Ukraine gained its independence on 24.8.1991. It's only since Slovakia emerged as a sovereign state that we can speak of the position of Ukraine in connection with Slovakia. Julian Groch, Trade Attaché at Slovak Embassy in Ukraine discusses the current situation and perspective of economic relations.

Economic co-operation between Slovakia and Ukraine has historical roots. Has the position of Ukraine on Slovakia changed after the former gained independence?

Since 1993 all basic agreements have been endorsed on economic and trade cooperation. Slovakia is seen as an equal and reliable partner. The government and business circles are interested in doing business with Slovakia. The relations don't carry any historical wounds or conflicts. Both countries share major part of their history and face similar problems of the complex transformation period. These facts multiplied by linguistic proximity and common border create adequate conditions for successful development of economic co-operation.

What is the current state of trade exchange?

Ukraine ranks among our major trading partners. In 1997 our foreign trade turnover ranked it 9th with 2.7% on total turnover. Export to Ukraine ranked it 8th with 2.9% and import the 9th with 2.5%.

In the 1st half of 1998 the share of export to Ukraine on total Slovak export declined to 2.08% (from 2.91% in 1997). The same applied to import at 2.17% (from 2.52% in 1997). After the breakthrough of the financial crisis in Ukraine the situation in the 2nd half of 1998 further declined.

How is the current protectionist policy of the Ukrainian government reflected in our economic co-operation?

Ukraine has largely liberalised its foreign trade. The agreement on the supreme national interest with Slovakia allow non-discriminatory access to the market. The Slovak exporters have thus quite similar conditions to access the Ukrainian market as other countries, except for a few from the former Soviet Union in case of selected commodities. The average import surcharge to Ukraine is 5.12%. The tax system doesn't contain discriminatory elements against the third countries.

Within seven years of independence, the Ukrainian economy did not manage to stop economic decline. Along with low domestic demand and absence of enterprise liquidity, the major problems lays in unstable trade environment and frequent legislative changes. The cabinet of ministers in Ukraine, for instance, has the power to change the customs fees. It exercises the power almost every month. Furthermore, the body may change lists of "critical import" commodities which are VAT-free when imported. Last November it exercised the power twice within a week.

Certification is a specific issue. Ukraine doesn't accept internationally recognised standards and employs the principle of reciprocity in trade relations. Cooperation agreement on mutual recognition of testing results from the Ministry of Economy SR and the State Committee of Ukraine for Standardisation, Metrology and certification sets out a procedure for an agreement on mutual recognition of test result and certificates for an agreed list of products and for mutual recognition of state testing institutes. Expert negotiations are under way.

The financial crisis that hit Ukraine last August significantly worsened the opportunities of the Slovak export. The devaluation of the Ukrainian hrivna by some 70% from August to October reduced the opportunities for the Ukrainian importers to purchase foreign goods. Moreover, the measures taken by the Ukrainian National Bank on protection of the local currency brought quite a few administrative barriers on purchase of foreign currency also to the importers who possessed funds for the purchase. The ministerial cabinet issued a decree limiting import barter operations with Ukrainian goods of the highest liquidity. Another adverse step came in form of a decree by the Ukrainian National Bank requiring the Ukrainian importers to implement advance payment for purchased goods only up to 20% of the contract value.

Where do you see the major reserves in economic co-operation?

In light of its market size, Ukraine is our largest neighbour. Good chances are open for manufacturers of construction and packaging material, furniture, agricultural equipment, construction engines, foodstuffs, printing products, as well as for construction companies. I see further reserves in the use of higher forms of co-operation, particularly in production cooperation and joint ventures.

A lot will depend on the Ukrainian demand and further development of its economy. There are major reserves in the use of science and technology potential of Ukraine.

You mentioned higher forms of co-operation. Do they include investment construction?

SES Tlmace turned to us via the ministry of Economy SR with a request for support in an international tender for reconstruction of Starobeshevo heating plant. EBRD will largely fund the project estimated at several tens of dollars. Participation of a Slovak firm together with the Ukrainians (amounting to about a quarter of the supply) has been supported by the Ukrainian representatives at the intergovernmental commission for economic, trade, science, and technical co-operation. That brought a victory to the Slovaks (together with the German Lurgi). Preparatory work for implementation of the project is underway.

Which Slovak goods are the most sought after?

The major Ukrainian demand concerns our radiation-proof material, magnetite, packaging material, selected foodstuffs, beer, rolled steel, printing products, agricultural and construction engines, motor vehicles, paper products, medical equipment, as well as chemicals and pharmaceuticals. There is also major interest in tourism in Slovakia, notably in Winter season in our mountains.

What is the major business demand on you as the mediator of contacts between the two countries?

It is mostly the Ukrainian businesses expressing interest in both sale of their output and in purchase of Slovak products. There are offers for joint ventures and other forms of cooperation, such as representation of Slovak business in Ukraine.

The Slovak businesses are particularly interested in placement of their production. They supply us with offers and search for potential consumer contacts. There is also interest in purchase of selected material and agricultural production.

What should the Slovaks offer to gain greater market share in Ukraine?

Above all they should improve product competitiveness. The Ukrainian market is covered with high quality products from developed industrial countries, as well as with a cheap Turkish, Chinese and Polish production. Marketing and search for reliable trade partners are inevitable, the latter in light of the high trade risks in the local environment.

Business missions, fairs and exhibits should be further utilised. We don't seem much advertising of Slovak products which s instrumental for their marketing. Customs and co-signed warehouses should be introduced. Without intense trade activities exercised directly in the field no success would be possible for our exporters in the trade and economic conditions in Ukraine.

Foreign trade with Ukraine (SK m, import in OP, export FCO parity)

Slovak Trade FORUM