On June 17-20, 2000, Kiev welcomed a group of Berlin businessmen, who visited the city to promote further trade and industrial cooperation between the two capitals. Heads of various companies who were in the delegation were interested mainly in cooperatio
KIEV AND BERLIN TO HAVE FRIENDLY ECONOMIC RELATIONS
On June 17-20, 2000, Kiev welcomed a group of Berlin businessmen, who visited the city to promote further trade and industrial cooperation between the two capitals. Heads of various companies who were in the delegation were interested mainly in cooperation with the Ukrainian enterprises, development of their own production and, expansion of their trade in Ukraine.
The following Berlin-based companies brought forward proposals for establishment of business relations with enterprises located in Kiev:
· WTCC firm specializes in chemical consulting, environmental issues, waste disposal, and industrial safety, and is seeking contacts with manufacturers of cleaning products and disinfectants;
· Sober GmbH commercial firm is planning to increase purchases of Ukrainian paper, steel, and steel products, and find an outlet for such goods as equipment for food-processing and feed-making plants, textile-making and paper-processing machine-tools, spare parts for equipment, and medicines;
· MolTech GmbH firm is inclined to broaden cooperation in the sphere of molecular technologies, laser technologies, optics, electronics, and monocrystals;
· Hering. Training & Consulting is willing to render consulting services to small and medium-size enterprises on establishment of joint ventures and borrowing of bank loans;
· Freund. Industrievertretungen GmbH is planning to establish representative offices of foreign construction firms and architects in Kiev, and is searching for contacts with manufacturers of construction materials;
· Bau-Arsenal. Vertribs GmbH intends to do trade, export/import business, and purchase construction materials, frozen vegetables and fruits;
· FML Laboreinrichtungen GmbH company that sets up quality control labs for the needs of food-processing and pharmaceutical industries is willing to design and supply fully-equipped labs, install the necessary equipment, and train personnel;
· Innovationspark Wuhlheide GmbH firms intends to render services related to machine-building technologies, development of PC software, alternative sources of energy, and environmental protection;
· Riccius+Siebt firm specializes in manufacturing of regulator machinery and automation of construction;
· Rinova. Planen und Bauen GmbH (construction; production of dry mixtures in Ukraine, polystyrene, equipment, new machine-tools and devices; machinery exchange for second-hand processing equipment) is searching for enterprises willing to promote cooperation in construction.
Heads of German companies visited more than 40 Kiev-based enterprises and met with Ukrainian businessmen. The callers conducted preliminary negotiations discussing the outlooks for future cooperation and left their contact details to establish closer business relations with those Ukrainian companies and enterprises that seized their attention.
According to the visit schedule, Kiev Chamber of Commerce and Industry arranged a round-table meeting entitled "Business in Ukraine", during which the guests were addressed by Viktor Kalnik, acting Minister of Economy of Ukraine, Nikolay Zasulsky, president of Kiev Chamber of Commerce and Industry, Viktor Pogrebnyak, deputy head with the Department for Foreign Economic Relations of Kiev State Municipal Administration, and Gennady Lega, head with State Tax Inspection of Shevchenkovsky district of Kiev city.
Viktor Kalnik informed the Berlin businessmen on peculiarities and difficulties intrinsic to the current state of investment climate in Ukraine. Among other things, he noted that in 1999 the aggregate non-resident capital increased by 16%, the number of enterprises partially owned by foreign investors rose by 4% (7,362 in total), while ratio of investments per enterprise gained 11% (USD 441,200). Direct investments are mainly made in Ukraine in money (45.7% of the total) and in movable and immovable property. Along with this, investments in form of securities underwent a sixtyfold growth in 1999.
In 1999, enterprises partially owned by foreign investors accounted for 12.7% of the total manufacturing output in Ukraine, 57.4% of the total amount of chargeable services rendered in the country, 31.5% of the total quantity of Ukrainian products sold on the domestic market, and 19.1% of the total Ukrainian exports.
As of April 1, 2000, direct investments in the Ukraine’s economy came from 106 countries worldwide. Seven countries account for the largest portion, i.e. 60%, of foreign investments, namely the USA (with 18.1%), the Netherlands (9.3%), Germany (7.1%), UK (7.5%), South Korea (5.3%), Cyprus (6.0%), and the Russian Federation (8.9%). For the most part, direct investments are made in food processing (20.4% of the total), domestic trade (17.2%), mechanical engineering and metalworking (10.9%), finance, credit, insurance and pension security (6.1%), and fuel industry (5.8%). The mentioned economic sectors consume more than 60% of the aggregate foreign investments.
As regards regional distribution of direct investments, Kiev (receiving 32% of the total) and Kiev region (8.2%) hold the leadership, followed by Donetsk region (with 8%), Zaporozhye (6.6%), Dnepropetrovsk (5.5%), Poltava (6.4%), and Odessa (5.4%) regions. When it comes to investments in various types of companies, collective enterprises got the largest portion of foreign investments, i.e. 71% of the total, compared to 27.3% raised by foreign-owned enterprises, 0.9% received by privately-owned enterprises, and 0.8% obtained by state-run enterprises. Joint ventures have become the most popular type of foreign economic cooperation. Today, 4,929 JVs are registered in Ukraine including 607 enterprises partially owned by German investors.
As of the beginning of 2000, total amount of direct foreign investments in Ukraine reached USD 3.2 billion. The first 5 months of 2000 registered a 26.2% augmentation in domestic investments in capital assets. This is a bright evidence to the fact that the accumulated capital, which used to be exported abroad, returns back to Ukraine. Besides, the year 2000 is the first time ever when the leading economic sectors show growing demands for investments, notably +20% in shipbuilding and aircraft engineering, +30.3% in mechanical engineering, light industry, and food processing, and +33.3% in electrotechnical industry.
However, the acting Minister of Economy of Ukraine emphasized insufficiency of the investments attracted (USD 65 per capita), low efficiency of investment use (only one-fourth of the total number of enterprises that obtained foreign investments manufactures goods), poor influence of foreign investments on technological development of the Ukrainian industryr (only 0.3% of the attracted investments was given in form of intangible assets), and profound disproportions in distribution of investment money (60% of the total foreign investments in Ukraine is directed to the secondary industries that neither contribute to technological progress nor promote growth).
By now, the Ukrainian government has undertaken a number of decisive steps aimed at fundamental improvement of the investment climate in Ukraine. Draft tax code, which would be a cornerstone for the whole batch of economic laws elaborated to ensure stable business environment, has been already forwarded to the Parliament. In particular, the Ministry of Economy succeeded to defend several fundamental issues mentioned in the draft code, which would make it possible to reduce fiscal pressure and enhance economic motivation. In mid-July, the Ukrainian Parliament is supposed to consider this bill in the first reading.
In turn, the Ukraine’s Cabinet of Ministers plans to reduce certain tax rates as well. It is anticipated that the value added tax rate will be lowered from 20% down to 15%; corporate income tax rate will be cut down to 20% from 30% today; while numerous incentives granted to monopolies on the Ukrainian market will be eliminated at all. Besides, such governmental actions as entering into force of the Law "On Concessions", the Law "On Division of Products", and the Law "On Governmental Purchases" are of paramount importance for investors as well. What is more, Ukraine has become a party to the international Concession on Investment Dispute Settlement.
At the same time, the Ukrainian government guarantees stability of the new laws and by-laws that regulate investment activity in Ukraine. In the coming 20 to 40 years, for instance, there will be no revision of the legal principles dealing with existence of special/free economic zones (11 regions) and areas with special regime of investment activity (9 regions). As everybody knows, areas with special status (these make up 10.5% of the whole territory of Ukraine) are exempted from the VAT and customs duty, and enjoy certain other business incentives. Owing to this, these regions raised more than USD 250 mln. of direct investments in the first half of 2000 under no governmental guarantees.
Nowadays, the Ministry of Economy of Ukraine intends to bolster up Ukraine’s accession to the World Trade Organization and further integration into the European Union. In the first half of 2000, Ukraine succeeded to achieve sound results in fulfillment of its Partnership and Cooperation Agreement with the EU, namely 19 disputable issues have been settled, while the other problems (concerning elimination of duty imposed on sunflower seed exports from Ukraine, entry into force of the Law "On Metal Scrap", and incentives granted to AutoZAZ-Daewoo) will be solved at the soonest. The Ministry has almost completed legalization of bilateral agreements with a number of countries; reduced customs duty imposed on selected types of farm produce; and what is more, it will strictly adhere to the concept of tariff regulation based on considerable curtailment of tariff pressure on the foodstuffs imported to Ukraine.
Issues dealing with certification and standardization of the imported commodities will be settled in the nearest future as well. Appropriate changes in legislation, which would fully adjust Ukrainian system of certification and standardization to the European standards, are planned to be introduced by the end of 2000.