APPROPRIATE AREAS FOR INVESTMENTS AND TRADE

IN UKRAINE

prepared by: HASAN DINGMinistry of Foreign Affairs TICA Ankara Turkey

Physical potential presents a rather positive picture of the Country. However, one can not merely depend on such an approach for the feasibility's of the projects at sectoral level. For this reason issues such as;

-economic and social stability of the Country; strength of economic management and political developments,

-realization levels of administrative and economic reforms,-order and security within the Country and along the main transportation and connection networks,

-credibility of the economic performance of the Country,-relations with the other countries and long-term stability expectations in these relations,

are taken into consideration before appropriate investment and trade areas are identified and attention has been directed towards such areas_

It is risky and deceiving to approach the topic by using specific projects. However, one can make the following conclusions after the analysis of the economic sectors;

A- In agricultural sector, there is a high investment potential in all activities which may directly or indirectly have impacts in increased productivity's and yields.

a)Modernization of fertilizer production facilities, improvement of capacities and manageable marketing networks,

b)Increased production of agricultural equipment and machinery as well as the modernization of the technologies used in agricultural sector,

c) Construction of necessary facilities for the elimination of bottlenecks regarding the fodder inputs of the livestock and animal husbandry sub-sector,Establishment of an efficient distribution network,

d) Agricultural lands and climates of Southern Ukraine and Autonomous Republic of Crimea provide very appropriate environments for the production of fruits, vegetables and flowers, mostly due to the capacity and the productivity of the agricultural lands. Greenhouse activities which were important in the past are completely out of operation for the time being due to the lack of operational capital. However, there is a continuous and considerable import activity of these products. For instance, 85 % of air cargo transportation originated from The Nederlands towards Ukraine contains .cut flowers. This statistical data alone can show the importance and profitability of greenhouse sub-sector and activities_ For this reason, there are a lot of advantages in re-activating agricultural facilities and greenhouses which are located especially at Crimea as a gain for the national and local economies.

e) Storage capacities should be increased in order to minimize to loses after harvesting. A network of cold storage facilities especially for climate-sensitive agricultural products and food-industries should be established. Additionally, as a logical and supportive continuation after harvesting a number of investments should be made in "packing industries" which are based on several different types of raw materials.

f) Investments should be made in agricultural industries in order to increase value added in agricultural products and sector.

B- Partnerships can be encouraged and established in operational management activities of the mines with long-term reserves and which are produced more than the domestic demand. As far as the minerals are concerned, it is necessary to identify the mines for crude iron. coal and valuable granite.

C- Investments can be made by forming various types of partnerships in ferro-metalurgical industries, chemical industries and especially fertilizers,

D- Capacity utilization ratio of the existing industries are very low. Within the framework of privatization, these facilities can either be sold or various forms of partnerships can be utilized in order to improve their conditions.

E- Automotive sector can be seen as a strategic area for foreign investments. Existing production is far away from meeting the local demand which is expanding rapidly. There are already several foreign companies like GM from the USA and Daewoo from South Korea which are interested in investing in this sector together with their domestic partners. It is being predicted that there will be a high demand for small cars in this country similar to the experiences of Poland and Hungary. An agreement had been signed between Ukraine and Hungary during November 1996 regarding the production of Ikarus buses and their spare parts. Also during this time, negotiations took place between the Ministry of Transportation of Ukraine and Evobus, a sub-company of Mercedes -Benz, regarding bus production . This production is planned to

take place at the bus factory located at Lviv. There is an agreement between Renault Company and the facilities at Lviv regarding bus production. Additional toall these, there is a project regarding the production of Renault and motors at the facilities of Malyshev (Harkov) to be used for Lviv produced buses.

F-Construction sector is not active enough for the time being, mostly due to the financial bottlenecks. However, in the short -term expanded activity should be expected once the economy is re-vitalized. This expected construction activity will be for repairing the existing buildings as well as new constructions. For this reason, production and trade of any kind of construction equipment will be very feasible activities.

G-There are also several tourism projects which require attention. For instance, investment and operation of urban hotels are appropriate and profitable economic activities. In this subject, the highest potential is at Kiev. And it is very natural to see this potential in Kiev due to its increased economic activity and importance. For this reason, additional to urban hotels, restaurants, health centers, entertainment centers and alike are also needed. A large portion of the foreign investments in Ukraine are allocated at Kiev region and this alone will increase the demand for such tourism facilities. The city of Kiev is also very rich in providing historical tourist attractions. In general the country has numerous well preserved castles, palaces, churches and residences which are of historical importance. Additional to these attractions, the southern coasts of the Crimea region also do have tourism potential and infrastructure. This topic should be studied further.

H-Some sub-activities of the service sector are in urgent need for entrepreneurs. Among these, inter-city bus operations and management, cargo transportation activities, civil air transportation, management of business and shopping centers are important examples.

There is a rapid increase in the number of vehicles in traffic. However, the services provided in this sector are not showing the same trend. To start with there is an urgent need for the improvement of modern fuel distribution and marketing networks. This is an economically feasible activity. Similarly, car washing and service stations as well as the management of multi-layered public parking garages are also among the profitable activities.

J-Big supermarkets and fast-food facilities are appropriate areas for investments in big cities which are urgently needed.

K- Real demand determines the size of commercial activities. And it is directly related to the size of the population and the level of income. For Ukraine the values of these indicators are as follows;

. Population of the country is approximately 52 million people.

. Per capita income (PPP) was US $ 3000 in 1994

US $ 5590 in 1990. During 1989 foreign trade performance of the country is very high. ( exports: US $ 77.1 billion, and imports: US $ 86.1 billion had been realized.) It is expected that the national economy would show this performance again in the near future.

. Geographical location of the country is an advantage for partnerships with other countries_

When these indicators are taken into consideration, it becomes very clear that Ukraine is an important partner country in medium and long terms. I would like to conclude my observations and point of views with this last paragraph;

L- Additional to all these, I would like to present you the following figure on "Ukraine Market Data" prepared by a research company called USA-Ukraine regarding the Ukrainianmarket. This is a summary of the findings of this Company whose Headquarters are located at Chiago. The study identifies the main markets of Ukraine by using scientific methods as presented in the following figure which concludes my short report.

This chapter is taken from the book written by liasan Dint, titled: "POTENTIALS FOR INVESTMENTS AND TRADE IN . UKRAINE" November, 1997