THE MOST FROM THE COAST !
KYIV Ukraine (Xinhua) —
The deep political and economic crisis that
has gripped Ukraine for two years is now easing, as the conflict in
its eastern region has partially subsided and its economy has seen a
glimmer of light for recovery.
Despite the encouraging signs, the country still has a long way
to go before an overall political stability is regained.
Although the year of 2015 has been hard for Ukraine, the
international diplomatic efforts to settle the situation did yield
some positive results.
In mid-February, leaders of Ukraine, Russia, Germany, and France
reached a landmark cease-fire deal in Minsk, the capital of Belarus,
providing a clear 12-point roadmap for resolution of the conflict
that has claimed more than 9,000 lives.
Although the deal has not been fully implemented and the road is
neither quick nor easy, currently a much-anticipated peace is coming
to the restive region as guns fall almost silent along the entire
frontline and displaced people are returning.
“Of course, it is too early to speak about an complete end to the
conflict, but now it is safe to say that a lasting cease-fire is
being established. In order to ensure the comprehensive peace, the
sides still have much work ahead,” said Vadim Karasev, the director
of the Institute of Global Strategies.
However, while violences and tensions have decreased, risks of
armed conflicts still remain.
First of all, the rival sides have found little common ground
concerning the future fate of the insurgent-held areas.
In addition, questions also remain over when all heavy weapons
will be withdrawn from the frontline, when all prisoners will be
released by both sides, and when Kyiv will regain control of the
Ukrainian border in the insurgent-controlled areas as prescribed in
the Minsk peace deal, which is due to expire on Dec. 31.
Besides, the prospects for an early end to the conflict are
dimmed by Kyiv’s decision to boost military spending next year to 5
percent of its gross domestic product, a record high since Ukraine’s
independence.
As the conflict that took a heavy toll on Ukraine’s backbone
industries and its overall business activities is easing, the
country’s economy is showing initial signs of recovery.
After almost two years of drastic decline, Ukraine’s economy
expanded 0.7 percent on a quarterly basis in the third quarter.
The
growth, plus other latest positive macroeconomic data, indicated
that a return to growth might be on the horizon.
In October, Ukraine’s industrial production showed an increase
for the second consecutive month, foreign exchange reserves have
doubled comparing with the beginning of the year, and the exchange
rate of the local currency has been stabilized.
“The Ukrainian economy has bottomed out and gradually returning
to growth. If the external and the internal political situation
could remain at least at the present level, next year we can expect
an economic growth of 2 percent,” said Alexander Sokolov, the chief
executive of the Pro-Consulting investment company.
Yet, his optimism may be premature.
The bad news is that the current stabilization was achieved not
through the structural economic improvements, but mostly on the back
of international loans, which should be repaid in the coming years.
Instead of squandering the loans on its everyday needs, Ukraine
should use the funding on implementing reforms, which could be
unpopular in the short-term, but will bring results in future.
“The current model of the Ukrainian economy is absolutely
outdated.
“If we do not carry out reforms, we would actually jeopardize the
existence of Ukraine as an independent state and the country would
experience a permanent crisis,” said Igor Burakovsky, the head of
the Kyiv-based Institute for Economic Research and Policy
Consulting.
Implementing deep political and economic reforms, ending the
conflict and improving the well-being of Ukrainians were the main
pledges of pro-Western authorities, which took over the country in
2014 when street protests toppled the previous government.
Yet, the pledges were not fully met and one of the main reasons
was due to disagreements within the ruling elite.
Just as in previous years, Ukraine’s main political players
continue searching ways of achieving political advantage over each
other, instead of working as a single team to develop the country.
First of all, it applies to the settlement of the conflict in
Donetsk and Lugansk, which is perhaps Ukraine’s biggest problem at
the current stage.
While President Petro Poroshenko and his allies have proposed to
solve the conflict through granting the restive areas a special
status, enshrined in the constitution, three major parliamentary
parties have rejected it, saying that boosting the autonomy of the
conflict-torn regions will “break the country apart.”
On Aug. 31, a parliamentary vote over the autonomy for eastern
Ukraine triggered an unrest outside the parliament building, in
which three policemen were killed and more than 100 wounded.
The tensions underlined how difficult it would be for the bill,
which is included in the text of the Minsk agreement, to win a final
approval from the two-thirds of the country’s lawmakers in the
second reading, whose precise date has yet to be set.
Another bone of contention among the Ukrainian policy-makers is
how to further develop national economy.
The government and the parliament have differed in a range of
economic reforms, such as tax code amendments, austerity measures
for next year, energy sector reform and changes of business
regulations.
The disagreements over the taxation reform and the draft 2016
budget have already resulted in a delay of disbursement of the
International Monetary Fund’s (IMF) third aid tranche for Ukraine.
And if the country further holds back its economic reforms
because of disagreements between the cabinet members and the
lawmakers, it risks losing all financial support from the
international lenders.
The ruling parliamentary coalition is also itself on the verge of
breaking up, because of antagonisms inside it.
At the beginning of
September, the Radical Party, which controls 21 seats in the
450-seat parliament, announced its withdrawal, meaning that the
remaining four factions lose the 300 vote majority needed to amend
the constitution.
Currently, certain lawmakers from different political parties
continue to drop from the coalition one after another, signaling
that the ruling majority may remain even without 226 votes needed
for adoption of routine laws.
Looking at a larger picture, it appears that the Ukrainian
policy-makers, some of whom are believed to be controlled by big
businesses behind the scenes, are acting as a circular firing squad.
The president, whose popularity appears dimmed by a lack of
progress in much-promised fundamental changes to the country, cannot
really rely on the government and the parliament.
And such a fact trims his influence among foreign partners and
undermines the international credibility of Ukraine.
The country’s foreign policy also finds itself in difficult
straits. While Ukraine’s relations with the European Union (EU) in
particular and the West in general have strengthened, its ties with
Russia, which used to be Kyiv’s essential trade and political
partner for decades, had further deteriorated in 2015.
Ukraine’s course westwards, launched in 2014, was cemented in
2015 after Kyiv has surprisingly passed all the reforms set by the
28-member block to obtain a visa-free travel following five years of
delay.
Ukraine’s closer ties with the West have also further fueled its
tensions with Russia, which have been deteriorating since last year
over the developments in Crimea and eastern Ukraine.
This year, the two ex-Soviet neighbors have exchanged sanctions
targeting their airlines, military sphere, and some other sectors.
Currently, they are threatening to introduce a food embargo
against each other starting from next year.
While the Ukrainian authorities are undaunted in their devotion
to developing ties with the West, believing that the free trade with
the EU will compensate for losing the Russian market, analysts warn
that curtailing trade ties with Moscow could be devastating to the
Ukrainian economy.
“All markets have different conditions, different tastes and
standards.
“When one market is closing, it is impossible to automatically
enter the other, selling the same volume of goods,” said Alexandr
Zholud, an economist at the International Center for Advanced
Studies.
Apart from economic aspects, Ukraine’s pivot to the West is also
defined by the country’s military policy, especially by the creation
of a joint military unit with Poland and Lithuania and rhetoric
regarding a decision to join NATO one day.
But despite the changes in Kyiv’s foreign policy priorities, the
issue whether to forge political, economic and military ties with
the West or with Russia remains deeply controversial in the country,
with people in the country’s west, north and center are
Europe-oriented, while people living in east and south are more
Russia-oriented.
If these differences are not properly managed, they could
eventually bring a serious trouble to the authorities.
In the current circumstances, it could be better for Ukraine to
pursue an independent strategy with a non-aligned status, pragmatic
economic dialogue with all international partners and a balanced
policy between the East and the West in foreign relations.
.
EARLIER REPORT:
European Union-Ukraine trade deal triggers new round of economic
clashes
BRUSSELS Belgium (Xinhua) —
The European Union (EU) and Ukraine
have started applying the Deep and Comprehensive Free Trade Area
(DCFTA) from Friday which formed part of the Association Agreement
signed in June 2014.
As a retaliation, Moscow is toughening economic restrictions
against Ukraine by suspending its free trade deal with Ukraine and
banning food imports from the same day.
The EU and Ukraine signed the Association Agreement with its Deep
and Comprehensive Free Trade Area on 27 June 2014.
With a ten-year transition period, the DCFTA covers a range of
economic sectors such as agriculture, heavy industry, machine
building and light industry, and would gradually remove custom
tariffs on over 90 percent of goods traded between Ukraine and the
EU.
EU exports to Ukraine amount to 17 billion euros and Ukraine
imports from the EU equaled 14 billion euros (data for 2014). Main
EU exports to Ukraine consist of machinery and appliances, transport
equipment, chemicals and manufactured goods.
Ukraine’s main exports to the EU are base metals, vegetable
products, mineral products, machinery and appliances.
EU’s Commissioner in charge of trade Cecilia Malmstrom expressed
confidence in the prospects for Ukraine.
“The entry into force of this trade area on 1 January 2016
creates unique opportunities for Ukraine to stabilise, diversify and
develop its economy to the benefit of all its citizens.
Assistance from the EU will be made available to help Ukrainian
SMEs seize these new opportunities, to grow, and thereby create
jobs.
EU businesses will benefit as well by gaining improved access to
a market of 45 million people.
The change will not occur over night, it will require work and
investment. Gradually, the DCFTA will contribute to a prosperous
Ukraine and to stronger economic integration with the EU,” she said.
The deal was applauded by the Ukrainian government, which upholds
a goal of approaching to the 28-member bloc EU.
“The free trade agreement with EU launched! My greetings on the
start of Ukraine’s economic integration into the European Union,”
Ukrainian President Petro Poroshenko said on his Facebook page.
According to the Ukrainian government, the free trade area with
the EU would boost Ukraine’s annual economic growth by at least 0.6
percent, promote exports by 2-3 percent each year, and create up to
190,000 new jobs.
Ukrainian authorities said that such results would be achieved
through modernization of the country’s economy, implementing new
technologies designed to improve the quality and competitiveness of
Ukrainian-made goods and easier access to the market of 500 million
consumers.
Another big aim of the deal is to align licensing of the
Ukrainian products with international standards, which would allow
the East European country to boost trade not only with the EU, but
also with other foreign partners.
However, Moscow, which has a separate preferential trade
agreement with Kyiv, has long warned that it would curtail access of
Ukrainian products to its market once the deal takes effect to
protect Russia from European goods flooding in via Ukraine without
import duties.
In mid-December, Russian President Vladimir Putin signed a decree
suspending Russia’s free trade deal with Ukraine beginning on Jan.
1, 2016.
Ukraine’s exports to Russia stood at 10.7 billion U.S. dollars in
2014, according to Russia’s official customs data.
Under the decree, Ukraine will no longer enjoy the most favored
nation treatment under the framework of the Commonwealth of
Independent States (CIS) free trade deal, as well as a host of
preferential policies in areas of migration, customs, quarantine
inspection, and investment.
Meanwhile, Moscow is toughening economic restrictions against
Ukraine by banning food imports from the neighbor starting from the
same day when EU-Ukraine trade deal becomes effective.
The European Union (EU) has prolonged the economic sanctions
against Russia until July 31, 2016, which Russia’s Foreign Ministry
slammed as a move to sabotage the implementation of the
peace-seeking Minsk agreement clinched in spring 2015.
“Retaliatory economic measures will be applied to Ukraine on Jan.
1, 2016, due to its accession to the anti-Russian sanctions applied
by the EU and the United States,” Prime Minister Dmitry Medvedev
announced in mid-December.
Medvedev has signed a government decision to impose a total ban
on imports of agricultural products from Ukraine, which includes raw
materials and foodstuffs.
Ukraine’s exports to Russia stood at 10.7 billion U.S. dollars in
2014, according to Russia’s official customs data.
“We have repeatedly told the Ukrainian authorities that the
implementation of the trade and economic agreement with the EU
affects our interests and creates a risk of our economic security.
“There have been several rounds of negotiations, which produced
no results,” said Medvedev.
On Wednesday, the Ukrainian government said it had passed trade
restrictions on Russia in response to Moscow suspending a free trade
agreement.
The trade restrictions will be introduced only if Moscow imposes
a trade embargo against Kyiv, Ukraine’s Deputy Economic Development
and Trade Minister Nataliya Mykolska said.
The protective measures, proposed by the country’s Economic
Development and Trade Ministry, envisage cancellation of
preferential import duties on Russian goods starting from Jan. 2,
2016.
In addition, they stipulate imposition of an embargo on a range
of Russian-made products, from food, cigarettes, alcohol beverages,
chemicals to equipment, starting from Jan. 10.
Controversy surrounding the EU-Ukraine trade deal was the initial
trigger for unrest in Kyive, and analysts said the negative impact
of the crisis may be enlarged again in the coming year as the three
parties are conflicting fiercely on the trade deals.
.
Latest Trade part of European
Union-Ukraine
Association Agreement becomes
operational
BRUSSELS Belgium (Xinhua) —
The European Union (EU) and Ukraine
have started applying the Deep and Comprehensive Free Trade Area
(DCFTA) from Friday which formed part of the Association Agreement
signed in June 2014.
The rest of the Association Agreement has already been in force
since November 2014.
EU’s Commissioner in charge of trade Cecilia Malmstrom expressed
confidence in the prospects for Ukraine.
“The entry into force of this trade area on 1 January 2016
creates unique opportunities for Ukraine to stabilise, diversify and
develop its economy to the benefit of all its citizens.
Assistance from the EU will be made available to help Ukrainian
SMEs seize these new opportunities, to grow, and thereby create
jobs.
EU businesses will benefit as well by gaining improved access to
a market of 45 million people.
The change will not occur over night, it will require work and
investment. Gradually, the DCFTA will contribute to a prosperous
Ukraine and to stronger economic integration with the EU,” she said.
Independent studies suggested that the simple implementation of
the AA/ DCFTA would bring benefits of about 6 percent of additional
Gross Domestic Product over the medium term and 12 percent in terms
of increased welfare for Ukrainians.
Much more can be expected if Ukraine genuinely implements the
reforms foreseen by the Agreement, as they would improve the
business climate and help to attract foreign investments and
technology transfers, according to the statement released by the
European Commission, EU’s top executive body.
However, Moscow said the EU-Ukraine deal could lead to a flood of
European imports into Russia and make its own exports to Ukraine
less competitive.
Russian President Vladimir Putin in December signed a decree
suspending Russia’s free trade deal with Ukraine beginning on Jan.
1, 2016.
Ukraine’s exports to Russia stood at 10.7 billion U.S. dollars in
2014, according to Russia’s official customs data.
Under the decree, Ukraine will no longer enjoy the most favored
nation treatment under the framework of the Commonwealth of
Independent States (CIS) free trade deal, as well as a host of
preferential policies in areas of migration, customs, quarantine
inspection, and investment.
The EU and Ukraine signed the Association Agreement with its Deep
and Comprehensive Free Trade Area on 27 June 2014.
EU exports to Ukraine amount to 17 billion euros and Ukraine
imports from the EU equaled 14 billion euros (data for 2014).
Main EU exports to Ukraine consist of machinery and appliances,
transport equipment, chemicals and manufactured goods.
Ukraine’s
main exports to the EU are base metals, vegetable products, mineral
products, machinery and appliances.
.
Ukraine seeks continuation of debt-restructuring talks with
Russia: minister
KYIV Ukraine (Xinhua) —
Ukraine’s Finance Minister Natalie Jaresko has said here that her country is intended to continue
debt-restructuring talks with Russia, which were stalled over Kyiv’s
ban on debt repayments.
“I expect that our dialogue will continue in January, after
winter holidays,” Jaresko told reporters during a media conference.
Earlier this month, Ukrainian Prime Minister Arseny Yatsenyuk has
ordered the cabinet to impose a moratorium on repayments of its
multi-billion debts to Russia and said that Kyiv was preparing for a
legal battle with Moscow over the debts in court.
The moratorium, which took effect on Dec. 20, applies to a
3-billion-U.S.-dollar loan in the form of Eurobonds borrowed from
Russia by the Ukrainian cabinet in December 2013 and several
government-guaranteed loans totally worth 582 million dollars.
Moscow has previously said that it will appeal to an
international court to recover the Eurobond debt, if Ukraine fails
to pay it by Dec. 31.