SIGMABLEYZER ECONOMIST: UKRAINE HAS HIGH CAPABILITY OF ECONOMIC GROWTH, BUT ITS REALIZATION DEMANDS "DESOVIETIZATION" OF ADMINISTRATIVE SYSTEM
Topical Commentary: By Dmytro Shkurko
Ukrinform, Kyiv, Ukraine, Friday, November 16, 2007

BRUSSELS - Ukraine has a very high economic capability, but its realization demands "desovietization" of the administrative system, [a former] leading economist with the World Bank, [now] Director of the SigmaBleyzer Kyiv office Edilberto Segura said during a roundtable into the political and economic situation in Ukraine, which was staged in Brussels under the auspices of the Ukraine-EU Business Council.

According to Edilberto Segura, despite political disputes the economic situation in Ukraine is getting improved. The country has been demonstrating stable growth of GDP during the recent couple of years. But it cannot last for long, as the conjecture of the world economy is changing, which fact demands structural reformation of the Ukrainian economics. The national government will be highly responsible for the changes, as it must be "the locomotive of economic reforms".

The fact that three main political forces in Ukraine having similar priorities in the sphere of economy he said was a positive signal for likely investors. Successful realization of economic reforms will make Ukraine attractive not only for big investors, but also for small- and mid-sized European businesses.

By way of answering a question of UKRINFORM's Brussels-based correspondent Edilberto Segura stated his conviction that the future agreement on free trade zone with the EU will be very important for Ukraine, as it will allow diversifying its export.

Traditional for Ukraine export of metallurgical articles and chemicals will be important but it will not anymore demonstrate growing dynamics, as it was in the past. The reason is not only in the need of updating basic facilities, but the fact that international prices for these products have reached their historical maximum and we cannot hope that they will grow threefold as we observed during the recent five years. China's entering the metallurgical market will also promote its stabilization, the expert said.

In his opinion, the free trade zone with the European Union may become an instrument of diversification of export through stipulating both Ukrainian traditional branches, as textiles, chemicals and metallurgy, and growing export of other industries, first of all agricultural  goods, in which area Ukraine has huge possibilities.

According to Edilberto Segura, during the first nine months of 2007 Ukrainian exports grew by 27.4%, mainly due to metallurgical articles (+28.8%), chemicals (+17%) and machinery (+54.5%). At the same time, due to the growth of consumer capabilities and investment activities import grew by 32%, mainly in fuel and equipment imports.

As a result, trade deficit is rather high and it may lead to the shortage of the payment balance in the amount of 2.5% of GDP. With a view of rehabilitating the situation, a new government is urgently needed, who will have to take very energetic action.

He stressed that Ukraine keeps on remaining an attractive country for foreign investments, though it is still very difficult to do business in Ukraine. Ukraine's accession to the WTO and creating a free trade zone with the EU will promote investment boom in Ukraine and will enhance it economic growth.

"I know very well the economic situation in Bulgaria and Romania and I can say that to the moment of their joining the EU, neither of these countries were not better than Ukraine is now in terms of economic growth.

I'm not a politician and I can frankly state that obstacles of Ukraine's accession to the EU lie in the budgetary, rather than economic sphere, as the European agricultural lobby doesn't need a new powerful agricultural producer and re-distribution of subsidies. I have no doubts that Ukraine can be EU member, according to its economic performances."