At the end of March, the Cabinet of Ministers of Ukraine approved the program on enhancing economic development for 2013-2014. The overall estimates of the program are 382 billion hryvnias, and 209 billion should be mastered already this year. Moreover, it is planned to attract up to 196 billion hryvnias from private investors, which would become a good example of development of state-private partnership the authorities have been speaking about lately.
Social aspect
The project sets rather ambitious goals. Thus, GDP is expected to grow up to 2.5% this year and 3-4% next year. According to the director of the department of strategic planning of the Economy Ministry Yevhen Oliynykov, such figures must become the main effect of the Program. The government expects that realization of the program will speed up development of priority spheres of economy, including diversification and reduction of power consumption.
The peculiarity of the plan is to involve banks into financing of priority investment projects, aimed at import substitution and improvement of energy effectiveness. In general, the Cabinet expects that the Program will keep the basic inflation within 5-6% margin and deficit of the state budget-2013 - at the rate of 3.2% of GDP; the level of GDP redistribution through consolidated budget this year must make 29.5%, and the direct state debt should not exceed 30.6% of GDP. Premier Azarov specifies that the realization of the Program will enable to build up production of export-oriented products by about $3 billion in 2013 and to press the success further.
The new national plan has five key priorities: improvement of competitiveness of economy, improvement of investment climate, support of domestic producers, development of hi-tech sectors, structural reforms and increasing of export. And macroeconomic stability is essential for the plan to be realized.
In this respect, economic development and trade minister Ihor Prasolov admitted that in 2012 Ukrainian economy suffered negative factors due to world economic crisis. "But we have learned economic lessons even under uneasy conditions. The government of Ukraine needs to bring national economy at the new level to make it stable and strong. At the same time, not the figures of growth, but the structure and quality of economy, as well as formation of new ideology of economic relations will have the decisive meaning. Effect of reforms on the prosperity of our citizens is also important, and for this, the Program is focused on increase of social standards and creation of new jobs, as well as on development of fast-payback sectors," the minister said.
Experts say
In this respect, director of the NBU Foreign Exchange Reserve Department Oleksandr Dubikhvist notes that the Program focuses, first of all, on financing economically viable projects. "It is expected to allocate money for either free-standing projects or projects, which do not require too much of budget means. Any bank will be interested in crediting such project. The Program also provides for compensation of interest rates, which makes such projects even more interesting and viable."
Oliynykov adds that the Program stipulates both financial feasibility and step-by-step detalization. "The document is based on reasonable estimations of resources, which can be allocated from the state budget and attracted from the private sector under state guarantees," the economist says. Deputy director of the National institute for strategic research Yaroslav Zhalylo agrees. According to his estimations, if the growth rate set in the state budget-2013 is followed, there should not be any problems with financing the Program.
The main instrument of attracting resources is not direct state financing, but state guarantees. In general, experts agree that the cost sheet of the Program is realistic. Thus, executive director of International Blazer Foundation says we can expect good results. "The Program is a useful document and serves to revise the state budget after the first quarter and to prepare budget for 2014. It is good that the Cabinet understands that only liberalization of economy and improvement of investment climate can change the situation. Otherwise, we will beat around the bush, but won't solve the problem," the specialist says.
At the same time, the developers have not picked or determined priority sectors. The Economic Development Ministry believes the business will decide by itself. "We've just set the categories of the sectors, like those which are viable already now (agriculture, for example), those which require modernization (metallurgy, for example) and those which have influence on the economy but are not interesting for business (infrastructure, housing and communal services)." In turn, president of the Ukrainian analytical center Oleksandr Okhrymenko specifies that the focuses in the Program focuses are set properly, and it has huge potential in various spheres.
Sectors in details
What can the new program give to specific sectors? Let's start with the metallurgy as the principle budget revenue generating sector. Metallurgic industry will get 10-billion-hryvnia-guranteesand import duty exemption for import of equipment, not produced in Ukraine, for technical re-equipping of works. Apart from general strategic areas of focus, the Program provides for financial support of concrete enterprises. Thus, nine billion hryvnias will be allocated for the new casting and rolling complex "Donetskstal", 1.54 billion hryvnias - for construction of the second production line of the arc-furnace complex "Interpipe Stal"; UAH 750 million - for development of new tube capacities at "Interpipe Niko Tubes" plant; 120 million hryvnias - for formation of capacities on production of steel and iron casting at "Nasosenergomash" plant in Sumy.
President's statement also proves seriousness of intentions to support the recovery and development of mining and smelting complex. "The problem cannot be solved without state's assistance, and such assistance will be provided. I ordered to form a working group, which will help the industry to fight for success. If we recover the mining and metals production sector of the country, we will be able to recover economy."
The engineering industry is considered by the Program as a hi-tech sector, and it is planned to attract 44 billion hryvnias, including 1.8 billion from the state budget. To promote aviation industry, the government plans to offer beneficial conditions for leasing companies to buy Ukrainian aircrafts. UAH 11.8 billion will be allocated for aerospace sector; five billion hryvnias of state guarantees and 700 million of subsidized loan - for development of import-substituting production of agricultural machinery.
Then, 68.9 billion hryvnias will be allocated for construction, reconstruction and repair of roads (mostly non-budget means); 20 billion hryvnias - for development of the railroad (provided purchasing of passenger and freight cars of domestic production); UAH 11.6 billion - for development of airports (in Odesa, Dnipropetrovsk, Symferopol, Luhansk, Sevastopol, Kyiv) and sea ports (in Odesa, Feodosia, Iliyichevsk). The sector of public transport will also get its share - 11.2 billion hryvnias.
UAH 32.3 billion are provided for residential construction. Moreover, the government plans to attract 6.6 billion hryvnias from various sources for provision of dwelling on a rental basis with further acquisition, and 4.7 billion hryvnias - for reduction of mortgage costs. The housing and communal services sector is supposed to get 25.39 billion hryvnias.
Special attention is paid to the agricultural complex. It is planned to attract about 30 billion hryvnias, and proposed measures include promotion of purchasing equipment of domestic production, construction and reconstruction of stock-raising and hothouse complexes, planting of young gardens, vineyards and berry-fields, etc.
Finally, 28.6 billion hryvnias will be allocated for advancement of electrical energy industry, and 67.3 billion hryvnias - for implementation of energy efficiency measures (reduction of power consumption, alternative fuel, etc.)ю
So, the country now has a mass and mature enough plan of development. Analysts say it is not perfect, and major priorities could have been worked out better, but in general, with adequate and responsible approach the Program is able to push the economy in right direction. Well, we all hope it will work.
Andriy Boyrunets
Social aspect
The project sets rather ambitious goals. Thus, GDP is expected to grow up to 2.5% this year and 3-4% next year. According to the director of the department of strategic planning of the Economy Ministry Yevhen Oliynykov, such figures must become the main effect of the Program. The government expects that realization of the program will speed up development of priority spheres of economy, including diversification and reduction of power consumption.
The peculiarity of the plan is to involve banks into financing of priority investment projects, aimed at import substitution and improvement of energy effectiveness. In general, the Cabinet expects that the Program will keep the basic inflation within 5-6% margin and deficit of the state budget-2013 - at the rate of 3.2% of GDP; the level of GDP redistribution through consolidated budget this year must make 29.5%, and the direct state debt should not exceed 30.6% of GDP. Premier Azarov specifies that the realization of the Program will enable to build up production of export-oriented products by about $3 billion in 2013 and to press the success further.
The new national plan has five key priorities: improvement of competitiveness of economy, improvement of investment climate, support of domestic producers, development of hi-tech sectors, structural reforms and increasing of export. And macroeconomic stability is essential for the plan to be realized.
In this respect, economic development and trade minister Ihor Prasolov admitted that in 2012 Ukrainian economy suffered negative factors due to world economic crisis. "But we have learned economic lessons even under uneasy conditions. The government of Ukraine needs to bring national economy at the new level to make it stable and strong. At the same time, not the figures of growth, but the structure and quality of economy, as well as formation of new ideology of economic relations will have the decisive meaning. Effect of reforms on the prosperity of our citizens is also important, and for this, the Program is focused on increase of social standards and creation of new jobs, as well as on development of fast-payback sectors," the minister said.
Experts say
In this respect, director of the NBU Foreign Exchange Reserve Department Oleksandr Dubikhvist notes that the Program focuses, first of all, on financing economically viable projects. "It is expected to allocate money for either free-standing projects or projects, which do not require too much of budget means. Any bank will be interested in crediting such project. The Program also provides for compensation of interest rates, which makes such projects even more interesting and viable."
Oliynykov adds that the Program stipulates both financial feasibility and step-by-step detalization. "The document is based on reasonable estimations of resources, which can be allocated from the state budget and attracted from the private sector under state guarantees," the economist says. Deputy director of the National institute for strategic research Yaroslav Zhalylo agrees. According to his estimations, if the growth rate set in the state budget-2013 is followed, there should not be any problems with financing the Program.
The main instrument of attracting resources is not direct state financing, but state guarantees. In general, experts agree that the cost sheet of the Program is realistic. Thus, executive director of International Blazer Foundation says we can expect good results. "The Program is a useful document and serves to revise the state budget after the first quarter and to prepare budget for 2014. It is good that the Cabinet understands that only liberalization of economy and improvement of investment climate can change the situation. Otherwise, we will beat around the bush, but won't solve the problem," the specialist says.
At the same time, the developers have not picked or determined priority sectors. The Economic Development Ministry believes the business will decide by itself. "We've just set the categories of the sectors, like those which are viable already now (agriculture, for example), those which require modernization (metallurgy, for example) and those which have influence on the economy but are not interesting for business (infrastructure, housing and communal services)." In turn, president of the Ukrainian analytical center Oleksandr Okhrymenko specifies that the focuses in the Program focuses are set properly, and it has huge potential in various spheres.
Sectors in details
What can the new program give to specific sectors? Let's start with the metallurgy as the principle budget revenue generating sector. Metallurgic industry will get 10-billion-hryvnia-guranteesand import duty exemption for import of equipment, not produced in Ukraine, for technical re-equipping of works. Apart from general strategic areas of focus, the Program provides for financial support of concrete enterprises. Thus, nine billion hryvnias will be allocated for the new casting and rolling complex "Donetskstal", 1.54 billion hryvnias - for construction of the second production line of the arc-furnace complex "Interpipe Stal"; UAH 750 million - for development of new tube capacities at "Interpipe Niko Tubes" plant; 120 million hryvnias - for formation of capacities on production of steel and iron casting at "Nasosenergomash" plant in Sumy.
President's statement also proves seriousness of intentions to support the recovery and development of mining and smelting complex. "The problem cannot be solved without state's assistance, and such assistance will be provided. I ordered to form a working group, which will help the industry to fight for success. If we recover the mining and metals production sector of the country, we will be able to recover economy."
The engineering industry is considered by the Program as a hi-tech sector, and it is planned to attract 44 billion hryvnias, including 1.8 billion from the state budget. To promote aviation industry, the government plans to offer beneficial conditions for leasing companies to buy Ukrainian aircrafts. UAH 11.8 billion will be allocated for aerospace sector; five billion hryvnias of state guarantees and 700 million of subsidized loan - for development of import-substituting production of agricultural machinery.
Then, 68.9 billion hryvnias will be allocated for construction, reconstruction and repair of roads (mostly non-budget means); 20 billion hryvnias - for development of the railroad (provided purchasing of passenger and freight cars of domestic production); UAH 11.6 billion - for development of airports (in Odesa, Dnipropetrovsk, Symferopol, Luhansk, Sevastopol, Kyiv) and sea ports (in Odesa, Feodosia, Iliyichevsk). The sector of public transport will also get its share - 11.2 billion hryvnias.
UAH 32.3 billion are provided for residential construction. Moreover, the government plans to attract 6.6 billion hryvnias from various sources for provision of dwelling on a rental basis with further acquisition, and 4.7 billion hryvnias - for reduction of mortgage costs. The housing and communal services sector is supposed to get 25.39 billion hryvnias.
Special attention is paid to the agricultural complex. It is planned to attract about 30 billion hryvnias, and proposed measures include promotion of purchasing equipment of domestic production, construction and reconstruction of stock-raising and hothouse complexes, planting of young gardens, vineyards and berry-fields, etc.
Finally, 28.6 billion hryvnias will be allocated for advancement of electrical energy industry, and 67.3 billion hryvnias - for implementation of energy efficiency measures (reduction of power consumption, alternative fuel, etc.)ю
So, the country now has a mass and mature enough plan of development. Analysts say it is not perfect, and major priorities could have been worked out better, but in general, with adequate and responsible approach the Program is able to push the economy in right direction. Well, we all hope it will work.
Andriy Boyrunets
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