Valeriy Khoroshkovskiy: I was appointed First Deputy Prime Minister to coordinate interagency issues
First Deputy Prime Minister Valeriy Khoroshkovskiy in a keynote speech at the conference sent several encouraging signals concerning the government’s intentions to reform domestic stock market infrastructure and deal with deep-seated problems disappointing portfolio investors in Ukraine. He also commented on several closely watched macro topics including negotiations with the IMF, planned sovereign Eurobond issuance, and gas talks with Russia.
Stock market development and corporate governance
• Regulatory framework — The government plans to present new legislative
proposals within a month to foster development of the domestic stock
market. Khoroshkovskiy added the government is also seeking to improve
coordination with the NBU in this area to quicker enact necessary measures
(in response to a question about allowing dual listing of Ukrainian
companies whose shares are currently traded on European exchanges).
• Corporate governance — Only a handful of Ukrainian listed companies
comply with corporate governance best practices and the government is
working on legislation to strengthen requirements in this field, particularly
what concerns curbing transfer pricing, instituting mandatory share buyouts
and other measures to provide adequate protection for minority
shareholders.
• Pension reform — The government is focused on bringing untaxed wages
(an est. UAH 150bn p.a.) out of the shadow economy, which should allow to
make the state Pension Fund balanced as early as 2013 and pave the way for
launching a second tier of the pension system as a source of long-term
domestic funding.
Investment climate
Commenting on the main complaints made by foreign investors in Ukraine, Khoroshkovskiy admitted the authorities have a long way to go to fight corruption, which he said has grown into a “national security issue”, reform the judiciary in order to stop “corporate raids aided by courts”, and reduce the powers of law-enforcement and regulatory agencies in order to “makes them less aggressive towards business”. He said the government is deeply aware of the urgent need to address these challenges and will continue to push through relevant legislation despite the approaching parliamentary elections in October.
Government’s 2012 macroeconomic targets
YTD economic performance and budget revenues dynamics have been better than expected despite a slowdown in industry, and the government sees no grounds for any significant revision of its 2012 GDP growth forecast of 3.9% y-o-y despite analysts’ consensus pointing to an almost twice lower rate. Khoroshkovskiy said other key macroeconomic targets are also unlikely to change significantly in the course of ongoing drafting of amendments to the 2012 state budget law.
Sovereign Eurobond issuance and domestic debt
The government is trying to minimize the cost of borrowing before printing a new Eurobond having already reduced the yield guidance in talks with potential lead-managers from 10.25% to 8.5%. He added the government is absolutely confident of refinancing its domestic liabilities this year.
Gas talks with Russia
The first deputy PM indicated the government is in no hurry to reduce the price of imported natural gas at any cost, saying Ukraine’s priority is to secure alternative sources of gas supply, which will facilitate talks with Russia among other benefits. Still, he added Ukraine is determined to continue talks to reduce Russia’s “unrealistically high” gas price, its goal being not the amount of a potential discount but negotiation of a “fair” pricing structure.
IMF negotiations
Echoing other government officials’ recent comments, Khoroshkovskiy said raising gas prices for households — one of the IMF’s principal requirements to unlock lending to Ukraine — is “out of the question today”. Without explicitly mentioning the October parliamentary elections in this context, he said even doubling gas prices for households would leave them below the cost level while causing further growth in arrears. He added the government is instead re-focusing on overhauling the existing system of benefits in the gas pricing area so as to leave only genuinely low-income households eligible for discounted prices before proceeding with further price hikes.
EU relations
Expanding on the Russian gas issue, Khoroshkovskiy reiterated that integration with the EU remains Ukraine’s “principal strategy” which the authorities have no intention to sacrifice for the sake of winning concessions from Russia.
About 8th Annual Investor Conference
During the eight years of its existence, Dragon Capital’s Investor Conference was a landmark event, which raises topical issues and makes public statements of the Ukrainian government. This format allows the international investment funds and banks that are willing to invest in Ukraine, to get answers to their questions from the top officials.
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