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Henry M. Robert

Foreign enterprises will relocate to Ukraine..

“To win the competition in the domestic market after the creation of the FTA with the EU, domestic companies should speed up modernization...”
23 April, 2014 - 18:19

Production facilities may be shifted from other countries to Ukraine after the signing of the economic part of the Association Agreement with the EU, deputy chairman of the Federation of Employers of Ukraine (FEU) Dmytro Oliinyk stated. In his opinion, it will involve redundant capacity.

“European companies wishing to retain their share of the EU market and reduce the production costs may be interested in it, as they will be able to shift some production lines to Ukraine. There may be interest on the part of companies from third countries, too, which are prevented by trade restrictions from increasing their market share in Europe. Locating their businesses in Ukraine will enable them to export products to the EU and enjoy low fiscal burden. First of all, we are talking about investors from China and Russia,” he noted.

Oliinyk also noted that to make that happen, Ukraine would need to implement a series of steps. Firstly, we have to reduce the fiscal burden and eliminate corruption. After all, the FEU estimates that business community has paid more than 37 billion hryvnias in advance taxes, the amount of unrebated VAT is 21.6 billion hryvnias, and the amount of bribes paid reached 200 billion hryvnias in 2013. In addition, it is necessary to reduce the energy intensity of the Ukrainian economy.

Secondly, we have to reduce the energy intensity of the production sector. “Ukraine has the highest rate of energy use per unit of GDP in its neighborhood, including the EU countries, at 435 kilogram of oil equivalent per 1,000 dollars of GDP, and the highest level of natural gas consumption among similarly-sized economies of Eastern Europe,” he told us.

Third priority is construction of new production facilities, which will also change the structure of Ukrainian exports. “Today Ukraine exports to the EU mainly raw materials, with their share reaching 75 percent. Our imports from the EU, on the contrary, are 70 percent high-tech products. Creation of new businesses will increase exports of high-tech products, and hence GDP and number of jobs,” he concluded.

At the same time, experts say that Ukrainian producers have no time to rest. They already have to look for money to fund retrofitting to win this competition on their own turf. As president of the Ukrainian Agrarian Confederation Association Leonid Kozachenko told The Day, the modernization of the Ukrainian food industry to bring it in line with EU standards will cost 7 billion euros. “There is processing industry, too, which must be certified. At the moment, we have about 7 percent of food companies holding both ISO and HACPP certificates, while 15 percent hold only one of them,” he explained.

By Natalia BILOUSOVA, The Day
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