligarchs of the old regime. "All investors will enjoy an equal tax status."

Pynzenyk also promised to try and revise the state's whole approach to collecting taxes with a comprehensive reform of the tax administration system.

"Currently we have a tax management principle of paramount control," said Pynzenyk. "We want to change this to a principle of control of tax deviations. This means that the tax service will only question tax payments that it believes are a deviation from the rules. Those companies that pay their taxes in good faith will never see the face of a taxman on their doorstep."

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Viktor Pynzenyk lays out Tymoshenko's plans for Ukraine

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