Procrastination

"the Defense Ministry is ready to implement the fundamental principles of Ukrainian President Viktor Yanukovych, which foresee that a switch to a professional army should be conducted from 2011.

As reported, a switch to a professional army was postponed in 2009.

In December 2005, former Ukrainian President Viktor Yushchenko approved a state program for the development of the armed forces in 2006-2011, which foresaw the creation of a professional army by the end of 2010.

Early in September 2008, former Prime Minister Yulia Tymoshenko predicted a switch to the professional army from January 1, 2009."

http://www.ukrinform.ua/eng/order/?id=184225

Fair Market Prices vs Stable Prices

The Ukrainian Prime Minister Azarov seems to confuse things - 'fair' market prices do not mean 'stable' prices...

KYIV, March 31 /UKRINFORM/. While opening the Cabinet of Ministers' meeting on Wednesday, Ukrainian Prime Minister Mykola Azarov said that the government's economic block had not taken enough measures to guarantee price stabilization in the market.

"I draw the attention of Kliuev and Tihipko to insufficiency of the measures they are taking," the Prime Minister emphasized adding that price stability is the main condition for positive changes in the economic and social areas.

At the same time, he called on businessmen for setting fair market prices, because price rise in one industry entails rises in others.

http://www.ukrinform.ua/eng/order/?id=184304

Are Universities Failing their Graduates?

The Foundation for Effective Governance today organized a debate on whether Ukrainian universities are doing a good job educating their students.

http://debaty.org/en/speakers/edu_ukr

The opponents' arguments basically can be summarized as - life in Ukraine is hard with corruption, government over-regulation and lots of unfairness - at university, students experience all that so they learn a lot about real life.

An interesting point of view, to say the least, but it confirms that the only conclusion can be that systemic change is needed indeed.

Listen to the President - If not, You're a Monopolist

the below statement is rather interesting and worrisome as it shows that the AMCU is becoming a political instrument rather than a guarantor of a level playing field.

""Following a directive by the President of Ukraine concerning ensuring stability of prices and tariffs at the socially significant markets, the Antimonopoly Committee proposed that Kyivstar abandon raising of tariffs for its services, report to the Committee about this done, and inform the publicity," the statement quotes Committee acting chairman Oleksandr Melnychenko as saying.

He stressed, if the operator raised the tariffs the Committee would consider these acts violation of competition laws."

http://www.un.ua/eng/article/256787.html

Search in Russia

A very interesting article on the politics of search engines

"Russia may pump $100 million into launching a national search engine "

http://www.theatlantic.com/business/archive/2010/03/move-over-china-google-has-a-russia-problem-too/38089/

A Free Economic Country?

The new government is considering to re-introduce Free Economic Zones in Ukraine (http://www.kyivpost.com/news/business/bus_general/detail/62644/), zones that get special privileges (for example in terms of taxes or labor laws) to attract (foreign) investors (http://www.kyivpost.com/news/business/bus_general/detail/62644/). This idea is not new – even back in 2000, one commentator on the discussion on FEZ’s in Ukraine wrote ‘The debate has been on in Ukraine for about eight years.’ (http://pdc.ceu.hu/archive/00001290/01/26.pdf). Also in the academic literature there is a vast number of studies on the issue, which, taken together, seem to suggest that sometimes Free Economic Zones work. For example, a recent paper on China, (http://personal.lse.ac.uk/wangj2/Jin%20Wang%20JMP.pdf), by Jin Wang of the London School of Economics finds that ‘that the policy package, including private property rights protection, tax breaks and land use policy, increases per capita municipal foreign direct investment by 58% in the form of foreign-invested and export-oriented industrial enterprises’, and finds that this effect is not off-set by a reduction in non- FEZ municipalities. At the other side, a study on ‘state economic zones’ in California, which also offer tax advantages, by David Neumark of the University of California at Irvine (http://www.economics.uci.edu/docs/micro/w09/neumark.pdf) finds no effect on employment.

Whatever the case, even if FEZs turn out to be effective, this would be not so much an argument for establishing FEZs in specific government-chosen locations as well an argument for making the whole country an FEZ.

Lack of Reform - Whom to Blame?

"The poll also found that 61% of respondents are not willing to support unpopular reforms."

http://www.ukrinform.ua/eng/order/?id=183939

Useless Professions?

This article claims to identify the most 'useless' professions - when reading further one will notice that usefulness is defined as professions that benefit the state, which is a rather peculiar definition

http://kyivweekly.com.ua/pulse/society/2010/03/25/014713.html

Cost of Living - International Comparison

"Kiev has an overall cost of living index which equates it with middle cost of living locations. The overall cost of living index is comprised of the prices for defined quantities of the same goods and services across all 13 Basket Groups. Kiev is currently ranked 153 overall, most expensive place in the world for expatriates to live, out of 276 international locations."

http://expatriatepay.blogspot.com/2010/03/ukraine-kiev-cost-of-living-january.html

Innovate Marketing Indeed

"Hundreds of computer geeks, most of them students putting themselves through college, crammed into three floors of an office building in an industrial section of Ukraine's capital Kiev, churning out code at a frenzied pace. They were creating some of the world's most pernicious, and profitable, computer viruses."

http://www.reuters.com/article/idUSTRE62N29T20100324?type=technologyNews

Intellectual Protection (or Lack Thereof)

"Eighty-two percent of companies in Ukraine have been involved in disputes over intellectual property rights in the past three years, according to the results of a poll commissioned by the Arzinger law firm and conducted by the InMind research company."

While I believe that the lack of intellectual protection is an issue in Ukraine, I think this conclusion overstates the issue somewhat. If you read further, most respondents are from big companies in specific sectors.

http://un.ua/eng/article/255504.html

When Is Somebody Too Old to Work?

The European Social Survey has an interesting question asking

"After what age would you say a (woman/man) is generally too old to be working 20

hours or more per week?"

In Ukraine, the average reply is 54 for women and 59 for men - which is the lowest for all countries surveyed (see figure 2 in vetnet.mixxt.org/networks/files/download.7584)

This suggest that attempts to increase the pension age will not be well received. One possible solution is to reframe the discussion in terms of years worked, like in 'a person can get a full pension after X years of working' (something they are trying to do now in Belgium).

Enjoy Blog Nr 200!

"The prime minister also explained why there are no women in the government.

Today the situation in the state is very difficult, that is why we formed the government only of those people who are ready to work for 16-18 hours and are in power to implement reforms. Reforms do not fall into women's competence," said Azarov, while adding that he greatly respects women.

http://www.interfax.com.ua/eng/main/34554/

Excessive Optimism or Lack of Economics Knowledge?

"20% expressed confidence that the rate would return to a pre-crisis level of UAH 5.05/USD 1."

http://www.ukrinform.ua/eng/order/?id=183411

Optimism at the Economist

'Through luck, judgment and friendly help, eastern Europe has staved off disaster.'

http://www.economist.com/world/europe/displaystory.cfm?story_id=15719286

Small Money, Big Problems II

Yes, even in Ukraine, people argue that eliminating small coins will lead to inflation!

"Meanwhile, Oleh Soskin, director of the Society Transformation Institute, believes that this year the inflation in the country will be at the level of 25 percent. InterMedia Consulting informs that the expert sees the reason for price increase also in the desire of the National Bank to withdraw from circulation coins with the nominal value of one and two kopecks. In Soskin’s opinion, this betrays a deliberate stimulation of inflation. The expert stressed: “There is no need to withdraw one- and two-kopeck coins. Every country has those. It will lead to the rounding up of the prices. Nobody rounds them down. It means if the price was, for example, 34 kopecks they will make it at least 35 and 50 at the most, so that it would be possible to pay with one coin. There is no country where these coins are being withdrawn; they are very cheap. They should be a signal for people that there is a totally stable monetary system in the country, including the situation with coins.”

http://www.day.kiev.ua/293668/

Corruption in Ukrainian Higher Education

An interesting report on corruption in higher education admissions in Ukraine

http://www.pace.org.ua/images/stories/Corruption_in_Higher_Education__Report-2009_ENG_Final.pdf

Roughly, the results show that many people belief there is corruption, that relatively few people experience corruption and that most believe that it's the parents and graduates themselves who initiate the corrupt activity.

The Economics of Mega Events

For those who still think hosting a major sports event (like UEFA 2012) has positive economic effects, read

http://www.imf.org/external/pubs/ft/fandd/2010/03/index.htm

and change your mind.

Robbers vs Employees

An interesting article in the Kyiv Weekly suggesting Ukrainian banks lose more money to employees than to bank robbers!

http://eng.weekly.ua/accent/vlast/2010/03/04/154319.html

Studying Economics Improves Well Being

This study will undoubtedly bring lots of happiness to economists: stuydying economics makes one happy!

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1557358

(via http://www.marginalrevolution.com/)

Where Are The Women?

An all male cabinet... and that so soon after March 8...

http://www.kyivpost.com/news/nation/detail/61558/

Small Money, Big Problems?

The Ukrainian national Bank recently announced it would like to stop issuing coins of one and two-kopecks (http://www.ukrinform.ua/eng/order/?id=182513) because according to opinion polls these coins have lost their usefulness. Given that people lose and destroy coins, stopping to issue a coin basically means gradually eliminating the coin altogether.

Many countries have eliminated small denomination coins before, and often such initiatives generate lots of discussion – Wikipedia has a good summary on the US debate, including on two bills on eliminating the 1 US$ cent coin, that were proposed to the US congress but that never passed.(http://en.wikipedia.org/wiki/Efforts_to_eliminate_the_penny_in_the_United_States).

One common cause of popular worry in these discussions is the alleged price increasing effect, the idea that shop owners will use the opportunity to increase prices up, instead of rounding up or down the price to the nearest 5 kopeks. Or that, because many prices end on .99 and few prices end on 0.01, rounding up will be much more common than rounding down. Academics have had heated debates about this second effect (see for example http://college.holycross.edu/eej/Volume27/V27N4P433_442.pdf and http://college.holycross.edu/eej/Volume33/V33N1P139_146.pdf)

Both effects would lead to a (one time) surge in inflation. But academics agree that overall, the effect on inflation would be very small for all but the lowest priced items: an increase of a price say from 9.99 to 10 would only be an increase of one hundredth of a percent. For the US, one study estimated that eliminating the 1$ cent coin would increase overall inflation in the US by one hundredth of a percent, which for all practical purposes is negligible.

Given the inflation levels in Ukraine, the proposal to stop issuing new 1 or 2 kopeks coins looks very timely as since the introduction of the UAH in 1996, 5 kopeks now are about as valuable as 1 kopek in 1996. Moreover, the price of stainless steel (which is used to make the one and two kopeks coins) is again increasing after a serious drop last year, making it more costly to produce such coins. I haven’t seen estimates of the cost of producing UAH kopeks but for Canada, academics have computed that the cost of producing a 1 cent coin is more expensive than 1 cent – see http://economics.ca/cgi/jab?journal=cpp&view=v29n4/CPPv29n4p511.pdf - for the US, recent numbers suggest the same http://college.holycross.edu/eej/Volume33/V33N1P139_146.pdf.

Journalistic Optimism

if we have to believe the author of the below article, we need to forget about China or the BRICs, Ukraine is the place to be.

"

Many world companies preparing to move production from China to Ukraine
"Ukraine has a good location, well-educated workforce, which has all the components to do a good job. That is, we are here to create more factories, more local producers and to make production for export," General Director of Phillips Ukraine LLC Maarten Durville said.

According to him, the main reason why Ukraine is yet seen as a competitor of the Asian region - a higher cost of production in Asia. This, in particular, contributed to a significant devaluation of the hryvnia against major world currencies, which made the export production in Ukraine more favorable than in many other countries.

"

http://www.nrcu.gov.ua/index.php?id=148&listid=113270

Memory

For all those that have problems remembering, read this

http://www.google.com/hostednews/afp/article/ALeqM5g5pjn3CE9MKGfSs4O9gZqwqC0ucg

Risks

A very nice blog on the risks related to the recall of Toyota vehicles

"

"There hasn't been a discussion about the actual risk of driving one of Toyota's recalled vehicles," said Fischbeck, a professor of social and decision sciences and engineering and public policy. "Even the messages from the Transportation Secretary have been confusing. First, it's a recommendation not to drive the cars in question at all. Then, that was retracted. I think it's important for people to realize that when you look at the actual risk of driving one of these cars, it's actually very low."

Consumers also may want to reconsider parking their recalled Toyotas until repairs have been made. "Replacing driving by walking really increases the risk of dying," Fischbeck said. "Walking a mile is 19 times or 1,900 percent more dangerous than driving a mile in a recalled Toyota. Driving while using a cell phone would increase risk much more than the chance of having a stuck accelerator."

"

http://www.cmu.edu/news/archive/2010/February/feb25_toyotarisk.shtml

Women's Day

Given that's it's Women's day on Monday, several newspapers and magazines have made rankings of business women.

http://eng.weekly.ua/foto/

From the above ranking, it seems women make money from alcohol, food and beauty

http://delo.ua/topwomen/

Last year I wrote a column on women in business for Investgazeta, which can be found here

http://www.kse.org.ua/events.htm?id_category=6&id=34

Smoking Elasticities

Candidate Prime Minister Azarov allegedly claimed

“Whoever drink vodka, continues drinking it. The same can be said of tobacco: people who smoke continue to smoke,” Azarov said. “But they pay Hr 2-3 more per pack now. And this means the additional Hr 2-3 could’ve been spent on groceries, clothing, transportation expenses.”

http://www.kyivpost.com/news/nation/detail/60559/

Of course, this goes against any economic intuition (a price increase typically leads to a decrease in demand) and against empirical estimates. A very recent study on this topic can be found here

http://www.nber.org/papers/w15781

The Need for Positive Films

" Ukrtelefilm needs to revise the subject-matter plan of films for 2010, because now "the plots of films are 90-percent tragic," Mykola Zhulynskyi, chair of the National Council for Culture and Spirituality, told a board meeting of the State Committee for Television and Radio Broadcasting."

http://www.ukrinform.ua/eng/order/?id=182354

State Employment

"Over the years of Ukraine's independence, the number of officers of state grew 1.76 fold on average (from 170,000 to 300,000), according to the Dzerkalo Tyzhnia weekly newspaper, UKRINFORM reports."

http://www.ukrinform.ua/eng/order/?id=182422

Wasn't everybody working for the state under communism?

Explaining Ukraine's Performance at the Olympics

Why Ukraine isn't mentioned explicitly the explanation of the lack of medals for Ukraine can be inferred from this article

http://www.slate.com/id/2246514/

"I've got a couple of other theories for some of the variation from the model. Russia's athletic performance is in relative decline because the whole country is in relative decline. In the post-Soviet era, Russia's health, life expectancy, and population have declined. In the past two decades, many of its most ambitious citizens, including world-class athletes and their families, have emigrated. "Emigration probably has some impact," said Johnson. "For any nation where quality of life is diminishing, people with world-class opportunities leave." In Beijing, for example,gymnast Nastia Liukin, a Moscow native, won medals for the United States, not Russia. Italy, another country in economic and demographic decline, similar fell on its face in Vancouver. The model, which perhaps gave too much weight to Italy's impressive 2006 Turin performance, projected the Italians would win 19 medals. They took home only five."

and

"As it was for the Austrian skiers, the Vancouver Olympics were a little chastening for Prof. Johnson and his model. Over the past few Olympics, the model has a 94 percent correlation with the actual medal count per country and about an 88 percent correlation with the actual gold medal haul per country. But this year, not so much. "The predictions were less accurate this year than in any previous Olympics for which we've run numbers," Johnson said. "That suggests to me that something changed and these games were unusual.""

Deal or No Deal

An interview with Thierry Post in Dehn

http://www.day.kiev.ua/293079/

the paper can be found here

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=636508

Professionals or Politicians

'Most Ukrainians do not want politician for prime minister'

"Ukraine needs a professional premier, who will implement unpopular reforms, the Kyiv Gorshenin Institute of Management Issues said in comment on a recent poll.

The opinion is shared by the overwhelming majority of respondents (81.7%). Some 68.4% said that Ukraine needed such a prime minister for sure, and 13.3% said they were inclined to that opinion.

A total of 5.9% of the respondents said that Ukraine needed a politician for prime minister, who would be guided with voters' opinion and hold a populist policy for winning the next election."

http://www.kyivpost.com/news/politics/detail/60731/

This is an interesting finding - and you would probably get the same results if you asked Ukrainians about whether they want 'professionals' for MP or president.

The question then becomes why Ukrainians elect 'non-professional' politicians and why professionals don't become political candidates?