Business news from Ukraine

APPROACHES TOWARDS PRIVATIZATION SHOULD BE CHANGED

Industrialists and entrepreneurs support effective privatization, bearing in mind that its main goal is not the complete sale of all available facilities to fill the budget, but the correct and substantiated transfer of state-owned property to private hands to attract investment for modernization, to boost the competitiveness of the national product, and accumulate funds for structural reforms. These were the subjects highlighted by President of the Ukrainian League of Industrialists and Entrepreneurs (ULIE) Anatoliy Kinakh at a roundtable talk entitled “Privatization of State Enterprises: What the Budget and Economy of Ukraine Will Get.”

“First of all, the process has to begin to draw up and endorse a state property privatization program. There should be no hurry in the privatization process. After all, these are in fact the least recent assets that the state has got for sale in general. And a risk is high here to quickly slip into raw economy and become the supplier of cheap labor to developed countries,” he said.

The state program on whose basis public facilities will be privatized shall include a feasibility study for each enterprise; a list of strategic enterprises that are not subject to privatization (defense, transport, energy and food security). The program should also provide thorough pre-privatization preparations to increase the value of state-owned assets. If this hasn’t been done, it’s not worth conducting large-scale privatization.

ULIE experts believe that there is an alternative to the privatization of state property, namely strategically important companies – this is to make management of such assets by the state more efficient. The statements that the state cannot be an effective owner are not true. Today, many leading countries demonstrate examples when the state acts as an effective owner, in some cases, with state stakes of between 20% and 40%.

“We are confident that inefficient enterprises, which are not of strategic importance and are not bound by state-related and social liabilities, rather than strategic ones should be sold first. An effective owner should come there, invest funds and make the enterprise succeed. However, strategic companies that are connected with national security have to remain in state ownership,” Kinakh said.

Participants in the roundtable talk at the ULIE stressed that one should not forget about the main strategic goal of privatization – the formation of the effective structure of the Ukrainian economy itself. We should focus on the development of high-tech and technically sophisticated production, identify it as a priority sector for state legislative and financial support; concentrate on raising investment in that area. We cannot accept the tendencies of becoming a third world nation with a resource-based economy and cheap labor.

Transparency, open process and the ability of the public to control how officials manage state property must become an integral part of the privatization, as this is the most effective barrier against corruption and possible abuse and provides the ability of mending previous mistakes in the privatization process, the ULIE said.

UKRAINIAN LAWMAKERS NEED TO CHANGE LEGISLATION TO DEVELOP BIODISEL PRODUCTION

Long ago, industrialized nations started to develop the production of bioethanol and biodiesel as part of natural gas substitution, while Ukraine lags far behind in this industry due to excessive fiscal pressure on producers and overregulation of the sector. This was discussed at a roundtable talk entitled “Condition and Prospects of the Development of Production of Bioethanol, Biodiesel and Mixed Motor Fuel in Ukraine,” organized by the Ukrainian League of Industrialists and Entrepreneurs (ULIE) and the State Agency on Energy Efficiency and Energy Saving of Ukraine. Ukraine has significant potential in developing the production of biofuel. Demand for bioethanol in 2020 is expected at 500,000 tonnes – exactly the same figure as stipulated in the national action plan for renewable energy by 2020.

“These are extremely important subjects for Ukraine, as it can help to solve two problems simultaneously. On the one hand, if we together develop powerful bioethanol production, our independence from fuel suppliers will grow. On the other hand, we can start building and reviving the engineering complex – and these are new jobs and capacities to create production facilities to produce means of production, which will be built in keeping with brand new, modern standards that will immediately improve the quality of production, boost the competitiveness of the Ukrainian product, and ensure better positions for Ukrainian exports,” UUIE First Vice President Serhiy Prokhorov said.

According to Prokhorov, it is important that equipment for biodiesel production is manufactured in Ukraine, as it considerably increases the competitiveness of Ukrainian products and their repair capability, and in particular, safeguards manufacturers against forex fluctuations and external suppliers.

Its turn, Chairman of the State Agency on Energy Efficiency and Energy Saving of Ukraine Serhiy Savchuk said that the question of production of liquid fuel for Ukraine is very urgent because “we are as dependent on imported crude oil, petrol and diesel fuel as on gas.”

“Only one of the six oil refineries is in operation now. Therefore the situation needs to be changed dramatically; we need to adopt the experience of Europe and the United States (the agricultural states of Ohio and Minnesota). What is more, that industry there is not subsidized but it has been developing in the United States at a huge pace. There are examples of setting up new generation bioethanol plants able to process cellulose and bulrush,” Savchuk said.

Participants in the roundtable talk agreed with reasons in favor of the development of the biofuel industry and listed the obstacles to why such a successful foreign industry has not developed in Ukraine. These are double taxation and excessive tax pressure, over-regulated licensing procedures and complicated export and import regulations. The following things will have to be cancelled for the dynamic development of bioethanol production: requirements for licensing of bioethanol, bills for its transportation, and excise on biodiesel. What is more, “bioethanol” should be defined as a separate compound chemical product rather than a type of ethyl alcohol.

The attendees will summarize their proposals regarding removing barriers to the development of the bioethanol industry and will send them to the Verkhovna Rada to amend the legislative base.

ANTONOV SHOULD FOCUS ON NEW MARKETS, NEW PARTNERS – POROSHENKO

KYIV. June 15 (Interfax-Ukraine) – President of Ukraine Petro Poroshenko during a visit to state enterprise Antonov drew attention to the possibility of developing cooperation between the enterprise and foreign partners, NATO member states, the presidential press service said.

“We have something to offer to the world,” Poroshenko stated.

Poroshenko stressed the importance of accelerating the program of import substitution for Antonov aircraft components and the pace of mass aircraft production. The government should provide appropriate conditions for the successful operation of the enterprise and fulfill these tasks “to make the plant operate full out.”

According to the president, focusing on new markets and new partners will help develop the country’s leader in the aviation industry.

DARNITSA PHARMACEUTICAL FIRM SEES 48% RISE IN NET PROFIT IN 2014

KYIV. June 15 (Interfax-Ukraine) – Private joint-stock company Darnitsa Pharmaceutical Firm (Kyiv) saw a 47.8% rise in net profit in 2014, to UAH 295.955 million, the company said in an offering memorandum.

The company said that its net revenue grew by 2.5% in 2014, to UAH 1.2 billion, and gross profit rose by 15%, to UAH 813.953 million.

In Q1 2015, net profit more than doubled, to UAH 220.503 million.

As reported, shareholders in Darnitsa Pharmaceutical Firm at a general meeting on April 15 supported the decision of the supervisory board of December 19, 2014 to place name bonds worth UAH 1 billion.

A total of 100,000 bonds will be issued in a book-entry form with a face value of UAH 1,000. The securities will be placed on the PFTS stock exchange (Kyiv) with the participation of underwriter UkrSibbank (Kharkiv).

The company is among the top-ten largest pharmaceutical producers of Ukraine and is one of the top-ten largest suppliers to hospitals.

KYIVSKY CARDBOARD MILL SEES 72.6% RISE IN PRODUCTION IN JAN-MAY

KYIV. June 15 (Interfax-Ukraine) – Kyivsky cardboard paper mill (Obukhiv, Kyiv region), a leader in Ukraine’s pulp and paper industry in terms of production and sales, produced goods worth UAH 1.46 billion in January-May 2015, 72.6% up on the figure for January-May 2014.

According to the UkrPapir association, in January-May 2015, the mill increased production of corrugated cardboard packaging by 10%, to 78.2 million square meters. The mill increased its production of cardboard by 5.3%, to 86,580 tonnes, including a rise of almost 19% in production of commodity cardboard, to 53,780 tonnes and a decline of 11.2% in production of box cardboard, to 32,800 tonnes.

Production of base paper (for sanitary products) decreased by 15.2%, to 28,530 tonnes, while the production of toilet paper fell by 15.4%, to 159.8 million rolls.

In January-May cardboard packaging production in Ukraine fell by 17.7%, to 289.43 million square meters and cardboard and paper output dropped by 12.1%, to 321,620 tonnes.

Kyivsky cardboard paper mill is one of the largest cardboard and paper producers in Europe. It mainly produces goods from wastepaper. Its capacity for processing wastepaper exceeds 850 tonnes a day. The mill exports its products to CIS states and other countries.

MALYN PAPER FACTORY INCREASES PRODUCTION BY 82.4% IN JAN-MAY

KYIV. June 15 (Interfax-Ukraine) – Weidmann Malyn paper factory (MPF, Zhytomyr region), the only producer of electrical insulating board for power engineering machines in Ukraine, increased production by 82.4% in January-May 2015 year-over-year, to UAH 172.2 million.

According to statistics by the Ukrpapir association, cardboard output in kind rose by 31.2%, to 2,100 tonnes, while cardboard production fell by 28.8%, to 2,000 tonnes.

The mill produces electrical insulating board, filter paper, stained base paper and cardboard, as well as a wide range of packaging and special types of paper. Raw materials are supplied from Russia, Austria and Sweden.

In 2014, electrical insulating board exports accounted for almost 70% to Ukraine states and 25% to the CIS countries.

Transformer board is sold in Ukraine (20%), CIS states (30%) and non-CIS states (50%).

As reported, in 2014 Malyn paper factory increased production by 7.1% against 2013, to UAH 217.51 million, while paper production fell almost by 11%, to 6,040 tonnes, transformer board production dropped by 24.4%, to 3,140 tonnes.

Wicor Holding AG (Switzerland) owns a 94.6% stake in Malyn factory.