Foreign investors in Ukraine, never a large group in the best of times, got plenty of reassurances of better times ahead from Ukraine's current prime minister, Arseniy Yatsenyuk, and the front-runner in the May 25 presidential race, Petro Poroshenko.
“The top priority for the new president is the business
climate,” said Poroshenko, the billionaire member of parliament who leads his No. 2 rival, ex-Prime Minister Yulia Tymoshenko, by a comfortable margin.
However, despite the happy talk, some Poroshenko’s political messages were not
met with great enthusiasm by the participants of Dragon Capital’s
Investor Conference.
When asked about the status of the Russian language and
the chances to make it second official one in Ukraine, Poroshenko said
that Russian already enjoys exclusive status since it is mentioned in
the Constitution.
He stressed military issues, including improving the combat-readiness of the Ukrainian army, which did not put up a fight as Russia seized Crimea in late February.
“If it is not NATO that
will guarantee Ukraine’s security, then a new security treaty instead of the Budapest one needs to be signed with the countries who would provide their guarantees,”
Poroshenko added, noting the Budapest Memorandum of 1994 in which the United States, United Kingdom and Russia guaranteed to protect Ukraine’s sovereignty and territory in exchange for the ex-Soviet republic’s surrender of its nuclear arsenal.
National Bank governor Stepan Kubiv tried to
sound as welcoming towards foreign investors as possible. “For the National Bank of Ukraine the
depositors are number one, as well as investors,” he emphasized.
Kubiv sees cutting the
hryvnia’s peg to dollar and inflation targeting as the central bank’s long-term strategy.
Inflation could reach 12-16 percent this year, he said. Receiving foreign financial support, the success of economic reforms and confidence in the country’s financial system will be determining factors in the inflation rate, he said.
“We
will change the approach as regulator, we will change approach to stability of
the banking system. NBU will conduct independent policy,” Kubiv mentioned.
Ukrainian
banks are facing stress tests this year. The first results will come in May. The central bank is going to support commercial banks if they “play by the rules,” if owners take part in
recapitalization and if there is a program for the bank’s development.
International
Monetary Fund’s resident representative Jerome Vacher commented on the $14-18
package of financial help that Ukraine expects to receive. The fund’s board meeting will take place
sometime in April to assess the request.
Jose
Roman Leon Lora, the first counselor for the European Union delegation to Ukraine, added
more optimism as he said the European Union will cut tariffs for Ukrainian goods before
May 15, while a full-scale free trade regime will come into force after signing. Lora
also explained that not everything has been clarified on the EU’s proposed $15 billion bailout package. However, the EU has started to disburse tranches of previous
programs frozen under the administration of ex-President Viktor Yanukovych, overthrown on Feb. 22 by the EuroMaidan Revolution.
Commercial banks had their voice during the conference
too. The chief executive officer of Raiffeisen Bank Aval, Volodymyr Lavrenchuk, said
that 2014 is seen as a year not for making
money, but for fighting challenges.
Last year, the share of foreign
banks’ assets in Ukraine dropped to 20 percent from 45
percent at the peak. Lavrenchuk expects it to drop to 10
percent. The country’s banking sector remains too unattractive with the net profit of local banks in 2013 reaching $290 million with 0.1 earnings to assets and 0.8
earnings to equity ratios. Deposit withdrawals remain significant but manageable, he said.
