BUSINESS IN BRIEF (09/05/99)

BUSINESS IN BRIEF

Moody's says Ukraine may default on debt

NEW YORK - The investment department of Moody's rating agency announced on August 26 that of all the countries with transitional economies, Ukraine, Ecuador and Moldova are closest to defaulting on their external debts. According to the agency, experts believe that the default could be caused by internal domestic struggle, falling export revenues, limited access to international capital markets, the growing perception of debt restructuring as a solution to economic problems and a Parliament that hinders the integration of the country's economy into the world system. According to Moody's, at the end of 1999 and beginning of 2000, Ukraine is due to repay $1.4 billion (U.S.) worth of external debt, and $2.3 billion in total for the year 2000, while Ukraine's currency reserves total just $1.1 billion. Moody's predicts that, as has previously happened, payment of Ukraine's external debts will be postponed. Its experts share the belief that the best thing for Ukraine to do is to default, as "the internal benefits from such actions will override sanctions after the default." (Eastern Economist)

Report released on economic indicators

KYIV - Preliminary analysis shows that prices on the consumer market are under control and this year's inflation rate is 7.5 percent, down from the predicted figure of 9 percent, said First Vice Minister of the Economy Viktor Kalnyk. Prices for petroleum products have not yet been determined, but they tend to decrease. Prices for fuels and lubricants have risen by 99.3 percent, impacting the entire pricing scheme. Food prices are expected to rise by 4-5 percent by year's end. Consumer prices are going to be influenced by the hryvnia's inflation rate. According to Mr. Kalnyk, if the hryvnia is kept within the specified currency limits during September and October, predicted inflation rates will be maintained. The inflation rate of utility prices is 3 percent, down from the predicted 9 percent. It can grow by another 4 percent after the population in all regions begins to pay the entire cost of utility services. Wholesale prices in general have stabilized following last year's crisis, while wholesale prices in the energy sector, chemical and petroleum industries have dropped. The current wholesale price index is 6.7 percent and it is expected to reach 16 percent by year's end, down from 35.4 percent of the last year. (Eastern Economist)

Kyiv shipyard unveils new cargo vessel

KYIV - The Kyiv-based Leninska Kuznia shipbuilding plant on August 26 released a 110-meter-long cargo vessel, FEWI. The ship was ordered by Dutch Robo International B.V. and is designed to carry a load of 1,617 tons. "This is the largest vessel that our plant has ever produced," stated the plant's president, Petro Poroshenko. The ship was sold for 1.2 million marks. Only Ukrainian-made materials were used in construction, and the plant financed all works without state support. (Eastern Economist)

Stakes in 16 firms on sale via exchange

KYIV - The State Property Fund has decided to sell stakes in 16 domestic companies undergoing privatization. The most lucrative stocks include a 49.54 percent stake in the Nadvirna woodworking plant, and a 6.84 percent stake in the Rodon JSC, both in Ivano-Frankivsk Oblast, and a 27.59 percent stake in the Zaporizhia-based Konstanta air company, a 0.13 percent stake in the Zdorovia pharmaceutical company and a 22 percent stake in the Holosiyivskyi Hotel in Kyiv. All stakes are to be sold via the Ukrainian Stock Exchange. A 17.42 percent stake in the Kyiv Aviation Technology Research Institute is to be offered via the Kyiv International Stock Exchange. (Eastern Economist)

SPF to sell stake in Lysychansk plant

KYIV - The State Property Fund has decided to sell a 3.84 percent stake in the Lysychansk-based technical rubber plant via the stock exchange by December 1. Another 3 percent stake was to be sold for cash via certificate auctions centers by August 31. To date, a 20.57 percent stake in the plant has been sold via auctions for privatization property certificates and a 1.55 percent stake on favorable terms. The plant's leaseholders already own a 21.04 percent, with the state retaining a 50 percent controlling stake. (Eastern Economist)

Russia accused of airlines discrimination

KYIV - Russia's aviation authorities are conducting a discriminatory policy in respect to Ukrainian airlines, said a Ukrainian Transportation Ministry official. According to the inter-governmental agreement on air traffic between Ukraine and Russia, Ukraine does not levy a value-added tax for services provided by Russian airlines in Ukrainian airports, while the Russian side taxes services provided by Ukrainian airlines in Russia because Russian legislation does not regard flights between the two countries as international, which makes it possible for the Russian side to levy VAT on CIS airlines. Such an approach violates the provisions of Russia's Air Traffic Code of February 19, 1997. Ukrainian airlines to date have paid Russia more than $3.2 million (U.S.) in VAT. (Eastern Economist)

Big Antonov line-up for Russian airshow

KYIV - About 300 aviation associations, design offices, plants, research institutes and enterprises participated and demonstrated more than 130 new aircraft at the fourth International Air Show MAX '99 held recently in the Russian town of Zhukovskyi. Ukraine's Industrial Policy Minister Vasyl Hureiev, his deputy, Valerii Kazakov, and the deputy chief of armaments of Ukraine's armed forces, Mykhailo Mytrakhovych, were in attendance. According to Mr. Kazakov, Ukraine displayed the AN-70, AN-140, AN-38 and AN-3, the AN-32P firefighter and the converted AN-74TK-200. The AN-140 was to have its first air demonstration ever. Mr. Kazakov said the aim of the show was to convince prospective partners that the AN-70 "has not been the only success of the national aviation industry." Ukraine will continue with its policy of promoting Antonov planes by holding talks with German and Italian delegations. The first passenger AN-140 could be assembled in the Iranian city of Isfahan by the end of 1999. Ukraine gained the rights for serial production of AN-140 in December 1995. (Eastern Economist)

South Africa intends to order Motor-Sich engines

ZAPORIZHHIA - South Africa intends to place an order for engines for 12 top-class fighting helicopters with the Ukrainian company Motor-Sich, Dellari van Tonder, South African Ambassador to Ukraine, said while visiting this company. The decision was reached after South African aircraft engineers had visited the La Bourget and Moscow air shows and learned of aircraft engine production at the Ukrainian company. (Eastern Economist)

Ukraine, Russia aim to begin production of AN-70

KYIV - Ukraine and Russia plan to begin joint serial production of AN-70 military transport aircraft in 2001, according to a senior Ukrainian official. Vice Prime Minister Serhii Tyhypko said on August 30 that the two countries would include expenses for the project, which is 75 percent financed by Russia and 25 percent by Ukraine, in their budgets for next year. He also confirmed that Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Valerii Pustovoitenko had come to such an agreement in Moscow a week ago. Mr. Tyhypko added that Russia had also agreed to pay a $52 million debt owed to the AN-70's designer, Ukraine's Antonov Design Bureau. Antonov predicts demand for the AN-70 at 1,500 units worldwide. The AN-70 is able to carry 35 tons of cargo. A version built with Germany called the AN-7X was offered in a tender for new military cargo aircraft for European armed forces earlier this year. The preliminary results of the tender were to have been announced on July 2, but are still being awaited. The base price of the AN-70 is expected to be about $40 million (U.S.), compared to $50 million (U.S.) for the AN-7X. There seems to be great interest in the AN-7X as well. Antonov has held talks with the Airtruck consortium uniting eight German aerospace firms on a trilateral agreement between Ukraine, Russia and Germany to supply the AN-7X plane to the air forces of Germany, Denmark and Portugal. The plane is a modified version of the new AN-70 aircraft. Under the proposed trilateral agreement, a total of 305 planes will be supplied to the armed forces of the three countries. In addition, Denmark and Portugal have announced plans to buy between three and five and AN-7X planes. (Eastern Economist)

Variah aircraft carrier is half paid-for

KYIV - Only half of the cost of the Variah aircraft carrier has been paid to date. Speaking on August 11, Oleh Firsov, deputy director of Black Sea shipbuilding plant, said the ship will not leave the shipyard until the buyer, a company based in Portuguese Macao, pays the total sum, $20 million (U.S.), in accordance with the contract signed in May of this year. (Eastern Economist)

Cabinet supports liquid pharmaceuticals

KYIV - The Cabinet of Ministers instructed the State Innovation Fund to provide funding for a project aimed at starting the production of liquid pharmaceuticals packed in tubes and droppers. The project will be implemented at the Styrol concern in Horlivka, Donetsk Oblast. The cost of the project is 21.9 million hrv. Styrol must present guarantees to the SIF for the repayment of the credit in 2002. (Eastern Economist)

Ex head of alumina plant is reinstated

KYIV - A ruling by a Mykolaiv regional court on August 6 reinstated the former general director of the Mykolaiv Alumina Plant, Vitalii Mieshyn, to his post. The court acknowledged that, in accordance with the articles of association of the MAP open joint-stock company, Mr. Mieshyn should manage the plant until privatization is completed. In accordance with his contract he will remain in his post until December 2000. The court ruled that the National Agency of Ukraine for Management of State Corporate Rights did not have the powers to break labor contracts concluded with the heads of joint-stock companies. (Eastern Economist)

Arrests made at Kryvorizhstal works

KYIV - Six managers of the Kryvorizhstal steel works have been arrested, and a total of 60 employees are under investigation, according to Interfax-Ukraine. Quoting a source at the law enforcement agencies, on August 11 the news agency reported that 40 criminal cases have been filed. Among the charges are theft, bribes and abuse of authority. Yet, the enterprise officials are denying accusations. "I don't know anything about any arrests or criminal cases," said Evgen Auer, assistant to general director. (Eastern Economist)

September launch planned for rocket

KYIV - A commercial satellite launch under the auspices of the Sea Launch international satellite program is planned to take place in mid-September. The first launch will involve launching a DIRECTV 1-R telecom satellite into orbit using the Ukrainian Zenit booster rocket. The satellite will broadcast 20 television entertainment shows for direct satellite TV subscribers. (Eastern Economist)

Coal industry makes strides, says minister

KYIV - Amidst all the closings of unprofitable mines, a new coal mine is to be opened in Ukraine for the first time since independence, Coal Minister Serhii Tulub announced. However, the coal sector was to receive 110 million hrv to finance objects of major importance, according to a March 23 Cabinet of Ministers decree, and only 9.3 million hrv has been provided thus far. Mr. Tulub warned that since the legislature overturned a presidential veto on changes to the law on revenue taxes, the coal sector lost one source of financing and any further reductions could lead to "the full destruction of mine-building industry." As a result of major changes in the management structure of coal industry which started in the second quarter of 1998, coal miners were able to reach some stability in the sector, Mr. Tulub said in his report to President Leonid Kuchma. He lauded the mechanisms of state support distribution, higher control for budget funds allocated from the sector, individual management at almost each of coal mining enterprises, capital construction financing only under tender conditions, and also development of a number of anti-barter, technical and social programs. The measures taken have made it possible to increase coal extraction and labor efficiency, lower production costs and increase quality. Given the positive experience of crediting mining enterprises in 1996-1998 and the increased productivity that resulted, Mr. Tulub suggested that President Kuchma allocate 160 million hrv for providing one-year loans for coal-mining enterprises for the purchase of equipment. He said that with enough unextracted coal remaining and new horizons developed, equipment remains the only obstacle to increased coal output. Since the beginning of the year, domestic mines have extracted 50 million tons of coal. The yearly plan for 1999 is 80 million tons; nearly 33 million tons have already been sent to consumers. In order for thermo-electric stations to accumulate the necessary reserves for the winter period, mines are being instructed to send 100,000 tons daily to the stations. (Eastern Economist)

Sugar beet crop to meet last year's volume

KYIV - The sugar beet crop harvested this year will be almost 16 million tons - the same as was brought in last year, announced the new Agro-Industrial Complex Minister Mykhailo Hladii on August 5. The harvest will ensure the production of around 1.9 million tons of sugar by Ukraine's 161 sugar refineries. The minister forecast that the total sunflower harvest is expected to reach 2.5 million tons, or 300,000 tons more than last year. The increased volumes are mainly due to better yields and increased acreage being seeded, 2.5 million hectares in all - substantially more than the initially planned 1.9 million hectares. According to Mr. Hladii, the state will not interfere in farm activities and will not restrict the movement of sunflower seeds from the region or from export. (Eastern Economist)

PrivatBank offers gold bullion service

KYIV - PrivatBank announced on August 5 that it has introduced a new service: operations with bank gold bullion. The bank can now offer buy-sell operations with 999.9 standard gold bullion in weights of 5-12,500 grams, store gold and provide special precious metals accounts that would enable the clients to do operations with gold bars. (Eastern Economist)

Professional women mark anniversary

KYIV - The League of Professional Women celebrated its second anniversary in August. The organization's goal is to protect labor rights and assist professional career women in business, science and education, public administration and the mass media. Partners of the league include the Institute of Philosophy of Ukraine, the Business Incubators Development Program in Ukraine, IREX, CIPE, ACCELS and the Women's Consortium of the NIS-USA. The League of Professional Women publishes an information bulletin and a newsletter to inform businesswomen about grants, training, education, conferences, and small and medium-sized loans. To date, seven members have won international individual grants with the advisory support of the league, while the league's consulting group recently published Dr. E.V. Lazorenko's book "Power in Ukraine: Non-Trivial Political Analysis for Those Who Are in Power and Those Who Want to Be in Power." (Eastern Economist)

Law set to exempt cognac producers

KYIV - President Leonid Kuchma signed a decree on August 10 exempting cognac spirit from customs duties until January 1, 2001, if the spirit is to be used for the production needs of domestic cognac manufacturers. The list of importers is to be approved by the government. The same law also imposes a privileged rate of excise, or 0.02 ecu per 1 liter of 100 percent alcohol, for ethyl alcohol used by domestic producers of pectin, vinegar, pharmaceuticals and veterinary medicines. The government must approve the supplies procedure and regulate the use of alcohol. (Eastern Economist)

German company orders bulk vessels

KYIV - UkrExImBank is to sign a loan agreement with Japanese Export-Import Bank worth 14.8 yen before September 10, intended for the Okean shipbuilding plant. The plant is to purchase equipment for the construction of 10 Panamax-class bulk vessels for the German Horizont Schiffahrtgesellschaft. A contract for the construction of two such vessels had already been signed earlier. The construction of 10 ships will cost $240 million (U.S.). Okean has already finished 67 percent of the first bulk vessel, which was originally built for the Black Sea Shipping Company but then halted due to lack of funds. (Eastern Economist)

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