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VIKTOR HALASIUK: “AN EXPORT CREDIT AGENCY IS THE REMEDY FOR THE RAW-MATERIAL DISEASE OF OUR COUNTRY”
– Why do we need an export credit agency in Ukraine?
– One of the main components of a national economy is export. If the export in any country is increasing, so are the gold reserves; the national currency is becoming more stable, the budget is being filled and new jobs are being created.
On the other side, if export is decreasing, the gold reserves in a country are draining and the state constantly needs to refill them artificially in order to keep the UAH exchange rate on a decent level at the expense of credits, namely from the IMF. The natural way of filling the gold reserves of any country is when the export level exceeds the import level.
The Ukrainian trade balance has been negative for 10 years in a row. It means that we are importing more goods than exporting them for over 10 years.
The trade deficit is extremely high – they accounted for 2-3 billion, sometimes 5-7 billion, and even shocking 14-15 billion US dollars per year. This results in a huge pressure upon the national currency (UAH) and the need of “stabilizing” credits that only heighten our dependency from other countries.
For example, the positive trade balance in Germany accounts for 255 billion US dollars, and this number is almost three times higher than the Ukrainian GDP in 2015.
Last year, the Ukrainian export level decreased almost by three times, so we lost practically 16 billion dollars of foreign exchange earnings. Meanwhile, the Russian market loss accounts only for 30% of the general loss. We lost 4 billion dollars on the EU markets, and 1 billion dollars each in Turkey, Belarus, and Egypt.
Such an export weakening undermines our economy and creates an artificial financial dependence on foreign credits. In addition, in the domestic export sector, the raw material component keeps growing. While it has reached 55% in 2010, in 2015 it already has grown to 62%. The Ukrainian export is becoming more primitive and cheap. We sell corn, grain, ore, round timber, and scrap metals at a cheap price; afterwards, we import more expensive goods that are produced from these exact materials, very often by Ukrainian emigrants abroad.
Another problem of the Ukrainian economy lies within the fact that the high-tech component accounts only for 6% in the total amount of export. This is the level of Southern Africa and Tanzania; even in China and Norway, high-tech export has much higher levels.
We need an export credit agency (ECA) exactly for this reason – to fix this disaster. This is a special state institution whose job is to make the domestic goods more competitive and increase the export of finished high value added products instead of raw material exports. ECA focuses on supporting the Ukrainian export-oriented manufacturers of technological products (vessels, aircraft, wagons, devices, etc.) who work on foreign markets.
In developed countries, export credit agencies are responsible for: insurance and guarantees of export agreements; insurance of direct investments abroad; partial reduction of the credit cost. Consequently, such an agency allows local manufacturers to make their goods more competitive and economically attractive on foreign markets. Even by exporting high-quality products, we loose on the foreign market because we cannot offer favorable crediting terms on our goods or guarantee risk withdrawal from the manufacturers.
So to say, an export credit agency is a special development institution which functions in most European and American countries. Moreover, in Europe, only three countries don’t have export crediting agencies – Albania, Moldova, and Ukraine. In addition, such method of local manufacturers’ assistance complies with the standards of the World Trade Organization agreement.
First of all, the Ukrainian export credit agency will develop the export of aircraft, vessels, equipment engineering, machine engineering, and other high technology fields that require supply conditions.
– Which powers will be given to the agency and which functions will it carry out?
– The state will insure and guarantee crediting agreements, reduce the costs of exporting credits and insure the investments abroad. Those are common state functions in accordance with the Organization for Economic Cooperation and Development Consensus (1978).
– Are there any opponents of the idea within the government or Parliament?
– The Prime Minister Volodymyr Groisman personally supported the idea of creating an export credit agency. He understands that without domestic manufacturing and high technology export, we are doomed to be a resource colony forever.
Moreover, corruption can be overcome only by increasing the citizens’ income. If people earn 150-200 dollars on average, it is impossible to fight corruption, regardless of how many anticorruption agencies are created. The best way to avoid corruption is to increase people’s income. This can be achieved by developing the manufacturing and ensuring economic growth. The export credit agency will be of great help to this cause.
