In April of 1994 the author had his first interview with Viktor Pynzenyk, Doctor of Economics, Professor at Lviv University, and President of the Ukrainian Reform Support Fund. He had just been reelected to Parliament. The guru of nascent market reforms looked and behaved democratically, speaking about complex things in simple words. His assistant, Sergey Teryokhin, Director of the Ukrainian Reform Support Fund, appeared a bit too ambitious. He was browsing English-language sources with a PC (quite a novelty in this country eleven years ago) and citing some phrases to Pynzenyk from time to time. Pynzenyk was forty then. Teryokhin was thirty-one.

Now Pynzenyk is fifty and Teryokhin is turning forty-two. Pynzenyk has been appointed Finance Minister. Teryokhin has been appointed Economy Minister.

They have been working in a tandem for thirteen years. Their paths first crossed in 1992, when Pynzenyk was Vice Prime Minister in the Kuchma government and Teryokhin was a deputy minister.

Pynzenyk was blamed for all the problems the country was experiencing then (price hikes, hyperinflation, fraudulent trusts, “detrimental” privatizations, etc.). Nevertheless, he was in demand as an economist. After radical economic reforms were announced, he managed to stay in the post of Vice Prime Minister under three Premiers (Masol, Marchuk, Lazarenko) from the fall of 1994 until April of 1997. For his devotion to market reforms, he was called “Ukrainian Chubais”. But when he lost his job in 1997, he gave up his beloved economics and created the Reforms and Order party. He enthusiastically supported Viktor Yushchenko in the presidential race.

Now it is hard to say what Pynzenyk really is - a politician or an economist. A new generation of experts has matured since reforms were launched, and Pynzenyk’s main themes remain the same: the incongruity of the national budget to the country’s economic growth rate, and the concealment of one portion of money from the budget by another part of the government.

His colleague Teryokhin became a lawmaker thanks to his profound knowledge of economics (Vienna Institute; Aspen, Germany; Harvard) and his natural gift to find the end of the thread in the most entangled knot. He came to Parliament in August of 1994, four years later than Pynzenyk did. Very soon, he gained a strong position in the standing committee on finance and banking activity. For the last seven years he has been known as the main lobbyist in the Ukrainian Parliament.

Teryokhin is the author of tax laws, the bill on payments, dozens of legal acts on licensing and on the lottery business, and hundreds of amendments to existent laws. Such prolificacy was rumored to be not entirely disinterested: some newspapers criticized him for “strange changes” in his position. For example, he pressed for a low progressive income tax on individuals, but a couple of months later he gladly agreed to the “13% for all”.

All those criticisms notwithstanding, Teryokhin remained the Parliament’s main lobbyist and “polisher” of tax laws.

But when it came to fundamental issues, he rarely succeeded. The package of bills dubbed “Economic Growth - 97”, which he drafted jointly with Pynzenyk in a very short time and which was meant to reshape the entire system of taxation and retirement security, was turned down (perhaps because it was presented on the eve of the new fiscal year). All his attempts to adopt the Tax Code failed (perhaps because very few could work productively with such a smart and peremptory man).

Alexander Paskhaver, President of the Center for Economic Development, believes that Pynzenyk and Teryokhin will succeed in the new government.

“Both Pynzenyk and Teryokhin have rich experience in joint executive work and in bureaucracy. That’s very important for their future activity, although this experience is rather old and negative. They have always positioned themselves as liberal economists. Now they have to prove their ability to follow through on their ideas. Both want to ease the tax pressure, both want a more rational distribution of incomes and a decreased role of the value added tax. Both want to introduce a tax on property, which the rich resist in every way. Let’s wait and see if they succeed. But their greatest challenge is to stop the practice of using economic instruments as “shadow policy”, for taming the intractable and rewarding the obedient.”

According to Paskhaver, three months is too little to prove anything, but is enough to see the new ministers’ style of work and evaluate their ability to materialize ideas.

Their opponent, Viktor Suslov, the former Economy Minister and now the chairman of the State Commission for Regulation of Financial Services, has a different opinion.

“The positive thing is that neither is a career bureaucrat and neither needs to be taught how to work. Both have personal opinions and are able to independently draft serious legislative documents. And if the government carries out administrative reform (the first thing to begin with), as long as these ministers don’t get overwhelmed by redundant commissions, they have fair chances to bring about their ideas. Teryokhin is extraordinarily gifted, but he is going to have a hard time at first. He is not used to working in a big team. He will invite a couple of executives and start working on a project. But what should all the rest do - stay aside watching? In my opinion, to organize effective work by a large collective is the paramount task for the new ministers. There is even a risk of rash decisions in the beginning of their new career, because they are eager to prove themselves efficient as soon as possible.”

At the post of Finance Minister, Pynzenyk is going to feel very soon that serious changes have taken place in the budgetary sector since he left the government in 1997. Now that Ukraine has a Budget Code, the problem of congruity between macroeconomic figures and budget revenues looks very important. But it is even more important for the new minister to form a viable team, capable of dealing with financial flows. He needs good deputies. Until now such officers have been mute executors of orders given by their almighty boss Nikolai Azarov.

Pynzenyk has to overcome the conflict of interests and amalgamate the Tax Administration, the Treasury, and the Customs under his ministry’s wing. The necessity of this change is ripe, as the Finance Ministry’s role should increase as the national economy grows more civilized. Viktor Yushchenko has already blessed the idea. The question is whether it will work.

The Finance Ministry is supposed to draft a new tax code and secure its adoption within twelve months. Will Pynzenyk’s huge parliamentary experience help him or get in his way?

The problems that face Sergey Teryokhin are somewhat different. First of all, he has to concentrate on some particular field, because, unlike the ministries of agriculture, industry, and others, the Economy Ministry has nearly turned into a rudimentary appendage. Unlike other ministries that turn over between $500 million and $1.5 billion annually, the Economy Ministry has been humbly content with a mere $19 million.

Now that issues of European integration have been relegated to Vice Prime Minister Rybachuk, the Economy Ministry’s arena is reduced to macroeconomic forecasting and licensing. The latter is a very lucrative piece, but it is too small for a body of central government. So Teryokhin ought to launch (or at least announce) a radical reformation. He still has a little time to decide what exactly to reform.

It is unclear, though, if Teryokhin really needs this position that much. Judging from the government’s action program, our lives are supposed to hinge on insurance (retirement, medical, etc.) rather than salaries, pensions, or decent living standards. The issue of insurance takes as many as several paragraphs in the text of the action program, as if to suggest that Ukrainians are simply doomed without their insurance policies.

Our sources attribute such an extensive presentation of the “insurance idea” in the government’s action program to Sergey Teryokhin - a minister by occupation and a lobbyist by vocation.