Ukraine Encouraged to Carry Out Fast Reforms to Capitalize on Interest

KIEV, Ukraine -- Investors called on Ukraine's new government June 17 to use the momentum from last year's Orange Revolution to make fast, effective and irreversible reforms, saying the top of the list needs to be a commitment not to meddle in business.

The two-day World Economic Forum on Ukraine began to wrap up with investors giving an upbeat assessment of what they'd seen from the government's first five months in power: a balanced budget, reduced inflation, the scrapping of some regulatory hurdles and a willingness to listen.

From left to right: Georgia's President Mikhaail Saakashvili, President Viktor Yushchenko, Azerbaijan's President Ilham Aliev, Estonia's President Arnold Ruutel and Moldova's President Vladimir Voronin

"Ukraine has a very good image in the world after the Orange Revolution. There are high expectations," said Klaus Schwab, executive chairman of the World Economic Forum, which is best known for its annual meeting in the Swiss resort of Davos. "But the challenges for Ukraine are tremendous, let's not forget it."

The forum's participants, which included five presidents and dozens of business leaders, prepared recommendations for President Viktor Yushchenko's government. They included protecting shareholder rights, fighting corruption, eliminating red tape and speaking with one voice.

Investors said it was important for the government of this former Soviet republic to clearly outlaw price controls and put an end to the confusing messages over its plans to revisit some of the old administration's privatization deals.

"The government must make a clear, binding and coherent statement about the handling of past privatizations," the proposal reads.

Other tasks include passing all the legislation necessary for entry to the World Trade Organization before parliament's summer break, setting up a one-stop procedure for starting new businesses, implementing international accounting standards and reducing social and business profit taxes.

Participants acknowledged the list is daunting, but emphasized that they were also pleased with progress the new government, which is striving to join the European Union, has made since the mass protests against election fraud helped usher it into power.

"Ukraine's investment climate is typical for the first year after a revolution," said Alexander Livshits, former Russian finance minister and deputy general director of Russian Aluminum. Russia is one of Ukraine's main investors.

"Ukrainians will improve their investment climate if the government actually does what it promises."

Yushchenko and his underlings spent the past two days pitching the positive, citing Ukraine's geographic position, its highly educated and experienced work force and its technological skills in rocket and plane-building.

Ukraine had one of Europe's fastest growing economies last year, registering gross domestic product growth of above 12 percent. This year, officials are predicting around 6 to 8 percent growth, a result of falling prices for metals, which remain Ukraine's main export, and the turmoil of last year's election and the new government's transition.

Foreign investment, however, has always been low. Last year, Ukraine received $1.7 billion (1.4 billion euros) in direct foreign investment, a figure that economists consider a minuscule amount compared to its $65 billion (53 billion euros) GDP.

Prime Minister Yulia Tymoshenko, delivering a speech June 17, encouraged investors to explore Ukraine's insurance, banking and aerospace sectors.

"We are ready to open doors for you, to open windows for you, to lay down the carpet so that you come to Ukraine," she said. "We have only one demand for you: Pay our taxes honestly."

She tried to stem concerns that the privatization probes signaled the start of a campaign to re-nationalize the properties.

"I ask you not to have any fear about this," Tymoshenko said. "We don't have such a philosophy. We don't have such an ideology. We don't have money in the budget for this."

She noted, however, that many Ukrainians support rescinding some of the past deals that were completed "with very crude violations of the law and very dishonestly."

But she said courts must decide and the government would support allowing the current owners to pay additional money to hold onto the businesses.

"The speeches are great but big businessmen want to see things happen on the ground level," said James Gallagher, senior vice president for Nestle SA's central and eastern Europe division.

Source: AP