DAEWOO Issues Ultimatum

At the mid-april, General Director of AvtoZAZ-Daewoo Wang Yang Nam read out the journalists an official petition of the DAEWOO-Motor Corporation management regarding the Cabinet’s order, which rescinds the minimum customs duty on cars imported into Ukraine and increases their age limit from five to eight years.

Noting that “the joint venture has a great potential and is able to conquer the Ukrainian automotive market,” and that AvtoZAZ-Daewoo can be of great interest to General Motors, Ford, and other potential investors, Mr. Nam said that the decision by the government has brought all hopes for his business to naught. As he put it, “This Regulation renders a mortal blow to the business activity of the AvtoZAZ-Daewoo Joint Venture, for it makes it possible to import into Ukraine a significant number of old cars. We have every reason to regard this regulation as a direct and unambiguous violation of the guarantees set forth by Section 2 of the law of Ukraine On the Regime of Foreign Investment.”

The firm’s General Director maintains that the Cabinet adopted the regulation “without conducting any consultations with the biggest investor in Ukraine’s economy.”

Mr. Wang announced that “in order to protect its interests,” the Korean side will take the following measures: “First of all, we will abrogate the Articles of Organization, demand the return of $195 million contributed as investment and credit, and compensation for profits not received. In addition, Ukraine will have to pay moral damages according to Article 10 of the law On the Regime of Foreign Investment.

Mr. Wang said that in the next two or three months Kyiv will be visited by a Korean delegation which will conduct official negotiations with the Ukrainian government. Their meeting will dot all the remaining i’s. Oleh Papashev, Chairman of the AvtoZAZ-Daewoo Joint Venture and of its Board of Directors from the Ukrainian side, regards the future with optimism. He claims it is too soon to bury the business. The Korean investor’s tough stand will force the Cabinet to reconsider its steps. According to Mr. Papashev, Cabinet members are now racking their brains over the issue of how to kill two birds with one stone, satisfy the European Union and to comfort the investor (did they again forget about the most important, our citizens? —Ed.). A package of compensating measures is being now developed. One of them includes a schedule, agreed upon with the EU Free Trade Committee, to gradually reduce import duties on vehicles. As for the content of other measures, the joint venture’s managers are at the moment not inclined to loquacity.