Welcome to the U.S.-Ukraine Business Council

Washington, D.C.

TO:  Members, U.S.-Ukraine Business Council (USUBC)
DATE:  Tuesday, September 25, 2007


On September 10, Yulia Timoshenko met with the representatives of the Western business and legal community, foreign government representatives and the media where she gave highlights of her economic policies and signed a document entitled 'Contract with Investors'.

A copy of the Contract with Investors will be available at the web site of Marks Sokolov & Burd, LLC (www.marks-sokolov.com) and via e-mail from Gene Burd at (gburd@mslegal.com).

Ms Timoshenko said that she was confident that her alliance with Yushenko will be victorious and stated that she intends to form a democratic coalition consisting of three or four political forces (possibly including
communists) working together.  She also said that her goal is for foreign investors to understand developments in the Ukrainian politics.

The Continuing Privatization Efforts -----

Ms Timoshenko has been critical of the present government for its lack of transparency during privatization.  She contrasted the second privatization of Krivorozhstal which she called "honest" with the recent privatization of Dneprenergo which according to her was simply a transfer to Rinat Akhmetov.
She also mentioned the inadequate efforts toward the privatization of the power industry and agriculture.

Ms Timoshenko said that she stands behind her past efforts to privatize 569 wholly or partially state owned companies and will pass laws to that effect.
Her primary concern is privatization of companies in the mining and natural resource industries.

'Economic Zones' will be Replaced by 'Investment Zones' -----

Ms Timoshenko has also been critical of the former 'free economic zones'
regime which according to her "killed" competition and which was misused for tax evasion.

Rather, she has proposed to implement a regime of 'investment zones' in underdeveloped areas.  Goods manufactured in these zones will be exported duty free but subject to duty if sold in Ukraine.

Investment and technology for investments will be tax free for as long as the investment zone regime exists.  Components and spare parts will be duty free for a period of five years.  Ms Timoshenko has promised to adopt the 'investment zones' laws within one month of coming to power.

The Acquisition Of Non-Agricultural Lands Will Be Streamlined -----

Ms Timoshenko has promised to streamline procedures for the acquisition of non-agricultural lands.  She said that the acquisition process currently requires 126 signatures which need to be done twice - first when the application is submitted and second when it is approved.

The new land acquisition law will require local governments to put the requested parcel of land up for auction within 10 days of a request or if unavailable to put up for auction a substitute parcel of equal value.  She said that the law will be adopted within four to six weeks after the election.

Less Red Tape -----

Ms Timoshenko said that she will fight bureaucracy by analyzing the function of each bureaucrat and fire those who are unnecessary in order to destroy the "corrupt bullion" of licenses and permissions.  She did not specifically name any licenses or permissions that she thought should be eliminated.  Nor did she present a time frame for their elimination.

Agricultural Land is Not for Sale -----

Ms Timoshenko said that until the laws regulating use of agricultural land are implemented there will a moratorium on the sale of agricultural lands.
She stated that the present lack of legislation regulating the use of agricultural lands will cause problems if the lands are allowed to be privatized.  For the meantime, these problems can only be avoided by maintaining a moratorium.

Customs and Certifications -----

Ms Timoshenko stated that she wants to streamline customs procedures wherein imported goods are checked and rechecked even if they have valid certifications.  She said she wants to implement a regime in which European certificates of quality will be accepted.

Taxes -----

Ms Timoshenko has promised to significantly decrease payroll tax and VAT.
She said that the present VAT regime is a source of corruption and inefficiency and that it can be substituted for by other taxes.  However, she did not explain specifically which taxes could substitute VAT and what economic effects these taxes would have.

The decrease or even elimination of VAT is a common platform between the Timoshenko Block and the Party of the Regions who are the main political forces in Ukraine together with Our Ukraine.

These changes were promised in the previous elections, but so far they have not happened.  Moreover elimination of VAT would contradict certain EU Directives.

Answering questions from the audience, Ms Timoshenko said that no politician in any country can assure which direction future legislation will take.  There has to be a legal system that works.

Lastly, she said that in order to force politicians to keep their promises there has to be a democratic system in which they can be voted out of office.

It does not matter whether the system is parliamentary or presidential - either one can work as long as the functions of each branch are clearly delineated and a system of checks and balances is imposed.

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Gene M. Burd is a member in the law firm Marks Sokolov and Burd, LLC and the head of its representative office in Kyiv.  He was born in Ukraine and was educated in the United States where he also practices law.  He
maintains: "It is a great pleasure to come back to Ukraine after many years and see a dynamic country striving to be independent.  American companies coming to Ukraine see a vital and rapidly developing economy with promising business opportunities which is becoming more attractive to the global investment community on a daily basis."

Marks & Sokolov, LLC (operating in Ukraine as Marks Sokolov and Burd,
LLC) is a boutique law firm known for its ability to handle complex litigation and commercial work in countries around the world including the U.S., Russia and Ukraine. The firm has offices in Philadelphia, Moscow, and Kiev and its lawyers are fluent in English, Russian, and Ukrainian.