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Investment and Trade Potential
Ukraine
continues to demonstrate impressive
economic success: its economy has
grown by more than 12% in 2004.
Since the year of 2000, average
annual growth rate makes 8.4 %.
Public debt to GDP ratio decreased
from 48 % in 2000 to 27 % today,
debt service as a share of exports
is below 5 % now. Industrial growth
for the same period is 12.5 %.
Positive balance of foreign trade in
goods amounted to 3.2 billion. USD.
Trade turnover with USA has
increased three times as much and
reached 3 bin. USD.
The new Government of
Ukraine makes great efforts to
prevent overheating of its economy,
strengthen its financial sector,
further reform tax system, enforce
anti-monopoly policies and improve
pension system. Business climate has
been improved and it is reflected in
a significant increase in domestic
investment and productivity. Current
account has recently demonstrated
healthy surpluses; our international
reserves have also significantly
increased from 7.5 bin. to about 9.5
billion USD in the beginning of last
year.
The Government
together with private sector work on
improving the transportation
infrastructure and accelerate
research and development activities
in order to approach to an economic
model based predominantly on
knowledge and innovation. After
almost a decade of production
collapse our industrial capacities
in many sectors are still used quite
insufficiently. Introduction of a
reasonable 13% flat income tax rate,
simplified taxation of small
businesses combined with pension
reform and reduction of enterprise
profit tax rate by 10%, accompanied
by certain expansion of tax base and
recent improvement in tax
administration have helped to reduce
the volume of unofficial economy.
Based on recent
strong economic performance, the
Government’s activity which
envisages substantial increase in
real household incomes has strong
social dimensions. Transition and
economic growth should bring
tangible results to ordinary people,
and this is main political objective
of Ukrainian Government. Main focus
of the government’s efforts is
concentrated at addressing social
dimensions of market reforms,
fighting poverty and corruption,
improving transparency and
governance at all levels, reform and
modernization of the municipal
utilities sector.
The victory of Mr.
Viktor Yuschenko in the third round
of the presidential election
encouraged investors and it resulted
in rapid growth of Ukrainian bonds
quotation. Quotations of indicative
Ukrainian bonds which expire in
2007, in the end of last year
increased by 0,625 points up to
107,250 per cent of the face value
with 7,397 annual per cent yield.
On January 5, 2005
the Ministry of Finance of Ukraine
has placed bonds of internal
governmental loan and attracted 543
million Ukrainian Hryvnia to the
state budget. Non-residents have
purchased a significant amount of
the bonds. It displays foreign
investors' trust in the obligations
of the state as a result of
macroeconomic stability and
favorable mid-term prospects of GDP
growth. Prominent banks expressed
their willingness to be a
lead-manager of Ukrainian external
borrowing in 2005, including
Citigroup, Deutsche Bank, JP Morgan,
ABN AMRO Bank NV, Dresdner Kleinwort
Wasserstein Bank, Nomura.
Last annual rate on T-bonds (2004
with repayment in 2011) was only
6,875 %. Profitability was 10 - 11%
in the year 2000.
The change of power
in Ukraine is most likely to spur
foreign capital investing in
Ukraine’s economy. Volumes of direct
foreign capital investment will
significantly rise. The European
Union is interested in establishing
closer relations with Ukraine
because the President - elect,
Viktor Yuschenko, has a western
mentality and will make efforts
towards Ukraine's more active
European and Euro-Atlantic
integration.
Just a few points of
Viktor Yushchenko's Program include:
To create 5
million new jobs.
Establish a system of
government contracts and public
works with the purpose of creation
of new jobs.
Destroy all barriers
for those who want to start a
private business and support their
personal initiatives.
Decrease credit
rates. To secure guaranteed access
to credits for small and medium
businesses.
Promote development
of advanced technologies in order to
ensure Ukraine's presence on
international labor markets.
Increase volume of
foreign investment in Ukraine's
economy ten times as much. It will
promote creation of new jobs and
development of new technologies.
To increase the
state budget by decreasing
taxation.
Decrease taxes. If
taxes are fair, they will be paid by
each citizen. Share of shadow
economy will decrease resulting in
the rise of budget revenues.
Decrease taxation of
the salary fund – in five years it
will not exceed 20%.
Simplify taxation
procedures making them transparent.
Separate business
from government; protect
entrepreneurs from extortion. End
the practice of using
law-enforcement for exerting
pressure on businesses.
Put an end to
corruption in tax administration
bodies; raise salaries for honest
professionals. Disband State Tax
Militia – there is no need for this
repressive body.
For years the United
States has used to work with
Ukrainian Government which was
ambivalent regarding reforms. Mr.
Yushchenko will bring to office a
commitment to genuine
transformation. As he defines his
reform priorities, we are expecting
that the United States should
reconsider its assistance programs
in order to help us make early
tangible progress.
Investments and trade
will be more than assistance. They
will consolidate a growing economy
and improve life of Ukrainian
people. New Ukrainian Authority will
improve Ukraine's business climate.
Fair and transparent rules will
increase foreign investments in
Ukraine from its current level of
$7.8 billion. Ukraine also defines a
road map to bring Ukraine into the
World Trade Organization this year
and improve market access for
Ukrainian products.
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