The Minister of Economic Affairs of Ukraine, B. Danylyshyn, has held a meeting with the representatives of business and science communities of Ukraine.

In the course of the meaningful dialogue, the head of economic department has stated, that, at present, the Government of Ukraine had become an almost consolidated center of resistance to the world financial crisis. The Government had developed a number of well-defined tactical arrangements and long-term strategy of competitive recovery of the economy of Ukraine.

The Minister had specified major directions of counterwork:

 

First of all – stabilization of situation, existing in the financial markets

In this domain, the Government takes cognizance of the experience of leading countries, which had successfully restored the banking system survivability and credibility.

It should be noted that the National Bank of Ukraine is an independent institution, which assumes measures and specifies steps to be taken for the purpose of banking system reinforcement. However, the Government does not preserve aloofness, as well. That had been revealed, first of all, in the course of adoption of anti-recessionary draft law, which, despite of political contests, had been validated by the Verkhovna Rada of Ukraine. This draft law provides major arrangements to be assumed for the purposes of mitigation of effects of the world financial crisis.

In compliance with that Law, the Government had made a decision on participation of the state in increase of authorized capital of any bank, as well as in formation of stabilization fund.

It should be mentioned, as well, that the decision, made by International Monetary Fund, on granting the loan to National Bank of Ukraine, in order to enhance foreign currency reserves of the latter, had played an important role. Unfortunately, NBU did not manage to stabilize national currency exchange rate, which had resulted in major losses, incurred by both the population and business community. However, the Government is not entitled to interfere in the affairs of NBU.

Secondly, the Government has developed a package of measures, focused on mitigation of: general stagnation of the economy; reduction in overall production in certain industries; expansive growth of unemployment

The Government has adopted a number of decisions, focused on settlement of topical issues in ore-mining and smelting industry, light industry and agriculture.

Furthermore, we have continued to adopt system-based decisions regarding operation of industries in the environment of world crisis, focused on further effectivization of each branch work. First of all, it means: adjustment of inter- and intraindustrial price proportions; improvement of energy efficiency; search for domestic marketing outlets, where the commodities to be exported could be marketed; import substitution.

As a result: daily average volume of cast iron production had grown from 42.6 thousand tons in November, 2008, to 50.9 thousand tons, or in other words, by 20%, for the first 8 days of December, 2008, while daily average volume of steel production had increased from 53.2 thousand tons to 62.8 thousand tons, or, in other words, by 18%; daily average volume of rolled steel products manufactured had grown from 50.4 thousand tons to 64.9 thousand tons, or by 29%.

  According to current information, provided by OP Metalurgprom, in November, 2008, as against October, 2008, we could observe positive development with regard to deceleration of the rates of reduction in overall production of cast iron (81.1%), steel (86%) and rolled steel products (93.3%).

For reference: in October, 2008, as against September, 2008, the volumes of reduction in overall production of cast iron had made 73%, steel – 75% and rolled steel products – 74%.

Negative development of metal products export prices had been decelerated, as well. For example, in October, the price of reinforcing steel had grown less by US$ 165 (from US$ 640 down to US$ 435), but in November, 2008, that price had grown less only by something like US$ 30.

 The volume of left over stock of domestic metal products, stored in port warehouses, had grown less, as well.

As of 4.12.2008, the volume of long products, stored in ports, makes something like 495 thousand tons, while as of 27.11.08 the left over stock had made 550 thousand tons.

As of 04.12.08, the volume of flat-rolled products, stored in ports, makes 370 thousand tons, that is by 30 thousand tons less than the volume of left over stock as of 27.11.08

 

In the third place, a number of arrangements are focused on export support

The Government, through its work and by all of its departments, including trade missions attached to the embassies of Ukraine in other countries of the world, in every possible way maintains national manufacturers’ occupation of both traditional and new markets. It should be noted that all such work is conducted in strict compliance with WTO requirements (the Government has assumed a number of arrangements, focused on adaptation of Ukrainian economy to the requirements of the World Trade Organization).

Furthermore, in order to decelerate negative development of foreign trade, the Government had formulated a number of arrangements on reduction of negative balance in foreign trade, such as: introduction of tight control over the goods imported, so that to prevent importation to Ukraine of commodities inconsistent with national veterinary, sanitary, phyto-sanitary, ecological and pharmacological standards; state assistance in introduction of financial instruments of hi-tech exports expansion;  intensification of cooperation within the framework of transportation corridors through integration of transport system of Ukraine into Trans-European one, and others.

Moreover, for the purposes of creation of balanced import/export structure, the Government has prepared the List of goods, to be licensed for import/export purposes, as well as the quotas for 2009.

 

The fourth, against the background of earning basis degradation, we must provide state budget revenues from the other sources, and, at the same time, cut the costs

The Government had completed readjustment of draft budget for 2009 according to both current situation development and arrangements with IMF. In addition, the Government has adopted a number of decisions on cutting the costs of administrating authorities, as well as the Concept of Cutting the Costs for 2009 on curtailment of administration expenses and other costs, not relating to development and social standards.

 

The fifth, because of reduction in number of own investment sources, the economy of Ukraine needs foreign investments, including financial resources, provided by international financial organizations

In the Government’s opinion, implementation of projects with the World Bank and European Investment Bank shall be one of major sources of investments. The projects on development of power engineering and transport industries, as well as on improvement of municipal housing economy are realized actively, as of today.

The Government pays special attention to implementation of projects on holding of EURO-2012. The Government of Ukraine and the World Bank had executed loan agreement that provides a credit to the amount of UAH 3 billion for 30 years at 5% annual in order to cover the state budget deficit.

In general, the arrangements on financial system hardening, liquidity support and restoration of banking system credibility will be promotive of continuous operation of temporary surplus funds redistribution instrument towards financing of investment projects, projects on expansion and intensification of production, as well as will provide unshadowing of the economy and financial stabilization.

Those measures will result in gradual restoration of credit accommodation to major sectors of economy, such as metallurgical and chemical industries, as well as to domestic market oriented industries, operation of which essentially depends on credits, such as food-processing industry, trade and agriculture.

When domestic enterprises are provided with additional floating capital, they will be able to mitigate the effects of the world crisis, improve energy efficiency of their production facilities and recover competitiveness of their goods.

Alongside with prevention of floating capital loss by the enterprises of ore-mining and smelting enterprises because of recession in demand for their products, stabilization of production will be promoted through the expansion of domestic demand for metal products because of their progressive cheapening, as well as through making use of those products in mechanical engineering and building industries. For example, commencement of implementation of several large-scale projects, such as the projects on infrastructural facilities construction, or on manufacturing of railway rolling stock, will provide gradual expansion of domestic demand for the products of mechanical engineering, mining and smelting industries, constructional services, wholesale trade, transport, financial services and a number of other types of activity, which will entail positive development of those products and services production.

Application of state budget funds for the purposes of implementation of top priority projects that require the products and services of domestic manufacturers will stimulate the positive development of domestic enterprises, inasmuch as floating capital of economic entities will be, actually, frozen for a certain period of time.

That, alongside with other arrangements, focused on stabilization and reduction of negative trade balance, will promote limitation of growing volume of import, as well as provide workload to domestic enterprises, guaranteed financing of orders and prevention of large-scale unemployment.

Finally, I have to say that we must know: how to overcome the crisis; what lessons are to be learned; and where we will move then. The major result of the world financial crisis mitigation in Ukraine shall consist in intensification of structural reforming and encouragement of competitive recovery of Ukrainian manufacturers, in order to enable further sustainable economic advancement of Ukraine.

As of today, the Government had formulated a new version of the Programme of Socioeconomic Development for 2009. The Strategy of Development of Ukraine up to 2020, formulated with the participation science community representatives, is based on clear-cut understanding of global mega-trends, the place of Ukraine in the world economics and necessity to remove critical weaknesses of Ukraine. That document includes the Programme of competitive recovery of the economy of Ukraine for 2010 to 2012, according to top priority milestones of economic policy pursued by the Government, as well a long-term strategy for 2013 to 2020, based, first of all, on harmonic fundamentals of sustainable development and Eurointegration. In the nearest time that document will be made public on the Web-site of the Ministry of Economic Affairs for the purposes of its public discussion.