AUR#813 Feb 9 Sweden’s Top Bank Buys Into Ukraine; Vanco; Westinghouse; VOA-RFE/RL; Case-New Holland; Corruption; Danone; Nestle; Biodiesel

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ACTION UKRAINE REPORT – AUR           
                 An International Newsletter, The Latest, Up-To-Date
                     In-Depth Ukrainian News, Analysis and Commentary

                      Ukrainian History, Culture, Arts, Business, Religion,
         Sports, Government, and Politics, in Ukraine and Around the World       

                        
ACTION UKRAINE REPORT – AUR – Number 813
Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., FRIDAY, FEBRUARY 9, 2007

              –——-  INDEX OF ARTICLES  ——–
            Clicking on the title of any article takes you directly to the article.               
   Return to the Index by clicking on Return to Index at the end of each article
1.                  SWEDEN’S TOP BANK BUYS INTO UKRAINE
By David Ibison in Stockholm and Roman Olearchyk in Kiev
Financial Times, London, UK, Thursday, February 8 2007

2.                UKRAINE’S CREDIT RATING MAY BE RAISED
                            BY MOODY’S, S&P ON GROWTH
Bloomberg News, London, UK, Thursday, 08 Feb 2007

3.       UKRAINE OFFERS VANCO 50% OF PRIKERCHENSKY

      OIL AND GAS FIELD DURING INDUSTRIAL PRODUCTION
Interfax – Russia, Kyiv, Ukraine, Tuesday, Feb 06, 2007

4BRC CERTIFICATE OPENS EXPORT DOOR FOR UKRAINE’S
                               SANDORA JUICE COMPANY
FreshPlaza correspondent Poland, FreshPlaza
Hertenkamp, The Netherlands, Thursday, February 8, 2007

5UKRAINE’S NATIONAL NUCLEAR POWER GENERATING CO
        CONFIRMS WESTRON AS ITS CORPORATE SUPPLIER
           Westron was founded in 1994 by Khartron (Ukraine) and
                Westinghouse Electric Company (United States).
Ukrainian News Agency, Kyiv, Ukraine, Wednesday, February 7, 2007

6U.S. BROADCASTING BUDGET PROPOSES REDUCTIONS FOR
         UKRAINIAN BROADCASTS BY BOTH VOA AND RADIO
                    FREE  EUROPE/RADIO LIBERTY (RFE/RL)
Broadcasting Board of Governors
Washington, D.C., Monday, February 05, 2007

7.   HUNGARY’S STILL HOT, FROM BUDAPEST TO BALATON
              Irish developer also looking for investments in Ukraine
Kevin O’Conner, Irish Times, Ireland, Thursday, Feb 08, 2007

8UKRAINE MOP MANUFACTURER LOOKING FOR PARTNERS
ISSA News, The Experts on Cleaning and Maintenance
Lincolnwood, Illinois, Wednesday, February 7, 2007

9.          UKRAINE: 2006 – A YEAR OF ECONOMIC SUCCESS?
COMMENTARY AND ANALYSIS: By Valentin Zelenyuk
Kyiv Post, Kyiv, Ukraine, Thursday, Feb 08 2007

10.    POLISH MINISTER URGES U.S. INTEREST IN PLANNED
                         UKRAINE-POLAND OIL PIPELINE
PAP news agency, Warsaw, Poland, Tuesday, 6 Feb 07

11.   CASE-NEW HOLLAND OFFERS STATE AGRICULTURAL
  LEASING COMPANY PROGRAM TO ORGANIZE PRODUCTION
               OF AGRICULTURAL MACHINERY IN UKRAINE
By Dmytro Kuzmin, Ukrainian News Agency
Kyiv, Ukraine, Friday, February 2, 2007

12FORMATION OF COUNCIL OF INVESTORS (COI) POSTPONED
                           List of members has not been approved
By Natalya Nepryakhina, The Kommersant-Ukraine
Kyiv, Ukraine, Friday, February 02, 2007

13.           YANUKOVYCH TO BECOME HIS OWN ADVISOR
   Cabinet of Ministers created Council of Investors (COI) Advisory Body
By Antonina Bazhan, The Ekonomichna Pravda internet newsletter
Business and economy by Ukrayinska Pravda,

Kyiv, Ukraine, Thursday, Feb. 1, 2007

14.                 A FAIR LAND MARKET OR A LAND GRAB?
ANALYSIS & COMMENTARY: Gary Reusche & Stephan Vitvitsky
Kyiv Post Kyiv, Ukraine, Thursday, February 08 2007

15.     UKRAINE: THE ECONOMIC EFFECTS OF CORRUPTION
ANALYSIS & COMMENTARY: By Oleksandr Shepotylo
The Ukrainian Observer magazine #228
The Willard Group, Kyiv, Ukraine, February 2007

16LARGE U.S. STEEL PRODUCER NUCOR STARTS PURCHASE

OF PIG IRON FROM DONETSK REGION METALLURGICAL PLANT
Ukrainian News Agency, Kyiv, Ukraine, Thu, February 1, 2007

17NETHERLANDS CO INVESTS IN UKRAINE FOR FIRST TIME
   Acquires over 50% of Styrol chemical concern (Horlivka, Donetsk region)
Ukrainian News Agency, Kyiv, Ukraine, Friday, February 2, 2007

18. USAID REALIZING TWO-YEAR $8M PROJECT TO DEVELOP
           TRADE, INVESTMENT AND BUSINESS IN UKRAINE
Interfax Ukraine Economic, Kyiv, Ukraine, Wed, January 31, 2007

19.    POLISH ALUMINUM KETY TO LAUNCH PRODUCTION IN
       UKRAINE IN 10 DAYS; EXPECTS FURTHER INVESTMENTS
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, February 1, 2007

20FRENCH GROUP DANONE TO INVEST OVER EUR 20 M IN
                     KHERSON DAIRY PLANT CJSC RODYCH
Interfax Ukraine Economic, Kherson, Ukraine, Friday, January 26, 2007

 
21. AUSTRIA’S MEINL LAND LTD TO MAKE FIRST INVESTMENT IN
     UKRAINE WITH EUR 150 MILLION IN TRADE CENTER IN ODESA
Interfax Ukraine Economic, Kyiv, Ukraine, Sunday, January 25, 2007
 
22. UKRAINE: NESTLE TO INVEST OVER $50 MLN IN NEW PLANT 
                      Will employ 1,200 workers in Volinskiy Region
Interfax-Ukraine, Kyiv, Ukraine, Wednesday, Jan 24, 2007
 
   MAJOR BOOM IN EXPORTS TO RUSSIA AND UKRAINE IN 2007
Interfax Central Europe, Budapest, Hungary, Thu, January 25, 2007
 
24.   BIODIESEL OF BESSARABIA TO LAUNCH BIOETHANOL
              MINI-PLANT IN ODESA REGION BY FEBRUARY
Interfax Ukraine Economic, Kyiv, Ukraine, Friday, January 26, 2007
 
25.   UKRAINIAN PRESIDENT MEETS WITH U.S. HELICOPTER
               MAKER SIKORSKY AIRCRAFT CORPORATION
Interfax-AVN military news agency website, Moscow, in English 18 Jan 07
BBC Monitoring Service, United Kingdom, Thursday, Jan 18, 2007
 
26.           UKRAINIANS: THE INFERIORITY SYNDROME?
ANALYSIS & COMMENTARY: By Volodymyr Senchenko
The Ukrainian Observer magazine, Issue 227
The Willard Group, Kyiv, Ukraine, January 2007
 
27.    STRUGGLE ERUPTS OVER ANCIENT CHURCH IN KYIV
ANALYSIS & COMMENTARY: Elisabeth Sewall, Assistant Editor
Kyiv Post, Kyiv, Ukraine, Thursday, February 08 2007
 
28INTERNET ENCYCLOPEDIA OF UKRAINE (IEU) FEATURES:
               THE ART OF FRESCO PAINTING IN UKRAINE
Internet Encyclopedia of Ukraine Newsletter
Dr. Marko R. Stech, Managing Director, CIUS Press
Project Manager, Internet Encyclopedia of Ukraine
Toronto, Ontario, Canada, February 2007
 
                                 Sunday, February 11, 2007
Action Ukraine Report (AUR) #813, Article 29
Washington, D.C., Friday, February 9, 2006
 
30.       CIUS PRESS PRESENTS A GUIDE FOR UKRAINIAN
                            GENEALOGICAL RESEARCH
CIUS Press, University of Alberta, Edmonton, AB, Canada, Feb, 2007
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1        SWEDEN’S TOP BANK BUYS INTO UKRAINE

By David Ibison in Stockholm and Roman Olearchyk in Kiev
Financial Times, London, UK, Thursday, February 8 2007

Swedbank, Sweden’s largest bank, is to acquire Ukraine’s TAS-Kommerzbank
for up to $985m, continuing the eastward expansion of Sweden’s banks away
from the mature Nordic markets to Europe’s high-growth emerging markets.

The Swedish lender will acquire 100 per cent of TAS-Kommerzbank,
Ukraine’s 13th-largest lender, for $735m plus an additional $250m in three
years if the bank’s performance meets certain undisclosed criteria.

Sweden’s largest banks are expanding into the Baltics, eastern and central
Europe and Russia, driven by surging economies in those regions and
populations there that are relatively new to sophisticated banking services
and products.

Swedbank and SEB, another Swedish bank, control 70 per cent of the Baltic
banking market between them and derive up to a quarter of net profits from
the region.

Yesterday’s acquisition provides further proof that Ukraine’s banking sector
is poised for a period of acquisitions. Foreign ownership of Ukrainian banks
is about 25 per cent compared with 70 per cent in Poland and 90 per cent in
the Czech Republic.

Several European banking groups, including the National Bank of Greece, are
close to completing acquisitions of two other Ukrainian banks, Forum and
Kreditprombank, and a handful of medium-sized banks are also for sale.

Ukraine has a population of 47m, nine times larger than Sweden’s, but its
per capita gross domestic product is languishing at about $1,771, well
behind its central and eastern European neighbours. However, an expected
compound annual growth rate of 5.3 per cent over the next five years is
expected to narrow this gap.

TAS-Kommerzbank was founded in 1989 and has 170 branches nationwide.
Its net interest margin in 2006 was 6.5 per cent, down from 8.6 per cent in
2004 and 7.5 per cent last year.

It has total loans $834m, although non-performing loan figures were not
disclosed. Its cost income ratio is 54 per cent, down from last year’s 58
per cent but up from 2004’s 39 per cent. Since 2004 it has more than
doubled its workforce and expanded its branch network.
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2.     UKRAINE’S CREDIT RATING MAY BE RAISED
                   BY MOODY’S, S&P ON GROWTH

Bloomberg News, London, UK, Thursday, 08 Feb 2007

Ukraine’s credit ratings may be lifted this year by international credit
agencies including Moody’s Investors Service and Standard & Poor’s

as high prices for steel and grain drive economic growth.

Ukraine is the biggest former Soviet state with credit ratings below
investment grade, a legacy of political instability and delays in selling
state assets and gaining membership of the WTO.

“Ukraine’s rating is B1, which is very low,” said Jonathan Schisser, a
Moody’s analyst in London by telephone. “We may raise it” though the

timing “depends on political stability and the government’s ability to carry
out structural reforms.”

Ukraine, a country of 47 million bordering the EU and Russia, seeks higher
credit ratings to reduce borrowing costs and win more overseas investment.

Foreign direct investment since the collapse of communism in 1991 totals $20
billion, less than a fifth of the amount lured by neighboring Poland. Higher
credit ratings mean lower debt costs for the government and Ukrainian
companies.

Ukraine’s 7.65% benchmark government bond maturing in 2013 yesterday

yielded 6.09%, down from 6.66% in October 2006. President Viktor
Yushchenko is battling with Prime Minister Viktor Yanukovych, the man
he ousted two years ago in the Orange Revolution, over domestic and foreign
policies.

Yushchenko seeks to bring the country into the European Union and NATO.
Yanukovych, who aims to rekindle links with Russia, has taken control over
some presidential powers, a move Yushchenko is challenging through the
courts.

“The situation there is not fantastically improving, but it is stabilizing,”
Standard & Poor’s analyst Helena Hessel said in a telephone interview in New
York. “The main constraint” on a ratings upgrade”is the political situation,
as the president is losing power and the prime minister is opposing him.”

Still, economic growth averaged 8.4% in the past five years and GDP has more
than tripled from $30 billion in 1998, when the nation defaulted on hundreds
of millions of dollars in debt, devalued its currency and eroded reserves.

“We expect the rating agencies to respond to the improved credit
fundamentals by delivering rating upgrades this year,” Tim Ash, the managing
director at Bear Stearns International Ltd., said in e-mailed comment on
February 7. “Ukraine’s rating at four to five notches behind Russia appears
somewhat unjust.”

Russia is rated Baa2 by Moody’s, BBB+ by S&P, BBB+ by Fitch. Poland,

which joined the EU in 2004, is rated A2 by Moody’s, A- by S&P, A- by
Fitch.

Exports including steel and grain and proceeds from shipping Russian gas via
Ukrainian pipelines to Europe make up more than half of GDP. The economy is
forecast to expand 6% a year through 2011, said Economy Minister Oleksandr
Makukha on January 30.

Ukrainian steel was traded at $455 per ton on the spot market February 5,
compared with $312 per ton a year ago, according to Bloomberg data.

Average prices for Ukrainian steel will increase 5% to 7% this year from a
year ago, analysts say, including Ivan Kharchuk, an analyst at Kiev-based
largest brokerage Dragon Capital.

Average prices for Ukrainian grain were $153 per ton in January this year,
compared with $85 per ton a year ago, Bloomberg data shows. “We

believe there is a good prospect of an upgrade,” said Ed Parker, a senior
director at Fitch sovereign group in London, in an e-mailed statement.”

Although Ukraine is likely to be subject to political noise for the
foreseeable future, Fitch believes that political risk is of a lower order
of magnitude than two-three years ago.”

Moody’s raised Ukraine’s outlook to positive from stable in November,
indicating it is ready to improve the rating. The foreign and local issuer
default rating was affirmed at B1, four steps below investment grade.

Fitch raised Ukraine’s outlook to positive a month before that.

The foreign and local issuer default rating was affirmed at BB-, three steps
below investment grade. S&P kept its long-term foreign debt rating at BB-,
its long-term local debt rating at BB and its short-term sovereign credit
rating at B, the company said in a statement in July. The outlook remained
“stable,” S&P said.                           -30-
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3. UKRAINE OFFERS VANCO 50% OF PRIKERCHENSKY
 OIL AND GAS FIELD DURING INDUSTRIAL PRODUCTION

Interfax – Russia, Kyiv, Ukraine, Tuesday, Feb 06, 2007

KYIV – Ukraine is proposing that Vanco International Limited sign a
production sharing agreement (PSA) on the Prikerchensky oil and gas field

in a proportion of 60:40 during industrial testing and 50:50 during industrial
production, Environmental Protection Minister Vasyl Dzharty told reporters
on Tuesday in Kyiv.

The PSA preparations with Vanco are in the final stages, Dzharty said. “The
document will be sent off next week, will be agreed on and will already be
signed within a month. There are no more major problems [with Vanco],” he
said. “We have prepared these terms and I think that Vanco will agree to
them,” he said.

Vanco International, a subsidiary of Vanco Energy Company, in April 2006 won
a tender announced by the Ukrainian government on the right to reach a PSA
agreement on the Prikerchensky oil and gas field.

Vanco sent the Interagency Commission its initial draft of the PSA in July
2006 that was adjusted several times. The Ukrainian government did not like
the draft proposed by Vanco and instructed the commission to prepare its own
version in October 2006 within three months.

Covering 3.2 million acres (12,960 square kilometers), the Prikerchensky PSA
Tender Area is located offshore the Crimea near the Kerch region. In its
northern shallower part, the Tender Area contains a prominent Tertiary
folded belt with numerous prospective structures similar to the recently
announced Subbotina oil and gas discovery.

The field has tentative D+2+3 reserves of 30,000 tonnes of fuel units per
square kilometer. No drilling has been carried out at the section.   -30-
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4.  BRC CERTIFICATE OPENS EXPORT DOOR FOR UKRAINE’S
                               SANDORA JUICE COMPANY

FreshPlaza correspondent Poland, FreshPlaza
Hertenkamp, The Netherlands, Thursday, February 8, 2007

WARSAW – The Ukrainian company Sandora occupies the leading position
on the Ukrainian juice market. According to the data provided by MEMRB,
Sandora’s share on the Ukrainian juice market was about 47% in 2006.

Last year, the company’s sales grew by 26% in comparison with data from
2005. In 2005 Sandora produced 409,3 million units of production (juice +
wine), in 2006 – 536,1 million units.

The production is exported to 24 countries, and Sandora is already leader in
juice markets of Belarus, Moldova, Azerbaijan, Armenia and Kirgizstan. An
increase in export sales in 2006 – in comparison with 2005 – was about 40%.

2006 became the year of active development and expansion of technical and
production capacities for Sandora, which will give company possibility of
increasing juice production by another 24% (wine – by 15%) in 2007.

In 2006, the company opened a new plant with an investments of 20 million $.
The new enterprise is equipped with 5 production lines with a production
capacity of 400 million units per year (next two additional new production
lines will make possible to increase the production capacities to 575
millions units per year).

But to its final designed capacity – 670 mln units per year – will be
reached by the end of 2007, according to company’s forecast.

What is interesting, Sandora is the only producer in the Ukraine, and one of
the few in East Europe, who obtained the BRC certificate – the universal
British standard, which opens the doors to networks of British supermarkets
Sainbury, Asda, Tesco, Waitrose) and retailers in Finland, Norway, Sweden
and Netherlands.                                      -30-
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LINK: http://www.freshplaza.com/2007/0208/1-7_ua_brc.htm

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5.  UKRAINE’S NATIONAL NUCLEAR POWER GENERATING CO
         CONFIRMS WESTRON AS ITS CORPORATE SUPPLIER
             Westron was founded in 1994 by Khartron (Ukraine) and
                    Westinghouse Electric Company (United States).

Ukrainian News Agency, Kyiv, Ukraine, Wednesday, February 7, 2007

KYIV – The Enerhoatom national nuclear power generating company has
confirmed the status of Westron, a Ukrainian-American joint venture

based in Kharkiv, as its corporate supplier. Westron announced this in a
statement, a text of which Ukrainian News obtained.

Enerhoatom granted Westron the status of its corporate supplier in late
January, thus granting it the rights of developer, supplier, and chief
installer of automated systems for controlling technological processes,
software for control and management systems, and electronic equipment
at all nuclear power stations. The status is valid until January 10, 2010.

According to the statement, Enerhoatom made this decision based on the
results of an audit it conducted. The audit was conducted in connection
with the expiration of a similar decision that the company made in 2004.

As Ukrainian News earlier reported, Westron is an affiliate of the Khartron
company, a producer of electronic control systems.

Westron specializes in development and production of automatic systems
for managing technological processes at nuclear and thermoelectric power
stations as well as for other industrial facilities.

Westron was founded in 1994 by Khartron (Ukraine) and Westinghouse
Electric Company (United States). The company exports its products to
Russia, Lithuania, the Czech Republic, Bulgaria, Sweden, the United States,
and other countries.

Enerhoatom intends to invest UAH 257 million in modernization, improving
safety, and extending the service lives of reactors at nuclear power plants
in 2007.

Enerhoatom operates the four nuclear power stations in Ukraine and accounts
for about 50% of the total quantity of electricity generated in the country.

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NOTE:  Westinghouse is a member of the Ukraine-U.S. Business
Council in Washington, D.C.
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6. U.S. BROADCASTING BUDGET PROPOSES REDUCTIONS FOR
          UKRAINIAN BROADCASTS BY BOTH VOA AND RADIO
                    FREE  EUROPE/RADIO LIBERTY (RFE/RL)

Broadcasting Board of Governors
Washington, D.C., Monday, February 05, 2007

WASHINGTON – The proposed fiscal year 2008 budget for U.S.
international broadcasting calls for an overall increase of 3.8% from
the anticipated fiscal year 2007 level that strengthens targeted
programming to provide essential access to news and information to
critical audiences.

The budget proposal is also aimed at increasing overall audience reach
around the world by utilizing the latest technology and strengthening
transmission capability.

Of the Broadcasting Board of Governors’ (BBG) $668.2 million request,
$142.4 million is allocated for programming to the Near East, South, Central
Asia and Eurasia, $116 million for Arabic language programming, $67.2
million for East Asia, $45 million for Latin America and $13.6 million for
Africa.

The proposal includes enhancements the agency believes are pivotal to
promoting freedom and democracy and enhancing understanding in key
regions. They include:

[1] Establishing a 10-hour coordinated stream of Voice of America (VOA)
and Radio Free Asia (RFA) daily programming to North Korea.
[2] Launching a daily three-hour live Alhurra television program produced
and broadcast from the Middle East.
[3] Continuing VOA’s Somali Service’s 30 minute daily radio broadcast
scheduled to launch February 12, 2007, to the millions of Somali speakers

in Somalia, Djibouti and the greater Horn of Africa.
[4] Improving Radio and TV Martí’s reach into Cuba through additional
transmission capability and enhancing the production of the programming.
VOA programming to Cuba would be increased to 7 days a week.

The budget also fully funds initiatives begun in FY 2006 to critical Muslim
audiences. These include the expansion of VOA television to Iran to a 12
hour stream, VOA Pashto radio programming to the Afghanistan/Pakistan

border region, television programs to Afghanistan and Pakistan and Alhurra
Europe, the 24/7 service to Arabic speakers in Europe.

To fund these initiatives and mandatory cost increases, the request proposes
the following savings: elimination of VOA and RFA broadcasts in Cantonese
as well as VOA Uzbek.

Reductions to the following:
[1] Ukrainian broadcasts by both VOA and Radio Free Europe/
     Radio Liberty (RFE/RL);
[2] Tibetan broadcasts by VOA and RFA;
[3] VOA Portuguese to Africa; and
[4] broadcasts in Romanian, South Slavic and Kazakh by RFE/RL.

Other savings will come from reductions in support services.

The FY 2008 request also includes several enhancements and reductions
requested in FY 2007. These include funds to increase Alhurra’s live news
capacity to 24 hours a day; expansion of VOA Spanish language programming
to Venezuela; additional transmission capabilities for RFE/RL Russian and
RFA Korean broadcasts and increased funding for employee training and
award programs.

Proposed reductions for FY 2007 included in the FY 2008 request include
eliminating VOA broadcasts in Croatian, Greek, Georgian and Thai as well
as RFE/RL broadcasts in Macedonian.

The request includes eliminating VOA radio broadcasts but continuing
television programming in the following languages: Serbian, Albanian,
Bosnian, Macedonian, Hindi and Russian.

The proposal also calls for discontinuing 14 hours a day of VOA NewsNow
English broadcasts while maintaining VOA’s English to Africa and Special
English services and continuing to strengthen VOA English on the Internet.

The Broadcasting Board of Governors is an independent federal agency which
supervises all U.S. government-supported, non-military international
broadcasting, including The Voice of America (VOA); Radio Free Europe/Radio
Liberty (RFE/RL); the Middle East Broadcasting Networks (Alhurra TV and
Radio Sawa); Radio Free Asia (RFA); and the Office of Cuba Broadcasting
(Radio and TV Martí).

Through its broadcast services, the BBG provides the United States and its
leaders direct and immediate access to a worldwide audience of 140 million
people. Current governors are Chairman Kenneth Y. Tomlinson, Joaquin F.
Blaya, Blanquita W. Cullum, D. Jeffrey Hirschberg, Edward E. Kaufman,
Steven J. Simmons, and Mark McKinnon. Secretary of State Condoleezza
Rice serves as an ex officio member.                     -30-
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http://www.bbg.gov/_bbg_news.cfm?articleID=142&mode=general
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7.  HUNGARY’S STILL HOT, BUDAPEST TO BALATON
               Irish developer also looking for investments in Ukraine

Kevin O’Conner, Irish Times, Ireland, Thursday, Feb 08, 2007

BUDAPEST is one of the more promising locations for investment, according

to Deirdre O’Regan. With a small portfolio of Irish properties, she felt future
returns would not match the past: “I know from my rents, which have hardly
moved in three years, that the best is over for the modest investor – so I
looked abroad.”

Trawling the net and comparing prices and yields, she found Budapest
attractive, at least on paper. The reality was equally promising. “After two
visits, I bought an office owned by a travel agent. He paid two years rent
in advance, so I had that comfort. It was, as they say, a win-win deal.”

The Hungarian owner got a lump of money and the Irish investor got a
property with a yield of about 7 per cent. Current Irish returns are about
3-4 per cent on similar properties. She did it all on the net, without an
agent – “found the property, corresponded with the seller and came out to
meet him”.

The tale did not surprise Odran Young, owner of a medium-sized estate agency
in Dublin. He came out to live permanently in Budapest four years ago, lured
by the promise of bargains in a country weaning itself away – at a fast
pace – from a failed Communist system. Now he controls the only Irish agency
with a full-time complement of staff in the Hungarian capital.

We were in a restaurant in Liszt Ferenc, an enclave of boulevards and
restaurants. There is gaiety and business and music – it’s an aria away from
the fabled Opera House whose baroque splendour has been restored with
dollops of eurodosh, a mere three years after Hungary emerged into the
eurofold of favoured nations.

Already, he can see the signs of creeping prosperity, a re-run of the
experience of the Irish republic. “When I came first, most of the cars were
old bangers, Ladas on their last legs.

Now most cars are hardly more than two years old. The cafes are full of
well-dressed young people. Then, there was only one restaurant on Ferenc

and four customers – me and three in our group.”

A lot has changed since then, for both Budapest and Young. They have been
agents of each other’s change. From his penthouse overlooking the musical
square, he counts 16 restaurants and cafe bars.

He is selling some of those refurbished baroque buildings and uses the
Hungarian capital to trawl for developments in Eastern Europe, notably in
neighbouring Ukraine.

Hungary has been good to him, turning him from a medium-sized player in
Irish property to a major wheeler-and-dealer of European property. Currently
he has several new developments on the go in Budapest, including a block of
“new build” apartments in the university district.

Of the 144 apartments, 80 have been sold off-plans. Not surprising given
that prices range from 60,000 for one of about 37sq m (400sq ft). A Dublin
equivalent, in quality and location, would cost upwards of 325,000. His
buyers are mainly Irish, with British and South Africans as runners-up in
the investment stakes.

Expanding his Budapest office this week to cater for the demand, he is
bullish about Hungary’s economic prospects. Well, he would be, wouldn’t

he?, given his own investment of time and monies.

But external factors support his projections, with rents and wages rising at
about 20 per cent in the past 18 months, while land values do not yet
reflect that surge.

“Property prices are cheaper here than in most of the neighbouring
countries – I can sell Budapest residential from 1,350 to 1,800 a sq m (32
to 167 per sq ft), whereas Sofia (Bulgaria) is 2,000 a sq m (185 per sq ft),
Ukraine is about 4,000 a sq m (371 per sq ft, payable in dollars) and

Krakow has gone very expensive at 5,500 a sq m (510 per sq ft).”

Still smarting under the rigour of communist control, major Hungarian banks
accept existing properties as collateral for further loans, “rolling-over”
the values, which was the financial base of the historic Irish property
boom. “It took some lobbying, but finally the forint dropped,” Young
recalls. Some banks will now fund 70 per cent of a prospective purchase.

His forays into commercial property include shopping centres, entire office
blocks, former government departments – bought by syndicates of investors
whom he describes as ” typically two or three Irish blokes, aged mid-30s to
mid-40s, punting with some spare cash”. (His definition of “spare cash”, is
elastic, given one buy of a shopping mall for 8 million).

THINKING big also drives the plans of Marty Carr, whose golf services
company is a significant partner in Zala Springs, about two hours drive from
Budapest.

On a greenfield site in the wine region of Balaton, the 18-hole course is
trumpeted as of “championship quality” with 7,200 yards of drives off the
tees, and around 468 acres of playing.

Why Hungary for golf? “Because it was there!” is Carr’s succinct answer,
before supplying some figures. “Hungary has only seven golf courses, about
one course for every 1.5 million of population; the comparable figure for
Ireland is a course for every 12,000 people.

Scion of the golfing family – “I have the name but not the game” – Marty’s
company, Carr Golf Services, manages six courses at home and partners
investors to develop major courses overseas.

“Golf, wine and baths” is the working motto for a spa market that is
currently fashionable. Zala Springs exploits the very Hungarian capacity for
enjoying bathing in thermal waters (sometimes outdoor in winter!) as well as
the region’s vineyards.

Using golf as lure, investing partners have funded a new 397-unit resort.
Family apartments and townhouses range from about 60-215sq m (645-2,217

sq ft) costing from 128,000 to around 350,000 for detached golf villas on the
fringes of the course.

All are being sold off plans, with Carr claiming a 10 per cent uplift in
price for buyers of the first phase. Housing completion is scheduled for end
of 2007, with the course playable in spring of 2008.

Lisney is holding a property exhibition on Zala Springs in the Westbury
Hotel, Dublin, this Friday and Saturday, February 9th and 10th.
————————————————————————————————
www.youngsbudapest.ie; www.casaro-hungary.com
www.zalasprings.com/www.lisney.com

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8. UKRAINE MOP MANUFACTURER LOOKING FOR PARTNERS

ISSA News, The Experts on Cleaning and Maintenance
Lincolnwood, Illinois, Wednesday, February 7, 2007

LINCOLNWOOD, Illinois – ISSA member AVS MOP, a mop and related
products manufacturer in Ukraine, has begun exporting its products to
countries outside Ukraine and is looking for European partners, according
to AVS MOP’s Andrey Sukhoruchkin.

AVS MOP joined ISSA in 2006. Later that year, the company attended an
exhibition in Moscow, where it secured several contracts and determined it
was time to expand beyond Ukraine.

It began exporting its goods in January of this year. Currently, the company
is looking to develop partnerships in Europe, where it buys its raw
materials.

For more information, contact Andrey Sukhoruchkin, Kiev, Ukraine
+380 50-462-62-78; e-mail, clin2006@ukr.net.             -30-
———————————————————————————————
http://www.issa.com/news/news_detail.jsp?typeId=101&newsid=1425&page=1&startPage=1

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9.  UKRAINE: 2006 – A YEAR OF ECONOMIC SUCCESS?

COMMENTARY AND ANALYSIS: By Valentin Zelenyuk
Kyiv Post, Kyiv, Ukraine, Thursday, Feb 08 2007

A year ago, virtually everyone gave a very pessimistic forecast for Ukraine’s
economic prospects in 2006-especially due to the drastic increase in the
import price of natural gas.

Nevertheless, Ukraine gave another surprise by finishing this difficult year
with one of the highest rates of economic growth in the world-about 7
percent growth in real GDP and about 20 percent GDP growth when valued in
USD.  One might get an impression that Ukraine is doing very well. This,
however, is an illusion.

Indeed, even now, note that Ukraine’s real GDP in 2006 is still under 65
percent of GDP in 1990.

Moreover, according to the World Bank 2006 report, the gross national income
per capita in Ukraine is only $1,520 – this is less than in Morocco
($1,730), Guatemala ($2,400), Albania ($2,580), Algeria ($2,730), Namibia
($2,990) and in many other developing countries!

Such a dismally poor performance can be hardly believed-given the fact that
the Ukrainian population has a relatively high level of education enabling
them to produce big airplanes, satellites and space rockets – a potential
that a majority of countries in the world lack.

What are the main reasons for such a shameful economic performance? To

give a brief answer, the main problem is rooted in the lack of reforms that
could liberalize the economy in Ukraine.

Indeed, since obtaining independence in 1991 and up until now, Ukraine has
been lagging behind other transitional and developing countries in terms of
implimentation of economic reforms, and has been characterized as a
repressed and mostly unfree economy (e.g., see indexes of economic

freedom by the Cato Institute and by the Heritage Foundation).

So, lagging behind in reforms has made Ukraine lag behind in terms of

wealth per capita as well.

The main reform that is urgently needed now is the tax reform. It is worth
noting that up until 1998, the tax burden in Ukraine was one of the highest
among all countries in the world.

Some positive steps have been taken since then – through the introduction of
a simple and moderate tax for private entrepreneurs at the end of 1998 and a
substantial reduction of personal income tax to a flat rate of 13 percent in
2004.

These two steps helped Ukraine move away from its deep economic fall and
recession since 1991 to decent economic growth since 2000 and an economic
boom in 2004.

Ukraine’s corporate taxes, however, remain excessively burdensome in
Ukraine, making it less attractive than most countries in the world. Indeed,
according to various cross-country world ratings, the rank of Ukraine on the
ease of tax burden is astonishingly bad.

For example, according to a very comprehensive World Bank survey ‘Doing
Business – 2007,’ based on 10 major criteria crucial for a business, Ukraine
was ranked 174 out of 175 countries! In the 2006 version of this report,
Ukraine was ranked 151 out of 155 – only better than Belarus and three
African countries, while now only Belarus is behind Ukraine.

The most recent estimates of the World Bank survey suggest that an average
firm in Ukraine has to pay about 60.3 percent  of their gross profit in
various taxes. By all standards, the current taxation burden on businesses
in Ukraine is prohibitively high for a country that desperately needs
economic recovery.

What should be  clear for policymakers is that countries that had a good
ranking on taxation (and other important criteria of the business
environment) were performing much better than those who had a poor

ranking.

More specifically, every country that achieved an economic miracle (e.g.,
Hong Kong, Singapore, South Korea, Taiwan, Ireland, Estonia, etc.) had low
taxes and liberalized markets. On the other hand, those countries that had
excessive taxation and excessive government bureaucracy (Armenia, Moldova,
North Korea, Uzbekistan, Ukraine, etc.) had economic disasters.

Many people, certainly including myself, hoped that after the Orange
Revolution the necessary economic reforms in Ukraine would follow
immediately. About two years have past but, regrettably, not much has
changed since then, mainly because the politicians in power were busy
re-electing themselves.

Now, with a pragmatic and business-oriented government, there is good hope
that a successful tax reform will finally be developed and implemented
shortly and that the parliament will be supportive this time.

So, what exactly needs to be done? First and most important of all, the
profit tax for all firms must be reduced substantially. Indeed, it is the
excessive tax bureaucracy that creates most of the problems for the
Ukrainian business environment.

For example, according to the mentioned survey of the World Bank, an average
Ukrainian firm must make about 98 payments, spending about 2,185 hours to
comply with tax requirements – which is much more than in most countries in
the world.

Such bureaucracy substantially reduces the attractiveness of Ukraine for new
foreign investors, slows down existing businesses and pushes many businesses
away to other countries or into the shadow economy.

(A noteworthy factor, by various estimates, is that the shadow economy in
Ukraine is about 50 percent of its official GDP and a big portion of it is
due to a very excessive tax burden.)

Overall, if an adequate tax reform is implemented liberalizing the entire
country into one free economic zone, then the resulting economic growth

can be enormous, generated by various sources.

The increase in growth would be driven by an increase in the operations of
existing firms and due to the entry of new firms, especially foreign firms
with superior technologies.

Moreover, a substantial part of the shadow economy can come to the light.

As a result, economic growth in the official real GDP in Ukraine can easily
reach 10-15 percent annually for the next three to five years, with a decent
economic performance afterward.

If such reforms are implemented, they could create the true economic

miracle for Ukraine that we have been awaiting for the last 15 years.  -30-
———————————————————————————————-
Valentin Zelenyuk is a Senior Economist at Kyiv Economics Institute (KEI),
assistant professor of EERC at Kyiv-Mohyla Academy, and the Director of
Ukrainian Productivity and Efficiency Group (UPEG). the author thanks
Natalya Dushkevych for valuable comments. The views expressed in this
article are those of the author and do not represent the views of the
above mentioned organizations or people.
———————————————————————————————–
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10. POLISH MINISTER URGES U.S. INTEREST IN PLANNED
|                        UKRAINE-POLAND OIL PIPELINE

PAP news agency, Warsaw, Poland, Tuesday, 6 Feb 07

WARSAW – The government will support the activities of Polish companies
aimed at securing their own crude oil reserves, the minister of economy,
Piotr Wozniak said on Tuesday [6 February]. “We declare our full support

for activities by companies aimed at securing their own deposits,” he told a
news conference here.

Deputy to Wozniak, Piotr Naimski, said that the ministry would soon present
its programme for the natural gas sector. He added he hoped US companies
would show interest in the planned Odessa-Brody-Plock oil pipeline.

“US companies operate in the Caspian Sea basin, in Kazakhstan and the
Russian Federation. We want the companies present in that region to take
interest in the Odessa-Brody-Plock pipeline project,” Naimski said.

The ministry of economy wants the cabinet to transfer supervision over oil
and gas transit companies to the economy ministry, from the ministry of
state treasury, Wozniak also said.

“The minister of economy, not the treasury minister, is solely responsible
for the country’s energy security,” he declared. In order to ensure such
security the minister of economy must have necessary tools, he added.
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11.   CASE-NEW HOLLAND OFFERS STATE AGRICULTURAL
  LEASING COMPANY PROGRAM TO ORGANIZE PRODUCTION
            OF AGRICULTURAL MACHINERY IN UKRAINE

By Dmytro Kuzmin, Ukrainian News Agency
Kyiv, Ukraine, Friday, February 2, 2007

KYIV – One of the world’s largest producers of agricultural machinery,
the Case-New Holland company (CNH, the Netherlands) suggests the
Ukrahrolizynh national joint-stock leasing company to organize production
of the New Holland’s agricultural machinery in Ukraine. The press service
of Ukrahrolizynh announced this in a statement.

As to the press service, Ukrahrolizynh is negotiating the world’s major
producers of agricultural machinery with an aim of developing financial
programs for procurement of machinery, that is not produced in Ukraine.

“Today the most attractive and beneficial proposition, as to price and
other criteria, is that of CNH,” the statement reads.

According to the press service, CNH proposes three stages of
cooperation:
[1] The first one – shipping machinery to Ukraine for demand

     analysis,
[2] the second – organization of joint production and
[3] the third – localization of products at up to 50% of Ukrainian
     components.

The press services reports no details of the Dutch side suggestion.
Case-New Holland is an international corporation, which produces tractors,
harvesters, excavators, loaders and other agricultural and construction
machinery. Italian Fiat concern owns 91% of shares in CNH.

As Ukrainian News earlier reported, the Cabinet of Ministers founded the
Ukrahrolizynh company in May 1999 to lease agricultural equipment to
agricultural enterprises instead of the State Leasing Fund. Ukrahrolizynh
ended 2004 with a net profit of UAH 0.2 million from net revenues of
UAH 37 million.                              -30-

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NOTE:  Case New Holland is a member of the Ukraine-U.S. Business
Council in Washington, D.C.
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12. FORMATION OF COUNCIL OF INVESTORS (COI) POSTPONED
                           List of members has not been approved

By Natalya Nepryakhina, The Kommersant-Ukraine
Kyiv, Ukraine, Friday, February 02, 2007

KYIV – The Kommersant-Ukraine laid its hands on a draft government
resolution to set up the Council of Investors, COI, under the cabinet of
ministers and to be headed by the premier [Prime Minister Viktor
Yanukovych]. The draft had already been approved by the government
committee on economic policy.

But the final go-ahead for COI couldn’t be given because the list of members
and criteria for their selection do not exist. Experts fear that COI will be
made up mainly of businessmen close to the present government.

In line with the government draft , a copy of which The K-U has, the cabinet
is out to set up another consulting and advisory body, COI. The decision to
set it up was approved on Monday, Jan. 29 by the committee on economic
policy.

For the record, late 2006 the cabinet disbanded the Council on Foreign
Economic Activities and the Council of Entrepreneurs, creating the Council
of National Associations of Producers and the Council for the Development
of Regions (See The K-U issues for 12.6.2006 and 12.22.2006).

As follows from the draft on COI, the new body will be headed by Premier V.
Yanukovych. He will approve the list of COI members and the secretariat
staff. COI secretariat is to be headed by the economy minister and deal with
coordination of COI activities.

COI members are to be involved in drafting recommendations for economic
policy in the investment sector, work out mechanisms of partnership between
the state and entrepreneurs and propose investment projects for
implementation in the economy priority sectors.
   LIST OF COI MEMBERS HAS NOT BEEN APPROVED
However, as one of the most contentious issues, the list of COI  members,
has not been approved, the government could not pass the resolution to set
up COI at its Feb. 1 session.

Government officials who had worked out the draft, could not clarify to The
K-U the criteria for selecting COI members who can be qualified as
investors.
ORIGINAL LIST OF 15-20 INVESTORS AND ORGANIZATIONS
The president of the State Agency for Investments and Innovations (SAII)
Viktor Ivchenko told The K-U that the original list made up of 15-20
Ukrainian and Russian investors, including, by the way, the co-owner of the
Industrial Union of Donbas, ISD, Serhy Taruta, the owner of Interpipe Viktor
Pinchuk and representatives of the European Business Association and the US
Chamber of Trade and Industry, was not approved by the government.
UKRAINIAN BUSINESS, FOREIGN INVESTORS & EXPERTS
Our source in the economy ministry has specified that the list will include
representatives of Ukrainian business, foreign investors, and experts.
Notably, the Consultative Council on Foreign Investments created in 2005
under the president of Ukraine was made up only of foreign investors.

“We are for a two-way street in the relationship of business and government
in order to solve the existing problems,” the source told The K-U.
Meanwhile, another source in the Ukrainian Center for Promoting Foreign
Investments forecast that COI may become an alternative to the presidential
council.

According to experts, an overcrowded list of COI members will trigger off a
tug-of-war and will not facilitate quick decisions.

“As evidenced by past experience, the number of council members should be
limited,” our source in SAII says. The more the number of members, the more
the number of contradicting views which cannot be moderated, he adds.

Analysts warn that the businessmen close to the government will predominate
on COI.

Thus, Head of the Association of Jewelers of Ukraine Dmytro Vydolob says
these government insiders will only lobby for their interests: “I don’t see
that the government is interested to promote competitiveness, and most
probably, COI will be made up of Ukrainian businessmen who will resolve
their own problems with cabinet assistance.”                -30-
————————————————————————————————–
LINK: http://www.kommersant.ua/search-results.html
————————————————————————————————–
FOOTNOTE:  Article translated into English by Volodymyr Hrytsutenko.
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13.     YANUKOVYCH TO BECOME HIS OWN ADVISOR
     Cabinet of Ministers created Council of Investors (COI) Advisory Body

By Antonina Bazhan, The Ekonomichna Pravda internet newsletter
Business and economy by Ukrayinska Pravda,

Kyiv, Ukraine, Thursday, Feb. 1, 2007

Premier Yanukovych continues to build the pyramid of his power. This time,
he set up an office that makes him chieftain of Ukrainian investors. On Jan.
24, 2007, the cabinet created an advisory body, the Council of Investors
(COI) affiliated with the Cabinet of Ministers.

In all probability, COI is to become a close-knit team of moneybags loyal to
the government. The council will be headed – guess by whom? – by V.
Yanukovych.
                                 REINVENTING THE WHEEL
According to The Ekonomichna pravda, the Yanukovych government, acting
quickly and without any notice, liquidated the Council of Entrepreneurs
(COE) set up by Pres Kuchma back in the 90s and.

To quote Economy Minister Volodymyr Makhuha, the reason behind this was
the Yanukovych government desire to raise, as he put it, the low
representative level of COE.

Accusations of the low representative level of COE were definitely made
against Yulia Tymoshenko who, when premier, enrolled mainly small and
medium-sized businessmen to sit on COE, unlike former Pres. Kuchma who
favored tycoons.

To judge by V. Makuha’s rather confused explanations, the cabinet questioned
COE effectiveness, saying its members, instead of representing the opinion
of the business community, were involved in lobbying for someone else’s
interests.

Besides, Makuha explained, the cabinet had already created a new
representative body for entrepreneurs that had to replace COE. Yet, at the
time the minister could not recall its name. It turned out later that Makuha
meant COI.

Under the circumstances, it was unclear then what the government motives for
scrapping the 10-year old COE had been. To have his way, it was sufficient
for the premier either to enroll new members who would suit him or to
restore the format COE had in Kuchma days, a club for Ukrainian moneybags
like Rinat Akhmetov and Viktor Pinchuk.

Anyway, the interests of the Party of Regions and its business partners
(major donors in the ruling coalition’s war chest) could have been insured
by appointing one of the insiders to head COE who would then form the
docile council needed by the coalition.
                                   SELF-MADE COUNCIL
Yet, the true motives for disbanding COE surfaced after the publication of
the COI statute. It follows from this bizarre document that the body,
designed to protect the interests of business community, will be headed by
no one other than the premier. The same official will approve the list of
new COI members and make changes in the list, if need be.

By the way, the COI statute is mum about the number and selection procedure
for council members. Nor does it say anything if anyone of COI members can
attend government sessions. Earlier, a COE head (who had never been a
government official) could literally rub shoulders with ministers.

In all probability, now there won’t be any need for the representatives of
entrepreneurs to protect the interests of businessmen – the authorities, to
be exact, the prime minister who is head of COI under the statute will take
care of it.

It’s this fact alone that makes the existence of COI pointless.

Because the council’s goal is to represent the interests of various business
associations of which COI is to be made up, jointly draw up proposals and
recommendations for the government. Most likely, Viktor Yanukovych will
now advise himself on issues vital for businesses.

Moreover, in line with the COI statute, information support for its
activities will be provided also by officials, as – guess who? – the
minister of the economy is to be in charge.

It seems the government will keep the Council of Investors on a very short
leash, both when appointing its members and when making decisions or
issuing press releases to cover its activities. Therefore, the roles
investors will play in the new council are very dim, more like those of

supernumeraries in a theater.

However, all these arguments can be logical only in a democracy. Given the
Ukrainian realities, a council of businessmen with its declared opaque and
docile format may well be turned into a cash cow for the incumbent head of
the cabinet. This club of business insiders may well become a base for the
premier’s economic self-sufficiency.

Much will depend on who Viktor Yanukovych could enroll to sit on COI and
what kind of quid pro quos he could offer to his potential sponsors. -30-
======================================================
FOOTNOTE:  Article translated into English by Volodymyr Hrytsutenko.
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14.         A FAIR LAND MARKET OR A LAND GRAB?

ANALYSIS & COMMENTARY: Gary Reusche & Stephan Vitvitsky
Kyiv Post Kyiv, Ukraine, Thursday, February 08 2007

The question of a land market in Ukraine has yet to make the transition from
the Soviet past. Under the Soviet Union, private property was illegal.

After 15 years of independence, land reform in Ukraine is still unfulfilled.
At stake is perhaps the best agricultural land in Europe, and its current
owners are the poor and mostly neglected rural inhabitants.

The roots of the current situation are in the Soviet era and are directly
related to the Holodomor, or Great Famine.  During the reorganization of
rural Ukraine by the Soviets, residents were uprooted, and during the famine
their population was decimated. In their place were established collective
farms.

These collective farms are now history, with the exception that the
inheritors of the collective farms have ownership of the land, but not the
right to sell it. Roughly 7 million rural Ukrainians have, or will soon
have, land acts for approximately 25 million hectares of the best farmland
in Ukraine (and in Europe).

How to move from the current situation to the future is the crux of the
problem. Will there be opportunities for the current residents to develop
farms and small businesses and create a decent life, or will vested
interests and elites grab the land? This drama will be played out in the
upcoming years.

What seems to be lacking is a vision for the future that gives realistic
hope for the current landowners to consolidate and utilize this land in ways
that are viable in a market economy.

In most transition economies, the creation of a land market and clear
property rights is essential to successful market economy transformation.

Ideally, land that is bought and sold within a market should change hands to
those who seek to enhance productivity, efficiency, and growth.

As discussed by agricultural expert Andriy Yarmark in a recent interview in
the Kyiv Post, a well-functioning land market also encourages investment and
increases revenue through land sales, which helps create jobs and enhance
rural livelihood.

The Ukrainian parliament’s recent prolongation of the land moratorium shows
again the government’s reluctance to complete its market economy transition
(though only the most naive will think that this situation is not benefiting
someone).

Although Ukraine needs an open land market now, it must be implemented in a
context of programs designed to assist the rural population to make the
transition, and encourage small business development.

If a small number of rich individuals or banks accumulate large tracts of
land by cheaply buying land from the rural poor, the outcome would be at
best an industrialized agriculture or at worst asset-stripping and
environmental degradation.

Such a land-owning oligarchy would reap millions of dollars and gain huge
political influence, and rural residents would speed up their migration to
cities.

If Ukraine is to create a land market, the government must make sure that it
is done legally, transparently, and most importantly, for the good of the
more than 15 million people living in rural areas.

Extreme poverty rates are highest in rural areas, with roughly one-third
living under a dollar a day. Simply creating a land market without certain
conditions in place will not necessarily improve the lives of Ukraine’s
poorest residents.

First, the government initially should regulate land transactions in order
to ensure a fair and socially equitable distribution of land. Quotas may be
placed that limit how much land an individual may purchase, which would
prevent oligarchs from purchasing large tracts of land at low prices.

Incentives should be given to the middle class and even to poor rural
dwellers, such as tax breaks or subsidies, to encourage them to purchase
land or cultivate the land they already own.

Opponents of this policy would scream that government regulation would
counter market reforms and lead to poor results.

Nevertheless, at least in initial years, the government must play a role in
regulating the land market to ensure that land is distributed fairly.  Only
when a land market has demonstrated functionality and stability should the
government step away.

Secondly, and of equal importance, is that credit must be available to new
landowners. For what is a new landowner, especially if he is a former
household plot farmer, going to do with 20-30 hectares if he has no access
to credit?

Without it, many would be forced to sell – probably to a wealthy individual
who can invest his own money, thereby increasing the likelihood that a land
oligarchy develop.

Rural areas are currently vastly underserved by Ukraine’s credit market.
Although many major banks, such as PrivatBank, Raiffeisen Bank Aval, and
ProCredit Bank, now offer small and micro-loan products, they primarily
focus on urban areas. Agricultural loan products also are limited in their scope.

According to statistics from the Ukraine Micro-Lending Program, an
EBRD-sponsored program that helps banks create micro-loan products, as of
mid-2006 only roughly 4,000 agricultural loans have been disbursed worth $20
million.

Various donor aid agencies, including the EU, USAID, and the World Bank,
have also tried to build up the credit cooperative system, known in Ukraine
as credit unions and cooperative banks.

The government has approved a strategy for the development of a credit
cooperation system, but in order to effectively implement the system,
changes to the legislation are required.

These are not encouraging signs for potential landowners. Therefore, banks,
NGOs, and credit unions should be encouraged to extend credit in small towns
and rural areas, helping fill a major void in Ukraine’s credit market.

Lastly, there must be strong institutions and courts in place in order for
land transactions to be processed efficiently, ensuring that laws are
upheld, and disputes settled. A land market without institutions would lead
to chaos.

Transactions would be made very slowly, disputes would be settled through
bribes and threats, and individuals would easily disobey the law. This state
would be devastating for rural areas and would further encourage corruption,
already a major problem in Ukraine.

Unfortunately, there is no quick and easy solution that can solve the
current land dilemma. It is high time that the government, along with NGOs
and development agencies, took steps to ensure that institutions and courts
are functional and transparent; as well as ready to handle the huge workload
once a land market is established.                    -30-
———————————————————————————————
Gary Reusche is rural development expert and former team leader of an
EU project in Ukraine that supported SME development in rural areas.
Stephan Vitvitsky is here as a Fulbright Research Fellow 2006-2007,
researching rural economic development.
———————————————————————————————-
LINK: http://www.kyivpost.com/opinion/oped/26043/
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15. UKRAINE: THE ECONOMIC EFFECTS OF CORRUPTION

ANALYSIS & COMMENTARY: By Oleksandr Shepotylo
The Ukrainian Observer magazine #228
The Willard Group, Kyiv, Ukraine, February 2007

Recently, a friend of mine was crossing the Russian-Ukrainian border by
train. The customs officer knocked at the door of his carriage compartment
and asked for his documents. After careful examination, the officer said
that the registration had expired and my friend was not allowed to cross the
border.

That would be the end of story if it were the US-Canadian border because
my friend would be forced to exit the train. The end of this story had,
however, a happy ending.

The officer was waiting and looking at my friend as if he wanted to hear
some explanations hinting that something could be done to resolve the
problem. After short negotiations, the officer asked my friend to follow
him.

Shortly, the friend came back with the stamp in the passport that allowed
him to cross the border. This example illustrates a more general point that
the rules are not strictly enforced in a country with a high level of
corruption such as Ukraine.

To achieve our goals we are ready to break the rules and bribe government
officials who are supposed to protect the law. Officials, in their turn, expect

that we behave that way and force us to give bribes.

The vicious circle is very hard to break because it has become ingrained in
the Ukrainian culture and governs people’s cultural code of behavior.

The common knowledge is that everybody does it, so why should you be any
different? Taking bribes is part of the routine work of policemen, customs
officials and municipal workers.

Adjusting numbers for the cost of living, Ukraine came in the second
place – not far behind Ghana – in annual bribes paid by households

according to the results of a public opinion survey of about
55,000 people in 69 countries. 
                          HOW COSTLY IS CORRUPTION
How costly is corruption for the welfare of a country? Oddly enough, the
mere fact of bribery has no direct impact on a country’s gross domestic
product (GDP).

However socially costly, the bribe is a transfer of money from one
individual to another that has an impact on distribution of income but
leaves the level of GDP unchanged (in fact, if it was registered, it would
even increase GDP).

Does that mean that corruption has no impact on economic growth?
Of course, the answer is negative.

Paolo Mauro – one of the first economists who empirically studied the
consequences of corruption – demonstrated that corruption reduces economic
growth in a country by 0.5-1 percent a year on average. For Ukraine, This
sum is comparable with the annual budget spent on education in Ukraine.

More importantly, it makes an even greater difference for economic growth in
the long run because losses accumulate over time. The negative impact of
corruption on economic growth comes from the very significant influence of
corruption on investment rates (it can be as high as 5 percent).

In addition, corruption distorts distribution of resources across
industries. Countries with high corruption levels invest relatively more
resources in construction and less in education and social programs.

A corrupt government official would prefer to finance a big investment
project with very uncertain costs where it is difficult to monitor
expenditures – i.e. build a highway or an airport – rather then give money
for educational programs that are more transparent and easier to control.
                    CORRUPTION PERCEPTION INDEX
In 2006, Ukraine – together with the Dominican Republic, Georgia, Mali,
Mongolia, and Mozambique – occupied places 99 in the annual report on the
corruption perception index provided by Transparency International.

The problem of high corruption in Ukraine is well recognized by all parts

of the political spectrum. Party leaders of the ruling coalition and the
opposition publicly announced that fighting corruption should be a priority
in the government agenda.

On December 5, 2006, the Government of Ukraine and Millennium Challenge
Corporation – a U.S. program that seeks to reduce poverty by rewarding
countries for establishing open markets and following other good governance
practices – signed an agreement estimated at US $500 million as the
threshold program for development of Ukraine that would be partially spent
to finance an anti-corruption campaign as a part of the threshold program
for Ukraine.

Prime Minister Viktor Yanukovych publicly stated that figure following a
meeting with US Secretary of State Condoleezza Rice. “The program will
envisage actively combating corruption, which will be a priority of the
current Government,” Yanukovych said.
                  BEST WAY TO REDUCE CORRUPTION?
At the same time, Ukrainian politicians are very much divided on the
question of the best way to reduce corruption.

It was very clearly demonstrated during the “Svoboda Slova”, a popular TV
show where the top government officials, parliamentarians, and experts
discuss important political and economic topics in front of a large
audience. The program was devoted to discussion on corruption in Ukraine
and was aired in December 2006.

While the minister of defense expressed the opinion that the best way to get
rid of corruption in the army is to subcontract all functions not directly
related to defense to private companies, the minister of transportation
argued that more government controls and more detailed regulations is the
way to lower the corruption level in the transportation sector.

In my opinion the minister of defense has a better strategy to fight
corruption. Winston Churchill once said: “If you have ten thousand
regulations you destroy all respect for the law.”

Simplifying cumbersome and lengthy laws and regulations, giving more
economic freedom to private companies, local governments, and organizations
and getting rid of politically driven decisions would substantially reduce
corruption opportunities for government officials and bureaucrats.
   DECENTRALIZED COUNTRIES LOWER CORRUPTION
Raymond Fisman and Roberta Gatti, world experts in the study of corruption,
have demonstrated that more decentralized countries have lower levels of
corruption.

Therefore, the administrative reform that gives more budgetary expenditures
to be divided at the local level suggested by the Socialist Party could be
beneficial for Ukraine because it would spur political competition between
local governments, improve their performance and lower corruption.

It is difficult to find the best anti-corruption roadmap for in Ukraine.
However, the establishment of a strategy for this purpose should not be
decided in a narrow circle of government officials or the ruling coalition’s
leaders.

According to the Global Corruption Barometer report, political parties are
the most corrupt institutions of society as shown in Graph 1. Therefore, it
would be very dangerous to leave the politicians on their own in a hope that
they will miraculously solve all our problems.

For an anti-corruption campaign to be a success, the government should work
out the strategy in collaboration with media, non-government organizations,
and educational institutions.

And if, on a wonderful day, people in power and the army of state
bureaucrats start behaving as role models for us by strictly following all
rules and regulations they have created for ordinary people, we would become
better citizens and stop cutting lines, violating traffic rules, and bribing
officials in an attempt to solve our everyday problems.            -30-
———————————————————————————————-
Oleksandr Shepotylo, Ph.D., is an assistant professor of economics at
EERC and Kyiv Economics Institute. The views expressed in this article
are those of the author and do not represent the views of above-mentioned
organizations.
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LINK: http://www.ukraine-observer.com/articles/228/991
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16. LARGE U.S. STEEL PRODUCER NUCOR STARTS PURCHASE

OF PIG IRON FROM DONETSK REGION METALLURGICAL PLANT

Ukrainian News Agency, Kyiv, Ukraine, Thu, February 1, 2007

KYIV – One of the largest steel producers in the United States, Nucor
corporation has started purchase of pig iron from Makiivka-based
metallurgical plant (Donetsk region). Plant press service has disclosed this
to Ukrainian News.

According to press service representative, in February, Makiivka plant has
to supply 65,000 tons of pig iron to the American corporation. As Ukrainian
News earlier reported, in September 2006, Makiivka plant reported on Nucor
intention to purchase pig iron.

In 2007, Makiivka metallurgical plant intends to increase pig iron
production by 55% or 0.71 million tons to 2 million tons.
In January 2006, the plant produced 152,600 tons of pig iron, of them 50,400
tons were reserved for the further sales.

Makiivka metallurgical plant closed joint-stock company was founded in 2004
as part of a financial recovery program for the Makiivka metallurgical mill
open joint-stock company.

According to the Agency for Development of the Stock Market’s
Infrastructure, as of March 2006, Zorino trading Limited, Zelino
Commercional Limited (both based in Great Britain), Mokrad Trading Ltd.
(B.V.I.), and Kellor Enterprises LLS (USA) each held 18.7943% in the plant.

The Kryvyi Rih-based Finoks company is the keeper of these shareholdings
which comprise 75.1771% of the shares. Finoks is also the keeper of the
Inhulets OMEP’s shares.

According to the Agency for the Development of Stock Market’s
Infrastructure, as of March 2006, 24.8229% of the Makiivka metallurgical
plant’s shares belonged to Makiivka metallurgical mill. The plant ended 2005
with a loss of UAH 235.41 million and net revenues of UAH 1,540.21 million.

Russian businessman Vadim Novinsky’s Smart Group (Dnipropetrovsk) controls
Makiivka metallurgical plant. 60.857% of the shares in the Makiivka
metallurgical mill belong to the State Property Fund of Ukraine

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17.   NETHERLANDS CO INVESTS IN UKRAINE FOR FIRST TIME
   Acquires over 50% of Styrol chemical concern (Horlivka, Donetsk region)

Ukrainian News Agency, Kyiv, Ukraine, Friday, February 2, 2007

KYIV – The Antimonopoly Committee of Ukraine has authorized Dotterbloem
Holding B.V. (the Netherlands) to acquire over 50% of the shares in the
Styrol chemical concern (Horlivka, Donetsk region). The press service of the
Antimonopoly Committee announced this to Ukrainian News.

Dotterbloem Holding B.V. performs investment and management operations.

It has never operated on Ukrainian territory. The company submitted the
relevant application to the Antimonopoly Committee on December 18.

The press service was unable to say whether Dotterbloem Holding B.V. has
already acquired over 50% of Styrol.

According to the information available as of January, the Styrolkhiminvest
limited liability company owned 50.01% of the shares in Styrol while
individuals owed 14.19%.  As Ukrainian News earlier reported, Styrol intends
to invest USD 50-80 million in production development in 2007.

In addition to developing its core production operations, Styrol plans to
actively develop additional operations such as production of pharmaceutical
goods and polystyrene.

Styrol ended 2005 with a net profit of UAH 513.13 million. Its net revenues
increased by UAH 622.58 million or 26.08% to UAH 3,009.95 million in 2005,
compared with 2004.                                 -30-

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18. USAID REALIZING TWO-YEAR $8M PROJECT TO DEVELOP
            TRADE, INVESTMENT AND BUSINESS IN UKRAINE

Interfax Ukraine Economic, Kyiv, Ukraine, Wed, January 31, 2007

KYIV – The United States Agency for International Development (USAID)

has presented a project on trade, investment and business acceleration in
Ukraine (TIBA). According to a press release drawn up for the presentation,
the budget of the two-year project will be $8 million.

The project is aimed at providing technical aid to the Ukrainian government
and the private sector in building trade, investment and business capacity,
which is, in turn, would accelerate Ukraine’s joining the international
economy.

The project will develop trade in commodities and services according to the
requirements of the World Trade Organization and help conduct regulatory
reform aimed at building a favorable legal and business environment to
develop small and medium business in Ukraine.

Booz Allen Hamilton President Don Pressley, presenting the project, said
that it would promote the development of private business in Ukraine.

He said that the development of small and medium business requires that they
have access to the international markets, and that the government should
interfere less.

Pressley said that the USAID project would promote further aid for Ukraine’s
joining the World Trade Organization, promote aid to government institutions
after Ukraine joins the organization, and promote aid to improve the
environment for the development of business.

Pressley said that in particular, this aid concerns a cut in the cost of
running a business and a cut in the number of laws that regulate this
sphere.  “The legal regulation should be cut to the minimum level,” he said.

In turn, Hennadiy Bilous, the deputy head of the state committee for
regulatory policy and entrepreneurship of Ukraine, said that the two-year
project would improve the investment climate in Ukraine and the situation in
the trade sphere.

He said that the Ukrainian government is improving regulatory policy in
entrepreneurship, the permit system and the registration of procedures, and
is relaxing requirements when starting a business.

Earl Gast, Director for the USAID Regional Mission in Ukraine, Moldova and
Belarus, said that the new USAID project would build on the achievements of
the previous USAID BIZPRO project.

Gast said that the project will improve investment activities, and the
situation with the regulation of business. “We hope that business management

will improve,” he said.

Commenting on the investment climate in Ukraine, Gast said that a gradual
improvement over all the years of Ukraine’s independence has been seen.

Gast said that an increase in foreign investment in Ukraine and interest not
only from U.S. but also European investors confirms this improvement. In
particular, he said that there is investment growth in Ukraine from Eastern
Europe, especially Poland, the Czech Republic and Baltic countries.

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19.    POLISH ALUMINUM KETY TO LAUNCH PRODUCTION IN
       UKRAINE IN 10 DAYS; EXPECTS FURTHER INVESTMENTS

Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, February 1, 2007

WARSAW – Polish aluminum firm Grupa Kety expects to launch production in
Ukraine within ten days and will consider expanding manufacturing facilities
in that country, Chief Executive Dariusz Manko told reporters Thursday. “In
Ukraine, production starts in ten days,” Manko said.

Kety said in early 2006 it would spend PLN 40 million on the installation of
an extruded-products press in Ukraine and Manko expects further investments
in the underserved Ukrainian market.

“We have a large order-book [in Ukraine], the market is very receptive,” the
CEO said. “That is why investments in just one press is unlikely to be the
extent of it.”                                        -30-

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20. FRENCH GROUP DANONE TO INVEST OVER EUR 20 M
                IN KHERSON DAIRY PLANT CJSC RODYCH

Interfax Ukraine Economic, Kherson, Ukraine, Friday, January 26, 2007

KHERSON – French group Danone is planning to invest over EUR 20

million in the modernization of Kherson-based CJSC Rodych dairy plant,
he Kherson mayor’s press service reported.

The sum was discussed ruing a meeting between Kherson Mayor Volodymyr

Saldo and Director General of Danone Ltd. for Ukraine Stephan Batoux.

The investment will be conducive to the launch of such dairy brands as
Activia, Danissimo and Danone yoghurts, the source said.

To launch the production of the new brands, French-produced equipment

will be installed at the plant to process locally produced cheese. At the same
time, the Rodych plant will continue producing dairy produce under its own
brand Vesely Pastushok.

As was reported earlier, on September 7, 2006, Danone, which has been
working on the Ukrainian market since 1999, announced the acquisition of
100% of CJSC Rodych dairy plant in Ukraine. The deal was completed on
October 2, 2006.

Danone also announced plans for 2007 to start the modernization of the
plant’s production facilities and increase dairy production from 30,000 to
200,000 tonnes a year within 10 years.                   -30-
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21. AUSTRIA’S MEINL LAND LTD TO MAKE FIRST INVESTMENT IN
     UKRAINE WITH EUR 150 MILLION IN TRADE CENTER IN ODESA

Interfax Ukraine Economic, Kyiv, Ukraine, Sunday, January 25, 2007

KYIV – Austria’s Meinl European Land Ltd. developing company plans to

invest around EUR 150 million in building a trade center in Odesa, according
to a company press release.

The total area of the trade center will be 60,000 square meters, reads the
release. The trade center is to be completed in late 2008. The profitability of

investment is over 12%, the company says.

According to the release, Meinl European Land Ltd. at present does not
invest in Ukraine, although the company is consulting with local developers
and researching possible future investments.

The company is considering options for investment in the development

of new directions in the real estate sphere and the building of trade centers.

Meinl European Land Ltd. operates in the real estate sphere and invests and
develops real estate in various countries. At present, the company plans to
develop in the Czech Republic, Hungary, Latvia, Estonia, Poland, Romania,
Russia, Slovakia, Turkey, Bulgaria and Ukraine.

As of September 30, 2006, the company’s investment portfolio was EUR

1.233 billion, which included 150 projects in seven countries with revenues
from leasing of around EUR 105 million.                -30-
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22. UKRAINE: NESTLE TO INVEST OVER $50 MLN IN NEW PLANT 
                      Will employ 1,200 workers in Volinskiy Region

Interfax-Ukraine, Kyiv, Ukraine, Wednesday, Jan 24, 2007

LUTSK – Swiss food giant Nestle plans to invest over $50 million in building
a new food plant in Ukraine’s Volinskiy region. The company signed the

relevant investment agreement on Tuesday, the press center of the Volinskiy
 regional council said.

The new plant will produce sauces, ketchup and baby food and will employ
1,200 workers.

The press release also states that at an extraordinary sitting of the
regional council on Monday it was decided to provide 34 hectares of land

for the plant.

Nestle Ukraine was set up in 1994 and in 1998 acquired a controlling stake
in the confectionery company Svitoch, and in November 2003 – 100% of
Volynholding, which operates under the trade name Torchinproduct. rd
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23.   HUNGARIAN SWEETS MAKER BONBONETTI EXPECTS A
   MAJOR BOOM IN EXPORTS TO RUSSIA AND UKRAINE IN 2007

Interfax Central Europe, Budapest, Hungary, Thu, January 25, 2007

BUDAPEST – Hungary’s largest sweets producer Bonbonetti Group, fully

owned by Austria’s Raiffeisen CEE Equity Fund LP, is planning to further
increase exports to the Central and Eastern European (CEE) region and
to Russia, CEO Sandor Santa told Interfax in an interview.

“One of our main goals of our three-year strategy is to increase exports in
the CEE region,” Santa said. “We also expect a major boom in exports to
Russia and Ukraine in 2007.”

Bonbonetti is set to register revenues of more than HUF 12 billion in 2006,
of which export revenues represent almost 30%, Santa said. Exports are
expected to increase by more than HUF 400 million in 2007, Santa added.

Increasing the weight of exports in group-level revenues has a great
importance in the medium-term goal of the company, Santa stressed, as the
move is necessary in order to remain competitive in the region.

“Taking an export-oriented path can be a way out for Hungarian firms, as the
Hungarian market is narrowing and the macroeconomic environment is not as
favorable as in the surrounding countries,” Santa said. “However, we are
ready to compete by offering quality and high standard of services.”

The company currently exports sweets to 48 countries around the world
including China and Mongolia, with the CEE region and Eastern Europe among
the most important markets, currently accounting for almost 40% of exports.
Bonbonetti also launched exports to Romania last year, with high
expectations for the year 2007.

In Hungary, the company is active in the production and sales of bar
chocolate ‘tibi’, which has the third largest share on the market of about
10%, while the company is the leader on the desserts market with its ‘Cherry
Queen’ brand with a share of around 10%.

The company also operates one of the largest chocolate mass making units in
the CEE region in its Budapest factory, which makes Bonbonetti the most
important player on the domestic market of intermediary products, supplying
the Netherlands’ Friesland and France’s Danone, Santa said.         -30-
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24.    BIODIESEL OF BESSARABIA TO LAUNCH BIOETHANOL
              MINI-PLANT IN ODESA REGION BY FEBRUARY

Interfax Ukraine Economic, Kyiv, Ukraine, Friday, January 26, 2007

ODESA – Biodiesel of Bessarabia Ltd. on January 29, 2007, is to launch a
mini-plant to produce biodiesel in Saratsky district of Odesa region, Odesa
Regional Governor Ivan Plachkov reported.

The plant whose production will be 7,000 tonnes of biodiesel is the first
enterprise of this kind in the region, however, in future, when their number
grows, prices of fuel are expected to decline, Plachkov said. “Bioethanol
will help smooth fuel price hikes,” he said.

As was reported, in 12 months after the launch of the factory, Biodiesel of
Bessarabia Ltd. is to double the plant’s capacity to 15,000 tonnes a year.
The number of jobs created under the project will grow from 15 to 80 people.
The company also plans to build an oil and fat factory in the district.

As raw materials, Biodiesel of Bessarabia will use rapeseed crops grown in
Saratsky region, which expanded areas under crops in 2006 by four times to
12,000 ha.                                                -30-

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25.  UKRAINIAN PRESIDENT MEETS WITH U.S. HELICOPTER
              MAKER SIKORSKY AIRCRAFT CORPORATION

Interfax-AVN military news agency website, Moscow, in English 18 Jan 07
BBC Monitoring Service, United Kingdom, Thursday, Jan 18, 2007

KYIV – Ukrainian President Viktor Yushchenko and Sergei Sikorsky

discussed cooperation between Ukrainian aircraft manufacturing firms
and Sikorsky Aircraft Corporation. Sergei Sikorsky, a son of the world-
renowned inventor and designer, is a cofounder of Sikorsky Aircraft
Corporation.

Yushchenko said at the meeting that the powerful technological and
industrial potential of Ukrainian aircraft manufacturing companies could
serve as a good foundation for the Sikorsky Aircraft Corporation’s activity
in Ukraine, the presidential press service said on Thursday [18 January].

Yushchenko also confirmed his position regarding the need to open a

museum for Igor Sikorsky in Kiev. Igor Sikorsky was born in Kiev in 1889.
He emigrated to the US in 1919, where he founded the Sikorsky Aero
Engineering Corporation in 1929.                     -30-
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26.     UKRAINIANS: THE INFERIORITY SYNDROME?

ANALYSIS & COMMENTARY: By Volodymyr Senchenko
The Ukrainian Observer magazine, Issue 227
The Willard Group, Kyiv, Ukraine, January 2007

Foreigners are surprised when a Ukrainian newscaster tells viewers at the
end of his program: “Respect yourself, you deserve it.”

Based on their own life experience, foreigners may think self-esteem is
innate and therefore Ukrainians do not need to be daily reminded that they
should respect themselves.

However, such a phrase is quite useful to Ukrainians. For our inferiority
complex, which makes us feel second-rate, petty and unimportant, is
programmed and has penetrated our outlooks and minds so deeply that

almost every individual Ukrainian has this ugly, shameful trait.

Average Ukrainian citizens have to suppress their indecisiveness before
attracting attention.

Foreigners often notice this characteristic behavior at customs. Ukrainians
act humbly and show fearful respect towards uniformed strangers simply
performing their professional duties. They act as if they conceal something
or are guilty and so want to appear better and more modest than they are.

A foreign friend once asked me why I shunned customs officers. He did not
know I had been taught since childhood I was indebted to my motherland and
that I was a mere screw in the gigantic machine of the Soviet state, and
that only top officials were entitled to drive those screws in any way they
wanted.

Foreigners also become bemused when Ukrainian journalists or officials ask
them for advice on how to act in this or that situation. Once my friend
complained to me that a foreign doctor who he asked for advice replied that
he himself had come to Ukraine to study the experience of Ukrainian
colleagues.

Unfortunately, there are still many people in Ukraine that think foreign
products are better, more advanced and more perfect. They are not guilty,
however, for they could not compare things when living behind the Iron
Curtain.

The opening of the Soviet borders blinded many Ukrainians with bright
labels, neon signs and exquisite designs. The younger generation, especially
pop stars, tried to derive advantages from their inferior fondness for
foreign things.

They went abroad and often performed in public transport or at bus stops

but returned home and achieved nationwide fame, stunning all with their
superficial European chic.

This makes foreigners believe the inferiority complex is innate in
Ukrainians, which is, in fact, not true because people are born with no
complexes, their behavior later being sculpted by life circumstances,
education and environment. No doubt, if this environment is poor and
squalid, as it is in India’s caste society, it will produce certain
stereotypes.

It provides the basis for some of our traits: we, for example, never argue
with directors but do what we think is right or appropriate.

This trait is mirrored in the Russian simile, “as stubborn as Ukrainians.”
However, doing what one believes should be done contributed to the
reputation of Ukrainians who are now good business people.

This trait somehow overshadows and muffles our lasting, aggressive and
tragic struggle for dignity. Oppressed, Ukrainians always revolted, and
there are many pages in our history showing how valorously we fought for
centuries to defend ourselves.
OBSTINATE UKRAINIANS OPPRESSED AND PRESSURED
Not only were “obstinate Ukrainians” oppressed and pressured but also they
were also encouraged to obey government and comply with unnatural commands
they were reluctant to follow.

The local elite was offered privileges and gifts in exchange for loyalty.
All governments ruling Ukraine did such things: Austro-Hungary, Russia, and
Poland. The country’s leaders were given titles, lands and other valuables.

Our foreign rulers also tried to assimilate Ukrainians by forcing them to
adopt Catholicism and materially urging them to speak other languages. We
were not allowed to study, sing and write in Ukrainian but still sang our
songs without words.

Our history was also scrupulously censored; periods and outstanding
personalities that could have inspired the nation and determined its course
being deliberately removed. They even censored research papers on the
Trypillya culture, the most ancient culture in our country.

That must have been done to prevent Ukrainians from looking to their roots,
as other Europeans do, to prove they are older than their “elder Russian
brothers.”
  RUSSIANS LOVED DEMONIZING UKRAINE’S HEROES
Russians also loved demonizing Ukraine’s national heroes and sometimes
exterminated them physically. The names of Mazepa, Petlyara, Makhno and
Bendera were not uttered without the prefix “bandit.” These names were used
to frighten and intimidate people.

Calling someone a follower of Petlyura or Bendera meant that this person
would be jailed. Even during this year’s election, there were no people with
such surnames and very few Mazepas, even though he lived in the 18th
century. He is still scorned as “the traitor of Tsar Peter, the Great” by
leaders of Russia’s Orthodox Church.

Sometimes government ignored national priorities if a Ukrainian made some
invention. Such was the case with an apple variety cultivated by Symyrenko.

Over the years of independence, Ukrainians have been gradually overcoming
their inferiority complex. They revived the names of their prominent
personalities.

I remember being stunned to learn about the famous Ukrainian ballet master
Serge Lyfar, performing in Paris’s Grande Opera, or about constructors of
space devices, or that constructor Glushko was among those who developed

and built the Katyusha multiple rocket launcher.

It is too early to claim we remember all our names. Many pages and names of
our history were torn off, deleted or misinterpreted. We still need much
time and effort to re-establish Ukraine as a historical nation.

Foreign researchers helped us see we are intelligent, educated and
industrious. That is, no doubt, a great result. At the same time, when being
compared with Americans and Europeans, Ukrainians see their actual
imperfections.

Another factor that contributed to our re-evaluation of who we are is the
comparison of our technologies and appliances with those produced in

Europe and Asia.

We have already recovered from the first shock and surprise from the
lustrous design of those devices, and that comparison has ruined the myth of
foreign superiority, although we thought only our military equipment was
equal to theirs. We now often see signs in shops declaring that a product is
produced in Ukraine and in accordance with the EU standards.
ORANGE REVOLUTION SEMINAL EVENT IN NATION’S REVIVAL
However, the greatest events that radically influenced us were the
Independence Square demonstrations of 2004, generally referred to as the
Orange Revolution. In fact, it was not a revolution at all. This became
obvious when its leaders gained power and betrayed their slogans.

Nevertheless, it was the seminal event in the nation’s revival. It must have
been the greatest revolution since the Liberating War of 1648-1654, led by
Hetman Bohdan Khmelnitsky. Back then, the war made many men become

Cossacks.

The political elite also betrayed their people, in Istanbul, Warsaw, Moscow
and Sweden, but the nation, which Europe called the Cossack nation, was
formed and existed for centuries afterwards.

It is clear that the 2004 events will be inspiring Ukrainians for decades.
The Maidan spirit and values will be passed on from one generation to
another.

Our posterity will no longer be offspring of the exterminated, oppressed
generation but of the generation of free, proud and self-respecting parents.
They will not berate themselves, complain and ask others for advice.

To progress to that time, we must often tell Ukrainians: “Respect yourself,
you deserve it.”                                -30-
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LINK: http://www.ukraine-observer.com/articles/227/978 
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27.      STRUGGLE ERUPTS OVER ANCIENT CHURCH

ANALYSIS & COMMENTARY: Elisabeth Sewall, Assistant Editor
Kyiv Post, Kyiv, Ukraine, Thursday, February 08 2007

An inside view of the disputed Church of St. Cyril of Alexandria, which
dates to the 12th century. Preservationists say the burning of candles
and incense from religious services are damaging the church’s old murals.

A medieval Kyiv church decorated with priceless murals is at the center of
an escalating dispute between museum administrators and a local church
subordinate to the Moscow Patriarchate.

For the last decade or so, the 12th century Church of St. Cyril of
Alexandria has been functioning as both a place of worship under the
administration of the Ukrainian Orthodox Church Moscow Patriarchate
(UOCMP) and as a state historical museum open to visitors.

Now museum officials say that daily religious practices, such as the
burning of candles and incense, are damaging the murals.

According to a report issued last October by the National Research
Restoration Center of Ukraine, St. Cyril’s fragile artworks, dating back to
Kyivan Rus years, need a proper microclimate to survive.

According to preservationists, the UOCMP doesn’t think the murals, some
painted by 19th century Russian artist Mikhail Vrubel, are “iconic,” and
therefore they can simply be painted over or covered up.

Sergiy Geruk, editor of Kyrylitsa news, a publication of the Metropolitan of
the UOCMP, called these claims “distorted,” and meant to make his fellow
churchmen look “uneducated.”

“What’s at issue is rights over use of the church, but that doesn’t mean
that the church will suffer from that use,” he said.

According to him, it’s up to the government to resolve the issue. But
preservationists claim that the UOCMP has already found a loophole in the
law, allowing it to pay a small fee for the right to redecorate the church.

“We need to do everything in our power to make sure the St. Cyril’s remains
under the stewardship of the museum,” said Iryna Marhodina, assistant
director at St. Sophia’s National Conservation Area.

“We don’t think that the UOCMP has adequate resources and educated
specialists to provide proper security and restoration, or to run the
educational tours.”

“It should be primarily a museum, and there should be separate church
services – not every day, but a return to the former schedule of church
services only on Saturdays and Sundays,” she added.

Instead, according to Marhodina, the UOCMP could hold daily services at St.
Basil’s church, which is adjacent to St. Cyril’s.

St. Basil’s was constructed using state funds for the express use of the
UOCMP. However, due to shortfalls in financing, the interior walls are still
bare. In 1965,

The Church of St. Cyril was put under the care of the National Preserve of
St. Sophia, which also administers the Pecherska Lavra complex, St. Sophia’s
Cathedral and St. Andrew’s Church.

In 1994, St. Cyril’s was designated a museum accommodating limited church
services. The situation changed significantly in 2004, when an agreement was
drawn up that made UOCMP the main steward of St. Cyril’s, limiting museum
oversight.

Regulation of the monument falls under the jurisdiction of the Ministry of
Construction, Housing and Communal Services of Ukraine. But American and
Canadian preservationists have recently begun writing petitions asking the
Ukrainian government to stop the UOCMP from using St. Cyril’s.

Olenka Pevny, an art historian specializing in Late Antique, Byzantine and
Medieval art history at the University of Richmond in Virginia, says that
her letter campaign is having an impact, gaining the support of New York’s
Metropolitan Museum of Art and the Early Slavic Studies Organization of the
United States, among others.

Pevny said the sole purpose of the campaign is to make sure that Ukraine’s
cultural heritage is protected for prosperity. “The issue I am raising is not

whether there are qualified and earnest individuals in the church versus the
museums.”

“What I am saying is that in all of Ukraine there survives only one
12th-century monument with frescoes. It is the second most important
medieval monument in all of Ukraine after the St. Sofia Cathedral. The
Church of St. Cyril should be designated a historical-cultural landmark
belonging to all the Ukrainian people,” she said.

Pevny has started a campaign on behalf of St. Sophia’s National Preserve to
apply to the World Monuments Fund to nominate St. Cyril’s for a place on
the Fund’s Watch List of the World’s 100 Most Significant Endangered Sites.

The Cabinet of Ministers of Ukraine recently removed 300 monuments from
the protective list of historical-cultural sites, allowing them to be
considered for “re-appropriation” and permanent Church use.

Pevny suspects that St. Cyril’s could be on this list.           -30-
————————————————————————————————-
LINK: http://www.kyivpost.com/opinion/26055/
————————————————————————————————-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
28. INTERNET ENCYCLOPEDIA OF UKRAINE FEATURES:
            THE ART OF FRESCO PAINTING IN UKRAINE

Internet Encyclopedia of Ukraine (IEU) Newsletter
Dr. Marko R. Stech, Managing Director, CIUS Press
Project Manager, Internet Encyclopedia of Ukraine
Toronto, Ontario, Canada, February 2007

BECAUSE OF THE CURRENT CONTROVERSY REGARDING THE
FATE OF THE FRESCOES OF SAINT CYRIL’S CHURCH IN KYIV,

INTERNET ENCYCLOPEDIA OF UKRAINE FEATURES:
THE ART OF FRESCO PAINTING IN UKRAINE (February 2007)

In the Kyivan Rus’ the fresco was the principal method of decorating church
interiors. While Byzantine-style mosaics were limited to the central part
of a church, frescoes covered all the side apses, vaults, columns and walls
of the side naves, and sometimes even the arch supports, galleries, niches,
and external portals. In Byzantium, mosaics were never mixed with frescoes
in the same building; this is a unique practice of Ukrainian church art.

Harmony between mosaic and fresco was achieved by using the same
dominant colors. The most famous examples of this decorative system
are Saint Sophia Cathedral (1037) and the Cathedral of Saint Michael’s
Golden-Domed Monastery (mid-12th century) in Kyiv.

After the middle of the 12th century frescoes almost completely replaced
mosaics in the decoration of church interiors. The most complete set of
frescoes from this period has been preserved in the church of Saint Cyril’s
Monastery in Kyiv.

Learn more about the art of fresco painting in Ukraine by visiting:
http://www.encyclopediaofukraine.com/featuredentry.asp
or by visiting: http://www.encyclopediaofukraine.com
and searching for such entries as:

FRESCO PAINTING. A method of painting on freshly plastered walls with
powdered pigments that are resistant to the erosive action of lime. Before
the colors are applied to the wet plaster the main lines of the composition
are usually traced on the preceding coat. The painting is very durable and
is applied to both interior and exterior walls. The origins of fresco
painting in Ukraine can be traced back to the 4th century BC.

Frescoes adorned the homes, public buildings, and tombs of the Greek
colonists and Scythians on the coast of the Black Sea. The most interesting
ancient frescoes from the 1st century BC were discovered during excavations
of burial sites in Kerch in the tomb of Demeter.

SAINT SOPHIA CATHEDRAL. Saint Sophia Cathedral is a masterpiece of
the art and architecture of Ukraine and Europe. It was built in Kyiv at the
height of Kyivan Rus’, in the Byzantine style, and significantly transformed
during the baroque period. The cathedral was founded by Grand Prince
Yaroslav the Wise and built between 1037 and 1044.

The original building, most of which remains at the core of the existing
cathedral, is a cross-in-square plan with twelve cruciform piers marking
five east-west naves intersected by five transverse aisles. The cathedral’s
interior is decorated with magnificent 11th-century mosaics and frescoes.
Exterior ornamentation of the original 11th-century walls consists of
decorative brickwork, the monochromatic painting of key architectural
elements, and a number of frescoes.

SAINT MICHAEL’S GOLDEN-DOMED MONASTERY. An Orthodox
men’s monastery in Kyiv. In the 1050s Prince Iziaslav Yaroslavych built
Saint Demetrius’s Monastery and Church in the old upper city of Kyiv,
near Saint Sophia Cathedral.

In 1108-13 his son, Sviatopolk II Iziaslavych, built a church at the
monastery dedicated to Saint Michael the Archangel. The monastery was
mostly destroyed during the Tatar invasion of 1240 and ceased to exist.

Written records confirm that it was reopened by 1496. Soon afterward it
began to be known as Saint Michael’s Golden-Domed Monastery, its name
being taken from the church built by Sviatopolk II Iziaslavych. Restored and
enlarged over the 16th century, it became one of the most popular and
wealthy monasteries in Ukraine. …

SAINT CYRIL’S MONASTERY. A monastery founded by Grand Prince
Vsevolod Olhovych ca 1140 on the outskirts of medieval Kyiv. Its church,
Saint Cyril’s, was built ca 1146. The church’s frescoes are fine examples of
12th-century Ukrainian art and the influence of Bulgarian-Byzantine
painting on it.

They depict the Nativity of Christ, the Presentation of Christ at the
Temple, the Eucharist, the Annunciation, the Dormition, the Last Judgment

and Apocalypse, an angel gathering the heavens into a scroll, the apostles, the
evangelists, and various prophets and martyrs.

Murals of saints-Saint Cyril and Saint Methodius, Saint John the Macedonian,
Saint Euphemios-adorn its pillars, and compositions depicting Saint Cyril
teaching the heretic, teaching in the cathedral, and teaching the emperor
are found in the southern apse.                      -30-
——————————————————————————————–
The preparation, editing, and display of the IEU entries associated with
the art of fresco painting in Ukraine by the financial support of the
CANADIAN FOUNDATION FOR UKRAINIAN STUDIES.

ABOUT IEU: Once completed, the Internet Encyclopedia of Ukraine will be
the most comprehensive source of information in English on Ukraine, its
history, people, geography, society, economy, and cultural heritage. With
over 20,000 detailed encyclopedic entries supplemented with thousands of
maps, photographs, illustrations, tables, and other graphic and/or audio
materials, this immense repository of knowledge is designed to present
Ukraine and Ukrainians to the world.

At present, only 11% of the entire planned IEU database is available on the
IEU site. New entries are being edited, updated, and added daily. However,
the successful completion of this ambitious and costly project will be
possible only with the financial aid of the IEU supporters. Become the IEU
supporter and help the CIUS in creating the world’s most authoritative
electronic information resource about Ukraine and Ukrainians!
———————————————————————————————
Dr. Marko R. Stech, Managing Director, CIUS Press
Project Manager, Internet Encyclopedia of Ukraine
Project Manager, Hrushevsky Translation Project
Canadian Institute of Ukrainian Studies
University of Toronto, 20 Orde Street, Rm. 124
Toronto, Ontario M5T 1N7; tel: (416) 946-7326; fax: (416) 978-2672
www.utoronto.ca/cius; www.encyclopediaofukraine.com
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
29. KYIV MOHYLA ACADEMY FUNDRAISER IN WASHINGTON

                                    Sunday, February 11, 2007
 
Action Ukraine Report (AUR) #813, Article 29
Washington, D.C., Friday, February 9, 2006

WASHINGTON – The Kyiv Mohyla Foundation will host fundraiser in
the Washington/Baltimore area for a premier Ukrainian university.
 
WHAT: Kyiv Mohyla Academy Fundraiser & Awareness Event/Dinner
WHEN: Sunday, February 11, 1:00 pm
WHERE: St. Andrews Ukrainian Orthodox Cultural Center
15100 New Hampshire Ave., Silver Spring, MD 20905
 
Please make reservations prior to the event by calling:
301-593-5316 (Valentyn Zabijaka); or 301-873-2035 (Andriy Bihun);
or 773-685-1828 (Marta Farion)
———————————————————————————————–
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
30. CIUS PRESS PRESENTS A GUIDE FOR UKRAINIAN
                          GENEALOGICAL RESEARCH

 
CIUS Press, University of Alberta, Edmonton, AB, Canada, Feb, 2007

RE: John D. Pihach, Ukrainian Genealogy: A Beginner’s Guide
CIUS Pres, 272 pp., $54.95 (cloth). $34.95 (paper)

John D. Pihach’s Ukrainian Genealogy is a guide to tracing one’s Ukrainian
ancestry in Europe. Consideration is also given to North American records
that are specifically Ukrainian or relate to the immigrant experience.

Because the overwhelming majority of people of Ukrainian origin in Canada
and the United States have roots in western Ukraine or southeastern Poland,
the guide concentrates on the resources of those regions.

This handbook is intended primarily for those whose ethnic roots are
Ukrainian, although some of the material in it may be useful to other groups
with roots in Ukraine.

Chapters 1 and 2 discuss general topics that are preliminary to research.
Personal names are examined in chapter 3. Chapters 4 and 5 outline the early
religious experiences of Ukrainians in North America and the church records
that are available. Chapter 6 addresses the crucial question of determining
the name of the European ancestral community.

Chapter 7 explains how to locate places on a map, describes the various
administrative divisions that existed in the past, and looks at the many
types of maps that pinpoint the location of the ancestral village and even
the actual home.

The resources for learning the history of a specific region are covered in
chapter 8. Chapters 9 and 10 are devoted to church-based birth, marriage,
and death records, the principal overseas genealogical resource. Chapters 11
and 12 survey other overseas materials.

Several appendixes describe Ukrainian transliteration schemes and present a
key to the scripts of the languages that were used in record keeping;
provide a starting point for research by other ethnic groups with roots in
Ukraine; and list useful Web sites.

John D. Pihach received a B.Sc. degree in physics from the University of
British Columbia and studied studio fine arts at Langara College, Vancouver.
He has spent many years wandering about Asia and Europe and has made a

dozen trips to Eastern Europe, where he has done genealogical research at
several archives.

He works as a weather observer and is the library chairperson of the East
European Genealogical Society in Winnipeg and author of several articles in
Galician genealogy..

Orders can be placed online at:
http://www.utoronto.ca/cius/publications/books/ukrainiangenealogy.htm
and by: e-mail: cius@ualberta.ca; telephone: (780) 492-2973 between

8:30 am and 4:30 pm (MST). fax: (780) 492-4967.
Mail: CIUS Press, 450 Athabasca Hall, University of Alberta, Edmonton,
AB, Canada T6G 2E8.

SPECIAL OFFER: MORE FOR LESS (valid only through Web site)
Buy the paperback edition of this book together with Ukrainians in Canada:
The Formative Years, 1891-1924 (cloth, $49.95) and save 20%
[Total Regular Price: $34.95 + $49.95 = $84.90]Purchase Together: $67.92

CIUS Press is the largest publisher of English-language material about
Ukraine. It is the publishing arm of the Canadian Institute of Ukrainian
Studies at the University of Alberta and the University of Toronto. The
emergence of Ukraine as an independent state has focused general and
scholarly interest on Ukrainian studies, and CIUS Press is meeting that
interest and need with a sizeable offering of new, forthcoming, and

already published books.
—————————————————————————————-
Dr. Marko R. Stech, Managing Director, CIUS Press
Project Manager, Internet Encyclopedia of Ukraine
Project Manager, Hrushevsky Translation Project
Canadian Institute of Ukrainian Studies
University of Toronto; 20 Orde Street, Rm. 124
Toronto, Ontario M5T 1N7; tel: (416) 946-7326; fax: (416) 978-2672
www.utoronto.ca/cius; www.encyclopediaofukraine.com
———————————————————————————————-
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
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Washington Office, SigmaBleyzer, The Bleyzer Foundation

Emerging Markets Private Equity Investment Group
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