Apartments for Rent in Odessa, Ukraine

Q&A with President Viktor Yushchenko

1. Ukraine is striving for World Trade Organization (WTO) membership and considers it a high priority goal.  What benefits will Ukraine gain from joining the WTO?

Ukraine is at the final phase of joining the WTO.  Protocols on access to the markets of commodities and services have been signed with 47 member countries of the working group, and negotiations with Kyrgyzstan and Taiwan are nearing completion.

WTO membership will convey considerable advantages to Ukraine's economy.  The regime of most favored treatment for Ukrainian commodities in 148 WTO members' countries will provide domestic producers with additional opportunities for export, worth up to an estimated $2 billion.  This organization will help safeguard Ukraine's interests within the framework of its antidumping investigation mechanisms.

Accession to the WTO will be a powerful impetus for macroeconomic, structural and institutional reform.  Market-oriented competition will be conducive to making the economy more efficient, improving the quality of commodities and services.  A better investment climate due to stable, transparent and predictable rules will contribute to an additional annual increase in investment, as well as an improvement in the structure of capital.  Budget receipts from foreign trade will also be on the rise.

WTO membership also opens for Ukraine and opportunity for closer economic integration with the European Union.  After gaining membership, talks on the creation of a free trade zone will start with the European Union, which will help boost the country's economic potential.

2. What measures should be taken by the new government and the newly elected parliament to raise investment and facilitate foreign trade?

I am sure that the creation of a competitive, socially oriented, innovation-based economy will become a strategic guideline for the economic policy of the new government and Verkhovna Rada of Ukraine.

The implementation of such tasks requires, firstly, the fostering of an investment climate in the country in line with the highest international standards.  Among the important tasks set before the government and parliament to improve the business environment is to reform the tax system, which will envisage a system of justified tax impetuses, the development of the banking sector, measures to ensure the transparency of privatization processes and the operation of the stock market, the settlement of land-related issues, the easing of regulatory pressure on small- and medium-sized businesses, and the introduction of incentives for dona fide investors in special economic zones and priority development territories.

Any increase in investment depends directly on the efficient work of the institutional infrastructure designed to support the foreign investor.  In the first place, it concerns the Economy Ministry of Ukraine and the State Agency for Investment and Innovation, which should take care of every investor.

In the foreign trade sphere, the government should pursue a more pragmatic policy, based on national interests.

Of particular importance for Ukraine is the broadening of trans-border trade and a crackdown on smuggling.

Special attention should be paid to the elaboration of Ukraine's export strategy which would foresee the creation of algorithms for insuring and crediting exports, boosting the development of export-oriented production, and the liberalization of customs procedures and the mechanisms for making VAT refunds.

I am confident that the policy of the new government and the Verkhovna Rada in the sphere of foreign trade and investment activity will have a stable and predictable character.

3. What are the major tasks Ukraine is currently facing to head off inflation and boost GDP growth and industrial production?

Heading off inflation will be a really important priority for the new government.  However, [the inflation] level is not at present a serious threat to the development of the economy.  [In fact] inflation [up to 10%] actually stimulates development.  Moreover, the level of inflation with fall as the pace of economic growth picks up.

To ensure there is such growth, it is most important that the economy be made more attractive to investors, capital investment should be built up, and the development of the high-tech branches should be a priority. 

An important factor in controlling inflation is coordinating the macroeconomic policies pursued by the government and the National Bank of Ukraine in that area.

Despite the election campaign, the government's policy has been effective in controlling inflation.  Since the beginning of 2006, inflation has been 2.8%, which is lower than the average annual rate over the past five years.  In May this year, the consumer price index raised a mere 0.5%, which augers well for a low inflation rate for this year as a whole.

4. Do the active inflows of foreign capital into the Ukrainian banking sector pose any threat to Ukraine, or they will strengthen the sector?

Ukraine's banking system is open for the entry of foreign capital.  The current laws allow banks with foreign capital to open in Ukraine, including subsidiary banks with 100% foreign capital, which work under Ukrainian legislation as legal entities.

In Ukraine today, there are 28 banks set up with the participation of foreign capital, including 11 banks with 100% foreign capital.  The banks with foreign capital account for a fourth of the overall amount of the statutory capital of the banks operating in Ukraine.  Last year and this year alone, their statutory capital almost tripled.

Last year, the banks' profits grew by 1.7 times, and the pace of lending doubled.  As of today, a fifth of retail commodity turnover is backed by bank loans.

Improvements on the banking services market in the future will much depend on the country of origin of investments.  If Russian banks or corporations are investors, then, taking into consideration the great similarity between the Russian and Ukrainian banking systems, the current approaches to the formation and provision of banking services are most likely to remain.

The appearance of large investments in banking capital from economically developed countries and the operation of reliable banks with high reputations in the Ukrainian financial market would strengthen depositors' trust in the banking system, draw low-cost and long-term credit resources into Ukraine's economy, and introduce new banking technologies.

The dynamic development of a bank-irrespective of the country of the origin of its capital-requires a constant increase in the quality of its products and the widening of its spectrum of activity.  New opportunities for this in Ukraine will be ensured by the adaptation of the Ukrainian legislation regulating the legal basis of the operation of the stock market, the development of mortgage crediting in line with EU requirements, as well as by an improvement in the investment climate across the economy and in the regions.  The authorities are working on bringing this about.

5. Can Ukraine use its historical relationship to Russia to soften the impact of the energy crisis on Ukraine?

Russia is taking a pragmatic stand on the issue of energy supplies, and we are taking a similar stand.

Russia, enjoying a monopoly position, has started dictating prices for energy-for natural gas in particular.  The formation of the prices was done in a political, rather than economic context.  The price of $230 per 1.000 cubic meters [of gas], which was offered by Gasprom [Russia's gas producing company] along with transportation costs exceeded European levels.

Recently we've heard ungrounded statements about Ukraine's economy being subsidized by "low-cost" Russian gas.  However, Ukraine itself sustained losses from the low rates [it could charge] on the transportation of Russian gas to Europe and its storage in underground storage facilities, which over the period from 1993 to 2005 amounted to over $21 billion.

Russia's pragmatic stance on the supply of energy is pushing us to shift to international standards in the energy sector, and to taking a pragmatic attitude to the issues of oil and gas transit, the ownership and leasing of property, and other issues.

It's time for pragmatic, friendly and good-neighborly relations.  This is the only correct approach.

6. According to current agricultural legislation, foreign investors are not allowed to buy agricultural land in Ukraine.  Could this ban create loopholes for criminal or semi-legal schemes for acquiring plots of land?  Is it an obstacle to the flow of investments and the introduction of advanced technologies into that important sector of the Ukrainian economy?      

A moratorium on the sale of agricultural land for all buyers, not just foreign ones, is in effect until the end of 2006.

To a certain degree, this encourages shady schemes for the acquisition of land and curbs investment in agriculture.

Political discussions on this issue have been going on for a long time.  I hope that the coalition in the Verkhovna Rada will make it possible for various political forces to come to an agreement [on allowing] the sale of land.

The main thing here is to form a legislative base and the corresponding infrastructure for the land market as soon as possible, which would maintain the high liquidity of Ukraine's black soils, and further protect rural land owners' interests.

7. You have often mentioned the importance of Ukraine developing the hi-tech sector of the economy, talking into accounts the excellent geographical positioning of Ukraine and the excellent human resources that are available.  What is being done to help stimulate investment in this priority sector of the economy?

High-technology is the future of the world-and Ukraine in particular.

Information technologies determine the level of the development of a modern society; therefore we're paying considerable attention to the development of the IT industry.  The creation of the necessary legislative base is a major task for the state at this phase.

With that aim in view, the decree of the President of Ukraine on top-priority tasks for introducing advanced information technologies was issued on October 20, 2005, the law of Ukraine on amendments to the law of Ukraine on the special regime of innovation activity at technological parks and other laws was passed on January 12, 2006, and the decree of the President of Ukraine dated April 10, 2006, on the plan for top-priority measures in the sphere of investment activity was signed.

The Cabinet of Ministers is elaborating a draft law on boosting innovation development and the production of high-tech products, as well as a draft government resolution on introducing venture capital investment in innovation activity.

8. What advantages would Ukraine gain from membership of the European Union?

European integration is an integral part of the long-term development strategy of the state, and one of the key ways of achieving the goals we set in building the state.

The long-term process of acquiring EU membership foresees comprehensive work to reform Ukrainian society in line with the highest European standards.

Ukraine's European-oriented policy should be backed up by conscientious action in certain priority directions.

Considerable progress has been achieved in the implementation of the joint Ukraine-EU Action Plan, which sets the stage to bring our relations to a qualitatively new level.

The Agreement on Partnership and Cooperation between Ukraine and the EU expires in 2008.  Our stance is that it should be replaced by the European Union Association Agreement, which foresees prospects for full EU membership [for Ukraine].

Today the EU is Ukraine's largest trading partner; its share is over 35% of our state's overall foreign trade.

We're actively proceeding in the direction of joining the WTO, which is a required prerequisite for creating a free trade zone with the EU.  Recently signed bilateral protocols with the United States and Australia give grounds to hope that Ukraine will join this organization as early as this autumn.

Talks are under way to liberalize visa regulations between Ukraine and the EU.

We have great potential for cooperation in the transport and energy sectors.

Ukraine stands every chance of becoming an active player in extending transport corridors and implementing a common European energy strategy.

At present, we are jointly working to resolve pressing problems in the energy sector: diversifying energy supplies, creating new routes for their delivery, using alternative energy, and integrating the Ukrainian energy market with that of Europe.

These directions are stipulated in the Memorandum of understanding on the field of energy cooperation between the EU and Ukraine, signed on December 1, 2005.

In addition, Ukraine has great potential to boost the supply of oil and gas from the Caspian region to Europe.  First of all, this concerns the implementation of the project to set up a Eurasian oil transport corridor using the Odessa-Brody oil pipeline, which is recognized by the European Union as strategically important.

9. Do you think the Ukrainian public wants Ukraine to join NATO?  What benefits could Ukraine derive from NATO membership?  Is there a plan to actively inform the population about the benefits of NATO membership?

Since the public knows little about NATO, the character of the current transformation of the alliance, and the development of its relations with Ukraine, it is hardly possible [for the public] to form an objective attitude to Ukraine's joining NATO.

The government has a very important task -to provide the population of Ukraine with objective and complete information about NATO and our relations with the alliance.

Major work to inform the public about NATO activities and the development of relations between the alliance and Ukraine is proceeding under the framework of the state program on informing the public about Ukraine's Euro-Atlantic integration for 2004-2007.

This year we stand every chance of reaching a new level of relationship with the alliance, through joining the NATO Membership Action Plan.

Under such conditions, the state's information policy in the sphere of Euro-Atlantic integration, which is one of the determining factors on Ukraine's path towards NATO membership, should improve as well.

I believe that the above-mentioned program should be fundamentally changed in the light of today's advantages:

·         it will speed up the process of domestic political, economic and social reform, with the aim of ensuring the democratization of the state and improving the welfare of its citizens;

·         the global weight of the state in the international arena will increase, since Ukraine will take part in the process of making key decisions concerning European and Euro-Atlantic security;

·         the state's investment attractiveness will considerably grow, which will result in the creation of new jobs, the development of high-technology, and the modernization of exiting enterprises;

·         the state will receive solid guarantees on the inviolability of state sovereignty, its territorial integrity and its borders, as is foreseen in the Washington agreement;

·         overall spending on the defense sector will fall, as the collective security system will help optimize national defense spending;

·         as a result of military reform, Ukraine will have a well-equipped, professional army, which its citizens can be proud of.

10. What is Ukraine's future in the Commonwealth of Independent States?

We continue cooperating in that multilateral format as a CIS member country.  At the same time, we're analyzing [the grouping'] effectiveness.

For Ukraine, the CIS was and remains a priority economic direction for multilateral cooperation.  The best format for cooperation among CIS member countries would be the creation of a free trade zone.

Moreover, we back the implementation of measures in the social sphere to meet out citizens' daily needs.

From the economic point of view, the CIS needs to be reformed in order to boos mutually beneficial trade and economic cooperation, with due regard to the WTO requirements.

Our opinions on the top importance of the economic direction in the CIS coincide with the vision of Russian President Vladimir Putin.  In his annual address to [Russian's] Federal Assembly, he stressed that Russia is interested in the creation of an efficient economic system that would ensure the effective development of every member.

The Commonwealth's further development, as many CIS member countries believe, depends on reforming its agencies and such reform is currently being discussed.

The Commonwealth's prospects depend on how fully and harmoniously it treats the national interests of every member state, and how efficiently it [the CIS] operates in the future.

11. Do you expect the GUAM [Georgia, Ukraine, Azerbaijan, and Moldova] grouping to expand?  What countries are potential members?

It is evident that the prospects for the extension of any international organization directly depend on its effectiveness and practically depend on its effectiveness and practicality for its members.  This can be seen in that such organizations as the EU and NATO are constantly expanding, while other [groupings] have broken up.

Azerbaijan, Georgia, Moldova and Ukraine have created an Organization for Democracy and Economic Development with the purpose of developing practical cooperation and of particular importance for our states is the development of GUAM projects in the sphere of transit, energy and security.

In this context, we're ready for the development of mutually beneficial cooperation with other states.  Today we can point to the achieving of noticeable results and active cooperation between GUAM and the United States, Romania, Poland, Lithuania, and certain EU countries.

The existing format of relations satisfies Ukraine at the moment.  At the same time, the GUAM is an organization open to the membership of other states which share its goals and principles.  Therefore, if such a question [of admitting new members] is raised.  It will be considered in the proper manner.  The enlargement of the organization, as was said above, would be evidence of its effectiveness.

12. What is your position on attempts by several regions to give the Russian language a regional status?

A real state has three backbone components: the people, the language and the state symbol.

To uphold national interests is not an easy task.  In the 15^th year of independence we still see a lack of understanding of the supremacy of national priorities, and a deficit of national self-confidence.  This is a serious challenge for Ukraine's young democracy, which is on the way to becoming a civilized European society.

It is extremely important now to avoid the subjects that divide us, that set us against one another.  There cannot be any easy and fast solutions in the issue of language.  The irresponsible and unbalanced approach of certain political forces to such extremely complicated and delicate spheres as international and language relations does not unite the state, and delicate spheres as international and language relations does not unite the state, and does not encourage concord.

To speak frankly, the current problem with the language has one major cause: the wish of certain [people in] local government, while carrying out their duties, to avoid having to learn and use the official language, as is stipulated in the Constitution and the laws of Ukraine.  This position is not Ukrainian-oriented, in fact.

The Ukrainian language is one of the symbols of Ukrainian statehood.  It is impossible to form a Ukrainian political nation without it; it should be safeguarded as a steadfast sacred thing.  This is a guarantee, a foundation, a way of patriotic thinking, [for] the development of the culture and spirituality of Ukraine.  I'm very confident that making the Ukrainian language the official [state language] is in the interests of both Ukrainian-and Russian-speaking citizens.

At the same time, one should remember that many Ukrainian citizens have got used to speaking in Russian.  Therefore a poorly considered language policy may hamper the social activity of many citizens, particularly young people, and create a situation of psychological discomfort.

The language policy should give priority to the principles of stimulating, encouraging and creating an attractive image of the Ukrainian language.  Overcoming the social and psychological stereotypes and the deformation [in the past] of the linguistic environment will take time and much effort.

The real answer to the language issue lies in the adoption of a new law on language in Ukraine, since the law of 1989 is still in effect today.  A well-considered approach to the language problem should satisfy the language and cultural rights of Ukraine's ethnic minorities, while simultaneously bolstering the constitutional position of the national status of the Ukrainian language, which is an important facet of the identity of the Ukrainian people.

And another important thing: language is a real reflection of the people's attitude to their state.  The authorities remember this, and citizens should be aware of this as well.

13. Does, in your opinion, Ukraine needs urgent administrative and territorial reform?  What are the advantages of the reform and what challenges may Ukraine face while pursing it?

The current administrative and territorial system appears archaic now, and it is characterized by territorial and demographic imbalances.  For example, we have districts whose population is 15.000 (in Chernihiv region) and whose population is 130.000 (in Kharkiv region).  The territorial communities, mainly in rural areas, lack resources, the administrative and managerial staffs are in many cases larger than needed for the current tasks and resources, and budget funds are used inefficiently.  The quality of services provided to citizens is not high enough.  The current system of organization of executive power does not ensure the proper management of the territories.

All this shows the need to carry out administrative and territorial reform.

July-August, 2006

Commerce

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