At the outset I would like to express my deep gratitude to the organizers of this event, in particular to Morgan Williams, president of the U.S.-Ukraine Business Council, his colleagues, to Serhiy Pohoreltzev, consul general of Ukraine in New York, and to everybody who contributed to organizing of this business forum. I am pleased to address to you during this event, which is another example of strong partnership, open and fruitful dialogue between the Embassy of Ukraine and American business community.
Our path toward independence and statehood was long and hard. We have a lot of historical records expressly stating that in the 10th-11th centuries Kyivan Rus, a predecessor of modern Ukraine, was the most powerful and influential country of Europe.
This August Ukraine will celebrate the 20th anniversary of its independence. For a human being, it is a considerable part of life. But for a state, for a nation, it is just a short moment. Our path toward independence and statehood was long and hard. We have a lot of historical records expressly stating that in the 10th-11th centuries Kyivan Rus, a predecessor of modern Ukraine, was the most powerful and influential country of Europe.
We also remember about Cossack state of Bohdan Khmelnytsky, the fight for independence by Hetman Ivan Mazepa, short periods of Ukrainian independence spring at the beginning of the 20th century. It took many centuries and sacrifice of millions of Ukrainian lives to restore independence of Ukrainian state. Nowadays Ukraine is a European peace-loving nation with rich historical and cultural heritage, which has a dream as well as strong will to come back to the European family of nations.
So, what we have achieved during these 20 years of independence? The progress is impressive:
1. Ukraine is recognized by the whole world as a responsible member of international community, peace-loving and tolerant nation. Our path from statehood aspirations to the independence of the present we passed peacefully, without any internal and external conflicts, without any bloodshed.
2. Upon the collapse of the Soviet Union, Ukraine inherited the third largest nuclear arsenal (176 strategic ballistic missiles, about 50 long-range strategic bombers, 1,300 nuclear warheads and 2,500 nuclear tactical units). To compare, it is more than China, Great Britain and France had at that time in total.
However, on appeal of world community, and our American partners in particular, we made a voluntary decision to eliminate this most powerful type of armament. It definitely was a major contribution of Ukraine into global peace and security. Such responsible actions could become an example for some other countries, which should abandon their nuclear programs and arsenals to make the world a safer place to live.
Continuing its consistent efforts to further diminish risks connected with the nuclear technologies and materials, Ukraine made a historical decision to surrender all highly-enriched uranium by 2012. As of today most of the stock has already been removed from the Ukrainian territory.
We continue close cooperation with our American partners to synchronize implementation of our bilateral agreements in this area. Successful fulfillment by the American side of its part of obligations will provide our scientists with a new, safe source of radiation for fundamental physical researches.
"Transformation of Ukraine into a country, which is the best place to live and to do business, is moving in the fast lane."
3. Ukraine has been solving all boundary issues with neighboring countries in a friendly and peaceful way. This process is peaceful, based on international law and has being resulting in relevant bilateral agreements. Thus and so, at present we have good relations with all neighboring states. And this stand should be clearly understood as another contribution of Ukraine into regional security and stability.
4. During the years of its independence Ukraine has participated in almost all international peace-making, peace-keeping and humanitarian operations under the auspices of the United Nations, NATO and the European Union. We are convinced that the world security is a common responsibility, and we will continue to take an active part in joint efforts of world community to this end.
5. Ukraine strives to maintain the relations of friendship and constructive, mutually beneficial cooperation with all countries. At the same time, Ukraine has clearly determined its foreign policy priorities, namely:
(a) Integration into the European Union. Ukraine and the European Union are finalizing negotiations on association agreement, including establishment of deep and comprehensive free trade area. I sincerely hope that the final text of the relevant agreement will be agreed upon by the end of 2011. This October, President Viktor Yanukovych is to meet president of the European Commission, Jose Manuel Barroso, in order to discuss this issue at the highest political level.
(b) Strategic partnership with the United States. While heading toward our historical European home, we regard our cooperation with the United States as a truly strategic and integral part of our foreign relations.
This was reiterated during the meeting in Washington Yanukovych and U.S. President Barack Obama in April 2010. Obama thanked the Ukrainian leader for an active role in promotion of nonproliferation of nuclear materials, namely the decision of Ukraine to give up the stocks of highly-enriched uranium. The Presidents also reaffirmed that economic reforms in Ukraine will improve business climate, increase investment and consequently provide the opportunity to overcome the recession in Ukrainian economy.
In July 2010, U.S. Secretary of State Hillary Clinton visited Ukraine. During her meeting with Yanukovych, the sides reaffirmed the readiness of our both countries to further deepen bilateral relations on the basis of the U.S.-Ukraine Charter on Strategic Partnership. This visit provided an opportunity to discuss the most pressing issues of the U.S.-Ukrainian relations and identify the areas where our cooperation can further broaden.
This is true in particular about increasing our cooperation in the areas of trade and investments as well as energy. During this visit the Second session of the U.S.-Ukraine Strategic Partnership Commission took place. During the visit, the Ukrainian side also expressed its deep gratitude to the United States for the U.S. position as a guarantor of Ukraine’s independence, sovereignty, territorial integrity and inviolability of borders.
On Feb 15, Clinton and Foreign Minister Kostyantyn Gryshchenko convened the third session of the U.S.-Ukraine Strategic Partnership Commission in Washington to further strengthen the strategic partnership between our two countries. Ukraine reaffirmed that the development of this strategic partnership remains one of its key foreign policy priorities. The United States reiterated its readiness to assist with Ukraine’s political, economic, defense and security reforms.
At the same time, Ukraine is trying to be reliable partner of Washington in nonproliferation efforts, strengthening of international peace and stability, peacekeeping operations, fighting against international terrorism, piracy, organized crime etc.
The visit to the U.S. of the head of State Agency of Ukraine for investments and national projects management in June proved a constant bilateral interest to maintain and enhance cooperation in the investment sphere. During his meetings with state officials in D.C. and representatives of business circles in New York several mutually beneficial projects were discussed. This visit paved the way for a so-called “road show,” which is expected this fall.
During this event, which is scheduled to take place in D.C., New York and potentially other U.S. cities, we will try to engage American investors into implementation of major national projects in Ukraine, which are widely supported by the president and the government of Ukraine.
Last May and this July, Emergencies Minister Viktor Baloha also visited twice the United States. His meetings with U.S. officials proved that there are a number of sectors where the expertise of our American partners would be highly valuable, in particular, in preparations for the soccer cup Euro 2012 and in creation in Ukraine an integrated emergency call system 112.
Oleksander Motsyk, Ambassador of Ukraine in Washington with President of the United States, Barack Obama, June 28, 2010.
mfa.gov.ua
Ukraine and the United States actively work within the framework of bilateral Trade and Investment Cooperation Agreement. The Trade and Investment Council headed by the minister of economic development and trade of Ukraine and the U.S. Trade Representative is a forum to address real and concrete challenges facing business communities of both sides. I hope that the next meeting of the council, which is scheduled to take place October this year, will give an additional impetus to our trade and investment cooperation.
(c) Forging of constructive dialogue and further advancement of strategic partnership with Russia. Russia is our neighbor and main trade partner. Direct dialogue between the leaders of Russia and Ukraine put bilateral relations to a new level during the last year and a half. We expect that fruitful cooperation in different spheres will result in increase of the trade turnover up to $50 billion not later than by the end of this year.
It is the first time in 20 years that such profound changes, covering 21 fundamental transformations in different spheres, are being implemented in Ukraine.
Long-awaited systemic reforms started
You might be all aware that Yanukovych and the new government started long-awaited systemic reforms. It is the first time in 20 years that such profound changes, covering 21 fundamental transformations in different spheres, are being implemented in Ukraine. Their final goal is to comprehensively modernize Ukraine and to transform it into a highly-developed democratic European state.
Since the beginning of this process in 2010, the new government has managed to implement more reforms than the previous governments during all years of the independence of Ukraine. In particular, adoption of the budget code and other relevant legislative acts streamlined the financial sphere. It also enabled triennial budget planning that is to promote confidence both within the Ukrainian society and among our foreign partners.
In this regard I would like to assure you that the budget of Ukraine will be approved timely, far in advance of the corresponding fiscal year. I would also like to remind you that Ukraine was managed in a so called “manual mode” during the previous years, when we didn’t have a budget during the most of the fiscal year.
The new tax code, which was also adopted as a part of the reforms, reduced the actual tax burden on business and simplified tax procedures. For example, state taxes and duties were reduced from 29 to 19, local taxes and duties – from 14 to 4. The tax code provides for stage-by-stage reduction of income tax rate to 16 percent (from Jan. 1, 2014), and VAT rate – to 17 percent (from Jan. 1, 2014).
The code also establishes a clearly defined and transparent procedure for VAT refund. Every new mechanism needs some time to adapt for further successful performance. However, the figures speak for themselves – during five months of this year, the tax authorities of Ukraine returned to the taxpayers more than $2 billion; that is 2.6 times more than in 2010.
This July, the Ukrainian parliament finally adopted the law on pension reform. It was not an easy process, as the law will have a significant impact over a number of Ukrainians. It is a pragmatic decision to fully utilize the existing human potential as well as to reduce excessive burden on the budget to get more resources for modernization and development of our national economy. In addition, the pension reform is in line with our obligations under the IMF’s Stand-By Arrangement.
As a result of the pension reform, the pensionable age increased from 55 to 60 years for women and from 60 to 63 for men. An astonishing gap between the minimum and maximum pensions (almost in 100 times) was significantly cut. For example, the newly established maximum pension level is capped with 10 subsistence minimums or around $1,100.
It is far less than the old $7,000-$8,000 in pensions for a limited circle of functionaries. At the same time, the minimum pension ($93) will continue to grow. For us it is a matter of social justice and order in this sphere, which will lead, at the end of the day, to better living standards.
One of the key elements of improving efficiency of public sector management is administrative reform, which resulted in significant restructuring of the machinery of the state. Staff of the governmental institutions were thoroughly assessed and cut for 30-50 percent in order to increase effectiveness and to reduce expenditures.
We pay one of the highest prices for gas in Europe.
Deep energy reforms implemented
There is also a deep reform being implemented in the energy sphere. Among other things, the prices for electricity and gas have been significantly increased for residential and other consumers during 2010-2011. They will be further increased in order to reach the market value. To our regret, a long-term contract between Ukraine and Russia on gas supply and transit (concluded in 2009) set very questionable conditions of gas procurement to Ukraine.
Constant growth of the gas price, which was increased in the third quarter for 20 percent and reached $354 per 1,000 cubic meters, is a heavy burden for Ukraine and the Ukrainian people. At present, we pay one of the highest prices for gas in Europe.
We also understand the necessity to modernize our gas transportation system to meet the current challenges, both domestic and regional. As a practical step, this July the Ministry of Energy and Coal of Ukraine started the first stage of modernization of gas transportation system of Ukraine (Urengoy-Pomary-Uzhgorod line) with the ministry’s own funds. It should further promote our internal energy security as well as ease speculations over Ukraine’s ability to ensure supplies of gas to Europe.
In this regard I cannot but express a view that the project South Stream is much less economically and ecologically favorable than modernization of Ukraine’s pipelines, which are already transporting about 80 percent of Russian gas to Europe. I sincerely believe that pragmatic calculations should not be overwhelmed by a political approach.
At the same time, Ukraine is working towards improving energy efficiency of domestic production, thus achieving energy independence and reducing the share of imported non-renewable energy. Measures are taken to implement the strategy of enhanced reform and restructuring of NJSC [state monopoly] Naftogaz of Ukraine. Ukraine plans to increase the share of renewable energy sources (biofuel, wind and solar power, micro-hydro power installations) and is working on attracting American companies to production of non-conventional energy sources (offshore, shale and coal gas).
I would like to stress that participation of our partners from the US in the mentioned projects is not only an economic issue, but also a matter of our national energy security. Diversification of investments and foreign partners makes our energy sector less vulnerable to an external pressure by certain states.
Ukraine-US relations succeed in energy
In this regard I am pleased to note that cooperation in energy sphere is one of the most successful directions of Ukrainian-American relations. Besides the Memorandum of Understanding on exploration of unconventional gas in Ukraine, two Memorandums of Understanding were signed recently between Naftogaz of Ukraine and American industry leaders Chevron and Exxon/Mobil. We expect that all these arrangements will result in implementing couple of projects aimed at exploration of alternative energy sources.
I am pleased to inform you also that on June 18 an amendment to the Law of Ukraine on production sharing agreements over a so-called “stability clause” entered into force. It guarantees implementation of such agreements irrespectively to the consecutive changes in Ukrainian legislation. This clause protects the interests of foreign investors and removes yet another obstacle on the path to further enhancement of our cooperation in the sphere of energy.
Corruption in our country is not purely Ukrainian phenomena, but a dreary legacy of the Soviet Union.
Ukraine consistently works to facilitate the business activity. With this in view, a set of laws and regulations, which were adopted during the Yanukovych presidency, eliminated up to 90 percent of all licenses. The final goal is to implement the principle of one-stop state offices, which will do all necessary paper work transparently and without delays. Reduction of licensing procedures will also promote our fight against corruption.
The president and government of Ukraine have a firm position that successful modernization of Ukraine is impossible without combating corruption and increasing responsibility of state authorities. On July 1, the newly adopted law on principles of prevention and combating corruption in Ukraine entered into force, marking a new stage of fighting against this evil impeding further development of Ukraine and the Ukrainian people.
In this regard I would like to repeat the words of some experts, who claim that corruption in our country is not purely Ukrainian phenomena, but a dreary legacy of the Soviet Union. Dozens of years of graft and chicanery is a great challenge, which was not adequately addressed by the previous governments.
The current government tackles corruption in practice. In these days, for the first time in Ukraine’s history influential public figures – from both the opposition and the government – face investigations for committing this crime. The investigations show that there can be no immunity for anybody and everyone should abide the law.
Ladies and gentlemen, Ukraine has all preconditions to become an economic leader in Eastern Europe
Ladies and gentlemen, Ukraine has all preconditions to become an economic leader in Eastern Europe.
Ukraine could become economic leader in Eastern Europe
Ladies and gentlemen, Ukraine has all preconditions to become an economic leader in Eastern Europe, using its rich natural resources, educated workforce and advantageous geographic location at the crossroad of major trade routes between Europe and Eurasia. Ukraine has a large and efficient heritage in science and technology, in particular, a system of research institutes and laboratories.
However, we need more in-depth cooperation, including with U.S. companies, to organize the joint production and marketing of high-tech industries, in particular, high- and nanotechnologies.
Ukraine has a broad industrial base, including much of the former U.S.S.R.’s space and rocket industry. In this regard I would like to remind you about such renowned scientists and engineers as Korol’ov and Sikorsky, whose glorious success in the spacecraft and aviation spheres started in Ukraine.
Ukraine is one of the few members of the space power club producing its own space launchers, rockets and satellites, has substantial aircraft manufacturing facilities. Antonov is a world-known aircraft brand and the world’s largest and heaviest strategic airlift cargo aircraft Antonov An-225 Mriya is assembled in our country.
Ukraine is an active participant of international projects in space exploration: Sea Launch, Elsacom (satellite services), Kosmotras and Alcantara Cyclone Space (launch services). Together with Russia, Japan, Egypt, India, Germany, France, Czech Republic, Brazil and other countries Ukraine is carrying out projects for launching satellites of various purposes.
Ukraine has a major ferrous metal industry, producing cast iron, steel, and steel pipe, and its chemical industry produces coke, mineral fertilizers, and sulfuric acid. Manufactured goods include, in particular, airplanes, turbines, metallurgical equipment, diesel locomotives, and tractors.
One of 10 largest food exporters in world
Ukraine is one of the 10 largest food exporters in the world and is a contributor to the UN World Food Program. With one-third of the world’s most fertile black soils, the Ukrainian terrain is highly favorable for agriculture. Our country is a major producer of grain, sunflower seeds, and beet sugar. Ukraine is currently one of the largest exporters of barley (1), rapeseed (2) and corn (4) in the world.
Ukraine is also the sixth world producer of wheat, but the volumes of harvest, which annually reach 40-50 million tons, can be increased twice up to 100 million tons upon implementation of effective and intensive agriculture.
It means that there are a lot of opportunities for American investors in implementing mutually beneficial cooperation to exploit Ukrainian resources. Partnership with U.S. companies is very important for Ukraine when it comes to introducing the modern agricultural technologies, new varieties of crops as well as establishing new distribution channels.
On July 21, Fitch Ratings has revised the outlooks on Ukraine’s long-term foreign and local currency issuer default ratings to “positive” from “stable” and affirmed Ukraine’s country ceiling at B. This unbiased international rating agency acknowledged that “Ukraine’s budget deficit is on course to significantly narrow in 2011, helped by the economic recovery and spending restraint. Activity of the current Ukrainian government was also highly commended. Fitch forecasts the economy to grow by 4 percent-5 percent in 2011-12, after 4.2 percent in 2010.
Transformation of Ukraine moves into fast lane
So, as you can see, transformation of Ukraine into a country, which is the best place to live and to do business, is moving in the fast lane. Modern Ukraine faces the future with confidence, while we are heading toward introduction of investment and innovative development model. And I would like to emphasize that the president and government of Ukraine are firmly determined to finalize these reforms.
At the same time, the recently adopted law on access to public information created a transparent system of public control over the actions of state authorities.
It should be absolutely clear that we will not compromise our democratic achievements and principles in course of systemic economic reforms. Democracy and effective economy are the driving forces and the basis of new Ukrainian society, which we are now building. In this regard we actively involve foreign experts and non-governmental organizations in drafting of the relevant laws.
For example, the draft law on elections is currently under consideration of the Venice Commission, International Foundation of Electoral Systems and Office for Democratic Institutions and Human Rights, and we sincerely hope that their expertise will make provisions of this draft law even better.
Ladies and gentlemen, at the end of my remarks I would like to sum up our major competitive advantages:
(1) great potential in virtually all business spheres, first of all, industrial, agricultural and high-tech sectors;
(2) geographical location at the crossroads of major trade routes between Europe and Eurasia;
(3) highly educated workforce;
(4) implementation of international legal and democratic practices in transformation of Ukraine;
(5) resolve and practical steps of Ukrainian authorities to modernize and streamline Ukrainian economy, which resulted in good prognosis of international experts for our country’s future.
I call upon American business to either start investments in Ukraine or considerably expand already existing investments. As the Ambassador of Ukraine, I am ready to fully assist you in your business endeavors in my country. Your every request will be individually considered by the Embassy to get a maximum outcome from perspective projects and to override difficulties should they arise.
Oleksandr Motsyuk is Ukraine’s ambassador to the United States. The Ukrainian embassy’s website is at http://www.mfa.gov.ua/usa/
