Japanese await warmer investment climate
There are many reasons restraining foreign investment in Ukraine, but the major one is the unsuitability of the existing tax system to running an efficient business. This view was voiced on May 22 by head of the Japanese-Ukrainian Committee on Economic Cooperation Hideya Taida during the Ukrainian-Japanese business symposium. He is convinced that Ukraine needs first to persuade Japanese businessmen and investors that they really can do business here. To expand, he said that even if the Japanese government ordered them to invest in Ukraine, no businessmen would take a step forward unless he was positive that he would make some profit.
Strange but true: Ukraine’s trade and economic relations with Japan, the number two state in the world in terms of economic strength, are rather modest. In 2002 foreign trade turnover between the two countries was only $276.2 million. Our country is represented in the Japanese market by a rather limited range of goods, mostly raw materials such as scrap metal. However, Ukraine is the overall leader in importing dried milk to Japan, covering 40% of the Japanese market. However, after traces of antibiotics were recently discovered in Ukrainian dairy produce and Ukraine’s veterinary service imposed temporary restrictions on exports, this trade has dropped considerably. Last year a new export article appeared, wheat and barley. Already in early 2003 the share of metallurgical equipment had grown substantially in the total volume of Ukrainian exports. Simultaneously, another very important export constituent, unprocessed aluminum, is falling: Ukraine occupies only the seventh place in importing it to Japan. Japan, in its turn, imports to Ukraine mostly hi-tech products. The lion’s share of their imports are Japanese automobiles (66.3%), and this share is still growing.
It was also noted at the symposium that the two countries’ investment cooperation remains on a low level: at the beginning of 2003 the total volume of Japan’s investment in Ukraine was $2.74 million, or 0.1% (sic!) of our total foreign investment volume. And all this in spite of the fact that Japan is among the biggest credit and finance centers and occupies a major place in terms of free capital volume invested in other countries’ economies. However, there still is some progress: in the view of State Secretary of Ukraine’s Ministry for the Economy Valery Pyatnytsky, among Ukrainian investment projects designed to involve Japanese capital the closest to implementation are constructing a bridge across the Pivdenny Buh in Mykolayiv and producing parts for auto construction in the Transcarpathia free economic zone.
However, the Ukrainian side expects more. In part, Mr. Pyatnytsky considers promising joint usage of Ukraine’s production facilities in the aerospace sphere, shipbuilding, machinery construction, metallurgy, metalworking industry, agriculture, and the food industry. In his turn, head of the State Property Fund Mykhailo Chechetov counts on Japanese capital participation in the privatization process and assures that Japanese investors “aren’t late” since the “best objects” have not yet been put up for sale. Perhaps Japanese entrepreneurs made note of these proposals, but they will still take their time with investments. According to General Manager of the Sumitomo Ltd. office Mitsugu Tomita, they will wait until the legislative base becomes truly transparent and the laws in force are consistently carried out.
