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Business news from the Ukrainian League of Industrialists and Entrepreneurs

RADA TAX, CUSTOMS COMMITTEE SUPPORTS REDUCTION OF ADDITIONAL IMPORTS DUTY

KYIV. April 20 (Interfax-Ukraine) – The parliamentary committee for tax and customs policy supports the reduction of the additional imports duty of 5-10% approved in late 2014, Committee Chairman Roman Nasirov said at the National Export Forum.

“Taking into account the upward pace of foreign trade with goods in the first months of 2015, the imports duty could be revised downwards… I could say for sure that the tax and customs committee will support the decision,” he said.

Nasirov said that the introduction of the additional imports duty affected the Ukrainian processing industry as the cash cost and the price of goods exported from Ukraine grew.

As reported, on February 25, 2015, due to worsening of the balance of payment Ukraine introduced the additional imports duty on all goods, apart from critical imports stipulated in the law on the stabilization of Ukraine’s balance of payment passed by the Ukrainian parliament in late 2014.

The law foresees the introduction of a 10% duty on finished food, fats, vegetable oil and butter, alcohol and non-alcoholic drinks, tobacco, vinegar, live animals (goods groups 1-24 under the Ukrainian code). The 5% duty is imposed on any other goods, apart from vitally important goods, including energy goods and some drugs.

KHARKIV TRACTOR PLANT, SAMPO ROSENLEW TO REACH OUTPUT OF 500 COMBINES A YEAR BY 2018

KYIV. April 20 (Interfax-Ukraine) – The joint venture of PJSC Kharkiv Tractor Plant and Sampo Rosenlew (Finland) intends to start producing about 200 harvesters from 2016, and by 2018 to increase output to 500 units per year.

“This year we plan to assemble an experimental batch of harvesters, certify them and, starting from 2016, at least 200 combines will be assembled, and by 2018 we will reach the amount of at least 500 units,” Kharkiv Tractor Plant CEO Vladyslav Hubin said, when signing a memorandum of cooperation with the Finnish company.

He said that the localization of production in Ukraine will help reduce the cost of 3085 series combines by 20%.

As reported, a contract to create a joint venture by Kharkiv tractor plant and Sampo Rosenlew was signed in December 2014. The plant in 2014 produced and sold 1,455 tractors, which is 10.4% or 137 units more than a year ago, and this year the plant plans to sell more than 2,000 tractors (37.5% up).

Last year the company sold tractors to more than 30 countries and was present in the markets of Europe, Asia, Africa and Latin America.

Sampo Rosenlew is a Finnish company, which is engaged in the production of harvesters and forestry equipment. Sampo Rosenlew supplies products to over 50 countries. The main markets of the company are the Nordic countries, North Africa, Ukraine, Azerbaijan, and Belarus.

UKRAINIAN GOVERNMENT EXPECTS 2% GDP GROWTH IN 2016 – YATSENIUK

KYIV. April 16 (Interfax-Ukraine) – The Ukrainian government expects 2% growth in GDP in 2016.

“We are very cautious about the prospects for 2016. At the same time, our forecasts coincide with those of the IMF: both the government and the IMF expect GDP growth in 2016 at ‘plus 2%’,” Prime Minister Arseniy Yatseniuk said during a meeting of the National Tripartite Social and Economic Council.

He said that GDP growth was impeded by the lack of foreign investors.

“It is no use to expect that foreign investors will come in 2015, it is too early: there is war, and a country that is at war with Russia cannot quickly become attractive for investment,” Yatseniuk said.

He said that this year will form the foundation for the beginning of economic growth in 2016.

In this regard, Yatseniuk announced the continuation of tax reform, the establishment of an effective system of VAT refunds, and for the search for new markets for Ukrainian products to continue.

ULIE, NGOs’ anti-crisis council prepare bailout action plan for government and businesses

The social and economic situation in Ukraine remains extremely complicated, and the reform implementation process is very slow. The country’s economy exhibited no growth in the first months of 2015 – industrial production January through February 2015 was 21.7% down year-over-year. During these hard times businesses are ready to offer their support to the government and consolidate their efforts to overcome the crisis. Industrialists and entrepreneurs discussed these issues at a joint meeting of the Anti-Crisis Council of Non-Governmental Organizations and the Management Board of the Ukrainian League of Industrialists and Entrepreneurs (ULIE).

The ULIE and the Anti-Crisis Council of Non-Governmental Organizations, which includes more than 80 business associations, drew up the Anti-Crisis Program of Joint Actions of the Government and Businesses, and the business community has submitted it to the Ukrainian government. Businesses think that the measures they suggest could stop the slump in industrial output, improve the living standards of households, and give the economy a chance of development. “Our program is based on an unbiased depoliticized analysis of the situation in the country and utilizes the practice of many enterprises in recent months. It calls on the government for partnership as long as only effective cooperation between the state and the real sector of the economy could bring good results. We insist that a modern industrial strategy of the country should be elaborated, an export policy should be developed, the economy should be streamlined to meet European standards as soon as possible, the taxation and investment environment should be reformed, while specific conditions should be created for small- and medium-sized businesses and self-employed citizens,” ULIE President Anatoliy Kinakh said.

Industrialists and entrepreneurs believe that particular attention should be devoted to social protection and the introduction of effective targeted relief aid for vulnerable social groups.

Businesses’ associations also demand that the government create a favorable business environment, protect and support national producers, and create financially sustainable and developed regions in Ukraine. The Anti-Crisis Program suggests measures to improve the monetary policy of the National Bank of Ukraine (NBU), eliminate problems with energy security, facilitate energy efficiency and energy saving, fight against corruption, decentralize power, develop better personnel policies and restore Ukraine’s labor potential.

The ULIE is sure that the Anti-Crisis Program of Joint Actions of the Government and Businesses should become an integral part of the adopted Action Plan of the Cabinet of Ministers of Ukraine and the Coalition Agreement of the Verkhovna Rada of Ukraine.

Ukrainian souvenir company enters EU market

The Linline Ukraine Company has started to sell its matted wool souvenirs on the Lithuanian market. The Ukrainian League of Industrialists and Entrepreneurs (ULIE), which has stable contacts with the Lithuanian Confederation of Industrialists, helped the company enter the market of the friendly country.

“Thanks to the cooperation with the ULIE and its partners, we made friends with Lithuanian craftsmen and found partners in Europe. Some of our matted wool souvenirs – cell phone cases, brooches, pins – generated great interest there. We came to Vilnius just to show samples, but it happened so that specialized craft galleries took them for sale at once,” Linline Ukraine Director Kateryna Yaroshenko said.

Lithuania actively supports the development of ethnic-oriented productions. The government and the European Union (EU) subsidize such programs, for instance, they cover rents for workshops, galleries and museums. There is no such diligent and careful attitude to handicraft trade in Ukraine yet. However, similar programs could be implemented as part of the Association Agreement between Ukraine and the EU. They could significantly increase tourist attractiveness, contribute to the revival of cultural heritage, and provide thousands of Ukrainians with jobs.

The company currently has forward-looking plans. It is gathering Ukrainian craftsmen for collective participation in Lithuanian fairs and trade shows. One such event – the Klaipeda Sea Festival – is to be held in the middle of July 2015. In addition, the craftsmen are ready to make new products – educational toys made of Ukrainian eco-friendly wood.

“Cooperation between Ukraine and the EU does not always mean large-scale projects implemented by large factories. Ukrainian small- and medium-sized businesses are ready to have their say on the European markets,” ULIE First Vice-President Serhiy Prokhorov said.

NO POSSIBILITY FOR RENEGOTIATING EU-UKRAINE BILATERAL DCFTA – EU

BRUSSELS. April 16 (Interfax-Ukraine) – The European Union has been active and open to discussing potential Russian concerns over the EU-Ukraine Deep and Comprehensive Free Trade Area of the Association Agreement (AA/DCFTA), Johannes Hahn, EU Commissioner for European Neighborhood and Enlargement Negotiations has said.

“The EU-Ukraine bilateral DCFTA does not impose a false choice on Kyiv. Those who say so are wrong, and may have their own agenda,” he said, commenting the Bertelsmann’s report “How to help Ukraine’s Economy Reform and Grow.”

The study goes on to suggest that an at least partial restoration of trade links with Russia and the so-called Eurasian Economic Union will be important to Ukraine’s economic recovery.

“I’d like to say a few words about trade. Your study rightly recognises that integration with Russia and the EU ‘are not in principle mutually exclusive,” Hahn said.

“The European Union is not looking for an exclusive economic relationship with Ukraine, and never has. The approximation with EU standards will not prevent Ukraine trading with Russia: the EU itself remains a major trading partner for Russia,” he said.

“What the DCFTA does do, is help Ukraine approximate to the EU’s world class norms and standards – just as Poland did 20 years ago – in ways that will ultimately boost its competitiveness and foreign direct investment. And, while the EU already unilaterally removed most tariffs in April 2014, Ukraine will benefit from some transitional periods after the DCFTA enters into force, before it is obliged to match this completely,” he said.

“Let me say that the European Union has been active and open to discussing potential Russian concerns. We are convinced that any justified Russian concern can already be addressed within the flexibility offered by the DCFTA, as it stands. But, there is no possibility for renegotiating the agreement, which a large number of Member States have already ratified,” Hahn said. “Change in Poland required political will and tough choices, and cooperation between political parties, Government and Parliament… We count on the current pro-reform and pro-EU government, and majority in the Rada to act now and seize the moment. Reforms are tough, and public opposition to some necessary but painful changes has to be faced. This requires courage and leadership,” he said.

“Since Maidan we have mobilised around EUR 6 billion taking together macro financial assistance, grant aid and support from European financial institutions. The majority of this funding effort is tied to reform conditions, which we seek to co-ordinate with others in the donor and investor community,” Hahn said.

The EU and Ukraine have agreed on 10 reform priorities under the joint Association Agenda and our conditionalities help to ensure the reform process is driven forward on: constitutional and electoral reforms; combatting corruption; judicial reform; public administration reform; deregulation; public procurement reform; tax reform; audit; and energy sector reform, he said.

“Above all, if Ukraine wants an investment-led recovery and to send a clear signal to its friends, it has to get to grips with corruption,” he said.

“The litmus test of the fight against corruption will be public procurement and the privatisation of State Owned Enterprises. The Support Group will be advising on how e-procurement – simple, open and transparent procedures online – can combine with effective oversight to prevent abuse… As part of a wider effort to rebalance the Ukrainian economy away from its current dependence on big business in the hands of the few, the relevant Rada Committee has consulted the Commission on the development of a new law in support of Small and Medium-sized Enterprises,” he said.