Ukraine's representatives press for foreign investment and WTO membership during World Economic Forum (02/10/02)

Ukraine's representatives press for foreign investment and WTO membership during World Economic Forum

by Areta Lloyd
Special to The Ukrainian Weekly

NEW YORK - Ukrainian leaders on February 4 wrapped up a long weekend of meetings in New York at the World Economic Forum, an annual gathering of multinationals and industrialized and developing countries that Ukraine has attended since independence. This year, riding an economic high, and flush with recognition and clout after receiving a positive rating by Moody's and J.P. Morgan, Ukraine pushed for increased foreign investment and indicated its intention to pursue membership in the World Trade Organization (WTO).

"We needed a physical presence at the meeting in New York City," said Ukraine's Finance Minister Ihor Yushko. "It's a standard business principle that people like to meet face to face - they feel more like business partners, and this is very important."

There was some feeling on part of the two-man team of Minister Yushko and Vice Prime Minister Vasyl Rohovyi that Ukraine has not been given a fair shake, and that their role at the World Economic Forum was to set the facts straight. "We don't want to be given more credit than we deserve, but we need to provide current, objective information about Ukraine," explained Mr. Yushko, speaking at a press briefing at Ukraine's Mission to the United Nations.

Their message these past few days has focused on the civil, criminal, land, tax, anti-corruption and ownership laws recently passed by the Verhkovna Rada, and the country's impressive 9 percent growth last year. From January 31 to February 1, Vice Prime Minister Rohovyi and Finance Minister Yushko peddled that message to investment firms, U.S. officials and World Bank representatives.

According to Ukraine's Mission to the United Nations, at a working forum with multinational finance and investment companies, representatives from Merrill Lynch "underscored the positive ratings accorded to Ukraine by international experts, which has turned investors' attention to Eastern European markets, especially that of Ukraine." Moody's, too, pointed to its own ratings upgrade for Ukraine, indicating a positive economic climate. The recent debt restructuring with the Paris Club was mentioned several times by Mr. Yushko as one of the keys to the recent ratings upgrades.

"Restructuring the Paris Club last year sent a significant, positive signal for investors," he noted. "Everyone agrees that huge gains have been made, and a positive outlook is important for investors."

Positive economic indicators and recent reforms provided a practical basis for discussions with the global investment banking and securities giant Credit Suisse First Boston, as well as with representatives from J.P. Morgan, HSBC, Carlson Investment Management, Oppenheimer Funds and Times Square.

According to the prime minister, the U.S. firms showed a strong interest in privatization and tax reform. Ukraine's representatives had an opportunity to talk at length about the country's structural reforms, as well as to exchange ideas about increasing the presence of U.S. investors in Ukraine.

Contacted by The Weekly for comment on the discussions, however, Credit Suisse declined.

"Ukraine feels confident on these issues," said Mr. Yushko. "But, in my opinion, we can't lose time on tax reforms in 2003." New tax laws will help eradicate corruption, which is a significant problem in most former Soviet countries.

"The second tack is regulatory procedures," said Mr. Rohovyi. "Many steps have been taken already, and now one can register a business in just one week. Inspections and legalization of profits have also been instituted." Admittedly, implementation of any reforms will take years; but the positives far outweigh the two- to five-year time lag for implementation.

Another key message Ukraine received at the World Economic Forum was that it must fight money laundering to safeguard economic development.

On sanctions and the WTO

On February 3, Messrs. Rohovyi and Yushko met with Grant Aldonas, undersecretary for the U.S. Department of Commerce. The issues tabled were: Ukraine's trade status with the United States, Ukraine's entry into the World Trade Organization, metallurgical imports, intellectual property and imports of poultry. Clearly, the most contentious issues were Ukraine's access to the U.S. steel market and intellectual property rights.

"We want to assure you, Ukraine does not have a passive position regarding metallurgical exports," said Mr. Rohovyi. "We have actively pursued other markets, notably within the European Community." He added that the United States' neighbor to the north, Canada, did not have a problem with this issue. It has previously been reported that Ukraine views the U.S. sanctions over CD piracy as an excuse to deny an export market for its steel.

Regarding piracy, Mr. Rohovyi indicated that the government of Ukraine continues to question the U.S. position. "We have made progress with the current law passed last month," he said. "Inspections are allowed and we have instituted better regulations." Although he stated that he saw "some progress," he said he does not believe that change will happen quickly.

The delegation was assured that the United States will review the situation and Ukraine will await the results. Mr. Rohovyi said Undersecretary Aldonas indicated that talks have by no means been halted, and that the door is open to further discussions on resolving the piracy issue and halting U.S. sanctions.

On a more positive and ambitious note, the vice prime minister stated that preparations for Ukraine's entry to the World Trade Organization is a priority for the country's government, and he asked for support from the United States Ukraine's economic gains and flurry of reforms bode well for its readiness to move forward. The U.S. State Department has previously stated that it is eager to see Ukraine's integration into Western institutions and would give its support. Mr. Rohovyi said he expects movement on the issue upon his return to Kyiv, and expressed assurances that the new Parliament that will be elected in March will continue to work towards this goal.

Aid and development

During the World Economic Forum, Ukraine's delegates also had the chance to meet with World Bank Vice-President Johannes Lynn. The discussions revolved around how the bank could support Ukraine's economic reform programs and help with macroeconomic stability. According to a statement by Ukraine's U.N. Mission, Mr. Lynn expressed a positive opinion of the Ukrainian government's efforts and voiced his support for the reforms implemented to date. He apparently affirmed the World Bank's intention to attend the Ukraine-European Community conference in Brussels in March and further indicated that the bank's visit to Ukraine in May could deepen the relationship and lead to greater cooperation.

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