Ukraine open for business - Business news

Business news from the Ukrainian League of Industrialists and Entrepreneurs

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.

EIB COULD PROVIDE EUR 400 MLN TO DEVELOP MUNICIPAL INFRASTRUCTURE IN UKRAINE

KYIV. April 16 (Interfax-Ukraine) – The European Investment Bank (EIB) is mulling the possibility of providing a framework loan of EUR 400 million to restore and develop municipal infrastructure in Ukraine, according to a report released by the bank.

The bank said that the project will extend the lifespan of critical urban infrastructure in the energy, water and sanitation sectors, will reduce losses, improve energy efficiency, reduce the intensity of greenhouse gas (GHG) emissions, and will contribute towards improving energy and water supply security.

According to the report, the total cost of the project is EUR 800 million, and the Regional Development, Construction, Housing and Utilities Economy Ministry will act as a partner in designing the project.

BASF EXPECTS CROP PROTECTION AGENT MARKET IN UKRAINE TO RECOVER IN 2015 AFTER 15% FALL LAST YEAR

KYIV. April 16 (Interfax-Ukraine) – The Ukrainian crop protection agent market in 2014 fell by 15%, to EUR 600 million, according to BASF chemical concern.

BASF Crop Protection Manager in Ukraine, Moldova and the Caucasian countries Tom Wetjen told reporters that the reasons for the decline were the difficult economic conditions in the country, the devaluation of the hryvnia, and farmers experiencing a lack of funds.

He said that last year many farmers made savings by reducing their application of plant protection agents to crops or by switching to cheaper agents.

The concern said that the share of herbicides of the total Ukrainian market in money terms in 2014 was 50%, that for fungicides – 30%, insecticides – 10% and protectants, and phytohormones – 10%.

Wetjen said that 2015 holds prospects for the recovery of the market volume.

“According to our feelings and observations in the competitive environment, companies are satisfied with the level of sales this year, and the market remains at least stable and maybe, growth could be seen,” he said.

Wetjen said that due to fears of the further devaluation of the hryvnia and the increase in prices farmers are trying to form stocks of resources, including chemicals.

He said he regretted that the Ukrainian government is delaying the introduction of the agrarian receipt system, which would make cooperation with farmers more effective under the conditions of a lack of funds. The company expressed hope that the government will accelerate the realization of the project across Ukraine.

BASF does not sell products in Ukraine via direct channels. It sells its products only via distributors. He said that this year the company could resume barter transactions with crop protection agents who are suing the BASF-distributor-farmer-trader chain.

Crop Science Division of BASF saw EUR 5.4 billion in sales in 2014 across the world. Around 9% of the sum was allocated to further research in crop science.

UKRAINE UNDER DUTY-FREE QUOTAS SUPPLIES 2,900 TONNES OF SUGAR TO EU SINCE EARLY 2015

KYIV. April 15 (Interfax-Ukraine) – Ukraine, since the beginning of 2015, has supplied 2,860 tonnes of sugar within the European Union’s duty-free quota of 20,070 tonnes.

According to the Ministry of Agricultural Policy and Food, Ukraine has fulfilled the quotas for honey (5,000 tonnes), and maize (400,000 tonnes). The quotas on barley cereals and flour has been 97.6% fulfilled (the volume of the quota – 6,300 tonnes), apple and grape juice – 98.8% (10,000 tonnes), oats – 67% (4,000 tonnes).

Ukraine also delivered 375,100 tonnes of wheat, 5,600 tonnes of barley and 4,000 tonnes of poultry to the EU under duty-free quotas.

As reported, the European Commission in October 2014 extended tariff quotas for Ukrainian agricultural products until December 31, 2015. In particular, tariff quotas, approved by the European Union from April 23, 2014, were extended until the end of 2014. Similar quotas were stipulated for 2015.

Thus, the quotas for all groups of goods in 2015 were not changed and are as follows: beef – 12,000 tonnes, milk, yogurt, dairy products – 8,000 tonnes, milk powder – 1,500 tonnes, butter – 1,500 tonnes, egg products – 1,500 tonnes, eggs – 3,000 tonnes, poultry – 36,000 tonnes, pork – 40,000 tonnes. Tariff quotas provided by the EU autonomous trade preferences for wheat are 950,000 tonnes, barley – 250,000 tonnes, and corn – 400,000 tonnes.