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Ukraine: President To Face Criticism From U.S. Business

Washington, 12 May 1997 (RFE/RL) - Ukrainian President Leonid Kuchma arrives in Washington this week for the meeting of the U.S.-Ukraine Binational Commission he co-chairs with U.S. Vice President Al Gore. But Kuchma will face a hailstorm of criticism from American officials and U.S. business leaders and investors deeply upset by what they see as an atmosphere in Ukraine which is forcing Western investors to flee, taking their money with them.

Only last month, the major U.S. electronics manufacturer Motorola pulled a $500 million investment in Ukraine's telecommunications sector, citing for its decision frequent government rule changes, exorbitant fees and official corruption. Other major firms, such as Monsanto, Cargill and Coca-Cola have also threatened to reduce stakes in Ukraine due to corruption and other problems.

U.S officials say that of 34 U.S. companies registered with the commercial section of the American embassy in Kyiv, 24 have asked for official U.S. help after suffering "serious difficulties" with Ukrainian authorities.

The American coordinator of assistance to the countries of the former Soviet Union, Presidential advisor Richard Morningstar, was recently in Kyiv to warn that unless the government begins to seriously deal with corruption and a long list of business and investment problems, even the U.S. government would have to start reconsidering its aid.

In addition to co-chairing the official commission meetings Thursday and Friday, Kuchma will meet on Thursday afternoon with a select group of American business executives and investors at Blair House, the White House guest home.

His aim, according to Ukrainian officials, is to encourage greater U.S. business investment and involvement in Ukraine. What he will get, however, is a blast from the American private sector.

In a statement being prepared for the meeting by the Ukrainian-U.S. working group of the U.S. Chamber of Commerce -- made available to our economics correspondent in Washington -- the business community says it has a "grave concern" that Ukrainian-U.S. trade and investment has "failed" because the "legacy of Soviet governance and commercial isolation" has not been overcome.

The group will present a list of nine major points that it says must be dealt with immediately if Ukraine is to have any hope of keeping the investment it has, let alone draw any new business. The list includes such things as government supervision of the financial sector, establishment of clear lines of authority for agencies dealing with trade finance, stability in customs law and tariffs, and "rapid privatization and devolution of regulatory authority to private sector participants." Opening up the private sector and eliminating much government regulation is the "only effective way to eradicate corruption in Ukraine," the business group says.

Even worse, the group says the oil and gas sector in Ukraine is in such terrible shape that it needs radical reform as a top priority if Ukraine is ever to achieve its goal of energy independence.

U.S. oil and gas companies offer a long list of problems, including "a maze of overlapping bureaucratic fiefdoms and state-run holdovers from the pre-market times," "no coherent policy" for development of the sector, a draft law on production which mostly reflects "the policy vacuum that currently exists" and a domestic market for energy that is "distorted and overregulated."

In addition, the oil and gas companies say that natural resources are being wasted in Ukraine through ineffecient use and mere "lip-service" to energy-saving programs, failure to adopt international technical, safety and environmental standards, and a tax system that discourages additional investment in any energy sector.