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  • Ukraine - Economics

    The Revolution in Banking
    March 27, 2014 ▪ Lyubomyr Shavalyuk
    With the new administration of Ukraine’s National Bank in place, Ukrainian banks appear to be waking up from lethargic sleep. Countless financial repressions imposed by the Viktor Yanukovych regime are gone, and the banking system is free to develop and grow

    There was good reason why the appointment of Stepan Kubiv as Governor of Ukraine’s National Bank (NBU) was one the first things the new government did. The hryvnia seemed to have gone into free fall, and a bank run nearly sent the country’s banking system crashing. Against this background, the first steps Kubiv took in the new office seemed totally wrong. To announce the meagre volume of the state’s gold and hard currency reserves at the height of a hard currency rush and to issue UAH 2.8bn of direct refinancing – money that could go to the currency exchange market – on the first day looked like pure madness. But less than a month later, the situation has completely calmed down. The banking system has started long-term reforms needed for its strategic recovery. The several weeks that Kubiv has been at the helm of the National Bank have brought about a revolution in the banking sector, enabling financial institutions to develop, just like the EuroMaidan has empowered ordinary Ukrainians.

    Success was secured through just a handful of the right steps. First, the National Bank switched to the floating currency exchange rate. By letting the hryvnia loose, the central bank refused to lie à la the previous government that there were “no economic preconditions for a significant devaluation of the hryvnia”. Instead, the National Bank started transparent and truthful dialogue with banks by holding two broad meetings with bankers within a week and promising to organize similar discussions on a regular basis. On Kubiv’s initiative and in an unprecedented move, free access to the NBU has been granted to all bank presidents, which will improve reaction time to challenges faced by the system. It became clear that the first measures taken by the new NBU governor, which initially did not seem to make any sense, are nothing else but an expression of transparency declared by the central bank. After being harassed by the old government for several years, bankers highly appreciated the new policy. They adopted a constructive stance, and though joint efforts the hard currency panic was overcome within days.

    What followed was a pinpoint strike that hit at the root of the problem. The NBU set a limit of an equivalent of UAH 15,000 on withdrawals in hard currency and, in case of early withdrawals, permitted banks to pay out the money in hryvnias (at the exchange rate set by the bank on the day of withdrawal). This measure revealed a deep understanding of the situation.

    The thing is that the bank rush was caused by rich and very rich Ukrainians. It so happened that under the Yanukovych regime, the majority of rich people joined the Party of Regions or drew close to it. It could not have been otherwise – it was their survival instinct at work. Later, after establishing contact, many businessmen began to participate in illegal schemes covered up by the government and redistribute money thus obtained. Again, it could not have been otherwise, because it was unreal to honestly increase one’s capital under Yanukovych – one could only honestly lose it. Therefore, when the EuroMaidan kicked off, it turned out that the majority of rich Ukrainians were linked to the Party of Regions and the regime. This is precisely the reason there were no major withdrawals in December, January and the first part of February while Yanukovych was in power. As soon as he was ousted, the pyramid crumbled and many people with millions on their accounts decided to run, fearing punishment for involvement in the regime’s illegal schemes. Initially, they tried to make money transfers abroad, but as foreign countries began to block dubious transfers, they decided to take cash. The banking system was losing billions of hryvnias from deposits every day, but not because of ordinary people. (According to Prime Minister Arseniy Yatseniuk, 85% of depositors have up to UAH 20,000 on deposit.)

    The limit placed on daily withdrawals had virtually no effect on ordinary Ukrainians but squarely hit the frightened schemers of the old regime who caused the high demand on the hard currency market in the first place. Moreover, by permitting banks to pay this money in hryvnias, Kubiv made sure, with almost complete certainty, that it would stay in Ukraine. Amidst a hard currency panic, banks purchase limited amounts of foreign currency in cash to be sold to the population. This is done to avoid large losses if the exchange rate goes in the opposite direction. Thus, wealthy Ukrainians were unable to purchase foreign currency through cash departments, because they simply did not have it in sufficient quantities. No-one will take hryvnias abroad in briefcases, because it can only be used as waste paper there. The NBU made a truly brilliant move with a happy combination of efficiency and no side effects.
    The Revolution in Banking - Economics - The Ukrainian Week

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  • #2
    Tycoon Wars: Elusive Hope
    March 6, 2014 ▪ Yuriy Radchenko
    Economic changes should be deep. Otherwise there will be no change

    As to oligarchs, they always switched to a new government only after they were sure that the old one was facing a defeat. They did so when Viktor Yushchenko replaced Leonid Kuchma, and when Yushchenko lost the election to Viktor Yanukovych. This time, the first signal came from the Dnipropetrovsk-based oligarch Ihor Kolomoyskyi who publicly warned Kharkiv Mayor Hennadiy Kernes to stop fueling separatism.
    Tycoon Wars: Elusive Hope - Economics - The Ukrainian Week

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    • #3
      IMF approves USD 17bln bailout for Ukraine 01/05/2014 | 09:11 AM World News

      WASHINGTON, May 1 (KUNA) -- The International Monetary Fund (IMF) has announced the approval of a USD 17 million aid package for Ukraine in hopes of helping the country recovery its continuing crisis.
      In a statement, the IMF said late Wednesday that the authorities' economic program supported by the Fund aims to restore macroeconomic stability, strengthen economic governance and transparency, and launch sound and sustainable economic growth, while protecting the most vulnerable.
      This approval allows immediate disbursement of about USD 3.19 billion. The second and third disbursements will be, "based on bi-monthly reviews and performance criteria." The IMF Managing Director and Chair Christine Lagarde said, "deep-seated vulnerabilities, together with political shocks, have led to a major crisis in Ukraine. The economy is in recession, fiscal balances have deteriorated, and the financial sector is under significant stress." According to Lagarde, this aid package is expected to maintain an exchange rate to restore competition, stabilize the Ukrainian financial system, reduce the fiscal deficit, eliminate loss in the energy sector and help the country move away from its past problematic governmental practices.
      Lagarde added, "the authorities are determined to stabilize the financial system, maintain confidence in banks, and strengthen balance sheets and financial regulation and supervision." She affirmed, "a strong and comprehensive structural reform package is critical to reduce corruption, improve the business climate, and achieve high and sustainable growth. The authorities have already enacted a new public procurement law, reducing room for misuse of public resources." The IMF noted that there are risks to the program in the case of further escalations from Russia the "unrest in the east of the country" that "pose a substantial risk to the economic outlook." (end) ak.sd
      KUNA : IMF approves USD 17bln bailout for Ukraine - Economics - 01/05/2014

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      • #4
        Ukraine bailout of $17bn approved by IMF who warns reforms are at risk
        Kiev agrees to a sweeping economic programme but may need to extend bailout if the unrest in east of country escalates
        Angela Monaghan theguardian.com, Thursday 1 May 2014 15.07 EDT

        Ukraine is at risk of a prolonged recession and may need an extension of its $17bn bailout should tensions with Russia and unrest in the east of the country escalate, the International Monetary Fund (IMF) has warned.

        The IMF approved the emergency funding package after Kiev agreed to a sweeping economic reform programme designed to reduce the deficit and promote greater financial stability.

        The Washington-based fund expects Ukraine's troubled economy to shrink by 5% in 2014 amid weak investor and consumer confidence, before partially rebounding in 2015 with 2% growth.

        However, the IMF conceded there were significant risks to the outlook, not least because of the strong trade and gas ties between Ukraine and Russia.
        Ukraine bailout of $17bn approved by IMF who warns reforms are at risk | World news | theguardian.com

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        • #5

          Turmoil in Ukraine
          Kiev Struggles to Break Russia’s Grip on Gas Flow
          By ANDREW HIGGINS 9:14 PM ET
          CHASLOVTSY, Ukraine — As Ukraine tries to contain a pro-Russian insurgency convulsing its eastern region, a perhaps more significant struggle for the country hinges on what happens beneath the ground here in a placid woodland in the far west, on the border with Slovakia.

          This is where about $20 billion worth of Russian natural gas flows each year through huge underground pipelines to enter Europe after a nearly 3,000-mile journey from Siberia. It is also, the pro-European government in Kiev believes, where Ukraine has a chance to finally break free from the grip of Gazprom, Russia’s state-controlled energy behemoth.

          In an effort to do this, Ukraine has for more than a year been pushing hard to start so-called reverse-flow deliveries of gas from Europe via Slovakia to Ukraine, thus blunting repeated Russian threats to turn off the gas tap.

          An agreement signed last week between Slovak and Ukrainian pipeline operators opened the way for modest reverse-flow deliveries of gas from Europe, where prices are much lower than those demanded by Gazprom for its direct sales to Ukraine.

          But the deal, brokered by the European Union and nudged along by the White House, fell so far short of what Ukraine had been lobbying for that it left a nagging question: Why has it been so difficult to prod tiny Slovakia, a European Union member, to get a technically simple and, for Ukraine and for the credibility of the 28-nation bloc, vitally important venture off the ground?

          Some cite legal and technical obstacles, others politics and fear of crossing the Kremlin, but all agree that a major obstacle has been the power and reach of Gazprom, which serves as a potent tool for advancing Russia’s economic and geopolitical interests, and is ultimately beholden to President Vladimir V. Putin.
          http://www.nytimes.com/2014/05/05/wo...ref=world&_r=0

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          • #6
            Ukraine Seeks to Raise $1 Billion Through Sale of U.S.-Backed Bonds
            Bond Deal Will Give Country Access To Global Debt Markets At Cheap Rates

            By Ben Edwards & Alexander Kolyandr May 14, 2014 7:40 a.m. ET
            Cash-strapped Ukraine is set to gain some much-needed financial support from the U.S. with a bond deal that will allow the country to borrow in global debt markets at ultracheap rates.

            Ukraine's government said on its website Wednesday that it is setting out plans to raise $1 billion from a sale of five-year bonds that will be backed by the U.S.

            The maximum yield will be 2.9%, the government said. By contrast, Ukraine's existing bonds maturing in six years are yielding about 11%, according to Tradeweb. Five-year U.S. Treasurys yield 1.593%, meaning that Ukraine's U.S.-backed bonds will be cheaper for investors to buy for essentially the same risk. Bond yields move in the opposite direction to prices. Separately the European Union Wednesday also raised 100 million euros ($137 million) from selling bonds, proceeds of which will be lent to Ukraine.

            The funds will help Ukraine meet pressing bill payments, such as the cost of natural gas imports from Russia.

            The cost of borrowing has been prohibitively expensive for Ukraine since November last year, when the country's then President Viktor Yanukovych backed out of a trade pact with the EU to seek closer ties with Russia, unleashing a barrage of civil unrest that led to Mr. Yanukovych being forced out of office and heightening tensions between Russia and the West.

            U.S. Treasury Secretary Jacob Lew last month signed a $1 billion loan agreement allowing Ukraine to issue debt that the U.S. will honor should Ukraine be unable to pay it back.
            Ukraine Seeks to Raise $1 Billion Through Sale of U.S.-Backed Bonds - WSJ.com

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            • #7
              Ukraine Gas Producer Appoints R. Hunter Biden to Board
              By Javier E. David

              Ukraine's largest private gas producer announced on Tuesday that it added R. Hunter Biden — the son of U.S. Vice President Joseph Biden — to its board of directors.

              In a statement on its website, Burisma Holdings said the younger Biden will be in charge of the company's legal unit, while providing support "among international organizations."

              The release quoted Hunter Biden as saying that "my assistance in consulting the Company on matters of transparency, corporate governance and responsibility, international expansion and other priorities will contribute to the economy and benefit the people of Ukraine."
              Ukraine Gas Producer Appoints R. Hunter Biden to Board - NBC News

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              • #8
                Whatever the outcome in the east (and the world hopes it will be a peaceful one) Ukraine must now look toward the furture and admit things cant go on as they have done. There is no reason why Ukranians cant stand shoulder to shoulder with the rest of the world with a brighter economy. Starting with bribery and curruption and nepotism. Transparency and keeping the general populace in touch with the everyday keeps them sweet and informed.
                Get the tourists in is a good money spinner. The UK makes about £19 Billion per annum just from tourism for example.

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                • #9
                  One more anti-corruption “warrior” Alla Dubrovyk 15 May, 2014
                  EBRD President and Arsenii Yatseniuk signed a memorandum on the establishment of the business ombudsman agency in Ukraine. However, its powers, sources of funding, and name of the potential head are unknown as of yet

                  “The initiative of establishing the business ombudsman agency to combat corruption in Ukraine originated with the EBRD. They are doing a lot to improve the business climate here. The rest of the signatories of the memorandum and the people who contributed to this idea, of course, support the EBRD. After all, corruption is really one of the major issues of concern for the business community in Ukraine.

                  “Whether it will work is what we are concerned today with as signatories of this memorandum. We would like to have the business ombudsman granted effective powers for fighting corruption, making that agency into an effective tool. As the Association, we, of course, will provide systematic data on corruption, should our members face it, and it is important for us to see a response from the state. One more anti-corruption “warrior” | The Day newspaper

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                  • #10
                    Why do exporters want to pay double taxes?
                    Alla Dubrovyk May 20, 2014 The Day
                    Roman KHMIL: “Today Ukraine just gives away tens if not hundreds of millions in dollars to the European, American or some other IT industry”
                    Every year Ukraine spends about 900 million dollars to train nearly 15,000 programmers, even though 5,000 of them go to work abroad. Meanwhile the remaining 10,000 manage to earn billions of US dollars for the Ukrainian economy. In particular, only last year Ukrainian IT specialists sold two-billion-dollar-worth codes worldwide. They could do even more: if the state does not stand in the way, they promise to increase exports to 10 billion dollars; if the state is helpful, the exports can exceed 20 billion. The Day learned all this from an interview with Roman KHMIL, operations manager, Ciklum (Ukraine). This company is known to have successfully organized close cooperation with the new government’s economic block (namely, with the economy minister Pavlo Sheremeta), which has already resulted in two draft laws and a platform for training IT specialists, Brain Basket. Why do exporters want to pay double taxes? | The Day newspaper

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                    • #11

                      Kenneth Rapoza Contributor - Forbes Magazine
                      Opinion 8/15/2014 @ 9:00AM
                      Saving Ukraine's Currency Will Help Save Ukraine from Putin

                      “Ukraine’s Currency Hits a New Low” blared a Wall Street Journal headline earlier this week. The hryvnia’s woes are attributed to Russia’s none-too-subtle efforts to annex, Crimea-style, a piece of eastern Ukraine and force the rest of the country into becoming a de facto Kremlin satrap. Putin believes wealth and power come from conquest.

                      The pressure on Ukraine is all too real. However, its woes are unnecessarily compounded by misbegotten economic policies foisted on it by the IMF , with the blessings of the U.S. and the EU, in particular, imposing higher taxes and “floating,” i.e., devaluing, the hryvnia to “spur” exports. Both policies are utterly counterproductive. The IMF is Putin’s unwitting ally.

                      Ukraine should immediately implement a currency board, under which the hryvnia would be tied directly to the dollar. The nice thing about such an arrangement is that the process operates automatically, and market confidence is enhanced precisely because there is no central bank discretion. Every hryvnia would be backed by dollars at a fixed rate. Ukrainians would be willing to hold hryvnias knowing they could easily turn them in for greenbacks.

                      This is not theory. Currency boards have been used successfully for more than 150 years. When Hong Kong fixed its dollar to our dollar in 1983, it did so with a currency board. Today such countries as Bulgaria and Lithuania use this mechanism to tie their monies to the euro. Estonia did the same thing for years before it switched to the euro itself.

                      A stable hryvnia would do wonders for the beleaguered Ukrainian economy. It would be a stark and enticing contrast to Russia’s wobbly ruble.

                      Israel has demonstrated that a country can devote considerable human and monetary resources to defending itself and still possess a vibrant, innovative economy amidst deadly threats and all-too-frequent acts of terror.

                      Alas, such a crucial and sensible move seems remote. As evidenced by the EU, the IMF, the Federal Reserve and every other economic body, ignorance about monetary policy is the greatest threat to our future.
                      Saving Ukraine's Currency Will Help Save Ukraine from Putin - Forbes

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                      • #12


                        Washington 8/11/2014 @ 11:23AM 5,259 Loren Thompson
                        New Energy Sources: How To Make Ukraine More Secure Without Using U.S. Military Forces

                        The Obama Administration faces a dangerous dilemma in trying to defuse the current crisis in Ukraine, because that country sits on the doorstep of a nuclear-armed rival with massive local superiority in every dimension of military power. If Russia chooses to invade its former republic, Washington isn’t likely to send forces; in fact, it is reluctant to even send military aid for fear of provoking Moscow. Yet it shares a concern with its NATO allies that successful Russian annexation of Ukraine’s Crimea province — the first forcible revision of European borders since World War Two — could foster further aggression. What to do?

                        Economic sanctions are certainly a start, but when winter comes in a few months, Moscow will have a powerful source of leverage in the form of natural gas supplies that the West currently can’t match. Ukraine imports much of the natural gas that powers its electricity plants, steel mills and chemical complexes from Russia. In addition, roughly 20% of Europe’s natural gas supply is piped through Ukraine from the east in what the International Energy Agency describes as “the largest gas transit infrastructure in the world.” Most European countries have alternative sources of supply, but a cutoff by the Russian state-controlled energy enterprise Gazprom during the cold months could cause hardship far beyond Kiev.

                        Of course, any such cutoff would hurt Russia too, given the dependence of its economy on energy exports. But the gas is Russian leader Vladimir Putin’s most potent tool for working his will without going to war. Simply forcing Kiev to pay the same price for gas as the rest of Europe could have a devastating effect on its economy, which became dependent on energy subsidies during the Soviet era. If Gazprom’s current cutoff of gas supplies to Ukraine persists into the fall — ostensibly due to billions of dollars in unpaid bills for past deliveries — then the country may once again resort to siphoning off gas transiting its territory that is intended for the West.

                        That could lead to a breakdown in the sanctions regime as shivering Europeans decide they’d rather be warm than stand up for Ukraine. Washington has led the way in pushing for economic sanctions against Russia over its aggression in Ukraine, but America is less vulnerable to energy disruptions than Europe and will suffer less from the depressing effects of sanctions on trade and capital markets. What the Obama Administration needs to do is help Ukraine become less dependent on Russian energy supplies — thereby depriving Moscow of its most important non-military source of leverage over Kiev (not to mention the rest of Europe).

                        I should note that Kiev’s energy vulnerability is largely of its own making. Its economy is hugely inefficient in the use of energy, lacking either a realistic cost structure or the means to meter usage. Furthermore, its energy industry and regulatory system are corrupt, an inheritance of previous regimes that continued to follow Soviet-style practices long after the USSR had disappeared. In fact, the government of deposed president Viktor Yanukovych had close ties to organized crime. Experts such as Stephen Blank of the American Foreign Policy Council and Edward Chow of the Center for Strategic and International Studies have argued forcefully that Kiev needs to clean up its act if it wants to escape the stranglehold that Moscow currently exerts on energy supplies.

                        However, it will take a long time to fix the demand side of the Ukrainian energy equation. Eliminating subsidies, installing meters, and reforming regulatory practices will only unfold gradually, in part because many Ukrainians will not want to give up the benefits they receive from the present inefficient and corrupt system. So as a practical matter, if President Obama wants to make any real progress in reducing Russia’s leverage over Ukraine while he is still in the White House, the focus needs to be on the supply side. In other words, Washington needs to help Kiev find alternatives to Russian gas as soon as possible.

                        It turns out that is not so hard, and might actually prove beneficial to U.S. industry. Ukraine has abundant potential in virtually every form of useful energy. The country already meets a third of its natural gas needs from domestic sources, it has abundant reserves of coal, it is one of the world’s top-ten producers of nuclear fuel, and its potential for exploiting renewable sources of energy is impressive. The problem is that Kiev’s past governments have done too little to exploit this potential and break the power of the country’s indigenous energy mafia. Here are three fairly quick ways in which Washington could help Ukraine find alternatives to Russian gas.

                        Shale gas. You’d think a country that depends on imports for 39% of its energy needs must have limited indigenous reserves, but in Ukraine’s case the opposite is true. The country already produces a significant amount of natural gas and oil domestically using conventional means, and its reserves of recoverable shale gas — gas that must be extracted using newer technology such as fracking — are estimated at 42 trillion cubic feet. That’s over 500 times the country’s current annual rate of consumption. Two major basins where shale gas is known to exist in quantity stretch across the country’s northeastern and southwestern expanses, making it one of Europe’s most promising prospects for new gas exploration.

                        The International Energy Agency says Ukraine could eliminate its reliance on Russian gas imports by more vigorously developing indigenous sources while moving forward on renewables and initiatives aimed at reducing waste. But Kiev lacks a legal and regulatory framework for stimulating the shale oil sector, and exploration for unconventional sources of fossil fuel didn’t even begin until 2010. Washington has signaled an interest in helping Ukraine to develop its shale-oil reserves, an area where U.S. industry leads the world. What is needed now is an aggressive package of financial incentives and regulatory protections that would encourage international energy companies to focus on Ukraine so that commercial production for domestic use can commence.

                        Clean coal. Ukraine is one of the world’s largest producers of coal, and has significant unused mining and distribution capacity owing to a decline in output following collapse of the Soviet Union. It would be a relatively straightforward project to convert the country’s 22 large thermal plants generating electricity and heat from natural gas to clean coal. The U.S. company Babcock & Wilcox estimates the five biggest plants could be converted in 24-36 months using U.S. technology and the local workforce, at a cost of $200-250 million per plant. It says that if all 22 plants were converted, the country’s ten-year energy savings — coal costs less than gas — would be $22 billion. (Disclosure: Babcock & Wilcox is a modest contributor to my think tank.)

                        Clean coal has not been a prominent part of proposals to achieve energy independence in Ukraine, but in some ways it is the most attractive near-term option. The country already has capacity to produce more coal and the boiler-conversion process from gas to coal is well understood. Conversion would stimulate the local economy while providing an opportunity to install modern pollution-control equipment to capture noxious gases and particulate matter. And although carbon dioxide generated by burning coal is often cited as a cause of climate change, the methane escaping from creaky Soviet-era gas distribution networks is actually 85 times more potent over a 20-year period in contributing to greenhouse effects. Babcock & Wilcox says a federal loan-guarantee program could jump-start clean coal efforts in Ukraine.

                        Renewable energy. Ukraine only meets about 1% of its energy needs today using renewable sources, but the International Energy Agency and other authoritative sources say the country has huge potential to generate energy from hydropower, biomass, wind and solar collectors. The most developed renewable source is hydropower, which provides about 6% of electricity needs and has installed capacity equivalent to 10% of electric consumption. Wind energy potential for the country is estimated at 30,000 gigawatts, with about half the country suitable for siting of wind farms. And the country has been making rapid progress in deploying solar equipment — although current solar installations have less than 1% the capacity of Germany’s, a country that gets less sun

                        Collectively, renewables could make a sizable dent in Ukraine’s reliance on Russian gas, and they tend to require less investment than nuclear and fossil-fuel plants. However, it appears that new fossil-fuel sources such as shale gas and clean coal can bring about the quickest reduction in imports, given the way in which the Ukrainian energy system is organized. With some modest inputs of assistance in the form of loan guarantees and legal protections, the Western allies could help Ukraine to become energy independent within a few years, reducing the country’s vulnerability to Russian pressure. That won’t solve all of Ukraine’s problems, but it will help to achieve U.S. goals in the region without the use of military forces.
                        New Energy Sources: How To Make Ukraine More Secure Without Using U.S. Military Forces - Forbes


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                        • #13
                          Where to get money for the Donbas’s reconstruction?
                          Experts suggest that those who have “plundered this region in all the years of independence” take up this problem
                          Vitalii Kniazhansky 13 August, 2014 - 16:48

                          “I believe that our country will see peace return and reconstruction start someday, and we will need our industry at that very moment to ensure that people have jobs, taxes are paid, and social guarantees implemented,” general director of Metinvest company (a subsidiary of the SCM group) Yurii Ryzhenkov said. He also reported that all production units of his company were in operation as he spoke, but plants in cities of Yenakiieve and Khartsyzk, still held by the so-called Donetsk People’s Republic, were still in a difficult situation, just as mines of Krasnodonvuhillia concern located in the territory held by the so-called Luhansk People’s Republic, as coal shipments were impossible due to problems on the railway, and the concern was running up its inventory. According to Ryzhenkov, Mariupol, where two largest of the company’s metallurgical plants are located, was in good working order (the integrated plants decreased output in early August due to shortages of raw materials, but the problem had been solved), and Azovstal plant had even put its third blast furnace back into operation. Avdiivka Coke Plant, the top manager believed, was still a hot spot on the map of Donetsk region, as fighting continued in Yasynuvata. Moreover, Ryzhenkov stated that this chemical plant was receiving power via only one of its four power lines, forcing all the shops to operate at low rates – “we are again teetering on the edge of a stoppage.”

                          It can be seen from these reports that the industrial empire of the uncrowned king of the Donbas Rinat Akhmetov is still holding fast (Ryzhenkov said they were not counting losses yet, prioritizing preservation of personnel and equipment), and does not look as a colossus with feet of clay even in this situation. In the current situation, the company, according to Ryzhenkov, had August and September output contracted, and Metinvest was able to repay eurobonds out of its own cash flow.

                          However, the empire, which was omnipotent just a short time ago, has almost lost its former political influence. It seems that it wants to compensate for this loss on the humanitarian front, becoming a center of assistance for peaceful people of the Donbas, above all children, the sick, the disabled, retirees, and those who have lost their homes or are persecuted. This work has been conducted by Rinat Akhmetov’s Development Foundation. Just as Ryzhenkov informed the press about his company’s efforts to survive under war conditions, the foundation’s chief Anatolii Zabolotny told us how many people and at what cost in human effort and risk had been rescued from the warzones and pulled out of the rubble by its volunteers.

                          Is it just a PR drive? SCM’s director for PR Natalia Yemchenko expected such a claim. “If it was PR on our part, we would have brought here a pile of photos depicting children, women, and the disabled who have been rescued by us,” she told the press. The same press conference saw SCM announcing establishment of the dedicated humanitarian headquarters at the foundation. Yemchenko introduced to the public its coordinator Rymma Fil. “Previously, our most important task was to take people out of the warzones,” Fil said, “and help them find some temporary housing, but the crisis’s scale has gone up enormously. According to the UN, half the population of Luhansk has left the city, and it is a huge number. A lot of people have left Donetsk as well, with numbers easily in tens of thousands. This is happening on the eve of September 1, when school-age children are to go to school, and students are to go back to university. The evacuees just have nowhere to live. They are mostly staying at summer resorts and children’s camps for now, but starting in mid-September, and in any case from October on, these places will become unlivable. Meanwhile, the issue of humanitarian aid is being suddenly transformed from personal problems to ones involving entire cities. It is especially scary when people are bedridden...” Fil promised that the humanitarian headquarters would continue the foundation’s work, just on a larger scale.
                          read further: Where to get money for the Donbas’s reconstruction? | The Day newspaper

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                          • #14
                            VOA News / Economy Gabe Joselow August 18, 2014 7:34 PM
                            Ukrainian Businesses Look for Alternatives to Russia

                            KHARKIV, UKRAINE—

                            With tensions continuing to rise with Russia, Ukrainian businesses are looking for opportunities elsewhere.

                            In the eastern Ukrainian city of Kharkiv, near the Russian border, economic change is underway. On a warm summer's day riding the cable cars at an amusement park in Kharkiv, you would never guess there is a war going on next door.

                            Just a few hundred kilometers from here the Ukrainian military is battling pro-Russian separatists in a months-long conflict that has divided the country.

                            Kharkiv has remained relatively peaceful despite the conflict in neighboring Donetsk province, but the economy has taken a hit because of tensions with Russia.

                            So, business owners are looking for opportunities elsewhere.

                            Industries in places like Kharkiv were built around serving the needs of the former Soviet Union. Ukraine still exports about 25 percent of its products to Russia.

                            These include agricultural goods like sunflower seed oil, as well as other food and heavy machinery.

                            But new Russian trade restrictions on Ukrainian products have started to affect local businesses.

                            Dmytro Kutovyi runs a successful construction business in Kharkiv, his wife owns a popular upscale cafe, and they are active with a leading civil society forum.

                            “Probably in the short perspective, the Ukrainian economy will suffer losses because cooperation with Russia has lessened and in some fields has stopped," Kutovyi said. "But nothing extremely awful has happened during these months.”

                            Russia has already put restrictions on food imports from Ukraine and exporters have complained about new, prohibitive customs requirements to access Russian markets.

                            Kutovy says the increased pressure from Moscow has encouraged businesses in Kharkiv to start looking increasingly inward to Ukraine for opportunities.

                            “No economy can be dependent on one, even a really large, customer," he said. "Even now, companies are slowly starting to work on the domestic market, which is traditionally important for such fields as the defense industry.”

                            One of Kharkiv's biggest industries is the production of military vehicles bought by Russia. Ironically, the rebels fighting against the Ukrainian military are accused of using Russian-supplied equipment.

                            A new regional administration is focusing on shifting the defense industry to support the local economy, as well as the country's armed forces.

                            The head of the Kharkiv state authority, Igor Baluta, says the industry was long neglected under the previous government.

                            “Things for many years have been falling into pieces, say, sabotaged, by the leaders of the Ministry of Defense. We are trying to restore it now,” he said.

                            The new government of President Petro Poroshenko has agreed to trade deals with the European Union to encourage more economic cooperation with the West.

                            But Russia remains the economic powerhouse in the region, its greatest leverage stemming largely from the supply of natural gas.

                            In the meantime, as war rages, Kharkiv is optimistic the most promising business horizon is at home. Ukrainian Businesses Look for Alternatives to Russia

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                            Hannia - Hania - Mighthelp

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                            • #15

                              Nick Gaidai: Large-scale deregulation can translate into billions of income for economy
                              Aug. 29, 2014, 2:38 p.m. | Op-ed — by Nick Gaidai

                              One of the goals Ukraine's government set for itself was to improve the nation's stance in the World Bank’s Doing Business ranking by making structural changes in its regulatory system. Currently Ukraine ranks 112th out of 189 nations.

                              Done on a massive scale and in conjunction with specialized foreign institutions, deregulation can bring amazing economic growth worth billions of hryvnias in income, not to mention cutting down the number of headaches for business owners and managers.

                              Deregulation is known as the process of eliminating excessive regulations for businesses, be it by slashing unnecessary permits and licenses, simplifying customs procedures and administration of taxes, decreasing the frequency of inspections, or even cutting down the number of state control bodies. In broader terms, deregulation is not so much about limiting state intervention in business activity though organizational, legal, administrative, or economic measures, but more of a paradigm shift in relations between the state and business.

                              The paradigm, which existed up until now and, in fact, still exists, is that of the state as a burden for business. The system was created over a period of many years, and its roots go far beyond Ukrainian independence in 1991. In fact, the Soviet regulatory system motto “regulate everything and keep a tight rein” became the model for independent Ukraine, leaving fruitful grounds for corruption. Supported by Ukrainian bureaucrats and complemented by “necessary” regulations, it has become a machine for terrorizing the Ukrainian business, sucking dry entrepreneurs’ funds and time, all of which could have been used to make businesses more competitive in local and global markets.

                              Understanding the necessity of breaking the chains of regulatory burden binding the hands and feet of Ukrainian business, team of advisors to the Minister of Economic Development and Trade was established to start the process of collecting, filtering, prioritizing, and implementing deregulation initiatives by working with representatives from business, professional business associations, industry experts, universities, and international organizations, among other groups.

                              It is worth mentioning that the past experience in deregulation was focused mainly on regulatory areas (i.e. permits, licensing, taxation, inspections, etc.) and improving Ukraine’s standing in the Doing Business ranking. In our view, such an approach has significant drawbacks for two key reasons: when looking at deregulation only through the prism of regulatory areas, many initiatives are ignored (e.g. moratorium on the sale of agricultural land, initiating tender on the sale of 3G licenses). The second problem is that although a country’s position in the Doing Business ranking is a litmus test for potential investors, it is relatively easy to manipulate the rankings without making real structural changes in a country’s business climate and therefore it should not be considered an ultimate goal of deregulation.

                              Given these drawbacks, the team of advisors employed an approach where regulatory areas were analyzed within the economy-wide deregulation initiatives, as well as within six key Ukrainian industries: food, agriculture, construction, electricity, oil and gas, and IT. Initiatives within these industries were then further broken down by respective value chains.

                              After initial assessments of past experiences in deregulation, conducted by various organizations, including, but not limited to Coordination Center of Reforms, Foundation for Effective Governance, International Finance Corporation, European Business Association, and the American Chamber of Commerce, about 1,000 deregulation initiatives, both economy-wide and industrial, have been collected. Further analysis narrowed down the total number of initiatives to 800. As a result of the prioritization based on experts’ assessment, 200 deregulation initiatives of a first priority were identified.

                              Another challenge was the way to quantify the economic effects of the implementation of deregulation. In this undertaking, the team of advisors closely cooperated with the IFC. Based on the methodology developed, the economic effect was split into three categories: industry growth, elimination of corruption, and the reduction of government spending. The total effect from the realization of 800 deregulation initiatives was calculated at impressive Hr 170 billion economic growth by 2020, Hr 125 billion of reduced corruption per year, and a yearly cut in government spending by Hr 40 billion.

                              As of now, the team has moved on to the implementation stage, which is the toughest area of focus since the realization of each deregulation initiative is politically challenging as they harm powerful interests. We expect significant resistance from government officials, who benefit from corruption, bureaucrats, whose powers will be reduced, and oligarchs, who are likely to lose market monopolies. For each initiative, we will identify our allies and opponents. As the implementation stage moves forward this information will be published on our website, *еформа регуляторної політики України.

                              Nick Gaidai is Advisor on deregulation to the Minister of Economic Development and Trade and a former Consultant with Roland Berger Strategy Consultants. He is a graduate of University of South Carolina and a board member at Professional Government initiative, association which unites Ukrainian graduates of western universities aiming at supplying highly-qualified candidates for positions in the government sector.
                              Nick Gaidai: Large-scale deregulation can translate into billions of income for economy

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                              Hannia - Hania - Mighthelp

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