You're reading: Korolevska: Time to cut bureaucracy

Generally recognized as “the most beautiful” Ukrainian lawmaker, former businesswoman Natalia Korolevska, 35, has secured top positions in most influential Ukrainian women ratings.

A graduate of Eastern Ukrainian National University and Donetsk State Governance Academy, Korolevska started her business career at age 18, with a company co-owned by her older brother Kostyantyn, and soon branched out with some of her own ventures in her native Luhansk Oblast. In 2004, she supported Viktor Yanukovych’s losing bid for president.

But shortly after the election, she joined the team of ex-Prime Minister Yulia Tymoshenko, who lost her bid for president on Feb. 7. Korolevska rose quickly in politics. She calls herself a team player who wants free-market reforms in the Ukrainian economy and business sector. Korolevska talked to the Kyiv Post about her vision of what is happening in Ukraine.

KP: How’s life in the opposition after being in power for quite a while?

NK: “Power is a big challenge that hardens people and releases all their inner ambitions, hidden grievances. So the last two and a half years have been not so easy – our leader [Tymoshenko] was busy with her governance tasks while the party was kind of living its own life.

KP: Have you learned from your mistakes? What are they?

NK: “The major problems in the eastern parts of Ukraine are inflated numbers of party members, weak structure [and] our opponents’ ‘spies.’ I never took part in party organization before, as I am more in charge of economic bloc, but the organization we had there just shocked me.”

KP: Eastern Ukraine fully supported Viktor Yanukovych for president. Maybe he’s not that bad if people voted for him?

NK: “Indeed, he got overwhelming support there. Western Ukrainians are property-oriented and people make more aware choices, while eastern Ukraine has always been a cradle of proletarian ideas and the choice is more emotion-driven. Luhansk region used to vote Communist for ages, and neither [ex-president Leonid] Kuchma’s regime nor representatives of the current ruling party could break it. It didn’t happen until the 2004 presidential vote, when a clear division line was drawn between “us” and “them,” between the “orange” [Viktor Yushchenko’s supporters] and the “white & blue” [Yanukovych’s supporters] and changed the voting pattern. So the “white & blues” won the region, as they were mentally closer, thus more understandable. Besides, Yanukovych’s team managed to convince people there that the “orange” politicians are enemies. So no matter how Tymoshenko tackles the eastern parts of Ukraine, people associate her with Yushchenko, and Yushchenko is their top nemesis. So we were trying to build our campaign on economic issues instead. Unfortunately we didn’t get the expected feedback from voters, but I am thinking positive. Anyway, we managed to increase Tymoshenko’s support in Donetsk and Luhansk by 30 percent compared to the last vote.”

KP: Your party fellows have voiced some fears regarding political repression against Tymoshenko. Are those fears well-grounded?

NK: “Those democratic traditions are rooted in Ukraine over the last five years strongly, and any significant threat to democracy would cause public protests. I understand that Yanukovych’s team is full of ‘hawks’ striving for revenge – those are pretty normal understandable human instincts, but it’s something intolerable in politics. So if they want to do some first-rate job they should forget about revenge. If there are accusations against Tymoshenko, we are ready to prove our case in a court. Yanukovych’s team, however, is actively involved in political cleansing in the regions, ousting our supporters. This “tradition” was started by Yushchenko and I think that Yanukovych should stop it. The stronger leader is, the more forgiving he should be.”

KP: Voter fatigue is sky high. It seems like many voters are tired of the same old faces. Perhaps it is time for Tymoshenko and other politicians to step down, allowing fresh faces to take over?

NK: “No, politics is like jungle, only the strongest will survive. So it really does not make any sense to step down and let a younger generation take over. You saw a phenomenon of young ‘reformer’ Sergiy Tigipko – he promised a lot, but his real performance has nothing in common with his TV image.”

KP: How far do your personal ambitions go?

NK: “Far enough, I am a pretty ambitious person.”

KP: So, shall we see you in charge of a political party one day?

NK: “Leadership skills does not necessarily mean being in the top position. I came from the business sector and I can assure that our country won’t be better off until economic reforms take place. Ukraine is now ranked number 142 in economic freedoms rating, while it was number 146 a year ago. We made it happen! I am not saying it’s a huge progress, but it’s the result of hard work. That economic legislation adopted over the last three years is often better than in other European countries, the problem is these laws are not being respected and implemented. Now Yanukovych has a unique opportunity to pass laws and make them work.”

KP: What’s would you say about 100 days of the new government and Yanukovych? Are there any positive developments?

NK: “When Yanukovych took the office he called off all the drafts submitted to the parliament by BYuT, but a couple of weeks later they were returned. I think it was a positive signal proving that some of our ideas match. Those drafts are currently on hold, but I hope that will change soon. First, we should adopt a tax code. The investment and business climate here won’t be favorable as long as we have ‘the rule of bureaucracy,’ when each bureaucrat has his own take on the laws and interprets those 1,200 amendments to [value-added tax] legislation as he pleases.”

KP: Currently a lot of tax administrations refuse to accept reports and declarations from businesses with low profit, losses or VAT refund claims. This is not new, but with the current government it seems to be even more common. Do know why?

NK: “By the end of 2009, the VAT refund debt was at Hr 20 billion. Despite the financial crisis, the government was paying pensions and salaries and trying to find common ground with exporters. That was last year. This year shows some economic growth and, paradoxically, the VAT refund debts also grew to Hr 35-40 billion. Probably oligarchs have their own ways to solve those problems, while small and medium businesses were left on their own. At first, the tax authorities deny a tax declaration from a business owner, then fine him or start a criminal case against him. Then follows cancellation of license and a new owner comes, or the enterprise goes under personal control of the bureaucrat who sanctioned its closure. We have seen it in the early 2000s. And when you realize it’s a nationwide tendency, you feel terrified. If we don’t change the structure of Ukraine’s economy today, if authorities do not stop repressing medium and small businesses we have all the chances to get worse off than Greece and Iceland.”

KP: What are the threats from the hidden budget deficit?

NK: “[The government] will have to either sequester the budget (cut expenditures) or borrow to cover the deficit. There are three possible options: raising taxes, cutting the budget or borrowing more money. Now the government is trying to solve this problem with the help of fiscal tools. But the methods they are applying are pushing economy into the shadow, which is already reaching 40-45 percent, but it might grow to 60 percent by year-end. The only way of drawing money to the state budget is to bring the economy out of the shadows, stop “wringing” business out and create favorable conditions for them.”

KP: So, basically, all those methods are used for filling the budget?

NK: “Yes, but it doesn’t work as you can see! They have the entire power vertical under control, they can pass any law by hitting a button, and with all that repressive machinery at work now, they can only collect 70 percent of the taxes collected in 2009. So either the collected money bypasses the state budget and sinks in somebody’s pockets or the machine represses the wrong people. Perhaps, they should collect taxes from somebody else? Maybe small and medium enterprises can’t provide enough money to cover the gaps? Two years ago businesses were pretty “plump”, last year made them lose a lot of weight, and now they look like a skeleton.”

KP: Does it make any sense to borrow money from the International Monetary Fund now?

NK: “We can borrow for investment purposes. We have a number of high-efficiency infrastructure projects able to boost the country’s competitiveness. But borrowing IMF funds for covering the budget gaps is a bad idea. Many reproach Tymoshenko for doing this, but last year we came close to default, to a social catastrophe, and the government had to pay pensions, salaries to state employees, so they had to get this money by all means.”

KP: The budget assumes 5.3 percent growth in gross domestic product. Is it feasible?

NK: “I think if those who are in charge of the state keep creating those nightmarish conditions for business, we’ll have a 3 percent GDP decline by the end of this year. We could have relied on GDP growth due to chemical and metallurgical products exports, but we can’t ignore the economic slowdown in Europe and unfavorable conditions on foreign markets. I don’t want to sound pessimistic though – this worst-case scenario can be prevented now and we can show a significant economic growth. We have to relieve the fiscal pressure on businesses and apply economic stimuli. In particular, we need to cancel more than 20 types of licenses, reduce the number of control agencies by 40 percent and make business-friendly legislation work. All these drafts have been developed by our committee and submitted for Rada consideration I think [Yanukovych] has enough power to change the business climate in Ukraine and I hope he has the will to do it.”

KP: Your brother holds a high-level job in the Moscow city government and is considered influential there. Perhaps you have, with this family connection, a good view on what Russia’s intention towards Ukraine really is?

NK: “You know, my brother and I have always been good friends and we never fought. But when I got myself into politics we started arguing a lot and our relationship worsened. So we decided to save it by banning all political talks in the family.”


Kyiv Post staff writer Olesia Oleshko can be reached at
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