Dear ladies and gentlemen,

Let me greet all the present here and express my gratitude to the organizers of the Conference for the opportunity for the representatives of business circles to exchange their ideas in relation of the state and prospects in the field of cooperation in the nuclear industry.

A remarkable feature of the end of the second millennium is rapid development of the economic relations in the world that have acquired a trend to globalization and mutual penetration, the latter being the result of increasing domination of the scientific and technical progress. There are taking place fundamental changes in the interstate and international relations; the socio-political, public and cultural relations are in the process of transformation all over the world.

In the UNCTAD Report at the United Nations Conference on Cooperation and Development in 1997 it was admitted that globalization of the world economy would finally become a heavy burden for less economically developed countries of the world. Selling and buying available assets have turned into a profitable business in the world as compared to the creation of new material values, which in its turn leads to excessive labor forces and rising in number of the poor population.

Due to UNCTAD data, anyway the major part of the direct foreign investments is related to the developed countries. Analysis of the world investment processes shows that the wish of the investors to invest their funds with the lowest risk results in the lions share (almost 73 per cent) of the direct investments remains to be concentrated in 26 developed countries. Much less (21 per cent) is related to 127 developing countries, and only few of that (about 6 per cent) approximately evaluated in US $160 billion is related to 28 countries with the economy in its transfer phase; the latter group includes Ukraine too.

Of course, such trends in the development of the world economies influence the setting-up of the economic basis in the countries that have got on the rails of the market relations only recently.

Ukraine, having chosen its independent way of development, showed a new pattern of the structure of the state socio-economic policy matching to the time by including the said changes in the Constitution of Ukraine; the basic criterion of the changes is admittance of the political, ideological and economic variety.

The course of economic reforms announced by the President of Ukraine in 1994 is the main element of the domestic and foreign policy of our state. It is owing to such a course, that there can be provided a qualitative restructuring of the economy, deep social changes and improvement of the people's wellbeing.

Seven years of the independence enabled creation of our own legislation basis, completion of structuring the state administration system; there are under formation the economic grounds of our state. Between 1994 and 1997 the most acute problem was settled - elimination of the hyperinflation that in 1994 was 10,000 per cent; in 1997 the 10 per cent level of inflation was reached, which should be considered as a situation that can be kept under control. The declining of the gross domestic product (GDP) has been decelerated, industrial production is gradually rising, the volumes of the capital investments, those of transportation services, as well as some other indicators, have started to increase too. In 1997 growth of the industrial production took place in five regions of the country, in 1998 this is true for 19 regions of the country, the indicator is not high. But we understand that the described situation in the economy have only been fixed, and that it can be qualified as a state of the unstable balancing, and that this situation may not be overestimated.

In spite of some progress, in general the economic situation remains utmost complicated; the financial crisis resulting from the crises on the Asian and Russian markets have become of systematic nature. It put limits on the possibilities for our state to provide a general economic stabilization and brought to the social problems becoming still more profound, and the financial problems having turned into the social ones: the indebtedness in labor payment as well as the delayed payments to the Pension fund are rising, there function at a loss not only separate enterprises, but a whole number of industries too.

Nevertheless, the Government of Ukraine undertakes measures aimed at improvement of the economic situation, and though currently on the macroeconomic level we have failed to achieve any cardinal changes yet, we have some positive attainments in the aspect of tactics.

A set of measures aimed at deregulation of the economy that was initiated in the end of 1997 demonstrated availability of enormous reserves for us on this way.

Undertaking urgent measures to optimize and simplify the procedures for implementation of entrepreneurial activities in Ukraine, granting permissions and licenses, introduction into practice of up-to-date accounting systems, setting up definite and clear algorithms in mutual relations with ministries and departments as well as with the local governments - these are all items from the list of the recent actions of the Government of Ukraine directed at improvement of the general investment climate in Ukraine.

Among the mentioned measures one should underline reducing the number of the sorts of activities that shall be liable to licensing. Currently it includes 41 sort of entrepreneurial activities, which in its turn corresponds completely to the requirements of the Memorandum between Ukraine and the International Monetary Fund.

There has been simplified the procedure for legalization of enterprises, the procedure has become clear and definite. The term for registration of the subjects of entrepreneurial activities has been reduced to 5 days.

Limitations concerning the number of the bank accounts for an enterprise has been canceled, the work in relation of ordering the procedures of inspecting enterprises is in process.

In the work with international financial organizations and, in particular, with the World Bank and European Bank for Development and Reconstruction, there is more often dominating the trend of transferring from the system projects to investment projects. There are being implemented or under preparation 34 investment projects and two projects requiring guarantees from the Cabinet of the Ministers of Ukraine.

As you know, the President of Ukraine approved a set of Edicts of the primary importance to settle the issues in the economic sphere that had not been under control of the legislation of Ukraine. At the present time the Government of Ukraine is implementing measures aimed at the speeding-up of the work directed at exercising the provisions of the said Edicts, because not all of them are acts of the direct binding, which, in its turn, restrains their practical exertion.

Continuing elaborating work in the above mentioned directions brings its positive results. The volume of foreign investments in Ukraine is steadily rising. In the first part of 1998 the foreign investors invested into the economy of Ukraine US $517.7 million, which is by 54.3 per cent higher than that for the same period last year. The main forms of involvement of foreign investments were investments in cash (US $361.4 million - 69.8 per cent) and investments in the form of movable and unmovable property (US $141.6 million - 23.7 per cent). Considering the dynamics of involvement of foreign investments for the recent five years, we can see presence of a steady trend for the rates of investments from foreign investors to grow, and consequently that concerning the interests of foreign investors to cooperate with Ukraine.

I understand that such an approach to the estimation of investments from foreign investors in Ukraine is in contradiction with the general estimations sometimes used by both Ukrainian experts, and especially by foreign experts.

Nevertheless, I would like to give some figures. I hope that the present here are aware of the world statistics concerning the foreign investments. It is well known that, for instance, China is the second after the USA in involvement of foreign investments, the total volume of which in 1997 was US $42 billion. If to define the proportion between the total volume of the investments to the number of the population, we will receive that the specific weight of those investments per capita in China is about US $40. In Ukraine in 1997 this indicator was US $14. If to consider the figures for 1998, it is expected that this index, taking into account the trends in the coming of investments, in the first part of 1998 will be US $20 of foreign investments per capita.

Bearing in the mind the fact that it took Ukraine only 6 years to attain the said indicators, while really the economic reforms were started in 1994, I believe that everybody understands that, despite the real problems and miscalculations, we have quite a high level of involvement of foreign investments.

From the other hand, I am not at all inclined to idealize the situation. For the recent years the level of the state capital investments has been only 4 to 5 per cent of the total costs from the state budget, or 1 per cent of the GDP, which is less than US $500 million (I am reminding you that only in 1997 the total sum of the received foreign investments was US $759.2 million); so the question is whether we can expect a noticeable increase in the coming of foreign investments.

However, even in the described situation I can see some possibility to achieve still more positive results. At today's meeting I would not like to attract the attention of the present here at the increase of the state capital investments. Different approaches can be used here in relation of both the involvement of bilateral credit resources of international financial organizations, and their combinations with domestic capital investments, by focusing these efforts on certain strategic spheres; and the number of such strategic directions should not exceed 3 to 5. I do not exclude that searching internal sources for financing can be done both on account of redistribution of the funds from the state budgets, and at a cost of pecuniary emission.

Currently, there have not been exhausted completely yet all possibly ways of involvement of the domestic resources, for example, by issuing state purposed securities for making investments of the "growth points" defined in advance.

Being back to the issue of involvement of foreign investments, I would like, first of all. To stop at the involvement of foreign investments through the mechanism of privatization of the state property.

Currently, 33 per cent of the production volumes are provided by the enterprises from the state property sector, the others - by enterprises with other property forms. The state has its share in 6,405 enterprises, and at 52 per cent of the enterprises the state having the dominating packet of shares.

Unfortunately, analysis of the processes of privatization, and in particular that of the certificate privatization showed the inefficiency of the said course. 5,520 enterprises were privatized, but the expected results were not achieved: the enterprises do not have their own working assets, which, of course, restraints their development and production growth. We expected to increase the incomes to the State budget of Ukraine at a cost of privatization and charging dividends on the state shares in joint-stock companies, but these expectations failed to come true. The total income of the enterprises with a state share is only $2.7 billion hryvnias.

Against this background in 1998 only 20 investors participated in the privatization of the property of the state enterprises, and only 7 of them became bidders and real owners of share packets, but only 2 investors got the control packets of shares.

A question rises, whether foreign investors are interested to participate in privatization of Ukrainian enterprises. Perhaps in Ukraine there are no objects attractive for investments? I think that the best these two questions can be answered by statistics. Now, doe to the data on July 1, 1998, in Ukraine there are registered 6,600 enterprises with foreign investments, 1,742 of them are engaged in production. Only during the first part of 1998 in Ukraine there were registered 193 enterprises with participation of foreign investors that brought the USA US $517.7 million. To my opinion, these figures speak for themselves.

How can be a foreign investor made interested? Everybody understands that it is one of the ways of involving the foreign capital in large volumes that would help, directly or indirectly, in balancing the payment system and the budget, bringing with it advanced technologies, know-hows, up-to-date marketing, export networks, etc.

It seems to me that the privatization process could experience a good impact through privatization of several bid objects that are attractive from the investment point of view. With that one should be based on successive schemes of holding privatization, for example, such as the Polish system of investment funds supported by the state and whose control is exerted by specialized western financial institutions. Leading western financial institutions or such international financial institutions, as the World Bank, European Bank for Reconstruction and Development should perform preparation of objects for their privatization.

And now, let me express some considerations concerning the procedure for privatization. By now, we have practically transferred the procedures for the certificate privatization on the pecuniary privatization. Almost no serious investor will take part in a privatization on such conditions.

The point is that the procedure of making decisions by foreign companies, investment, insurance and pension funds in relation of investing funds into shares in developed countries requires much more time, than it is provided by the corresponding regulations and procedures in Ukraine, and, taking into consideration that the system of informing about carrying out a share sale is limited, participation of serious foreign investors in auctions and bids is practically made impossible.

An important component to the investment climate is registration of the rights to ownership, including the rights to the real estate, lots of land and securities. In particular, the current order of allocating lots of land, according to which there required from the investor to prepare a project, and thus investment of significant funds without a guarantee of the further granting the right to the ownership of a lot of land; the latter cannot in the least stimulate the investor to invest his own funds into large investment projects, nothing to say about the projects related to the development of the infrastructure.

Among the unfavorable factors in the activities of foreign investors in Ukraine one should underline the current taxation system. I would not like to discuss all the wrongs of our taxation policy, but there should be pointed out that the repatriation tax valid in Ukraine for foreign investors that is equal to 15 per cent - and this is in addition to the income tax - does not in the least stimulate the foreign investors to invest in Ukraine.

Dear ladies and gentlemen!

In my speech I have tried to focus only on the key points of the activities aimed at the development of the strategic partnership with foreign investors. I hope that you have paid attention that, on the one hand, I have described the problems of the foreign investor in Ukraine quite sincerely. Especially I would like to add that the Government of Ukraine traces these problems and undertakes measures to settle them. From the other hand, I have given you the data that prove, first the investors in Ukraine work rather successfully, and, secondly, we are always ready for a dialog with foreign investors not only about settling their urgent problems, but also in relation of the issues of development of a joint strategy of a further cooperation.

Summing up my speech let me express you my gratitude to the organizers of the Conference for an opportunity to share the ideas. I an sure that this round table is a successful initiative that will contribute in full to making foreign investors confident of the development of cooperation with Ukraine.