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Investors Come, Investors Go

15 June, 00:00
By Oleksandr SYRTSOV, The Day Ukrainian cigarette demand is estimated at 75 billion cigarettes a year, the Ukrayinski Novyny Agency reports. Neither the state nor private organizations are waging anti-smoking campaigns. And Ukrainian legislation turned out to be able to meet the requirements of tobacco investors as a result of the latter's lobbying. Thus this industry has in fact been taken over by foreigners. New jobs, decent wages, and budget revenues are the pluses of the way of privatization chosen. But it has also brought its minuses.

This year, the Vynnyky tobacco factory was to celebrate its 220th anniversary. However, Ukraine's by far oldest enterprise in this industry is going through, to put it mildly, not the best of the times. A few years ago, the factory faced a future that seemed almost rosy. About six years ago, it became the first enterprise in this sector to catch the eye of a wealthy foreign investor, the R. J. Reynolds Tobacco Company. The investor gradually bought 97% of this limited-liability company. Everyone was pleased. The investors profited, the workers got good wages, and the city taxes.

Vynnyky became an island of prosperity amid the surrounding ruin. Public-sector employees earned money there. Vynnyky Mayor Yaroslav Khamuliak estimated that factory payments accounted for at least 60% of the town budget.

But then the investors had a stroke of bad luck. At first they transferred the manufacture of filter cigarettes to their Kremenchuk facility. And quite recently, they decided to decommission the plant altogether. The investor has moved all cigarette-making equipment to Kremenchuk. A liquidation commission is now working at the enterprise, all the workshops have been sealed, and the factory is being guarded by Titan guards. Factory employees were dismissed with a rather good severance pay: an 18-month wage equivalent, according to unofficial information. The Vynnyky budget became aware of the factory closure two months later. According to Mayor Khamuliak this has radically reduced the number of sellers in the local marketplace, with the trade turnover of stores and kiosks also plunging. Allocations to the city budget have dropped in corresponding measure.

PS. By a recent decision of the oblast council, the shares of R. J. Reynolds Tobacco have been made oblast communal property. The legality of this decision is debatable, but it shows that local authorities are seeking ways to save the situation.
 

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