In accordance with Article 106 of the Constitution of Ukraine I submitted to the Verkhovna Rada the text of the annual State of the Nation Report of the President of Ukraine. This document consists of two chapters: "Social and Political Development of the Country. The Strategy of Political Reform" and "Results of Social and Economic Development of Ukraine in 2002 and Tasks for 2003".
     The Report includes six topical reports on the most urgent issues of the state policy. Namely:
     - "Priorities in Technological Development of Ukraine";
     - "Formation and Implementation of Technical Policy in the Agrarian Sector of the Economy";
     - "Demographic Situation in Ukraine";
     - "Ukraine-WTO: Mechanisms and Socio-Economic Results of Cooperation";
     - "Euro-Atlantic Integration of Ukraine";
     - "Adaptation of Ukraine's Legislation to Legislation of the European Union".
     As always, the Report contains unique statistics prepared by the State Statistics Committee of Ukraine, which reflect socio-economic processes in the state from 1990 to 2002.
     I want to especially emphasize that besides providing information and analytical materials which characterize today's internal and external state of the country, the Report outlines concrete tasks, mechanisms and instruments, which should be embodied, in the first place, in the Program of the Government's Activity and serve as a basis for the activity of central and local organs of the executive power.
     In my address I will dwell on the most important issues concerning the current and strategic tasks of our socio-political and socio-economic development.
     To start with, this year the President's Report is delivered to a qualitatively new parliament.
     Although there were no corresponding constitutional regulations, the current composition of the Verkhovna Rada was the first one to make an attempt to go away from the counterproductive non-political principal of formation of the Cabinet of Ministers and to create a coalition government taking over the responsibility for its activity, and therefore, the responsibility for the situation in the state.
     So, in practice, 2002 became the beginning of reforms in the political system. Not only should these reforms overcome unbalance in power, give new, tangible impulses to democratization of the society, but, what is very important, they should finally take the state out of the post-Soviet system of government.
     We should do our best to speed up this process, create the necessary legislative field.
     The current economic situation also urges us to make the corresponding steps. Having overcome the deep crisis and reached the trajectory of sustainable development, we were confronted with the acute necessity to introduce serious qualitative changed to the system of economic relations.
     In the first place, I am talking about realization of the main principle of the market economy - separation of powers and property, its deep democratization, fight against shadowization of the economy, other deformations, which we could not avoid in the previous period, and not only because of subjective reasons.
     The same can be said about the entire complex of the most urgent issues of the social policy, increase in our citizens' living standards.
     All these issues are organically related to the political reform and are determined by its implementation.
     These were the reasons I was guided by, when last year I proclaimed the necessity of the constitutional reform and submitted concrete proposals on its contents a month ago.
     I will be frank - making this step I counted on your support.
     I proceed from the fact that constructive atmosphere, deep convictions concerning the objective necessity of crucial system transformations aimed at increasing the effectiveness of the authorities, and therefore, of our state, development of democracy and parliamentarism.
     I am convinced I was not mistaken. The discussions of the political reform held in this hall last week showed the existence of close positions on the key issues of the proposed draft law. I am talking about:
     - consolidation of the main fundamentals of the parliamentary-presidential republic;
     - giving the parliament the constitutional right to form a coalition government and the obligatory existence of a parliamentary majority, which should be fully responsible for the government's actions;
     - giving the President the right to dissolve the parliament under clearly determined circumstances, when mechanisms of mutual responsibility are violated;
     - conduct of parliamentary elections on a proportional basis.
     I knew that the proposal concerning creation of a bicameral parliament would raise the most heated debates.
     This problem is not new.
     It was actively discussed when the acting Constitution was prepared.
     Returning to this problem, I proceeded from three positions.
     Firstly, transition to the propositional election system and insufficient maturity of political parties, which will receive the function to form not only the legislative, but also the executive powers. There are some objective preconditions which hamper the process of political parties' self-development, consolidation of their positions.
     In the first place, it is insufficient structuring of the society, which cannot be forced artificially.
     Secondly. When the proportional system is implemented, a problem of crucial importance - regional representation in the parliament - can also become urgent.
     Thirdly. There are some urgent problems concerning the quality of the law-making process.
     They are well known. A bicameral parliament is a balancing mechanism in this direction as well.
     I fully agree to the necessity of adhering to a well thought approach when determining mechanisms of cooperation between the two chambers, ensuring priority of the lower chamber, election of the upper chamber in strict accordance to the existing world practice, principles of democracy.
     I do not exclude the possibility of transition to the bicameral system after the implementation of the administrative and territorial reform in 2006-2010, which could be stipulated in Transitional Regulations of the Constitution.
     Mechanisms of direct action of the all-national referendum on changes to the Constitution should be elaborated more clearly taking into account international experience and democratic standards.
     There is no doubt that they require modern and efficient legislative provision, but you should agree that plebiscites with results of direct actions are the highest form of people's power. Such a step is able to considerably increase the population's trust in the Main Law of our state, which is the most important thing for me.
     I think it is necessary to search for compromises on these and other issues, but I want to emphasize once more: the corresponding changes and amendments are to be introduced by the end of 2004 so that the formula: a newly elected President - a new political system could be realized.
     I am aware how difficult this task is.
     I address all the political forces, including the parliamentary opposition: it is necessary to strengthen political dialog on these issues.
     Besides, I cannot share skepticism of some politicians questioning our citizens' ability to get the gist of the urgent problems of state building skillfully and with consideration.
     I came to this conclusion once more during my recent meeting with young people in Kharkiv. The young citizens held conversation on the best way to develop our sovereign home at the highest intellectual and professional level.
     So, trusting our people's wisdom let us first listen to their voice and then in the walls of power institutions continue the work to which they will bless us.
     I am convinced that besides promoting political stabilization, dialog on the reform will also promote formation of a new, broader coalition of political forces. The society has the right to expect such a course of events.
     I was glad to read the text of the Memorandum signed yesterday by the leaders of the CPU, SPU, Yulia Tymoshenko's Bloc and "Our Ukraine".
     Leaving some evaluations on the conscience of the authors, I want to note two things, which, in my opinion, are the most important: in spite of all the disagreements I was pleasantly surprised by the constructiveness of the approach towards the proposed changes, because for the most part, the President's propositions were supported in the Memorandum. Secondly, I consider such a constructive approach a result of the wide discussion taking place in Ukraine.
     In this relation I want to submit a proposal to conduct a "round table" on the political reform with the participation of parliamentary parties, the government and the President.
     It is necessary to fully use all the possible instruments of political decisions that can ensure achievement of the set aim. It is our common obligation to the society.
     The authority of the reform bill would substantially rise if after thorough elaboration the corresponding draft law were examined by influential international organizations. In the first place, I mean the Venice Commission of the PACU, corresponding mechanisms of interparliamentary cooperation between Ukraine and European countries, in the first place, Germany, France and Poland. Such steps should be taken in the shortest time possible.
     ***
     Now let me dwell on the most urgent, in my opinion, issues of the economic policy.
     For three years on end we have had stable and high rates of economic growth. In 2000-2002 the country's gross domestic product rose by 20.9%. It is almost 7 % a year.
     As a matter of fact, it is the highest rate of growth on the European continent.
     The three months of the current year prove sufficient validity of the corresponding processes.
     It is also important to note that the leading spheres of growth are the spheres producing ready-to-use products, and, in the first place, machine building - the heart of our economy.
     Substantial intensification of the investment process can be observed. Investments in the fixed capital have increased by almost 40%.
     Real wages have increased by almost 39.7% in the last three years.
     In spite of the difficult foreign economic conjuncture the tendency towards increase in Ukrainian export maintains. In the last three years its volumes have increased by 42%. Gold and foreign currency reserves have substantially increased during this period. The amount of Ukraine's state debt has decreased.
     Steady stability of the national monetary unit plays an especial role in these processes.
     At the same time, we would make a serious mistake if we weakened our attention to the existing drawbacks. There are a lot of things Ukraine needs to do to finally overcome the results of the economic crisis, especially in the social sphere, and people's living standards.
     We cannot turn a blind eye to the fact that the economic growth of 2000-2002 was realized on an extensive basis - on a technological basis formed in the previous years mostly.
     The fact that in the years of economic growth the number of companies realizing innovations did not grow, on the contrary, it decreased, proves this conclusion.
     I pointed out these issues in order to once more concentrate attention on the objective necessity to correct the economic policy in principle.
     It should be concentrated on the main thing - use of mechanisms of structural and innovation renovation of the economy.
     Unfortunately, we practically do not have such mechanisms.
     The positive dynamics in the economy will be maintained if the government efficiently introduces corrections to the fundamentals of the economic policy, in the first place, in the innovation and investment spheres.
     It should be understood that the instruments of this policy, which worked under the crisis circumstances, are no longer able to ensure innovation development.
     The social sphere also remained a relapse of the old system. Legislative fundamentals of the country's social policy are practically being laid out only now. For the most part, we only talk about the pension, medical, education reforms, and in practice do little to renew the spheres which are of direct appeal for the people.
     I cannot leave out the problem of shadowization, which has already become "the talk of the nation".
     The matter concerns not only fight against legalization and laundering of illegally obtained money, although in this context I have repeatedly emphasized that we should thank the world community, and, in the first place, the FATF for its firm position towards Ukraine.
     Thanks to it, although, unfortunately, with a delay, the government and the Verkhovna Rada managed to substantially improve the legislative basis and prevent introduction of ruinous sanctions.
     Talking about shadowization, I would transfer the discussion to a larger plane - shadowization as a way of life. This general "illness" has already engulfed non-economic organs of our society as well: shadow political and social market, shadow lobbyism. Not everything goes well in science, education, medicine.
     The reason is well known - in addition to double morality inherited from the old system, the pseudo-market tax burden practically shoves an entrepreneur into the shadow.
     How many more times is it necessary to repeat in the annual Presidential Report the appeal to the parliament and the government to take the country out of the state of tax absurd?
     ***
     Now about some foreign policy issues. In pursuance of the tasks determined in the Message "European Choice", last year Ukraine's Euro integration policy was substantially intensified.
     But we need to understand that Ukraine will integrate into the European Union as Europe enters Ukraine - European standards of political culture, public and labor relations, the way of thinking and lifestyle.
     We will be in Europe when the philosophic Euro standard becomes a conviction and daily practice of our citizens, who want to join the progressive and flourishing civilization.
     The year 2002 will enter the history as the year, in which Ukraine declared its intention to join NATO. I want to emphasize: this intention will be reinforced by intensification of purposeful organization and political activity in this direction.
     Today we have every reason to aim to integrate into the World Trade Organization not later than in 2004. I consider this step as a decisive pre-condition for future creation of a free trade zone between our country and the European Union.
     At the same time, I want to warn officials against allowing infringement of our interests when the terms for integration into this organization are discussed.
     In general, activity in the sphere of Euro integration should be aimed at preventing appearance of another "Berlin Wall" between the United Europe and its "neighbors, which could turn our state into a zone between the integrated Europe and integrated Euro-Asian world.
     On the other hand, chairmanship in the CIS creates possibilities for intensification of Ukraine's influence on formation a free trade zone on the post-Soviet territory in accordance to the principles of the WTO, which will promote intensification of economic relations, exchange of capital, goods, services, working force.
     I point out the necessity to pay special attention to our relations with the Russian Federation.
     We cannot remain indifferent to the decrease in trade relations with the Russian Federation that could be observed last year. The situation with other countries of the CIS is no better. This drawback should be eliminated.
     The signature of the Statement on Intensification of Integration Processes and Formation of a Common Economic Space by the Presidents of the Republic of Belarus, Republic of Kazakhstan, Russian Federation and Ukraine does not contradict our aspiration for natural rapprochement with Europe, on the contrary, it supplements it.
     Development of constructive dialog with the United States of America aimed at consolidation of principles of strategic partnership and elimination of barriers along the course of bilateral cooperation is of especial importance for us.
     Because our common approaches towards fight against the threat of global terrorism and proliferation of weapons of mass distraction alone make us reliable partners and long-term allies.
     I am deeply convinced that Ukrainian diplomacy should work more actively on issues concerning further strengthening of our relations with Poland, Baltic countries, Central and Eastern Europe, China, Canada, Turkey and other countries of the Middle East and Latin America. We have a lot of common interests, which creates an objective basis for economic cooperation and mutual understanding.
     And about the most painful thing.
     All of us are well aware that the world has changed drastically after the events of September 11. Accents and approaches towards international security issues have been changed.
     In general, Ukraine has always stood for peaceful settlement of any disputes. We cannot remain indifferent to the Iraqi crisis. We aspire for prompt settlement of the military conflict on the basis of international security interests.
     I believe Ukraine has found a proper response to this uneasy challenge. Performing their duty Ukrainian military men were among the first to come to the aid of civil population if weapons of mass destruction were used.
     It was our joint decision. It is a sign of our civilization, loyalty to universal values, but it was very and very uneasy step for each of us.
     It is difficult to stand aside in international politics staying in one of its epicenters, but it is not the only point. Paraphrasing the renowned politician, it is necessary to understand that it is impossible to live in a globalized world and to be free of it.
     On its part, Ukraine is ready to take a most active part in post-war reconstruction of Iraq as well.
     ***
     And to wind down.
     The last parliamentary elections once more drew the public's attention to the problem of unity of our state. It was caused by well known differences in electoral orientations in the regions.
     Such differences had been seen before. They have both objective historical and, what is more important, temporary preconditions. And these preconditions should be overcome.
     The life itself, the practice of public and political transformations indicate the necessity of a more decisive, and, what is the most important, well-thought-out movement forward along the magistral line of state building activity - formation of a modern Ukrainian political nation.
     Solidarity, consolidation and unity of Ukraine - it is a concentrated embodiment of the most urgent historical task facing Ukraine in the second decade of its sovereign existence.
     The country's political elite and power structures should focus more and more attention on this problem.
     We will not free ourselves from the shackles of inferiority if public energy is worn out in permanent quarrels and general defamation. Politicians "specializing" in such a direction of public activity should understand it.
     Democratic pluralism we have been consistently adhering to can produce positive results only when it rises to the level of all-national consensus.
     We can continuously wander around the world accusing each other, but we will never get what we hope for, because it is a tradition in the world to respect only those peoples, who respect themselves.
     At his time, which is far from being easy for our state, I want to call on all the political forces to adhere to this principle.
           
Dear national deputies,

     
     The next presidential elections will be held in Ukraine in less than two years. On my part, I will do my best so that the elections of a new head of the state could be conducted in a civilized way, on a democratic basis, in complete accordance with the acting legislation.
     But I am worried that new cruel political battles can take place in this period. We should not pause in our development, in the policy of reforms, in realization of deep social transformations.
     I hope and believe that all of us will muster enough strength and will to ensure real consolidation of all the branches of power and on this basis take new tangible steps along the course of Ukraine's consolidation as a modern highly developed social state.
     Having come an extremely difficult way of economic, social and political transformations, we have enriched ourselves with experience that should become a basis for further progress. We should do our best to make this progress tangible.
     Thank you for attention.