You're reading: Ukraine ministers tout deregulation efforts, make foreign investment plea

Ukraine's economy and finance ministers worked tirelessly to sell the nation to donors and foreign investors at the government's Support for Ukraine conference, held on April 28 in Kyiv.

At the one-day event, Economy Minister Aivaras Abromavicius and Finance Minister Natalie Jaresko asked supporters not to closetheir eyes on investment opportunities in Ukraine and for businesses already invested in Ukraine not to turn their backs.

At the same time, European Union officials in attendance saw positive efforts but want more, while Ukraine is struggling to survive in a war.

“The situation is very serious. We had an almost 7 percent drop in gross domestic product in 2014, and GDP this year is projected to fall by a minimum of 5.5 percent. The most recent forecasts are even worse than that – at 7 to 7.5 percent,” Jaresko said at the opening of the Business Climate and Investment Opportunities in Ukraine panel of the conference.

Compounding problems are Ukraine’s inflation rate thatis “in the range of 30 percent” and foreign reserves of only around $10 billion.

The current economic is the result of four successive catastrophes that created the current conditions, Jaresko said. Her government inherited Ukraine’s Soviet past, then 23 years of incomplete reforms, little progress in the rule of law and the destructive Viktor Yanukovych regime that stole billions of dollars from the state budget.

“Ukraine’s economic situation needs to be stabilized and improved, while we are simultaneously repeatedly being wounded in the east of our country,” Jaresko said.

But stability is not enough for the finance minister. Ukraine needs a healthy economy and financial investment inflow that will help healUkraine. “Getting the country back and running means a flourishing and prosperous Ukraine that investments keep pouring in from those of you who represent the private sector,” she said.

Ukraine’s financial needs for 2015-2018 are $40 billion, in order for the country to be functional, she said, citing the International Monetary Fund. Of that, $17.5 billion will come from the IMF, and $7.5 billion from bilateral and multilateral commitments. The Ukrainian government still needs to fill the remaining gap.

“We are in consultations to renegotiate, restructure our public debt and will achieve $15 billion dollars in savings through the public sector.”

First steps have been taken through fiscal-policy reform. Jaresko is aiming to broaden the tax base, level out the tax burden and implement more business-friendly taxes. “We are ensuring that all businesses pay their fair share, closing fiscal loopholes, getting rid of transfer-pricing – things that were exploited for years by some big businesses.”

State-owned companies were a severe burden on Ukraine’s economy.

“We slashed the deficit of our state-owned energy company Naftogaz from about $10 billion last year to about $1.5 billion dollars this past year. Our goal is to wipe out that deficit entirely by the end of 2016,” Jaresko said.

The Ukrainian government recently liquidated state-owned Ukrekoresursy, a waste processing company, which was used for financing political parties, according to Economy Minister Abromavicius. “Ukrekoresursy collected money and never collected any waste,” he said, whose top priority is still the deregulation of state-owned companies.

“The business community told me from day one that thiswould be an indication of the government’s determination to do reforms if we push for the closure of this company,” he added.

The minister said that Ukraine will receive advisory help from France in properly dealing with privatization.

The European Commission’s Johannes Hahn is asking for deregulation as well. “Business can solve its own problems,” he stressed. Small and medium businesses are only 12 percent of Ukraine’s GDP, while in the EU itis the primary chunk, he added.

But Ukraine needs additional deregulation and a full free-market economy in addition to strengthening its rule of law for fair competition. “Now Ukraine has to show that it is against corruption,” he said.

Abromavicius said that one of the main complaints of foreign businesses about Ukraine is the anti-trust agency. One out of 3 U.S. companies complains about it, the minister said.

Investors don’t necessarily have to wait. American billionaire-financier David Rubenstein recently said that “Ukraine is an extremely attractive place to invest.” Jaresko quoted him at the conference, finding these words assuring for cautious investors.

“Ukrainian assets are undervalued,” she said. “Successful investors who try to operate with a counter cyclical mindset will know that the best opportunities present themselves in situations like the one we are facing today.”

In addition to the energy, agriculture and IT sectors, Abromavicius said that the infrastructure, amber and titanium industries have immense potential for investors.

He believes that Ukraine’s darkest economic days are in the past.

Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].