Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 24 - Evidence
OTTAWA, Monday, March 18, 2002
The Standing Senate Committee on Foreign Affairs met this day at 10:05 a.m. to examine and report on emerging political, social, economic and security developments in Russia and Ukraine; Canada's policy and interests in the region; and other related matters.
Senator Peter A. Stollery (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, today we will be briefed on the situation in Ukraine. Our first two witnesses are here. Please proceed.
Mr. Walter Makowecki, Heritage Frozen Food Ltd.: Honourable senators, I should like to express my thanks to the Senate committee for giving me an opportunity to appear before you. I am a jack of all trades and a master of none. I have been involved in the Ukrainian community in Canada for much of my life. I am a Canadian businessman who has had many ties with Ukraine since 1957.
Mr. James Dmytro Jacuta, Director, Canadian Institute of Ukrainian Studies, University of Alberta: Honourable senators, thank you for this opportunity to speak to you today in regard to Canada's relations with Ukraine, as it progresses through a difficult transition.
Over the lat 10 years, I have been involved, in various capacities, with members of Parliament from Ukraine, government ministry officials, members of non-governmental organizations and the public. In recent years, I have spent most of my time as a project manager and legal advisor in activities designed to assist Ukraine in supporting the development of democratic institutions, good governance structures and assisting the Parliament of Ukraine in the development of legislation that would move this transition process forward. In turn, this would support the development of a functioning market economy.
In my presentation today, I should like to provide an analysis of these areas in our bilateral relationship with Ukraine, and to review the progress of Ukraine to date, as well as its prognosis for the future.
Since 1991-92, Ukraine has been faced simultaneously with three distinct transitions that have necessarily overlapped each other. Those are, first, the transition to independent statehood from its status as a constituent colony of the former Soviet Union; second, the transition from one-party communistic rule to multi-party democracy; and, third, the transition from a command economy to a market economy.
Throughout this entire transition process, and over the course of the last 10 years, Ukraine has unfortunately suffered from an image problem. It has been misunderstood and not given due credit for the success it has achieved.
It is worth noting that, of all the states of Central and Eastern Europe and the former Soviet Union, Ukraine is arguably the only country in similar circumstances that has successfully faced a triple transition. It is the only country that has successfully traversed the difficult and uncharted territory of a triple transition. One occasionally reads of comparisons between Ukraine and other countries in the press, complaining of the so-called lagging or slow reforms in Ukraine. It is unfair, however, to mix apples and oranges when comparing Ukraine to other countries that were not faced with a triple transition. Poland, for example, had statehood in place and was not faced with the same challenges Ukraine faced in the first phase of its triple transition. In regard to the second and third stages of transition, Poland at least had a living memory within its society and people of democratic institutions and a market economy.
In a comparison to Russia, I would point out that Russia also had statehood in place. It was the centre of its empire and had full international legal status and personality. It could lay claim to all the physical assets of the embassies of the former Soviet Union to assist in maintaining and developing its international relations. Ukraine, in comparison, had none of these and was faced with incredible challenges in the period immediately after 1991.
Independence, statehood and governance were part of these incredible challenges. How does a Parliament constitute itself without standing orders or rules for the Speaker? How does it in fact choose a Speaker? How does it function without the structure provided by organized political interests, without an election law, without even a new constitution until 1996?
Despite this and many other complicating factors, among which was Ukraine's strategic geopolitical position at the break-up of the Soviet Union, Ukraine has nevertheless succeeded in establishing its statehood and its international legal personality as a peaceful country. Ukraine is the only state to renounce its nuclear arsenal. Ukraine has not been involved in wars like its neighbour Russia. There have been no domestic incidents of terrorism like in Moscow. Ukraine has been, instead, for several years, a close partner with NATO in a partnership for peace agreement that Russia is only now contemplating.
In regard to the second part of the transition, the transition to democracy from one-party rule, Ukraine has again not been given credit for the many successes it has achieved. The Parliament does in fact represent the diverse political interests of a pluralistic society. It is grossly unfair to compare Ukraine's democracy, which has been built over the last 10 years, to the democracies in Canada, England, the United States, or other time-honoured democracies. In fact, one might argue that Ukraine's democratic tradition is even shorter than 10 years, being dated from the adoption of its new constitution on June 28, 1996, rather than the referendum on independence on December 1, 1991.
The third aspect of Ukraine's transitional process relates to the establishment of a functioning market economy. Ukraine is not given recognition often enough for its accomplishments in this area. Despite the worldwide economic downturn of recent months, Ukraine has been showing positive economic growth. It has been reported that Ukraine's GDP in 2001 increased by 9 per cent over 2000. Inflation was at an annual rate of 6.1 per cent. The rating agency Moody's has recently upgraded Ukraine for bonds to a B2 rating from Caa1. It has also been reported that JP Morgan's Emerging Markets Bond Global Index returned 51.7 per cent for foreign investors in Ukraine in 2001. This put Ukraine at the top of the list as one of the most attractive investment countries in 2001.
Reuters reported just last week that Ukraine made payment on its 2007 Eurobond issue. This maintains good standing on its debt that was rescheduled in April 2000 when U.S. $2.37 billion was restructured by the Ukrainian government.
It should be noted that all of this economic good news is to be put in the context of a country that as recently as 1994-95 was faced with inflation of 10,000 per cent per annum, did not yet have its own currency and was still in the process of establishing a national bank.
There is only one other state that is struggling with the kind of legacy with which Ukraine was left — a legacy as a constituent republic of the former Soviet Union located strategically on the border of the European Union — that being, of course, Belarus. I invite anyone who is striving to better understand the transitional processes in Ukraine by making comparisons to other countries, be they western countries, Central or Eastern European countries or the former Soviet Union itself, to make all the comparisons you want with Belarus. This is the only fair comparison that could or should be made in view of all the historical, political, geographical, economic, social and other circumstances.
Upon making such an apples-to-apples comparison, one can only come to the conclusion that Ukraine has succeeded against incredible odds whereas Belarus is, by today's measures, on almost all accounts, lagging substantially behind Ukraine.
That Ukraine has succeeded is in no small part due to the contribution that Canada has made. Canada has yet to be duly recognized for our incredible contributions, as a nation and people, to Ukraine's success. We gave contributed to what is arguably one of the most significant international successes of the latter half of the last century — the stabilization of the decaying Soviet empire and Ukraine's contribution to post-Soviet stability and the security of Europe.
Canada has assisted Ukraine in many ways, among them by leading Western nations and being the first to grant Ukraine international recognition. Since then, both countries have referred to our relations as being on the level of a special partnership. This is due in large part to the over 1 million Canadians of Ukrainian heritage, the diaspora community they form, and the many contacts they maintain.
Although Ukraine still faces many challenges in the next five to 10 years, there would appear to be no reason why Ukraine should not eventually integrate fully into European structures. Among its remaining challenges in doing so are maintaining economic growth, macroeconomic stabilization, and sound fiscal and monetary policies. Among the more specific challenges in these areas are the following: First, to enhance efficiency and governance in public administration; two, to consolidate bureaucratic and administrative structures at all levels — central, regional and local — third, to modernize the legal environment, legislation and courts, maintaining stability, consistency and order while these reforms are under way; fourth, to guarantee property rights and allow land to be bought and sold as a commodity in the private sector; and fifth, to develop citizen input into nongovernmental organizations and further develop open and transparent mechanisms for civil society.
In conclusion, while some people might be reluctant to prognosticate on Ukraine's short- and long-term prospects given the tumultuous events of the last 10 years, I am not one of them. I have no doubt that Ukraine is destined to succeed and, in the long term, excel as a society and a nation. I would go even further and state that, in the short term, over the next couple of years, Ukraine will see an economic boom. Indicators of this economic growth are just beginning to manifest themselves. At present, there are few who see the coming opportunities. Only those who are ahead of the curve will benefit from the future relationships that Canada and Ukraine will develop in the spheres of business, trade, culture, and many other aspects of our bilateral relationship.
Mr. Makowecki: I fully support what Mr. Jacuta has said about the developments that have taken place in Ukraine. Seven or eight years ago, I predicted that it would take 10 years to go from the chaos that existed in Ukraine to build an infrastructure that could handle the change to a market economy. I visited Ukraine five weeks ago, after being away for four years. I saw that big changes have been made in four years. The country is stabilizing, and there is a new optimism, especially among the younger generations, for a future in which they will have a say. There is optimism for the democratization of Ukraine.
Mr. Jacuta said quite properly they had to build a total new structure with no previous experience. There has been no previous experience of a united Ukraine for at least 500 years, as the Ukraine has been partitioned in the past. I think the future bodes well.
It is important for Canadians to understand the close ties that the Ukrainian-Canadian community has had, and continues to have, with the people in Ukraine throughout the years. In the 1930s, Ukrainian-Canadians supported the struggle for unification of Ukrainian lands which were under the Soviet Union, Romania, Poland and what have you. Up to the present, on the question of independence, the Ukrainian-Canadian community has rallied to help Ukrainians to find a place of their own and to help them understand the role that democracy has to play.
Democracy must bring with it responsibility, not chaos. In the first four or five years in Ukraine, Russia and other republics of the former Soviet Union, there was chaos. In a speech Gorbachev gave last Friday in New York, he spoke of the chaos that President Putin has inherited.
I met Mr. Jacuta at a meeting of the Canada-Ukraine Business Initiative, whose members are from Manitoba, Saskatchewan and Alberta. Under the directorship of the former mayor of Edmonton, Laurence Decore, who has since passed away, we got together with the provincial governments and sponsored delegations on agriculture and business initiatives. The Saskatchewan government has a longstanding exchange program with Ukraine that existed even during Soviet times. I also believe that the Manitoba government has undertaken some exchanges. We also have an Alberta-Ukraine advisory committee in Alberta. It is a government-appointed committee that takes initiatives to help people understand the steps they must take.
Two years ago a judicial delegation from Ukraine spent a month in Alberta, sitting in courtrooms and observing our legal procedures. I think that was very important.
Only two months ago, a Ukrainian delegation of 38 people spent three weeks in Alberta observing our farming practices. They are copying some of the procedures that Albertans and Canadians take for granted. Using the Canadian Wheat Board as an example, they have established a Ukrainian Wheat Board in an attempt to organize the marketing of their agricultural products.
I was in Ukraine five weeks ago — and I was only in Kiev so I cannot speak for the rest of the country — and I know there are difficulties, but there is also optimism in the younger generations. There is a positive attitude. After five or six years of chaos, Ukrainians are beginning to look positively at themselves and they are trying to support their own industries.
At one time, McDonald's was a big thing and pizza was a big thing. Today in Kiev you see self-serve restaurants serving only Ukrainian food. You see young people working hard and keeping their environment clean and neat. The new apartment blocks in Kiev are as modern as ours. To accomplish these things within 10 years of independence is a sign that they are going in the right direction. I feel very optimistic about it. I only wish I were a bit younger so that I could participate more.
I have dealt with Ukraine since 1970 when I purchased my first perogy-making machine from the Soviet Union, through Moscow. At that time I was not allowed to go the factory to see where the machines were made. I did get there later, however.
I was a participant to the conference on joint ventures in 1989, during Soviet times, just before the break-up. There were sixty-five of us from North America. From that number, maybe two or three were from the United States and the rest were all Canadian-Ukrainians — businessmen, construction workers, et cetera. I formed the joint venture in 1990, before the break-up of the Soviet Union, although it did not get registered until 1993. Those were the difficult times but, with the prospect of independence, there was a lot of optimism. The gross national product figures in Ukraine dropped in the first five or six years of independence.
Imagine, for all the years that Canada exported wheat to the former Soviet Union, in November of last year, Ukraine sold two tank loads of wheat to Ontario. It was not top quality wheat, but it was something that the Ontario cattle feeders needed.
Finally, it is important that Canadians understand the strategic location of Ukraine in the context of Europe. It is a crossroads to the Middle East. I hope the battles that were fought over the good lands are a thing of the past. There will be some more dislocation, just as we had in Canada. In 1939-40, 40 per cent of the population of Canada lived in rural areas and on farms, and today less than 2 or 3 per cent live in the rural areas. Last week's census shows growth in urban centres and a growth in industrialization. That will take place in Ukraine and, as a result, they will run into problems. They will have to learn to regulate. There is an underground economy, tax evasion and a bartering system to avoid paying wages. Computerization of all accounting procedures within the banking system and strengthening the legal system will diminish that underground economy to a certain extent.
I am also an optimist, as is Mr. Jacuta, and I firmly believe that there is very strong potential in the future of Ukraine.
Senator Graham: Thank you, Mr. Chairman, and welcome to our witnesses. We are all impressed with the optimism that you have talked about today, especially the optimism among the younger generation. That is most encouraging to all of us who are attempting to study your homeland.
You mentioned Laurence Decore, who many of us know and admire, and you have your own champion in this room, Senator Andreychuk, who has distinguished herself in many ways in the Senate. I mean that very sincerely. She has carried the message of Ukraine to us in very eloquent ways.
Since we, unfortunately, will only have you with us for a short time, I will concentrate on the question of elections. In one of your summaries there is mention of there not being an election law. Do you have an election law that has been approved by all the parties that might be involved? When might we expect the next election?
Mr. Jacuta: I was referring to the period in 1991 and immediately after independence where Ukraine was faced with all these challenges. Members of Parliament, or deputies as they are called, were elected under the old Soviet constitution. They were faced with new challenges, however. They did not know how to structure themselves. They took some of the key leaders, along with the most senior people from each of the parties, and constituted that as a presidium. They gave them the authority to rule on certain procedural matters. They then elected a Speaker. I am giving you this as a background to lead into the election law and to illustrate how unstructured the election law was. I should tell you that, today, the situation is much better, in that they have standing rules and orders which, for the most part, function well. In the early stages it was common for the Speaker to stand up and let someone speak ``from over there.'' The person, in moving a motion, could say, for example, ``I move this motion, which will be seconded by someone over there.'' There was no time allocation. They would talk for however long the Speaker thought it was appropriate for that person to speak.
Senator Graham: That happens around this table.
Mr. Jacuta: Another member of Parliament would then stand up and start speaking and make another motion which would be on the floor at the same time as the previous motion. It may or may not have been seconded. They would talk until the Speaker, in his wisdom, decided that they had reached the level where they should bring the matter to a vote. The Speaker would say, ``I think we should vote.'' If no one disagreed they would vote. The Speaker would say, ``The motion is...'' and then do a compilation of the various motions that had come forward and say, ``This is what we will vote on.'' That is how bad it was in the very early stages.
Even worse, they had electronic voting, something which the Parliament of Canada has looked into. I am sure they have benefited from the Ukraine experience. Members of the public in Ukraine were disturbed to see being broadcast some empty seats and a member of Parliament leaning over and registering a vote for his neighbour. Electronic voting has a number of drawbacks.
In the early stages, the election law had some fundamental flaws. When they held their general election on March 27, 1994, they almost put themselves into a constitutional crisis. The law required that at least 50 per cent of the vote go to the winning candidate. They had a run-off election two weeks later, and two weeks later and two weeks later. You needed 50 per cent as well as 50 per cent of the voters turning up to vote. The winning candidate was required to get 25 per cent of the people on the voters' list to turn out and vote for him or her. The run-off elections were only for the top two candidates. In some cases, they had up to 14 run-off elections trying to elect someone, until they gave up.
Where they could have put themselves into a constitutional crisis was that they also required a quorum of 225 to constitute the Parliament. They almost did not make that.
The election law that is in place now is much like yours. It will be first past the post. These are recent innovations after the 1998 election. They are currently in an election campaign for a parliamentary election which will take place on March 31, 2002.
Senator Bolduc: Both of you seem very optimistic about the economic situation. To what extent is the growth in the Ukrainian economy due to the inner strength of the economy itself? To what extent is it due, perhaps, to the positive impact of the growth of the Russian economy?
Mr. Makowecki: First, Ukraine is not a Third World country. It has a highly educated workforce. They learn very quickly. It helps to have relatives in a country like Canada with whom they can communicate. We can visit them there and discuss things with them. We exchange ideas. Many delegations over the past 30 years, have visited farms and other places. However, not all industry allows people to visit their plants. With foot-and-mouth disease it is even more difficult for visiting delegations to visit farms.
The delegation that visited Alberta went through all the necessary inspections. They did achieve everything they set out to achieve. The films that were taken in Alberta during this 38-man delegation have been played over and over again on Ukraine national television. They saw 5,000 head of cattle on a farm being taken care of by a farmer and two or three people. This is the type of inspiration people get from these exchanges.
We have a Ukrainian connection. The people who emigrated were as poor as church mice when they arrived here in Canada. Today, when visitors come to Canada from Ukraine they are hosted very well. They see the success stories. Everyone is getting a better education. They are able to send their children on to higher education. They can take their place in government in a country like Canada. There are Ukrainians in the Senate and in other governments. They are premiers of our provinces. That is an inspiration to Ukrainians in the Ukraine. They like to be like us. They like to have the democratic right to make decisions for themselves. That was never the case when my parents came over in the early 1900s. Democracy was something new to them. However, for them, it has to be constructive democracy.
During my visit here we went to see someone who had arrived in Alberta just one month before I arrived. They served us supper. He had two daughters. One was 18 and the other was 16. With us was a professor emeritus from Ukraine. She spoke perfect English and was a very highly socially conscious young person. This professor taught at the University of Alberta for 30 years and is now retired. He was flabbergasted that a young person like that could ask the questions she did. We thought there was something wrong with the second daughter because she said nothing the first night. However, on the second night, she was home alone and she was quite open, but she was not going to interfere with her older sister.
These are the types of young people who are coming out of the educational institutions in Ukraine. Anything we can do to help to provide them with information, with textbooks for schools and whatever else, would help these young people to quickly adapt to the world. I predict the process will take 20 years to complete. We have another 10 years to go.
Mr. Jacuta: Ukraine has suffered from a lack of direct foreign investment. Much of their economic success is due to their own efforts. They have not received direct foreign investment from the private sector along the lines of Poland, Hungary or Russia. They have not received World Bank or International Finance Corporation money along the lines of those other countries because Ukraine has had many disputes with the World Bank and the International Finance Corporation over many of the conditions that they required for credit approval. The last letter to Ukraine had about 123 conditions in it. Not much money has been coming in.
Having said that, Russia has invested in Ukraine, because it is the closest neighbour to Ukraine, as the United States is our closest neighbour and biggest investor. Russia more in tune with the way things were done in Ukraine, because of the Soviet legacy, and it was easy for them to operate in that environment. Canadian investors, however, were not used to that environment and had many difficulties adjusting to it, and so they chose not to operate in that environment.
The Chairman: This is the first time I had heard about foot-and-mouth disease in the Ukrainian context. Do they have foot-and-mouth disease?
Mr. Makowecki: We do in Canada. We ask anyone who arrives in Canada whether he or she will be visiting a farm. That was our law that had to be bent.
The Ukraine does not have foot-and-mouth disease. Even with the stricter regulations, they were allowed to visit farms. They were screened and passed through. They still had to undergo the test. The Department of Agriculture in Alberta made sure they passed the test.
Senator Grafstein: In the last five or six years, I have spent a considerable amount of time in Ukraine. I had some very interesting business experience, but that is are now fading. However, I do speak to you with some firsthand experience.
Mr. Jacuta, your analysis of this monolithic state called Ukraine does not represent my analysis of the historical origins of Ukraine. Odessa was a sophisticated entrepôt and trading centre for two or three centuries. It saw internationally sophisticated trading and was multilingual. There is now a rebirth of Odesa, but Odesa has huge historical roots that predate some of the early trading patterns of the Hanseatic league. I do not buy the notion that Ukraine was not a sophisticated society. Kiev, in the centre, Donetsk to the west, and particularly Lviv, were highly sophisticated, educated, and westernized mercantile centres. One must step back from that analysis and come to the current situation carefully. I do not accept that analysis.
Let me talk about a current analysis, that is, the conflict in Ukraine between the president and Parliament. I see strong checks and balances building up nicely in Parliament, and a very autocratic and unfortunate presidential executive that has aggregated to itself substantial powers. We have the current situation of the newsman who was murdered and charges being brought by Parliament against the president. Perhaps you can provide some analysis of where that stands. That is an important current issue, because those presidentially-directed actions deprive Ukraine from integrating into the OSCE and Europe. That is on one level.
On the second level, there is the question of private business law in Ukraine. Since we started our study, we have detected that, in Russia, tremendous reforms have been made respecting private property. For example, one will soon be able to obtain a mortgage and, if there is a default, the lender will be able to take over the property. However, in Ukraine, there is no investment in private property because there is no way of securing any debt. Ukraine is deprived of debt because there is no way of retrieving security if there is a default in payment.
Could you just deal with those two issues: First, the ongoing parliamentary conflict between the administration and where you think that is going; and, second, how far is Ukraine now behind Russia in terms of the advance of private property legislation that, if it were passed, would quickly attract debt investment in Ukraine. There would be no debt investment in Ukraine; it would be all equity until the private property issues are sorted out. Do you agree?
Mr. Jacuta: I agree that Ukraine is a pluralistic society with diverse interests and with many variants between different regions. Lviv is a European and wonderful city. Odesa is a trade centre. Kiev is a European capital.
When I was making comparisons as to how bad things were, I was referring to the disintegration of the Soviet empire and the early years of restructuring. There is no doubt that the economy, for at least five years, went through a contraction and depression greater than our great depression of the 1930s.
In regard to the president and the Parliament, there is the matter of an unresolved murder of a journalist that will have serious consequences for Ukraine. The consequences are such that the OSCE and other European structures have expressed their displeasure at the highest levels, as I expect, though I am speculating, have Canadians, Americans and others.
As you have said, senator, the good news is that their Parliament is diverse, with checks and balances and with different and competing interests in society. Given the historical circumstances, Ukraine is a functioning democracy.
The president's administration is unresolved. There is an unresolved murder and we must see how the situation plays itself out.
I do not wish to speculate on what some of the worst-case scenarios would be or the involvement of some of the government structures may have been with or without the knowledge of certain political leaders. Certainly, that would be a black mark on Ukraine's historical record.
In regard to the point of private law, I made the point that law should be private and traded as a commodity. However, Ukraine is making significant progress. As there are separate registries for buildings, immovables and land, one can lend, one can put a mortgage against a building, and buildings can be seized fornon-payment of mortgage. Property can be sold at auction, and this is already happening quite regularly in Western Ukraine.
In regard to land, Ukraine is going through the process of what they call the first title; that is a piece of paper that gives a citizen title to a plot of land. That titling procedure, which they call ``state acts'' is, in my opinion, about 30 per cent complete for the country, although you will hear different numbers for different areas of the country and from different sources. The World Bank is currently developing a loan of in excess of U.S. $100 million to Ukraine to complete the titling process which, in my opinion, will not be ready to go to tender until early next year.
Having said that, it may be that Ukraine will title all of its land into private titles itself. They are working with the geophysical people. You can imagine all the surveys that have to be done for the whole country, and then they must be put into land titles. They are faced with a problem that has not existed in many other places in the world, that is, surveys of entire cities and farms with buildings. How do you get the buildings that are in one complete registry system into the land title registry system so that there is one title to the property? I believe that around 2005 Ukraine will be in a position to have land bought, sold and registered as a commodity.
Senator Di Nino: Welcome, gentlemen. You touched on the issue I want to discuss, that is, the role the media plays in developing a democracy. The perception is that the independence of the media is questionable in Ukraine. Could you give us some thoughts on that issue?
Mr. Jacuta: It is natural for us to use the frameworks in which we operate to make comparisons with what we see there. We end up comparing ourselves to the Ukrainians. We live in the best country in the world. Using all kinds of indicators, the United Nations has said that for many years, and we do not need the United Nations to tell us that we certainly live in one of the best democracies in the world.
Ukraine is coming out of a colonial status, one-party rule, communistic command economy. It has literally thousands of newspapers through which journalists are fighting for the right to be independent. Ukraine has independent radio and television. They are owned by the private sector. You can argue whether certain business people are oligarchs or independent, but they are not state owned.
The media is at times, particularly during election campaigns, under incredible pressure. I do not think they get enough credit for writing about what they do. If we want to compare the media here in Canada with theirs, we have a lot of issues to compare. We talk about the concentration of media ownership and access to free-time public broadcasts during election campaigns. Do not forget that a journalist was shot in Montreal. In the best country in the world, we have had our share of problems.
Ukrainian journalism is not yet on a par with the free press in Canada. However, compared to where they started only a couple of years ago, they have come incredibly far, and I give them credit for that.
Senator Di Nino: I am not sure that I am interested in comparisons. The question was an opportunity for you to enlighten us on the issue. Is there some independence? Is there ability for the media to fairly report? There is no question that there have been great strides and I generally agree with the comments you make, although I am not as knowledgeable on the subject as some of my colleagues.
I do not care about a comparison with Canada, Europe or anywhere else. In a developmental democracy it is critical that information be disseminated to the public in as open and transparent a manner as possible. Is this happening? Is it starting to happen? Is it improving? We are being led to believe from time to time that the situation may be getting worse.
Mr. Jacuta: I would say that, if you want something published in Ukraine, it is more likely that it will be published than not. You can express your views. There are no absolute barriers, that is, you will not be arrested or your printing press will not be shut down.
The pressure that is being exerted during this election campaign is much more subtle. There are very few instances of media outlets actually being shut down, although that has happened. It is more along the lines of the tax department checking your books and trying to cause you problems until you write the kinds of stories they want to be written.
Senator Andreychuk: Mr. Jacuta, I have two unrelated questions for you. When I travel in Europe and talk about security, political issues, and trade and investment, I hear that Poland's relationship with Ukraine figures very prominently, and that Poland is often the advocate of a strong Ukraine. That is not something we hear much about in Canada.
You probably follow the upcoming election on a daily basis. Last time, after all the problems during the election process, there was great difficulty electing a Speaker. The Communist Party refused to give up its power base. Other pro-democracy forces had to fight to get back in before there was a realignment of forces.
Has the system matured enough that the results will be accepted on a more routine basis? Will there be a governing Parliament more quickly than the last time around?
Mr. Jacuta: On the first question, there is no doubt that Poland and Ukraine share a history that only now they have come to fully understand, that is, that it is in their best interests to assist each other in the strengthening of their independence, their nationhood, their economies and their bilateral relations. Up until the beginning of the last century Ukraine and Poland competed for territory in Western Ukraine. That was, of course, a destabilizing influence. Poland and Ukraine are geopolitically strategic, being centred between Germany and Russia.
They are now cooperating in many areas. Poland and Ukraine have a joint peacekeeping brigade that works together under the United Nations, I believe. They work together on economic and trade matters. Poland is working to develop stronger relations with Ukraine. There are concerns with the European Union requirements that will create some obstacles to cross-border travel and trade once Poland moves fully into European Union structures. However, they are working much more closely than they have historically.
With regard to what will happen with the election, in the election of 1998 they went into what was called a ``Speaker's Olympiad.'' They could not elect a Speaker. They did not use the system of the person with the most votes becoming Speaker. They used a system where the victor needed more than half the votes. They were frozen for months because they could not elect a Speaker. They have changed their rules and remedied that situation. They are learning which practices work.
In many cases, in the initial stages, Ukrainians, given a choice between being very democratic and doing something which is, perhaps, a little more practical, more efficient and speedier, always erred on the side of being the most democratic as possible. For example, a candidate to become a member of Parliament needs over 50 per cent voter turnout and receive 50 per cent of the vote. They are now learning that sometimes there is a saw-off between what is more democratic and maintaining some order and stability in your system. My guess is that the Parliament will be structured better than it has been in the past. There may be a majority that emerges and that a new Speaker will be elected without much confusion around May 7 to 15.
Mr. Makowecki: Everybody wants to be in power. They have 29 parties on this ballot, and you know how confusing that can be. In Canada, we have five parties and we have difficulty figuring out which one to choose.
The recent joke in Ukraine was that there are six communist parties in Ukraine so you do not know which way the communists will be split.
The Chairman: Mr. Makowecki and Mr. Jacuta, on behalf of the committee I wish to thank you for sharing your thoughts with us.
Honourable senators, I now extend our welcome to Mr. Andrew Witer, who was the member of Parliament for Parkdale, which is just down the street from where I live, from 1984 to 1988.
Would you proceed with your presentation, please?
Mr. Andrew Witer, President, Romyr and Associates: Mr. Chairman, Romyr and Associates is a Canadian public affairs firm which has provided counsel to private and public sector clients in Ukraine since 1993.
Three years ago, we started a publication called The Romyr Report, a quarterly political overview of Ukraine. The report started out as a three-page review for our clients and took on a life of its own. Today, The Romyr Report is published in English and Ukrainian, and is distributed free of change to all members of Parliament in Ukraine, members of cabinet, the present administration, all oblast heads, city mayors, key bureaucrats, universities, as well as a variety of media in North America and the EU, and people in North America who are involved in policy in Ukraine. The report is available on our Web site and receives approximately 15,000 hits every issue.
I have been asked to appear before you today to provide a political overview of Ukraine. It is my pleasure to do so. To do that, I think it is important to put things in perspective as opposed to indicating what is going or has been going on in the last 48 hours or 30 days or during this election campaign.
As you may have heard from other witnesses, Ukraine has a population of 48.8 million. By area, it is the largest country located entirely in Europe. Ukraine shares borders with seven countries: Belarus, Poland, Slovakia, Hungary, Romania, Moldovia and Russia. Ukraine's population is about 55 per cent larger than Canada's. Its territory is a little more than half the size of Ontario, but its population is four times larger.
The historic homelands of most Canadians of Ukrainian heritage, Halychyna and Bukovyna, are in the present day western oblasts of Ivano Frankivsk, Lviv and Ternopil, and Cernivtsi, which in total comprises 12 per cent of Ukraine's population in an area approximately the size of Nova Scotia.
Canada has benefited from over 100 years of immigration and contribution to its history and development by Canadians of Ukrainian heritage. Prior to and since independence, many Canadians provided their Ukrainian relatives with financial support. Lately, this has likely become a significant and unrecorded grant program for starting up small and medium-sized businesses in Ukraine.
Like Canada, Ukrainians live, geopolitically, with a very large neighbour. Unlike Canada's neighbour, the United States, Ukraine's neighbour, Russia, has an imperial multinational colonial history that confronts its present development as a democratic nation, influences its international aspirations and policies, and presents challenges to Ukraine's development.
Many welcome the strategic direction chosen by Ukraine, as declared by President Kuchma who said, ``The strategic course for Ukraine is determined by its geopolitical position, its historical and cultural traditions. And they clearly identify our state as a European one.''
Many others will agree with Zbigniew Brzezinski's view that ``Ukraine's independence marks the end of the imperial era of Russian history,'' and ``Ukraine's independence and security will contribute to European stability, specifically Central European security. This is just as important as NATO expansion.''
There is no real precedent for transitions like those made by Ukraine and countries emerging from former Soviet rule. Ukraine is learning how to do it, and Canada is learning how to respond and help as both go forward. Persistence, responsiveness to needs and systematic efforts at continued improvement are more important, in my view, than judgment or condemning past performance.
In order to appreciate the current political picture in Ukraine, it is helpful to understand the political realities in Ukraine prior to independence, and the course Ukraine has travelled in political development since independence.
Political activity on the eve of independence in 1991 was determined by Article 6 of the Constitution of the Ukrainian Soviet Socialist Republic. The article defined the leading role of the Communist Party and secured a party state monopoly on participation in political processes. By law, all public organizations were totally politicized by the Communist Party. Opposition was prohibited. Any show of divergence led to repression.
The government bureaucracy was thoroughly controlled by a party ``nomenklatura'' that enjoyed privileges, rewarded individuals and party loyalties, and punished transgressions. The system was significantly more repressive in Ukraine and other Soviet republics than in neighbouring countries like Poland, and built on historic measures and colonial policies of the previous Russian Empire.
Independence did not suddenly do away with the aspiration of power elites and many established leaders located throughout the system, from the central to village level. Neither did it suddenly eliminate the corruption people were forced to engage in to make ordinary things work or to fulfil the objectives of a planned economy.
After independence was declared, power elites and many of the leaders worked either to restore the old regime or to secure their existing positions of power under new circumstances. In doing so, they obstructed democratic development and added to the pain of economic transition. They also focused blame for economic hardship on democratic forces which themselves faced internal turmoil and breakup.
Democratic development was further hampered by Ukraine's poor international image. A history of political and economic dependence on Russia did little to enhance democratic development.
Ukraine's independence started with old party leaders still in office, old Soviet laws in place, with very few international diplomatic links and assets, continued imperialist pressure from Russian interests, a collapsed command- control economy, loss of direction and reverence of old Soviet mentality.
What has happened since independence? Externally, starting from a position of being fully integrated and dependent on the Soviet Union, Ukraine has disengaged its nuclear arsenal, patriated its military, developed a foreign service virtually from scratch and integrated itself into the international diplomatic community. It developed foreign policy directions that balanced interests to the east with the European choice to the west.
Internally, Ukraine developed and adopted a democratic constitution in 1996, dividing authority between branches of power. It passed a democratic law on elections, a land code that includes rights of land ownership. In the area of civil society, Ukraine introduced political pluralism and has multiple parties participating in political processes. It has avoided violence and widespread revenge against former communist elements. Public sector institutional capacity and infrastructure has developed. The media and information sector has been relatively liberalized.
In law reform, the new constitution extended a list of issues that can be brought to court by citizens. The number of cases brought by individuals against the state is increasing, and the courts sustain more claims against authorities. Economic indicators over the past 18 months have been positive.
GDP is up. Inflation is down. Industrial output is up. The currency is stable. There has been a 13 per cent increase in the start-up of small businesses in the last year. Moody's International rated Ukraine as the country with the highest rate of return on investment in 2001, at 57 per cent.
Two elections for president and two for central and local Parliaments were held. In the last election, 1998, the voter turnout was 70 per cent, and there were no gross violations reported by domestic and international observers at polling stations. A new law on elections was passed, and although many see it as an interim measure, it is more democratic than previous election legislation. A better control mechanism has been introduced to ensure compliance with electoral legislation, and appeals can be filed on the results of the election and improper actions of authorities. There is a fixed term for campaigning before election of 90 days, the formation and work of electoral commissions has been improved, and there is a limit placed on the amounts that can be spent on campaigns.
What is the current situation? I have just returned from Ukraine — last night, as a matter of fact — where I had a chance to observe what has been going on in the election campaign. There are, as senators may know, 225 constituencies and 450 seats in the Ukrainian Parliament. There will be two separate parts of the ballot. One is for single-member constituencies where Ukrainians designate the candidate of their choice from among those on the ballot. The other is a list of parties, blocks and unions from which Ukrainians are asked to select one. Half the seats in Parliament are allocated proportionally to those on the list that get over 4 per cent of the vote, and the other half to single members obtaining the most votes in their ridings.
There are 13 blocks, 19 parties, and one political union on the election list, for a total of 33. Approximately 6,500 candidates have been registered. If elections were held at this time — polling results are forbidden 15 days prior to election time in the Ukraine — according to recent pollings, the results would be as follows: Victor Yushchenko's block would get approximately 19 per cent of the vote. The Communists would get 17 per cent. In the last parliament election, by the way, they received 24.65 per cent. Other parties likely to cross the 4 per cent barrier are the SDPU, which is the Social Democratic Party of Ukraine, the block For Ukraine United, the Green Party, the socialists, and Women for Ukraine.
One-quarter of the people polled last week had not yet made up their minds. In my view, the Communist Party has the least potential for growth, with the undecided voters and Yushchenko's block the highest.
It is likely that centre, right of centre and left of centre parties will dominate the next Parliament. We do not project that there will be a majority in the next Parliament. The election campaign is vigorous, but without violence. There will be approximately 500 observers from the OSCE, hundreds from other international institutions, and thousands of domestic observers at the election.
Since the referendum of December 1991, Ukraine has secured its independence and advanced liberalization, democratization of society, and international and European integration. It has made important progress in political and economic reforms, but Ukraine has seen that its battle against powerful political inertia does not bring positive results quickly. Overcoming corruption and bringing the economy out of the shadows requires further efforts. Much of the public sector in Ukraine remains ineffective and does not contribute significantly to national policy. Vested interests of leading figures and oligarchs still stall reforms or steer them to their own ends. There remains too much control of the media in too few hands, and media coverage of various political forces is not always balanced.
Although we have seen much evidence of commitment to reform, the biggest challenge with the new laws is to make them work on the ground and on a day-to-day basis. This requires strengthening the technical capacity to implement the laws. It also requires discipline to exclude political interference from the legal system. Continued movement and momentum are necessary, as are durable institutions. The key is time.
Canada, in my view, needs to continue her role in providing technical assistance in a responsive and positive way, direct more attention to long-term business partnerships that takes advantage of Ukraine's scientific and technological potential, and add our efforts to build and share in cultural links that nourish the soul. Ukrainians trust Canadians. Canada can and should continue to be a great friend of Ukraine in the international arena as a facilitator of IFI, NATO, the World Trade Organization and others, to continue the integration of this globally strategic nation into the world community. It is in our interests to do so.
The Chairman: Thank you.
Senator Setlakwe: I listened carefully to what the two previous witnesses said and what you have said. I agree that great progress has been made over the last 10 years or so within Ukraine, but my concern is to what extent all these reforms and all this progress has contributed to foreign direct investment in Ukraine. I would like your views as to what extent all these reforms have contributed to foreign direct investment. My understanding at the moment is that there is a terrible lack of that type of investment within Ukraine. Despite the rosy picture you have portrayed, is there, perhaps, lingering doubt among foreign investors as to how safe it is to transact business within Ukraine? It is very important for the future of the Ukrainian economy that that subject be cleared.
Mr. Witer: Needless to say, investment levels in Ukraine are not to where Ukrainians themselves would like to see them. The reforms that have been put in place have not been circulated or are not known to many people in Ukraine, never mind outside of Ukraine. Communications is something that can be done much better, in my view, by Ukrainian officials.
When you talk about investment, let us not forget something which some of us do tend to forget. The backbone of our economy in Canada, and certainly will be and is in Ukraine, is small and medium-sized business. There is no record of investing in small and medium-sized business in Ukraine. Investments were measured in large investments and large companies and large dollar amounts, but we do not remember the virtually millions of dollars that are pouring into Ukraine by relatives of Ukrainians from all around the world. I am not talking about getting money out. I am talking about people that start a hardware store, an ice cream factory, a confectionery store or whatever. Virtually thousands of these kinds of businesses are starting up, and the funding is coming from Ukrainians in Canada, the United States, Europe and other parts of the world. There is no record of this investment. Perhaps that is why we see a 13 per cent increase in small business in Ukraine, whereas in Russia last year there was a 2 per cent decrease in the start-up of small businesses. Perhaps one of the reasons is that these investments are not recorded.
In terms of large investment, even the best rules, regulations or legislation on the books is no substitute for a ``good news'' story — a company that has come in and worked under the conditions that exist there and that has actually made some money. We are a very small company, but we have worked in Ukraine since 1993, and we have made a profit in Ukraine every year since then. We have invested in Ukraine in real estate and we are doing very well, thank you very much. We can always do better. Others are also doing well, and I am not referring only to small businesses. However, the fact is that there are more people, especially large international firms, that have come into Ukraine and have not done well. There are many reasons for that which I would be pleased to share with you.
Senator Grafstein: You told us that seven countries surround Ukraine. I think it is eight. There is the Supreme Soviet of Transnistria, the unrecognized, run-away Soviet republic on the Moldavian border. The only reason I say that is I am part of the OSC peace mission to unfreeze this frozen problem, and it is very intense. The Russian troops are still there.
My central point about Ukraine is the comparison between the presidency of Russia and the presidency or the executive in Ukraine. Although Putin's administration has been subject to a number of very serious allegations, those have not filtered through as a negative barrier to investment in Russia.
If you compare the Kuchma regime, in my view — and this is based on extensive discussions at the OSCE — it, in itself, is a barrier to future investment. I will not list the allegations or the malfeasance because they have all been documented and are well known. As I said to one of the earlier witnesses, the good news is that Parliament in the Ukraine is becoming democratic and acting as a valid check and balance against a runaway administration.
What are your views about that? By the way, do you see that changing in the foreseeable future? To my mind that is the major barrier to future progress in the Ukraine.
Mr. Witer: I cannot comment on Mr. Putin because Russia is not my area of expertise. As far as Transnistria is concerned, I am sure that, once they obtain official status, Ukraine will be the first country to officially recognize them as their eighth neighbour. All I can say is that what has been going on in Ukraine is not from a lack of trying. The president, as former head of the foreign investment advisory council, has invited the senior executives of every major company that has anything to do with Ukraine to invest there. I am talking about Shell, Coca-Cola, Lucent Technologies and others. They get together and talk about the issues that concern them and the obstacles that they face at least once a year. Working groups have been established to resolve the problems that international investors have in Ukraine.
As far as I can see, people at the top are bending over backwards to resolve these issues. I would not identify the problem that the international investors have had in Ukraine as coming from the top, I would identify it as occurring at the local level, where even though a decree has been passed, it does not filter down. The local fellow still says, ``Kiev may have made a decision, but you are working in my town and, in my town, these are the rules.'' That still goes on, but to a much lesser degree than it did six or seven years ago. As far as I know that is characteristic of all or most of the republics of the former Soviet Union.
Let us not forget that, when we talk about investors, we need to remember that they not only like security and stability, but they also like knowing where they are investing, so being aware of the country in which they are investing is important. I think that if you mention Ukraine to most corporations in the world they would ask, ``Who?'' If you go to those same corporations and mention Russia, without a single other factor, they will recognize the country and that it is intriguing, it is a large country, it has a huge potential market. Those factors are important in the decision-making process of any corporation.
Senator Andreychuk: I wish to follow up on what Senator Grafstein has just commented on and your response.
Certainly, Russia looms large in foreign policy in Canada, and Ukraine seems to fall into the category where it could be suggested that we have an interest in Ukraine because we have such a large Ukrainian community in Canada, of which I am one. My roots are Ukrainian. You stated that it is in Canada's best interests to have a relationship with Ukraine, and this committee is studying recommendations about Canada's foreign policy toward Ukraine and Russia.
Can you characterize what it is beyond the Ukrainian community that you think should lead us to say that we need to focus on Ukraine, that it is somehow special? We continue to say that we have a special relationship and I continue to ask about the extent of that beyond the Ukrainian community. I cannot get an answer to that question. It seems to me that this is what this study is about. Do we have a special relationship because we have 1 million Canadians of Ukrainian descent and we are catering to that politically in Canada, or is there some real special relationship that Canada could build on with Ukraine? I recognize Canada's unique position in being next to a large power, and Ukraine's unique position in being next to Russia. I also recognize the geopolitical issue of where it is strategically located in Europe. Why do you think we should build our relationship, and what recommendations would you suggest we make to our government on foreign policy issues?
Mr. Witer: That is a tall order, senator. I will do my best to answer your question.
Senator Andreychuk: I should say, before you answer, that I do read your publication and I was pleased that you were here because I wanted to tell you that I think your publication is crisp, and it gets right down to the issues in its coverage of politics, as well as investment and trade. It has put forward the most balanced point of view on Ukraine. Therefore, your views are important to this committee.
Mr. Witer: Thank you, you are very kind, senator. We try to do our best.
As someone said earlier and as all of us know, we have a wonderful standard of living in this country — the highest in the world. I am not the first to say this, but I do feel that it is important for us to export the kinds of things we have in Canada. I am not just talking about democracy; I am also talking about our high standard of living. Canada is uniquely positioned to do that not only in Ukraine but also in many other parts of the world. However, that raises the question of funding and what we can afford. That is where we have to focus. We must set a list of priorities. How do you pick priorities? How do you pick countries where you can do this and where you cannot do that and where you can allocate resources?
You mention that there are approximately 1 million Canadians of Ukrainian descent. Canadians of Ukrainian descent have been coming to this country for over 100 years. They are pioneers, they have established a huge part of this country, made major contributions in virtually every aspect of Canadian life and, therefore, it naturally draws us closer when a priority list is drawn up with Ukraine, Italy, Portugal and others on that list. It is only natural for us to focus on Ukraine. We need to export the standard of living that we have in Canada to other countries. That is the best security that we can have for maintaining that standard.
When you talk about business and economic interests, Ukraine and Canada are natural partners in many areas. One example of that is in the area of aerospace. Ukrainians are doing well in areas like airplane transportation where huge technologies have been developed in terms of the kinds of planes that are not available except on the drawing boards of most other companies in the world. However, Ukraine lack lacks marketing skills, financial know-how and political clout. These are all things that Canada has and a smaller firm, perhaps Bombardier, would be a natural fit with a country like Ukraine. It could then go into other markets, markets for which Boeing and other companies simply do not have the product. This is just one example, but there are many other examples where Ukrainians and Canadians could be excellent partners.
Finally, if this country takes off and meets its potential, we will have developed a great trading partner. In today's world of globalization, it is important to have trading partners. We cannot do what we have been doing forever, that is, relying on just the United States to as a trading partner. As a long-term policy we have to look at other options, and Canadians have been trying to do that for 40 or 50 years. Some prime ministers even stated that as a priority, but at the end of their terms we ended up with a higher percentage of our trade with the U.S. than when their terms started. It is frustrating for us but I do not think we should give up. We need to develop links with other trading partners, and not just Ukraine of course, but Ukraine is a natural in my view.
Senator Graham: You are saying that, apart from the obvious humanitarian reasons, there would be significant economic dividends to Canada if we invest and encourage investment in that country.
I want to go back to the forthcoming election. You mention in your paper that there were 3,500 OSCE observers and hundreds of other observers from agencies around the world. First, are these observers welcome in the Ukraine?
Mr. Witer: Perhaps you can qualify your question. Welcome by whom?
Senator Graham: By the local people.
Mr. Witer: Having been an official observer in the first parliamentary election in the Ukraine, I can assure you that one of the problems is in the interpretation of the word ``welcome.'' When observers come into a village or a town to observe election results, people do not want to let them go. Hospitality is something ingrained in Ukrainian character. It is mind-boggling. You may never have met those people before, yet they expect you to have a meal with them. Of course, they are welcome. There is no question about that.
However, it is the government and the officials who invited these people to come. The President of the Ukraine invited the OSCE to send observers and others to Ukraine to observe the election. There are some who say, ``We do not need Western observers because they will control the outcome of the election.'' The most surprising comment that I heard last week on this came from the Russian ambassador to Ukraine. I did not expect him to say something like that. Those kinds of statements are made by various individuals, but that is neither the view of the political elite in Ukraine nor the view of the general public. It is the view of certain individuals and of the Communist Party of the Ukraine.
Senator Graham: You also mentioned that there would be thousands of domestic observers. That is encouraging. Are they organized? I led a delegation to an election in Bulgaria where one of the journalists — and, there were 400 present the day after the election — asked, ``When will you consider it no longer necessary to interfere?'' The question was directed to the National Democratic Institute in Washington because they thought they represented the huge interventionist American policy, which they had alleged. I simply responded, ``When you no longer invite us,'' because we had been invited by the opposition parties, by the electorate, and so on.
Are the domestic observers organized along the lines of the National Movement for Free Elections in the Philippines, which was the first such organization established in any country around the world? I remember the similar organizations that grew up in Bulgaria, Hungary and elsewhere. Are they organized?
Mr. Witer: There are Ukrainian NGOs.
Senator Graham: I am talking about the domestic observers.
Mr. Witer: I am talking about domestic NGOs. Yes, they are engaged in observing the election. An even more effective form of observing the election the fact that there are 33 parties and each of those parties is entitled to a scrutineer. In Canada, the scrutineer works on election night; in the Ukraine, the scrutineer must be registered with the election commission and his rights begin the day he is registered. Scrutineers can sit in on all election commission hearings to see how decisions are made. They observe every single inch of the procedure during an election campaign. This is why the parties were anxious to make a change in the election law back in November of last year. They said, ``If we do nothing else but introduce this one particular change, we will have approximately 3,500 registered established.'' Everyone has his own interest but everyone is watching everyone else. That is a welcome development in election law. We are pretty well assured that there will be no gross violations in this upcoming election. In every election in every country, including Canada, things happen. The issue is: Will there be some gross representation? My assessment is, no, there will not. There are too many eyes watching and too many ears listening.
Senator Graham: Did I hear you correctly when you said that polling is prohibited 15 days before the actual election date?
Mr. Witer: The polling results are prohibited to be published 15 days prior to election date.
Senator Graham: It is an interesting differentiation between polls being published or parties polling and keeping the information to themselves. Are they allowed to poll?
Mr. Witer: Yes, they are.
Senator Graham: But they cannot publish the results?
Mr. Witer: That is correct.
Senator Di Nino: Welcome, Mr. Witer. I want to go back to the economic issue, if I may. I have two specific questions.
First, when a country goes from a controlled economy to a market economy, we see, more often than not, a problem with capital outflow. My friend Senator Setlakwe was asking about investment in Ukraine. Could you enlighten us as to whether Ukraine had problems once the economy was opened up as a result of people pulling money out the country?
Second, do you have any comment on the underground economy?
Mr. Witer: First, on the flight of capital from the country, there is no question that, after the breakup of the Soviet Union and the establishment of an independent Ukraine, a significant amount of capital fled the country. The favourite places were offshore locations such as Cypress, the Channel Islands and Switzerland. However, a lot of that money is now coming back into the country. How else would you explain the fact that Cypress is the third largest investor in Ukraine? How else would you explain that the city of Kiev is now going through a major redevelopment? A shopping centre is being built under the entire centre of the city. We are talking about hundreds of acres of shopping centre and hotels, and not a penny is being invested by the city. It is all private, local investment. That money is coming from somewhere. A lot of that money is now coming back into Ukraine and being invested in the country.
The underground economy or the grey economy exists, and it will continue to exist until you have a taxing system whereby it is more profitable to do business above board. That is not yet the case in Ukraine. There is a proposal for a new tax code. It was not passed, although many attempts were made to do that in the last Parliament. There is good reason to believe that it will be tabled again in the new Parliament and that it will be passed. Various statements have been made not only by government officials but also by the president himself that it is in the interests of Ukraine to repatriate the capital that has fled back into the country. Yes, efforts are being made. The difficulty is to measure how much of that capital is coming back in. However, there is evidence that it is coming back in.
Senator Di Nino: Would you guess as to how large the underground economy may be?
Mr. Witer: I do not like to guess. Based on what I have read and heard, there have been rough estimates of up to 50 per cent.
Senator Bolduc: You are an investor in Ukraine, and the former witness is also an investor in Ukraine. As investors, how does the business environment compare to that of Canada?
We know progress has been made in macroeconomic policies. Some structural reforms are occurring in the banking system, and to bankruptcy laws, company laws, et cetera, but between the law and its application there are often discrepancies. What are your views on that?
Mr. Witer: We are very small, but we are the perfect example of the fact that investment is possible. Perhaps I could give you an example to illustrate the difference.
I own real estate in Canada. That real estate shows me a return of approximately 7 per cent per year. I also own real estate in Ukraine. That real estate shows me a return of 43 per cent per year.
Senator Di Nino: Do you want a partner?
Mr. Witer: I am on the low end of the return on investment. The fact is that there is greater risk in investing in a country like Ukraine, but the return is greater.
Senator Grafstein: Is that after evaluation?
Mr. Witer: That is after evaluation. Mechanisms are in place to pay taxes and take a profit and conduct business in a normal way. Yes, there are difficulties and there are risks, and they are much greater than in Canada.
Senator Bolduc: Is there bureaucratic meddling?
Mr. Witer: I invest in Kiev and I publish a report that is widely distributed in Ukraine. People do not bother us. We have many clients.
As a matter of fact, one of the newspapers interviewed the director of Price Waterhouse in Ukraine who was asked about the difficulties bureaucrats may cause their clients. He responded that in the last few years they have not had those difficulties for the simple reason that, when their clients have issues, they take them to the courts. They win approximately 85 per cent of their claims. Now that there is a system in place for voicing concerns and taking contractual issues before a court, that element of difficulty is decreasing.
Senator Bolduc: Is a normal legal system beginning to take shape?
Mr. Witer: It is beginning to take root, yes.
Senator Setlakwe: Given all these facts, to what extent is the Ukraine interested in joining the World Trade Organization?
Mr. Witer: It is probably the number one economic and political priority for Ukraine. It is very much interested in joining the World Trade Organization. I might add, Ukraine very much appreciates the efforts made by our ambassador in Switzerland on this issue and by officials at the Canadian embassy in Kiev. This is something that is well noted. I think Canada has done a great deal to facilitate Ukraine's entry into the World Trade Organization and it is very much appreciated by Ukrainians. It is a very high priority.
Senator Setlakwe: Is Ukraine interested in joining the European Union?
Mr. Witer: That is a more difficult issue. Ukrainians themselves realize that can be a long process. They have come to the realization they maybe ready sooner for the EU than the EU is ready for Ukraine.
The Chairman: According to indications from Poland, Czechoslovakia and Hungary, the Brussels bureaucrats are worse than the old Soviet bureaucrats.
Mr. Witer: I have heard that expressed, senator.
Senator Bolduc: You suggested that transportation is a possible trade area. What other sectors might be interesting in that regard, apart from natural resources?
Mr. Witer: For Canada, agriculture is a natural fit. In the last two years, Ukraine has started to come into its own. It is returning to its historical position before the command economy and the command system of farming were imposed on it. I predict Ukraine will be a huge success in agriculture in the next decade.
Canada has seeds that Ukraine needs. We have technologies that Ukraine needs. We have knowledge that Ukraine needs. Let us not underestimate the issue of knowledge. Every society has certain things that it values. One of Ukraine's highest values happens to be knowledge. I know of people who have great jobs in Ukraine, but who will leave those jobs if they have an opportunity to get a degree somewhere outside of the country. We have two examples of that in our own firms. One young woman left her job for two years on an Edmund Muskie scholarship to get a Masters of Public Relations in San Diego and then she returned. A second one left in August to join the same program.
Hundreds, and perhaps thousands, of people do that. More important, it is engrained into the Ukrainian psyche. This type of educational opportunity is something that Canadians can offer to Ukrainians, and that is not always easy because Ukrainians are a very proud people. The Americans have a problem with this, but Canadians do not.
An excellent program is run by the Academy of Public Administration and Local Government, which is funded by CIDA. It is a phenomenal success story for us. We do not spend a lot of money, but we get a big bang for our buck; partly because of the projects we pick and partly because of the people we send.
Senator Bolduc: The problem of CIDA is that it has difficulty focusing because it wants to be everywhere and to do everything. CIDA is subject to pressure from so many areas. How would you rate our CIDA program in Ukraine?
Mr. Witer: Let me answer that in context. Ten years ago CIDA was groping to find what to do, and it made many mistakes. My position today is that we have learned from those mistakes. CIDA is investing money in the transfer of technical know-how in Ukraine and the building of public institutions, which, quite frankly, are second to none.
The only question Ukrainians raise is why Canadians cannot convince their colleagues to invest. Private investors represent less than 1 per cent of the aid to Ukraine and we are involved in some very high profile projects. We have been able to leverage our investment very well. This has all happened in the last four or five years. The question is: Why do we not tell others about this?
Ukrainians conducted a study on aid that goes to other countries in Europe, and compared how that money is used to what it is used for in Ukraine. Ukrainians know exactly what they want. The only problem is that they have so little to spread around. The total package last year was less than $20 million and there were 40 to 50 projects. We have our limitations. However, in my view, we are spending our dollars very effectively.
Senator Bolduc: There is a very good program in public governance, which is run by a professor from the University of Toronto.
The Chairman: Thank you, Mr. Witter. The most interesting information you have given us will help us in the preparation of our report.
The Chairman: Honourable senators, we will now hear from our witnesses from the Ukrainian Canadian Congress, the Canada Ukraine Foundation and the Canada-Ukraine Advisory Council.
We will hear from Mr. Czolij first. Please proceed.
Mr. Eugene Czolij, President, Ukrainian Canadian Congress: Mr. Chairman, thank you for hearing us today. The Ukrainian Canadian Congress, also known as UCC, is the national coordinating body of the Ukrainian-Canadian community. Since 1940, the UCC has actively participated in the development of national policies and programs which not only impact on Ukrainian Canadians but on Canadian society as a whole.
Throughout its 60-year history, the UCC has taken a proactive approach on such issues as multiculturalism, citizenship, immigration, justice matters, Canada-Ukraine relations and foreign affairs.
[Translation]
I am happy to be here today, as a witness for the Standing Senate Committee on Foreign Affairs, to have the opportunity to discuss the efforts initiated by the Ukrainian Canadian Congress and the Canadian Ukrainian community, aimed at building close ties between Canada and Ukraine. I am also happy to share certain observations for your study on new developments in the field of politic, social, economic and security issues in Ukraine, on Canada's interests and politics in the region, as well as on other related subjects.
The Ukrainian Canadian Congress supports the initiatives taken by Canada to strengthen the privileged partnering relationship it has with Ukraine.
[English]
We recall the excitement of 1991 as we witnessed the rebirth of Ukraine as a sovereign and independent state. Ukraine's independence effectively dissolved the Soviet Union which was a constant threat to Western democracies. It also ended 70 years of persecution and destruction of the Ukrainian intelligentsia and people by the Soviet regime, including the famine genocide of 1932-33 that caused the deaths of over 7 million Ukrainians.
The proclamation of independence on August 24, 1991, ratified by a national referendum on December 1 of that year, brought together the hopes and dreams of so many Ukrainians in Ukraine, as well as individuals of Ukrainian heritage throughout the world, and especially here in Canada.
However, our enthusiasm was tempered by the knowledge that Ukraine was engaging in a difficult process of transition from authoritarianism to democracy, and from centralized state planning to a market oriented economy with its fragile underpinnings.
In 1991, as we celebrated the one-hundredth anniversary of our settlement in Canada, Ukrainian Canadians were delighted that Canada, as a government of the G7 and a member of NATO, became the first Western nation to formally recognize Ukraine as an independent country. The recognition was a strong indication of the confidence which Canadians had in Ukraine and its people to forge ahead in the development of a civil society based on the rule of law.
While this was an important step, Canadians also understood that providing the necessary supports would be critical in helping Ukraine establish the required programs and policies to meet the needs of its citizens and to lay the foundation for a truly democratic society.
Inspired by the natural bond between Canada and Ukraine, due in great part to the significant contribution of Ukrainian Canadians in the development of Canada, and the fact that there are more than 1 million Ukrainian Canadians living in this country, Canadians, including the UCC and its member organizations, accepted this remarkable challenge.
The first major undertaking of the UCC was to coordinate an intensive fundraising campaign in 1992, which raised $1.6 million in eight months to assist Ukraine in establishing an embassy in Canada.
In 1994, a G7 meeting in Winnipeg on the partnership and economic transformation of Ukraine provided a good opportunity to discuss the necessary strategies to enhance economic and social development in Ukraine. It also allowed the newly elected president of Ukraine to meet with Ukrainian Canadians. Working together with the Canadian government, the UCC was able to organize special events that contributed to the success of that state visit.
In 1994, the UCC also concluded a 12-month agreement with the Government of Canada to administer the Canada Ukraine Partners Program. Within this $2.5 million program, designed to promote democratic reforms, individual organizations managed sector-specific programs in public administration, health, agriculture and civil society. This was achieved in part through the placement of as many as 160 Canadian volunteers on assignments in Ukraine, and by providing short-term training in Canada for up to 40 Ukrainian volunteers.
In August 1995, the UCC established the Canada Ukraine Foundation, also known as CUF, to provide a permanent structure that would focus on future relations with Ukraine. CUF is committed to relieving poverty, advancing religious tolerance, promoting education, and engaging in a variety of other charitable activities in Ukraine. To date, CUF has undertaken a variety of projects in Ukraine, financed principally by individual Canadian donors. For instance, CUF, with the participation of professional educators, established the CUF Education Centre Consortium Office in Lviv.
In 1996, a new two-year Canada Ukraine Partners Program was announced by CIDA with an emphasis on democratic governance, civil society, health and gender equality. The UCC was tasked with promoting this program and providing advisory services.
In addition, in 1996, the Honourable Lloyd Axworthy, at the time Canada's Minister of Foreign Affairs, established the Canada-Ukraine Advisory Council to build on the partnership between the UCC and the Government of Canada. This council, composed of senior officials from the Department of Foreign Affairs and International Trade and senior executive members of the UCC, was created to provide a forum for sharing information and offering advice, ensuring thereby that Canada remains a viable partner in the development of Ukraine.
UCC provincial councils are also participating in advisory councils of the provincial governments of Alberta and Saskatchewan concerning relations with Ukraine.
During the reorganization of the federal cabinet in January of this year, the UCC was pleased to see the creation of the position of Secretary of State for Central and Eastern Europe and the Middle East, which demonstrates Canada's commitment to this important region. The appointment of the Honourable Gar Knutson as Secretary of State is already providing dividends with his recent visit to Ukraine at the outset of his mandate. The UCC looks forward to working with him and his colleagues in advancing practical Canadian solutions for the advancement of democratic reforms and prosperity in Ukraine.
In September 2000, the Canada-Ukraine Legislative and Intergovernmental Project was announced to assist Ukraine in developing policies and legislation as well as in creating effective structures to strengthen democratic social and economic reforms. Coordinated by the Canadian Institute of Ukrainian Studies at the University of Alberta, it brings together ministers, parliamentarians, civil servants, judges and various officials from Ukraine and Canada to analyse the Canadian experience as a basis in determining practical solutions in different spheres of activities. The UCC contributes to this program by demonstrating to the participants the importance of a multifaceted and organized community life.
It should be stressed that UCC's member organizations and the Ukrainian-Canadian community have also been actively involved in numerous valuable projects in Ukraine. Examples of such volunteer efforts include the Council of Ukrainian Credit Unions of Canada, which has been managing the Ukrainian Credit Union Development Assistance Program since 1992, together with the Canadian Cooperative Association. The program includes internships for Ukrainian credit union leaders in similar institutions in Canada and intensive training for managers and staff in 150 credit unions across Ukraine.
Other examples include the Ukrainian Canadian Social Services, which has created a sister, non-governmental organization in Ukraine with about 100 branches; PLAST Ukrainian Youth Association of Canada, which has managed the trainers project and organizes numerous camps in partnership with the PLAST Ukrainian Scouting Organization in Ukraine; the Ukrainian Youth Association of Canada, also known as SUM, which assists in organizing various camps and other activities for youth; the Ukrainian Catholic Women's League of Canada, which has donated funds to orphanages in Ukraine; the Ukrainian Self-reliance League of Canada, which has supported publishing projects in various locations in Ukraine; the Ukrainian Catholic Brotherhood of Canada, which has provided money and equipment to the Sheptytsky Hospital in Lviv; the Ukrainian National Federation of Canada, which has assisted Ukrainian students; and the League of Ukrainian Canadians, which has provided emergency aid to miners and supported the development of the Ukrainian language.
This list of activities is only a small portion of the efforts that have been undertaken by the UCC, our member organizations and the Ukrainian-Canadian community to assist Ukraine during this transitional period.
A document recently released by CIDA entitled, ``A Path to Reform: Ukraine Programming Framework, 2002-06,'' provides a long-term plan of action, not only for the Ukrainian-Canadian community, but for all Canadians who are concerned with reforms in Ukraine. The UCC draws the attention of this committee to a section entitled, ``Best Advantage of Canadian Resources,'' on page 30 of that framework document, where CIDA states:
We have learned that the Ukrainian community in Canada, through organizations such as the Ukrainian Canadian Congress, can be effective sources of information and advice on developments in and technical cooperation programming for Ukraine, and can play an active role in implementing Canadian technical cooperation programs. Members of these organizations, many of who volunteer their time to assist Ukraine, have made significant contributions to our program.
In addition, during a Ukrainian night at the National Archives of Canada on the occasion of the tenth anniversary of the establishment of Canada-Ukraine diplomatic relations, the ambassador of Ukraine to Canada, His Excellency Dr. Yuri Scherbak noted the following:
I have also to underline the great positive role which the Ukrainian-Canadian community plays in our relations. We are grateful to the Ukrainian Canadian Congress — an organization which represents one million Canadians of Ukrainian origin — for its support of the Ukrainian way towards democracy, prosperity and European Community.
The UCC is not drawing your attention to these statements out of vanity, but as a matter of fact. We urge you to echo this important assessment of the contribution of the volunteer sector in your final report to the Senate to provide a complete picture of all aspects of Canada-Ukraine relations.
The UCC also recommends that this standing committee stress that Canada should rely much more on its volunteer sector and that the Government of Canada adequately fund programs and projects undertaken by this sector that enhance the further development of a civil society and economic reforms in Ukraine.
One of the key issues in Ukraine preventing faster reforms and further integration with Western democracies, which is in the best interests of Ukraine and Canada, is the cultural and social distance of the Ukrainian population from our Western concepts of civil society. Communism destroyed the people's understanding and ability to establish and administer self-governing volunteer organizations. Canada needs to place a priority on focusing on the renewal of civil society in Ukraine, in addition to its work with private business and government sectors.
To this end, a change in policy is needed to close the gap at CIDA between countries of the former Soviet Union and those countries that Canada recognizes for Official Development Assistance, ODA. The latter, but not the former, are serviced by CIDA's partnership branch whose mission is to support Canadian NGOs in implementing effective and sustainable projects.
The UCC believes there is a need for a policy framework in CIDA's partnership branch, encouraging Canadians to help build a civil society in Ukraine. Under such a policy, Canada would support projects and programs of Canadian NGOs, both in Canada and in Ukraine, to the extent that these are compatible with Canada's foreign development aid and technical assistance policies.
Given the extensive family ties and language skills of Ukrainian Canadians, the UCC is confident that Canadian NGOs would respond strongly to such an opportunity of helping Ukrainians develop their civil society, if Canadian NGOs were assisted by and funded under CIDA's partnership branch programs.
As Ukraine enters its eleventh year of independence, it is important that we continue to engage in programs and areas of economic and social reform that have been successful and have improved the human condition in Ukraine.
We must also encourage and support the reformist attitudes and movements in Ukraine, which will further strengthen Canada-Ukraine relations in the next decade.
On December 5, 2001, the Honourable John Manley, then Canada's Minister of Foreign Affairs, and his Ukrainian counterpart, the Honourable Anatoliy Zlenko, signed in Kiev a joint declaration on continuing development of the special partnership between Canada and Ukraine. In this document, Canada and Ukraine reaffirmed the following:
That the secure existence and territorial integrity of an independent, prosperous and sovereign Ukraine is in the fundamental interest of Canada and the entire international community.
Therefore, the UCC recommends that this standing committee reiterate clearly in its final report to the Senate that an independent, prosperous, sovereign, democratic and reform-driven Ukraine is in the fundamental interest of Canada and the entire international community. Such a statement would not be simply a complacent affirmation, but it would also shed further light on the benefits all Canadians derive from Canada's international involvement. Indeed, this committee has the opportunity to explain to Canadians that Canada's assistance to Ukraine should not be perceived as a mere handout, but rather as a strategic investment in its own future. Indeed, Ukraine's independence and prosperity ensures that we will not revert to a bipolar world and is a solid guarantee of global stability and security.
In addition, Ukraine, with a population of over 49 million and a territory the size of France, is an attractive partner for Canada in various fields of endeavour, including trade and commerce.
[Translation]
Therefore, the Ukrainian Canadian Congress congratulates the Senate for the serious interest it exhibits in dealing with the relationship between Canada and Ukraine.
The work accomplished by the Senate committee will constitute a valuable source of information, and will no doubt include useful recommendations, as we shall continue to support and help Ukraine through this transition period, fully conscious that the strategic position of Ukraine is vital for international security and stability in the region.
[English]
We will be pleased to answer any questions you may have.
The Chairman: Thank you very much, Mr. Czolij. I will now call on Mr. Hawaleshka to make his presentation.
[Translation]
Mr. Ostap Hawaleshka, President, Canada Ukraine Foundation: Mr. Chairman, I thank you for the opportunity you are giving me to make a presentation on behalf of the Canada Ukraine Foundation and as the former executive director of the Ukrainian Center for Sciences and Technology, potentially the most important current Canadian project in Ukraine.
[English]
My presentation is intended to be complementary and supplementary to the presentation just made to you by Mr. Czolij, president of the Ukrainian Canadian Congress, UCC.
After describing some of CUF's activities and what aid activities we believe Canada should be involved in, my presentation will highlight some special and unique characteristics of Ukraine that Canada could benefit from while continuing its efforts to bring modern concepts of civil society and democracy. My presentation is based on my firm conviction that the best relationship is one that is mutually beneficial to the recipient and to the donor.
I will first address aid programs.
Ukraine is a culturally and technologically sophisticated country that, unfortunately, under Soviet rule was brought to an alarming state of disrepair, coupled with a significant lack of understanding of ordinary, normal, democratic and competitive processes. It is this conversion from autocratic/centralized government to democratic and freely competitive decision making that Canada has justly selected as the main objective of its assistance to and its relationship with Ukraine.
The Canada Ukraine Foundation totally supports this Canadian orientation. For the past few years, CUF has endeavoured to establish itself as a credible organization devoted to extending Canadian-Ukrainian assistance to Ukraine.
CUF now has a series of specifically targeted aid projects in operation in Ukraine. These include, among others, and I will point them out simply for information sake: First, a modern and effective education of hearing-impaired children. This is a very interesting project being run in Ukraine through various people associated with CUF. Second, upgrading primary school teachers and their certification. Third, publishing school textbooks in Ukraine. Notice item six coming up later. Fourth, sending technical texts to Ukrainian technical institutes. Fifth, specialized, directed funds for the support of higher education of top students from Ukraine. These are family-oriented funds, directed funds for very specific purposes. The nice aspect of this is that these are personal orientations for specific people who can be identified. We have developed this excellent people-to-people type of relationship. Sixth, in response to Canadian needs — and this brings me again to this business of mutually useful — identification of appropriate Ukrainian texts, published in Ukraine, which could be suitable for use in Canadian Ukrainian-English bilingual schools. This was funded by Alberta and recently was joined by Saskatchewan and Manitoba.
In order to facilitate these activities and to assist other Canadian organizations working in Ukraine, CUF has, with the assistance of its very generous education consortium, a group of Canadian organizations, established a staffed office in Lviv, Ukraine. It is available for any Canadian organization wishing to do something in Ukraine. We can provide some assistance and some information. It enjoys the excellent support of the City of Lviv and cooperation with the Canadian embassy in Ukraine as well as the Canadian consulate in Lviv.
It is no coincidence that most of CUF's projects at the moment are related to the general problem of education. If we are to influence the mindset of Ukrainians and help them espouse normal, accepted, democratic principles of behaviour, we must concentrate our efforts on those who can be influenced, those who are still malleable, and those who are still receptive to new ideas. This, for the most part, excludes the old ``apparatchiks'' who, unfortunately, are still in power at all levels of government, industry and education.
This brings us to the following conclusion: The actual change that is hoped for by Canada will take much longer than originally anticipated. It will take a generational change. Hence, to be an effective change agent, Canada must be in for the long haul. You simply cannot be in and out.
The most effective way to influence people is to get them while they are still young. These people eventually will become leaders and be able to implement those needed changes.
Therefore, CUF recommends to this committee, and to DFAIT and CIDA, if we can, that you pay special attention to the education and training of Ukrainian youth. The importance of the relationships between Canada and Ukraine, and the importance of Ukraine's geopolitical situation, as well as its ambitions, make it appropriate for CIDA to consider a major project similar to that which was established for China about 15 years ago, or longer, to bring in a significant number of brilliant young Ukrainian students to study at all levels in Canada, mostly at tertiary levels. Canada can then become the model that will eventually be followed by these students once they return to Ukraine. This includes considerations such as democratic behaviour, open competition, peer evaluation of the work that they have done, and dealing with powerful neighbours.
I have thrown this in because Canada truly is an expert in dealing with powerful neighbours. Ukraine right now is trying to learn how to deal with a very powerful neighbour. We have a natural fit — Canada and the United States, Ukraine and Russia.
In order to carry out these tasks effectively, we need good information, which, as of today, seems to be lacking. CUF intends to present to CIDA, and we are asking for honourable senators' support indirectly, the following projects that would be useful to Canada, Ukraine and to CIDA as an organization. The projects involve developing three databases which would become available on the Internet and accessible to anyone interested. The first is a database of Ukrainian-Canadian expertise that could be brought to bear to Canadian aid to Ukraine. This information is unavailable at present. The second is a database of aid projects presently underway between Canada and Ukraine. The data would cover projects run by governments, NGOs, and private organizations and individuals. This would be very useful, and is unavailable as a compendium. The third is a database of Ukrainian-Canadian organizations that could be involved in assistance projects to Ukraine. This particular database was actually suggested to me by Peter Daniels of CIDA.
The governments of Manitoba and Saskatchewan have also stated that they badly need more immigrants to fill various job requirements in their provinces. Alberta does not seem to have this problem because everyone is moving to Alberta.
CUF would recommend that Canada make a special effort to open its doors to Ukrainian immigrants who are generally highly educated and very well qualified. Today's rules are much too restrictive. It is worthwhile to recall the enormous contributions that Ukrainian immigrants have made to Canada, particularly to Western Canada.
On behalf of CUF, I ask that the committee consider the above proposals and support them with our appropriate agencies.
Part 2 of my presentation deals with technical cooperation.
Let me set the scene: The first sustained nuclear reaction in Continental Europe occurred in Kharkiv, Ukraine. The first digital computer in Continental Europe was developed at the Hlushkov Cybernetics Institute in Kiev, Ukraine. The world's top welding research institute is the Paton Institute in Kiev, Ukraine. You might be interested to know that the welding apparatus to be used in the space station will come from the Paton Institute. You might also want to know that the Washington subway was welded using Paton technology.
The world's largest airplane is the AN-225 Mriya, and it was built to carry the Soviet shuttle. To give you some appreciation of the dimensions of this aircraft, from the tip of one wing to the other is almost the same length as a football field. The length of this aircraft is much longer than the width of a football field. It is absolutely amazing.
The Ukraine has a smaller version of this plane that regularly travels to Canada. This airplane was modernized recently and flew its first fully commercial flight between Belgium and Montreal. It came to Montreal about two months ago.
I believe there is tremendous opportunity between Canada and Ukraine to work on joint projects in this area. The Canadian military needs a transport aircraft that is bigger than the Hercules, but not as big as the American Star Lifters, which are quite a bit smaller than this. As an interesting anecdote, the smaller version of this aircraft brought the American spy plane back from China.
Ukraine's National Academy of Sciences has over 80,000 top scientists in its institutes. There is a huge pool of brain power contained in this institute.
When I was in charge of the Science and Technology Centre in Ukraine, we dealt with a reduced pool of scientists. We dealt with scientists who had developed weapons of mass destruction and their task was to convert them into something more useful.
I have given the chairman this first annual report of the Science and Technology Centre. In it you will find a full description of what it is all about, including a full list of the projects that we funded. There is also a description of the first-ever Internet database of Ukrainian science and technology. You can imagine how ``loved'' I was by Ukrainian state security when we published this.
In a different area, the Soviet Union's largest bus factory, called LAZ, is in Lviv, Ukraine. Some of the world's largest shipyards are in Mykolayiv, Ukraine, and one of the world's largest deep-space communications centres is in Evpatoria, Crimea, Ukraine. The world's largest rocket and satellite manufacturing facility is the Southern Rocket Design Bureau. If you are lucky, in the next year or so you will see a display in Ottawa called ``Ukrainian Contributions in Aerospace, Science and Technology.'' I will inform all of you when that occurs, so that you may see it.
I list these to simply to indicate to the members of this committee that, although it has been greatly mismanaged during the Soviet or Communist era, Ukraine is a world-class powerhouse in the scientific and technology fields. This includes recognized leadership in areas such as materials technology. No one beats Ukraine in the fields of titanium and ceramics, telecommunications, computer programming, welding technologies, medical lasers, nuclear medicine, aerospace, airplanes, spacecraft and biochemistry. In that regard, a centre recently opened in Alberta. Not by coincidence, these topics mirror the strategic interests of Canada as expressed by Canada's Natural Sciences and Engineering Research Council, NSERC. In The Globe and Mail today there is an article entitled, ``Give R&D a place to grow,'' which speaks to what I am talking about. I would also refer you to the article that deals with the Antonov airplanes which are being produced, as well as the article from The Romery Report, which may have been quoted before, ``Science and Technology in Ukraine,'' and another one dealing with immigrants.
CUF recommends that Canada actively support Ukraine science and technology not just by handing out money for R&D but by encouraging Canadian firms and organizations to work with Ukraine scientists and institutes on technical and scientific problems of pressing interest to both.
Some of these things are ongoing. The Science and Technology Centre in Ukraine, with a lot of difficulty, managed to convince about 12 or 13 companies in Canada to actually work with Ukrainian scientists. That is a great beginning. Canada, through its contribution to that centre, is contributing to the support of over 10,000 former weapons scientists. They are from the top-secret outfits. They are now being supported by working on these economically useful projects. These people used to shoot down rockets using laser technology; that is, ion beams. They came to us and said that they could produce a new sterilizer for medical equipment. The problem with the existing technology is that it uses high temperature, alcohol or carcinogenic gases and we have no idea what to do with those carcinogenic gases once we have used them. They invented a barrel-shaped object in which you can place a rubber-based medical product such as an endoscope, which is difficult to sterilize, plastics and rubber and, in five minutes, it is sterilized at room temperature with no side effects. I think this is truly extraordinary. I could not interest one single Canadian company to voice an interest in this project. However, in a matter of half an hour, two American companies signed up. I would like to encourage Canada to be involved in this.
This is a prime example of how technical assistance can and should be a benefit to both the recipient and the donor. This kind of Canadian effort would not only support Ukrainians in their hour of need but would also, through contacts with our organizations, show them how things can be done honestly and above board. I stress the words ``honestly'' and ``above board.'' You must learn that it is possible to be successful being honest.
It would also result in economically useful developments and products from which Ukraine, Canada and the whole world would benefit. In conclusion, CUF would like to underline the following facts. First, Ukraine is a very important geopolitical player in its region. Canada can contribute greatly from its own experience with the USA. Second, Ukraine was badly mismanaged during the era of the USSR and Russia previously. Third, in order to reorient Ukraine towards full democracy and competitive economic environment, Canada must be at Ukraine's side for the long haul. Fourth, in order to achieve positive results, Canada should do its utmost by influencing future decision makers, Ukraine's highly educated and intelligent youth. This can be done through provisional large-scale programs with scholarships for such students to study in Canada. In this way, we will train Ukraine's future decision makers while developing long-lasting friends. Fifth, to complement the above proposed educational and training requirement, CUF recommends that Canada also support an enlarged cooperation between Ukrainian scientists and engineers and our own Canadian firms. Both would benefit greatly from such a relationship.
Finally, we ask the committee to encourage Citizenship and Immigration Canada to be more generous in opening its doors to highly qualified and extremely hard-working Ukrainians. In this way, Ukrainians could continue their Herculean effort and contributions to the development of our beloved country, Canada.
[Translation]
Senator Bolduc: This is very interesting. I liked the two presentations. You alluded to the value of CIDA's projects, Mr. Czolij. You also mentioned that there is an opportunity to push further, towards more concrete goals. I would like you to expand on that idea. We had the opportunity to hear CIDA representatives discuss programs in Russia and Ukraine. That is a novelty for us.
I would like for you to tell us the type of improvements we could recommend on CIDA's involvement, which has, I believe, the right intentions.
They are solicited on many fronts. You were talking about ``databases'' earlier, and I agree we need ``databases,'' but we require more than that. We should understand the American's involvement.
I went several times in Africa on behalf of the World Bank. What always struck me was that in countries such as the Central African Republic and Cameroon, I would immediately notice idle Caterpillars in the fields while the depot was stocked with John Deere spares.
It does not work. It is ridiculous to have that. It seems to me that coordinating the aid from the various sources is necessary for these programs to work.
What do you propose for CIDA? You can expand on your comments.
Mr. Czolij: Senator Bolduc, I am pleased to offer the expertise of someone more competent than myself in this field, Dr. Roman Petryshyn, member of our Canada-Ukraine Committee from the Ukrainian Canadian Congress. He was prepared to answer such a question that we had anticipated. I will ask him to answer your question.
[English]
Dr. Roman Petryshyn, Member, Canada-Ukraine Advisory Council: Mr. Chairman, I would like to comment briefly on this notion of a need for a new policy within CIDA to deal with Canadian NGOs and, in particular, policy affecting the partnership branch.
In general, Canadian NGOs have not yet been encouraged to work actively in Ukraine. That is to say, the major NGOs, the some 750 that are in the partnership branch, do not have projects in Ukraine. In part, this is because CIDA follows the Official Development Assistance Program, which is for the poorest of the poor. That category now exists in Ukraine, unfortunately, as well.
My point is that, in addition to the traditional policies at CIDA, there is a need for a new policy to support democratic movements through civil society organizations in Ukraine, policies aimed at what might become a middle class in Ukraine. If there is to be democracy in Ukraine, there needs to be the emergence of a middle class that operates with nongovernmental organizations, that takes the style of work that we are very used to and which can form agencies that are independent and autonomous of government and the private sector to advocate the development of social policies.
At this point, Canadian NGOs wishing to work in Ukraine do not, in general, have the help of the partnership program. It seems to me that, with the enormous objective of developing civil society, the wonderful and beautifully- designed programs that we do have in CIDA need to be added to and applied to the transitional society sector. That is to say, there needs to be a new set of policies in addition to the ones we have. This is not to take away from official development assistance, but to tailor it for the private sector.
Senator Bolduc: Do you know if the OECD is doing something like that with Ukraine?
Mr. Petryshyn: No, I do not.
Senator Bolduc: They have an extensive program in Eastern Europe.
Mr. Petryshyn: Senator, in my view at any rate, there is increasing cooperation among donor agencies in Ukraine. Over the last 10 years, the contours of cooperation have crystallized more and more. I think, though, that Canada in particular, with our multilingual population, is in the right position.
In many wais I think of the Kennedy years when the peace corps was developed. A strong program under the guidance of government was put forward to mobilize people for a particular activity. It seems to me that now is the time in Ukraine's history, post-Soviet history, when Ukraine needs this kind of assistance. It needs strong support from Canadian organizations that can work in the realm of civil society, but with coordination and funding from the federal government.
Senator Bolduc: What you are saying is that, even though governments may have other perspectives, such as government-to-government perspectives, inside both societies it would be efficient to have something going on independent of governments.
Mr. Petryshyn: A series of such programs has already been started under CUF. With the growth of the Internet, for example, there is the ability to twin organizations in Canada and Ukraine at a reasonably small cost to stimulate and to continue to support those organizations in Ukraine. These are tools that we never had before. We have seen the rise of registered civil society organizations in Ukraine. We have seen their ability to sustain themselves and to advocate policies that the government may not wish to see. This situation can be helped by Canadian NGOs having an ongoing relationship with newly created Ukrainian NGOs.
Through the Internet, through a small granting program, we can draw upon the vast experience that we have in the voluntary sector in Canada. I am speaking not only of the Ukrainian community, but also of the general Canadian society. The experiences we have drawn upon from 40 years of work across the world are a resource that can be focused and made available to Ukraine. Such a contribution would be warmly welcomed. It would be a major contribution to this particular historical moment.
Senator Graham: Since yesterday was St. Patrick's Day, perhaps today should be called ``Ukrainian Day.''
From time to time during your presentation, I was watching Senator Andreychuk. She could hardly contain herself. She wanted to stand up and cheer. I congratulate you on your presentation and the pride that you have in your ancestry.
I wish to return to the first presentation. I was intrigued by the manner in which the Ukrainian-Canadian community has coalesced and gathered together in a volunteer way to assist Ukraine. I was struck by the first major undertaking of the UCC, which was to coordinate an intensive fund-raising campaign back in 1992, which raised $1.6 million in eight months to assist Ukraine in establishing an embassy in Canada. Were all of those funds disposed of, or is that fund still in existence?
Mr. Czolij: The funds were fully used for the purpose for which they were raised. We bought a residence for the ambassador. We have provided various supports for the embassy. Canadian-Ukraine businessmen have purchased the embassy building which was transferred, as was the residence, to the embassy of Ukraine. I understand the building is being used today for the consulate, and the residence is still used by the ambassador.
Senator Graham: Do we have other examples of that kind of generosity?
Mr. Czolij: Senator, the reason I mentioned that was not to impress you with the fact that $1.6 million was raised, it is because I wanted to impress you with the fact that it was raised in a timely manner over an eight-month period when Ukraine was at the most fragile time of its history following the referendum of 1991. Fully aware of that, the Ukrainian-Canadian community showed its generosity and understanding of the historical importance of the moment.
Senator Graham: I recognize that and congratulate you. One of the things that impressed me was not so much the amount, but the fact that you did it in such a short space of time.
Senator Andreychuk: I am sure that Mr. Czolij would want to remind senators about why it was significant that the embassy was set up. They needed an embassy. They needed an international presence in the diplomatic field, something which they did not have before. It was also an interesting signal to the Ukrainian community that there was now a Ukrainian state.
One of the roles of the UCC, was to send the message to Canadians that there would be a new way of working with Ukraine, that is, as an independent state. The significance of that embassy goes a lot further than the support that was contributed, it was a way that Canadians would understand the new dynamic. I think it is unique in that sense.
Senator Graham: That is an important point. I do not want to prolong that particular issue, Mr. Chairman, but it would be interesting to note whether citizens of Ukrainian descent in other countries, for instance, those in the United States, performed a similar activity.
Mr. Petryshyn: Yes, senator, they did.
Senator Grafstein: What is the Ukrainian population of the United States?
Mr. Petryshyn: It is about 1.5 million.
The Chairman: That population lives mostly in New Jersey, does it not?
Mr. Petryshyn: That is the point of origin, of course, but the community today in the United States is spread out, and they live in Chicago and, interestingly enough, the West Coast. Just to reiterate the comments of Dr. Hawalelshka, today Silicon Valley has about 25,000 people from Ukraine working in its high-tech area.
Senator Graham: All of you have used the word ``democratic behaviour,'' and Dr. Petryshyn talked about the necessity of the emergence of middle class NGOs to encourage democratic movements, if I am quoting correctly. I absolutely agree with that.
Earlier we had talked about elections and the free and democratic process in the Ukraine and, indeed, in other countries. Mr. Witer, who testified earlier, said that observers would be very welcome in the Ukraine. I would love to be there for that election, as I have been in countries where I was public enemy No. 1.
I would refer to a statement by security advisor Condoleezza Rice in Washington. She said in a live television link between Washington and Kiev on March 4 that the United States is watching Ukraine's election campaign very carefully in order to assess whether Ukraine will show in a clear way that it is ready to be a member of the international community of democratic states.
The day following that statement by Condoleezza Rice, the Russian ambassador to the Ukraine said, and I am quoting the ambassador, ``The massive visits of Western politicians to the Ukraine ahead of the 31 March parliamentary ballot are a humiliation and insult to the country.''
How would you assess that statement?
Mr. Hawaleshka: I dealt with that area of sensitive relationships in the weapons area. Obviously I had to deal with the political aspects as well, with the state security people, with the NATO people, with the former KGB, et cetera.
I think what the Russian ambassador said is an insult by itself. For him to say who should visit Ukraine and who should not, I think, is extraordinary. It is not his garden. He should not worry about this.
As far as the West visiting Ukraine or, for that matter, visiting Russia or Georgia or Uzbekistan, they can visit wherever they want. I mentioned in my speech that Ukraine is in an extremely strategic position geopolitically. Canada is in an extraordinarily strategic position in terms of the world's view of the United States. Clearly Ukraine is similarly positioned vis-à-vis Russia. It is no big surprise that somebody is interested in what Ukraine will do.
It would be a dangerous thing if Ukraine were to backtrack. We do not want to go through that all over again. I think it is normal and rational for the West to see what is going on. I did not see any threats in the U.S. statement, although there were some elements of what we might call concern raised in that particular talk.
By the way, I hope you feel envious because I am going next week, Senator Graham, to these elections. We hope that these elections will prove to be better than the election they had in Florida.
Senator Graham: Mr. Chairman, I am compelled to make a comment. The people I have done a considerable amount of election-observing with — a U.S.-Washington-based election observer group, along with the Carter Institute in Atlanta — have both said privately, and now I am saying publicly, with regard to the situation in Florida, that we would not even observe the election in Florida because we would only go where there are uniform electoral laws and the situation is the same from one state, one city, to another. There were so many variations in the Florida electoral law that we would not go there.
I come now to your conclusion that the actual change that is hoped for will take much longer than originally anticipated, and that it will take a full generation to change — and that is very interesting and very pertinent — and that Canada must be in for the long haul to be an effective change agent. That reminded me of a time that I was in Paraguay — and I am dropping a name here, Mr. Chairman — with President Carter. I spoke to the publisher of a tabloid newspaper that had been suppressed during the Stroessner years who told me that, after Rodriguez became president, the newspaper was back on the street almost immediately, following the election in 1989. Paraguay made progress toward democracy in 1991 and 1993. The publisher said to me, ``Don't love us and leave us.'' This is what you are saying. We must be in for the long haul. When I asked him what he meant by that remark, he said, ``I was there when you talked to Rodriguez, the president, and he promised a new constitution and a new electoral law, and you must ensure that that new electoral law is delivered.''
Would you care to expand on that comment?
Mr. Hawaleshka: I would like to point out that Canada is not totally unaware of this particular problem. Even CIDA, in its enormous inertia, has managed to identify this fact. I remember that the previous technical assistance officer at the Canadian embassy in Kiev, who was involved in restructuring Canada's involvement in Ukraine, made me aware of the realization, I am pleased that he did, that ``Love `em and leave `em'' is not what needs to be done. You have to introduce, nurture, shepherd and monitor, and once you are at the same level you then say, ``Let's have a beer together.'' You are then into a different situation.
What is required, though, is consistency in our agencies. What tends to happen is that an aid project is approved by CIDA for two years and then, at the end of that time, when the project is just taking off, that is, it is in a growth curve, CIDA withdraws its funding because it no longer funds that specific type of project.
CIDA may then ask them to come up with some new ideas. Why do we need a new idea when one is working well? Why not fix what you have and bring it to a good working state? This is what I mean by being in for the long haul. There should not be change just for the sake of change.
A new president comes in and we have a new policy. Whereas before it was management by objectives it is now management by activity, and next it is management by results, then it is result-based management and then it is something else. This is crazy. There must be a way to run things in some kind of organized and simple fashion. That is all we are saying.
However, there was one project that was not destroyed by this method. It is the Science and Technology Centre of Ukraine. It was not destroyed because it was not strictly a Canadian project. The United States was involved, as well as the European Community, Uzbekistan, Georgia and Sweden. Canada was an important partner, but only one of several partners, therefore, they could not screw it up. That project is being maintained and doing well. It is still considered to be the premier shining light of aid projects.
Ambassador Miller of the United States wrote to Madeleine Albright, when she was the Secretary of State, and stated that the STCU is the best aid project in which the United States had been involved. This is only a statement, but this has been in existence since 1994. It has been eight years, and Canada has submitted additional moneys, so this will run at least until 2005, 2006 or 2007. We are looking at a 10-year, 11-year or a 12-year involvement at a high level of support. That is a successful project.
The same applies to other places. Perhaps the length of time is not the same, but at least some effort is being made to not just start something and then let it drop.
Senator Bolduc: Does that comment apply also to the rotation of the people in the bureaucracy?
Mr. Hawaleshka: I could mention many situations in that regard.
Mr. Czolij: I would add one comment to what Mr. Hawaleshka said. In our presentations, whether to this committee or to others, we stress the importance of this critical time. We do not do this to dramatize the situation. The comments the senator made regarding the Russian ambassador indicates that Ukraine is currently at a crossroads between continued Russian influence and further integration with Western democracies. The language used by the Russian ambassador reinforces the fact that Ukraine is leaning towards Western democracies and certainly indicates that what Western democracies are doing in Ukraine certainly bothers Ukraine's neighbour, which would like to continue its influence. That should only assure us that Canada is doing the right thing by participating at this crucial time.
Senator Grafstein: I also want to add my congratulations. This has been an informative and eye-opening presentation from all of you. I wish to thank you for that.
There are 1 million people in Canada from the Ukrainian diaspora. How many of those people would travel to Ukraine in a year? What would be the percentage of two-way travel? Is it high or low? Could you give us estimates?
Mr. Hawaleshka: The ambassador could possibly tell us that.
Dr. Yuri Shcherbak, Ambassador of Ukraine to Canada: At the outset I would thank you for the opportunity to be here. It is most interesting to hear the opinions of Canadian friends.
I can say that the turnover between Canada and Ukraine in the year of 2000 was Can. $140 million
The Chairman: The question, ambassador, is how many people of Canadian-Ukrainian background visit Ukraine in a year?
Dr. Shcherbak: Approximately 20,000 people visit Ukraine. That is based on the data of Air Ukraine. I do not know how many travel with Polish airlines and Hungarian airlines.
The Chairman: If I may, to clarify this question, is that the number of people who travel on the airline, or is that the number of visas that are issued? There must be a statistic, if you would be prepared to give it to us, of the number of Ukrainian-Canadians visit. You do not know who is travelling on the plane. It could be anyone. I find 20,000 to be a large number.
Senator Grafstein: We want to know the number of Canadian visitors.
Dr. Shcherbak: We issue visas for all Canadians, not only, of course, to Ukrainians. We issue approximately 40,000 to 50,000 visas for Canadians. We believe that perhaps 70 or 80 per cent of those who travel to Ukraine are Ukrainian. However, last year when we celebrated the tenth anniversary of Ukrainian independence many Ukrainian-Canadians travelled to Ukraine.
Senator Grafstein: I only use that as an example. I assume that one of your problems as a people who are interested in taking leadership roles, has been trying to penetrate through the large diaspora here and to turn your community around. I respect that.
One of the things I found fascinating in my travels to Ukraine was the high literacy rate. That is why it came as no surprise when I heard about the achievements in identifying scientific organisms and in engineering and computer science. I believe Ukraine's literacy rate is higher than Canada's. Canada's illiterate rate is around 18 per cent. In Ukraine it is around 2 per cent.
Mr. Hawaleshka: It is practically non-existent.
Senator Grafstein: That should form part of our record. Particularly in the subjects of maths, science and engineering there is a high potential for development.
Having said that, in the last decade I have also noticed that these world-class institutes are suffering from the results of a huge brain drain. The computer institute that you mention, for instance, has lost many of its academics primarily because computer specialists want to keep up to date cannot do so because of lack of funding. Many have ended up in the United States, in Israel and in parts of Europe. The institute that was one of the leaders of strategic computer utilization has drifted downward in its stature.
Is that the same with respect to the Antonov aircraft company? They make a magnificent airplane which is the best heavy-load aircraft in the world. It is better than the Boeing aircraft.
Mr. Hawaleshka: It is bigger.
Senator Grafstein: It is bigger and better, yet, there is no market for it. What is the problem from the perspective of development? The technology is in place and it works very well. Canada certainly could use a few of them. We had to use an American heavy-load aircraft to fly our equipment to Afghanistan. Why is that aircraft not more widely sold?
My third question, which is linked to the other two, relates to the inconsistency with respect to your brief. On the one hand, you are asking Canadians — I agree with this, by the way — to foster increased educational and scientific exchange. I think that is very important, and I agree with that and everything you have said about the NGO policy in Canada. On the other hand, we have a very strong suggestion that you would like us to induce or seduce use these brilliant young immigrants from the Ukraine to come to Canada, and we would welcome them. However, is there not an inconsistency in your policy or attitude about this?
Mr. Hawaleshka: I could try to answer this in an off-hand manner, but I will not. One could be very glib.
To address your contradiction first, I did not suggest that they immigrate to Canada. I suggested the training of young people in Canada. We have had that experience in the past, and I particularly quoted the Chinese experiment. CIDA spent close to $100 million over the years bringing many scientists, young students and professors over to Canada. I had three working with me.
Senator Grafstein: I am referring to the last recommendation in your brief. You might have been referring to exchanges, but it does not seem like that.
Mr. Hawaleshka: That is an immigration situation.
First of all, I am interested in the training of the young people. I would like them to return and do their thing for their country, but you and I both know that 100 per cent of them will not go back because people see that the grass is greener or whatever. However, a large percentage will return, and that is what we want.
As far as item 6 is concerned, I was generalizing. When I refer to highly qualified and extremely hard-working people, I am not speaking only of computer scientists or genetic scientists, I am including people who would like to work, build something, and create a better life for themselves and improve their surroundings as well, in the Canadian milieu. They would buy houses and generate economic activity here. I was referring to the builders.
Senator Grafstein: We are trying to get at specific recommendations. I do not quarrel with what you have said, but we should know what the problems are. You have suggested that you want to encourage the immigration of skilled people, and I have absolutely no problem with that. Canada has a deficit of skilled workers. Certainly everything I have seen in Ukraine would indicate that these skilled workers are useful and necessary to build Canada. That is certainly what the last census indicates. You have encouraged us to be more generous in our immigration policy. What is the problem?
Mr. Hawaleshka: I would turn this over to Dr. Petryshyn and then return to your other point.
Mr. Petryshyn: Briefly, there is an extremely difficult problem with immigration at the Canadian embassy. There are two sides to this. There is a growing demand from the Ukrainian population and a greater number of immigrants. We are now receiving over 3,000 a year. However, the rejection rate is, I believe, over 90 per cent.
Part of the reason for that is that some officials have been corrupted. People have been manufacturing documents and speeding up processes inside the embassy. They have been caught by security. However, as a result, the processes with immigration have become extraordinarily tight. As well, the fees that immigrants are obliged to pay have been very disconcerting.
The Chairman: Are you saying that Canada receives 3,000 immigrants a year, more or less?
Senator Grafstein: There are many more applications.
The Chairman: I understand that. This, by the way, is not just a problem related to Ukraine, it is also related to some other countries of Eastern Europe, in particular.
Senator Bolduc: Is it a matter of security?
Mr. Petryshyn: It is not simply a matter of security. There is some evidence to show that there is a systemic lack of appreciation of the internal dynamics in Ukraine. There is also a problem that is not fully appreciated which is related to the Ukrainian-Canadian community, and I should like to say just a word about that.
From the end of the Second World War to the rise of the independence of Ukraine, there was virtually no Ukrainian immigration from the U.S.S.R. The Ukrainian community of Canada went through two generations when there was no immigration. We would normally have a steady relationship with the Ukrainian community, which is now in its sixth generation, but there is an imbalance because there has been an interruption.
The Ukrainian Canadian Congress, in a brief to the Department of Citizenship and Immigration, suggested that this historical imbalance be corrected by some favourable treatment to allow an acceleration of the reunification of families, and particularly to favour immigration where there is an occupational shortage in Canada, for example, in the nursing area. There is a surplus of nurses in Ukraine and a shortage in Canada.
However, there is no special appreciation of the difficulty that the community faces here or the systemic problems that immigrants face at the Canadian embassy. Thus, it is an area of considerable unhappiness on both sides, I am afraid.
Mr. Czolij: Since the senator asked about the illiteracy rate for Ukraine, I would point out for the record that, in the document entitled, The Path to Reform: Ukraine Programming Framework 2002-06 of November 2001, prepared by CIDA, in annex 1, there is an adult illiteracy rate noted of 0 per cent. The source is the Encyclopaedia Britannica 2001 year book.
Senator Grafstein: That is compared to Canada's about 18 per cent.
Mr. Hawaleshka: Senator Grafstein asked about the Antonov airplane. After surmounting extraordinary difficulties with no funding, and no purchases of aircraft after 1991, the company managed to carry on by sheer love, by effort. In the past four or five years, this has been slowly turning around.
There have been partnerships. For example, Russia has been contributing to the development of certain aircraft because they know these are good aircraft. As well, the Ukrainians have done things on their own. For example, they have developed a brand new commuter-type airplane, the Antonov 140, which is now being manufactured in Ukraine, Russia and Iran; and China just bought the rights to manufacture them.
Ukraine has several problems with regard to the big aircraft. First, those big aircraft may be too big for certain things or for general-purpose use. How many Antonov 225s would the Canadian Air Force need? It would not need any. It would, however, need the Antonov 124, which is a much better aircraft for Canadians.
Senator Grafstein: For the cold weather, we would need the big one.
Mr. Hawaleshka: The Antonov 225 would be useful for the Americans and so on. It is just too big. Therefore, we doubt whether selling the big airplane would be a profitable venture. The smaller airplane, the Antonov 124, which is still bigger than anything else we have here, is a good airplane and could be used by many operators as a general transport plane. We could not get our troops to Afghanistan. This plane would have been useful in that regard.
The Chairman: We have studied this issue to death. The problem does not lie in transporting our troops; it lies in transporting our larger pieces of equipment.
Mr. Hawaleshka: We must remember that Ukraine is still considered by some to be part of the former Soviet Union. Even our people here who deal with sensitive matters cannot attend some functions in Ukraine without previous clearance or notification. Some people are still not sure whether we are with the West or not.
As well, prospective purchasers have no experience with former Soviet Union organizations about continued support if they buy something. They may think: ``What will happen if we buy an airplane and those guys stop delivering the parts? What will we do?'' Those concerns have not yet been addressed.
Finally, Ukrainians are very poor at marketing; that is, brochures, salesmanship, presentations, and so on. If they were really smart, they would hire smart people from the West to do this for them. Canadians could be useful in that regard.
Senator Grafstein: Who owns Antonov?
Mr. Hawaleshka: Antonov is owned partly by the Ukrainian government and partly by private companies.
Senator Grafstein: Is the privatization process accelerating?
Mr. Hawaleshka: Yes, it is.
Senator Grafstein: I raise this as a question of personal privilege. My wife's grandparents both came from the Ukraine. Therefore, I must be especially respectful of anything that emanates from the Ukraine. I am just the grandson of a poor Polish immigrant, so I married up.
Senator Andreychuk: Should I defend the Poles or the Ukrainians?
Lest you think I will ask you an easy question, I will ask you the question so many other Canadians have asked me. That is, we talk about a special relationship with Ukraine. We say that it is in our best interests to have a stable, pro- western, pro-democracy, secure, independent Ukraine. Most Canadians agree with that. When we talk about trade and investment, some Canadians say that they will invest their time, but they believe that the fruits of their labour will then go to the entrepreneurs and the investment community in Western Europe. How do you respond to that?
Mr. Hawaleshka: I do not believe that would happen. Without doubt, they look at Germany, at Austria and at the countries around them. If Bombardier, for some reason, develops a relationship with Antonov to produce aircraft that could be complementary to the Canadian line, I could practically guarantee that you would not have a problem in terms of them bypassing Bombardier and going to Europe. They would enter into a joint venture with Bombardier and work with them. I also believe that they would then approach Europe as an entity, together. I do not see that as a problem.
From our perspective, the problem occurs because Western Europeans are much more active than we are. Everywhere you turn, you see an Italian.
Senator Andreychuk: That is true.
Senator Bolduc: They are all around the world. I met more Italians in Africa than anyone else.
Mr. Hawaleshka: Senator Di Nino is an example.
The Germans are everywhere. How many Israelis are in Ukraine doing business and developing things? They are taking advantage of the situation.
If the element of trust — and, I would put that at the top of any relationship between a Western firm and a Ukrainian firm — is developed, then I think the relationship will be very good. However, without trust, there can be problems.
Mr. Petryshyn: I head up a business management program at the Ukrainian Centre at Grant MacEwen Community College for which we charge $3,500 U.S. CIDA has achieved quite a few successes in Ukraine, one of them being the funding of the business management program so that we can now bring students from Ukraine to Alberta every year. I am referring to working people who have companies and who are taking our program in the evening. The third group is now in Edmonton doing their practicums with Canadian banks, private institutions and government institutions. These are business relationships. They are the seeds-of-trust relationships that will encourage future investment.
The British, in particular, were very good at this throughout the world by training people at their institutions and developing friendships. I believe that, over a period of time, Canada will be a direct beneficiary of programs such as that.
The Chairman: Thank you very much. This has been a most interesting presentation. Until today, it is fair to say that some of the testimony about Ukraine has been rather negative. Clearly, the tenor of the evidence from this panel is positive. Progress is taking place.
[Translation]
Senator Bolduc: Mr. Czolij, if I understand what was said, there is two Ukraine. There is a Western Ukraine, which is somewhat pro-European, and there is an Eastern Ukraine, where traditionally economic power belongs to the Russians and a few prominent Ukrainians, such that it begs the question whether there is political momentum toward separation, with one part of the Ukraine going to Russia and the other part joining Europe, or whether in the end, there is no divisive issue and everyone is ultimately Ukrainian: it's normal patriotism and it is fine as such.
Mr. Czolij: I believe that the two parts of the Ukraine, the West and the East, have different historical realities, which explains what was described. Kiev, along with the West is turned towards the western world, while the East looks to Russia.
However, I believe astute politicians in the Ukraine make sure not to emphasize theses differences, and rather strive to create a strong sense of belonging of Ukrainians to a united Ukraine. Those who would look for ways to weaken Ukraine often amplify these types of disagreements. Promoting divisiveness is often a means to weaken a country.
Some have attempted, in the past, to make it a religious issue, between Catholics and Orthodox, or attempted to use other means to find divisiveness to weaken the country. As I said before, I think that astute politicians, believing in their country, and willing to explain the historical differences put in the appropriate context, will make sure not to accentuate these differences but rather will promote the sense of belonging to one single country.
[English]
The Chairman: Thank you very much. It has been a great pleasure listening to you.
Honourable senators, our last witness before the minister is Mr. Orest Subtelny.
Please proceed, sir.
Mr. Orest Subtelny, Professor, Department of History and Political Science, York University: Mr. Chairman, I am also a director of a CIDA-funded project dealing with asymmetrical relations, such as the relationship between Canada and the U.S., and Russia and Ukraine, which is now in its second year. Therefore, I have theoretical and some practical knowledge about Ukraine.
We are discussing this topic at a very difficult time. In my many years of teaching, I have come to realize that 2:30 is a witching hour, a time at which students' eyes begin to glaze over. I am sure that this august body will not have a problem. However, should it happen, I will understand.
As I listened to the previous witnesses, it struck me that there is an assumption at work here, that is, the sooner Ukrainians become more like Canadians, the better off they will be. This seems to be the underlying theme, and it can be understood why. When you make a comparison between the living standards and so forth of Canada and Ukraine, of course it looks like that might be the direction to go.
However, at the outset, I would caution about pushing this too far. They are very touchy on this score. They are not about to become Canadians. They want to remain Ukrainians. They would like to make life better in Ukraine rather than making Ukraine into a Canada.
I think the concept can be pushed too far sometimes. The process they are going through is exceedingly complex. That is a truism that has been repeated many times. What is often forgotten is that there is another assumption, that is, that somehow they are an underdeveloped society moving toward a more developed Canada-like society. They were not underdeveloped; they were highly developed. They were highly modernized, just in a different way. They took a different route to modernization.
Therefore, we cannot assume that we know modernization and Ukrainians do not. As was indicated before with the technology sector, they feel quite competent in that area. I believe that should be taken into account. I understand you will be taking a trip to Ukraine and Russia. Therefore, you might run into a certain amount of scepticism about what we have to offer, in particular scepticism about anything they might perceive and hear as a patronizing attitude. They are supersensitive.
Your committee has gone into great detail, Mr. Chairman. You have heard a great deal of testimony, which has been most interesting and informative. I therefore asked myself: What can I add? What topic can I possibly touch upon which has not been dealt with thoroughly?
If there is one thing that should be discussed, I believe it is the issue of the elite in Ukraine, the people who are running the show, and the nature of the elite. It is crucial to keep in mind that the decision making and the policymaking — everything that is happening — is bound to this phenomenon of the so-called ``new and not-so-new Ukrainian elite.'' Who are these people? How did they get there? Volumes can be written about it. I will try to give you a sketch of this group of people.
At the outset, let me say that I am very optimistic about Ukraine. By and large, I think things are heading in the right direction. I believe the long-term future is very promising. A great deal has been accomplished.
Having said that, let us move on to discuss the elite. The first point is that Ukraine now has an elite. For centuries, there was no elite in Ukraine. Being part of an empire, any ambitious young man or woman wanted to go to the heart of the empire, which meant Moscow, St. Petersburg or elsewhere. They left. There was a constant brain-drain of ambitious young people. If you look through the ministries in Moscow now, you will be surprised to see how many Ukrainian names are there. Those are the people who made it in Moscow. Ukraine was not seen as a place where you could advance your career.
Now, young people are staying in Ukraine. They see Ukraine as a context for their work and activity. This is a hugely important historical event. They always went; now they are staying. You are dealing with a real elite in Ukraine. From a historical point of view, this is important because now you have people living in Ukraine making decisions about Ukraine.
The other aspect is that they are not a very pretty elite. They are highly unattractive. You might say this is to be expected. All new elites are unattractive. Going back to medieval times or American elites, you see that, at the beginning, they were a rather rough bunch. Unfortunately, the elite are perceived to be exceedingly lacking.
The Chairman: I suppose that is because they come out of a conspiratorial background, which was the nature of politics in the Soviet Union.
Mr. Subtelny: That is exactly the point. In Ukraine we have an unusual situation where one system collapsed, a new system is being built, but the same elite is in place. Usually, when an empire collapses, the imperial elite collapses or leaves. Here you have had a change of system and no change of elites. It is quite remarkable. It just does not happen.
Why? I do not want to lecture you, but I would like to develop the point. A process has occurred in Ukraine by which, as the Soviet Union was collapsing and a new Ukrainian state was formed, the really smart people, those with connections, especially young leaders, not the old Brezhnev types, saw which way things were going. They had the connections and realized that they had influence and power in the old system. The trick was to get wealth — to transfer that influence, that power in the collapsing system into wealth in the new system. That was the first phase.
When Ukrainian independence was established, what they began to do was introduce privatization. All of us would clap and say, ``Wonderful, privatization.'' To them, it meant getting their hands on wealth through connections. They did not build or create anything. They just used their connections to get shares in factories and enterprises and to get their hands on wealth. They no longer had the power of the Communists, but they had the wealth. That was the phase one.
In the second phase, which ran from about 1994 to 1997, they took the money they had and began to transform it into power in the new system, the independent Ukraine. We are seeing the conclusion of that phase right now. That meant they bought elections, influence, and their seats in parliament.
What did this mean? The new independent Ukrainian state became a mechanism for the elite to jump from one ship to another. Rather than the state serving society, it became a tool. How does the average Ukrainian look at his own state when he sees this was the key process that was occurring? Obviously, there is a sense of alienation.
I should say that much the same happened in Russia. This creates the problem that we see in Ukraine. You will probably run into it. There is constantly a discussion of ``they'' and ``we.'' It is a case of: ``We the people, and they who run the show.'' There is a huge gap and they do not see that they are part of one entity. As a result, there is a problem of what the state is about.
Whose interests is it serving? That problem continues to exist. Any time you mention the state, they jump. They want no part of it. This is a huge problem in Ukraine.
The problem of the new elite is that they were the old types, communists, factory directors, people in the various security agencies and so forth, unlike in Soviet times where there was a fairly fluid exchange of elite. A peasant boy like Yeltsin or Gorbachev could make it to the top. What is happening in Ukraine today is that peasant boys will not make it to the top, because now you need money. You need education and money to stay on top.
Society is developing a cleavage of a very tiny, privileged elite and a vast mass of people who are underprivileged or suffering in many ways. This was not the problem in the old Soviet case. This makes the Soviet past, to some people — the older generation — attractive.
What is disturbing is that before, as I said, village boys could make it to the top. Why can they not now? One has to pay $3,000 to $5,000 for a university education. They do not have the money. There are social boundaries. In the past, a party secretary's children and the children of a factory worker often went to the same school. Today they go to separate schools. Before, they often lived in the same housing. The party bigwigs had privilege, but they did not have much concrete wealth. Today the elite, very symbolically, is building houses. They have huge walls — not fences, walls. They are afraid of the outside world. They are isolating themselves from society. This is creating almost an impenetrable elite where politics at the top becomes a game of the very few, of clans and groups. It has little to do with the impact of society.
What I am driving at is that there is a danger — and this is often discussed in Ukraine — that we are getting a Latin American variant, where we have aspects of democracy, elections, Parliament, constitutions, but the power is held by a oligarchy that is really closing in the fences and holding on to power very strongly. I raise the point up because I believe this is something to be aware of when dealing with people in Ukraine. You obviously have to differentiate.
There are people in the elite who want to do something for the country. We have an election with various groupings, but so far that new elite is definitely in control and has its own interests very blatantly at heart and no one else's. I believe this is the key issue. Will they entrench themselves long term, or will elections undermine their hold? I think this, from an historical point of view, is the key issue that is about to be decided in Ukraine.
These are general comments about what I thought might be a key issue in Ukraine today. I would be very happy to discuss any other points you would like to raise.
The Chairman: Thank you very much. You touched on something that has crossed my mind. I have never been in Ukraine, but I know Brandenburg, Pomerania and all of the former East Prussian and Polish provinces very well. It is interesting how the notion of egalitarianism is changing in those areas. In spite of the fiasco, egalitarianism is gradually disappearing, which seems to me to be something similar to what you are speaking about. It is a subject which is widely discussed.
Senator Setlakwe: Further to this sense of alienation that you speak of, the previous witness mentioned it would take a generation or more to arrive at a satisfactory situation. To what extent do you think that the electoral process that is now underway will shorten or lengthen the time it will take to eliminate this type of elitism?
Mr. Subtelny: When I was there last week, I witnessed some of the preparations for the elections. There is room for optimism and room for pessimism. On the optimistic side, there seems to be a much more concerted effort to convince people. There are all the PR tricks of the trade. Television is now used very effectively to promote democratic values. They are even letting opposition figures, who were banned or at least discouraged from appearing on television, have access to television. In a somewhat unfavourable context, it is always two against one, but at least they are allowed to appear on television. I think that is positive.
Another positive feature that I saw was that people are certainly talking about candidates very pragmatically. They are able to distinguish put-ons, propaganda, and attempts to buy people. You hear this stated openly. People are aware of what is happening.
On the negative side, there still is, as you know, the problem of media control. Not everyone can get access to the media. The people who have money, the people who run the elections, are people from the elite. No outsiders can get in. Even people in the opposition to the elite come from a background of money. It is not populist, it is not people rising from nowhere or a popular wave, it is people who made their money and now have decided they have enough and would like to do something for the country. The point is that they went through the process of privatization in becoming wealthy. Even the opposition comes from within this small elite.
As far as time goes, we remember when it was going to be five years, then it was 10 years. Now the popular figure is a generation. The argument is that anyone who became an adult in the Soviet system is a lost cause. That is not always true, as some people have made radical transitions. Some people who grew up in the Soviet system became the greatest enemies of the Soviet system. However, the general wisdom is that anyone who has socialized in that system will never be able to get rid of certain elements of that thinking. It will take a generation.
Senator Di Nino: I was pleased that you raised this issue because we did not heard much about it today. If I may use my own word, I would suggest that the word ``corruption'' would also apply.
I have two questions. We have heard a great deal about educational standards. I think it is accepted that they are quite high. Do you believe that, because of the standards of education and the fact that people are well educated, the ability of the masses to overcome or at least to change that elitism, is enhanced and that it will be accomplished a little easier?
Mr. Subtelny: The educational level is the one thing that does not fit the Latin-American model. Such a level of education is quite unusual and it may make the Latin-American model more difficult to implement. That definitely is a factor.
A have a comment about corruption. What is corruption to us is not always corruption to others. There is a cultural context. For example, in Middle Eastern society, giving gifts is just a way of doing business, but to us it is corruption. We should be aware of what corruption means. Historically, the Russian empire — and to a certain extent the Soviet Union — was a poor empire. It did not have the money to pay a bureaucrat. The assumption was that, when you got your bureaucratic job, you made your living by soaking the people. Your salary came from what you could get from the people, including the fees you could impose on them and so forth. It was assumed that you would pay for yourself. This attitude carries over to today. You get a job, it is poorly paid, and it is assumed that you will use your position to add to your income. For that person it is a tradition, almost, and a perfectly logical way of behaving, good or bad. Obviously, the only solution is to pay them a decent salary so that they do not have to use those means.
Senator Di Nino: My question was related to the control that the elite would have over the economy and over politics, and over, hopefully not but maybe, even justice and things of that nature, and how that could corrupt the system even more. I will leave that.
Mr. Subtelny: There is no aspect of society that is really beyond that kind of control. One must wonder who can mobilize an opposition. The best chance of that happening would be as a result of a division within the elite. As it is occurring today, to an extent, certain groupings of the elite will come up with one program and other groupings will come up with another program. Certain groupings within the elite then might take on the role of a Roman council, appealing to the masses. It will have to happen within the elite, with one group, perhaps the younger people.
There is a factor at play here. Every elite of this type wants to gain legitimacy as soon as possible. It wants to gain legitimacy within its own society by being perceived as less corrupt, as well as gain legitimacy outside its society. It is important to them that, when they go to Europe or to Canada, they not be seen as Mafia. They want to be seen as ministers and so on. Their children, especially those who are sent to England to attend Oxford or private schools, would like to legitimize their position. That might mean you have to act. If you want to be accepted in Western society, you must behave in a Western way. That factor of acceptance in a global elitist club might lead them to make certain concessions.
Senator Di Nino: My second question deals with the effect that this might have on the democratic reforms, particularly the political democratic reforms. Will this hinder or slow down the process, do you think?
Mr. Subtelny: It will slow the process. They will not rush towards real democratization. If I were in their position I would not rush to bring about a true democracy. Their great advantage has been this slowness of the process, this lack of clarity. They can profit most when there is a lack of clear-cut laws. It is very much in their interest not to push it too fast.
Senator Graham: I am fascinated by what you have said, Professor Subtelny, about the elites, and I am comforted by the fact that you have said you are optimistic about them. Mr. Witer talked about a poll that indicated the Viktor Yuschenko block has the best chance in the upcoming election, which is 19 per cent. Is that the Our Ukraine bloc?
Mr. Subtelny: That is correct.
Senator Graham: Another poll indicated that there are six parties and blocks that might be able to overcome the 4 per cent threshold or voting barrier, and those would be Yuschenko's party at 23.9 per cent, the Communist Party at 16.8 per cent, and Mr. Witer's poll had the Communist Party at 17 per cent. They are relatively the same. There was the Social Democratic Party United at 8 per cent, then for United Ukraine 7 per cent, the Greens 5.5 per cent, and Women for the Future 4.1 per cent.
Do the elites belong to one of these parties? If so, which one? Who are they? How did they get there?
Mr. Subtelny: They are people who held top positions in the system, which, primarily, is the political and economic system, be it directors of banks, directors of factories, ministers, high bureaucrats and so forth. They are individuals who held the high positions, in whatever aspect of society.
Senator Bolduc: They were there.
Mr. Subtelny: They were there. There was a changeover, obviously. Some of the old members, such as First Secretaries of the Communist Party, lost out because their party collapsed. However, the young ones managed to change over and become Christian Democrats. The same people, with a new name, created a new party.
The changeover in personnel has been minimal. That is occurring more now just because of age. For the first 10 years the changeover was minimal.
Senator Graham: To which party do they belong?
Mr. Subtelny: All parties.
Senator Graham: Does it matter?
Mr. Subtelny: I cannot think of a party in which these people, who are broadly and precisely called ``elite,'' do not hold top positions. Practically no party has a grassroots base.
Yuschenko is obviously a member of the elite, but he is an example of someone who is taking a position in opposition to other members of the elite. As I said before, this is where the fissures might occur. There are obviously conflicts within the elite. Mr. Yuschenko represents one of these dimensions, and is more democratically inclined. However, he was the head of the Central Bank. The people around him come from the top levels. Members of his campaign staff were in leading positions in the president's administration. He has to do this. He cannot operate without people who do not have the requisite connections. There is no way that you can take people from the villages or the towns and try to be effective. You would just fall flat. This is a precondition of effective politics.
Senator Graham: You have just returned from Ukraine.
Mr. Subtelny: That is correct.
Senator Graham: Would you care to give us your forecast of the outcome of the elections?
Mr. Subtelny: I spent most of my time in Kiev. Kiev is not all of Ukraine, the same as Moscow is not all of Russia. When you walk down the streets of Kiev you are surprised to see people better dressed than those you see in Ottawa or Toronto. Fifty-six per cent of all investment goes into Kiev and it shows, with MacDonald's restaurants and so forth.
I was in Kiev. I saw many people debating many issues. I saw at least three or four different parties publicizing their positions, although mainly the government parties. The party of the mayor who runs Kiev has placards posted in the city, but I saw very few signs of the opposition parties in Kiev. However, I saw open debate. In the last week, they did allow opposition figures to participate in debate on television. This is very positive. This is not a Belarussian situation. It is not even Zimbabwe. They are making an effort to appear democratic.
You asked me a specific question. Yuschenko seems to be in the lead. It is very important to note that the communists will probably come in second. For the first time in the last 10 years, the communists are losing their position. They will probably not control the majority in Parliament.
Senator Graham: Is that a good thing? You may be surprised that I ask that question.
Mr. Subtelny: The communists made a name for themselves by harkening back to the old egalitarianism, or fairness, of the old system. If I asked a granny in a village if she thought it was a good thing that the communists are losing their position, she would say ``no.'' She is for the communists and sincerely believes in communism. She remembers the old days. If I asked a young computer specialist, he would say, ``That is great, because I am for the Western system.'' It depends on what segment of society you turn to. They have a social base, but it is weakening.
Senator Graham: Has the electoral law been agreed to by all the parties? Is it a free and democratic law? Is it a fair law?
Mr. Subtelny: The general consensus is that the law itself is fairly democratic. The entire issue is whether it will be adhered to.
Senator Andreychuk: You referred to the oligarchies, and to me that would seem to be a natural process. The system changed; the people did not leave. Obviously those who had some access or knowledge knew where to move and how to manipulate. You have painted an oligarchy that functions in the same way as before independence, but I have found that they are very different. There is the oligarchy that made phenomenal money, a very small group. One wonders whether that money stayed in Ukraine or went elsewhere.
Then there are the people who may have been managers in factories in outlying areas who automatically moved to the new system and knew how to proffer themselves. They were perceived to be power figures. They were perceived as people to respect in the community and that continues, grudgingly or otherwise, because there has been no displacement of them. Do you not think that in itself is a variance?
It is not one oligarchic group, as in Latin America, where two or three families exchange positions and keep going. In Ukraine there are many different elites. That seems to be a strength for Ukraine, because they are not all the same. They did not all make the same kind of money. They do not all come from the same power base. Some are municipal, some are state, and some are federal. It is all shaking out, if I may say.
The key is not to just have grassroots, but to have a middle class, which means encouraging small and medium-sized businesses that flourish, people who take risk and who then make leaders accountable, knowing that they can. There would be some sort of rule of law system in place that would bring them to heel if they were not working for the people. They are slowly building a culture with a civil society where people know that they can join associations and make a difference. Is that not, historically, how we started as a democracy? Surely there must be some understanding of how to use the systems in a democracy.
It seems to me you have simplified it. My concern is that it is much more complex and has many shades.
There is also that little layer of what I would say are entirely out-of-control oligarchs who got their hands on the biggest chunks. Coalitions between them and others like them in Russia and other parts of the former Soviet Union is more worrisome to me.
Mr. Subtelny: I am grateful for your comment that the elite must be differentiated. That is very important. I must stress that. Although the general phenomenon, as I say, is much of the old transferring into the new, still, there has been differentiation. There were different types of people, and it continues. It is differentiating even as we speak. That is a factor.
It is interesting that the people I spoke to who might be considered the elite have almost a patriotic attitude, ``Yes, I have made it, but I would also like to do something for the country.'' They know each other. They sort of say, ``He is one of us. He thinks like we do.'' They almost form a club within this group. That is a description I hear. They will point to a man who is obviously is in an important position, and say that he is also a patriot, meaning that he thinks not only of himself, not only of his group, but also of society. Apparently he stands out from all the others, because he is being identified in such a way. However, it seems that they are a minority.
The differentiation is vast regionally. People coming out of the mine factories, the large-scale industrial leaders, are the equivalent of our corporate leaders in the East. There is the equivalent in Odessa or the tank factories. They are all close-knit groups. Yes, it is differentiated, but the mentality is: ``We control the situation.''
As far as civil society is concerned, we all say that we must build civil society in Ukraine as fast as possible. However, it is incredibly difficult. The people who are most vulnerable to pressure from the top are those who start building civil society. Those who try to build a small business are the most easily approached for shakedowns and have no one to go to, but someone at the top level who will protect them. The people we were counting on to build the roots are the ones most vulnerable to repression, coercion and so forth. That is one reason why I think this building of civil society will be a slow process, but it will eventually occur.
Why am I optimistic? I am optimistic because I think the situation that obtains in Ukraine today is simply an anachronism. You cannot have a feudalistic type of elite in the world we have today. It is bound to pass.
Senator Andreychuk: Throughout the system, certainly when I have been in Ukraine, I was impressed with women who see an opportunity for promotion and advancement within the structures in Ukraine. They also have a lot of thoughtful discussion about how they can get into politics and change the dynamics of the country. That is different from the old Soviet system. Would you agree?
Mr. Subtelny: I could not agree more. The women have been especially dynamic in this society. They have built up stamina. In the old Soviet system, women had to have a job and then wait in line for five hours to get food for the family. They continue to do that today. Very often, you see small businesses being run by women. You see women as the most dynamic element who are trying to better their situation. You see the emigration of women to Portugal or Greece to work. The husband does not leave. It is the women who are going out to try to better their economic situation. We are talking about hundreds of thousands of women. That is most evident. That is very often remarked on in Ukraine.
Senator Grafstein: I have done some work on nomenclature in Poland, Czechoslovakia and Hungary, and you tend to encounter these types of people at international meetings. In my experience, they tend to be very well educated. They have an advance on most of the people in their own societies in that, because they were the brightest and the best in their educational process, they were able to travel broadly. Thus, you will find in the foreign ministries and the economic portfolios these young, very bright and well-travelled former Communist apparatchiks who have shed their communist clothes, who wear the new emperor's clothes and who are bridging into a more dynamic society. You seem to say that that really has not happened to any extent in Ukraine. Is that correct?
Mr. Subtelny: This is a problem in Ukraine and in Russia as well — you see it throughout the former Soviet system. The Soviet system left an imprint.
In the long run they will be pushed aside. However, in the short run I am worried about the social isolation they are creating with the monopoly on capital, social isolation, practically no intermarriage and separate schools. Isolation is a dangerous phenomenon.
Senator Grafstein: Let me move to the other side of the equation. I used Czechoslovakia, Poland and, to a latter extent, Hungary as an example. Against the sophisticated nomenclature that was able to surf through the transition at the end of the 1980s, you had the Velvet Revolution, which was highly educated people within their societies — writers, painters, authors, teachers — moving toward independent, democratic grassroots organizations.
We have heard about the elites. When I went to the Ukraine, I tried to find some information on that at the university, but it is very difficult to find that information. Is that anecdotal on my part or has that been your experience as well? In other words, the universities and other organisms within society are acting as a countervail to the nomenclature?
Mr. Subtelny: They are part of it; they are not countervailing; they are funnelling people up to the top. Since universities are very often expensive, then it is the children of the elite who move into the top positions, especially in certain universities.
The reason you do not see that is the simple historical fact that for 300 or 400 years there has been no civil society in this area. Unlike Hungary, the Czech Republic or Slovakia, and unlike Poland where you had aspects of civil society up until 1939, under the Russian empire there was no civil society.
Senator Grafstein: We heard that from Mr. Jacuta, but I do not quite accept that. I have studied the history of Odessa. Some of the greatest writers in Russia came from Odessa. Some of the greatest countervail to Russian imperialism came from writers in Odessa and other places. What happened to that strong liberal strain of intellectual antagonism towards autocracy, which was very evident in Lviv and Kiev, and certainly from Odessa. It was a cultural antagonism towards autocracy.
Mr. Subtelny: You are talking about an intelligentsia that set itself apart from the system as an antagonist to the system. This was the case in the Russian empire. During the Soviet regime, much of the intelligentsia became part of the system, which was quite different from the Russian empire.
Senator Grafstein: Or was wiped out.
Mr. Subtelny: Yes, either wiped out or part of the system. The base for antagonism was not there. That is why you will not often see it in universities today where you might expect it.
The Chairman: Mr. Subtelny, when you speak about an elite, the word ``oligarchy'' is thrown around loosely. Even in the Spanish-speaking countries that I have known for 50 years and where I speak the language, they all work differently. They are not all the same. There are two major characteristics. If there is not very much money around — most of those countries are poor — then a group of people get together and steal the little bit of money that there is. That is one characteristic.
The second characteristic is that when you read the newspapers, watch the news and all the rest of it, the same names come up. It is not just three names; it may be 50 names. Argentina, which has a middle class, still has a totally corrupt system of the same families. When you talk about what is taking place in Ukraine, can we anticipate seeing the same 50 names over the next 50 years or not?
Mr. Subtelny: I do not think so. There is too much differentiation and the country is too big. I do not expect that to go on. The point I wanted to make is that the problem I see is that the new state has been identified with one tiny social group. It is a tiny group, and that is dangerous for any new state. That is one of the key problems.
The Chairman: Is that because they have the money?
Mr. Subtelny: They have the money. They control things and it is in their interests and nobody else's to do so. The others do not relate to the state. If you do not relate to the state, how will you make up a civil society? How will you vote for change? You are alienated.
Senator Bolduc: My first question is about history. I am unfamiliar with the period of the 1920s and the purge but, apparently, 7 million people lost their lives. Were those people the intelligentsia or those who rebelled against the Soviet state?
Mr. Subtelny: Both. However, there was a systematic destruction of the intelligentsia. That was almost the plan.
Senator Bolduc: I am interested in the study of elitism. At university many years ago, I remember studying the French elite. Do you not think that, instead of looking at politics as the process to break the system, the best way to do it is through economics and the market?
At the beginning you must have political reform to start a market economy. When it is rolling, the best way to increase democracy is through that market economy because there is competition, one way or another, and the elites have to perform or they are just pushed aside. What do you think of that situation? Should we in Canada push to have them in the World Trade Organization even though they are not prepared for it?
Mr. Subtelny: We should push for it, we should go for it, but the problem is that, so far, they control the market.
Senator Bolduc: I know. The only way to break that is to open it up, and the way to open it is through the World Trade Organization.
The Chairman: Thank you very much, Professor Subtleny. You raised an aspect we needed to hear about.
Our next witness is the Honourable Gar Knutson, Secretary of State for Central and Eastern Europe and the Middle East.
Hon. Gar Knutson, P.C., M.P., Secretary of State (Central and Eastern Europe and Middle East), Department of Foreign Affairs and International Trade: Honourable senators, I appreciate the opportunity to appear before the committee to speak about Ukraine. Ukraine and Russia are an important part of my mandate as Secretary of State for Central and Eastern Europe and the Middle East. I applaud your important work and look forward to reading your report on developments in the region.
It is a special honour to be here, as this is my first appearance before a parliamentary committee since my January appointment. I should like to thank committee members for their interest.
I made a day and half working visit to Kiev following the Team Canada mission to Russia. While there, I had the chance to meet with the foreign minister, officials from the foreign ministry and the presidential administration, representatives of the Canadian business community in Kiev, the managers of CIDA's projects, and embassy staff.
I note that the committee will be travelling to Ukraine next month, where you will likely meet some of the same people I saw during my visit. I am confident that Ambassador Robinson and the embassy personnel will make the visit a productive and informative exposure to a country that holds many opportunities for Canada.
I also note that the committee has been holdings on the subject of its present mandate since May 2000 and has received testimony from many expert witnesses. Your report could not come at a better time. Ukraine's strategic location, its economic potential and the large population of Canadians of Ukrainian descent made this country an area of Canadian interest.
[Translation]
Last December we commemorated the 10th anniversary of Canada's recognition of Ukrainian independence and in January, the establishment of diplomatic relations ten years ago.
[English]
Ukraine has gone through an historic evolution during this period, a fact that is often overlooked when our attention is focused on different issues. Whenever I think of centrally planned economies and the nuclear threat posed by the Cold War, I am reminded how far Ukraine has progressed. The extent of Ukraine's achievements over the last 10 years should neither be forgotten nor underestimated. We recognize Ukraine's accomplishments in building the institutions of an independent country and its emergence as a constructive member of the international community. Ukraine made a significant contribution to international security through the ratification of the START-1 and the Comprehensive Test Ban Treaty, elimination of nuclear weapons on Ukraine's territory and adherence to the non- proliferation treaty as a non-nuclear country. We welcomed Ukraine's decision to close the Chernobyl nuclear power plant in December 2002.
Relations between Canada and the Ukraine have matured over the past 10 years. Now is the time to look ahead. As a first step, we have renewed and updated the special partnership declaration between our two countries. This document reaffirms certain fundamental principles underlying our bilateral relations: that the secure existence of an independent and sovereign Ukraine is in the interests of Canada and the entire international community; the adherence of both countries to the principles of democracy and the free-market economy; and the significant role played by Ukrainian Canadians in the development of our relations.
Over the past 10 years, we have established a sound legal basis and a new maturity in our relations. This new declaration identifies areas for future cooperation, including the international campaign against terrorism, foreign policy and security initiatives, Ukraine's accession to the World Trade Organization, the development of our commercial ties, and relations between Canadian provinces and territories and Ukrainian regions.
This special partnership between Canada and Ukraine is more than an abstraction. It recognizes that Canada and Ukraine are natural partners in key areas. Part of what we share is a cultural heritage, given expression by over 1 million Canadians of Ukrainian descent. As you know, this community has made significant contributions to Canada. You have heard from its representatives earlier today.
Canada and Ukraine also share a common interest in multilateralism. Our interests are served by supporting multilateral institutions and a rules-based international system. This is one area where models of past achievements can inspire us in the future. For example, Ukraine has made significant contribution to peacekeeping operations. Canada has supported this, in part, through our Military Technical Assistance Program, by developing language skills and peacekeeping capabilities. Canada and Ukraine were partners in our peacekeeping efforts in both Bosnia and Kosovo. Canada has provided technical assistance for Ukraine's accession to the World Trade Organization and will continue to do so. The evolution of our bilateral relations also depends on the choices Ukraine will make about its own future.
Ukraine is faced with difficult choices about the direction and pace of economic reform. Despite numerous problems, many of the Canadian business people I met in Ukraine have done well through perseverance, adapting to local conditions and attentive hands-on management. Nevertheless, our bilateral trade is below potential and declining despite two years of strong economic growth in Ukraine. Canadian exports to Ukraine in 2001 were only $18 million, an almost 25-per-cent decline from the previous year. Canada's imports from Ukraine during the same period were valued at $63 million, an almost 50-per-cent decline from the previous year. Given the potential of the Ukrainian market, it is incumbent upon us to maintain our efforts to expand trade, difficult as these may be.
Such efforts are only a small part of the equation. The ultimate success in expanding trade and investment levels will depend on Ukraine's ability to create an attractive business climate. In this regard, Canada's efforts to promote such change, whether through direct lobbying or through technical assistance programs, must also continue. Ukrainians will make choices in the upcoming parliamentary elections for seats in Verkhovna Rada that will be held on March 31st, 2002. During my visit to Kiev, I conveyed to the Ukrainian authorities Canada's interest in seeing that the election campaign and the voting are free and fair. We welcomed Ukraine's invitation for the international community to send election observers. Canada has contributed six long-term and 10 short-term observers to the OSCE election observer mission in Ukraine.
Ukraine will also make choices in the orientation of its foreign policy, which can open up new avenues for cooperation. These opportunities have been demonstrated by the consequences of the September 11 terrorist attacks. Ukraine has been a strong supporter of the anti-terror campaign, making Ukrainian air space available for military transport flights and taking steps to combat money laundering.
The special partnership between Canada and Ukraine is a worthwhile reality in which we must continue to invest through our diplomatic ties, technical cooperation program and efforts to enhance trade. In years to come, Canada and Ukraine have the potential to build a more diversified partnership in the domain of international relations and foreign policy.
The recommendations of your committee will be very timely and will help guide us on the path ahead, and I look forward to hearing from you.
Senator Graham: Minister, congratulations on your very important appointment.
The previous witnesses today have emphasized the importance of Canada being in for the long haul.
Can you give us assurance, and particularly with your new and very specific responsibilities in that part of the world, that Canada is, and will continue to be, in for the long haul with respect to assistance to Ukraine, whether it is through democratic assistance or through CIDA or whatever?
Mr. Knutson: I can give you that assurance. Put aside for the moment the issue of how much money will actually flow from CIDA over the next number of years, I believe you will see a strong emphasis on maintaining and enhancing Canadian-Ukrainian relations.
When the Prime Minister appointed me, my mandate was to increase Canada's presence in that part of the world, including Ukraine. On my visit there, I quickly realized that there are a number of opportunities for Canadian investment in Ukraine, provided the Ukrainians take the steps necessary to do basic things like respect contracts and provide a level playing field, so that businesspeople know the risks going in.
My view is that economic development will do more to enhance the prosperity of Ukraine, as well as other countries. It will be more along those lines than just raw foreign aid.
On the diplomatic end, we have an interest in seeing Ukraine move forward in terms of its commitment to democracy and human rights. We have an interest in making sure that they do not step backwards. I am quite confident in saying that we are committed over the long haul.
Senator Graham: You mentioned the short-term and long-term observers who will be there for the elections. When you say ``long term,'' are you talking about weeks or months? Are they people who have been in that area for some time with the OSCE? Can you elaborate on that?
Mr. Knutson: Six weeks would be considered a long-term observer.
Senator Graham: Short term?
Mr. Knutson: Short term can be anywhere from four days or five days to a couple of weeks.
Senator Graham: Finally, I would presume that there would be a close collaboration between your department and CIDA.
Mr. Knutson: There is a close relationship between Foreign Affairs and CIDA.
The Chairman: We occasionally go to the meetings of the EBRD. The EBRD had a big problem in Ukraine not very long ago. That has not been discussed here. Have you any expertise on what is going on with the EBRD? Canada is a contributor and a participant.
The EBRD has not been talked about today; I thought it should be touched upon briefly.
Mr. Knutson: I am not an expert on EBRD. I am sure my officials are, though.
Ms Ann T. Collins, Director, Eastern Europe Division, Department of Foreign Affairs and International Trade: I am not an expert on EBRD. Mr. Chairman, could you elaborate a little bit when you refer to ``a problem?''
The Chairman: I am going back to the financial collapse and the fact that the EBRD had projects for which it was not paid. I am sure someone will correct me if I am wrong, but I believe that EBRD loans money on projects. They did it in Russia and Ukraine. They do it in many places. The idea is to jump-start various activities. They were badly burned in Russia and Ukraine.
I believe there was a change in management. I do not know if that was specifically related to the problem. The former managing director has become the managing director of the IMF, I recall.
As these projects got going, EBRD would get out. EBRD would turn the project over to the local private sector.
What is the situation with EBRD in Ukraine? Are they still working in Ukraine? Did they go back to Ukraine and work there? Do they consider Ukraine to have achieved a level high enough so that their loans are not necessary?
Ms Collins: I believe the ERBD is still active in Ukraine.
Mr. Knutson: We can provide you with that information.
The Chairman: I will not pursue it. It is just that it us something that we have not heard about all day, and I thought it should be mentioned.
Ms Collins: The discussions between Ukraine and the international financial institutions generally are going better than they have in the past. Ukraine has undertaken certain reforms that have been helpful, and there has been stronger economic growth over the past couple of years.
There are still a number of commitments that they have to make, for example, to the IMF, but there has been a sense that those discussions have been going better generally.
The Chairman: The answer may be that we need a witness on international institutions.
Senator Andreychuk: Minister, I want to welcome you and congratulate you on your new position. No doubt the trip you made to Ukraine was noted across Canada. You will be hearing from many constituents, I am sure.
You indicated that bilateral trade has dropped. That, of course, if we are talking about our special relationship, should be of great concern to all of us. Have you ascertained the reason for that, and have you formulated any steps to turn that around?
Second, you indicated that Ukraine will be making some choices in its orientation of foreign policy, a step that can open up new avenues for cooperation. What steps is the Canadian government taking to mature this special relationship?
When there is a reciprocal visit, whether in Ukraine or elsewhere, we dust off old phrases like ``special relationship'' and ``closer cooperation.'' I keep looking for the meaning of that. In particular, I should like to know what you mean by what almost seems to be a signal to Ukraine that what we do will depend upon what they do. What conditions are you putting on that relationship?
Mr. Knutson: I will answer the latter question first. Part of my mandate is to involve myself in trade promotion. We are considering taking a trade delegation to the Ukraine to make investments. We do not want to encourage Canadian companies to invest in Ukraine unless we are satisfied that the conditions in which they will invest are considered normal or typical business risk.
As part of ascertaining that, I met with a number of Canadian entrepreneurs operating in Ukraine. It came as a surprise to them. They were all quite positive.
However, they laid down certain preconditions. For example, one gentleman controls about 65 per cent of the fast- food business in Kiev. He said that if we are going to tell Canadians to invest, we must tell them to not show up with a suitcase full of money and expect to be in and out in a couple of weeks. People must be prepared to commit for the long term. They must be prepared to make a commitment in terms of time, energy and personnel. They must be very thorough in choosing a partner.
Those things would form part of my advice to Canadian business when considering whether to invest in Ukraine.
All but one of the groups with whom I met — and I met with about a dozen — spoke Ukrainian, with the one exception being a person from Alberta who is involved in oil and gas.
The general message, and I have to firm it up still, was that if you do things at a medium to small scale, you can be quite successful.
In terms of enhancing Canada's Ukrainian relationships, it would be my intent to take that message out to Western Canada, for example, out to the oil and gas people, and say: ``Look, here is a man who has been successful in the oil and gas business. Here is how he has gone about it, and this may be something to consider.'' It is a message I might want to take to the Ukrainian community in Toronto. I might say, ``If you are a business person and you speak Ukrainian and are looking for a place to expand, you might want to consider Ukraine.'' I would tell a businessperson that the situation that existed four or five years ago has changed, that it is now more positive. This does not mean that it is like doing business in Canada, but the embassy in Kiev can put people in touch with Canadians over there who can also provide help and guidance in terms of the dos and don'ts of setting up a business.
That would be one example of taking the next step in terms of fostering trade. It is not very complicated. It is, however, very much predicated on not having problems with the Ukrainian government and their justice system. If something goes awry, it is essential to know that Ukrainian officials will intervene to right it. There have been some problems. My sense is that the country is in transition and that we can look forward to a better situation in the near future.
Why did trade decline? I think in part it had to do with the collapse of our trade with Russia. When there was a collapse in the Russian economy, they allowed the devaluation of the currency and then a lot of imports were replaced by domestic production. Both Ukraine and Russia are still recovering from that.
Mr. Ron Halpin, Director General, Central, East and South Europe Bureau, Department of Foreign Affairs and International Trade: Basically, Ukraine and Canada are not natural trading partners. When we have opportunities elsewhere, the business goes where the business is.
We find that the economic interest in Ukraine seems to be founded more upon investment opportunities than trade, although I hope it will pick up. We are doing our best in terms of taking initiatives inside Ukraine to get the business community more active and engaged. We are working with the Ukrainian government and authorities to improve microeconomic conditions, which, in turn, will improve both investment and trade.
Ms Collins: If you look at the overall trade figures, Ukraine has a surplus with Canada, and has for a number of years. The significant decline in Canadian imports over the past year has been mostly in imports of Ukrainian steel.
In terms of our exports, just to follow up on what Mr. Halpin said, if you look where Canada would have a niche and where we have a lot of potential, it would be in high value-added technology and equipment, possibly in the agricultural and mining sectors. We are trying to be more targeted in terms of our business-development efforts.
For example, last week in Toronto the Prospectors and Developers Association of Canada held their big mining conference. We held a seminar on mining opportunities in Ukraine. We had 25 Ukrainians who would be potential buyers of equipment come over. About 50 Canadian suppliers attended. We are looking at doing similar things at other shows in the agricultural and other sectors.
In our experience, by trying to target and focus on areas where we have potential, we can make inroads. The level of interest is gradually increasing. We will try to work with that new momentum.
Senator Di Nino: Minister, I should like to offer my congratulations on your appointment.
I am delighted to hear you say that one of your mandates is to work on increasing trade between the two countries. When you look at the numbers, I think they are shameful. It was interesting today during these discussions to hear the role that Canadians of Ukrainian background are playing in rebuilding this nation after so many years under the Soviet empire.
It may be of some use to you to have your officials look at the transcripts of today's hearing. Andrew Witer, a former member of Parliament, gave us some wonderful information, which may be helpful. I think we have missed the boat on that. I am not being critical of you, I am being critical of ourselves. Some $18 million in trade with a country of 48 million can hardly be considered a trade relationship.
The discussions, in particular today, about the relationship between Canadian business people and Ukrainian business people were quite positive. However, there was one irritant that I found disturbing. It was in the area of immigration. We were told today that 10 per cent of applicants are accepted while 90 per cent are rejected. Frankly, I do not think this exists with any other nation in the world.
I think it is a statistic that we should take a very close look at, particularly when we hear and know that Ukrainians are probably one of the most educated people in the world. We were told today that the literacy rate for adults is zero, which makes our own statistics look rather poor. I therefore ask myself this question: Why are we not attracting many more immigrants, people we need in our country, as was shown once again by the recent census statistics?
Minister, if I could ask you directly: What do you know about that and can you shed some light on it?
Mr. Knutson: Are you talking about visitors' visas or applications for permanent status?
Senator Di Nino: I am talking about permanent status.
Mr. Knutson: I do not know. Consequently, I cannot shed any light on it. All I can say is that we that we have a point system. When I first became a member of Parliament, I served on the Immigration Committee for a number of years. My sense is that it is pretty much a formula. We can look into it and try to provide you with a more complete answer.
Senator Di Nino: I would appreciate that. It sounds very strange that 90 per cent of the applicants would be rejected.
Senator Bolduc: Mr. Chairman, we have 1 million people of Ukrainian descent here. For 50 years, immigration has been closed. Since 1945, no one could get in. There are obvious problems with family relationships and things like that. It seems to me that it should be corrected one way or another.
The Chairman: In another life, I was the chairman of the House of Commons Immigration Committee. At another time, I was a member of Parliament for Chinatown in Toronto. I realize you are not the immigration minister. However, because of the Chinese Exclusion Act, which was around for many years, we made a special effort to encourage Chinese immigration in the 1970s and 1980s. I endorse what Senators Bolduc and Di Nino have said. Minister, as I said, I am perfectly aware this is not your department.
Senator Di Nino mentioned the question of immigration. I would take it a step further. I know of a member of Parliament from Estonia who could not come to Canada because he could not get a visitor's permit. I am not talking about immigration. I understand the point system. That is out of our hands. I have been quite shocked, however, by some examples involving visitors. I lay that out there.
There is one Baltic state whose president spent most of her life in Montreal. There has been a long story of Balts living in Canada. Now, they cannot get a visitor's permit to come to Canada.
Mr. Knutson: I attended at breakfast with the Prime Minister in Russia where he met with the business delegation as part of the Team Canada mission. It was their opportunity to raise concerns. They raised two concerns. The first one was the availability of EDC financing for investments. That aside, their main was the ability to get visas for their Russian clients, prospective investors, partners or customers to come to Canada.
They made the point quite strongly that if you are selling X number of dollars worth of widgets to Russia, perhaps they want to come and inspect your plant. They made the point that it was very difficult to get visas, and we were competing with the Americans for these sales. Some deals were lost over the issue of the visas.
The Prime Minister committed to review that. You will have to ask the Minister of Immigration where it stands. That is a valid complaint and concern.
The Chairman: I brought it up with the previous Minister of Immigration.
Senator Di Nino: If this were taken as criticism, it was constructive and certainly not directed at yourself or the officials. Our thought was that, since you were responsible for that area, we should make you aware of those concerns. The transcripts of some of these hearings would be useful.
Second, minister, I would hope that you and/or your officials would also take this up with the Minister of Immigration, to express to the minister our thoughts so that we could get an answer either directly or indirectly.
Mr. Knutson: I am prepared to make that commitment. I commit to raising it with the minister. At the same time, though, the Senate can always express its thoughts.
Senator Di Nino: Thank you for that.
The Chairman: May I remind honourable senators that this was the first recommendation the committee received from its first witness, which is quite a while ago. We are very aware that this will probably be in our list of recommendations.
Senator Bolduc: I have a question regarding the CIDA program. It is not a big program, because there are many countries in which we try to take our share of cooperation.
We heard today that we have a tendency to change the program too often. It is difficult to focus on one aspect in light of the immense problems either in Russia or Ukraine, or all over. If we are there for the long haul, let us focus on one or two aspects because the United States will do something or France will do something. We are not alone. If we decide to be involved in something, let us pursue it until it is a success. Otherwise, we can never measure the results. That is very important. We are spending public money, maybe $20 million or $25 million. It is important for us to get results from that.
Mr. Knutson: I agree.
Senator Bolduc: It would be helpful if you could do something. This is not a criticism of CIDA, which I know is competent and does its best. My impression is that CIDA has pressures from everywhere to do various things. Moreover, there is a rotation of the people there. Each director who comes has a new initiative. Let us try to be more focused.
Mr. Knutson: On your general point that we must make the commitment to the extent that we actually achieve the results that we set out for, I agree with you. Whether that is a particular problem in the Ukraine, I do not know. Certainly, if you are putting money into HIV/AIDS, public health campaigns, trying to encourage safe sex, that may take a long time. You can measure results.
If you are putting money into increasing the ability for democratic governance, institutions, how you measure when it is time to move your money to another country or pressing need may be more problematic. Certainly, I understand the point.
Senator Bolduc: It also has a tendency to multiply the initiatives. I have looked carefully at the CIDA programs in regard to Russia. There are about 50 different initiatives. That is a significant number. I know they must be seen all over the territory, but 50 initiatives with $20 million — it must make miracles.
Senator Grafstein: First of all, minister, I wish to welcome you. You have come from London, Ontario, the home of many great parliamentarians, including myself.
The definition of your portfolio is Central, Eastern and Southern Europe. Where does Ukraine fit in?
Mr. Knutson: That is Eastern Europe.
Senator Grafstein: It is not Central Europe or Southern Europe?
Mr. Knutson: The countries I am responsible for are generally described as the former Communist Bloc, the Czech Republic, Slovakia and east. I am not responsible for Austria.
Senator Grafstein: Would your responsibilities extend to the Crimea, Georgia and other places as well?
Mr. Knutson: They extend to all of the former Soviet Union. The ``-stans'' are part of Asia. They are part of my responsibility.
Senator Grafstein: Having travelled both in Ukraine and through that part of the world, I noted that — leaving aside for a moment Ukraine — we have no representation in many of the places for which you are responsible, none on the ground.
Mr. Knutson: That is right.
Senator Grafstein: Even when it comes to Ukraine, we have a good embassy in Kiev.
**We have someone in Lviv; is that right? However, that is it.
In respect of cultural balance, well over 1 million Canadians have their roots in that part of the world. Compare that to, for instance, China: We have the largest, most powerful representation on the ground in southern China, in Central China, in Hong Kong and, indirectly, in Taiwan. Compare that to this part of the world, and it is almost as if there is a large component of representation here and the accompanying allocation of the department's budget. Yet, there is practically nothing for this part of the world where we have decided to send troops and put them in harm's way. Do you have any thoughts about that? Is there any way that you can rebalance the department's priority to give us more representation on the ground, both for trade and for security issues?
Mr. Knutson: The general question of why we put people here and not there is really better asked of Minister Graham.
Senator Grafstein: You can pass that question along. He will find it not new. When he was on the parliamentary side — not in the ministry — this was a concern to him. Perhaps you could refresh his memory about this very important issue.
Mr. Knutson: I will make that commitment as well.
Generally, when the Prime Minister created the position, he told me it was on the advice of then Foreign Affairs Minister, John Manley, that Canada was underrepresented. When we were competing with the Americans, the British or the Germans, or a host of other countries, we needed to have more high-level political contact. While the Minister of Foreign Affairs cannot be everywhere all the time, secretaries of state can play valuable roles. That is why this position was created.
Senator Grafstein: I find it amazing to go to a place such as Ukraine or Georgia and learn that there is representation from Germany, China, Japan, the Czech Republic, et cetera. Yet, when a Canadian shows up, we are highly regarded, although we do not have any substance on the ground. This goes back to the point that Senator Bolduc made: We are stop-started in terms of our projects because we do not have any political support on the ground for the NGO projects. Perhaps we could return to that point another time.
Thank you for your indulgence. My last question concerns a statement that you made in the second-to-last paragraph of your submission to the committee. You said that Ukraine has been a strong supporter of anti-terrorism coalition by making Ukrainian airspace available to military transports and by taking steps to combat money laundering.
Our research has indicated that the head of the commission in Ukraine that is investigating a newsman's murder has made accusations against the administration for selling arms to Iraq. Does the Canadian government know about this? Were representations made to the Ukrainian authorities about this practice?
Mr. Knutson: I did not make any representation to the authorities about the sale of arms to Iraq. As for departmental knowledge of this, I would ask the official to comment.
Mr. Halpin: We have not made any representations to Ukraine about arms sales to Iraq. We have been in discussion with Ukrainian authorities about arms sales in general and arms sales to the Balkans. However, this is very much associated with the new and cooperative relationship that Ukraine is seeking to build with NATO countries.
Senator Grafstein: Would this be a topic of concern, then, in terms of future activities interfacing with the Ukrainian authorities? This is at the executive level, not at the parliamentary level.
Mr. Halpin: It is fair to say that that is one of the prevailing issues. As we saw, in terms of the first document — a special partnership and the renewal of it — these things change. You solve the problems in one, and others arise. The issues that we are currently dealing with for many European countries relate to security, counterterrorism and weapons of mass destruction. It is only natural that we are discussing these issues with Ukraine.
When I was there two weeks ago, I met with their arms control and proliferation people and I raised some of these points.
The Chairman: I wish to thank you, minister, for taking the time to appear before the committee. We are quite honoured that this is your first committee since you were appointed secretary of state.
The committee adjourned.