Tymoshenko tries to change her anti-business image (04/23/06)

Tymoshenko tries to change her anti-business image

by Zenon Zawada
Kyiv Press Bureau

KYIV - In a direct attempt to combat an anti-investment image festering in Western business circles, former Prime Minister Yulia Tymoshenko told the American Chamber of Commerce that her highest ambition is to eliminate corruption and make Ukraine business-friendly.

"My higher ambition is to build the type of Ukraine that will be a diamond in the civilized world," Ms. Tymoshenko said to applause. "That's my ambition, and who will stop me in my ambitions? Show me one such person!"

Addressing more than 250 businessmen on April 17, Ms. Tymoshenko outlined several initiatives she would take as prime minister, including reforming the courts, holding judges accountable for unlawful rulings, creating a stock exchange, opening Ukraine's market to foreign banks and making non-agricultural land easier to purchase.

Since her bloc's surprisingly strong performance in the March elections, Western businessmen and investors have expressed concern over Ms. Tymoshenko's possible prime ministership.

"As prime minister last year, she surprised us negatively by focusing on re-privatization, which had not been part of her government program," wrote Anders Aslund, a senior fellow at the Institute for International Economics and Ms. Tymoshenko's most vocal critic.

"Now she has received a greater popular mandate than ever before, so we can only wonder how she will amaze us this time," he noted.

Ms. Tymoshenko claimed she never even used the term "re-privatization" when she served as prime minister and has been unfairly smeared by her political enemies.

"Through a very well organized propaganda system, a terrible, horrible, scary re-privatizer has been made of me, who walks around with a scythe and hacks off honest private owners," Ms. Tymoshenko said.

Western businessmen are concerned about re-privatization because they perceive it as a threat to their private property rights and investments in Ukraine.

Ms. Tymoshenko and President Viktor Yushchenko launched one large-scale re-privatization effort, involving the Kryvorizhstal steel mill in Kryvyi Rih, in order to resell the plant at its true market value.

Former President Leonid Kuchma had sold Kryvorizhstal to his son-in-law, Viktor Pinchuk, and industrial magnate Rynat Akhmetov for $804 million. At the October auction last year, multinational Mittal Steel Co. bought a 93 percent stake for $4.8 billion.

The government is attempting to re-privatize a second enterprise, the Nikopol Ferroalloy Plant in the Dnipropetrovsk Oblast, which also is owned by Mr. Pinchuk.

A lawyer from the Baker McKenzie firm attending the meeting asked Ms. Tymoshenko whether she had truly considered re-privatizing more than 3,000 companies, which had been widely reported in the media.

She said she never made the claim that as many as 3,000 properties may become re-privatized, a notion that was artificially created in the mass media.

However, after President Yushchenko had dismissed Ms. Tymoshenko as prime minister, even he accused her of considering re-privatizing 3,000 businesses.

In fact, Ms. Tymoshenko said the following at a February 19, 2005, press conference: "The government is to review the legality of the privatization of more than 3,000 enterprises, of which inspection results had been set aside by Ukraine's procurator general for five years."

She later added: "Nobody today can state the number of properties that will be returned to state ownership. It has been established that violations during privatization occurred, and there are courts that should investigate these issues."

At the American Chamber of Commerce event, Ms. Tymoshenko said nowhere near 3,000 properties would be re-privatized, and repeated her commitment that courts would decide all re-privatization efforts.

Responding to the claim that some Ukrainian bankers are concerned about her prime ministership, Ms. Tymoshenko said the only bankers who are concerned or scared are those who don't pay taxes.

They are also the ones who have given her three labels - re-privatizer, populist and unshakable person - in order to create fear of her policies.

"If you will see that our internal environment fears me, then this kind of prime minister is needed for investors because they know I will change things, and change things so that there won't be a closed space and they won't have a Ukraine that's a closed type of stockholder association."

As for her plans to improve Ukraine's investment climate, Ms. Tymoshenko led off with the need for "complete, deep and effective reform of the judicial system."

Judges need to be freed from their dependency on the executive government and the Presidential Secretariat so they can make independent rulings, she said.

A system of accountability also must emerge to hold judges responsible for unjust rulings, Ms. Tymoshenko said. No such accountability of judges exists today.

Ukraine needs a stock market that protects the rights of minority shareholders, Ms. Tymoshenko said, noting that they are currently very vulnerable.

Ensuring such rights will encourage foreign investment, which is needed in the electrical energy industry, as well as drilling for oil and mining natural resources, which are abundant in Ukraine.

"We will absolutely pass a law that will ensure for minority stockholders absolutely guaranteed rights that exist in the civilized world," she said. "Today, this is an absolutely ruined, undeveloped sphere in Ukraine."

Ms. Tymoshenko criticized Ukraine's restricted access to foreign banks, accusing Ukrainian bankers of intentionally creating a closed market where they're able to charge annual interest rates on business loans as high as 20 percent.

These Ukrainian banks have their powerful interests represented in the Verkhovna Rada to protect their businesses, she said.

"Offering 15 percent for annual credit is not a bad profit," Ms. Tymoshenko said. "But it doesn't allow the private entrepreneur to develop adequately."

As a result, foreign banks with access to larger resources of financial resources can only monitor Ukraine's banking activity or perhaps buy a Ukrainian bank, instead of participating in the market.

Ms. Tymoshenko acknowledged complaints from Western investors regarding the cancellation of free economic zones that offered tax breaks to foreign businesses invested in them.

However, the free economic zones eventually became abused by Ukrainian businesses for which they weren't created. Access to these zones eventually bred corruption in which businessmen paid bribes to access the zones in order to evade taxes.

"So if an oil refinery located in Donetsk operated in a free economic zone, and a meat-processing plant in Dnipropetrovsk didn't, they ended up working in entirely different conditions," Ms. Tymoshenko said.

"One didn't face taxes on the domestic market, while the other paid taxes on the domestic market. That's why I believe we made a colossal step forward to make all business structures equal before the law," she explained.

Free economic zones should be strictly limited to Ukrainian companies that export goods.

Ms. Tymoshenko also addressed the difficulty foreign investors face in acquiring land for their business. At least 127 signatures are needed for a business land purchase in the Kyiv Oblast, she said, requiring a wait of at least three years.

"On top of that, the bribes that you would have to pay out increased the cost of this land by almost double," she said.

Ms. Tymoshenko said she wants to pass legislation that would speed the land acquisition process to require five permits and one month of waiting.

To deal with corruption in the Verkhovna Rada, Ms. Tymoshenko said a strong opposition is needed to publicly reveal which officials are engaging in corruption.

If she joins the coalition government, Ms. Tymoshenko said she'd give all the necessary tools to the opposition to act as a watchdog for the government.

Furthermore, "if I form the government, I won't allow anybody who took a bribe."

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