Ukraine's economy minister meets with officials in D.C. (02/15/98)

Ukraine's economy minister meets with officials in D.C.

by Yaro Bihun
Special to The Ukrainian Weekly

WASHINGTON - Ukraine's Minister of the Economy Viktor Suslov is convinced that the United States and the West will not ignore Ukraine's economic needs and allow a leftist victory in the March 29 elections to the Verkhovna Rada.

Following six days of private meetings, discussing trade, investment and assistance issues with U.S. government officials, congressional leaders and representatives of U.S. and international financial institutions in Washington, Minister Suslov said that he and the members of his delegation are returning home "with higher hopes, absolutely convinced that financial destabilization will not be allowed to happen (in Ukraine)."

"I'm also convinced that after the elections the course towards market reforms will stay in place," he said during a press briefing on February 5 at the Center for Democracy, a Washington-based organization that promotes the democratic process worldwide, which sponsored his Washington visit.

"The world community cannot leave Ukraine alone to face an economic crisis, especially now when we have an election campaign in full swing," he said through a Russian-language interpreter.

"Any financial destabilization would play into the hands and contribute to the success of radical forces and may change the political situation in the country," he said, explaining that he was talking about leftist radical forces.

The threat of a victory of radical Communists and Socialists in the coming election is real, he said, because they are waging a populist campaign during a period of hard economic times in Ukraine.

"One must understand, however, that victory of those forces would not solve anything, because they would not be able to solve Ukraine's economic problems, and all forms of international assistance, including foreign private investment, would dry up," he said.

Minister Suslov said that, while he is a member of the leftist Peasants' (Selianska) Party, he considers himself part of the forces interested in "real market reforms and promoting political stability" and "against political radicalism." They would, nonetheless, be ready to accept even "the Chinese economic model, which would still get massive inputs of foreign investment."

The February 2-7 visit, which also included Export-Import Bank of Ukraine Chairman Oleksander Sorokin and First Vice Minister for Finance Petro Hermanchuk in the delegation, came within a week after the trade and investment committee of the Ukraine-U.S. Binational Commission held its third meeting on January 29-30 in Kyiv.

Minister Suslov pointed out that American investments in Ukraine, which at $325 million surpass all other foreign investments, grew by 25 percent in 1997. Nonetheless, he added, it remains far below Ukraine's investment potential, which he estimated to be in the $40 billion range over the next two to three years.

Increasing foreign investment is a strategic goal of the Kuchma government, he said, and the government has taken a number of concrete steps in that direction - establishing a presidential council on foreign investment which includes both government and private Ukrainian and foreign business representatives, a new department at the Economics Ministry and a website on the Internet.

Minister Suslov said he was certain that Ukraine will be able to resolve the outstanding disputes with American investors and meet the requirement added to this year's U.S. foreign assistance legislation, which stipulates that unless Ukraine resolves these disputes by the end of April, it will lose half of its appropriated $225 million U.S. aid package.

Among the trade issues discussed, Mr. Suslov said, was Ukraine's need to increase its exports to the United States and the yet-unsigned bilateral agreement to eliminate double taxation and prevent tax evasion.

One of the stumbling blocks to signing the taxation agreement is the Ukrainian law allowing for secret foreign-currency accounts in Ukrainian banks, Mr. Suslov said. There is a draft of a presidential decree ready for signing that would ban such accounts, he added.

As for Ukraine's chances of joining the World Trade Organization anytime soon, Minister Suslov said he doubts that Ukraine would join the WTO within the next two to three years.

"We need to gradually introduce a number of procedures that would reconcile our system of tariff regulation with the requirement of that organization," he explained.

In response to a question about Harvard economist Jeffrey Sachs' recent criticism of Ukraine for slowing down its reform programs prior to elections and not taking serious measures to counter the economic crisis, Minister Suslov said that the recent Asian economic crisis did not affect Ukraine as it did many other countries, and that the hryvnia had remained stable.

He added, however, that, indeed, there was a decrease in foreign investors' interest in Ukrainian treasury bills, which forced Ukraine to raise National Bank interest rates, expand the foreign exchange "corridor" (the range of allowed exchange rates) for the hryvnia and raise the rate on government securities.

Following the press briefing, Minister Suslov told The Weekly (in Ukrainian) that in order to increase American investments in its economy, the Ukrainian government must establish the rule of law and develop a judicial system.

"The investor must be protected by the country, its courts and government," he stressed. "These are the fundamental requirements.

"The government should also accelerate its privatization program and maintain financial stability," he said.

"And yet another prerequisite," he added, "is a government made up of moderates who understand well that Ukraine's future is tied to its integration into the world economy."

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