Экономические науки./4.Инвестиционная деятельность и фондовые рынки.

Kordukova N.G.

Danielyan A.B.

Vlasova I. A.

Donetsk National University of Economics and Trade

Named after Mikhailo Tugan-Baranovsky

Trade and investment mission to Ukraine

The international business community has been watching Ukraine closely as the political environment, which will have a major influence over the country and its investment climate over the next several years, takes shape. As Ukraine finds itself once again at a crossroads, international investors are observing intently for the signs and movements that will trigger their ability to start to invest heavily for the future. The questions many investors are asking include thing such as: is Ukraine really committed to European integration? Will Ukraine push forward and become a member of the World Trade Organization? Will the current leadership of Ukraine ensure that democratic and free elections take place? How will Ukraine utilize their indigenous and imported energy resources? How will Ukraine handle the looming crisis in the agricultural sector?

On a very positive note, statistical results for the year of 2003 confirm that the basic macro economic indices match if not exceed forecast. The preliminary assessment of GDP growth issued at the beginning of 2003 amounted to a cautious 4.1%. The official figure provided by the State Statistics Committee for the first half of 2003 is 5.1% growth as compared to the same quarter of 2002. This correlates with the optimistic scenario for development of the Ukrainian economy.

For over twelve years, the American Chamber of Commerce in Ukraine has been constantly collecting information from our Members, the Ukrainian government as well as the international donor and diplomatic community, which has resulted in what we believe to be a realistic and comprehensive overview of the economic situation in Ukraine regarding foreign direct investment.

Romanow and a representative Saskatchewan delegation from the sectors of energy, agricultural machinery and cultural industries, have meetings set for the 11 days abroad in England, Germany and Ukraine. "The mission to western Europe will focus on investment promotion with both the financial community and with major agricultural biotechnology and chemical companies that have raised the possibility of relocating research and development operations to western Canada" Romanow said. "I am going there to persuade them to choose Saskatchewan." In England, a key objective will be to meet with members of one of the world's most important financial communities to discuss the positive prospects for Saskatchewan's economy. In addition, meetings are being pursued with a major European agricultural biotech company, the International Grains Council and The European Bank for Reconstruction and Development, which finances major capital projects in Ukraine and other members of the former East Bloc.

In Germany, the mission will also meet with biotech and uranium companies considering relocation of research and development personnel to Saskatchewan. While in Berlin, the Premier will be joined by a Saskatchewan trade mission of agricultural machinery and production companies to promote new sales to Germany, and through it, to central and eastern Europe and Ukraine.

The fastest rates of growth were observed in the manufacturing industry making up almost 75% of the total industrial production in Ukraine – 12.8% (7.6% in 2002), mining industry – 2.4% (0.6% in 2002), production and distribution of electricity, gas and water – 11.5% (-1.1% in 2002). The growth of consumer purchasing power and the import substitution effect resulted in a substantial growth of consumer goods production oriented towards internal markets. Among the growing industries machine building leads the way with 26.6% growth, production of wood and wooden articles 22.2%, cellulose and paper industry and printing production 16.1%. Considerable growth as compared with the same period of 2002 was also observed in chemical and petrochemical industries (13.3%) as well as in metallurgy and metal processing (12.5%). For the first time since Ukrainian independence light industry demonstrated 0.7% growth as compared to January-May 2002. The mining of coal and peat is still declining posting a -5.4% slide along with oil processing losing 2.1%. All Ukrainian regions have posted positive growth figures in industrial development except for the Khmelnitska and Poltavska regions where the decline amounted to 1.5 and 2.0% correspondingly.

It is anticipated that the rate of investment withdrawal will decrease in the second half of 2003 provided Ukrainian legislators pursue new positive amendments to taxation and privatization legislation. The long-awaited Tax Code is being adopted on a step-by-step basis which is anticipated to facilitate the adoption of politically sensitive issues. Many of the proposed changes to the taxation legislation are designed to help bring businesses from the “shadow” and establish a larger more predictable tax base. The latest achievement for tax legislators and their supporters was the reduction of personal income taxes starting from January 1, 2004 already approved by the Parliament. Still, this measure could become effective only provided the accompanying cuts in social funds taxes that employers have to pay. Moreover, the much-needed reduction of VAT from 20% as well as its proper implementation regarding refunds to exporters is still a hot issue stifling additional FDI into Ukraine.

Another important issue is privatization, a major challenge to foreign businessmen seeking investment opportunities of in Ukraine. The government is pushing a new long-term National Privatization Program for 2003-2008 that is hoped will stimulate investment. The Program is to create a nation-wide inventory of public property, establish registers of enterprises of all forms of ownership, and design mechanisms for effective tenders and allocation of returns. Namely, the architects of the reform envisage that unlike the past, 25% of the privatization revenues will be allocated for restoration of capital assets of property to be privatized. All the activities of the Program are aimed at reaching balance between preserving strategic assets and offering attractive high-quality opportunities to prospective investors.