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Update No: 256 - (23/04/02)

Ukraine is in a distinctly volatile condition. It has just had parliamentary elections, in which the pro-regime forces got in by a whisker. But the opposition did remarkably well under the circumstances, with everything stacked against them.

Opposition makes an impact
The parliament of 450 seats is elected on two lists. One half of the seats are chosen on a party basis, the other half on a constituency one, with direct elections for individual candidates counting for all. In the later case, the role of local business moguls and political barons counts enormously and saved the day for the regime, pro-President Leonid Kuchma.
On the party list it was a different story. The leading opposition party, Our Ukraine, headed by former premier Viktor Yushchenko, scored 22%, ahead of the about 20% of the communists and well ahead of the pro-Kuchma party, For United Ukraine, on around 14%. Another opposition figure, former head of the gas giant company, Yulia Tymosheko, did well, but has the decided disadvantage, in a still very sexist country, of being a woman, but this is a formidable billionaires, not to be regarded as anybodies object of pity.

Presidential election looming
The real contest coming up is for the presidency itself, the source of power in Ukraine, as the recent parliamentary elections show. The next election for the presidency is in 2004, the expiry of Kucha's second five-year term. He is not allowed to stand for a third one, according to the constitution.

Scandals galore
He may try and change that. He has, according to the media, a large number of skeletons in his cupboard. Politicians and journalists of an awkward disposition have a way of 'disappearing' in Ukraine. Here today and gone tomorrow.
The latest to be removed from the scene was Valery Malov, the head of Ukraine's biggest arms exporter, who died in a car accident on March 6th, amid a scandal involving the president and arms to Iraq ahead of the vital elections. There have been many others, including Alexander Yemets, a parliamentarian who died at the peak of the 'Kuchmagate' bugging scandal in January 2001. In August 1998 Alexander Veselovksy deputy head of the central bank, died during investigation of dodgy deals with foreigners. 
There is the festering sore of the story of journalist, Georgy Gongadze. The disappearance in 2000 sparked anti-government protests and lead to a government crackdown last winter.
The president is not the only one under fire. A local monitoring group, International Secretary for the Committee of Voters of Ukraine, or CVU, cited in its February-March report that political corruption is rampant throughout the country. Opposition figures are routinely denied air time on national TV and radio, government employees have been harassed. The complicity of a corrupt elite with the regime is what keeps Kuchma in power.

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AVIATION & SPACE

Ukraine wins tender to launch Egyptian satellite

The Pivdenne design bureau has won a tender to develop, produce and launch an Egyptian satellite. Ukraine, France, the UK, Italy, Russia and South Korea participated in the Egyptian tender. The satellite is to be launched in 2004 by a Dnipro booster rocket. Signal-receiving and satellite control stations will be built in Egypt. Egyptian personnel are going to start their training in Dnipropetrovsk in June this year, Ukrainian Television First Programme has reported.

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CREDIT RATINGS

Fitch upgrades Ukraine's Long-term ratings

Fitch Ratings, the international rating agency, has upgraded Ukraine's Long-term foreign and local currency ratings to B from B- (B minus). The out-look is stable. The short-term foreign currency rating was affirmed at B. The agency said the upgrade reflects Ukraine's strong economic recovery and rehabilitation since the 1998-2000 financial crisis when it defaulted on its debt.
Last year it recorded an excellent macroeconomic performance, as GDP grew by nine per cent, inflation fell to single digits, the current account was in strong surplus and foreign exchange reserves doubled to US$3.1bn. It also took further steps to restructure debt arrears and regularise relations with creditors, including agreements in principle with the Paris Club and Russia.
Nevertheless, Fitch said that Ukraine's rating is constrained by significant weaknesses and risks. Ukraine is a poor country, with the GDP of just US$800 per head at market exchange rates. It faces severe structural problems such as weak property rights, tax distortions, non-payments, unrestructured loss-making enterprises, corruption, low foreign direct investment, under-capitalised banks, an inefficient energy sector and dependence on metal exports. 
Structural reforms are, therefore, vital to improve the wealth and diversity of the economy. The agency also warned that Ukraine's external financing position remains quite tight. Fitch expects the current account surplus to narrow from 3.4% of GDP in 2001 to 1.2% this year. It also expects capital flight to continue to exceed foreign direct investment.

EBRD to apportion US$12m loan to Hostomel

The European Bank for Reconstruction and Development (EBRD) said recently that it would provide a US$12m loan to modernise Hostomel, Ukraine's oldest and biggest glass packing producer.
The loan to the Hostomel glass plant will pay for repairing and modernising equipment, and bringing the plant's accounting system into line with international standards, AP quoted bank officials as saying in a statement.
The deal will also help the plant produce glass packs for the beer industry, which EBRD also supports. "This long-term financing is very important for us, because it gives us enough time to bring our production standards up to an international level," said Pavlo Rybitsky, the plant's director.
The EBRD has lent about US$1.4bn to Ukraine, signing 41 deals over the past decade to stimulate the development of private enterprise.

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ENERGY

Ukraine seeks role in CIS energy alliance

Ukraine supports the first steps made by several CIS countries towards creating an energy alliance Prime Minister Anatoliy Kinakh, said at the Eurasian economic summit in Almaty in Kazakstan on 8th April, UNIAN News Agency has reported.
Kinakh noted that during the creation of an energy alliance it is necessary to take into account the interests of both the countries that own natural resources and those having an efficient transit system. This would solve at least two tasks: that of diversifying energy supplies and that of creating a more effective competition field on the energy market.
The Ukrainian prime minister is confident that this would only "benefit" economic processes in all the countries. It is necessary to step up the formation of a transport infrastructure, first of all combining the transport systems of Europe and Asia, Kinakh said. Ukraine is ready to take part in this process, he added.
Further steps in this area will be an important factor of economic integration and would have a favourable effect on achieving equal conditions in socioeconomic development including poverty reduction, Kinakh stressed.
At an informal CIS summit over a month ago in Almaty, the presidents of Kazakstan, Russia, Turkmenistan and Uzbekistan signed a statement on cooperation in energy policy aiming at protecting the interests of gas-producing countries. The ultimate purpose of the statement was to create an organization under the working title Energy Alliance.

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FOREIGN ECONOMIC RELATIONS

Ukrainian plant to supply equipment for Iraqi pump station

The Novokramatorsk machine-building plant, which is one of Ukraine's biggest manufacturers of metallurgy and mining equipment, has signed a contract to supply hydro-technical equipment to Iraq, UNIAN News Agency has reported. 
The equipment will be supplied to the Iraqi Irrigation Ministry. The plant's press service reported that the equipment will be used in the construction of a big pump station in Al- Nasiriyah. Altogether the plant will supply 90 tonnes of equipment. The press service said that the plant had already received an advance payment but refused to name the total sum of the contract.

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FOREIGN LOANS & AID

World Bank allots US$30m to Ukrainian private sector

On 28th March, the World Bank board of directors approved the allocation of a US$30m loan to Ukraine to develop the private sector of the economy, UNIAN News Agency learnt at the World Bank office in Kiev.
The loan will be spent to elaborate legal norms regulating private business activity. 
The money will be used also to train the managing personnel to participate in enterprise restructuring.

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TELECOMMUNICATIONS

PM wants Ukrtelecom privatisation in 2002

Ukrainian national telecoms operator Ukrtelecom should be privatised in 2002 as revenues from the sale of its shares have been included in the country's state budget for 2002, Ukrainian Prime Minister, Anatoly Kinakh, told a news conference on April 2nd, reports New Europe. 
Kinakh also stressed that the government would be closely monitoring the foreign market environment in order to avoid an undervalued deal. The commission on Ukrtekecom privatisation decided to increase the company's stake being offered to a strategic investor from 37 per cent to 42.86 per cent. The Ukrainian government planned to sell 13 per cent of shares in a special low-rate stock sale, but sold only 7.14 per cent. Ukrtelecom's charter capital totals 4.681bn hryvnias, with a normal price of 0.25 hryvnias per share. The company's controlling stake of 50 per cent plus one share is owned by the state.

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