27 November, Kyiv

The shadow economy of Ukraine is hampering the country’s regional development and reducing its economic competitiveness, stated Nataliya Izosimova, Managing Director of the Foundation for Effective Governance (FEG), at a regional development roundtable held by FEG in Kiev.

“The issue of regional competitiveness is one of the main priorities for FEG. We are confident that the economic growth of Ukraine directly depends on the successful development of its regions,” Izosimova stated. “It is in Ukraine’s shadow economy where much of the country’s economic growth is occurring. Ukrainian policy makers and opinion leaders have confronted a very important question: ‘How do we manage the shadow so as not to kill its entrepreneurial character, while working to bring it into the light’?”

These as well as other issues were discussed during the open discussion “Regional development as a way to strengthen regional competitiveness” organized by the Foundation for Effective Governance in a framework of FEG’s ongoing regional economic development project of the city of Lviv in Western Ukraine and the Donetsk Oblast region in Eastern Ukraine. The regional economic development project is being implemented by FEG in partnership with Monitor Group, a leading international consultancy, and in close cooperation with local governments.

While carrying out a comprehensive analysis of the regional economy of Ukraine, Monitor Group has found that in different sectors with different economic structures, 30 percent to as much as 80 percent of the overall economy is a shadow economy.

“It is important to understand that the shadow economy diverts resources, scares away legitimate investors, and cripples those businesses that play by the rules,” stated Andrew Swart, a partner of Monitor Group.

Among those in attendance at last week’s roundtable were Graham Meadows, former Director General of the Directorate General for Regional Policy, European Commission; Kim Campbell, Chair of FEG’s International Advisory Board and former Prime Minister of Canada; Paul Helmke, former head of the U.S. Conference of Mayors; Andriy Sadovyy, Mayor of Lviv; Anatoliy Blizniuk, Donetsk Oblatsk Council Chair; Anatoliy Kinakh, President of the Party of Industrialists and Entrepreneurs of Ukraine; and Vira Nanivska, President of Ukraine’s National Academy for Public Administration.

During the economic roundtable, titled “Regional Development as a Way to Increase National Competitiveness,” a number of other important issues were discussed regarding the formation of a constructive regional development policy for Ukraine. Leading representatives from the Ukrainian government, international companies, policy research groups and academia, and select media defined the priorities for development of an efficient regional policy. Participants also proposed ways to improve communication between business and local governments, as well as considered the best world practices of regional development that could serve as appropriate examples for Ukraine.

“Ukraine must focus on further development of its regions during this time of global financial downturn,” Kim Campbell stated. “The current challenges can help us understand the weaknesses of the Ukrainian economy, and provide new ideas on how to reshape the public and private sector and build a platform for reform.”

Profile

Foundation for Effective Governance
The Foundation for Effective Governance(www.feg.org.ua) was established in 2007 by Ukrainian businessman, Rinat Akhmetov with a mission to develop and implement long-term projects and programs which encourage the long-term economic development of Ukraine. The Foundation is committed to help reach public and political consensus on the key areas of the economic transformation programs.

To achieve the objective the Foundation involves the leading Ukrainian and international experts with impeccable reputation. The International Advisory Board, which includes prominent public and political figures from different countries, ensures the Foundation’s independence. Among its board members are former Canadian Prime Minister Kim Campbell; former U.S. Senator Lincoln Chafee; former president of the National Bank of Hungary György Surányi; as well as Managing Director of Morgan Stanley’s Office in Kiev Ihor Mitiukov. The International Advisory Board takes an active part in building the Foundation’s strategy, selecting the priority projects, and representing FEG both inside and outside Ukraine.
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