Hands Off The Market

KIEV, Ukraine -- Prime Minster Viktor Yanukovych’s stern warning to sunflower oil exporters last week suggests that his government is incapable of learning from past mistakes.

PM Viktor Yanukovych
Instead of recognizing that inflation is to be expected when social payments are increased just before elections, Yanukovych’s Party of Regions has looked to pin inflation on business and political opponents.

Ukraine is the world’s second largest sunflower oil producer after Russia. Export restrictions on this staple are not a solution to higher prices because they ultimately create additional problems.

The last time the Yanukovych government imposed export restrictions (on grain last year), farmers were hit the worst, as they were unable to fetch the best prices for their produce.

Multinational traders also incurred hundreds of millions of dollars in losses.

Farmers unable to secure higher revenues will be unable to reinvest into their operations. Furthermore, the international business community will have additional proof that Ukraine is unpredictable and chaotic – an image the country’s detractors would like to promote.

As we have emphasized in the past: Soviet-style management of the economy is bad for business, bad for the market, bad for the country and bad for the farmers.

The Ukrainian government needs to be told again and again: Stay out of the market.

Source: Kyiv Post