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24 September 1998
For immediate release
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Prime Minister Pustovoitenko Refers To Reimbursement Of External Debts As His Government's Urgent Problem

Speaking at a Cabinet session on September 21, Prime Minister Valeriy Pustovoitenko referred to the reimbursement of external debts as the government's most important problem. The premier subdivided the problem into three stages, such as reimbursement of the external debt against the security of the government, repayment of credits given by the Russian Federation and Turkmenistan, and payment for the consumed Russian natural gas with Ukrainian commodities. According to the data, till the year's close Ukraine has to reimburse its external debt to the amount of $ 152 million. If we fail to pay, we will have to settle the debt at the expense of social benefits and wages of budgetary organizations, said the premier. He expressed satisfaction with the outcome of the talks with his Russian counterpart Yevgeny Primakov, referring to the talks' atmosphere as very sincere and realistic.

Most Kiev Residents Oppose Government's Resignation

A poll conducted among Kiev residents indicates that a large majority of them do not want Prime Minister Valeriy Pustovoitenko's government to resign. The poll, which was conducted by the Political Technology Center, indicates that only 21% of respondents expressed dissatisfaction with the current Cabinet of Ministers while 16% expressed either indifferent or were undecided. 63% said they considered the parliamentary opposition's demand for the Cabinet of Ministers' resignation to be a dangerous political game that is unacceptable under the present financial crisis.

Parliament Confirms Ban On Raising Tariffs For Housing And Communal Services

On September 15, Ukrainian parliament confirmed its ban on raising tariffs on housing and communal services, having overruled President Kuchma's veto on the law "On Temporary Ban on Raising Prices and Tariffs on Housing and Communal Services and Public Transportation Services." Parliament adopted the law on July 23. 317 out of 357 deputies voted to overrule the president's veto (a two-third majority is required to overrule a presidential veto). President Kuchma had vetoed the law on the grounds that it violated the Ukrainian Constitution as well as on the grounds that "its introduction will have negative economic consequences and require additional budget allocations." According to government estimates, introduction of the law will require an additional 800 million hryvnia in central and local budget subsidies. The population presently pays 80% of the cost of communal services. Full payment for housing and communal services provided to the population was planned to be introduced on July 1. According to Volodymyr Gusakov, head of the State Committee for Construction, Architecture, and Housing Policies, the Cabinet of Ministers has drafted procedures for calculating tariffs for housing and communal services in such a way that tariffs will rise only by 10%. A July 27 Cabinet of Ministers resolution raised the ceiling on tariffs for housing and communal services from 15% to 20% of a family's average monthly income. Housing tariffs were last raised in August 1996 to 80% of the actual cost of communal services.

Economics Ministry Appeals To Constitutional Court On Parliament's Freezing Of Housing Tariffs

Ukraine's Deputy Economics Minister Viktor Kalnyk has described as economically unjustified the parliament's adoption of a law temporarily freezing the tariffs on housing and communal services and public transportation fares. Mr. Kalnyk told a press conference on September 23 that the law would not improve the population's social welfare, since low-income citizens already receive state subsidies. According to him, the law will also permit the prosperous section of the population to avoid paying the full cost of services, essentially receiving subsidies that they are not entitled to. Moreover, the deputy economics minister described the new law as a serious obstacle to implementation of the government's measures to stabilize the financial situation in the country and boost domestic manufacturers' working capital. According to Finance Ministry data, the temporary price freeze will require 800 million in additional budget allocations while enterprises will lose over 2 billion hryvnia in incomes. Mr. Kalnyk said that low-income citizens would ultimately suffer as a result of the law. The Economics Ministry is preparing an appeal to the Constitutional Court to clearly define the powers of Parliament and the Cabinet of Ministers on the issue of price regulation and pricing policy. These functions are within the government's competence, he said.

State Regulation Of Prices Will Be Discontinued On October 1

State regulation of prices will be discontinued on October 1, Deputy Economics Minister Viktor Kalnyk told journalists on September 23. "We have limited the prices of low-octane gasoline for a short period: until October. This is due to monopolistic tendencies on the petroleum products market. I am confident that we will not have to extend the relevant directive even if the situation on the currency market worsens," Kalnyk said. "We believe that state regulation of prices should be limited to monopolies on the market and such regulation should not involve provision of subsidies and most importantly, it should be introduced for a short period - no longer than one month. Introduction of state regulation of prices for a longer period will result in higher inflation." Authorities in the Crimea, Kiev, and the Kharkiv region made "spontaneous, illegal" decisions to regulate the prices of certain types of goods and services while the government permits regulation of only the prices of petroleum products, Mr. Kalnyk said. The Economics Ministry has sent letters to the regions involved demanding that they rescind their illegal decisions before October 1.

Inflation Process In Ukraine Will Be Much Milder Than In Russia, Economics Ministry Forecasts

First Deputy Economics Minister Viktor Kalnyk has referred to the development of inflation process in Ukraine after the "Russian model" as unrealistic. As disclosed by him at a press conference on September 23, the Economics Ministry's forecasts for the current year presume two practical variants of developments in view of today's dynamics of the foreign exchange rate. The first variant would be ensured by the implementation of the government's anti-crisis measures to the full extent. In this case, inflation would amount to 147.3 percent in September, 103.1 percent in October, 101.8 percent in November, and 102.4 percent in December. It means that over the December 1997-December 1998 period, the decline would amount to 118 percent versus estimated 110-112 percent. If the government fails to completely implement anti-crisis measures, the total inflation amount could reach 129.3 percent over the named period. Mr. Kalnyk voiced conviction that the Cabinet of Ministers would be able to realize its anti-crisis program. At worst, the government has foreseen measures for identification of the population's incomes in case the inflation index exceeds the level determined by the law, said the first deputy economics minister. These resources have been secured in the budget and can be provided through increasing minimal wages and social payments, he said.

Parliament Opposes Cancellation Of Certification Of Goods Having International Certificates

On September 16, Ukrainian parliament excluded from the draft law "On Certain Measures to Deregulate Business Activities" a provision canceling re-certification in Ukraine of goods having international certificates. Several deputies agreed with Tatiana Kiseleva, head of Ukraine's Committee on State Standards (Derzhstandart), who said that cancellation of mandatory certification of imported goods would simplify importation of poor quality goods into the country. According to Oleksandr Kuzhel, head of the State Committee for Business Development, Derzhstandart frequently abuses its power to certify foreign goods and unjustifiably conducts captious inspection of goods manufactured by prominent foreign firms holding international certificates. Moreover, certification of spare parts imported for Ukrainian goods raises their prices. Deputies approved the draft law's provision prohibiting government organs from inspecting an enterprise more than once in a year; stipulating that unscheduled inspections are to be carried out only in cases stipulated by law; introducing inspector registration journals at enterprises; banning confiscation of enterprises' documents and assets; and prohibiting all government organs, excluding the State Tax Service (and customs organs in certain cases), from suspending operation of enterprises' bank accounts. On the eve of the parliamentary consideration of the draft law, the Association of Ukrainian Entrepreneurs called on Parliament to abrogate the July 23 presidential decree "On Certain Measures to Deregulate Business Activity." The presidential decree will go into force on September 23 unless Parliament rejects the draft law.

Prime Minister Pustovoitenko Attends Ceremony Of Launching New Tanker Built At Kiev Shipyard To Order Of Dutch Company

A new tanker built to the order of the Dutch company "IHDA Shipbuilding Service BV" was launched at the Kiev shipyard "Leninskaya Kuznitsa" on September 22. The tanker had been built by the "Leninskaya Kuznitsa Plant" in cooperation with the Ukrainian industrial-investment concern which had provided guarantees to the Dutch company for the project's financing. The new ship's length is over 85 meters, the width exceeds 10 meters, while the tank capacity is 1,900 cubic meters. The tanker is equipped with pumps and pipeline systems designed for freight handling. Speaking at a rally on the occasion, Prime Minister Valeriy Pustovoitenko stressed that the fulfillment of the Dutch company's order supports the Ukrainian shipbuilding's high prestige on the international market, as well as Ukraine's ability to compete with western and South-Korean shipbuilding companies. Currently, the plant is completing the building of a head trawler of new generation and fulfilling a contract on building three ships for the Russian Federation. As disclosed by Valeriy Pustovoitenko, during recent talks held by the Ukrainian president and prime minister in Russia, further expansion of Russian orders at Ukrainian shipyards had been touched upon among other issues. The premier stressed a considerable attention the government is paying to the development of the shipbuilding as a priority industry. During the last year-and-a-half period only, the Cabinet issued over 15 resolutions and directions referring to the shipbuilding, said Mr. Pustovoitenko. In 1997-98, over 60 million hryvnias were allocated as a financial support for the industry, which allowed shipbuilding enterprises to stop the decline in production, reduce debts to the state budget and lessen social tension in labor collectives.

Presidential Decree Being Drafted To Create Special Economic Zone Based On Mykolaiv Shipyard

Specialists with the Economics Ministry and representatives of regional administrations currently are drafting a document aimed at creating a free economic zone on the basis of the Mykolaiv-based shipyards. The document is expected to form the basis of a presidential decree, which President Kuchma instructed directed the Cabinet of Ministers to draft before the end of 1998. Creation of the special economic zone is expected to help Ukrainian shipyards to overcome the crisis in the sector.

Program Approved For Developing Ukrainian Insurance Market

On September 14, the Cabinet of Ministers approved the Program for Developing the Ukrainian Insurance Market in 1998-2000. The program provides for improving the existing normative base, raising the solvency of insurance organizations, and setting conditions for establishing and operating insurance organizations.

President Kuchma Signs Decree On State Management Of Information Sector

The document is aimed at improving efficiency of the state information policy, supporting national broadcasting companies, printed media, publishing and printing companies, as well as at improving administrative structures while reducing their number, and forming the information infrastructure of the Ukrainian state. Under the decree, the National Information Agency of Ukraine (DAINU) has been formed under the Information Ministry. The president also supported the Cabinet of Minister's suggestion to establish state joint-stock companies "National TV and Radio Broadcasting" ("UkrTeleRadio") and "Ukrainian Publishing and Printing Association" ("UkrIzdatPolygraphia") with transferring 100% shares of state joint-stock companies transformed from state information companies not subject to privatization to their authorized capital. The government is due to implement relevant measures aimed at the companies' establishment within six month.

Prime Minister Pustovoitenko Meets With DAEWOO Group President

On September 21, Prime Minister Valeriy Pustovoitenko met with Kim Woo Jung, president of the DAEWOO Group, to discuss a necessity to perfect the system of sales of products of the Ukrainian-South Korean AvtoZAZ-DAEWOO joint venture and the project's current issues. As disclosed by Minister of Industrial Policy Vasyl Gureyev, as of today, the joint venture has assembled 20,000 automobiles, out of which only 1,770 DAEWOO cars and 300 Tavrias have been sold. The parties have agreed to establish a joint venture, which would be engaged in the products' marketing and which is likely to be based on the "UkrAvto" service company having a well-arranged sales network. Ukraine is interested in the AvtoZAZ-DAEWOO project's further development, stressed premier. He gave relevant instructions aimed at solving problems of the parties' mutual interest.

Ukraine Will Soon Begin Mining Diamonds

Prime Minister Pustovoitenko said that Ukraine will soon begin its own diamond, for which state support is likely to be provided. He was speaking on September 23 during a meeting with representatives of the geological and mining industry. It was noted that last year's Cabinet of Ministers decision to repay the industry's debts has facilitated significant development of the industry.

NSA Director-General Negoda Reassures Worried Public As To Ukrainian Rocket Zenith-2's Future

Speaking at a press conference in Kiev on September 18, Oleksandr Negoda, Director-General of the National Space Agency of Ukraine, commented on the recent launch failure of the Ukrainian Zenith-2 carrier rocket stating its underlying cause as an incredible malfunction of the rocket's two computers, incidentally made in Russia. Mr. Negoda referred to this double computer mishap as an unprecedented one in the history of space exploration. Following the fact-finding commission's final verdict, Ukraine will likely attempt to launch an "Ocean" Ukrainian-Russian spacecraft in November, though originally the launch had been slated for December. As the NSA head disclosed, during the relatively brief spell of Ukraine's existence as a sovereign and independent nation, a total of 47 Ukrainian carrier rockets (Cyclone-2s, -3s and Zenith-2s) have been launched with only four of these having been setbacks. Within the same period, there have been two failures involving US boosters, one Chinese booster's failure and abortive launch attempts involving one French booster and a Proton. Mr. Negoda referred to Ukrainian boosters of the Zenith class as highly reliable, efficient and unique in this category of space rocketry. Ukraine is doing everything to make the Zenith booster regain its hitherto unblemished reputation, Mr. Negoda said. American astronaut Kevin Kregel, the Columbia crew's commander, echoed Mr. Negoda's utterances saying that space exploration is anything but an easy ride and not exactly meant for those who fear setbacks. The American astronaut referred to the Southern Engineering Plant's record of successful space launches as statistically spectacular. He also volunteered to embark on a space exploration mission on board the very first manned Zenith-2, provided Ukrainian astronaut Leonid Kadenyuk agree to be the mission's commander.

EBRD Is Ready To Participate In Preparing Ukrtelecom For Privatization

The European Bank for Reconstruction and Development is ready to provide $ 200 million in loans for preparing Ukrtelecom for privatization, Yaroslav Kinakh, director of the EBRD's representative office, said on September 16. The State Property Fund hopes to begin privatizing Ukrtelecom next year. Parliament must adopt the relevant law before Ukrtelecom can be privatized. Ukrtelecom completed construction of the Pivden and Pivnich fiber-optic trunk lines in 1996; the EBRD provided a loan for the project.



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