Political unrest spells trouble for foreign trade

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Dec. 16, 2004, 1:41 a.m. |
Acting prime minister appeals to EU politicians reached a political compromise in the form of a revote, Ukrainian companies involved in foreign trade are beginning to feel the impact of market uncertainty.

The Director of Economic Programs of Kyiv-based Razumkov Center for Economic and Political Studies Volodymyr Sidenko claims there has been a tendency of reviewing contract terms for Ukrainian companies, and in most cases, foreign entities now require a 100 percent down payment on imports into Ukraine.

As for export operations, Sidenko notes that they’ve significantly decreased, partly because pre-election statistics were inflated and in some cases capital used to finance the elections were disguised as exports. The other reason for the decrease, Sidenko said, can be explained by the potential wariness of foreign companies to engage in the Ukrainian market. In some cases companies prefer to avoid buying goods from Ukrainian companies altogether, at least for the time being.

In response, Acting Prime Minister Mykola Azarov appealed to the governments of European Union member countries to assist in restoring the credibility of Ukrainian firms by recommending that their business circles not make contract conditions for Ukrainian companies harsher, blaming it on the uncertain political situation in the country, Ukrainian News reported on Dec. 10.

Sidenko was doubtful that such measures will bring any specific results. “Nothing is going to change until the repeat second round of elections takes place.”

Some benefit, most uncertain

Ironically, the companies that suffered most were those owned by powerful businessmen with governmental ties, as Sidenko named those as the major exporters of commodities from Ukraine.

System Capital Management, an industrial holding 90 percent owned by Rinat Ahmetov, did not return the Post’s requests for comments.

Yuriy Sivitsky, vice president of Softline, a Kyiv-based software developer, acknowledged that the political instability may cause problems with short-term contracts. He also confirmed hearing of cases where companies from the EU and the United States suspended payments for products they imported out of Ukraine. However, to Syvytsky’s Softline, the Orange Revolution in Ukraine brought nothing but pleasant surprises in terms of business.

“Our clients from Europe and States actually called us and asked what they can do to assist us in this situation.” He said that in some cases their willingness to help would go as far as offering to make early payments.

It is different when it comes to the representatives of Russian firms, who Syvytsky claims still have “the fog in their brains.”

Senior Economist with the Kyiv-based International Center for Political Studies Andry Blinov acknowledges the additional obstacles that the politics imposed on foreign trade activities of Ukrainian companies, and he does not forecast an improvement in the short term. He thinks early 2005 will be rather dim, and the most obvious indicator will be decreases in investments.

“It is one of those times when it is virtually impossible for anyone on the market to plan ahead, no matter how well connected you are.”
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