KYIV – While addressing foreign businessmen on May 17 during a seminar on the investment climate in Ukraine, Prime Minister Viktor Yuschenko said the government will protect the rights of foreign investors in their economic activity in the country.
“We want the foreign investor to feel safe. We are ready to guarantee that there will be no problems removing capital from the country should a project fail,” said Mr. Yuschenko.
Ukraine has not attracted foreign capital in large numbers in the nearly nine years since its markets opened up to the world mostly because of extensive bureaucratic red tape and corruption that have left foreign companies reluctant to risk their capital. The country has received merely $3.25 billion in foreign investments – about a third of what has flowed into neighboring Poland.
Some of those who have taken the plunge have had to adjust to laws that hinder their work and taxes that have eaten up their profits; some have suffered losses through unfair trade practices.
Mr. Yuschenko said that a new era in investor relations has begun, pointing to how the economic climate in Ukraine is changing to make it more accommodating to businesses.
He explained that the watershed was the passage of a balanced budget for 2000, which will release the country’s financial resources – for years held hostage by the government’s need to borrow to cover its budget deficits – to investors.
He said that inflation, although running at about a 12 percent clip in the first quarter of the year, will remain low because the government plans to adhere to a tight fiscal policy. The prime minister underscored that in the first four months of 2000 his government has not borrowed a single “kopiyka” on either domestic or international currency markets.
“I believe we will continue to fight inflation successfully and will not go outside the parameters we have set for this year,” said Mr. Yuschenko, while assuring foreign investors that their investments no longer are at risk of losing value.
State privatization, long considered the corrupted playground for Ukraine’s political and financial clans as they took control of the Ukrainian market, is undergoing major changes as well, to make the process more open and transparent. The prime minister said that, as the sell-off of the state’s business holdings moves into its largest phase, the sale of regional energy suppliers, only businesses with transparent practices willing to have their books audited will now be allowed to participate and that the process itself will be recorded at every stage.
For investors who are reluctant to join the Ukrainian economy until substantial land reform occurs, Mr. Yuschenko said they will not have long to wait. He explained that the first stage of land reform, whereby collective farms were transformed into land cooperatives and agricultural corporations, is complete. Towards the end of the summer Ukraine’s long-ignored agricultural sector should finally begin to see real money begin flowing back into the country’s villages.
He announced that a second round of land reform, to begin in the second half of the year, will include enactment of a new land code that will be followed by land registration.
Other changes in the economic sector, including ongoing administrative reform and a new tax code, also will make it much easier for foreign investors to begin their work in the country, explained Mr. Yuschenko. He noted that the government now has better control over revenue collection, which resulted in a 47.4 percent increase in government income in 1999.
Mr. Yuschenko had plenty of positive economic indicators to cite as more proof that the time is right for foreign investment in Ukraine. He said that in the first quarter of 2000 capital investment increased by 26 percent, individual savings by a whopping 130 percent and hard currency investment by 20.5 percent, while average annual incomes grew by 11.5 percent. He also noted that, for the first time in several years, pension and wage arrears had been paid.
He said the current numbers, along with already released economic figures that show a 5.5 percent increase in gross domestic product in the first quarter and a nearly 10 percent growth in industrial output, give every reason to believe that Ukraine’s long economic slide has been stemmed and economic growth is occurring.
“With conviction I want to tell you that we are at the beginning of a period of economic reinvigoration,” Mr. Yuschenko underscored.