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Action Ukraine Report

"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter
In-Depth Ukrainian News, Analysis, and Commentary

"The Art of Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World"

WTO MEMBERSHIP: VERY CRITICAL WEEK FOR UKRAINE

Will the Parliament Pass the Legislation Needed for Accession to WTO
Or Will The Parliament Hold Ukraine Back and Keep Ukraine's
Economic and Business System From Moving Forward On
the Much Needed Path of International Expansion and Integration

"THE ACTION UKRAINE REPORT - AUR" - Number 515
Mr. E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, TUESDAY, July 5, 2005

------INDEX OF ARTICLES------
"Major International News Headlines and Articles"

1. PROSPECTS OF ECONOMIC DEVELOPMENT OF UKRAINE
By (Prof.Dr.Dr.hon.c.mult.) Bohdan Hawrylyshyn
Founder and Chairman of the Board,
International Management Institute (IMI-Kyiv)
Published by The Action Ukraine Report (AUR) No. 515
Washington, D.C., Tuesday, July 5, 2005

2. UKRAINE - MACROECONOMIC SITUATION - JUNE 2005
Monthly Report by Iryna Piontkivska, Edilberto L. Segura
SigmaBleyzer Private Equity Investment Group
Kyiv, Ukraine, Tuesday, July 5, 2005

3. UKRAINE: NO PLACE FOR THE HOLODOMOR MEMORIAL
Seventy-two years after the genocide of millions of
Ukrainians
COMMENTARY: By R.L. Chomiak, Journalist, Kyiv, Ukraine
Special to The Action Ukraine Report (AUR), Number 515
Washington, D.C. Tuesday, July 5, 2005

4. PRESIDENT YUSHCHENKO PROPOSES THAT KYIV SUBMIT
PROPOSALS FOR PAYING TRIBUTE TO GREAT FAMINE VICTIMS
Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005

5. UKRAINE: KYIV DECIDES TO CREATE A MUSEUM OF FAMINE ON
TRIOKHSVIATYTELSKA STREET BY NOVEMBER 26, 2005
Ukrainian News Agency, Kyiv, Ukraine, Wed, February 9, 2005

6. PM TYMOSHENKO CALLING ON RADA TO DEBATE BILLS
NEEDED FOR JOINING WTO ON TUESDAY, JULY 5
Ukrainian News Agency, Kyiv, Ukraine, Monday, July 4, 2005

7. ADOPTION OF LAWS PROMOTING UKRAINE'S ACCESSION TO WTO
DISCUSSED BY BRITISH AMB AND MINISTRY OF ECONOMICS
Ukrinform, Kyiv, Ukraine, Monday, July 4, 2003

8. UKRAINE: SOCIALIST PARTY FACTION MEMBER MYKOLA
RUDKOVSKIY SAYS FACTION WILL NOT SUPPORT WTO BILL PACKAGE
Tetiana Vesna, Ukrinform, Kyiv, Ukraine, Tue, July 5, 2005

9. PARLIAMENT SPEAKER CALLS ON FACTIONS TO FURTHER
COORDINATE THEIR WORK ON LAWS NEEDED FOR WTO ADMISSION
Ukrainian News Service, Kyiv, Ukraine, Monday, July 4, 2005

10. PARLIAMENT SPEAKER AND U.S. AMBASSADOR DISCUSS
ADOPTION OF LAWS REQUIRED FOR UKRAINE'S ADMISSION INTO WTO
Herbst expressed concern over the progress of economic policy in Ukraine
Oleksandr Sukov, Ukrainian News, Kyiv, Ukraine, Mon, June 27, 2005

11. RUSSIA INTO SERIOUS CRISIS WITH ITS WTO MEMBERSHIP TALKS
Russia has made all concessions, which it could make
in the talks about its incorporation in the WTO
By Sergei Malinin, Pravda.ru, Moscow, Russia, Wed, June 29, 2005

12. US AMBASSADOR HERBST EXPRESSES REGRET ABOUT WAY
UKRAINE CARRIES OUT ITS ECONOMIC POLICY
IntelliNews - Ukraine Today, Kyiv, Ukraine, Friday, Thu, June 30, 2005

13. FORMER US SECRETARY OF STATE MADELEINE ALBRIGHT CALLS
FOR MORE SUPPORT TO DEMOCRATIC REFORMS IN UKRAINE
AP Worldstream, Czech Republic, Monday, Jul 04, 2005

14. DEPUTY STATE SECRETARY MARKIAN LUBKIVSKIY COMMENTS
ON UKRAINE'S STEP TO INTRODUCE VISA-FREE REGIME FOR US
TRAVELLERS AS MIRRORING NATION'S CONSISTENT FOREIGN POLICIES
Larysa Kozik, Ukrinform, Kyiv, Ukraine, Fri, July 1, 2005

15. IFC PROVIDES $45 MILLION IN LOANS TO U.S. BASED AES
CORPORATION'S TWO ELECTRIC UTILITIES IN UKRAINE
UNIAN, Kyiv, Ukraine, Wed, June 29, 2005

16. YUSHCHENKO PROMISES INVESTORS THAT DAMAGES FROM
THE CANCELING OF BENEFITS IN FREE ECONOMIC ZONES WILL
BE COMPENSATED TO THOSE WHO WORKED HONESTLY
Ukrainian News Agency, Kyiv, Ukraine, Fri, July 1, 2005

17. PRESIDENT SAYS IT IS NECESSARY TO CREATE ONE
MILLION JOBS IN UKRAINE ANNUALLY
Interfax-Ukraine news agency, Kiev, in Russian, 23 Jun 05
BBC Monitoring Service, UK, in English, Thu, Jun 23, 2005

18. LARGEST TV BROADCASTER IN CENTRAL AND EASTERN EUROPE
CONFIRMS INTENTION TO TAKE CONTROL OF UKRAINIAN TV AND
RADIO BROADCASTER STUDIO ONE PLUS ONE
Correspondent.net website, Kiev, in Russian 25 Jun 05
BBC Monitoring Service, UK, in English, Sun, Jun 26, 2005

19. UKRAINIAN MEDIA TYCOON RABYNOVYCH SAYS MOSCOW
NEWSPAPER HE PURCHASED TO REMAIN LIBERAL
TV 5 Kanal, Kiev, in Ukrainian 1800 gmt 3 Jul 05
BBC Monitoring Service, UK, in English, Sun, July 3, 2005

20. UKRAINE PARLIAMENT VOTES TO MAKE BAILIFFS
INDEPENDENT OF JUSTICE MINISTRY
Interfax-Ukraine news agency, Kiev, in Russian, 23 Jun 05
BBC Monitoring Service, UK, in English, Thu, Jun 23, 2005

21. RAUCOUS LOOK AT UKRAINIAN REFUGEES
Book Review by Orysia Tracz, Winnipeg Free Press,
WInnipeg, Manitoba, Canada Sunday, July 3rd, 2005

22. ADOPTED CHILDREN BECOME U.S. CITIZENS IN MIAMI BEACH
INCLUDING TWO CHILDREN ADOPTED IN UKRAINE
By Lisa Orkin Emmanuel, AP Worldstream,
Miami Beach, Florida, Tuesday, July 05, 2005

23. UKRAINE 3000 INTERNATIONAL CHARITABLE FOUNDATION
EXPLAINS ITS FUNCTION AND PROGRAM
Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Thursday, June 30, 2005

24. MOLDOVA AND TRANSDNIESTRIA: GANGSTERS CORNERED
Ukraine tries to broker peace in Moldova
The Economist, London, United Kingdom, July 2-8, 2005
===============================================================
1. PROSPECTS OF ECONOMIC DEVELOPMENT OF UKRAINE

By (Prof.Dr.Dr.hon.c.mult.) Bohdan Hawrylyshyn
Founder and Chairman of the Board,
International Management Institute (IMI-Kyiv)
Published by The Action Ukraine Report (AUR) No. 515
Washington, D.C., Tuesday, July 5, 2005

A number of facts provide the basis for making a good prognosis for
Ukraine's economic development for the next 10 years or so, i.e. recent
growth of GDP and DFI, current economic and administrative situation,
historic patterns of economic growth, Ukraine's economic potential for
growth, and absorptive capacity of Ukraine for DFI.

Ukraine has been in the economic take-off stage since late 1999, early 2000.
There were several contributing reasons: land reform, reforms in the energy
sector, carried out by Yulia Tymoshenko, at that time Deputy Prime Minster
and now Prime Minister, which imposed the shift from barter deals between
producers and distributors of energy to monetary settlements, which brought
new revenue to the state budget.

This allowed the Cabinet of Ministers under the then Prime Minister, Victor
Yushchenko, to pay most of the salary and pension arrears, which, in turn,
increased the purchasing power of the population, thus creating a greater
consumer demand.

To satisfy the demand, foreign companies, operating in Ukraine, and existing
Ukrainian companies increased their capacities, along with new, particularly
small and mid-size companies, which increased the supply side. This led to
quick growth of traditional sectors, like metallurgy, chemical
machine-building, and particularly food-processing.

The above resulted in the growth of GDP per capita during the last 4 years
of 9 % per year on average. This also increased the annual DFIs, but not to
possible and desirable level because there was some political instability,
changing legislation, pervasive corruption, arbitrary actions, many
bureaucratic barriers and weak judicial system.

Thanks to the Orange Revolution, resulting in the election of the New
President and Cabinet of Ministers, the image of Ukraine changed rather
dramatically. Also, there is a firm commitment of new powers to work towards
a membership in the European Union, integration into the Trans-Atlantic
structures and development of full-fledged democracy and a real market
economy. The government is under pressure to bring about a lot of changes.

Even though the demands of the Orange Revolution were only "Liberty and
Freedom", rather than "Bigger salaries, more jobs", a lot of promises have
been made by the President and his team during the Revolution and they
have to satisfy those promises. This, in addition to the increases in
pensions, salaries and other commitments, made by the previous government,
put the current government under pressure to act over a very broad front and
very quickly.

Given the fact that the governing team are in the great majority new people,
yet much of bureaucracy remains the same, it will take some time and
possibly until after the next parliamentary elections in March 2006 for the
government, whose composition is likely to change, to become fully
effective.

Given the fact that elections in question will be based on party lists,
rather than be a mixture of party lists and majoritarian system, there will
be fewer, stronger parties represented in the parliament, hence likely
stabilization and improvement of legislative process and cooperation
between the Cabinet of Ministers and the Parliament.

A very important basis for predicting fairly high rates of growth of
Ukraine's economy over the next decade or so, is the pattern on growth of
different economies starting in the XIX century and continuing through the
XXth. This pattern was as follows: once a country fulfilled the so called
"pre-conditions to take-off", it would start growing between 7 and 10 %
per year on the average for up to 30 years.

This has been the case of the United States in the XIXth century, followed
by imperial Russia after 1861 (abolition of serfdom and opening up to
foreign investments), then after the World War II Japan from 1952, later
also by Italian and more recent East Asian "economic miracles". Now
China is the most outstanding example of such economic growth pattern.

The ability of a country to follow such growth pattern depends on the will
of the people to work hard, appropriate knowledge in all kinds and levels of
jobs to work well and sufficient level of domestic and foreign investments
to give people necessary instruments (a horse power behind every elbow
and now a computer behind every brain) to work effectively. These 3
preconditions are fulfilled when a country is governed with wisdom.

As far as Ukraine is concerned, it has a broad range of natural resources
(though short on oil and gas), very fertile soil, reasonable physical
infrastructure, highly educated population, particularly in natural
sciences, engineering, but now also in management (I can speak about
his last point with real conviction).

The International Management Institute-Kyiv, which I founded in 1989, has
alone gradated over 1300 people from post-graduate, post-experience MBA
programs and a couple of thousands of people from shorter seminars, and
in-company programs.

What is still needed is the improvement and stabilization of legislation,
reduction of bureaucratic hurdles, corruption, and strengthening of the
judicial systems. The current government is very firmly committed to bring
about the needed changes. After a short observation period, the DFIs will,
therefore, increase sharply.

Even the shortage of oil and gas need not continue to be a constraint on
growth for a long period. First, Ukraine still have some deposits of oil and
gas, and with better exploration and extraction technologies, the production
of both can increase. Several years ago, for instance, British Petroleum Co
had estimated that production of natural gas in Ukraine could be increased
by 20 billion m3 per year.

Also, as part of its heritage of the Soviet Union, Ukraine has an economic
system and structure that is too energy intensive. It uses 3 times as many
calories per unit of GDP than Germany. With likely changing economic
structure, energy saving and increasing efficiency in energy use, Ukraine
will be much less dependent on the import of oil and gas from Russia and
is already building a system on alternative sources of energy supply.

Given all above, the absorptive capacity of Ukraine for the DFIs is bound to
increase in the coming years. This also because of changing economic
structure, of improvements of physical infrastructure, the already existing
natural resource base, quality of human resources, the expanding internal
market and export capacity.

One can ascertain that within 5 years Ukraine should be able to attract and
absorb the DFIs of around 5 billion USD per year (i.e. around of 100 USD
per capita of Ukraine's population) and sustain that rate for the following
5 years.

The cumulative investments (1'000 USD) by that time will be approaching the
current per capita cumulative investments in some of the new members of the
EU. The economic boom will be sustained also due to the likely significant
increase of investments from domestic sources.

Barring some cataclysmic effects more of external or world economic or
geopolitical character rather than of internal nature, and given all the
above factors and the fact Ukraine will definitely not go back to the
policies and practices of the previous regime, the economic prospects of
Ukraine for the next 10 years are good. -30-
===============================================================
2. UKRAINE - MACROECONOMIC SITUATION - JUNE 2005

Monthly Report by Iryna Piontkivska, Edilberto L. Segura
SigmaBleyzer Private Equity Investment Group
Kyiv, Ukraine, Tuesday, July 5, 2005

SUMMARY --------

(1) Real GDP growth kept decelerating in May, reaching 4.7% yoy of
cumulative growth. Accelerating agricultural production is expected to
improve the overall growth performance in the summer months.

(2) Consolidated budget execution indicates improvements in tax
compliance and the administrative capability of fiscal authorities as the
surplus reached 2.1% of GDP in January-April.

(3) Ukraine's prospects for foreign investment inflow crucially depend on
successful resolution of the Kryvorizhstal issue.

(4) Hryvnia appreciation and stabilization of gasoline prices contributed to
non-accelerating consumer price dynamics in April-May.

(5) In January-April, the merchandise trade surplus narrowed to $800
million, less than half as over the same period last year.

(6) Fitch revised the outlook of sovereign Ukrainian ratings from BB- stable
to BB-positive in early June.

ECONOMIC GROWTH --------

In January-May, broad-based economic growth in Ukraine continued, but its
pace decelerated considerably. Over the period, real GDP growth made up
4.7% yoy compared with 5% in January-April. Lower rates of growth were
registered in all sectors except for agriculture and utilities. Value added
in agriculture increased by 6% yoy in January-May compared to a 3.3% yoy
decline over the same period in 2004.

The Ministry of Agriculture indicates that current weather conditions
support expectations of a fairly good harvest this year. At the same time,
construction continued to stagnate, posting a 6.7% yoy decline after almost
30% yoy growth demonstrated during the same period last year.

In May, industrial growth slowed to 4.3% yoy compared to 5.1% yoy growth a
month before. This brought the cumulative growth rate to 6.2% yoy at the end
of May. Machine building, chemicals and food processing were the major
contributors to the expansion of industrial output. Machine building
performance remained solid despite the deceleration of production to 8.4%
yoy in May.

During the month, food processing demonstrated robust growth of 11% yoy,
encouraged by an increase in spending power of population. Enjoying strong
external demand, chemicals producers expanded their production by 12% yoy
in May. Export-oriented metallurgy showed a slight decline of 0.3% yoy in
January-May, reflecting weakening external demand for metals. Oil-refineries
improved their performance in May as compared to previous months, but in
annual terms production volume declined 2% yoy.

The latter figure looks considerably better than the 12% yoy decline in
April, thus indicating stabilization of the situation on the domestic
gasoline market. At the beginning of May, the country experienced a gasoline
crisis -- after the government tried to intervene to prevent an abrupt
increase of petroleum prices in April (provoked by higher world oil prices)
the market experienced a shortage of gasoline.

Rising income and propensity to consume stimulated by loose fiscal policy
and relatively low interest rates are expected to boost GDP growth in the
short-run. However, it seems unlikely that economic growth will reach 8.2%
as the government expects. Taking into account recent economic develop-
ments, GDP growth of 6-7% forecasted by international organizations and
independent analysts looks more realistic.

FISCAL POLICY --------

In January-April, the consolidated budget surplus reached almost UAH 2.33
billion ($461 million), which is equivalent to 2.1% of period GDP. Budget
execution indicates improvements in tax compliance and administration by
fiscal authorities. In real terms, consolidated budget revenues went up 32%
yoy to reach UAH 35.8 billion ($7.1 billion), while expenditures grew by
26.3% yoy to UAH 33.5 billion ($6.64 billion).

Tax revenue collection has been successful so far, as corporate tax proceeds
increased 47.2% yoy in real terms. Although value added tax receipts
increased 62% yoy to UAH 9.4 billion, the government failed to fully execute
its VAT refund targets. Despite successful implementation of budget targets,
further fiscal performance crucially depends on the ability of fiscal
authorities to collect revenue because the ability to cut budget spending is
limited.

If budget revenues fall short of targeted levels, the government will have
to look for extra resources to cover a larger fiscal deficit. In terms of
budget gap financing, the government relies heavily on new debt issues
and also privatization receipts.

In the first five months of the year, the government demonstrated poor
privatization performance due to the ban on the privatization of strategic
enterprises imposed in February 2005 and the change of the State Property
Fund (SPF) management. Soon after the appointment of the new Head of the
SPF (Socialist party representative Valentyna Semeniuk) the ban was lifted.
However, acceleration of the privatization process is expected only after
successful resolution of the disputed Kryvorizhstal deal.

Allegedly, there are some 30 more enterprises whose privatization may be
reconsidered. However, the list of those enterprises has not been published
yet. On June 11, Prime Minister Yulia Timoshenko ordered the SPF to initiate
the Kryvorizhstal re-sale procedure, after the commercial court declared
that the privatization of Kryvorizhstal was carried out illegally and
ordered the sold shares to be returned to the state. It is expected that the
new tender will be held within a month.

According to the 2005 Budget Law, the government expects to receive
UAH 4.5 billion ($890 million) from the sale of state property in 2005.
However, the target may appear ambitious taking into account that
privatization receipts made up only UAH 633 million in January-May and
there is no clear privatization plan for the remainder of the year.

In January-April, total public debt shrunk by 1% year-to-date (ytd) to $15.9
billion as the government reduced the share of external debt, while issuing
domestic debt instruments. Over the period, external public debt fell 5.8%
ytd to $11.5 billion, while domestic debt increased by almost 14% ytd to
$4.5 billion. Domestic T-bills issued in 2005 turned out to be attractive
debt instruments to non-residents and this allowed the government to
substantially reduce the cost of its borrowings.

This appears to be quite prudent debt management policy to issue cheap
medium-term paper while paying out more expensive earlier external
obligations. According to Ministry of Finance estimates, about 40% of
domestic T-bills are held by non-residents, which makes the local money
market vulnerable to the changes in foreign investors' sentiment towards
Ukraine.

In order to prevent swings in speculative capital flows, the NBU and the
Ministry of Finance decided to limit the amount and the maturity of T-bills
that non-residents may hold. There will be a special committee to decide on
the amount and maturity of internal government papers that non-residents
may buy.

MONETARY POLICY --------

Hryvnia appreciation and stabilization of gasoline prices helped to contain
further acceleration of consumer prices. In May, the consumer price index
(CPI) stood at 14.6% yoy, virtually unchanged from the previous month's
figure. Although food prices continued to grow at almost the same pace as a
month before, growth of non-food prices decelerated. Over May, food prices
grew by 18.9% yoy, while non-food price growth slowed to 5% yoy, down from
6.3% yoy in April. Over the month, gasoline price growth dropped to 27% yoy
from 67% yoy in April.

The latter decline occurred after the government managed to reach an
agreement on the growth of gasoline prices with the major gasoline market
players. However, the agreed level of gasoline prices is conditional on the
dynamics of world oil prices. Also, the parliament cancelled import duties
for different types of gasoline and diesel as an additional measure to ease
tensions on the gasoline market and facilitate price reduction for the final
consumer.

At the same time, service tariffs growth accelerated to 7.2% yoy as a
lagged effect of the gasoline price increase on transportation tariffs. The
producer price index (PPI) continued to decelerate, reaching 20.3% yoy in
May.

Monetary aggregates growth slowed down in May following the hryvnia
revaluation and the NBU's measures restricting the excess liquidity of the
banking sector. In May, money supply (M3) growth fell to 35% yoy. Despite
the increase in the required reserves ratio, commercial bank lending
continued to accelerate reaching 34% yoy growth in May, while the average
cost of loans fell to 13.6% annually from 14.7% in April. At the same time,
growth of deposits dropped to 42% yoy, while average deposit rates
declined to 7.3% annually.

After a sharp revaluation in April, the official hryvnia rate remained
frozen at 5.05 UAH/USD, with only small fluctuations in the cash exchange
rate. Further fluctuations of the exchange rate will depend on consumer
prices dynamics and the dollar supply on the domestic forex market.

With the narrowing trade surplus, further appreciation of the national
currency is unlikely. In May, gross international reserves increased by 1.4%
month-over-month reaching $13.2 billion.

INTERNATIONAL TRADE AND CAPITAL --------

In January-April, the surplus in the trade of goods account declined to $800
million, almost half of the level achieved in the same period last year.
Since the beginning of 2005, imports growth has been accelerating,
eventually exceeding the rate of export expansion in March-April. Over the
period, exports grew by a robust 12.4% yoy to $11.39 billion in the first
four months of 2005, while goods imports increased by 22.9% yoy to
$10.59 billion.

In April alone, the merchandise trade balance turned into a deficit of $61
million. Cross border metals sales remained among the largest contributors
to the overall growth of goods exports, though the pace of metals export
expansion dropped from 60% yoy to slightly above 40% yoy. Some
deceleration of export growth is associated with weakening of external
demand for Ukrainian metals products. At the same time, a sharp increase
in household incomes and recent hryvnia appreciation will further boost
growth of imports.

The positive effect of cheaper imports is that it is likely to stimulate
investment goods purchases abroad to renovate obsolete production
capacities. The factors mentioned above will eventually result in a narrower
current account surplus as compared with the previous year, but they are
very unlikely to be strong enough to erode the surplus altogether by the end
of the year.

The positive macroeconomic outlook for Ukraine's future development
seemed to lessen political risks associated with the drastic changes in the
management of the country in the beginning of 2005. As a result of the
peaceful transfer of power, the overall country risk decreased considerably
in foreign investors' assessments. This is evident in the robust inflow of
foreign direct investment in the first quarter of 2005.

Over the period, net FDI inflows made up $235 million. Although this figure
is somewhat lower than over the first quarter of 2004, it is a quite
promising start taking into account the political turbulence of the first
months of 2005. At the end of March, the cumulative FDI stock that Ukraine
managed to attract since independence had increased to $8.8 billion, which
is equivalent to $186 per capita.

The largest amount of FDI originated from the USA (13.7% of the total),
Cyprus (13%), and the UK (10.7%). The amount of FDI attracted by Ukraine
is considerably lower than in other transition economies and is far below
the country's investment potential. For a long time, foreign investors have
not considered Ukraine to be an attractive investment location because of
its poor international image and business environment.

The new government acknowledges that Ukraine urgently needs foreign
capital in order to replace worn-out capital stock, which is necessary for
sustainable economic development. With this motivation in mind, the new
government has launched an extensive country promotion campaign in order
to improve the country's image.

On June 16-17, Ukraine hosted an international investment forum, called
"Mini-Davos". The invitation to visit the forum was accepted by nearly 150
international companies, and the event attracted significant attention from
potential investors, which may eventually result in a considerable increase
in foreign investment inflows to the country. For the time being, the
international investment community is awaiting the resolution of the
re-privatization issue, which negatively affects the investment climate in
the country.

INTERNATIONAL PROGRAMS --------

On June 1-7, a regular IMF staff mission visited Kyiv to assess the key
macroeconomic challenges facing Ukraine today. The mission concluded
that accelerating inflation is the most important problem that the
government needs to address immediately. To bring inflation back down
to single digits, the IMF recommends the following actions:

(1) tighten monetary policy by allowing more flexibility to the exchange
rate;

(2) assure strong fiscal discipline in order to achieve optimistic fiscal
targets in 2005. In addition, fiscal policy tightening is expected in 2006,
which will improve Ukraine's medium-term growth outlook.

(3) accelerate implementation of market-friendly structural reforms,
including quick resolution of the re-privatization issue.

(4) demonstrate a more unified and coherent macroeconomic strategy
(cooperation between the NBU and the government should be more
effective in order not to send contradictory signals to market
participants.)

Later this summer, a follow-up IMF mission is expected to arrive in Kyiv to
focus on fiscal policy issues and the 2006 State Budget. Currently,
cooperation between Ukraine and the IMF is limited to technical assistance
support and there is no active lending program.

At the beginning of July, the government expects to receive a $175 million
tranche under the Second Programmatic Adjustment Loan (PAL-2) from
the World Bank. The disbursement of this financing is conditional on the
adoption of the package of laws facilitating energy sector reform.

Also, the World Bank and the government are working closely on a new l
ending program, the Development Policy Loan (DPL), which envisages up to
$500 million of development assistance financing. However, this has yet to
be approved by the World Bank Board of Directors.

OTHER DEVELOPMENTS AND REFORMS
AFFECTING INVESTMENT CLIMATE --------

On June 9, Fitch revised its outlook for sovereign Ukrainian ratings from
BB- stable to BB-positive. According to the agency, the peaceful change of
government in Ukraine should bring medium-term economic and political
stability to the country. The agency expects the government will accelerate
implementation of structural reforms in the medium-term.

Among positive trends, Fitch also pointed out the positive pro-reformist
steps of the new government such as anti-corruption measures, cancellation
of a wide range of special tax privileges and re-orientation in external
policy toward the EU. At the same time, Fitch hopes that the government will
make greater effort to reduce the fiscal deficit and to contain inflation in
2006.

Ukraine again failed to obtain market economy status from the EU. During
the meeting of the Ukraine-EU Cooperation Council, the EU postponed its
positive decision on granting functioning market economy status to Ukraine
emphasizing concerns over the government's efforts to intervene in price
setting via non-market mechanisms.

The recent crisis on the gasoline market as well as earlier attempts by the
government to reduce meat prices were the likely reasons preventing the EU
from granting market economy status. Obtaining market economy status from
the EU is an important step towards signing a free-trade agreement with the
EU and joining the World Trade Organization. The government expects that
the outstanding issues will be resolved in the coming months, thus enabling
Ukraine to achieve market economy status in the fall of this year. -30-
-------------------------------------------------------------------------------------------------------------
SigmaBleyzer, Ukraine, Macroeconomic Situation, June 2005
Chief Economist, Ediberto L. Segura, Editor, Rina Bleyzer Rudkin.
-------------------------------------------------------------------------------------------------------------
NOTE: To read the SigmaBleyzer June Ukraine Macroeconomic Report
in PDF format including several detailed color charts and graphs click on
this link: http://sigmableyzer.com/files/Ukraine_Ec_Situation_06_05.pdf.
For additional information contact: mwilliams@SigmaBleyzer.com.
===============================================================
3. UKRAINE: NO PLACE FOR THE HOLODOMOR MEMORIAL
Seventy-two years after the genocide of millions of
Ukrainians

COMMENTARY: By R.L. Chomiak, Journalist, Kyiv, Ukraine
Special to The Action Ukraine Report (AUR), Number 515
Washington, D.C. Tuesday, July 5, 2005

KYIV - Waiting for the holodomor memorial in Kyiv? Don't hold your breath.

On July 2 Vechirniy Kyiv, the newspaper owned by the Kyiv city council, had
this to say: "The issue of the final location of the memorial to victims of
the holodomor and political repression is far from completion."

Seventy-two years after the genocide of millions of Ukrainians by
Moscow-based totalitarian regime, 14 years after Ukraine threw off its
imperialistic shackles, four years after high-level decision to "do it now,"
the memorial complex remains "far from completion." Independent Ukraine
seems to live in denial.

Maybe it doesn't really want a holodomor memorial, despite the fact that you
can't walk through Druzhkivka, or Khoruzhivka, or one of the 32 Dmytrivkas
in Ukraine without meeting someone whose ancestors died during the man-
made, or rather Stalin-made artificial famine of 1932-33.

The news story by Kyrylo Kasatkin in the July 2 Vechirniy Kyiv goes over the
sites already proposed for the memorial. The first proposed site was at the
Arsenal Square. It's on the high bank of the Dnipro river. In 1918 workers
of the Arasenal armament plant, stirred up by Lenin's agents, staged a
failed rebellion against the short-lived government of the Ukrainian
People's Republic.

(To this day, Kyiv city government has not changed the name of the January
Uprising Street that begins there. It was so named by the Soviets to
memorialize the rebellion.)

The proposal called for erecting a monument on the square and convert the
Kyiv military garrison headquarters into a holocaust museum and study
center. "However, for certain reasons, this site was dropped," writes
Kasatkin, without a hint about the reasons.

One possibility could be the rapid construction of an apartment building
about 50 yards from the garrison building. Apartments in the building are
reportedly in the one million plus (US dollar) range, and apparently all
have been sold. It was started about a year ago under the former Kuchma
regime.

Construction rules were seriously bent and blueprints, that had been
approved through a series of exemptions, were changed during construction.
Five additional floors that were not in the original plans, appeared during
construction. Now the new president, Viktor Yushchenko, wants the place
torn down.

The area is within a park, and soil may not be able to hold the huge
building. It may actually slide down to the river. But so far, all that has
happened is that construction of the virtually completed building has been
suspended. Who will pay for tearing it down?

Meanwhile, a new site for the holodomor memorial was proposed on the
Dnipro river bank, near the Paton bridge -- out of sight, far from the usual
tourist routes, inaccessible by public transportation, and next to a
floating casino on the river.

After a few weeks this site, too, was scrapped.

The "final" worthy site proposed for the holodomor memorial was the hill
along Tryokhsvyatytelska Street, that goes up from the European Square
(where Hotel Dnipro is located) to the St. Michael's Church, destroyed in
1938 and rebuilt about five years ago. Back in the tsarist days there was a
big diorama there, that attracted visitors.

As soon as that site was announced for the holodomor memorial, Russian
investors made it known that they were willing to recreate the diorama as a
commercial project -- like the one that was built in the old imperial days
and that lasted well into the Bolshevik takeover of Ukraine.

The "final" plan called for building a monument on the hill, and converting
the existing building at 4b Tryokhsvyatytelska St., halfway between St.
Michael's and the Statue of St. Volodymyr, into the holodomor center.

Good location. It is along a well-traveled tourist trail. There are
scholarly institutes nearby. Done deal? No way. The latest barrier is
being laid by the Ukrainian Orthodox Church, Kyiv Patriarchate. (Yes,
those are the good guys, who broke away from the imperialist Moscow
Patriarchate after independence).

BUT -- there is a presidential decree in effect in Ukraine, that provides
for the return to churches of former church real estate confiscated by the
Soviet state. A couple of years ago the US-Ukraine Foundation office in
Kyiv had a legal lease in a building that once housed a monastery. Moscow
Patriarchate claimed it, and US-Ukraine had to find other quarters, legal
lease notwithstanding.

Now -- Kyiv Patriarchate Orthodox Church says the building at 4b
Tryokhsvyatytelska Street, as well as other nearby buildings, once were
part of the St. Michael's Church and monastery, so it should be returned to
that Church -- in accordance with the presidential decree.

"If this happens," writes Kyrylo Kasatkin in Vechirniy Kyiv, "there will be
no room for the holodomor museum."

Seventy-two years after the greatest disaster of Ukrainian people there
still is no place for a center to study it and keep the memory of it alive.
===============================================================
4. UKRAINE: PRESIDENT YUSHCHENKO PROPOSES THAT KYIV SUBMIT
PROPOSALS FOR PAYING TRIBUTE TO GREAT FAMINE VICTIMS

Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005

KYIV - Ukrainian President Viktor Yuschenko proposes that the Kyiv city
state administration and the Kyiv city council submit proposals for paying
tribute to the memory of the victims of famine in Ukraine in 1932-33. He
expressed this idea, addressing the municipal administration on February
8. "I am saying this for you to feel that this is our duty," Yuschenko said.

He said that now, in his opinion, the subject of famine is covered
insufficiently. "Where is the famine museum? Where is the monument to
famine?.. When will we order a film on the famine, a drama or feature
film?.. I am waiting for the capital to make its say on the famine issue,"
Yuschenko stressed.

He proposed that snowball trees be planted on one of Kyiv's hills in memory
of the famine. "It seems to me that one of the hills may be planted with
snowball trees... There may be 8,000 or 9,000 of them," Yuschenko said.

As Ukrainian News reported, the Kyiv city state administration extended
UAH 6 million for the creation of a memorial complex to famine and political
repression victims. The complex, including a scientific research center and
a museum, will open in the reconstructed uninhabited building at 4b
Triokhsviatytelska Street.

As a result of the 1932-1933 famine, according to different estimates,
from three to seven million people perished. -30-
===============================================================
5. UKRAINE: KYIV DECIDES TO CREATE A MUSEUM OF FAMINE ON
TRIOKHSVIATYTELSKA STREET BY NOVEMBER 26, 2005

Ukrainian News Agency, Kyiv, Ukraine, Wed, February 9, 2005

KYIV - The Kyiv city state administration has decided to create a Museum
of Famine before November 26 [2005] to be situated in Triokhsviatytelska
Street near the St. Michael's Cathedral. Deputy chairman of the Kyiv city
administration Ivan Dankevych reported this to journalists.

He also said that Kyiv mayor Oleksandr Omelchenko instructed to choose
a place for planting a snowball tree and rowan grove in April-May. According
to Dankevych, the grove will be planted in the area of Volodymyrska Hirka.

In such a way, in his words, Omelchenko reacted to President Viktor
Yuschenko's proposition to plant a snowball grove, which would remind of
famine victims of 1932-1933.

As Ukrainian News reported earlier, President Yuschenko proposed that
the Kyiv city state administration and the Kyiv city council submit
proposals for paying tribute to the memory of the victims of famine in
Ukraine in 1932-33.

The Kyiv city state administration set aside UAH 6 million for the creation
of a memorial complex to famine and political repression victims.

As a result of the 1932-1933 famine, according to different estimates, from
three to seven million people perished. -30-
---------------------------------------------------------------------------------------------------------
NOTE: This news release was never taken seriously by anyone. It
is not possible to create a world-class Museum of Famine, as it is
called in the news release, in February of 2005 and have it finished
by November 26, 2005. Such fantasy-type statements have been
made several times in the past few years by the Kyiv City State
Administration. Any work done under such unreasonable time
constraints would not be acceptable, and not be world-class so it
is good that such statements do not end up with any degree of
reality as to their implementation. [EDITOR]
----------------------------------------------------------------------------------------------------------
FOOTNOTE: I have been closely tracking the work in Ukraine during the
past few years to approve, choose a location, design and actually build a
world-class memorial complex (monument, museum, library, research
center, gallery, wall inscribed with victims names and so forth) to properly
honor and remember the millions who died in the Holodomor (terror/famine/
death/genocide) during the Stalinist Soviet regime in Ukraine in 1932-1933.

Most of what has been done can be described as talk only, with a few
proposals made by the Ministry of Culture and the City of Kyiv, a design
competition that certainly did not produce world-class work, and a great
deal of starting and stopping with very little serious attention given to
the project by top authorities in the government or the parliament which
has resulted in very little work actually being accomplished.

The latest report, found above, researched and written by journalist R. A.
Chomiak in Kyiv indicates that once again the project is sputtering to a
halt, is not going any where at the moment. The projectdoes not have
the leadership needed regarding a very serious, important agenda that
deserves far better attention from the government and the citizens of
Ukraine who supported the Orange Revolution and who declared
that the future would be different than that experienced in the past.
[EDITOR]
===============================================================
6. PM TYMOSHENKO CALLING ON RADA TO DEBATE BILLS
NEEDED FOR JOINING WTO ON TUESDAY, JULY 5

Ukrainian News Agency, Kyiv, Ukraine, Monday, July 4, 2005

KYIV - Prime Minister Yulia Tymoshenko is calling on the Verkhovna Rada
to consider on Tuesday, July 5, a package of bills required for Ukraine's
accession to the World Trade Organization (WTO). The prime minister
reminded that during the past week a working group of representatives of
the government and parliament deputy factions coordinated this package
of documents.

Tymoshenko said that the Cabinet of Ministers submitted to the parliament
two draft resolutions on the procedure of consideration of the
government-suggested bills. The first draft resolution (No. 7726) provides
for voting on 14 bills for joining WTO in a package.

At this, the premier added that almost all leaders of factions gave their
preliminary agreement to support this draft resolution. According to
Tymoshenko's calculations, 326 MPs are ready to vote for it.

The second draft resolution (No. 7727) envisages debate and also package
voting on six bills for implementation of the housing construction program.
Tymoshenko asked MPs to debate these two draft resolutions and two
packages of bills at the parliament's meeting on Tuesday evening.

As Ukrainian News reported earlier, the Cabinet of Ministers and heads of
the parliament coordinated a package of documents to be passed before
Ukraine's accession to the WTO. Tymoshenko on June 21 addressed the
Verkhovna Rada leaders with a request to vote on 14 bills needed for
Ukraine's accession to the World Trade Organization (WTO) in a single
package.

She has also asked to vote on six other bills on housing construction in a
single package. At its May 26 meeting the Cabinet of Ministers approved
a package of 22 bills required for Ukraine's accession to the WTO. -30-
===============================================================
7. ADOPTION OF LAWS PROMOTING UKRAINE'S ACCESSION TO WTO
DISCUSSED BY BRITISH AMB AND MINISTRY OF ECONOMICS

Ukrinform, Kyiv, Ukraine, Monday, July 4, 2003

KYIV - Prospects for adoption of the package of laws, which promote
Ukraine's accession to the WTO, at an interministry conference in Hong
Kong in December 2005 were discussed by Deputy Minister for Economics
and European Integration Volodymyr Ihnashchenko and British Ambassador
to Ukraine Robert Brinkley on Monday, the Economics Ministry's press
service told Ukrinform.

During the meeting Robert Brinkley was briefed about the package of the
relevant bills, which have been already submitted to the Verkhovna Rada.
Volodymyr Ihnashchenko expressed his high confidence that the people's
deputies approve it this plenary week, as it will first of all promote
signing bipartite agreements with the USA, Japan, Australia and China.
===============================================================
8. UKRAINE: SOCIALIST PARTY FACTION MEMBER MYKOLA
RUDKOVSKIY SAYS FACTION WILL NOT SUPPORT WTO BILL PACKAGE

Tetiana Vesna, Ukrinform, Kyiv, Ukraine, Tue, July 5, 2005

KYIV - Speaking to journalists on Monday, Mykola Rudkovskiy, a member
of the Socialist Party faction, said the faction will not support the WTO
bill package as containing bills, which are sure to harm the Ukrainian
economy.

As Mykola Rudkovskiy contended, Prime Minister Yuliya Tymoshenko failed
to persuade the lawmakers to support the package vote mode. -30-
===============================================================
9. UKRAINE: PARLIAMENT SPEAKER CALLS ON FACTIONS TO FURTHER
COORDINATE WORK ON DRAFT LAWS NEEDED FOR WTO ADMISSION

Ukrainian News Service, Kyiv, Ukraine, Monday, July 4, 2005

KYIV - Parliament Speaker Volodymyr Lytvyn is calling on parliamentary
factions and groups to further coordinate their positions on the draft laws
whose adoption is necessary for admission of Ukraine into the World Trade
Organization (WTO). Lytvyn announced this to journalists.

According to him, these draft laws will be tabled for consideration at a
meeting of the conciliatory council of leaders of parliamentary groups and
factions. At the same time, Lytvyn expressed the conviction that the
documents needed to be carefully studied again.

According to Lytvyn, some of the draft laws need to be considered only at
the first reading while some of them are already ready for consideration at
a second reading. Based on this, Lytvyn said that adoption of the draft laws
as single package has a low probability. "Therefore, it is not exactly
ethical to table them for consideration as a single package," Lytvyn said.

He confirmed Prime Minister Yulia Tymoshenko's words that 326
parliamentary deputies are ready to back the draft laws on the WTO.
However, he said that many parliamentary factions have various, sometimes
mutually exclusive, reservations on the proposed documents.

Parliamentary Deputy Mykola Rudkovskyi of the Socialist Party faction
recently said that the Socialist Party opposed voting on the draft laws on
WTO admission as a single package because some of them violated the
interests of indigenous manufacturers.

The Social Democratic Party (united) faction's leader Leonid Kravchuk said
that his faction was prepared to back this package of draft laws if all the
parliamentary deputies combining their parliamentary jobs with executive
government jobs relinquished their parliamentary mandates before the vote on
the draft laws.

As Ukrainian News earlier reported, Tymoshenko is calling on the parliament
to consider the package of draft laws required for Ukraine's accession to
the World Trade Organization on Tuesday, July 5. The Cabinet of Ministers
and the heads of parliamentary factions and groups recently coordinated
their positions on the package of documents to be passed before Ukraine's
accession to the WTO.

On June 21, Tymoshenko called on the parliament to vote on 14 draft laws
needed for Ukraine's accession to the World Trade Organization in a single
package and vote on six draft laws on housing construction in a single
package. The Cabinet of Ministers approved a package of 22 bills required
for Ukraine's accession to the WTO at its May 26 meeting. -30-
===============================================================
10. PARLIAMENT SPEAKER AND U.S. AMBASSADOR DISCUSS
ADOPTION OF LAWS REQUIRED FOR UKRAINE'S ADMISSION INTO WTO
Herbst expressed concern over the progress of economic policy in Ukraine

Oleksandr Sukov, Ukrainian News, Kyiv, Ukraine, Mon, June 27, 2005

KYIV - Parliament Speaker Volodymyr Lytvyn and the United States'
Ambassador to Ukraine John Herbst have discussed parliamentary
adoption of the laws required for Ukraine's admission into the World
Trade Organization (WTO). Lytvyn announced this to journalists.

According to Lytvyn, he also discussed the fate of the draft law on
intellectual property, particularly the aspect involving compact discs, with
Herbst. According to Lytvyn's spokesman Ihor Storozhuk, Lytvyn said that
the parliament has sufficient political will to back the constructive
actions of the new government.

Storozhuk said that Herbst expressed concern over the progress of the
economic policy in Ukraine, particularly its lack of strategy and
continuity. Storozhuk said that Lytvyn received Herbst at Herbst's request.

As Ukrainian News earlier reported, the Cabinet of Ministers approved a
package of 22 draft laws necessary for Ukraine's admission into the WTO
on May 26. -30-
===============================================================
11. RUSSIA INTO SERIOUS CRISIS WITH ITS WTO MEMBERSHIP TALKS
Russia has made all concessions, which it could make
in the talks about its incorporation in the WTO

By Sergei Malinin, Pravda.ru, Moscow, Russia, Wed, June 29, 2005

The process of Russia's incorporation in the World Trade Organization may
take a much longer time. In addition to the Russian dispute between WTO's
followers and adversaries, Russia continues its fight with the
international community regarding the terms of the membership in the
organization.

Russia wants to secure competitive advantages of its producers, having
preserved low tariffs and prohibitive duties for substituting import. The
foreign community wants to make Russia become a comfortable market.
Russia's WTO membership thus represents a system of deterrents - a
compromise, at which the government of the country plans to gain the
maximum profit from the WTO membership with minimum losses for the
industry of the national significance.

"For the time being, we have completed the talks with 33 states, with which
Russia has 87 percent of the foreign trade turnover," Russian Minister for
Economic Development and Trade, Gherman Gref, stated during the recent
talks in Geneva. Russia signed agreements with Norway and Mexico last
week, whereas only a couple of issues remain unsolved with five other
countries.

In addition, Russia came to agreement to sign adequate documents with five
other countries before September; the documents with India, Japan and the
USA are to be signed before the end of the current year.

Nevertheless, the Western side in the talks has a rather skeptic attitude
to Russia's accomplishments in the process of the talks. Stefan
Johannesson, the chairman of the workgroup for Russia's incorporation in
the WTO, stated that he was rather concerned about the talks with Russia.
According to Mr. Johannesson, Russia is not ready to set forth the
suggestions, with which it would be possible to start working. Stefan
Johannesson added that he would not like to expand on the matter.

Pravda.Ru asked the question about the current affairs in the WTO talks to
Aleksei Portansky, the director of the Informational Bureau for Russia's
Incorporation in the World Trade Organization.

"Minister Gherman Gref said in Geneva that Russia would not make any other
concessions in the process of negotiations. The minister was not the first
person to release such a statement. The leader of the Russian delegation,
Maxim Medvedkov, also said that Russia had made all the concessions that it
could make on the matter. They want Russia to raise home prices on natural
gas. The Russian delegation says no to it, claiming that it is an internal
matter of the Russian government.

In addition, Russia does not tend to abide by international obligations on
energy tariffs. The West also wants Russia to cut prices on civil aviation.
We protest against it too, for it would ruin the home aviation industry. To
crown it all, Russia is not willing to give permission to foreign banks and
insurance companies to set up their branch offices on its territory.

"Russia takes a rather tough position on tariffs for the services of
natural monopolies. Our tariffs on internal and foreign railway
transportations differ, which comes into conflict with WTO principles.
However, the matters are different with energy tariffs. Unlike
transportation tariffs, the WTO does not regulate them. They obviously want
to deprive our certain producers of competitive advantages. It concerns
fertilizer-makers first and foremost: 70 percent of their production cost
is spent on gas.

"The market of financial services is the most sensitive one of all. Russia
will not let foreign banks and insurance companies enter the national
market and set up subsidiaries here: it would only be possible to do so
through branch companies.

"Furthermore, the talks pertaining to the Russian aviation industry are
still open. The USA, Canada and Brazil make their own aircrafts and sell
them. These states will continue to strive for the zero prohibitive duty
for the import of aircrafts. Russia will not make such a concession.

"There are several problems in the current talks about Russia's membership
in the WTO. Russia will have to work more on its laws to adjust them with
WTO principles. This is a rather slow process, and we have to work faster
on that."

Aleksei Portansky did not venture to predict, when the talks are going to
be over and when the sides achieve the complete agreement on all issues.
The specialist only hopes that all problems will be settled by December of
2005. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
12. US AMBASSADOR HERBST EXPRESSES REGRET ABOUT WAY
UKRAINE CARRIES OUT ITS ECONOMIC POLICY

IntelliNews - Ukraine Today
Kyiv, Ukraine, Friday, Thursday 30, 2005

KYIV - US ambassador in Ukraine John Herbst express regret about the way
Ukraine carries out its economic policy. During his meeting with Verkhovna
Rada speaker Volodymyr Lytvyn on June 27, the US ambassador pointed to
strategy and integrity absence in Ukrainian economic policy. Herbst also
took an interest in the parliament activity of passing laws necessary for
WTO accession.

To remind you, earlier this week US Department of State representative Paul
Carter confessed that populist actions of the Ukrainian government threaten
US-Ukrainian relationships. Carter criticized government's attempts to
control prices and to sharply raise pensions. Paul Carter is responsible for
US-Ukrainian relationships in the US Department of State. -30-
===============================================================
13. FORMER US SECRETARY OF STATE MADELEINE ALBRIGHT CALLS
FOR MORE SUPPORT TO DEMOCRATIC REFORMS IN UKRAINE

AP Worldstream, Czech Republic, Monday, Jul 04, 2005

CZECH REPUBLIC - The Czech-born former U.S. Secretary of State
Madeleine Albright called for more support to democratic reforms in
Ukraine, in an interview published here Monday. Albright is visiting the
Czech Republic as a guest of the Karlovy Vary Film Festival together with
former Czech President Vaclav Havel and movie stars including Robert
Redford and Sharon Stone.

"Democracy is not an event, it is a process," Albright said in an interview
with the Mlada Fronta Dnes daily. She called for more reforms in the
Ukraine, fearing the process of democratization following the Orange
Revolution could slow down and eventually reverse.

"In Venezuela real reform did not take place, the poor people did not
benefit from democracy and now we have Hugo Chavez there," Albright
warned. "Something similar could happen in the Ukraine," Albright said.
"People may start having a feeling they can think and speak freely but
otherwise democracy gives them nothing", she said.

On June 28, Albright joined former secretaries of State Henry Kissinger and
James Baker in a statement calling on the EU "to commit unambiguously to
an Open Door for eventual Ukrainian EU membership." They called on U.S.
President George W. Bush's administration to seek a "membership action
plan" for Ukraine following parliamentary elections in the country next
March.

EU's ambitions for further eastward expansion including Ukraine have been
put into question recently when plebiscites in France and the Netherlands
revealed some popular resentment to such plans. -30-
===============================================================
14. DEPUTY STATE SECRETARY MARKIAN LUBKIVSKIY COMMENTS
ON UKRAINE'S STEP TO INTRODUCE VISA-FREE REGIME FOR US
TRAVELLERS AS MIRRORING NATION'S CONSISTENT FOREIGN POLICIES

Larysa Kozik, Ukrinform, Kyiv, Ukraine, Fri, July 1, 2005

KYIV - Ukraine's step to introduce the visa-free regime for US travellers on
July 1, 2005 confirms the nation's consistent foreign policies, Deputy State
Secretary Markian Lubkivskiy told a Friday news briefing in Kyiv.

This is applicable to those Americans who are visiting Ukraine within six
months following their previous visits to Ukraine, for terms not in excess
of 90 days, Mr Lubkivskiy noted.

He stated the President's decree to this effect as designed to promote
comprehensive contacts between the two countries in the spirit of Ukraine -
USA strategies partnership.

In turn, the Ukrainian side counts on the US Administration's reciprocal
moves, in particular, with regard to Ukrainian business people, politicians,
students. The US party practices issuance of five-year visas, but shortly
the term may be extended to ten years, Markian Lubkivskiy told the
journalists. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
15. IFC PROVIDES $45 MILLION IN LOANS TO U.S. BASED AES
CORPORATION'S TWO ELECTRIC UTILITIES IN UKRAINE

UNIAN, Kyiv, Ukraine, Wed, June 29, 2005

KYIV - The International Finance Corporation (IFC), the private sector
financing arm of the World Bank Group, is providing $45 million in loans to
two electricity distribution companies in Ukraine, AES KyivOblenergo (KOE)
and AES Rivneenergo (RE), according to the press release posted at the
Business Wire. The AES Corporation (NYSE), based in Arlington, Virginia,
USA, is a majority shareholder in both companies.

KOE and RE together serve 1.2 million customers from a population base
of approximately 3 million people. KOE supplies electricity to the areas
surrounding Kyiv (excluding the city of Kyiv) and RE supplies electricity to
the northwest region of Ukraine. IFC's financing will help the companies
reduce electricity losses, refurbish their distribution network equipment,
increase the network capacity in high growth areas, and improve their
overall management efficiency through investing in modern communication
systems and information technology.

"IFC is committed to meeting Ukraine's infrastructure investment needs,
especially with private companies like AES Corporation that are dedicated
to high standards of service," said Francisco Tourreilles, director of IFC's
Infrastructure Department. "IFC's investment will support the improvement of
electricity services in Ukraine and provide an important signal for further
private investment in Ukraine's energy sector."

"IFC is pleased to have committed its first investment in Ukraine's power
sector," said Edward Nassim, IFC's director for Central and Eastern Europe.
"IFC's investment will provide the necessary long term financing that is
currently unavailable in Ukraine."

"AES is pleased to work with the IFC to support the growth and
modernization of Ukraine's electric power system and to contribute to the
economic development of the country," said Garry Levesley, AES Vice
President, Ukraine. "Since privatization in 2001, AES has made significant
improvements to the operation, reliability and network capacity of KOE and
RE.

The companies are already among the best performing electric utilities in
Ukraine. Through this new, targeted investment, we will extend our
commitment to operational excellence and bring additional benefits to our
customers and other stakeholders."

The loans are denominated in US dollars and have the longest debt tenor
for a privately owned infrastructure project in Ukraine. In addition to the
loans, the IFC will provide a $5 million Partial Credit Guarantee (PCG),
which will enable the two companies to mobilize an additional $30 million
Hryvnia-equivalent long term debt. This will be the first PCG debt
structuring in Hryvnia. -30--
===============================================================
16. YUSHCHENKO PROMISES INVESTORS THAT DAMAGES FROM
THE CANCELING OF BENEFITS IN FREE ECONOMIC ZONES WILL
BE COMPENSATED TO THOSE WHO WORKED HONESTLY

Ukrainian News Agency, Kyiv, Ukraine, Fri, July 1, 2005

KYIV - President Viktor Yuschenko has promised to investors that damages
from canceling of benefits for free economic zones will be compensated to
them. He informed about this at the Ukraine-Poland economic forum in
Gdansk (Poland) yesterday.

He said that such point was written down into decision of the National
Security and Defense Council of Ukraine at its meeting on June 29.
"One of the points of decision will refer to compensations that Ukrainian
state takes with respect to all projects where investors worked honestly in
free economic zones, met requirements, and the state should apologize to
them," Yuschenko said.

He informed that he did not support canceling of benefits for the FEZ
himself, but the Verkhovna Rada made this decision following initiative of
the Cabinet of Ministers and now this situation needs correction.

He informed about violations connected with economic activity in the FEZ,
for instance the President mentioned such facts as UAH 8 billion of tax
breaks while only UAH 3 billion worth of gross domestic product were
produced in these zones.

The President said that commitments about creation of new workplaces
have been fulfilled only by 50%, and 75% of products were sold domestically,
and not exported. The President made it understood that the FEZ were not
formed under the principle of economic expediency.

"The principle of zone formation when Medvedchuk clan works in Zakarpattia
and there should be a free zone there, Yanukovych clan works in Donetsk,
and there should be a zone there too," the President said.

Moreover, he said that he understands that the situation with FEZ looks
different for honest investors. "We understand that there is another side to
this process for honest investors," Yuschenko said.

As Ukrainian News earlier reported, World Economic Forum previously
recommended to President in its 10 urgent steps for improving investors'
trust to envisage during tax reform the compensation of investors for
damages incurred during the abolition of the free economic zones.

The Verkhovna Rada approved changes to the national budget for 2005
proposed by the Cabinet of Ministers canceling tax breaks that had been
provided previously for the FEZ, PDTs, technoparks, as well as branch
benefits and "Chornobyl" benefits of the enterprises. Eleven free economic
zones presently operate in Ukraine while special investment regimes have
been introduced in nine priority development territories.
===============================================================
17. PRESIDENT SAYS IT IS NECESSARY TO CREATE ONE
MILLION JOBS IN UKRAINE ANNUALLY

Interfax-Ukraine news agency, Kiev, in Russian, 23 Jun 05
BBC Monitoring Service, UK, in English, Thu, Jun 23, 2005

KIEV - Ukrainian President Viktor Yushchenko has said it is necessary to
create one million jobs in Ukraine annually. "I remind you that it is on
your head to create one million jobs a year," the president said at a
working meeting on employment issues and the activities of the fund for
social insurance against temporary loss of capacity for work in Kiev today.

He stressed that "the main challenge is to mobilize resources". Yushchenko
noted that he wanted to hear "a professional discussion" at the meeting
about employment and what needed to be done to improve the situation on
the labour market.

Yushchenko said that at the moment the employment service in Ukraine is
struggling to provide jobs for 18,000 graduates of colleges and institutes.
Half of the disabled people capable of working are unemployed, he said,
adding that there are a total of 2.5m disabled people in Ukraine.

The president highlighted the fact that the money being spent on job
placement for Ukrainian citizens is not always being used correctly. "You
are getting a huge amount of funds, and I am really surprised that their use
is not clearly spelt out," Yushchenko said.

According to expert estimates, the number of registered unemployed in
Ukraine will total 980,000 by the end of the year. The rate of unemployment
in Ukraine is 8.6 per cent, according to the methodology of the
International Labour Organization. The rates for Poland, France and Austria
are 18.8 per cent, 9.7 per cent and 4.5 per cent, respectively. -30-
===============================================================
18. LARGEST TV BROADCASTER IN CENTRAL AND EASTERN EUROPE
CONFIRMS INTENTION TO TAKE CONTROL OF UKRAINIAN TV AND
RADIO BROADCASTER STUDIO ONE PLUS ONE

Correspondent.net website, Kiev, in Russian 25 Jun 05
BBC Monitoring Service, UK, in English, Sun, Jun 26, 2005

KIEV - Central European Media Enterprises Ltd (CME), the largest TV
broadcaster in Central and Eastern Europe, intends to increase its share in
the Ukrainian TV and radio broadcaster Studio One Plus One from 18 per
cent to 60 per cent.

The company announced this on 24 June in connection with a recent
announcement by the National Council for TV and Radio Broadcasting
confirming the right of CME to a controlling stake in Studio One Plus One.
At present, CME indirectly owns 18 per cent of the Ukrainian company.

CME owns 60 per cent of the German company Innova Film GmbH, which
owns 100 per cent of Inter Media, which operates in Ukraine as a foreign
legal entity. Inter Media owns 30 per cent of the statutory capital of
Studio One Plus One. The remaining 70 per cent is owned by One Plus
One honorary president Oleksandr Rodnyanskyy.

Thus, CME currently owns 18 per cent of the statutory fund of Studio One
Plus One through Innova Film GmbH and Inter Media.

CME intends to increase its stake in Studio One Plus One to 60 per cent in
cooperation with its Ukrainian partners - Oleksandr Rodnyanskyy and
[German-based businessman] Boris Fuchsmann.

At present, CME and its Ukrainian partners are taking urgent steps to
change the structure of One Plus One and consolidate their position on the
Ukrainian market. In particular, a Ukrainian company is being set up that
will own 42 per cent of Studio One Plus One.

As a result of the restructuring which is planned to be carried out shortly,
CME will own 60 per cent of Studio One Plus One (18 per cent through Innova
Film GmbH and Inter Media, 42 per cent through the newly created Ukrainian
company). CME's partners will have a 40 per cent stake.

CME said that the company intends to maintain and expand its presence in
Ukraine, which it sees as a very promising market. CME is currently working
on an investment programme for Studio One Plus One, which involves setting
up a professional television centre and expanding local Ukrainian TV
production.

"Having established control over Studio One Plus One and cooperating with
our partners, we will have the opportunity to correct problems with news
coverage, which was insufficiently objective in the past, and also to apply
the standards of broadcasting and journalistic practice for which we are
known and respected in all the markets where we are present," CME chief
executive Michael Garin said. -30-
===============================================================
19. UKRAINIAN MEDIA TYCOON RABYNOVYCH SAYS MOSCOW
NEWSPAPER HE PURCHASED TO REMAIN LIBERAL

TV 5 Kanal, Kiev, in Ukrainian 1800 gmt 3 Jul 05
BBC Monitoring Service, UK, in English, Sun, July 3, 2005

KIEV - The new owner of The Moscow News and Moskovskiye Novosti
newspapers, Ukrainian media tycoon Vadym Rabynovych, has promised
that they will remain liberal. Speaking on the Ukrainian 5 Kanal TV, he said
that editor-in-chief Yevgeniy Kiselev had been sacked, but refused to reveal
the name of the new editor.

"We understand what this brand means for liberal Russia. We understand
the responsibility we have assumed perfectly well," Rabynovych said. "I
think Moskovskiye Novosti will remain in the liberal niche. All its
traditions will be preserved," he promised.

"Maybe the newspaper will become more modern. It will look at events
without blinkers, and it will be even more honest than it has been," he
said. "One of the conditions of the purchase was the dismissal of all
management," Rabynovych said, explaining the sacking of the previous
editor-in-chief. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
19. UKRAINE PARLIAMENT VOTES TO MAKE BAILIFFS
INDEPENDENT OF JUSTICE MINISTRY

Interfax-Ukraine news agency, Kiev, in Russian, 23 Jun 05
BBC Monitoring Service, UK, in English, Thu, Jun 23, 2005

KIEV - The state bailiffs service will be removed from the structure of the
Justice Ministry and will function independently. This follows from the law
on amendments and supplements to the laws on the state bailiffs service
and on the implementation of court orders, which the Supreme Council
[parliament] voted on Thursday [23 June]. The vote was carried with 381
of the 415 MPs present in favour.

Reporting on the bills, Justice Minister Roman Zvarych said the service
had to be removed from the ministry to ensure no interference in its
activities.

Also, it is planned to expand the service's functions. It will carry out
courier services, seizure of property and funds and inquiries. MPs said
the law will bring order to the implementation of court rulings. -30-
==============================================================
20. RAUCOUS LOOK AT UKRAINIAN REFUGEES

Book Review by Orysia Tracz, Winnipeg Free Press,
Winnipeg, Manitoba, Canada Sunday, July 3rd, 2005

RE: A Short History of Tractors, in Ukrainian, A Novel
By Marina Lewycka, Penguin Press, 294 pages, $36

MANITOBANS of Ukrainian descent, especially those of the generation
who came to Canada as post-Second World War refugees, will relate to
this bittersweet and raucous novel set in England.

The setting is an ocean away, but the genesis of the narrative is the same.
And while readers may not wish to admit to it, some closets here may hold
characters just as strange.

This is a story of family love and strife, wartime suffering and heartbreak,
greed, loss, memories both eagerly remembered and forcibly buried, and
reconciliation.

It is narrated by Nadezhda, who is of the same generation as the author,
Marina Lewycka, a teacher at Sheffield Hallam University in England and
author of six books on elder care. This, her first novel, was shortlisted
for Britain's Orange Prize for Fiction.

Gold diggers come in all shapes and sizes, but Valentina Dubova is in
a class all her own. Her shape is unique, too, with "ferocious breasts
bursting like twin warheads out of an underwired, ribbon-strapped
Lycra-panelled lace-trimmed green satin rocket launcher of a bra."

Those bombastic boobs could give Anna Nicole Smith a run for her, er,
his money. Nikolai Mayevskyj, an elderly widower, is so lonely for female
companionship that he is willing to let this larger-than-life harpy into his
life.

"Thirty-six. She thirty-six and I'm eighty-four. So what?" To his daughter's
horror, he even wonders if it is possible to father a healthy baby at his
age. "Snag is, hydraulic lift no longer fully functioning. But maybe with
Valentina...."

The gold-digger from Ternopil arrives with her teenage son on a tourist visa
in Peterborough, England, hell-bent on snagging a rich, unsuspecting
husband.

Vera is Nadezhda's older sister, born in Ukraine just before the Second
World War and brought to Germany's forced labour camps with her parents.
Not only do 10 years separate the estranged sisters, they are also on
opposite ends of the political spectrum. They reconcile to do legal and
personal battle against Valentina.

The conflicts are multi-layered, between the sisters, father and daughters,
and the daughters and money-grubbing interloper. Blowsy, raunchy, and
loud, this well-told tale presents the characters in all their funny,
melancholy, and deeply sad facets.

While frail and sometimes senile, Nikolai remains intellectually active. An
engineer, a poet, a philosopher, he has been writing a history of the
tractor in Ukraine, the manuscript of which he reads to anyone unfortunate
enough to be around. The novel is interspersed with the text of the history,
quite informative but tedious by the story's end.

In the long run, this story is not funny at all, with tragedy and loss close
to the surface at all times. This generation of survivors is haunted by much
baggage -- Soviet rule and persecution, the Holodomor (genocide by famine),
the war itself, forced labour in Germany, escape from the Nazis and Soviets,
not being able to go home, and being forced to find a new life in a strange
land.

If only Lewycka had spent as much time getting some of that history as
straight as she did in researching the history of tractors.

No self-respecting Ukrainian, especially a survivor, would call himself or
his daughter by the Russian version of a name. Nikolai would be Mykola or
Nykola, and Nadezhda definitely would be Nadia. Anything but Nadezhda.

In an otherwise delightful book, this inaccuracy grates.

A major error is the spelling of Ukrainian place names in Russian
transliteration. Maybe Lewycka did not know better, but she should have,
or perhaps she let the editors convince her otherwise.

Recent scholarly publications on Stalin and the Soviets are bringing to
light the other horror of the 20th century. The characters in this novel
reflect the experiences and scars of that surviving generation on a
personal level. -30- [The Action Ukraine Report Monitoring Service]
---------------------------------------------------------------------------------------------------------
Orysia Tracz is a Winnipeg writer and translator. The daughter of forced
labourers in Germany, she spent her first four years in a displaced
persons camp in Berchtesgaden, Bavaria.
===============================================================
21. ADOPTED CHILDREN BECOME U.S. CITIZENS IN MIAMI BEACH
INCLUDING TWO CHILDREN ADOPTED IN UKRAINE

By Lisa Orkin Emmanuel, AP Worldstream,
Miami Beach, Florida, Tuesday, July 05, 2005

MIAMI BEACH - Five years after Tracey and Greg Wood traveled to the
Ukraine to bring their two adopted children home, 6-year-old Amanda and
7-year-old Daniel became U.S. citizens at a Fourth of July ceremony. "It
feels good," Greg Wood said. "This is the final piece of the puzzle."

The Woods, of Coconut Creek, Florida, were among six children who
became U.S. citizens at the Monday ceremony. The others were from
China, Colombia, Guatemala and Russia.

In the last week, more than 15,000 people have become U.S. citizens across
the country, according to U.S. Citizenship and Immigration Services. Each
year more than 450,000 people become Americans. "It's a symbolic
ceremony," agency spokeswoman Ana Santiago said. "It's a long road to
adopt a child. ... This is one other layer of that process."

In Miami Beach, the children's naturalization ceremony kicked off the city's
Independence Day celebration, including a performance by the Miami
Symphony Orchestra and a fireworks show.

The Woods said they decided to adopt after suffering through several
miscarriages, and they adopted two children at once because they didn't
know if they could make the trip back to the Ukraine again.

At the orphanage in Odessa, officials told them Amanda didn't talk or
associate well with people. They didn't want to show the nearly 2-year-old
girl to the Woods. But when Amanda saw Tracey, she immediately warmed
to her and they played Peek-a-Boo. "I was thinking I wanted a mother and a
daddy," Amanda said.

Fourteen-year-old Misha Orosz also became a U.S. citizen at the
ceremony.Kathryn Orosz found Misha in 1998 at a benefit in New York when
he was 8 years old. Misha was on an orphan exchange program. "I fell in
love with this boy at first sight," she said. "It was just amazing."

Misha left his orphanage in Siberia in 2000 and learned English in four
months after arriving in the United States. Now he says he's excited to
become a U.S. citizen. "You feel like another person," he said.

Misha says he's a lucky person. He often finds money on the streets and
wins small amounts in the lottery. "We think the luckiest thing that
happened is that we met," his mother said. -30-
===============================================================
23. UKRAINE 3000 INTERNATIONAL CHARITABLE FOUNDATION
EXPLAINS ITS FUNCTION AND PROGRAM

Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Thursday, June 30, 2005

KYIV - On June 29, the Ukraine 3000 International Charitable Foundation
held a presentation. At a press conference before the presentation, the
Head of the Foundation said the Ukraine 3000 was not financed by
government organizations and did not use the so-called administrative
resource.

The Foundation functions on donations of certain sponsors, private
organizations, and other charitable foundations and does not aspire to
become a large organization with many staff members.

"The Foundation is a coordinating center and we carry out all our projects
conjointly with our partners. There are hundreds of such partner
organizations," stressed Andriy Myroshnichenko, Advisor to the Head of
the Supervisory Council. He said the biggest of them were the Otchiy Dim
Charitable Foundation, the Help Us - Help Children Foundation, the Kolo
Ra Foundation, and the Triumf Sertsya Foundation.

The Ukraine 3000 works in three major fields metaphorically called
Yesterday, Today, and Tomorrow. Each of the three directions has several
specific programs. In 2005-2006, the Foundation plans to provide grants
for cultural and historical projects.

Myroshnichenko also informed the present that last month the Foundation
had spent almost UAH 25,000 on charity. About 80% of those who address
the Foundation ask [for assistance] to buy medicine for treatment.

According to the Advisor, the Head of the Ukraine 3000 Foundation signed
an agreement with the Zaporizhstal Plant that would help repair the
Zaporizhzhya Central Children's Hospital.

The Foundation also signed a 1.5-million-hryvnya agreement with the
Procter&Gamble to buy ambulance vehicles for children's clinics. Among
other famous partners of the Ukraine 3000 Foundation are the Kredo-Klassic
Insurance Company, the Mandarin Plaza Organization, the Crimean Soda
Plant, the Metro Cash & Carry, Ukraine, and others.

Myroshnichenko also said the Foundation would help hold the Second
International Folk Festival Kraina Mriy (Dreamland).

Answering a question whether an average person could get any aid from the
Foundation, Kateryna Yushchenko, Head of the Supervisory Council, said
that "resources of any foundation are quite limited and so we prefer to use
a general approach to solve problems."

According to the First Lady, because of numerous appeals from parents
whose children undergo treatment in the hematology and cancer ward of the
Okhmadit, the Foundation decided to raise funds to re-equip the whole
hospital.

Touching on an issue of cultural projects and museums, Mrs. Yushchenko said
the state was "right to work with NGOs [non-governmental organizations] and
private sponsors to support culture". "It is better when culture is
supported by people than by the state," she said. "Recently, the state did
not focus its attention on this. In the whole world culture is supported by
private foundations and sponsors," she noted.

The Ukraine 3000 Foundation was founded by Victor Yushchenko in 2001. In
2005, his wife Kateryna heads its Supervisory Council. -30-
===============================================================
24. MOLDOVA AND TRANSDNIESTRIA: GANGSTERS CORNERED
Ukraine tries to broker peace in Moldova

The Economist, London, United Kingdom, July 2-8, 2005

AT SOME point in the past few years, 70 portable surface-to-air Igla
missiles disappeared from an ex-Soviet military stockpile in
Transdniestria, a breakaway region of Moldova. Western governments
doubt the authorities' undocumented explanation that the missiles were
destroyed after water leaked on them. "We don't know where they are
or who's got them," says a senior western security source.

This tale exemplifies western headaches over Transdniestria, a rogue
statelet that won quasi-independence after a brief war in 1992, and has
survived ever since on Russian military support, money and cheap gas,
plus a thriving arms business and other smuggling activities. Not that the
locals gain much. Transdniestria is a police state; its existence helps
keep Moldova one of the poorest countries in Europe. But it benefits
people at the top.

Corrupt politicians and officials in neighbouring countries
enjoy the perks of illicit trade through Transdniestria. Russia sees the
region which has a largely Russian-speaking population as a surviving
bastion of its former empire. Fitful western involvement through such
outfits as the Organisation for Security and Co-operation in Europe has
had little effect.

Now change is on the way. Ukraine, previously an accomplice in
Transdniestria's smuggling business, has launched a peace plan, broadly
backed by the European Union. It features free elections in Transdniestria
and a negotiated settlement with Moldova under international supervision.
Reaction has been mixed, but so far nobody has rejected it outright.

Ukraine is also exerting practical pressure: next week, it will open five
new customs posts on the border, jointly staffed with Moldovan officials.
Previously, Ukraine had insisted that its constitution forbade foreign
customs officers from operating on its territory. That was a convenient
fiction which allowed smuggling to thrive. The most lucrative illegal
business may find a way round. But the new moves are still ominous for
Transdniestria, especially if they presage international supervision of the
border, which an EU mission is considering.

Genuinely free elections in Transdniestria would be hard to organise, given
the lack of independent political parties or media and the omnipresent
secret police. And what will happen to Russia's armed forces, called
"peacekeepers" by the Kremlin, but unwelcome overstayers by Moldovans?
"It would be desirable if western leaders would raise this with President
Putin," comments Adriaan Jakobovits de Szeged, the EU's envoy to the
region, drily.

Others are gloomier. Vladimir Socor, a hawkish pro-Moldovan based in
Germany, says some Ukrainians' motives are still dodgy: "Russia has
realised that it is too weak to hold on to Transdniestria, while these
Ukrainians are not strong enough to grab it. So they need each other to
ensure a condominium." -30- [Action Ukraine Report Monitoring Service]
===============================================================
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