Jonathan Holslag, a Belgian writer on political and economic issues, is a skeptic when it comes to Ukraine’s hand-to-mouth economic model.
An expert on China, Holslag says Ukraine, and
its neighbor the European Union, face similar challenges despite their massive
differences. “Ukraine and the EU – we’re in the same space of this vast
Eurasian continent looking at mighty, mighty competitors in the East,” said
Holslag, 33, during a visit to Kyiv on Oct. 1-2 to give a lecture.
Having met Chinese leader Xi Jinping three
times in person, Holslag calls him a pragmatic who is comparable to Russian
President Vladimir Putin in their desire to elevate the status and respect of their
countries on the global stage.
Holslag’s latest book “How Europe Will Survive
the Asian Century” came out earlier this year.
China considers Ukraine a stepping stone to
the EU market due to the preferential trade schemes, he says. “But we should
not expect China to create jobs in Ukraine. China wants to create jobs for its
own people – it needs six million new jobs annually to avoid unemployment which
is being done through a very aggressive exporting policy, largely advanced by
state-owned credit facilities,” Holslag told the Kyiv Post.
He sees huge demand in China for Ukrainian
grain and meat as the Communist Party-led 1.4 billion nation is likely to
double or even triple consumption of meat, soy and grain in the next two
decades. Prices will also increase. “But Ukraine needs to develop its food
processing. You don’t have to export grain, but cookies. Not meat, but
sausages. Brand them, bring them to Asian markets using Asian loans. We
shouldn’t tolerate China turning Ukraine into a resource exporting country,”
the economist said.
He pointed out that Asia’s rise hasn’t been
that impressive given that it grew by 6.5 percent over the last decade, adding
that inflation has chipped 4.5 percentage points of that. Employment grew by
only 0.8 percent, while the Asian population has grown by 5.1 percent annually.
If China was to take the Russian side in its
war against Ukraine, it would be severely pressured by Japan and would also
lead to more aggressive moves by Malaysia, the Philippines and Vietnam in their
territorial disputes with China. So, the emerging superpower will unlikely
offer very much support, said the doctoral degree holder in international
politics from the University of Brussels.
“China does anything to keep business
relations open,” Holslag added.
When asked about President Petro Poroshenko’s
bid to apply for EU membership in 2020, Holslag said: “Good luck!”
“To put it bluntly, you’re on your own when it
comes to managing the economy. And you get lots of competition from us rather
than assistance,” he says. To do well Ukraine has to diversify its economic and
trade interests, he noted.
He says the EU is mainly interested in Ukraine
as an export market. “Honestly, I don’t see a big German car producer in the
short term building a plant in Ukraine. First of all, there’s enough capacity
to build cars in the EU. And around Ukraine there’s no market – the Balkans,
Caucasus and Turkey that already produces too many cars,” Holslag says.
Another problem is that Ukraine is too
dependent on large businesses. As of now, the share of small and medium
business in the nation’s gross domestic product does not exceed 15 percent,
according to Baker Tilly, a British accountancy firm that operates in Ukraine.
In developed economies this share stands at 50
percent, according to Deutsche Bank analysis.
“The nearest future for the SMEs (small and
medium enterprises) in Ukraine will continue to be very difficult… Ukraine
can’t say people are its advantage, because demographics is not going up. And
it’s not wages because we can produce as cheaply in Bulgaria and Romania. And
it’s not brains because that’s what you have everywhere,” concludes Holslag.
He says that becoming an export-oriented
economy should not be the ultimate goal for Ukraine’s government. Ukraine, he
says, should strive to develop domestic demand. Stronger internal demand is
crucial for breaking the negative economic trend, while education could become
a powerful factor for creating a new generation of quality consumers.
Kyiv Post associate business editor
Ivan Verstyuk can be reached at [email protected].
