By Yuliya Sobko, Head of Financial Communications and Investor Relations, The PBN Company, Kyiv

From the outside things have seemed particularly grim in Ukraine of late, with a combination of pre-election politicking and energy issues dominating international headlines. But in the midst of the severe economic slump Ukrainians are strikingly optimistic – about economic recovery (we hope we see production bottoming out in August) and the ability to cope with any policy mistakes that may come our way.

Ukrainians are stubborn survivors and optimists, and the government is more optimistic than ever. Ukraine’s Economy Minister Bohdan Danylyshyn, upbeat about the country’s future economic prospects, recently said that Ukraine has the resources to prevent the country from defaulting on its debts. “We have got the crisis under control and, little by little, Ukraine is overcoming it,” he offered as reassurance.

The draft State Budget, submitted to parliament on September 17, is also infected with bullish forecasts. The government expects GDP to grow by 3.7% in 2010, with inflation at 9.7% (compared to 1.5% GDP growth and 13.4% inflation forecasted by the World Bank). Based on these projections, the UAH 1.27 billion budget foresees a 19% increase in revenue and a 21% rise in expenditures compared to the 2009 budget (and the 2009 budget was based on rather upbeat forecasts as well). The budget deficit is predicted to increase by 49.9% in 2010 to UAH 46.7 billion, while UAH 4.5 billion is needed to cover credits and UAH 11.7 billion for credit arrangements. The fly in the ointment for the government? The fractious political situation makes it unlikely that the budget will be passed before the January elections.

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By Myron Wasylyk, Senior Vice President & Managing Director, The PBN Company, Kyiv

US Vice President Joe Biden’s visit to Ukraine this week accomplished three very important objectives not only for the US-Ukrainian bilateral relationship, but also for communicating Washington’s security policy views to Central and East Europeans.

First, Biden affirmed for official Kyiv the continuity of US-Ukrainian relations and their strategic importance to both sides on a wide range of issues. This ended speculation in both capitals about the status and nature of the bilateral relationship and affirmed that an independent, democratic and prosperous Ukraine remains a strategic priority for America.

During meetings with Ukraine’s political and business leaders, Biden specifically affirmed Washington’s support for the 1994 Budapest Memorandum, which gave Kyiv security assurances from the United States, United Kingdom and Russia in exchange for Ukraine’s getting rid of its nuclear weapons arsenal, one of the world’s largest at the time. The term of the memorandum expires this year and the Ukrainians were keen to receive a signal of support from Washington.

In another important step for Kyiv, the Charter on Strategic Partnership signed by Presidents George Bush and Victor Yushchenko was renewed. Biden announced a bilateral commission would be established to focus on economics, trade, energy, security and rule of law with an inaugural meeting of the commission scheduled for this autumn in Washington, DC Biden also affirmed US support for Ukraine’s Euro-Atlantic integration without mentioning NATO by name.

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President Yuschenko’s chief of staff, Victor Baloha, has resigned, accusing his former boss of cronyism and of betraying promises made during the 2004 Orange Revolution. Myron Wasylyk, Senior Vice President and Managing Director, The PBN Company Kyiv, analyzes Baloha’s performance

Victor Baloha’s tenure as head of the Presidential Secretariat, akin to presidential chief of staff, has been filled with very important political victories for President Victor Yuschenko, as well as a number of failures.

Baloha’s parting words show him as a spiteful and disloyal lieutenant whose limited intellectual boundaries became ultimately inconsistent with the strategic vision of his former boss.

But Baloha did help Yuschenko in some ways as chief of staff.

Immediately after his summer 2006 appointment, Baloha moved quickly to bring relevance and order back to a Secretariat left disorganized by two Yuschenko allies not known for their political astuteness or management skills – Oleksandr Zinchenko and Oleh Rybachuk.

Then Victor Yanukovych had just won the plurality in regularly scheduled parliamentary elections and put together a coalition with Socialist MPs, who betrayed Orange Revolution allies in exchange for seating Oleksandr Moroz as Verkhovna Rada’s speaker. A series of nationally televised roundtable sessions were held and a political agreement on pursuing a pro-Western policy was signed by Yanukovych and all other political players except Yulia Timoshenko.  This paved the way for Yuschenko to fulfill his constitutional obligation of submitting Yanukovych’s nomination for the premiership.

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By Viktor Kovalenko, Account Manager – Government Relations, The PBN Company, Kyiv

On May 12 Interior Minister Yuri Lutsenko resigned after a drunken incident in Frankfurt airport. Lutsenko’s resignation is the first time that a Ukrainian politician has resigned for violating moral standards.

The incident began on May 6 when Yuri Lutsenko and his 19-year old son Olexander were not allowed to board a Lufthansa flight from Frankfurt to Seoul and were detained by the police. According to the German tabloid Bild, the Ukrainian minister and his son were very drunk and behaving in a disorderly fashion. After airline officials refused to let them board the plane, the minister and his son became angry and attacked Lufthansa’s personnel and police officers.

As reported in the paper, the Frankfurt police chief and police press secretary stated that the Lutsenkos beat police officers, spat and threw mobile phones at them. The Lutsenkos were detained for drunk and disorderly conduct.

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By Viktor Kovalenko, Account Manager - Government Relations, The PBN Company, Kyiv

In the middle of May, a special meeting of Ukraine’s National Security and Defense Council is scheduled to discuss the problems associated with launching nationwide digital broadcasting (DB).  According to official data, Ukraine has the infrastructure to enable 85-95% of households to receive a digital signal.  But despite this, DB has gotten off to a slow start in Ukraine - it was only six months ago that some TV channels started test digital broadcasting in Kyiv and Odessa, two of the biggest cities.  Other countries in the region have left Ukraine in the dust - Belarus has already started digital broadcasting, and even Kyrgyzstan has launched a digital network.

The delays are due to the fact that DB has become a contentious political issue - yet another example of the notorious rivalry between President Viktor Yuschenko and Prime Minister Yulia Timoshenko.  At the beginning of the process, there were two rival agencies competing for the state’s DB mandate, which would give control of a budget worth millions: the Ministry of Transport and Communications controlled by Prime Minister Timoshenko and the National Council for TV & Radio, which supports President Yuschenko.  The Ministry’s scheme would cost UAH 4.3 billion, while the Council’s plan came in at more than UAH 6 billion.

After more than three years of deadlock, on April 22 of this year President Yuschenko finally signed decree #259/2009, awarding the DB mandate to Timoshenko’s Ministry. The decision seems to be budgetary - in this time of crisis the President went for the cheaper offer.  Some communications experts, however, say that the Ministry plan was also better developed, and that from a technical standpoint the President made the correct decision.

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