aaus-list @ ukrainianstudies.org -- [aaus-list] Fwd: Ukraine Today -- 18.03.2002

[Robert De Lossa <radelo@earthlink.net>]

[from "Yaroslav Davydovsky  {20122}" <sda@ukrainet.lviv.ua>]

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   UKRAINE TODAY
   Main weekly events from Infobank News Agency


   18 March 2002



   * FUTURE PARLIAMENTARY ELECTIONS WILL ENHANCE UKRAINE'S CREDITABILITY, SAYS
     JP MORGAN
   * EUROPEAN OIL MARKET STUDY CONFIRMS INTEREST IN ODESA-BRODY OIL
     PIPELINE
   * KUCHMA CRITICIZES GOVERNMENT FOR POOR PERFORMANCE IN TERMS OF FORMING
     GRAIN MARKET
   * PARLIAMENT CANCELS IMPORT DUTY ON DIAMONDS, CHANGES DUTIES ON IMPORT OF
     FUR CLOTHES
   * CABINET CANCELS CLEARING SCHEMES IN FUEL/ENERGY COMPLEX AFTER
     APRIL 1
   * BUDGET TARGET FOR JANUARY-FEBRUARY MET 94.9%
   * IN FEBRUARY GDP GROWS BY 4%, BY 3.6% SINCE BEGINNING OF 2002
   * UKRAINE'S SUPREME COURT CANCELS LOWER COURT DECISION FOLLOWING APPEAL BY
     DEPUTY RZHAVSKY
   * UKRAINE MIGHT REVOKE CONTRACT WITH AMERICAN ESI COMPANY FOR NOT MEETING
     ITS OBLIGATIONS TO COMPLETE DNISTROVSKA HAPP
   * CENTRAL ELECTION COMMISSION CANCELS REGISTRATION OF YABLUKO PARTY LEADER
     AS CANDIDATE FOR VERKHOVNA RADA






   FUTURE PARLIAMENTARY ELECTIONS WILL ENHANCE UKRAINE'S CREDITABILITY, SAYS
   JP MORGAN

   LONDON. Despite a large number of contenders (33 political parties and
   blocs) the results of the forthcoming parliamentary elections will be
   market-friendly for eurobonds. Such is the forecast by a world leading
   investment bank, JP Morgan, contained in the bank's March 7 review of the
   developing countries' markets, For-ua.com reports.

   According to JP Morgan experts, in Ukraine the Left is balkanized, while
   the pollsters' favorite Our Ukraine bloc led by former Prime Minister
   Viktor Yushchenko is leaning toward those parties that support President
   Kuchma. The Communists, the review continues, will not be able to create a
   coalition with other leftist parties, being engaged in fiercer ideological
   squabbles with each other than with the Yushchenko Our Ukraine and other
   pro-presidential parties.

   Given the elections positive result, Ukraine stands a good chance to raise
   its creditability. In particular, JP Morgan review points to a 15% economy
   growth in the last two years, a sound fiscal policy, hryvnia
   strengthening, and the completing restructuring by Ukraine of its Paris
   Club debt. JP Morgan says that in the next several years Ukraine's
   payments on it foreign state debt, which shrank since 1999 from 54% to
   23%, will be low and smooth.


   EUROPEAN OIL MARKET STUDY CONFIRMS INTEREST IN ODESA-BRODY OIL
   PIPELINE

   KYIV. A study of the European oil market carried out by US companies
   Brown&Root and CERA for Ukrtransnafta has confirmed the interest of
   Europe's oil refineries to use the Odesa-Brody oil pipeline,
   Ukrtransnafta's press service report says.

   According to the report, the study's preliminary results have been
   submitted to the quadrilateral work group headed by the first vice premier
   Oleh Dubyna. The US companies will report on their final results in Kyiv
   on April 10.

   According to earlier reports by Infobank, the US Agency for Trade and
   Development earmarked a US$ 125,000 grant in 2001 for an additional survey
   of Europe's markets and the prospects for the Caspian oil transited via
   the Odesa-Brody route of the Eurasian transport corridor. The agency
   commissioned the US firm Brown & Root, a subsidiary of Halliburton, to
   implement the survey. Earlier, Brown&Root was involved in preparing a
   technical evaluation for extending the Odesa-Brody pipeline to the Polish
   city of Polotsk.

   According to Ukrtransnafta board chairman Oleksandr Todijchuk, the
   European oil refineries are currently questioned as to their interest in
   oil supplies via the new Ukrainian pipeline. "Following the results of
   questioning we will approach the refineries on an individual basis'" Mr.
   Todijchuk stressed. He also mentioned that the transit tariffs have not
   been fixed yet and their size is to be negotiated with potential clients.

   Apart from Ukraine's Naftokhimik Prykarpattia oil refinery, interest in
   the new pipeline has been shown by Slovakia's Transpetrol, Czech's Ceska
   Rafineria, Austria's OMV concern, and American Exxon Mobil. However,
   there were no proposals so far from foreign firms to sign oil transit
   contracts with Ukrtransnafta for 2000.

   According to Oleksandr Todijchuk, this new 9 million ton annual capacity
   oil pipeline will bring a profit if at least 6 million tons are transited
   annually.


   KUCHMA CRITICIZES GOVERNMENT FOR POOR PERFORMANCE IN TERMS OF FORMING
   GRAIN MARKET

   KYIV. Speaking at the nationwide meeting on the post-reform development
   of the agricultural sector on March 11, the Ukrainian President, Leonid
   Kuchma, subjected the Cabinet of Ministers to harsh criticism for poor
   performance in terms of forming the Ukrainian grain market, which belongs
   to the government's priorities.

   According to korrespondent.net, the President pointed out that a
   considerable part of agricultural production was certified as long ago as
   the Soviet times, which is why the forage grain sold in Ukraine as Grade 5
   and 6 grain is sold abroad as Grade 3. The President also said that
   mainly foreign traders are operating on the country's grain market with no
   domestic exporters available. Among those exporting Ukrainian grain there
   are many tax-evading companies as well as companies "lasting one day"
   only.

   Leonid Kuchma was also critical of the way Ukrainian banks provide loans
   to agricultural producers, saying that their credit interest rates are
   exaggerated. According to the head of state, in order to overcome the
   given situation it is necessary to make some new staff appointments and
   accelerate the financial rehabilitation of the state joint stock company
   Khib Ukrayiny (Ukraine's Bread).


   PARLIAMENT CANCELS IMPORT DUTY ON DIAMONDS, CHANGES DUTIES ON IMPORT OF
   FUR CLOTHES

   KYIV. The Supreme Council of Ukraine has passed government-proposed
   changes to the country's blanket customs tariff, canceling a 5% duty on
   the import of uncut, cleft or roughed diamonds and thereby backing the
   Cabinet of Ministers in its attempts to preserve diamond production in
   Ukraine and increase budget revenues, reports Interfax-Ukraine.

   As Infobank has reported earlier, Olexandr Shlapak, minister
   of economy and the issues of European integration, told journalists
   after the January 23 government session that high import tariffs had
   brought about a sharp decline in the production volumes at Ukraine's
   ten diamond-cutting plants. Annually, the import of diamonds into
   Ukraine totals UAH 70 million (USD 13 million). Olexandr Shlapak also
   stressed that lifting the import tariff is one of the conditions for
   Ukraine to join the World Trade Organization.

   According to the governmental press service, in 2001 Ukrainian
   enterprises purchased 4.5 times less diamonds than in 2000. This led
   to a drop in the export of Ukrainian jewelry.

   By making other changes to the blanket customs tariff Ukrainian lawmakers
   have lowered from 50% to 25% the full rate of import duty on central
   heating boilers with the capacity of up to 100 kW and from 25% to 15% the
   preferential rate. Besides, the parliament has increased from 30% to 40%
   the rate of full duty on the import of clothes made from mink, nutria,
   polar fox, rabbit, hare and sheepskin. The full rate of import duty on
   calcium hypochlorite has been raised from 15% to 20% and preferential rate
   from 5% to 15%.


   CABINET CANCELS CLEARING SCHEMES IN FUEL/ENERGY COMPLEX AFTER
   APRIL 1

   KYIV. At its sitting on March 13 the Cabinet of Ministers of Ukraine
   decided not to extend after April 1 its resolution allowing mutual debt
   setoffs in the country's fuel/energy complex, Oleh Dubyna, the country's
   First Vice Prime Minister, told reporters.

   As Infobank has reported earlier, on January 11 the Ukrainian
   government extended the period for mutual debt setoffs for
   electricity among the enterprises of the fuel/energy sector through
   one-day bank credits. This procedure was in effect until December 31,
   2001.

   In the prolonged resolution, the Ukrainian government outlined the payment
   procedure for electricity among the energy sector enterprises using
   one-day bank credits, as well as the list of such entities. Later on, the
   government increased the number of entities entitled to this procedure,
   including, among others, penitentiary institutions and Ukrzaliznytsia
   railway companies.

   Coal companies supplying coal to power plants, Naftohaz Ukrayiny companies
   supplying gas to thermal power plants, Ukrzaliznytsia railway companies
   delivering goods to energy-generating companies and nuclear power plants,
   as well as water utility companies supplying water to coal mines are
   entitled to mutual electricity debt offsets.


   BUDGET TARGET FOR JANUARY-FEBRUARY MET 94.9%

   KYIV. Over January-February this year, revenues of the state budget's
   joint pool actually amounted to UAH 4,852,000,000, while the target was
   UAH 5,114,000,000 (94.9% of the target) but in the second month the amount
   of revenues was 1.6% higher than the target, Ihor Yushko, Ukraine's
   Finance Minister, told journalists after the government meeting on March
   13.

   According to Mr. Yushko, tax revenues over this period were UAH 100-150
   million higher than over January-February last year. At the same time the
   amount of revenues from corporate profit tax was UAH 229 million lower
   than the target, from excise duty on imported goods by UAH 46 million,
   from import duty by UAH 50 million and from payments for the transit of
   natural gas by UAH 200 million.

   Ihor Yushko also said that the state budget joint pool's expenditure over
   January and February this year, excluding sums spent on the servicing of
   the public debt, stood at UAH 3,228,000,000. UAH 774 million was spent
   towards repayment of the capital amount of the public debt (UAH 365
   million of internal debt and UAH 409 million of external debt) and UAH 445
   million on debt servicing (UAH 129 million spent on the servicing of
   internal debt and UAH 315.7 of external debt). The amount of borrowing
   over the first two months of 2002 was only UAH 80 million.


   IN FEBRUARY GDP GROWS BY 4%, BY 3.6% SINCE BEGINNING OF 2002

   KYIV. According to preliminary reports, the gross domestic product grew
   by 4% in February compared to February 2001. For the first two months of
   2002, the GDP grew by 3.6%, Korrespondent.net reports, citing a source in
   the Ukrainian government.

   In January the GDP growth slowed down to 3.2% against 9.1% in January
   2001. In 2001, the GDP went up by 7.6% in January-February. The government
   forecast a 6% growth of the GDP in 2002.


   UKRAINE'S SUPREME COURT CANCELS LOWER COURT DECISION FOLLOWING APPEAL BY
   DEPUTY RZHAVSKY

   KYIV. The board of judicial chamber of the Supreme Court of Ukraine
   confirmed that the untaxed minimum income of Ukrainians is equal to UAH
   17, and cancelled an earlier decision by a rayon court which said that
   income tax calculation must not be based on this figure, State Tax
   Administration press service release says. The rayon court took this
   decision following an appeal by people's deputy Rzhavsky.

   According to the STA press service, after considering the case, Supreme
   Court judges confirmed the validity of presidential decree of September
   13, 1994 imposing this untaxed minimum income. The STA will continue to
   base its calculations on this figure, the press service stressed.

   It was the STA that initiated a proposal to include in the draft Tax Code
   much lower tax rates to calculate the incomes on natural persons (10-20%
   instead the currently used 10-40%). New untaxed minimum income level can
   be imposed only in a legal way, the STA report continued.

   As Infobank has reported earlier, on September 10 the Shevchenkivskyi
   court of Kyiv satisfied a complaint filed by MP Oleksandr Rzhavskyi and
   rendered invalid the regulation by the State Tax Administration of Ukraine
   on making changes and amendments to the part of the instruction on income
   tax, dated by April 28, 2000, that goes counter to the Cabinet of
   Ministers decree on income tax.

   The essence of the problem set out in the lawsuit is that under existing
   laws, the taxation of natural entities' incomes is carried out on the
   basis of the Cabinet decree on income tax (December 26, 1992). According
   to this decree, income tax rates are set depending on the minimum wage in
   the country, which in 2001 is UAH 118 and which must not be taxed.
   However, the above presidential decree sets the untaxed minimum at UAH 17
   and income tax rates depending on this minimum.

   Oleksandr Rzhavskyi believed that this order of taxation of natural
   entities is in disagreement with the Ukrainian Constitution, according to
   which the system of taxation, taxes and duties are set exclusively by
   Ukrainian laws. As a result of this ambiguous interpretation of tax laws,
   the state has for a considerable period of time been exacting more taxes
   on working Ukrainian citizens than is provided by the law, which the MP
   believes is a violation of the constitutional rights and freedoms of tax
   payers, i.e. of virtually all able-bodied citizens of Ukraine. According
   to A. Fedur, by purposefully using the wrong tax scale for calculations,
   tax officials monthly collect UAH 300 million in excessive taxes from
   Ukrainians.

   Under the governmental decree of December 26, 1992, taxation of natural
   entities must be carried out according to the following rates: 1 minimum
   wage is not taxed; the tax on sums ranging from 1 minimum wage + 1 kopeck
   to 10 minimum wages is 10% of the sum exceeding the minimum wage; on sums
   ranging from 10 minimum wages + 1 kopeck to 20 minimum wages - an
   additional 20% of the sum exceeding 10 minimum wages; on sums ranging from
   20 minimum wages + 1 kopeck to 30 minimum wages - an additional 35% of the
   sum exceeding 20 minimum wages; on sums over 30 minimum wages - 50% of the
   sum exceeding 30 minimum wages.

   The presidential decree # 519, dated by September 13, 1994, sets the
   untaxed minimum income at UAH 17 and a 10% taxation rate on the sums
   ranging from 1 to 5 untaxed minimums, 15% on sums from 5 to 10 untaxed
   minimums, 20% on sums from 10 to 60 untaxed minumum incomes, 30% on sums
   from 60 to 100 untaxed minimums and 40% on sums amounting to over 100
   untaxed minimums.

   Later, Ukraine's State Tax Administration (STA) has issued a statement in
   which it says that claims made by MPs Andriy Fedur and Oleksandr Rzhavskyi
   (who said that imposing income tax on natural entities is against the law)
   are populist. According to the STA, this tax is collected in line with
   the country's legislation.

   Serhiy Lekar, head of the STA Natural Entities Taxation Main Department,
   income tax is collected on the basis of the Cabinet of Ministers decree
   issued on December 26, 1992 and the STA Instruction "On Income Tax"
   (issued on April 21, 1993), which defines the order of application of the
   decree's provisions according to changes in Ukraine's legislation.

   Clause 7.1 of the STA Instruction defines the order of the application of
   scale of income taxes, described in the decree, depending on changes in
   the amount of untaxed minimum income, which is established by other
   legislative acts issued by the President, Supreme Council and Cabinet of
   Ministers. Since September 1, 1996 the untaxed minimum income has stood
   at UAH 17.


   UKRAINE MIGHT REVOKE CONTRACT WITH AMERICAN ESI COMPANY FOR NOT MEETING
   ITS OBLIGATIONS TO COMPLETE DNISTROVSKA HAPP

   KYIV. The Government of Ukraine might revoke the contract with United
   States' ESI company for its failure to meet its contractual obligations to
   complete the Dnistrovska Hydro Accumulating Power Plant, MigNews quotes
   deputy head of the department for strategic policy and development at the
   Ministry for Fuel and Energy Mykola Borysov as saying.

   According to the official, the completion project has not been implemented
   due to certain causes related both to the Ukrainian and American parties.
   The Ministry is currently holding talks with the European Bank for
   Reconstruction and Development and World Bank on funding the completion of
   this power plant.

   As Infobank has reported earlier, the construction of Dnistrovska HPSPP
   was started in 1988; to date, the first stage of the plant construction is
   only 31% finished and the first hydroelectric unit is 55% finished. The
   role of Dnistrovska HPSPP is expected to be that of the regulator of
   optimal current frequency in Ukraine's energy system. The plant can
   become a link between Ukrainian and Hungarian atomic power stations, which
   opens new opportunities for the export of Ukrainian electric power.

   In July 2000, SPF transferred 87 percent of the power plant into the
   ownership of an American company Engineering&Construction, which has
   stopped funding the completion of the power plant. íhe Canadian company
   planned to finish construction of the start-up unit in 5 years. The unit
   includes 3 engines with capacity 350 megawatts each.In 2000 the company
   planned to invest up to USD 25 mln.

   The total cost of the completion of the plant's three planned stages
   amounts to nearly US$ 1 billion. Earlier Ukraine wanted to attract a World
   Bank loan worth US$ 500 million for this project but in late 1998 the
   World Bank refused to take part in the completion of the HPSPP. The
   refusal came when the order for equipment for the fisrt hydroelectric unit
   had been placed with Ukrainian manufacturers, Kharkiv-based TurboMash and
   ElectroVazhMash, while the World Bank wanted the equipment to be purchased
   via a tender.

   Joint stock company Dnistrovska hydraulic pumped storage power plant was
   set up in 1998 by a government decree with the objective to attract local
   and foreign investment to complete construction of the project. HPSPP's
   property became part of the statutory fund. 300 mln UAH had been already
   invested in its construction.

   According to the government decree, the State Property Fund is the founder
   of the company. But state-owned stock will have to be managed for 5 years
   by the winner of the tender for the best investment project. After the
   investor meets all his obligations, the deal can be prolonged for another
   5 years. As soon as investment is made, Cabinet of Ministers will be
   responsible for introducing a special way to calculate tariffs for energy
   sales which would help to get payback on investment.


   CENTRAL ELECTION COMMISSION CANCELS REGISTRATION OF YABLUKO PARTY LEADER
   AS CANDIDATE FOR VERKHOVNA RADA

   KYIV. At its March 15 session, the Central Election Commission, CEC, has
   cancelled the registration of eight candidates from the Yabluko party
   ticket, allegedly for untrue information they entered in their income
   declarations. Among the group are Yabluko leaders Mykhailo Brodsky and
   Viktor Chaika.

   According to For-ua.com, Mykhailo Brodsky, No. 1 on the party slate,
   failed to declare UAH 186,949 in payments to various entities' statutory
   funds, while No. 2 on the Yabluko slate, Viktor Chaika, also did not enter
   in his declaration the UAH 188,126 he paid into statutory funds of some
   entities.

   As Yabluko representative Volodymyr Hutsubidenko said after the CEC
   session, the CEC decision to expel his comrades from the election race
   will be protested in the Supreme Court in the nearest time. He also said
   that this decision is evidence of CEC biased attitude toward Yabluko.




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