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Monday, February 19, 2007

Capital outflow threats to Ukraine

Interfax Ukraine

President Viktor Yuschenko says capital outflow poses one of the biggest threats to the country's national security.

"The scale of the capital outflow in the past 4 or 5 years from Ukraine indicates that the phenomena is one of the basic threats to the national security of Ukraine," Yuschenko said at a meeting of the National Security and Defence Council in Kiev on Friday.

Although there are no official statistical data, it is said a colossal $12.9 billion left the economy between 2004 and 2006, with $13.2 billion in direct foreign investment flowing into the country, Yuschenko said.

"We are proud of having this unique investment inflow, especially over the past two years, but we must realize that the same sum was taken out of circulation [in Ukraine]," he said, according to the press service of the president.

Given Ukraine's $6.7 billion trade deficit, the tendency is particularly dangerous, Yuschenko said. "We may soon be facing very serious challenges, disrupting price and monetary stability," he said. The president said law enforcement agencies had been ineffective in preventing capital outflow. He added that the government introduced no reforms encouraging domestic investment.

"At this table, we must ask those in charge of improving the investment climate why we have not yet created a comfortable business environment and why the black economy is flourishing," he said, slamming the State Committee for Financial Monitoring for failing to prevent murky financial transactions.

Unfortunately, in my opinion, this shows that Ukrainian economy has not as enough stability as investors want. The investments come in Ukraine for sure, but economical and political issues don't allow to capitalize this process. And most dangerous, that domestic capital is trying "get out of here". Of course, not total investment amount does it but the significant one. I'm agree with President that we're losing unique chance to develop Ukraine within different directions with investment assets because the outflow are. And not only in real estate market.