European Parliament’s resolution on the current developments in Ukraine, adopted toward the end of last week, gives Ukraine until December to bring its judicial system into conformity with EU legislation and legal practice. According to analysts, despite this harshest judgment passed on Ukraine-EU relations over the past decade, European Parliament members showed a rather tolerant attitude to Ukraine’s current administration, using good old political verbiage cliches aimed at avoiding anything that could further complicate the EU-Ukraine integration process. Analysts say Europe’s stand was something well to be expected, considering that Europe is probably even more aware of the economic – and especially political – risks involved in Ukraine’s Customs Union membership than official Kyiv. More on this and other pressing issues in Ukraine’s foreign economic policy in the following interview with Volodymyr SHCHELKUNOV, president, National Ukrainian Committee, International Chamber of Commerce (ICC).
UKRAINIAN BORDER AUTHORITIES WILL ADOPT SINGLE WINDOW IN TWO TO FIVE YEARS
Recently you presided over the first meeting of an interdepartmental task force responsible for the implementation of a pilot project known as “Single Window: Local Solution” within the jurisdiction of Ukraine’s customs authorities in the southern regions, including the seaports in Odesa oblast. The whole project is an initiative of ICC Ukraine. Would you care to comment on this, using facts, figures, singling out the main advantages for the Ukrainian state in general, and Ukrainian business in particular?
“First, practice shows that the customs clearance procedures take fewer days: one or two compared to five or seven previously. In other words, between four and five days are saved. This is very important in doing business. Second, the amount of errors is automatically reduced to 70-80 percent.
“The single window method gives us an opportunity to work transparently and allows to understand why this or that company has customs clearance problems, so there is no need to go through the living hell of the existing red tape; so any business can instantly find out why their goods aren’t cleared through customs. In other words, there is a concrete answer to a concrete question. Also, the single window method enables businesses to approach their paperwork in a more professional and prepared manner.”
Why did you test your project using Ukraine’s southern customs stations?
“Because the initiative came from JSC PLASKE and several other ICC Ukraine member companies, including ones at Illichivsk and Odesa seaports, as well as the open joint stock company Odesa Portside Plant, considering that these businesses have everything to do with the southern customs stations. We decided to combine efforts in implementing this project. Also, because the customs authorities in the south of Ukraine present most problems in terms of cooperation between businesses and controlling authorities. Besides, these authorities supervise Ukraine’s important transit corridor.”
Ukrainians have long been promised single window procedures, yet they appear to remain on paper. When do you think they will become legally effective?
“It’s true that this project started being discussed in 2007, and for the past seven years it has remained on paper. There are two problems preventing the single window procedures from being practiced at Ukraine’s border checkpoints. The first one is organizational: the introduction of computerized paperwork and e-signatures. The second one is financial. Considerable progress has been made in solving the second one. Those ‘upstairs’ have realized the importance of this project. In other words, there is enough political will to carry it out. There are central budget appropriations slated for 2012. There are also a number of international organizations interested in carrying out of this experiment in Ukraine. Their officials were invited to attend the interministerial task force’s latest session. In the end, they promised to consider the possibility of partially financing the single window project in the south of Ukraine. After solving these problems we will be able to launch the project [on a nationwide basis]. There are no problems with the customs authorities. In fact, they are interested in its implementation and are prepared to help it, within the limits of their budgets. If and when everyone concerned honors one’s commitments and keeps one’s promises, the single window project will start being actually carried out before the end of 2012.”
How long will testing this project take? What criteria will be used to determine its effectiveness?
“Its effectiveness will be determined by the businesses involved, in the first place, and secondly, by the government. Their findings will show the project’s advantages and shortcomings. I believe this pilot project should last for a year at the least and three years at the most, so we could figure out our mistakes and ways to correct them. After this detailed analysis we could submit this project to be implemented all over Ukraine. Let me stress again that this pilot project is very important to be carried out, so we see what the whole thing is all about. Well, practice makes perfect.
“We have encountered similar problems working on projects ‘Viking’ and ‘Zubr’ [having to do with NASA and a Soviet air-cushioned landing craft model. – Ed.]. Everything looked OK on paper, but in practice there turned up lots of rough edges to be smoothed off.
“This is precisely what we’re doing working on the single window one. There is the human factor to be considered. Some of the [customs] officers and men, especially on the middle level, don’t seem to understand how goods can be cleared through customs without examining them, just as they can’t figure out computerized paperwork. Testing and proving the previous two projects took about 18 months.”
How much do we know about the human factor? Do these officers and men mistrust progressive technologies? Are they scared that their usage will deprive them of taking bribes?
“They do and they are – above all, they aren’t prepared intellectually or mentally for this kind of procedures.”
Any other problems?
“The adjustment of our legislation and interministerial computerized data exchange. The human factor remains the most important one.”
Suppose your single window [pilot project] works in the south of Ukraine, what will happen next? What regions will be involved in this project?
“All regions. There is no sense in testing this pilot project in another couple of regions. Its advantages and shortcomings must be determined in the south of Ukraine, practicing it at the local customs stations. Afterward, it will be implemented all over Ukraine.”
In other words, you predict that the single window procedures will become legally effective at all customs stations in two to four years?
“Yes, if and when the pilot project in the south of Ukraine proves effective, upgraded while being carried out, analyzed and finalized.”
How will Ukraine’s transit potential increase after instituting the single window customs procedures?
“My guess is five to ten times, if everything goes according to plan. There will be numerous international trade structures willing to collaborate with Ukraine. At present, they prefer to deal with customs authorities outside Ukraine because know our customs red tape.”
UKRAINE’S CIS CUSTOMS UNION MEMBERSHIP MAY COST EUROPE FIVE OF ITS NINE TRANSPORT CORRIDORS
In a recent interview you said the European Union wouldn’t benefit from procrastinating the signing of FTA with Ukraine, that they had to be aware of the risks involved in Ukraine’s CIS Customs Union membership. Would you please enlarge on these risks?
“First, this would mean losing, wholly or partially, a country accommodating five out of Europe’s nine transit corridors. Ukraine is located in the heart of Europe, so the European Union is very much interested in our political stability. Besides, if and when Ukraine adopts the European values, it might serve as a conduit of EU’s influence in the Orient.
“All things considered, Ukraine has long become a European country, despite the fact that some of our MPs keep traveling abroad, lowering Ukraine’s international ratings instead of raising them. This is wrong. You don’t wash dirty linen in public.”
Is this about Ukraine’s opposition?
“That’s right. No one cares for a strong Ukraine except our country. The EU wants this country to be predictable compared to other EU members. This is absolutely realistic in economic terms, considering that most problems are caused by political instability.”
As an official ICC Ukraine, how would you comment on Ukraine’s prospects of [European] integration? What are Ukraine priorities?
“Those currently in power are waging a two-vector policy. This allows Ukraine to collaborate with the European Union and with its CIS partners. Ukraine can benefit, strategically and economically, by keeping this unique position and maintaining this balanced policy. This is a sophisticated political game. Europe doesn’t want Ukraine torn away from Russia – this would be contrary to the EU’s interests. Europe wants Ukraine to play this game by its rules, otherwise nothing will work, period.”
Granted: Europe doesn’t want Ukraine snatched from Russia. How about Russia trying to tear Ukraine away from Europe? Isn’t this what this two-vector policy is all about?
“Russia is certainly interested in having Ukraine separated from Europe. A statement to this effect has been made by one of their ranking officials.”
You mean Vladimir Putin?
“Yes, and some of their MPs are known to have made similar statements. The important thing is to realize that Ukraine, while maintaining contacts with its partners in the East, must keep in mind the rules of the European game, considering that some of the CIS countries have domestic problems to resolve. Ukraine’s signature under the FTA doesn’t mean, of course, that Ukraine will become part of that free trade area tomorrow or a day later. This agreement is legally best described as a protocol of intentions. What actually matters is the practical outcome, for everything committed to paper sounds great: such-and-such will be carried out on this date; that Ukraine will buy oil products and other kinds of energy in terms of free trade; that such-and-limitations will be lifted in such-and-such year.
“The struggle for this agreement had lasted for a number of years before the signing ceremony that took place in what could be best described as a spontaneous manner, with three countries taking time-out to decide whether they would accept the stated terms and conditions. In other words, the preparatory stage was marked by the absence of clarity and predictability. Europe, in contrast, offers Ukraine clearly formulated rules of the game.”
Does this mean that the European vector is the highest priority for Ukraine?
“I wouldn’t put it that way. No priorities can be singled out of this issue. Ukraine can’t afford to lose something by giving preference to something else. Business is done regardless of such preferences. One can’t determine higher or lower priorities in Ukraine’s economic integration because each has its pluses and minuses.”
President Yanukovych recently visited Cuba and Brazil, invariably calling for foreign inland investments in the Ukrainian economy. How would you describe Ukraine’s prospects to this end?
“Doing business with Cuba means taking into account its status as a member of the former communist camp supported by the former Soviet Union. Cuba still has its socialist command economy and governance. The commodity turnover between Ukraine and Cuba has lowered significantly of late, considering that Cuba doesn’t rank with solvent market players. I remember Cuba buy MT-1036 motorcycles made by a plant in Kyiv. We supplied them to Russia and its companies paid the Kyiv manufacturer and then shipped the motorcycles off to Cuba.”
Why couldn’t the Ukrainian manufacturer make direct shipments?
“Because we wanted hard cash and Cuba didn’t have it. Cuba proposed some two- or three-way approaches which our business didn’t accept, whereas their counterparts in Russia found another way to make payments – probably some barter deals, I’m not sure. What could make Cuba an interesting business partner for Ukraine? Cane sugar, rum, cigars, and resort accommodations. That’s it in terms of business collaboration. Market prospects? Nothing to write home about, considering the Cuban population’s low buying capacity, with the Cuban in the street earning 15-20 dollars a month.”
In other words, no Cuban investments in the Ukrainian economy?
“Absolutely. Brazil is a different story, with big prospects in terms of machine- and rocket-building, space and aircraft technology, nanotechnologies, you name it. Given a systemic, balanced approach, Ukraine-Brazil cooperation offers vast opportunities. Last year’s exports from Brazil boasted more than 100 kinds of products: apart from the traditional cigars, coffee, cane sugar, there were increased beef and pork supplies. In January-August, Brazilian exports to Ukraine had increased by almost 18 percent, compared to the same period last year, amounting to some 385 million dollars, with Brazil importing 68 percent more Ukrainian products worth some 320 million dollars. Despite these encouraging statistics, Brazil lacks hi-tech products, importing from Ukraine hot-rolled and other steel sheet, nitrate and ammonium sulfate.”
