3.1. INVESTMENT POLICY

In 2000, special attention was paid to turning of investment into priority direction within the economic restructuring, which was defined by the Decree of the President of Ukraine No.1004 of August 18, 1999 "On major courses of investment policy for 1999-2001". Also, much efforts were made to elaborate legal drafts, which would ensure fulfillment of the Decree of the President of Ukraine.

Capital investment by the state was made in directions, where Ukraine is able to compete on the international markets or to secure economic restructuring. These include development of aircraft-building, construction of objects to provide the country with power resources, backing of state programs in agricultural machinery engineering, medical instrumentation, municipal transportation, as well as gas supply installation for rural area, and environmental safety. The latter primarily embrace measures on elimination of Chernobyl disaster after-effects and restoration of landmarks.

In 2000, percentage of capital investment from the State Budget made as low as 0.7% in GDP of Ukraine as compared to 4.4% in 1999.

Within the period under review, all types of construction enterprises and companies obtained USD 19.5 bln. of capital investment and commissioned fixed assets worth a total of UAH 17.2 bln. In January-December 2000, investment in equity added 11.2% against a 0.4% growth in the respective period of 1999.

Fig. 1. Capital investment

More than the two thirds of funds (71.8%) have been invested into construction of industrial outfits as compared to 71.9% in 1999. Considerable investment recovery was traced in ferrous metallurgy, chemical and petrochemical industries, transportation and communication, construction, as well as in machinery building and metalworking. The enterprises activated investment into upgrade and reconstruction of production facilities, as well as acquisition of new technologies.

Major source of backing was equity of enterprises accounting for 67.6% in total investments. Only 6.1% of total investments into construction were obtained from the State Budget (against 7.6% in 1999) 4.5% derived from local budgets; foreign investment made 4.1%, whereas investment of population into construction of lodgings made 5.8 %.

State-owned construction companies obtained over a half of (51.2%) of all investments into this industry. At the same time, construction sector not owned by the state obtained UAH 9,502.9 mln. of all capital investment, thus, accounting for 48.8%.

Within total capital investment, building operations accounted for 45.6%. Virtually the same share (45.2%) was spent for acquisition of machinery, facilities, and equipment for newly built units and technical upgrade of profitable enterprises.

In 2000, all types of construction enterprises in Ukraine commissioned residential houses of 5,356 ths. sq. m in total area, public schools for 14,292 students, pre-school institutions for 565 places, hospitals for 784 beds, ambulatory and clinic establishments scheduled for 2,253 visits per shift, as well as clubs and cultural centers for 1,050 places.

Most of community institutions (except for lodgings) were commissioned by state-owned companies, whereas 83.3% of all housing were commissioned by non-governmental construction companies. Funds from the State Budget backed commissioning of only 1.6% of total housing. During the period under review, commissioned accommodations increased as compared to January-December 1999 in 5 regions and the city of Kiev.

According to the data with construction enterprises, construction of objects bound to liquidation of Chernobyl disaster after-effects in 2000 obtained UAH 49.6 mln. of centralized capital investment accounting for 59.3% of stipulated annual amount.

Total annual demand of the country for investment sources exceeds UAH 50 bln. According to the State Statistics Committee of Ukraine, in 2000, funds from the State Budget made UAH 1,198.0 mln. of investment in equity.

State capital investment fully backed expenses for construction of units, which will serve to supply gas to rural area (UAH 20 mln.), as well as reduced long-term state loan for construction (reconstruction) of housing for young families and single young citizens in 2000 (UAH 70 mln.). The latter will call forth commissioning of 64.72 ths. sq. m of total housing area.

To resolve the issue of stimulating of bank capital concentration and driving it into actual economy sector, there was elaborated the draft Law of Ukraine "On the Ukrainian State Bank for Reconstruction and Development", which was approved at the meeting of the Cabinet of Ministers of Ukraine on May 3, 2000 and submitted for consideration of Ukrainian Parliament in July 2000.

The bank is established to issue loans to investment and innovation projects on industrial restructuring and upgrade, development of export potential of Ukrainian business, construction of housing, as well as to provide guarantees on these projects. Assets of other commercial banks may be driven as loans via the bank.

In 2000, shares issue made UAH 11.65 bln. (6.9% of GDP), which exceeds the figure of 1999 by 47%. Average monthly volume of stock transactions in Ukraine amounted to some UAH 3 bln. Out of these, about UAH 233 mln. were made on the formal market; thus, accounting for 7-8% in total stock turnover on stock market.

According to the Ministry of Finance, in 2000, USD 778.2 mln. were registered as direct foreign investment, which outran the 1999 result almost 1.5 times.

Fig.2. Registered direct investment

As of October 1, 2000, direct foreign investment to Ukraine totaled USD 3.72 bln. (data from the State Statistics Committee), yielding some 8% of the overall demand.

Ukrainian companies that obtained the largest foreign investment during this period were Ukrtatnafta with USD 103.9 mln., OJSC Rosava with USD 23.9 mln., Cargill Works with USD 19.8 mln., as well as McDonalds Ukraine LTD, with USD 25.3 mln.

To activate investment activity in the country and effectively utilize state and community property, the government of Ukraine introduced the tool of granting concessions for objects of state and community property.

In order to fulfill provisions of the Law of Ukraine "On concessions", the Cabinet of Ministers of Ukraine approved provisions dated 11 December 1999 No.2293 "On ratification of the list of objects of state property", dated January 18 2000 No.72 "On the register of concession agreements", dated April 04 2000 No.639 "On ratification of the procedure of concession payments calculations", dated April 04 2000 No.642 "On ratification of the regulation on concession bid and conclusion of concession agreements for objects of state and community property, which are allowed to concession", dated April 12 2000 No.643 "On ratification of typical concession agreement", dated July 07 2000 No.1114 "On regulation on the order of determining the concession objects, which may obtain privileges regarding concession payments, subsidies, compensations, and terms of their arrangement".