Letter to the U.S. Department of Commerce
From the Ukraine-U.S. Business Council
Kempton B. Jenkins, President
Washington, D.C. 20036
June 18, 2002

Gentlemen:

We write to endorse the application of the Government of Ukraine to revoke the non-market economy status of Ukraine by the U.S. Government.

The Business Council represents more than thirty major US corporations doing business in Ukraine. It has been an active interlocutor between business and the Governments of Ukraine and the U.S. for more than five years. Our goal has been to improve business conditions in Ukraine for U.S. investors and promote U.S. Government policies and assistance to that end.

It is essential in our judgment to recognize and acknowledge Ukraine's achievements over the decade of its independence and particularly over the past three years when the economy grew at a dramatic rate after several years of decline. In 2001 Ukraine's GDP rose more than 10% and was the fastest growing economy in Europe. In the first quarter of 2002 growth continued at more than 4%.

U.S. corporations, who are members of the Council, confirm that they have experienced solid improvement in business conditions over the past three years. Additional investments by the major U.S. corporations have followed this improvement. AES Corporation has purchased regional electricity production facilities; AIG is establishing a nation-wide insurance network; agricultural input corporations have experienced major sales increases; Boeing hails the operation Sea-Launch program and particularly the Ukrainian partnership as a remarkable success.

Those individual experiences are reflective of the general increase in agricultural harvests, the wiping out of wage and pension arrears, the growth of domestic investment, and consumer production expansion. Major international financial observers (Moody's, e.g.) now describe Ukraine as an excellent investment opportunity. None of this means there are no lingering after affects of 80 years of Soviet hegemony. There are. But, Ukraine's progress over the past three years is now beyond question. In specific response to the DOC criteria which are mandated by law, the Council believes that Ukraine has clearly satisfied the requirements for currency convertibility, free bargaining for wages, and foreign investment. And, in the past two years government ownership and control of production has been sharply reduced.

We note that the Department has recently revoked Russia's non-market economy status.

It is worth noting that in both the energy and agricultural sector Ukraine has progressed in privatization beyond Russia's performance. The increased privatization of agricultural property in Ukraine has led to a dramatic doubling of its annual harvest, in contrast to Russia where privatization of agriculture has barely begun, and the Duma continues to resist privatization.

In the energy field, the current scandal surrounding Slavneft in Russia highlights a lack of acceptable governance, competition, and continued government ownership (see The Washington Post, June 18, 2002).

In short, while we support the revocation of NME status for Russia as clearly in the interest of U.S. business (and obviously the U.S. national interest more broadly), similar action in Ukraine is even more appropriate.

The Council would appreciate the opportunity to participate in the hearing which the Department plans to hold on this issue.


Very truly yours,
Kempton B. Jenkins
President