Speech by H.E. Volodymyr Khandogiy, Ambassador of Ukraine to Canada at the Dinner hosted by the Ukrainian Canadian Professional and Business Association of Manitoba

Winnipeg, April 13, 1999

Dear ladies and gentlemen,

I would like to begin by thanking the Ukrainian Professional and Business Association of Manitoba for hosting this meeting, which, I hope, gives us the opportunity to exchange our ideas on development of the trade and economic relations between Manitoba and Ukraine.

I am glad to meet here in Winnipeg with Canadian businessmen who work in Ukraine and all those who are interested in strengthening of bilateral cooperation. I am happy to get acquainted today with new people, who's ideas, I believe, will contribute to the new projects in our countries.

This is my first visit to your province as Ambassador of Ukraine. I was very glad to be appointed as Ambassador to this country. Canada has stable economy and takes the leading positions in the world politics. Canadian impressive international initiatives that address such core issues as child soldiers, cultural sovereignty, small arms proliferation, and non-first use of nuclear weapons, reveal a great deal of good will and leadership. Such multilateral success stories as the global ban on land-mines and the establishment of International Criminal Court have demonstrated Canada's determination to bring about a more secure world. I am vary glad to inform you that Ukraine has joint recently the Ottawa convention on the ban on land-mines and I signed this document on behalf of my country on the 24th of February in New York. It is very important that Canada was elected as a non-permanent member of the United Nations Security Council, which Ukraine has wholeheartedly supported. I am confident that such a choice came as recognition of Canada's special role in maintaining international peace and security.

The Government of Ukraine is deeply grateful for the invaluable assistance Canada has rendered to my country from the very outset of her independence. The Canadian political, moral and material support have been substantial and meaningful, and so it remains to this day. Since December 1991, when Canada became the first Western state to recognize independence of Ukraine, our bilateral relations have developed and achieved the high level of special partnership. Our positions on all of today's global issues are very close or openly coincide. In particular, we share Canada's approach to updating NATO's nuclear policy in the light of the transformed international security circumstances. I would especially like to point out Canada's support for Ukraine in such international frameworks as the United Nations, G-7, NATO and the WTO. It will not be an exaggeration to state that this support is an investment that will certainly yield dividends.

There is yet a lot to be done as we move on to the new stage of cooperation. Even though last year the level of bilateral trade doubled as compared to 1997 and reached almost 100 mln dollars, existing economic ties between our countries are far from being satisfactory. President Leonid Kuchma emphasized the critical importance of economic component in Ukraine-Canada relations as my priority task during our meeting before my appointment to Canada.

Now few words about internal situation in Ukraine.

The general economic situation in Ukraine during the first half of 1998 was characterized by a relatively stable financial system and constantly increasing level of privatization, but it changed for the worse by the end of the year. Privatization of small and medium-sized enterprises is in its final stage with over 80 percent of them being privatized. The process of selling shares of large state enterprises is more complicated, and the level of privatization for this category is not that high, but it is also higher than 50 per cent, and the share of large private companies continuously increases as well. In spite of some decrease in GDP by 1.7% in 1998, percentage was less than in the previous year (GDP decreased by 3% in 1997 compared to 1996).On the other hand, the overall volume of sales of consumer goods decreased in relative prices by 4.5% in 1998. Retail turnover of officially registered enterprises of all forms of ownership totaled 19.1 billion hryvnyas (approximately 9.5 billion US dollars), that is also 5.4 percent less in comparison with 1997 data.

You know about recent economic problems connected with the negative impact of financial crisis in the neighboring country that Ukraine faces since August, 1998. The President of Ukraine, Government of Ukraine, National Bank have developed a set of anti-crisis actions that are in progress now. The support of international community is rather crucial at this time. The 2,5 billion US$ loan, provided to Ukraine by the IMF in September, gave the opportunity to use this financial resources for the most urgent needs. The Canadian support at the IMF Executive Directors meetings is highly important for Ukraine.

In order to achieve economic stabilization, real economic growth and the overall economic improvement the Government of Ukraine has elaborated the Ukraine-2010 Program which envisages three stages of social and economic development.

The first stage (that is, the years 1999-2000) includes economic stabilization and transfer to economic growth. The second stage (2001-2005) is dedicated to profound changes in economic structure and enhancement of economic efficiency, GDP growth up to 7% annually. The third stage (2006-2010) will see the continued structural transformation of the economy and higher pace of its growth, the achievement of the GDP per capita according to the real purchasing capability of US$4-4,5 thousand.

Like in Canada, trade with other nations constitutes over 40 percent of our GDP. Last year was not successful for the Ukrainian foreign trade. The volume of Ukrainian exports decreased in January-November 1998 by 13%, import - by 15%. But we do hope that general rehabilitation of the economy, as well as the accession to the WTO, which Ukraine is currently actively engaged in, should boost Ukrainian exports.

At present time the major Ukrainian exports include ferrous metals, ores and goods manufactured from ferrous metals, products of chemical and related industries primarily fertilizers, machines and equipment. Gas and oil remained the major critical import of Ukraine in 1998. Along with mineral fuels, Ukraine imports various machines and equipment, products of chemical and related industries, plastics and rubber, metals, processed food.

According to Statistics Canada Ukrainian export to Canada in 1998 was 69 million. For the first time, Ukraine exported 75000 tones of feed wheat to Eastern Canada in 1998 and that was the reason for the Agriculture and Agri-Food Canada to name Ukraine as the competitor to Canada in the grain markets. Even Ukrainian vodkas Perlova, Old Kyiv, Hetman as well as beer Obolon can be purchased in the Ontario stores.

Attracting foreign capital is one of key challenges to the economic reforms in Ukraine. The establishment of capital market along with input of both domestic and foreign investment are prerequisites for Ukraine's further successful development. According to the estimates of international experts, the need in foreign investments in Ukraine exceeds US$ 40 billion, including $7.0 billion to come to metallurgy; $5.1 billion to machine building; $4.0 to the food industry; $3.7 billion to transport sector. Lots of companies need the inflow of capital immediately, otherwise a valuable state-of-the-art enterprises, which Ukraine still possesses in some areas, might be permanently lost. The President of Ukraine and the Ukrainian government pay great attention to the attraction of foreign investment. Recently the special economic zones were set up in Crimea, Donetsk region and Western Ukraine (Yavoriv, Lviv oblast) with a favourable regime for foreign investors.

The total amount of foreign investment in 1997 was US $759.2 million, which is a 42.9-percent increase compared to 1996. The overall amount of direct foreign investments in Ukraine as of 1998 was US $2.1 billion. Average yearly share of foreign direct investments in Ukraine constitutes about 2,5% of the total amount of the investments in housing and production sphere. But, as you can see the gap between the necessary capital and available resources is still huge.

The most promising branches of Ukraine's economy from an international investor's point of view are agriculture and food processing industry, chemicals and fertilizers production, machine-building and certainly aerospace industry. This list will not be complete without exploration, transportation and refining of oil and gas, power generation, telecommunications and tourism infrastructure. And as you can see, a great deal of coincidence between the demand and the area of Canadian expertise on the international markets.

According to the Canadian international trade experts, agriculture, energy and construction are the 3 major sectors for further economic cooperation between Canada and Ukraine. The importance of these sectors have been reflected in the composition of Ukraine-Canada Intergovernmental Economic Commission, which currently has 3 corresponding subsections, as well as Canadian Ukrainian Business Initiative (CUBI), and is in the process of creating the forth one that will deal with space and high-tech cooperation.

We consider the cooperation with prominent Canadian investors as of great importance for Ukraine. I am glad to inform you that we have now 174 Ukrainian-Canadian joint ventures, the whole amount of Canadian direct investments increased last year from US$ 35,8 to 53,6 mln., but this is only 2,6% of foreign direct investments in Ukrainian economy.

Ukraine and Manitoba are closely connected by various links, including ethnic, cultural and linguistic commonality.

At the same time, trade and economic ties remain fundamental to our cooperation. Their development is facilitated by the coincidence of Manitoba economic potential with the priority sectors of Ukrainian economy. The Memorandum on cooperation between the province of Manitoba and Ukraine, signed during the visit of Premier Filmon to Ukraine in October 1997, contains eleven priorities for cooperation in the fields of energy, construction, agriculture, aerospace industry, tourism, transportation etc.

There is a great potential for cooperation in agriculture. We hope that the representatives of Manitoba Agricultural business will take an active part in CUBI-2 planned for the coming summer.

Bilateral trade requires intensification: neither its volumes nor structure corresponds to the needs and capabilities of the two sides. The positive dynamics of overall development of Ukraine-Canada trade gives good grounds for the hope that the general positive tendency will also influence on Ukraine-Manitoba trade turnover. Ukrainian export to Manitoba increased last year in 5 times from CAN$ 1 to almost 5 mln (the 3 position among Canadian provinces - after Quebec and Ontario), but the volume of export from Manitoba was only CAN$ 195 thousand (the 9^th position).

In April, 1998 the Head of the National Agency of Ukraine for Development and European Integration Mr. Roman Shpek and the president and CEO of the Canadian Export Development Corporation (EDC) signed a protocol that should provide a mechanism to facilitate EDC's financing activities in Ukraine. This protocol will supplement EDC's existing $US20 million line of credit with the State Export-Import Bank of Ukraine and should support Canadian exporters.

Ukraine is an old nation, but still a very young state which lacks experience of working on the world market, partially due to the fact that the majority of goods produced in Ukraine before its independence were sold through giant trading companies located in Moscow. So, in spite of the fact that we produce a lot of very competitive, sometimes state-of-the-art products from unique welding machines to the famous cargo aircraft AN-70, we still have a problem of finding a market for them. Canadian companies that possess a great deal of international marketing expertise might be rather useful and successful in this connection by establishing multilateral economic ties.

I am not trying to create an illusion of easy money, what I am trying to imply is that the potential of Ukraine-Canada economic relations has yet to be utilized. Unequivocally, and you know that better than I do that there might be some difficulties before you eventually carve yourself a niche in Ukrainian market or find a market for Ukrainian products. But you also know that the difficulties pale against the possibilities.

The first visit to Ukraine by Prime Minister Chretien last January has become a landmark in bilateral relations. The first visit of the Head of Canadian Government since the restoration of Ukraine’s independence had a primary political importance and opened new opportunities to strengthen the special partnership between Ukraine and Canada.

During the negotiations between Jean Chretien and the President of Ukraine Leonid Kuchma a wide range of issues of bilateral cooperation was discussed as well as the problems of the two countries interaction at the international arena, the integration of Ukraine into European and Trans-Atlantic structures, and the issues of Chornobyl. The Canadian Prime Minister reconfirmed the course of the Canadian Government to support Ukraine within the IMF, G-7, NATO and other institutions where my country is not represented, as well as in the process of Ukraine’s accession to the WTO. Both sides agreed that the main task of the current stage of our relations is the development of bilateral trade and investment cooperation. They also advocated the further intensification of regional cooperation between the two countries that would enable to realise to the fullest the interests and potentials of businesses of Ukrainian regions and Canadian provinces.

During the visit, seven intergovernmental agreements were signed. The economic component of the visit was also substantial: nineteen commercial agreements totalling CA$268-million were signed, including five contracts worth CA$10-million, seven memorandums of understanding valued at CA$126-million, and seven letters of intent worth CA$132-million. These signings came in a number of sectors, including agriculture, energy, construction and manufacturing. Nearly 150 Canadian businesses participated in the business mission to Ukraine.

It is my pleasure to note that the large business delegation that accompanied the Prime Minister to Ukraine included several representatives from Manitoba. The Central Canadian Structures of Winnipeg signed a memorandum of understanding with Darnitsa Pharmaceutical Company of Kyiv to upgrade and develop Darnitsa’s production facilities. The objective is to improve the company’s operating efficiency and increase its market share in the Ukrainian pharmaceutical industry. The first phase of development is expected to be worth approximately $ 7,5 million with Canadian content $5,3 million. The Central Canadian Structures also signed an agreement with Olvia Corporation of Dnepropetrivsk to supply three energy-efficient houses that utilize the latest Canadian building technology. The project is valued at $ 1 million with a Canadian content value of $ 500000. I think that this is a good example of new opportunities for Canadian business at Ukrainian market.

I hope for the good development in future of the relationship between such companies as New Holland, Manitoba Heavy Construction, Smith Carter Architects and Engineers and other with their partners in Ukraine.

I do believe that the Ukrainian Professional and Business Association of Manitoba, the CUBI Chamber and especially its construction section, headed by Jim Orzechowski from Winnipeg can make an important contribution to the strengthening of mutually beneficial economic cooperation between our countries.

And if you wish to invest in Ukraine or buy Ukrainian products the doors of Ukrainian Embassy in Ottawa and Consulate General of Ukraine in Toronto are always open for you.

Thank you.