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Israel-Ukraine FTA: Ukraine just offers cheap raw materials

Author : Oleksiy Kushch

09:33, 17 May 2018

Israel-Ukraine FTA: Ukraine just offers cheap raw materials

Author : Oleksiy Kushch

Ukraine could raise the market of start-ups but went on about the agrarians and metallurgists

09:33, 17 May 2018

Read the original text at 112.ua.  

president.gov.ua

Israel is in the world top news again. You bet, sure, when the US president is your backup dancer. Sometimes it seems that the Land of the Covenant takes all the frontal lobes in Trump's mind. He is almost like a Russian leader Boris Yeltsin, waking up, asking himself and the officials: "What have you done today?" But Yeltsin was thinking of Ukraine, and Trump is thinking about Israel.

Time has made its own adjustments and now the kinship in the Oval Office is passed along the line of the son-in-law... Although, if this external influence had no strategic bases, then those sons-in-law would help. And so fans of a conspiracy have something new to discuss.

In this coordinate system, all the nearby and subject countries of the Middle East are transformed into the Valaam donkey. Balaam prophet rode on the donkey to the Moabites to curse the Israelites, but when his donkey saw an angel with a sword on the road and spoke "not in a donkey's voice," he suddenly changed his mind and blessed those whom he wanted to curse yesterday.

Related: Ukraine, Israel initial Free Trade Agreement

The marker of the country's top positions is numerous indicators, which, like the bulbs in the cockpit, indicating that the flight is normal. And this is not about some economic matter. The model of the behavioral economy pays too much attention to such details as psychology, consumer choice, collective decisions. One of these markers is Eurovision. There are good singers at each competition, but “the necessary ones” win. A few years ago, Ukraine was in the European top, thanks to which our representative won the contest, although by the decision of the experts Australia won, and according to the viewers - Russia. This year, the "world political charts" were formed clearly without our participation, as a result of which the talented Ukrainian performer was moved to the second ten. The representative of Israel won, and she stated in her homeland that the contest will be held in Jerusalem.

How is this whole story interesting for Ukraine? In the next five years, Israel will be in the top. In the American and, therefore, the world one. And for us, given historical reminiscences, unique opportunities are opened for using close relations with Israel for the development of our economy and our system reset.

In March 2018, Ukraine signed with Israel a preliminary protocol on the establishment of a free trade zone. Last year, Ukrainian exports to this country amounted to $ 604 million, and imports from it were only $ 167 million; exports grew by 23%, while imports fell by 10%. In other words, we have a positive trade balance for 436 million dollars, and also an increasing dynamics of increasing the "plus". Among the main product, groups that we supply to the Israeli market are grain ($ 281 million), metals ($ 156 million), and oilseeds ($ 48 million). The Ukrainian market is supplied with chemical products ($ 66 million), polymers ($ 14 million), and pharmaceuticals ($ 7 million).

Related: U.S. Embassy to Israel to opened in Jerusalem today

In accordance with the preliminary agreements between Ukraine and Israel, it is planned to practically recreate the trade and economic model that is already operating between our country and the EU. This is a standard trade stencil, which, unfortunately, does not fully take into account the innovative opportunities for further cooperation. What does it consist of?

As a rule, a country that is more economically developed reveals its market more deeply than its underdeveloped partner. At the moment, Israel's GDP per capita is 35-37 thousand dollars per year, while this figure ranges from 2.5 to 3 thousand in Ukraine, that is, the economic potentials of the two countries can be estimated as 10: 1. It is assumed that Israel will open its market by 80%, and Ukraine by 70%. It would seem an advantage on our side, but a 10% margin does not compensate for our economic backwardness. Ukraine receives duty-free trade for the most part of industrial goods; the problem is only that we have almost none of them. But speaking about food, duties are not applied only within the limits of the quotas. At the same time, Ukraine pledged to reduce duties on Israeli vegetables and fruits. The schedule of zeroing of duties will be extended for seven years. In general, the usual classic, exactly the same trading model is laid in the agreement on FTA between Ukraine and the EU.

Related: Why Israel's Benjamin Netanyahu came to Putin's parade?

But this is, you could say, something outdated. The problem is that the demand for the work of our officials is formed not by national interest, but by the immediate commercial. He who has the gold makes the rules. And who has the money in Ukraine? Metallurgists, grain traders, and sellers of "sunflower seeds" and sunflower oil. They form the trading agenda, defending their interests in the process of developing trading protocols. And the officials are helping them here in every possible way. Israel has nothing against it; it is not afraid of strengthening the industrial products on the market of Ukrainian producers, and therefore opens up a green light for them, knowing well that we have nothing to offer.

But if you look a few years ahead, Ukraine needs to get access not so much to the goods market but to Israel's services and, first of all, the development of the system of start-ups. Getting into the Israeli ecosystem of innovation is akin to a lucky lottery ticket because according to the Startup Genome, this country ranks second in the world in terms of innovative development after Silicon Valley in the US. Local officials not only stimulate this sector, allocating 4-5% of GDP per year on research and investigations (while in Ukraine this figure is in the range 0.5-0.7%) but also create a venture capital investment. As the experience of Israel has shown, a long-term war is a unique "incubator" for developing the ability of non-standard thinking at the mass level. Turning the crisis into opportunities is the key principle of Israeli start-ups. By investing in innovation of approximately 500 million US dollars. The Israeli government has reached a tenfold multiplier effect and not only returned the money spent by the state but also got to the exit of the market capitalization of the innovations of $ 4-5 billion. At this point each year, about 5000 start-ups work in Israel, they are funded by 250 venture funds and 1,000 "business angels." The basis for the innovative development of the country is an effective education system that stimulates tax policy, protects investments and titles of property.

Related: Gold hunters systematically desecrate mass Jewish graves in Ukraine

Thus, it is completely pointless to enter into a standard FTA with a country like Israel, more precisely, it will not bring any significant effect and will turn into another tick in the records of officials. Israel needs to offer an innovative agreement on the establishment of a free trade zone in the services and innovation sector, completely freeing from taxes and any currency restrictions joint innovative projects and start-ups. Ukraine has tremendous human capital and today it is also turning into a supplier of "digital raw materials", the peak of which has already been passed and this direction is expected to inevitably decline in the next five to ten years. At the same time, we practically do not use our innovative potential to attract venture investments and create start-ups attractive for foreign buyers. And Israel will become like a bridge to the Silicon Valley (USA): American companies are the main players in the local market of start-ups.

Related: The number of successful startups in Tel Aviv grows 20% annually

However, in order to get to the innovation landscape of a foreign country, you need to offer something more than the Hasidic "golden ring" from Uman to Medzhibizh or mention the fact that the great Hebrew poet Chaim Bialik and Shaul Tchernichovsky were born and raised in Ukraine. We need a systemic state policy that shows Ukraine's friendly location to its partner. And here, strange voting in the UN or a scandal with the consul in Germany, which posted Nazi symbols and xenophobic statements on his Facebook, are completely out of place. Xenophobia itself must be severely punished at the state level. Unfortunately, the current state ideology emits completely different people, who are able to destroy their own home and take a dump in someone else’s house.

This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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