The following letter, addressed to Prime Minister Valery Pustovoitenko and dated Aug. 14, was distributed on Aug. 19 to members of the American Chamber of Commerce in Kyiv. For the Post's article on the issue, see the Aug. 18 issue.
Your Excellency,
The Agricultural Committee of the American Chamber of Commerce in Ukraine is very distressed to learn that for the third consecutive year the government of Ukraine is engaged in a very damaging discriminatory policy against the private sector in agriculture.
The series of orders emanating from the national government, oblast and rayon administrations, as well as various government owned entities, instructing officials to confiscate grain in favor of state owned institutions, on a privileged basis vis a vis private sector entities, is in our view an extremely unfair practice that is bound to impede significant investments in the agricultural sector in Ukraine.
We were especially distressed to discover that instructions for the government to intervene and discriminate against the private sector by providing government institutions seniority rights and privileges in the market were personally authorized by yourself.
We were astonished that at least one of the instructions signed by you, Cabinet of Ministers Order # 1146 dated July 27, 1998 was issued during the final week of intensive negotiations with the International Monetary Fund to obtain over $2 billion under an Extended Fund Facility that would assist Ukraine in developing its economy.
In 1996 and 1997, foreign suppliers and Ukrainian private sector distributors experienced millions of dollars of losses because of discriminatory behavior in agriculture on the part of the government of Ukraine. This year, many of the foreign suppliers reduced the supply of agricultural inputs to Ukraine because of bad debt problems largely resulting from a planned policy of Ukrainian government intervention. The result is a further reduction in Ukraine's capability to produce a large amount of high quality agricultural products.
We understand that the Ukrainian government is facing a severe financial crisis and is woefully short of budgetary funds. We do not argue that the Ukrainian government should not undertake a program to collect its past debts. We believe, however, that the Ukrainian government, if it truly believes in the development of a market economy, should be willing to establish common and fair rules for all participants in the market.
We would like to point out that the corporate sector has previously provided substantial credits to agriculture in Ukraine and would be willing to provide even more funding if it could be assured that the government of Ukraine will not intervene to make it impossible to collect payment on private sector obligations.
The American Chamber of Commerce represents a large number of multinational companies which are working and investing in Ukraine. The Agricultural Commirtee at the Chamber of Commerce represents those members which work primarily in agriculture providing agricultural equipment, plant protection supplies, hybrid seeds, agricultural services, and are involved in food processing, and the import and export of commodities. Foreign investment in agriculture amounts to more than $400 million. Unfortunately, total foreign investment in Ukraine, at slightly more than $2 billion, is very low when compared to the level of investment in other countries.
Our members are very interested in conditions that would facilitate greater investment and support ofUkrainian agriculture. Nevertheless, an extensive Ukrainian government policy of administrative control, intervention and unfair discrimination in the sale and purchase of agricultural commodities under private contracts makes it very difficult to promote investment and support of Ukrainian agriculture.
We protest the Ukrainian government policy of discrimination against the private sector.
We are requesting you to end immediately all practices which favor government owned institutions and place the private sector at a disadvantage.
With respect,
Mark Kalenak
Executive Director
c.c. President Leonid Kuchma, Ukraine
Vice President Albert Gore, United States
Mohammed Shadman-Valavi, Division Chief, European II Department, International Monetary Fund, Washington, D.C.
Patrick Lenain, Senior Representative, International Monetary Fund Mission in Ukraine
Paul Seigelbaum, Director Ukraine and Belarus, World Bank, Washington, D.C.
Edilberto Segura, Mission Director, World Bank Resident Office in Ukraine Jan Kalicki, Ombudsman for Energy/
Commercial Cooperation for the NIS, United States Department of Commerce, Washington, D.C. Ambassador Steven Pifer, United States Embassy in Ukraine
