Many headlines will make you believe that the sun has finally set on the Orange Revolution.  The reason of course is the fact that last week Viktor Yanukovych was approved by the Ukrainian parliament as prime minister, ending months of political battles, which at times turned physical, for power.  It is ironic that Yanukovych has now assumed the position of prime minister after having failed to win the presidency in the election that brought the Orange Revolution into the streets in the first place.

Amid speculation, more careful considerations must be given to what is taking place in Ukraine before proclaiming that democracy has run into the wall.  At the end of the day, what happened was the result of a political process that endured after neither party could secure an absolute majority in parliamentary elections earlier this year.  The Orange Coalition did not withstand the political pressures and crumbled as the influence shifted towards the Party of the Regions, which was able to secure the post of prime minister.

A close reading of the election results shows a country whose political divisions fall along geographical lines.  Viktor Yushchenko’s Our Ukraine is based in Eastern Ukraine whose nationalist aspirations were first given voice to by the Rukh movements.  A populist Timosehenko Bloc led by Yulia Timoshenko occupies the center, and Viktor Yanukovych’s Party of the Regions is solidly based in Eastern Ukraine’s Russian speaking area.  Several minor parties, including the Socialists and Communists hold seats spread out around the country.  The Orange parties’ failure to agree on a government platform was based on the animosity built up as a result of Timoshenko’s populism versus Our Ukraine’s market oriented-policies and Timoshenko’s need to dominate the political agenda.  When one of the minor parties had enough and defected, the Orange coalition collapsed and the forces of Yanukovych prevailed.

All this took place as one would predict it can happen in a parliamentary system – through public debates, campaigning for votes, and coalition-building between elected representatives.  We may just be observing a parliamentary democracy at work in Ukraine, not a failure of democratic process and certainly not the defeat of the Orange Revolution. 

While the experts are focusing on the political implications of the last week’s news -- mainly the position Ukraine will take between the East and the West -- the economic path the country is set to take deserves its share of the spotlight.  So, what lies ahead for the private sector in Ukraine following the comeback of Viktor Yanukovych as a prime minister?

The Declaration of National Unity, signed by Viktor Yanukovych and Viktor Yushchenko on August 3rd, sets forth several action plans in regards to the economic development of the country.  The Declaration calls for efforts to combat corruption and improve local governance, proposes the private sale of agricultural land, makes protection of property rights one of the key priorities, hints at the possibility of completing WTO negotiations by the end of the year, and refers to economic cooperation with all interested countries.  No doubt, the government will repair the breach with Russia, but not necessarily at the cost of Ukraine’s economic ties to the rest of the world.

While the government clearly signals its priorities in the national unity strategy, much will depend on the private sector itself in making sure that the free market-open trade agenda is fully implemented.  In fact, it is the private sector that will be able to determine its own path by working for the kind of business climate that can produce the socio-economic progress the country is looking for.  The foundation for this may already be in place.

In April 2006, following the parliamentary elections, the Ukrainian business community came together to develop a national business agenda titled “A Message from the Ukrainian Business Community to the Government” .   The manifesto was delivered to all parties elected in the Verkhovna Rada.  In doing so, the business community, led by the Institute for Competitive Society and the Ukrainian Center for Independent Political Research, recognized that it has a responsibility to advocate for concrete reforms that can produce economic growth and social stability.  This move has also positioned the private sector as the participant in reform efforts by opening the closed doors behind which policy was made.

The message delivered to members of parliament got a positive feedback.  In June 2006 a conference was held in Kiev to present the business community manifesto to representatives of the three major political parties – the Party of the Regions, Our Ukraine, and the Timoshenko Bloc.  The parties signaled that they were ready to work in cooperation with other parties in the Rada on improving the business climate in Ukraine in line with the reform priorities outlined by the business community.

Interestingly, the reform recommendations list put together by the business community this past April fits in nicely with economic vision for the country captured in the Declaration of National Unity.  It calls for privatization, protection of property rights, tax and judicial reform, improvements in local government, simplification of government regulations, and other reforms aimed at improving the market competitiveness of Ukrainian companies. 

Concrete steps are already being taken.  In July, the Verkhovna Rada set up a new Committee on Economic Development, Regulatory Policy, and Entrepreneurship.  What we are hearing from the business community is that the establishment of this new committee in the Vekhovna Rada signals the readiness of the new parliamentarians to seriously address entrepreneurship development issues. 

The sub-committee on Regulatory Policy and Entrepreneurship is now headed by Ksenia Lyapina, who has worked for years with the private sector to implement the National Business Agenda strategy.  Such a strategy requires the private sector to come together, identify major issues that hamper economic growth and market development, outline policy recommendations, and communicate a message of free market reform to policymakers.

Ukraine is now at one of those turning points in a country’s history when events can shape the political contest for years to come.  The pivotal question facing the new government and the opposition is will Ukraine continue to fight the battles of the cold war in terms of aligning with Russia or the West?  Or will the private sector be able to create the political will to forge the economic reforms needed to build a sound market economy and attract the foreign investment needed to sustain growth?  If the national business agenda prevails, creating property rights, a slimmed down regulatory climate, effective local government, and judicial reform, then Ukraine will resign the battles of nationalism to the history books once and for all.