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Business news from the Ukrainian League of Industrialists and Entrepreneurs

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.

EBRD MULLING EXPANSION OF PRESENCE IN UKRAINE’S BANKING SECTOR

KYIV. April 15 (Interfax-Ukraine) – The European Bank for Reconstruction and Development is mulling the possibility of expanding its presence in Ukraine’s banking sector, a representative of the National Bank of Ukraine (NBU) has said.

It could be investment in one private bank and one state-run bank, director of the NBU’s international relations department Serhiy Kruhlyk said.

“It’s the best timing for entering,” he told reporters on Wednesday.

However, he did not provide any further details.

The press service of the Kyiv office of EBRD did not comment on the information.

The EBRD is the largest international financial investor in Ukraine. As of March 1, 2015, the Bank had a total cumulative commitment of EUR 10.9 billion in 344 projects in the country.

The EBRD holds 15% stakes in UkrSibbank and Megabank.

As reported, in March 2015, it was announced that EBRD, which held 15.2169% in ProCredit Bank (Kyiv), would withdraw from the structure of the bank’s shareholders.

In March it was reported that Austria’s Raiffeisen Bank International AG is holding negotiations with the EBRD to involve the bank as a co-investor in Raiffeisen Bank Aval.

Kruhlyk told reporters that a foreign investors want to buy a bank in Ukraine.

“Yesterday an investor arrived: he is buying one of the Ukrainian banks. Foreign investor… He said that he wants to develop a specific business there,” he said.

Kruhlyk said that the foreign investor has relatives from Ukraine.

EUROPE FORMALIZES EUR1.8 BLN ASSISTANCE TO UKRAINE

BRUSSELS. April 15 (Interfax-Ukraine) – The European Commission’s (EC) proposal for new macro-financial assistance (MFA) worth EUR 1.8 billion to Ukraine was adopted on April 15, the EC has announced.

It was formalized with the signatures of President of the European Parliament Martin Schulz and of Zanda Kalniņa-Lukasevica, Parliamentary State Secretary for the European Affairs of Latvia, on behalf of the Latvian Presidency of the Council.

This follows the European Parliament’s positive vote and a Council agreement on the new proposal.

According to the EC, the EU and Ukraine will now have to agree on a Memorandum of Understanding.

The Commission says it hopes to conclude this process in the coming weeks, in order to allow for the disbursement of a first tranche of EUR 600 million before the summer break.

The new MFA comes on top of what the EU is already contributing via the State Building contract in terms of humanitarian, project, and technical assistance.

It will also be the third MFA program for Ukraine since 2010. In the course of 2014, the Commission disbursed EUR 1.36 billion under the previous MFA program, with a final tranche of EUR 250 million under MFA 1 to be disbursed this month.

Together, the three MFA operations to Ukraine amount to EUR 3.41 billion, which represents the largest financial assistance to a third country in such a short time.