For Ukrainians, chaos reigns Election: Residents of the former "breadbasket of Europe" prepare to vote for Parliament, amid political and economic transition.

Sun Journal

March 28, 1998|By Susan Milligan | Susan Milligan,SPECIAL TO THE SUN

KIEV, Ukraine -- This is how Ukrainians take a taxi: They stand on the side of the road, arm outstretched, and wait for a car -- any car -- to stop. The two parties negotiate a price, unofficial, cheap and untaxed.

Licensed taxis are few and expensive, so Ukrainians respond as they do to so many aspects of their lives in this post-Communist nation: The system does not work, so ignore it. The result? A huge underground economy, widespread corruption and a cynical, exasperated electorate on the eve of parliamentary elections tomorrow.

Just seven years after independence from the former Soviet Union, Ukraine is still struggling to find its place in the world, caught between centuries of imperial or Communist rule and a modern era of open elections and Western consumer goods.

A typical street in Kiev might feature a spectacular, baroque-style theater, a grim, gray, Communist-era block of apartments and a Giorgio Armani boutique. Economically, Ukraine is a tantalizingly open market for investors, but old-style corruption hampers business deals.

The political situation is chaotic: The country has had seven prime ministers in as many years, several of whom left amid charges of corruption.

`Here in Ukraine, we don't ask who's kissing whom,` says Yuri Hnatkevych, a former member of the Verkhovna Rada, the Ukrainian Parliament. `We ask who's stealing more.`

The laws against corruption are largely ignored. Last year's `Clean Hands Campaign` faltered after its leader, the former minister of justice, quit in disgust over a lack of government commitment to the problem. `In a lot of ways, [Ukraine] is kind of a free-for-all,` says Nick Deychakiwsky, director of the Eurasia Foundation.

That is not an environment that makes Western governments and foreign investors happy. The West -- particularly the United States, which ranks Ukraine as its third-largest recipient of foreign aid -- wants Ukraine to be a stable democracy, because of its strategic location southwest of Russia.

Ukraine is bigger than France and, at 50 million, nearly as populous. Once it was known as the "breadbasket of Europe," and it has abundant supplies of iron, coal and hydroelectric energy. Ukrainians think their country should be rich.

Hopeful investors see a massive potential market if the country can be ruled by law instead of bribes. But Ukraine has drawn a mere $2 billion in direct foreign investment since independence. Hungary, one-fifth the size, has attracted $17 billion.

Investors are discouraged by an economy that is 60 percent black market, says Tomas Fiala, director of the Kiev office of Wood and Company, a brokerage firm. Also daunting, he says, is the multi-layered bureaucracy left over from the Communist era.

`The problems are not so much with the [criminal] mafia,` Fiala says. `The problems are really with the state bureaucracy and the state mafia.`

If the situation is frustrating for foreigners, it is grave for many Ukrainians. Caught in a political and economic transition, and lacking the foreign cash that could prop up the economy and raise living standards, Ukraine has lost the social services and public safety it had as a Soviet republic.

There is no middle class. A small, newly wealthy group of government officials, businessmen and crime figures linger in Kiev's expensive cafes and restaurants. Their fashionable girlfriends and wives shop for furs and imported designer clothes at boutiques patrolled by armed guards.

Meanwhile, most Ukrainians subsist on incomes averaging $80 a month -- when they get paid. Some miners have been waiting nearly 18 months for paychecks. Other workers are being paid in factory products that they can trade or sell. People supplement their meager incomes by using their cars as unofficial taxis or selling produce and cheap consumer goods in the subway underpasses.

Surviving in Ukraine means getting around the rules or ignoring them. Business people commonly have two sets of books -- a real one, and one to show to tax collectors.

Rule-dodging breeds ingenuity. When the government defined "alcoholic beverages" for taxation purposes as containing 8.5 percent alcohol, a clever brewery owner began selling individual-serving bottles of already-mixed cocktails whose alcoholic content was just beneath the threshold.

With restaurants expensive and retail rents pricey, many Kievans stay underground -- literally -- in the subway underpasses. This labyrinth is a popular meeting place for teen-agers who cannot afford to go to a cafe, and for adults peddling black-market goods for quick cash.

`Intelligent people are suffering, because people are not honest,` laments 73-year-old Natasha. Weeping, she would not give her last name. She supplements her $20-a-month pension by selling cigarettes in the underpass.

`The Communists were not perfect,` Natasha says. `But you could go to university for free. If you had to go to the hospital, it was free. I loved opera. You could go to the opera, and it cost

very little.`

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