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UKRAINE


 

 

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Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 49,537 41,380 37,600 55
         
GNI per capita
 US $ 970 770 720 137
Ranking is given out of 208 nations - (data from the World Bank)

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REPUBLICAN REFERENCE

Area (sq.km) 
603,700 

Population 
47,732,079

Principal 
ethnic groups 
Ukrainians 72.7%
Russians 22.1%
Jews 0.9%. 

Capital 
Kiev

Currency 
Hryvnya

President 
Viktor Yushchenko




Update No: 296 - (26/08/05)

Premier to side with Yushchenko in 2006 polls 
In a most important development, Ukrainian Prime Minister Yulia Timoshenko said on July 30th that she will stand alongside President Viktor Yushchenko instead of being his rival in the parliamentary elections in March 2006. Interfax News Agency quoted Timoshenko as telling a press conference in the city of Simferopol that she is a member of the president's camp and has no intention to compete with him. Either she or the president's prestige will add to the prestige of the president's camp as a whole, and the enhancement of either's prestige will help propel the country's political reforms, she said.
She is of course his natural heir and, being ten years younger and with no obvious health problems, she will expect her loyalty to be rewarded one day.

Yushchenko battles corruption by a barrage of prosecutions 
Meanwhile the tasks ahead of the new government are colossal. President and premier are as one on the need to combat corruption as the top priority of the state. Nothing constructive can be attempted for the country at large so long as the central organs of power are venal through and through.
In the 1990s an extraordinary loan of US$600m was extended to Ukraine by the World Bank to 'combat corruption.' Little has been heard of where the money went since. Kiev needs to put its own house in order first before such Western largesse is again forthcoming.
In June Yushchenko was travelling in the back seat of an ordinary sedan, not the usual official limousine, from Kiev to a destination several kilometres away. His car was stopped on average every fifteen minutes by traffic police demanding bribes before it could proceed. So appalled by this was he that he promptly disbanded the entire force of 30,000 traffic policemen. No serious disturbances have been reported to the movement of traffic. Indeed, it is moving more smoothly than before. After all traffic police are kept low key in most countries. The signal has gone out loud and clear that he means serious business against corruption.
On May 16, 2005, during the plenary seating of the third meeting of the leaders of the Council of Europe member states, Yushchenko has already announced that Ukraine is ready to join the group of states fighting corruption. According to him, the new Ukrainian power has declared war against corruption and wishes to make use of all instruments to overcome it, including legislative regulations created by the Council of Europe.
During his election campaign Yushchenko constantly said that "bribes, which became the system of power, don't allow Ukraine to move forward." Yushchenko opined that fighting corruption can be fostered only by "transparency of economic relations, sincerity and responsibility of the power." After the victory at the presidential elections, the new president appointed his team-mate Yury Lutsenko to head the ministry of interior. He became the first civilian minister of interior in Ukraine and first of all he changed all the militia chiefs in Kiev and country regions. Similar changes took place in security service, prosecutor's office, tax administration and customs office of Ukraine. As a result, the detentions of the bribe takers began in the regions of Ukraine.
Recently, the ministry of interior and prosecutor's office have questioned several dozens of the highest level officials, several criminal cases were brought, and some suspects have been arrested. In general during the last six months 18,000 state officials were fired in Ukraine. It is worth mentioning that the opposition has condemned these prosecutions as a "witch hunt," saying that such large-scale cleansing has a political character.
At the same time Lutsenko claims that all criminal cases that were brought in action against former state officials deal only with theft, misuse and other crimes. Thus, a criminal case has been already brought in action against the former mayor of Odessa Ruslan Bodelan, the former head of state administration of Sumy oblast Vladimir Shcherban, the former head of the executive office of the president administration Igor Bakay - all of them were close to President Kuchma. All of them are being searched for now and according to the latest data, Bodelan and Bakay are hiding in Russia. "One hundred and twelve officials of the previous power are the subjects of criminal cases, brought in actions by the prosecutor's office according to the initiative of the ministry of interior," Lutsenko said. "This is not all, the quantity rises. When a person has stolen a billion it is not an economic crime. If a person being a high-rank official organised the robbery of the country he cannot buy it off by any sum of money and he will face a trial," he added.
Kuchma was interrogated twice about the case of investigative journalist George Gongadze, who disappeared in autumn 2000, after the former president was heard on a tape calling for him to be 'wiped out.' His beheaded torso was later found in a forest. The son-in-law of former President Igor Franchuk (now chairman of the state-owned enterprise Chernomorneftegaz in Crimea) was summoned to the ministry of interior for interrogation. 
The Ministry of Interior discovered 330 oil wells in the Crimea, though only 40 of them are licensed. According to Lutsenko, if the explanations of Franchuk turn to be not sufficient, he becomes an accused, not a witness.
The most high profile case is still that of Boris Kolesnikov, which was brought in action March 25, 2005 for "extortion of property right with the help of abuse of power and a threat of death." On March 28 this case was transmitted to the chief investigation office of the ministry of interior of Ukraine for further investigation. On April 5, Kolesnikov was detained by the militia at the exit from the prosecutor's office, after an interrogation about separatist announcements and Severodonetsk congress.
In general, it appears that the majority of Ukrainian citizens like the irreconcilable attitude of the new power and want more of the same. According to a polling conducted by the social service of Razumkov Centre, the question of "does the new state power take any measures fighting corruption and abuse of power?" was answered "yes, a lot of measures" by 23.1 per cent of respondents, "something is done, but it is not enough" by 53.8 per cent of respondents and "nothing or almost nothing" by 15 per cent of respondents.

Kalnyk stresses importance of SMEs for Ukrainian economy 
Nine months after Ukraine's Orange Revolution - and with fresh parliamentary elections scheduled for next March - it is important to analyse the reaction of foreign investors and how they perceive the situation in Ukraine in order to further improve the investment climate, said Ukrainian Ambassador to Greece and former First Deputy Economy Minister Viktor Kalnyk. Fellow Orthodox Greece is a key player in Ukraine, as in the Balkans.
Kalnyk noted that European investors are more interested now in the Ukrainian economy. "Frankly speaking, within this year we had more proposals from the Greek side to invest in Ukraine than we had over the last three years before the Orange Revolution. That proves that there have been considerable changes in the rules for foreign investors in Ukraine, especially in economic freedom and the fight against corruption," Kalnyk told New Europe in an interview, adding that these changes have improved Ukraine's image abroad. The ambassador is wrapping up his term in Greece and will be replaced by Valery Tsybukh, former head of the National Tourism Administration of Ukraine, in September.
Kalnyk, ahead of a return to the economic ministry, noted that there were still problems in Ukraine, namely in the banking and agricultural sectors. Ukraine needs to make the banking system flexible and transparent. "We still have some weak points in the banking sector. When our own sources are not enough we have to think about involving foreign banks in the economy of Ukraine. We have a lot to do in adapting banking legislation to EU standards. And after those changes are implemented our declarations regarding future integration with EU will be more practical," he remarked. The ambassador also said that Ukraine has "a poor policy regarding the export of agricultural products. One of the main reasons is that we do not have a developed market of agricultural products inside Ukraine and sometimes it is not transparent. Nobody knows exactly what figures we have in Ukraine and how to work in order to sell our products."
The future of the Ukrainian economy lies with small and medium enterprises (SMEs), Kalnyk said. He emphasised that the new government has shortened the period for registration of SMEs and that President Viktor Yushchenko promised to cut taxes for them at least by 50 percent at the beginning of next year. "At the moment we are in the process of preparing new legislation which will regulate the taxation for small and medium businesses. There are also some measures in order to make privatisation in Ukraine more transparent," Kalnyk said, adding that these steps have borne fruit with Greek investors.
According to him, EU member state Greece now has several planned projects with Ukraine including the construction of an electric power station in the western part of Ukraine, a US$700 million sports centre in Kharkiv, several US$300 million ship-building ventures and a construction project with Mixaniki SA. He also said that he is in personal talks with three groups of prominent Greek businessmen although he refused to name them. He said there are more than 20 businesses who would like to transfer their production facilities from Greece to Ukraine.
However, the government's struggle with disputes over the privatisation and re-nationalisation of enterprises appears to scare off some investors, but Kalnyk said there was no cause for concern. "Of course there are some problems in this sphere but the government is determined to solve them in the near future. I'm talking about the so-called re-privatisation of several factories which were privatised against the law and are treated as corrupt actions of the previous government," Kalnyk said.

Coming Elections
A more serious concern for the current coalition government is the upcoming parliamentary election. "Of course it's very difficult for the government to implement its policies due to the upcoming election. Parliamentary elections could mean changes again in the government. But I think the government has enough time to at least solve the main problems in Ukraine - to implement its ideas. Some of them are already done. I mean we have a balanced budget and the macroeconomic policy has been improved considerably so we have a good basis to be successful this year," he said. "The government doesn't wait for the parliamentary elections and is trying to do as much as possible right now," he said, referring to the passage of several laws through the parliament so that Ukraine can enter the World Trade Organisation before the end of the year.
The envoy noted that the government is also thinking how to change the structure of Ukrainian exports from raw materials to finished products. "Previously GDP growth was mostly supported by the export of Ukrainian raw materials like steel and chemical fertilisers but we have great potential in high technologies like machine-building," Kalnyk said. The switch is one of the reasons that Ukraine is expected to turn in a growth rate of 6.5 per cent in 2005 compared to 12 per cent in 2004 but, he explained, foreign investment in the nation is expected to double this year, which is a sign that Ukraine should enjoy a much improved situation in the long run. 

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AGRICULTURE

Raiffeisenbank to develop credit programmes for farmers


Ukrainian President, Viktor Yushchenko, has suggested that Austria's Raiffeisenbank draw up special crediting programmes to support Ukraine's farming sector in 2005-2006. "I asked my friends in Raiffeisenbank to work out a special crediting programme for 2005-2006 to support farmers and farming projects in Ukraine," Yushchenko said during a meeting with Austrian businessmen in Vienna recently, New Europe reported.
"Now we, along with Raiffeisenbank, are working on a project aimed at possibly purchasing one of Ukraine's largest banks, Aval Bank, whose network covers Ukraine's whole territory and which might become your partner," Yushchenko said. This would be "a good communication point for Austrian business contacts on Ukrainian territory and on Ukrainian projects," Yushchenko said.

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ENERGY

Ukraine and Iran discuss oil deliveries to Europe 

Ukraine proposed to Iran to deliver oil and gas to Europe via the former Soviet republic at a meeting of Iranian Oil Minister Bijan Namdar-Zanganeh with a Ukrainian-Iranian experts group in the oil and gas sphere in Kiev, Alexander Todiychuk, director general of JSC Ukrtransnafta, said, New Europe reported recently. 
"I was in the meeting with the minister and experts in this field and we discussed without protocol general issues about oil and gas policy in the Caspian region and the future of the EU energy corridor," he said telephonically from Kiev.
"We asked the Iranians if they want to develop this business together and what routes do they envision but we understand we are going to have an answer after the government changes. It will probably be in September or October," he said, explaining that Iran's president elect would choose his cabinet ministers in the first half of August.
"We are interested to see what the strategy of the new government will be and its vision in connection with the European Union. Ukraine is between these two big players," Todiychuk said laughing.
The Ukrtransnafta director general said a possible deal with Iran will not complicate Ukraine's business ties with the United States. "We don't want to prepare any competition. Our discussion is very open without any secrets from our partners and it is very interesting for us and for our American partners to see in which direction this country (Iran) will develop in the future," Todiychuk said.
Iran, which is the world's fourth largest producer of crude oil, would help secure supplies for a Ukrainian-led pipeline project to bring oil to Europe. Ukraine is pinning hopes for obtaining alternate sources to Russian oil on a recently-built tanker terminal on the Black Sea shore, and a pipeline running to the Polish border and the European oil transportation system. 
The US$200m Odessa-Brody pipeline was completed in 2003 but has yet to obtain customers.
Ukraine's previous government had authorised the reverse use of the pipeline to carry Russia oil to Odessa. A number of contracts with international oil companies to carry oil to Europe were frozen.
But the Orange Revolution reoriented the direction of Ukrainian policy toward the West.
The European Union recently unleashed financing for a feasibility study to extend the pipeline to Plock in Poland to carry Caspian oil to Europe. In what could be seen as a sign of things to come for the direction of the Odessa-Brody pipeline, Todiychuk returned to his position as director general of Ukrtransnafta on June 5, 2005, replacing Stanislav Danilenko. Todiychuk had opposed the idea of pumping Russian oil through the Odessa-Brody pipeline to Odessa and had been forced to resign on May 19, 2004.
"The priority is to use Odessa-Brody in its direct mode to Europe," Todiychuk said. "I have been back a little more than one month in my position as director general of Ukrtransnafta and my main task is to renovate these agreements and contracts and terminate our position with the Russian company and start to operate the pipeline in right direction," Todiychuk said. 
He stressed that the European Union has a specific interest in the extensive oil reserves of the Caspian Basin which will, in the future, contribute to security of supply in Europe. Todiychuk noted, however, that Ukrtransnafta is seeking "to develop some compromise with Russian companies." 

Iran purchases more Ukrainian energy machinery 

Ukraine is increasing energy machinery deliveries to Iran, Interfax News Agency reported recently.
The Zarya-Mashproyekt gas turbine plant based in Mykolayiv is making equipment for two gas pumping stations in Iran with a 150 megawatt capacity each, a plant source said. The plant has delivered two DU-80 engines with a capacity of 25 megawatts. The value of the contract is unknown, but the plant is to deliver 12 engines in 2005-2006. The total capacity of equipment supplied for Iranian gas pumping in 1995-2000 neared 200 megawatts. Iran will need about 40 engines worth US$200-400m within the next five years, an expert said. Zarya-Mashproyekt is the CIS leader in the design and production of gas turbines for warships. Experts say that Ukraine has good chances on the Iranian energy machinery market.

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FOREIGN COOPERATION

Yushchenko, Koizumi sign market access agreement 

Ukraine and Japan signed a protocol on access to each nation's goods and services markets in Tokyo recently. In addition, Ukrainian President, Viktor Yushchenko, and Japanese Prime Minister, Junichiro Koizumi, have signed an agreement on new partnership in the 21st century, New Europe reported.
Ukraine and Japan also created an intergovernmental commission, headed by their foreign ministers, which will work to develop bilateral cooperation. Ukraine is prepared to act as a reliable partner for Japan in Central Europe and on the international arena, Yushchenko said.
"We left the negotiating table convinced that Ukrainian-Japanese relations have a good future. We would like to assure Japan that Ukraine is prepared to become its reliable partner in Central Europe and on the international arena," Yushchenko told Koizumi in Tokyo. Koizumi said that "Ukraine is a state with a great potential and good prospects, and Japan is ready to cooperate with Ukraine actively, not only in a bilateral format, but in the world arena, as well."
Speaking about the Ukrainian-Japanese statement on partnership in the 21st century, Yushchenko said this document reflects new principles for cooperation and "lays down priorities on which both countries will work in the near future."
Yushchenko said the potential for bilateral trade and economic cooperation far exceeds the current US$500m. "We must intensify the political dialogue and business contacts," he said. "Cooperation in aircraft building and space remains our priority," Yushchenko said.
Meanwhile, the Ukrainian president said Ukrainian Dnipro (Dnepr) launch vehicles will take two Japanese satellites into space in October. "I am pleased to announce that today we have agreed on the production of another satellite in Ukraine under a Japanese project," he said in Tokyo addressing members of the Japanese parliament and the parliamentary association of Ukrainian-Japanese friendship. Yushchenko reminded them that the world's first satellite was manufactured in Ukraine and that satellite making is a traditional industry of his country.
"The main purpose of my visit to Japan is to give Japanese politicians and businessmen a signal that, six months ago, a new democracy was born in the centre of Europe that is determined to build the most advanced, the most active European market," Yushchenko said.

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FOREIGN LOANS

IFC offers Galnaftogas US$25m credit 

The International Finance Corporation (IFC) will offer Ukraine's Galnaftogas in Lviv a loan worth US$25m, the IFC office in Ukraine said in a recent statement, Interfax News Agency.
Galnaftogas will use the money to expand its filling station chain and to improve product quality and service, the statement read. IFC has provided the concern with consultations on introducing one of Ukraine's first corporate governance codes, enabling Galnaftogas to become a leader in transparent and responsible business management, the document said.
Cooperation with the IFC over corporate governance, social and environmental issues, and the company's success in raising foreign investment can serve as an example for other Ukrainian companies, the statement cited IFC Central and Eastern Europe Department Director Edward Nassim as saying.
The IFC hope that expansion will help Galnaftogas improve operating activities, raise quality standards and increase competitiveness on the retail fuel market, Rashad Kaldany, the IFC oil, gas, mining and chemicals department chief, said. The IFC plans to provide the necessary long-term funding to support the company, which has good development potential, he added.
Galnaftogas is one of Ukraine's largest filling station operators. It owns 164 filling stations around Ukraine.

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SHIPPING

Israeli firm to shell out big money for port project 

An Israeli shipping company announced plans to invest up to USD one billion in new infrastructure for a Ukrainian port, Itar-Tass News Agency reported on July 8th. 
Zima Israel Navigation Ltd plans to construct two container terminals at Odessa seaport, said officials from Ukraine's Ministry of Transport. If completed, the project would become the biggest shipping industry investment by a foreign firm in Ukrainian history. It would also make Odessa the largest shipping container turnover point on the Black Sea. The announcement came after recent meetings between Ukraine Transport Minister, Evhen Chervonenko, and Zima representatives. The talks produced a memorandum of understanding for increasing the capacity of Odessa port to handle shipping containers from 300,000 units a year to five million. Ukraine's ports have been booming for years on the strength of the country's internationally competitive steel and chemical export industries.

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WORLD TRADE ORGANISATION

China to support Ukraine's WTO bid 

Ukraine's accession to the World Trade Organisation (WTO) will help further enhance that country's trade and business cooperation with China, Chinese State Council member, Tan Jiaxuan, said at a meeting with Ukrainian National Security and Defence Council Secretary, Petro Poroshenko, Interfax News Agency reported. 
Tan said his country has absolutely no plans to create obstacles for Ukraine's entry into the WTO, Poroshenko's Press Secretary, Irina Fryz told Interfax. Ukraine's membership in the WTO "will contribute to joint efforts aimed at expanding trade and business cooperation between the two states as WTO member nations," the Chinese official said. Ukraine is an influential global player and its accession to the WTO is a necessary step toward bringing Ukrainian products to markets worldwide and boosting trade turnover, he said. Speaking on behalf of President Viktor Yushchenko, Poroshenko invited Chinese President Hu Jintao to pay a state visit to Ukraine. A preliminary agreement was achieved at the meeting to sign a bilateral memorandum on the principles of cooperation in the 21st century, Fryz said.

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