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EDB Head: Common Economic Space, Customs Union could invest in Ukraine's high-tech industry

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Sept. 24, 2012, 7:34 p.m. | Business — by Interfax-Ukraine

Ukraine's high-tech industry needs investment, which could come from the countries of the Common Economic Space and Customs Union [Russia, Belarus, Kazakhstan], according to Igor Finogenov, the Chairman of the Management Board of Eurasian Development Bank (EDB).
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Ukraine's high-tech industry needs investment, which could come from the countries of the Common Economic Space and Customs Union [Russia, Belarus, Kazakhstan], according to Igor Finogenov, the Chairman of the Management Board of Eurasian Development Bank (EDB). 

"The share of industry in the formation of Ukraine's GDP is 20%, with the manufacturing sector accounting for 14% and the mining one for about 7%. Metallurgy and engineering are the core industries in the country. If you look at investment statistics, it turns out that a large part of the total investment goes to transport, trade, construction, food processing, and real estate. This means the engine of the economy is not getting enough investment. If this trend continues, there are prerequisites for the degradation of industry. What conditions are to be created so that such giants as Azovstal, Zaporizhstal, Motor Sich, Antonov, Azovmash, Kryvorizky ore mining and dressing mill do not face any shortages of investment? Life shows that the post-Soviet space, mainly the Common Economic Space countries, is the main market for these industries, one should think about the maintenance of these markets and ensure a flow of investment in those sectors, which, as a rule, comes from the countries that consume these products," he said at a press conference at the Interfax-Ukraine News Agency on Monday.

According to him, the import of corresponding commodities from Ukraine to Russia, Kazakhstan and Belarus is now being replaced by those from other countries, especially from China.

"This concerns nuclear, energy engineering, engine building. Our research shows and our belief is that the only way to keep these industries working is to consolidate and create transnational holdings, which would occupy a significant share of the market and ensure competitiveness on it," he said.

Finogenov cited as an example the case of merging Russian Helicopters and Motor Sich into one company - it would occupy 17% of the world's helicopter market.

"This is a synergy in terms of costs, the capitalization of such a merger on the market would be $3 billion today, and the share of the manufacture of helicopters on the world's market and could increase to 30%," he added.

He said that to implement such cooperation, administrative barriers blocking the movement of commodities goods and services should be eliminated, customs procedures need to be liquidated, and a single system of standardization and technical requirements for commodities has to be introduced, which could be done if there is the political will.

He pointed to the maximum effect of the implementation of similar initiatives and projects in the technology industry due to the creation of transnational holdings in the nuclear industry, agriculture, and aerospace industries.

"In the case of the creation and realization of transnational companies, our bank takes over the functions of the initiation of individual projects, their expertise, financing of programs for the upgrading of fixed assets, co-organization of syndicates, primary and special placements on the financial markets, trade finance, including outside the CIS markets, [as well as] financing of working capital under projects," he said.

For Ukraine to become an EDB member, it must sign the agreement on the establishment of the bank and sign its charter.

"In this case we, as an international development bank, may operate on the territory of Ukraine. Thus, we obtain certain protection, our representatives have diplomatic immunity, and we are exempt from taxes as any other international development bank, the World Bank, the Black Sea Trade and Development Bank," he said.

According to him, he is in constant contact with Ukrainian authorities, discussing possible projects that could be implemented if Ukraine becomes a member of the bank.

"Frankly, I'm pushed by Belarusian, Russian, Kazakh and Armenian entrepreneurs who, having experience of implementing joint projects with our bank in their countries, would like to work with our bank in Ukraine too. This is because it means a certain level of convenience, and we have a sign of quality. Our existing shareholders, representatives of the six countries, would welcome with pleasure a request from the Ukrainian government to become a member of the bank," he added.

Eurasian Development Bank (EDB) is an international financial organization established by Russia and Kazakhstan in January 2006. Any interested states and international organizations sharing the EDB's goals may join it. States and international organizations become EDB members based upon relevant resolutions of the bank's board adopted following the accession of such states and organizations to EDB Foundation Agreement and payment for the bank's shares in the established procedure. In 2009, 2010 and 2011 the Republic of Armenia, the Republic of Belarus and the Republic of Kyrgyzstan, respectively, became full-fledged members of the bank.

EDB is the Manager of EurAsEC Anti-crisis Fund's (EAF) resources. 

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