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24 June 1998
For immediate release
[Press Releases Home]
PRESIDENT KUCHMA MEETS WITH CHAIRMAN OF UNION OF INDUSTRIALISTS
President Leonid Kuchma on June 22, met with Mr. Anatoliy Kinakh, Chairman of the Ukrainian Union of Industrialists and Entrepreneurs, to discuss cooperation of government and parliament with entrepreneurs and industrialists in implementing the presidential decrees aimed at resolving the current payment crisis, creating favorable conditions for businesses, and deepening economic reform. They expressed confidence that the measures stipulated in the decrees will facilitate financial stability and resolution of the current economic crisis. The economic dimension of the crisis underway in the parliament was also addressed. The President and the UUIE leader noted that the parliament's inability to elect a speaker has delayed decisions on important legislative acts.
PRESIDENT KUCHMA ORDERS CREATION OF SLAVUTYCH ECONOMIC ZONE
The President Leonid Kuchma has signed the Decree on Slavutych Special Economic Zone aimed at creating new jobs for Chernobyl nuclear power plant personnel laid off in connection with the shutdown of the station. The Slavutych zone is to exist until the year 2010 within the limits of the city of Slavutych, Kiev region. Subjects of the Slavutych zone who are registered with the Zone Administration and who realize investment projects on the territory of the zone are eligible for exemption from the following taxes and payments, regardless of amendments to the tax legislation: profit tax for the first two years, land rental payments, the State Innovation Fund tax, the Chernobyl Fund tax, the mandatory social unemployment insurance tax, and import duty on raw materials, materials, and equipment imported for industrial use. The presidential decree was signed under the "Transition Provisions" of the Ukrainian Constitution and will take effect in 30 days provided the parliament does not reject the bill by the same name by that time.
PRESIDENT KUCHMA PROPOSES MEASURES TO STABILIZE STOCK MARKET
President Leonid Kuchma has issued a decree approving measures for stabilizing the stock market. The measures provide inter alia for the following:
the State Commission for Securities and the Stock Market (SCSSM) and the National Bank of Ukraine are to draft within two months laws regulating the issuance and circulation of derivatives of securities and taxation of operations with securities; they are also required to draft measures for creating a National Depository System and monitoring the stock market; the SCSSM, the National Information Agency, and the National Bank of Ukraine are to draft within three months proposals on creating an interdepartmental information network and an information transfer system on the stock market; the Cabinet of Ministers is to adopt measures for signing with foreign credit institutions agreements aimed at attracting additional resources for creating the National Depository System; the SCSSM is to create an organ to organize the creation of the National Depository System and provide the necessary equipment and resources for its functioning; the State Property Fund is to transfer the national network of certificate auction centers to the SCSSM within three months.
UKRAINIAN-AMERICAN JOINT VENTURE FOR MANUFACTURE OF TRACTORS
On June 22, Prime Minister Valeriy Pustovoitenko attended a ceremony at the Cabinet's Headquarters in Kiev which involved the signing of an agreement between the Southern Engineering Plant and the US-based Case company on setting up their joint venture in Ukraine to manufacture wheeled tractors. Mr. Pustovoitenko voiced his intention to personally patronize the joint venture as likely to boost domestic tractor manufacture and Ukraine's tractor exporting capability. According to Yuriy Alekseyev, the Southern Engineering Plant's CEO, the joint venture's early activity will focus on assembling 250 h.p. tractors, some 500 of which are expected to be made by the year's close. Within several years to come, the joint venture's output may reach 4,000 to 4,500 tractors a year.
GOVERNMENT PLANNING TO OBTAIN FOREIGN LOANS IN JULY
The Ukrainian government intends to borrow on the foreign market in July, according to Deputy Prime Minister Serhiy Tyhypko. "After meetings with investors in London, I drew the conclusion that the market is now absolutely unpredictable; it could even get worse in the near future. I don't think we'll be able to enter the market in June; we'll try to do it in July," Mr. Tyhypko said. The Finance Ministry earlier planned to take out a foreign loan this June to finance significant government internal loan bond (OVDP) payments of 1,060 million hryvnia; due to lack of demand, the ministry has raised average OVDP yield from 56.73% to 73.46% per annum. Mr. Tyhypko said the government plans to take out two loans in July. "We'd like to take one small loan, which would allow us to improve the quality of the falling profitability curve of borrowing, and then come out again on a serious market. We will try to do this in July. If we cannot, we will move it to August, but August is a dead month," Mr. Tyhypko said. The government did not disclose the expected amount or currency of the borrowing. According to unofficial data, in July the Finance Ministry plans to attract 1,450 million hryvnia in foreign loans. "We now have a very small choice of markets. At the same time, we have to be efficient about finding something. We're looking at a number of currencies, and they might even be a bit untraditional," Mr. Tyhypko said. The Finance Ministry earlier considered the possibility of borrowing in Italian lira, Swiss francs, and French francs. In July-August, the Finance Ministry must pay out about 2,500 million hryvnia on foreign and domestic debts. The Finance Ministry earlier placed two tranches of three-year bonds denominated in Deutsche marks for a sum of 1,000 million, and two-year bonds in ECU for 500 million. The funds were used to finance social payments, redeem government bonds, and service foreign loans.
NATIONAL BANK TO OBTAIN EBRD CREDIT LINE
The National Bank of Ukraine aims at getting the European Bank for Reconstruction and Development to finance credit projects drafted by banks before the suspension April 30 of a credit line for development of small and mid-sized businesses, Oleh Rybachuk, director of the NBU’s international relations department, told Ukrainian News. "We have already agreed with the EBRD on their financing credit projects approved before April 30. Now we're continuing negotiations on the projects submitted before that date," Rybachuk said. In May, the EBRD suspended the activity of the credit line for development of small and mid-sized enterprises. The reason was violation of a number of the terms set for activity of the line. The EBRD says that due to reduction in bank capital, a number of banks violated the NBU’s limit on the maximum size of a loan for one borrower (25% of capital). On January 1, Ukrainian banks changed to international accounting and reporting standards; due to the change, the volumes of servicing banks' capital fell when they were audited for 1997. The results of the audit of servicing banks were sent to the EBRD April 30. In May, the EBRD and NBU concluded an agreement on opening a new credit line of 80 million ECU for development of small and medium businesses. The agreement will take effect upon its ratification by the Ukrainian parliament.
LOCAL AUTHORITIES TO COORDINATE LOAN BORROWING WITH FINANCE MINISTRY
A new presidential decree states that local government organs must coordinate with the Finance Ministry all their domestic and foreign borrowings, as informed by Deputy Finance Minister Vasyl Rehuretsky. President Leonid Kuchma signed an edict "On Regulating Domestic and Foreign Borrowing" on June 18. It will take effect within 30 days if Parliament does not pass a law on the issue. " An issue of internal local loan bonds is registered with the State Commission for Securities and the Stock Market after its amounts are agreed with the Finance Ministry," the edict stipulates. According to it, local bodies of power are to inform the Finance Ministry each month of the receipt of funds from bank loans and other types of borrowing. In 1995-97, the Finance Ministry did not control foreign borrowing or handle information on loans taken. Hence, on June 15, the Odessa municipality was not able to pay out 91.25 million hryvnia of the 91.5 million hryvnia due on its 1997 issue of municipal loan bonds. The Crimea, Lviv and Kiev, in particular, plan to take out loans in 1998. Bankers say financial market conditions are now unfavorable for foreign borrowing due to the financial crisis on some international markets.
UNEMPLOYMENT RATE STATED AT 2.9% AS OF JUNE 1
Data obtained from the Ukrainian State Statistics Committee states that the number of registered unemployed people stood at 824,777 as of June 1, (2.9% of Ukrainian labor force). There were 49,300 vacancies at Ukrainian enterprises as of June 1. In May, the State Employment Assistance Fund allocated 18,877,000 hryvnia toward provision of unemployment benefits. 500,336 people were receiving unemployment benefits in May. The average amount received by one person was 39.65 hryvnia.
PRICES FELL IN UKRAINE, ACCORDING TO STATE STATISTICS COMMITTEE
On June 5-16, food prices in the country fell by 1.2%, non-food prices dropped by 0.1%, prices at city food markets fell by 2.7%, and prices paid for services remained unchanged, according to the State Statistics Committee. In May, food prices fell by 1.2%, while prices of industrial products remained the same and prices of services rose by 2.1%. The overall inflation index in May was 0%. To date, no deflation has been recorded in any monthly summary by official statistics organs.