German Consultants Advise Ukraine to Pronounce Debtors Bankrupt, Protect Shareholders, And Develop a Competitive Environment

The Ukrainian government should apply the bankruptcy procedure more actively in 2001 to illiquid enterprises and simultaneously strengthen the protection of property rights in this country. This opinion was expressed by member of the German economic consulting group in Ukraine, Volkhart Winzenz, at the conference on Economic Growth in Ukraine in the Past and Next 365 Days held on January 17 in Kyiv. Interfax-Ukraine quotes him as saying that the government’s main achievement last year was drastic reduction in non-monetary operations and complete rejection of the latter in meeting obligations to the state. Yet, the consultant noted, last year did not see complete implementation of the earlier adopted “good law” on bankruptcy. “Bankruptcy should be clear and easy to understand. The same threshold should be set for all enterprises,” Mr. Winzenz said, pointing out that he means a threshold lower than that in developed economies. He also emphasized specifically it is necessary to improve corporate management in this country, a thing to which insufficient attention was paid in 2000. “The protection of property rights should be focused on: you can’t possibly redistribute property ad infinitum,” the German consultant said. According to him, information on the performance of enterprises here is also still extremely inadequate. In this connection, Mr. Winzenz suggests that the government make efforts to extend information to shareholders and potential investors as part of the public administration concepts now being adopted. He also drew attention to the necessity of offering incentives to reinvest profit by reforming the tax system.

Prof. Stephan von Cramon- Traubadel also emphasized that the development of a lease market in land and the creation of a competitive environment among the agribusiness market elements, particularly between elevators and ports, are the most important tasks for the government of Ukraine in reforming its agro-industrial sector in 2001.

Assessing the pace of the reform in this sector last year, he positively appraised the presidential decree of December 3, 1999, On Urgent Measures to Accelerate the Reform of the Agrarian Sector of the Economy, which established mechanisms for leasing land and increasing the number and cost-effectiveness of private farms.

In his opinion, the second important achievement was stripping the agro-industrial complex of funds, raw materials, and fuel provided by the government. The German consultant also highly praised price variability in 2000, which contributed to narrowing the disparity between agricultural and industrial prices.

Simultaneously, he was skeptical about the presidential decrees on the development of a market infrastructure and grain market regulation, pointing out the inherent non- market elements and the wrong time of their issue (the decrees On Measures to Ensure the Formation and Functioning of the Agrarian Market of June 6, 2000, and On Urgent Measures to Encourage the Production and Develop the Market of Grain of June 29, 2000 — Ed.).

Herr von Cramon-Traubadel said that if Ukraine enjoys a good harvest in 2001, it will turn from the importer into the exporter of grain. These changes will cause, in his opinion, a 30-35% drop in grain prices, which will in turn increase pressure on the government from agrarian market agents against such lower prices.

He stressed that the government should analyze this situation in time and adequately assess the degree of possible intervention. He also believes that price reductions can be minimized and the sector remain effective if the government sets up a lease market for land and creates a competitive environment among elements of the agrarian market infrastructure.