Tensed relations with Russia made Ukraine's manufacturers reorient to West

Author : Pavlo Kuzheev

Respondent : Viktor Pynzenyk

Source : 112 Ukraine

Ukrainian MP and financier Viktor Pynzenyk on 2019 state budget, the impact of the martial law, and the pressure of public debt on the country's economy
23:37, 13 December 2018

112 Agency

Ukraine has introduced martial law. What economic results will we face at the end of December, when it expires?

Martial law means the introduction of systems of any additional actions unusual for the normal regime. But some special actions are not introduced. The presidential decree and the law that approved this decree provide for only the right to introduce some kind of system of restrictive measures and specific actions in ten regions of Ukraine. And it depends on how the situation develops.

National Bank head (NBU) Yakiv Smoliy said that the liquidity of the banking sector is about 2,7 billion USD, which is a sufficient level for the proper uninterrupted functioning of the system

The growth rate occurred at 1.3%. I cannot say whether this is connected with this decision or not. Perhaps it had a definite influence on the course. But we deal here with excessive liquidity. Most likely, there is a reason for the growth rate, because excessive liquidity is the number of free funds that are in the accounts of commercial banks of Ukraine, that is, these funds can affect the exchange rate.

In 2014, the president explained why it was impossible to impose martial law for this period, they say, all external financial assistance would be stopped. Now the question is whether financial assistance from the IMF will be frozen - 3.9 billion dollars. They expected to receive the first 1.5 billion by the end of the year.

We have heard the IMF’s explanation that there are no legal restrictions on cooperation with us, in which martial law has been declared. Assistance depends solely on economic policy, on economic activities, associated with the provision or failure of IMF support. It is necessary to take into account one more circumstance: sometimes it is very difficult to judge the decisions taken in such situations.

How do sanctions against Russia affect the Ukrainian economy?

We have fewer ties with the Russian economy. Not only traditional war has been declared against us, but also a trade war, which is little talked about. We have a free trade agreement with the Russian Federation. This agreement prohibits the imposition of any restrictions on trade. RF has unanimously banned the importation of goods from Ukraine. It has also banned transit to some other countries. This economic war is declared and it lasts for many years. A positive moment here us that many of our manufacturers have reoriented to the West. Our exports to the CIS countries compared with 2013 fell 3.5 times. Our exports to the EU have increased. Our economy is looking for stable sales markets.

After the decision of the Stockholm arbitration, Russian Gazprom announced the termination of contracts with Naftogaz.

How to live with a neighbor who can turn off the gas tap any time? Are these civilized relationships of the XXI century? Therefore, Ukraine has made the right move, when stopped buying Russian gas. We do not have any problems with gas today. I do not see any risks now because we have enough gas reserves (17 billion cubic meters). According to statistics, daily gas withdrawal is 61 million cubic meters. This is less than 2 billion a month.

For how long will "Rotterdam+" exist?

As soon as we do all those things, any schemes will disappear, because the price will be set by the market. We cannot talk about the market price when there is one supplier.

Ukraine has risen by 5 steps and ranked 71st in the World Bank’s rating of ease of doing business. However, the conditions of doing business in Ukraine are among the worst in Europe.

This is one of the problems of doing business. When the investor hears that the owner suddenly changes, such things repel him. When he does not know which court to apply to. This is one of the reasons why an investor does not come here. And it’s not only about foreign ones. For these six months, foreign investors have provided $ 1.3 billion. This is not that much. Basically, this is the financial sector - $ 750 million. Mostly, this is a forced investment, when the National Bank forces the owners of Ukrainian banks abroad to recapitalize their banks. On the other hand, the National Bank states that an amount exceeding the amount of foreign investment will be withdrawn from Ukraine by repatriating profits by foreign companies. This indicates some problems. And the situation in the domestic market is no better. The statistics show that our investments grew by almost 20% in 9 months, but let's look at some other figures. How have the prices of industrial products increased? By 18%. Prices for construction and installation work increased by 23%. These numbers mean that there is no real growth. We must realize that slogans do not raise the economy, but the investments do. If we want a rate to exceed 2-3% (at least, by 5-7%), then the investment environment in the country should be significantly better than in other countries.

Last year, there were 115 rich people in Ukraine, and now this number increased to 135? I mean those whose wealth exceeds $ 50 million.

The rich people are not a problem. A country, in which people do not have the opportunity to get rich, does not have a chance for a better life. Our problem is that the wealth of some people is done against the background of the impossibility of improving the life of another people.

How do you see the influence of the participation of oligarchs in Ukraine’s economic development?

I am afraid that the possibility of this influence is high. Many decisions, made in the Verkhovna Rada, demonstrate it. They control groups of deputies who influence the adoption of certain decisions. You can find a common position if you have the will to do it. In 2005, the budget was adopted along with some decisions. We have canceled all the tax privileges, all preferences that individual oligarchs had. A lot of people who are engaged in business came to me then. They had one demand: not to save the benefits, but to apply this rule applies to all.

What is the future of eco-energy in Ukraine?

The European Bank said it would not give more than a single dollar loan for the construction of solar power plants. I think this is because there are no such prices for electricity generated by solar power plants. Just imagine what would happen if this approach to the power industry is maintained? These prices are just terrifying, and we have to pay. In other countries, the price of alternative energy is 3-4 times lower. Therefore, it is necessary to make a decision, and those people whom you called oligarchs have an extremely strong influence here.

Would Ukraine benefit from the functioning of the cryptocurrency market and its taxation? Is this an urgent question?

For what? Do we want to create another problem for people? I took some sweetie papers and say: buy, it will be a new currency. Bitcoin was worth 20 thousand USD, now it’s 4.7. Well, a technological element of the release of currency is permissible. You might even use it as a tool for market games. But it cannot serve as currency. The state should have a monopoly on the currency. Sometimes, the state uses it as a technological issue tool.

In November, five years have passed since the beginning of the Revolution of Dignity. Yanukovych did not sign the association with the EU thus launching the mechanisms that changed Ukraine forever. Finally, the agreement was signed and ratified. Did we pay the bad value? What has Ukraine got from the association now?

We have already received it. The desire of people to live in the civilized world is natural. Have you ever heard that Ukraine banned exports to the EU? Or banned transit? Of course, not. This is a huge market, comparable to the US one. This is a unique opportunity, and we need to use it.

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