Stricken East needs a safety net: G7 needs to do much more to help the former Soviet Union, argues Amersham International's Bill Castell

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The Independent Online
NOTHING could underline more dramatically the need for concerted Western assistance for the economies of the former Soviet Union than the news of the past two days, coming as it does on the eve of this weekend's meeting of the Group of Seven finance ministers and bankers.

Leonid Kravchuk is quitting the Ukrainian presidency, raising the real fear that Ukraine will not ratify the nuclear non-proliferation treaty. In a dramatic illustration of the dangers of the collapsing infrastructure of the area, a nuclear plant near St Petersburg has once again been shut down following a cooling system leak.

Yet despite the obvious threats such developments pose to the West, the G7 leaders are apparently still waiting for anti-inflationary and reform measures before they will act.

For many this is not the vision of global stability that was expected following the dismantling of the Soviet Union. In spite of their pious statements, Western politicians have done little in the post-Cold War period either to embrace the peace dividend within our own economies or to underwrite its continuance by building a safety net for the fledgling democracies of Eastern Europe.

So what should be done? First the West must establish a common vision, set clear goals, find the management to implement its objectives and secure the necessary financial commitment.

There is an urgent need to go beyond the stereotyped notion of privatisation, to which our Western leaders have paid lip service for two and a half years - rather like the Jesuits in a different era, who thought they had the only solution. Privatisation alone provides little scope for dealing with the realities of a previously centralised economy.

What is essential is some form of transitional assistance that will provide an economic safety net to mitigate the suffering caused by the transition from central planning to capitalism.

There are some signs that the West is begining to take this idea on board - witness President Bill Clinton, who last month referred to the need for a safety net shortly before signing the Ukrainian nuclear missile treaty. Such a safety net must have clear and specific goals, capable of being responded to by the industrialised world.

The priorities should be:

The average adult Russian has lost five kilogrammes in weight in the past two years, reflecting widespread food shortages. The West must act to upgrade farming and distribution systems to ensure the availability of basic supplies.

Medical supplies in the former Soviet Union were always restricted; now they are simply not available at all. No scalpel blade for an appendectomy, no medical gases, and nothing to counter the growing incidence of tuberculosis, diphtheria and polio. Ensuring an adequate supply of medicines and equipment to beat the black market, followed by technology transfer to build the local supply capability, is essential.

The continuing decline in energy production is putting great pressure on the nuclear industry. Chernobyl and 21 additional reactors acknowledged to be of unsafe design are being worked at higher operational levels than ever before. In the interests of European safety they should be closed immediately. But first must come the installation of massive new generator capacity to replace these unsafe reactors.

For geopolitical reasons, there is an urgent need to build sufficient housing to repatriate the Russian military.

In other words, we need a programme to feed, heat and sustain the fitness of the peoples of the former Soviet Union as they evolve their form of industrially based democracy. An infusion of skills, technology and investment must be offered by the West in return for a policy of democracy, monetary stability, free markets and a downscaling of the nuclear threat.

The management challenge is bigger than anything previously undertaken by the industrialised democracies, however.

This time we are not looking to rectify the financial excesses of a particular member of the International Monetary Fund. We are seeking to encourage and prove the benefits of free enterprise over central planning.

Because of the size and nature of the task, we need the G7 to accept both individual and collective responsibility for making the safety net a reality.

It is entirely inappropriate to delegate this responsibility to the IMF, the World Bank or the European Bank for Reconstruction and Development. They lack either the resources or the constitution or both to undertake a task of such magnitude.

The solution to the challenge of size is for the G7 to take a coordinated geographical approach, with each member country taking responsibility for achieving the goals in a region of the former Soviet Union. This approach also has the advantage of the devolution of power away from the centralist hub of Moscow.

But how much would such a programme cost? Investment of dollars 20-30bn per annum should allow tangible progress towards the goals. A large figure in the current climate of financial rectitude, but even so it represents a small fraction of 1 per cent of global gross national product.

And how would it be paid for? There are many reasons why the Japanese should see it as in their own interests to supply and to secure peace in the world, with acceptance of their global statesmanship by their G7 partners.

President Clinton and Prime Minister Morihiro Hosokawa are facing a dangerous stalemate in trade negotiations just two months after the apparent Gatt accord.

If the Japanese were to fund the first year of such a safety net - providing it represented untied aid - this would act as a further significant injection into the global economy. Rather than cajole the Japanese into buying cars from Detroit, how much better to improve the balance of trade indirectly through implementing the vision to prevent anarchy in the world's newest democracies.

In addition, the political harmony created within the G7 group would provide fresh confidence for our political leaders to share and act on the challenges of Bosnia and North Korea.

This is not a simple agenda for 1994, but it is one we need to bring firmly to the table if our electorates are to retain the freedom enjoyed since the Second World War.

The Amersham connection

BILL CASTELL, 46, is chief executive of healthcare group Amersham International. He has worked for more than 20 years in the healthcare industry, and before joining Amersham was group commercial director of Wellcome.

Amersham has extensive contacts with the former Soviet Union. It is a founder member of the British Healthcare Consortium, a private sector initiative by some of the UK's biggest drug groups. BHC is involved in transferring Western healthcare technology and standards to the former Soviet Union.

Amersham has also established a joint venture with the Russian Atomic Energy Ministry for the production of isotopes with medical applications, part of the former Soviet Union's programme of converting military facilities to peaceful use. It has also linked up with the Institute of Cardiology in Moscow.

(Photograph omitted)

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