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Doing business in the time of crisis
Anatoliy Kinakh, President of the Ukrainian League of Industrialists and Entrepreneurs, believes that УSuccessful joint projects can be successfully carried out even in the uneasy time that Ukraine is living through.Ф Mr Kinakh has granted an interview to Maryna SEMENOVA for Welcome to Ukraine Magazine.
Mr Kinakh, 55, is a prominent Ukrainian politician; he is a People’s Deputy of Ukraine in the 6th convocation of the Verkhovna Rada, the Ukrainian parliament. Previously, Mr Kinakh was a prime minister (2001–2002) under President Leonid Kuchma; he also served as a first vice-prime minister, and a minister of economy of Ukraine. Also, he worked as the Secretary of the National Security and Defense Council of Ukraine. He was elected MP of five parliament convocations.
Anatoliy Kinakh has been president of the Ukrainian League of Industrialists and Entrepreneurs (ULIE) for ten years now.
The economic, industrial and financial crisis that Ukraine is currently experiencing presents serious challenges to the business community of Ukraine. Mr Kinakh, what is your assessment of the state the Ukrainian economy is in?
The situation remains precarious. The volume of the industrial production in Ukraine for the eight months of 2009 fell by 28 percent; in the machine building by 53 percent and in the ship building by 62 percent. In July and August the situation in the metal production began to improve somewhat — the rates of the recession slowed down from 31 percent to 28 percent.
According to the Derzhkomstat (State Committee of Statistics) of Ukraine, the amount of foreign investments into Ukraine’s economy considerably shrank in the first half of 2009, and the amount of internal investments decreased as well. Unfortunately, the crisis in Ukraine has been provoked more by the internal causes rather than solely by the world economic recession, namely by the absence of structural reforms in Ukraine’s economy, by the tax policies which are not conducive to business, by too much state interference in business, and by little or no access to the credit resources.
Has all this affected the foreign economic links of the ULIE in any way?
We, at the ULIE, understood very well that it was necessary to get integrated into the world market system, and now more than ever before, and we have always been doing our best to improve our international cooperation. Among the ULIE’s goals are: support of Ukrainian producers at the foreign markets, establishment and protection of foreign economic links for Ukrainian producers, attraction of investments and bringing of international capital to the internal market.
The ULIE has signed 85 agreements on cooperation and partnership with various organizations and industrialists and entrepreneurs of many countries. The first such agreement was signed with the Russian Union of Industrialists and Entrepreneurs (RUIE) in 1992. Many years of cooperation between the ULIE and the RUIE have turned these two unions into the motive forces of the bilateral cooperation.
As of the end of 2008, the trade between Russia and Ukraine was estimated to be at about 40 billion dollars. The share of foreign trade in Ukraine’s economy is 27 percent and it involves hundreds of thousands of jobs. We must preserve this potential and our mutual economic space.
What are the most important areas of economic cooperation with Russia?
There are some spheres in which our cooperation in economic, scientific and technological fields have long been of strategic importance. These spheres include space industry, aircraft building, agriculture machinery production, transport infrastructure, agro-industrial sector and energy production. We are using all our experience to preserve these traditional links, not to lose the established contacts, to develop new projects and carry them out.
We are working tirelessly at the establishment of new contacts. During the visit of ULIE delegation to Saint Petersburg in Russia in the spring of 2009, Ukrainian entrepreneurs reached an agreement with the governor of Saint Petersburg Valentina Matviyenko on supply of buses made by the Ukrainian company Bohdan to Saint Petersburg. This company is well known in many countries of the former Soviet Union. The first buses have already arrived in Saint Petersburg. Ukrainian buses can help solve public transportation problems in Russian cities and we hope the deal will be successfully sealed. At the first stage, Bohdan buses will be sold in Russia and maintenance stations will be set up, but at the second stage of this cooperation a joint venture is planned to be created to actually build buses closer to the places where they are to be used. Even at the first stage the amount of investments can reach 70 or 80 million US dollars and this figure will grow as the number of orders for the buses will increase.
I know that the ULIE has recently made public its project of building apartments at affordable prices. Could you provide some details about the project?
Our project aims at building housing at affordable prices using the materials produced in Ukraine. The construction will be highly economical and thus the housing built will be accessible to considerable numbers of Ukrainian consumers. To make the prices for such housing within reasonable brackets, such apartments will have no luxury or redundant features. And the most important thing — new, energy-saving technologies will be used. Incidentally, financial support for the project is expected to be found in Switzerland. The preliminary talks with some Swiss banks have shown that these banks are ready to provide loans to carry our projects which will develop energy saving, improve the infrastructure and be environmentally friendly.
Could you please dwell more on contacts with Switzerland?
In 2008, the Swiss Confederation invested 716 million US dollars into the Ukrainian economy. It puts Switzerland at the ninth place among the European countries which make investments into Ukraine’s economy. It is a good foundation upon which further cooperation can be built. Swiss-Ukrainian programs should be made accessible to any Ukrainian business. The Swiss government is prepared to provide support in the establishment of joint Swiss-Ukrainian ventures. The government-run organization SIPPO makes it possible for Ukrainian businesses to join the Program of Support of Imports into Switzerland. Every year the amount of import from Ukraine and export to Ukraine grows but the trade balance is still in favor of Switzerland. In 2008, imports from Ukraine to Switzerland reached 831 million US dollars but Switzerland exported to Ukraine 1 billion 172 million US dollars worth of goods. The program suggested by the Swiss government can help Ukraine increase the export rates. Ukraine mostly exports crude oil and oil products, precious stones, butter and cooking oil but the new program will make it possible for Ukraine to offer other items for export to Switzerland.
SIPPO, for example, has shown interest in products of metal working and even offered the ULIE to look for and find such metal-working companies to which it would be worth giving some support in their bid for entrance to western markets.
Does the ULIE have any economic relations with German companies?
Germany occupies the second place among all the countries of the world as to the amount of investments into Ukraine.
Recently, the Ukrainian-German Forum, a powerful non-governmental organization which works in direct contact with the ULIE, has celebrated its tenth anniversary. This mutual cooperation has been developing in such key spheres as energy saving, relations of businesses and municipal administration, and the housing and domestic utilities reforming. It is cooperation in these spheres that creates good preconditions of Ukraine’s European integration.
Energy saving in housing and domestic utilities sector is the subject of one of the projects that the ULIE is carrying out in cooperation with Germany. A pilot project of rehabilitation of houses and cost-cutting for house heating has already been launched in the city of Mykolayiv. A similar project is planned to be launched in the city of Donetsk. An international conference to be devoted to the current state and prospects of housing and domestic utilities sector in Ukraine is planned to be held next year. This conference should assess what has already been done in this sphere and what should be done in the future.
Is energy saving a field which is attractive to investments?
I would say that it is a field that needs investment ahead of any other sphere. It is an urgent issue because the effective work of the whole of the Ukrainian economy depends on how this problem is dealt with. Considerable financial resources are needed for solving the problem of energy saving. According to the experts’ estimates, Ukraine needs at least two or two and a half billion dollars to be invested into the state-run sector of the economy in the next five to eight years to successfully improve energy saving technologies. The private sector of the economy also needs such investments. That is why the ULIE is actively cooperating with international organizations, and in particular with the German Energy Agency which can help with attracting investments.
Legal background, rules and regulations in the sphere of energy saving in Ukraine are needed too. Bills and regulations are being worked out with the German experience and expertise being taken into consideration. New projects with the use of energy saving technologies are being launched to introduce and improve energy saving in housing construction, in the housing and domestic utilities sector, and in the social sphere, alternative technologies for reconstruction and modernization of the currently functioning systems of central heating installed at schools, hospitals and other public buildings. Ground should be prepared for Ukraine’s transition from the use of natural gas and coal to the use of renewable sources of energy.
It is also worthwhile to make investment policies more active in the sphere of the agricultural-industrial complex. A lot of money is needed for renovation and construction of grain elevators, storage facilities and plants for processing agricultural products.
Ukraine is one of the major transit centers of Europe, and consequently construction of new roads, sea and river ports, transport and aviation terminals is of strategic importance for Ukraine, as well as the modernization of the whole transport infrastructure of Ukraine.
Which other countries does the ULIE cooperate with?
The ULIE constantly keeps widening the circle of countries in which it could find partners for cooperation. At present, we are establishing links with business circles of Mexico. Last year, the volume of trade between Mexico and Ukraine grew by 26 percent and reached 2.8 billion US dollars, but there is still a lot of potential for mutually beneficial trade and business cooperation.
Our potential for economic cooperation is very considerable and includes transport, energy machine building, fuel and energy sector, processing industries and the agricultural and industrial complex. We are planning to carry out joint projects with South Korea, Japan, Cuba, Estonia, Lithuania and some countries of Latin America. During a recent visit of a ULIE delegation to the Republic of Yemen and to Ethiopia, creation of joint Ukrainian-Yemenite and Ukrainian-Ethiopian companies which would work in providing certain services in the sphere of security was discussed. Such companies can provide security at factories and offices, protect private businessmen from foreign countries and organize training of non-governmental security guards. This visit of the ULIE delegation to Africa and Middle East resulted in signing a memorandum of mutual understanding between the ULIE and the Ethiopian Chamber of Commerce and a memorandum between the ULIE and the Federation of the Chambers of Commerce and Industries of Yemen.
The ULIE is always ready to promote the establishment of beneficial foreign economic relations between Ukrainian businessmen and foreign partners and provide assistance in setting up new joint ventures.
The ULIE seeks cooperation
At the talks on cooperation between Ukrainian and Korean businessmen.
President of the Republic of Lithuania Valdas Adamkus confers the Cross of Commander on Anatoliy Kinakh.