“Lost opportunities” again?

The Poles have been forced to admit that Ukrainian-Polish economic relations have entered a winter period in both the literal and figurative meanings. Compared to the past two years of a burgeoning trade turnover and investments, 2005 saw a notable slowdown in the dynamics of economic relations between Ukraine and Poland, Minister-Counselor Anna Skowronska-Luczinska said at a press conference at the Polish Embassy’s Trade and Economic Department. She said there are several factors behind this. It is common knowledge that raw materials, especially iron ore, and semi-finished goods account for 80% of Ukrainian exports to Poland. As a result of privatization, some large Ukrainian ore-refining works acquired new owners, who breached earlier contracts signed with Polish partners. Another “surprise” was a zero quota for the export of Ukrainian oil to Poland imposed by the Ukrainian government early in the year, oil comprising the lion’s share of Ukraine’s exports to its western neighbor. On the whole, Polish exports and Ukrainian imports totaled $1,740,470,000 and $752,170,000, respectively, in the first nine months of 2005.

“Since the first years of independence the Poles have sought to invest in the Ukrainian economy, but we have to take a cautious approach because the problem of creating a sound investment climate is still unresolved,” the minister-counselor noted. A convincing illustration of this is the situation with the promising Ukrainian-Polish gas-extracting company Devon, which is still unable to obtain a license, Ms. Skowronska-Luczinska said. Another thing that made Polish investors leery is the 20-percent investment tax, which is much higher than in other European countries. “We are a bit surprised by this measure, because when a state wants to attract foreign investments, it does just the opposite, i.e., it cuts taxes,” the counselor noted. What’s more, privileges were canceled in the free economic zones, which shook the confidence of Polish businessmen. Citing some positive examples of cooperation, Ms. Skowronska-Luczinska mentioned the project to extend the Odesa-Brody oil pipeline to Plock, which is now in the preparatory stage. On Dec. 20 Poland’s Ministry of Economics will present a feasibility study in Warsaw to help select potential investors. The study was funded by the European Union, which is also interested in the implementation of this project. Poland, in turn, gave Ukraine money to implement the Ukraine-EU Action Plan.

Although Polish business has had somewhat of a rough ride in Ukraine in the past year, it still has a great interest in the Ukrainian economy. The new president and prime minister of Poland are expected to pay official visits to Kyiv in early 2006.