World Economic Forum roundtable in Kyiv outlines plan for Ukraine's economic progress (06/26/05)

World Economic Forum roundtable in Kyiv outlines plan for Ukraine's economic progress

by Mark Adams
World Economic Forum

KYIV - A 10-point action plan for rapid economic progress was presented to President Viktor Yushchenko of Ukraine on June 17, the final day of the World Economic Forum's Ukraine Roundtable. Some 250 participants of the roundtable proposed a framework for the urgent measures to improve investor confidence.

"The participants are impressed with the remarkable reforms the new government has already undertaken and their expectations are now high," said Prof. Klaus Schwab, founder and executive chairman of the World Economic Forum. "The Ukrainian government must seize this window of opportunity to deliver reforms in a fast, decisive and comprehensive manner."

"Based on infrastructure, location and people, Ukraine has the potential to become the key production site of Eastern Europe, but the challenges are tremendous," he said. "If Ukraine were to achieve a growth rate of 6 to 7 percent - which would require massive foreign investment - Ukraine would need 15 years to catch up with income levels of Hungary," Prof. Schwab noted.

The 10-point action plan contains broad policy issues which participants said must be driven forward by a coherent government program. The areas participants highlighted included improved corporate governance, extensive reform of the public administration, concerns over state intervention in business - particularly regarding the issue of privatizations, clearer government policies and a strengthening of Ukraine's international role.

The plan outlined specific steps some of which must be implemented before July 1, the planned start of the Verkhovna Rada's two-month summer vacation, in order to push for the earliest possible WTO accession, increase foreign direct investment and improve the general business environment in Ukraine.

The 10 points can be summarized as follows:

1. Enact all legal changes needed for WTO entry before the Parliament's summer break.

2. Create a unit of specialists to support foreign investors.

3. Implement the foreseen one-stop procedure for starting new businesses.

4. Eliminate excessive and overlapping regulation.

5. Repeal the Economic Code and enact the Commercial Law Reform.

6. Enact the Financial Securities Law, which is essential for shareholder protection.

7. Implement international accounting standards (IFRS).

8. Pass necessary tax reforms to increase Ukraine's competitiveness and generate, in the long run, higher tax revenues.

9. Make efforts to enhance management and business skills and to encourage the transfer of knowledge and technologies from abroad.

10. Fight corruption.

Participants in the World Economic Forum's Ukraine Roundtable had other pieces of advice for Ukraine's new government.

"Stop trying to reinvent the wheel. Stop any arguments that Ukraine is different than other countries and that you need to find a specific 'Ukrainian solution' to everything. Ukraine and its citizens are just as normal as everyone in the Euro-Atlantic world. Copy the successful reforms of the Baltics, Eastern Europe and Georgia, and use now the experience and know-how of those who have already defined solutions and already made proposals for drafting legislative reform needed for economic growth and job creation," the roundtable's communiqué said.

"Also, do not accept as an excuse for avoiding tough reform measures the fact that Ukraine's economy is already growing substantially. One essential factor for this growth has been the favorable external situation, notably the rise in commodity prices. It is only comprehensive reforms which will create sustained high growth rates," the communiqué underscored.

In an address to the participants, Prime Minister Yulia Tymoshenko, sought to woo investors by detailing a raft of political and economic reforms the Ukrainian government is implementing. The prime minister promised to respect private property and the rule of law.

"Ukraine is ready to open the door wide to you, and I appeal to all business in Ukraine that we operate in a fair way with no conditionalities," she said.

Prime Minister Tymoshenko also addressed the controversial issue of privatizations, saying that they would be conducted "according to the constitution and laws." Regarding the re-privatization of Ukraine's largest steel mill, Kryvorizhstal, Ms. Tymoshenko said it had been "returned to state hands and will be privatized again in a model way."

Energy independence from Russia is a strategic goal of the new government, Ms. Tymoshenko said, and she invited business leaders at the Roundtable to invest in oil, natural gas and nuclear power projects.

The Ukraine Roundtable convened on June 16 with an opening plenary session addressed by President Yushchenko. "Ukraine is prepared to ensure its place in the modern world," he told the more than 250 participants - the vast majority of them business leaders - from 32 countries.

Mr. Yushchenko outlined the government's economic and political reform program to raise the effectiveness of the state and ensure Ukraine "is the most beneficial place for investment."

Mr. Yushchenko also announced a new memorandum on privatizations. "The Parliament and the Cabinet have signed a memorandum on privatization and the authorities recognize private property. There will be no re-privatizations," he said, promising that it would be left to the legal system to deal "fairly" with any investigations of past privatizations.

Other reforms on the agenda include fighting corruption; eliminating unnecessary regulations; upgrading the securities market and social benefits.

"From the youngest to the oldest, our aim in 2005 is that social benefits would be felt by each Ukrainian citizen. Real income in the first quarter has grown by 25 percent," Mr. Yushchenko said in his keynote address.

The Ukrainian president reiterated the country's strategic goal of European Union membership. He noted that the "European choice of Ukraine cannot be an obstacle to relations with Russia ... and the development of ties (with Russia) is in the interest of all Europe."

Presidents Aleksander Kwasniewski of Poland, Mikheil Saakashvili of Georgia, Ilham Aliyev of Azerbaijan, Arnold Rüütel of Estonia and Vladimir Voronin of Moldova all spoke in the plenary in support of Ukraine's bid for EU membership.

"Ukraine needs Europe, but Europe needs Ukraine," declared Mr. Kwasniewski. He called on the EU to "keep the doors open to new countries and believe in the European project and values."

The EU is developing close ties with European states beyond its borders through its "good neighborhood" policy, said Joaquín Almunia, commissioner for economic and monetary affairs, European Commission. The message he will take back to Brussels, he said, is that "we need to build a common vision of Europe among all Europeans."

The president of Georgia echoed calls for greater European solidarity. Ukraine and Georgia are two nations that are "proving that democracy in this part of the world works," Mr. Saakashvili said.

He drew participants' attention to Belarus whose population also "deserves to be in a free democratic society," adding, "Today we need solidarity for Belarus and hope that soon we can have a new conference of what we can learn from the Belarus democratic experience."

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