President Viktor Yanukovych on June 23 heard the same drumbeat of criticism that’s been playing in national leaders’ ears for more than a decade.
President Viktor Yanukovych on June 23 heard the same drumbeat of criticism that’s been playing in national leaders’ ears for more than a decade. If the message is getting through, it somehow isn’t getting carried out.
“Address the systemic and pervasive corruption that…touches the lives of every citizen at every level,” Thomas Mirow, president of the European Bank for Reconstruction and Development, said at an investors’ council meeting chaired by Yanukovych.
Some of the largest foreign and domestic investors in Ukraine came to tell Yanukovych what they thought of his plans to improve the economy and investment climate, two key components of the president’s plan to transform the country.
The 30-member council includes global giants Microsoft, ArcelorMittal and Cargill, Ukrainian-Russian Smart Holding and Russia’s Lukoil, as well as local players, including EastOne Group under Viktor Pinchuk, Group DF headed by Dmytro Firtash and DCH controlled by Oleksandr Yaroslavsky.
I want to hear the point of view of investors, how they today view the regulatory framework in Ukraine and how legislation is being reformed.
– Viktor Yanukovych
“I want to hear the point of view of investors, how they today view the regulatory framework in Ukraine and how legislation is being reformed,” Yanukovych said. “We will certainly take into consideration the investors’ standpoint.”
He mainly heard what local and foreign experts have been preaching since he first served as prime minister in 2002: combat corruption, strengthen the rule of law, improve the banking and agricultural sectors, make taxation fair, improve energy efficiency and simplify trade and customs procedures.
“Across-the-board corruption and personal interests paralyze the implementation of your initiatives and don’t allow business to function, invest and create jobs,” Tomas Fiala, president of the European Business Association, told the president.
Some wonder whether this direct dialogue will lead to more than lip service from Ukraine’s fourth president.
Since taking office on Feb. 25, 2010, Yanukovych’s administration has adopted unpopular but needed austerity and transparency measures demanded by the International Monetary Fund in exchange for a $15 billion line of credit.
Household utility prices have been hiked towards market rates. The number of civil servants has been reduced. The moratorium on the sale of farmland may end by January. And lawmakers may hike the pension age for women, from 55 to 60.
But as Mirow and others noted, the key issue is implementation of free-market reforms that could improve the investment climate.
“Investors will closely examine and assess how favorable these changes are to them, these will be the determining factors,” said Svitlana Kononchuk of the Ukrainian Center for Independent Political Research.
Foreign direct investment is expected to reach $5.81 billion this year, due to “reforms carried out by the Ukraine state and an improving climate for investment,” Ernst & Young’s 2011 Ukraine foreign direct investment report stated. In 2010, FDI inflows stood at only $4.15 billion.
This is a great place for the world to grow more food. But all the gifts that nature provides can be undone with bad policies.
– Greg Page, Cargill’s CEO
Ukraine ranked 10th in Central and Eastern Europe for the number of FDI projects – 178 – and number of jobs created – 7,487 for the years 2006-2010.
Ukraine is a high-risk destination for investment. According to the June Euromoney Country Risk Survey, Ukraine remains among the 10 riskiest countries in Central and Eastern Europe.
Kononchuk said government government institutions need to be strengthened, laws adopted that treat everyone equally.
Speaking at the investment council meeting, Ukraine’s richest man, a longtime backer of Yanukovych, was upbeat. “We’re going in the right direction,” said billionaire Rinat Akhmetov. “There’s a favorable investment climate in Ukraine today.”
Speaking with the Kyiv Post, Cargill’s CEO Greg Page stressed that a vast amount of investments could pour into Ukraine to help develop the nation’s promising agriculture sector, double harvests within a decade and, in turn, feed an increasingly hungry world.
But he warned that if protectionist policies such as last season’s grain export restrictions persist along with preferences for insiders, Cargill, which has invested $150 million in Ukraine thus far, could roll back on investments.
“This is a great place for the world to grow more food. But all the gifts that nature provides can be undone with bad policies,” Mr Page said.
Read also: ‘Investors’ message’
Kyiv Post staff writer Mark Rachkevych can be reached at [email protected]
