Reading over the countless articles that have recently appeared on the global financial and economic crises and their potential effects on Ukraine, I can’t blame anyone for getting depressed.

There is little doubt that the world’s richest economies will experience negative growth in 2009, and it is highly likely that Ukraine’s gross domestic product will not grow substantially in 2009.

Although the $16.4 billion committed by the IMF to “stabilize” Ukraine’s economy may help the banking sector in the short-term, the outlook for the country’s export sector, primarily metallurgy, remains bleak. The IMF cannot increase the world price of steel, and given that this commodity represents over 40 percent of Ukraine’s exports, short-term pessimism is justified.

Many of my friends work in foreign-based companies whose top management is constantly concerned with stock market valuations. When those fall, investments in emerging markets are among the first to be cut.

If you work in consulting, or in an investment advisory services company, now might be the time to think about a career change. If you’re a talented financial director, you may find yourself promoted to Chief Executive Officer during the next few years – over the head of the marketing director who was being eyed for the job in the past.

But don’t rejoice too soon: the job will not be easy!

Pessimism breads pessimism, and for Ukraine as a whole, pessimist discourse seems to be a deeply ingrained cultural trait. At the same time, Ukrainians’ evaluations of their collective environment do not necessarily reflect what they think and do at an individual level.

I recall a roundtable discussion held as part of ‘The Economist Conference’ in Kyiv last year with leaders from some of the world’s largest multinational corporations that have invested in Ukraine all complaining about their local workers being “overly entrepreneurial.”

The lament was expressed in the context of comparison with Russia, where a company that provides training and a decent benefits package to workers can expect their long-term loyalty. In Ukraine, an employee who receives training is apt to open his or her own business after 2-3 years of experience with a multinational firm. Ukrainians love to complain, but they also have a fantastic ability to survive and prosper. They drive their entrepreneurial activity underground, they avoid taxes, they bribe officials, but they produce, they survive and they prosper.

This entrepreneurial spirit is what makes me optimistic about Ukraine’s prospects for 2010 and beyond. Indeed, the short term economic outlook is bleak: salaries will fall, unemployment will rise, inflation will eat into the population’s savings, credit will tighten, and foreign investment will decrease. And in the midst of all of that despair, the experience of the 1990’s (when official GDP fell to 40 percent of pre-independence levels) shows that adept Ukrainians will find entrepreneurial opportunities. New niche markets will appear for innovative small companies offering unique products to discerning consumers.

The days of the large holding company are numbered. The credit crunch and a decrease in FDI will lead to a refocusing of corporate priorities from increasing capitalization to improving cash flow. During the next 3-5 years we will see a disbanding of financial-industrial groups into specialized companies. The trend toward vertical integration will be replaced with a focus on outsourcing – including to small companies – as medium and large firms concentrate on their key competencies and reduce financing for non-core activities.

In other words, during the medium term, Ukraine’s economy will be transformed from one that is dominated by Donbas-based export-oriented conglomerates to one that is built on small companies whose owner-managers serve a local clientele. Free trade agreements with the European Union and with other countries should now become a real priority for the Ukrainian government if these small companies are to gain even limited access to foreign markets.

The model that Ukraine must now build is one that is closer to that of Chile in the 1980s or Taiwan in the 1970s – meaning a small- and medium-sized business -based economy – rather than to the South Korean example that the country has been attempting to follow during recent years. If this is recognized – and it’s a big “if,” the long-term prospects for Ukraine look quite good.

However, such a realignment of Ukraine’s regional economic balance will not come without much political pain. The rise of small business will likely entail an increase in the political influence of Ukraine’s western regions, where the entrepreneurial spirit was destroyed far less during the Soviet period than in other regions. And this will lead to an increase in calls for the "Ukrainianization‘ of the country’s cultural and educational spheres. Odesa will always be Odesa, and the chernozem (black soil) of the central regions will allow the agricultural heartland to retain its status as the breadbasket of Europe, if, of course, land reform happens quickly and is coupled with a free trade agreement with the EU.

True, much depends upon more “ifs.” But the relative decline of the East is likely to lead to increased political instability. Unemployment in the eastern regions of the country will no doubt result in protest marches on the capital, and economic demands will likely be coupled with calls for protection of the Russian language and culture.

Certainly, Ukraine’s northern neighbor will not spare funding for the fomenting of such instability. So, the political scene will remain interesting in Ukraine.

However, during the last two decades, Ukrainians have proven that political conflict in Kyiv is a game that has little effect on their local economic activities. Ukrainians are extremely entrepreneurial – a fact that the Soviet regime recognized during the 1930’s when Stalin attempted to break the back of the kulaks.

The fact that he failed, as evidenced by the growth of small business during the 1990s, is what makes me optimistic with regard to this country’s prospects during the next decade. Next year will hurt, but after that we just may see the emergence of a new “tiger” on the background of a world economic slump.

In the words of Fox Mulder: “I want to believe!”

Mychailo Wynnyckyj was born in Canada and received his PhD from Cambridge University, having written his dissertation on post-Soviet entrepreneurship. He has been living in Ukraine since 2002, teaching at Kyiv-Mohyla Business School and at the department of Sociology at Kyiv-Mohyla Academy. Currently he is Director of the Kyiv-Mohyla Doctoral School and can be reached at mychailo@ukma.kiev.ua.