(KIEV)-Strong international hopes for sweeping democratic transformation in Ukraine were put to the test by the grave economic crisis, which followed the “Orange Revolution” in December 2004. The first hundred days of the new Ukrainian government headed by Victor Yanukovich have buoyed Western market analysts’ optimism. While the new government has been in power for only a few months, its results even in the short run deserve attention and mirror some of the positive developments it secured during its first term, 2003-2004.

Yanukovich’s government has changed it approach in several areas. Its budget policies are guided by realism, with social spending no longer be a part of electioneering, determined rather by the country’s actual capabilities. If the 2006 budget, developed by Yuri Yekhanurov’s government, was largely election-oriented and provided for raising social spending without regard for revenues, there is now a new air realistic appraisal linked to expected revenues and desired spending.

The new government has lowered hopes for privatization-driven income and does not view privatization as a quick-fix budget tool. This conclusion came from the earlier effort to privatize the Krivorozhstal metallurgical complex that involved a series of failing re-sales. Yanukovich’s government relies more on the advice of experts who insist that projections of budgetary revenues should not be based on large-scale privatization.

The Kiev government also prefers an export orientation, taking its place in the global economy, rather than relying on the stimulation of imports. Economic growth, it believes, can come from exports, or from domestic demand for the same goods.

As an organic part of Europe, in time Ukraine intends to join the European Union. The government believes, however, there is little hope that Brussels will allow such a decision in the near future, and so Kiev regards its growing trade with Russia as a means of tactical economic revival that does not contradict the longer range strategic objective of moving into Europe.

Ukrainian sources indicate that Ukraine is in principle ready to join the World Trade Organization (WTO), though a number of issues remain unresolved. Yanukovich has repeatedly pointed out that agriculture – an important sector of Ukrainian economy - will suffer; thus a farmer support program will need to be developed to cushion affiliations with the WTO.
 
Yanukovich’s government considers free economic zones another important tool for attracting foreign investment. Earlier models in 2004 showed both some successes and failures. The current cabinet considers it necessary to abandon the zones where the experiment failed while simultaneously bolstering profitable ones such as Donbass and Trans-Carpathian.