Ukrainian president on free zones and customs bureaucracy
President Leonid Kuchma believes as chair of the CIS Council of Heads of States, he is obligated to step up cooperation with neighboring countries. On February 5, he stated at a meeting of the Board of the State Customs Service of Ukraine, “First of all, decisive steps must be taken to form a common free trade zone allowing better use of Ukraine’s export potential and its infrastructure.” Kuchma said he was sure that Ukraine, while on the road to European integration, should not and would not deny herself the large and promising market of the post-Soviet CIS.
For the most part the president dealt with international economics, area in which customs authorities should play a more active role. While on the subject, he lashed out at miscalculations made in order to protect the domestic market, primarily unjustifiable tax concessions granted importers using free economic zones. As an example he stated that last year, over $51 million worth of agricultural products were imported into the special economic zones and so-called priority development territories. The government lost UAH 647 million, a sum that could have raised salaries of teachers, physicians, and other employees. Kuchma brusquely instructed the cabinet to introduce new legislation, noting that no references to delays in parliament would be accepted. He stated, “We have a government formed by the majority in parliament that has assumed responsibility for our government and is supporting it, among other things, by passing pertinent bills.”
The president then turned to the free economic zone in Donetsk oblast, calling it a “free semi-criminal zone,” a “free zone,” but not an “economic” zone. He said that unwanted European meat was imported and sold tax- free. He asked, “What about economic development aimed at attracting investment?” Kuchma turned to First Vice Premier Mykola Azarov, and said, “We must end these zones. Liquidate them, period.”
Next the president addressed actions of the Sluzhba Bezpeky Ukraiyiny (SBU, the equivalent of the FBI) and other law enforcement agencies approach to the free economic zones. “You all seem to be looking the other way. Could it be because you get your cut of the pie?”
Commenting on Ukraine’s favorable geopolitical location, Kuchma noted that at best, only seventy percent of this country’s huge transportation potential is being utilized, and these statistics do not reflect pipeline use. As a result, each year the national government loses at least UAH 800 million. Over time, more and more freight bypasses Ukraine to avoid customs red tape. The president pointed out that, apart from customs declarations, there are over twenty other freight documents to cope with. “You won’t find this in any other country,” he said, “and worst of all,” these regulations decrease the country’s competitiveness on the world market. Commodity turnover has slowed and they are far too expensive. He also noted that border crossing feature far too many checks. “Why not learn from the European experience? They check only three to five percent of freight.” The president instructed Mykola Azarov to straighten things out in two months.
During the year the customs authorities initiated 423 criminal cases involving contraband worth over UAH 188 million. But Kuchma believes this figure does not reflect the actual scope of such illicit transactions, considering that only one in ten cases involves more than $100,000. Meanwhile, smuggled goods dominate certain markets. The president noted that “Experts believe that actually three-quarters of products of the light industry on the domestic market are contraband.” He cited the situation in the mobile telephone market. In 2002 the government allowed 165,000 imports, while the number of users had increased by 1.4 million during that period.
