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Egypt was afraid to deal with the Ukrainian exporters

Egypt canceled the contract with the Lviv Bus Plant, thanks to which Ukraine could attract hundreds of millions of dollars and provide jobs for thousands of Ukrainians. This is a prime example of how the National Bank and the government of the country close their doors to foreign investment, which provokes the collapse of hryvnia and further impoverishment of the population.

Ukrainian exports of failure, the main source of currency into the country, which largely depends on the GDP of Ukraine, contributes not only to fiction with the opening of European markets and the gap of trade relations with Russia. Ukrainian exports of killing with his own hands the local central bank, which is still in 2014 year introduced currency restrictions in the country and only two years later, talking about the need to liberalize the foreign exchange market. The restrictions were relaxed in early June, but the visible result yet.

One of the clearest examples of how due to the regulator's actions affected the Ukrainian business - is Egypt cancellation of the tender for the supply of Ukrainian buses 289 89 worth million dollars contract with possibility of extension up to 2 460 thousand buses worth million dollars.. This tender was won in 2015 Ukrainian company Sity Transport Group (CTG, the management company "Lviv Bus factories", LAZ).

After the victory of the Ukrainians in the tender the parties signed a contract in the presence of Prime Minister Ibrahim Mehleba Egypt, Cairo Governor Galia Al-Said and the Ambassador of Ukraine in Egypt Gennady Latiya.

Ukrainian company was to supply low-floor 12-meter long buses LAZ A-183-CNG, made specifically for the Egyptian tender. Under this contract LAZ 1600 intended to create jobs, but companies work fully and has not been renewed. Egyptians did not suit the economic constraints of the authorities of Ukraine, and they abandoned the contract. Not a bad deal over nothing.

"In the year 2015 CTG has won the tender for the supply of buses in Cairo 289 89 on million dollars. But due to the economic situation in Ukraine, the inability of government agencies to provide the necessary government guarantees, as well as in connection with the adoption of the law on compulsory sale coming currency prepaid, Egypt canceled the tender, "- said General Director of CTG Igor Churkin," Interfax ".

Thus, Cairo did not accept the economic context of the implementation of the contract. Egypt requirement of government guarantees means that the customer is afraid of problems with the implementation of the order, for which the money will be paid due to currency restrictions.

However, the Ukrainian producer of buses will be a second chance to get the order, but "on the other terms of payment", as Churkin said.

Egypt in the near future intends to announce another tender for the purchase of buses, now at 400 such buses, and still with the possibility of prolongation of the contract up to 2 thousand. Bus to 460 million.

But Churkin asked the Ukrainian authorities to help, because the contract with Egypt opens the perspective to create more than 18 thousand. New jobs in five years. The Government of Ukraine "has a good chance to secure the inflow of currency into the economy of Ukraine, if it turns out the real support to domestic producers derived from the provision of contracted credit lines of hard currency." Plus, it is necessary to ensure financial guarantees, local and optimize export laws, asked the general director of the Ukrainian manufacturer of buses.

And it proves once again that in the context of European integration and the imaginary break ties with Russia a real demand for Ukrainian products are not observed in the EU, and Asian markets and the Middle East markets, without the need to sign an Association Agreement hard. However, the Egyptian contract demonstrated the Ukrainian authorities that the development of exports also need relief in respect of the foreign exchange market.

"The situation with buses is just one of the hints of the existing problems in the country caused by prolonged currency restrictions. The obligation to sell all foreign exchange earnings received on prepayment during the weakening of the hryvnia significantly increases the risk of non-fulfillment of long-term contracts. A situation is created when the currency received as a deposit is sold, and the hryvnia depreciates, as a result, there is not enough money to fulfill the contract, which is extended for several years, "says Ivan Andriyevsky, First Vice-President of the Russian Union of Engineers. "This is a serious barrier, especially for long-term export contracts. For the machine-building industry, whose products account for about 10% of all Ukrainian exports in monetary terms, this is all the more serious restrictor, "he adds.

Ukraine imposed administrative restrictions as early as the year 2014 to prevent capital flight and the collapse of the foreign exchange market. In particular, restrictions were introduced for individuals to withdraw currency from accounts and purchase it, to obtain individual licenses for capital withdrawal and mandatory sales of 75% of foreign currency earnings by exporters, as well as a temporary ban on payment of dividends for 2014 and 2015 years. Moreover, these measures were supported even by the International Monetary Fund, although it traditionally advocates the freedom of capital flow. Russia, incidentally, did not follow this path, although similar measures were lobbied by presidential adviser Sergei Glazyev. The Russian Central Bank chose a different strategy by letting the ruble float freely.

At the same time, exports for Ukraine are one of the main sources of currency for the country. The second source is the transfer of Ukrainian guest workers. Because of the fall in exports to Ukraine, there is a catastrophically shortage of currency. In the first quarter of 2016, Ukrainian exports fell to 9,8 billion dollars against 19 billion dollars for the same period 2013 year, that is before the coup in the country. "Without export growth, we can not see currency. Therefore, the risk of devaluation is always present on the Ukrainian currency market. Earlier in a day, they bought and sold currencies on the interbank market about 2 billion dollars, and now not more than 200 million dollars. The fall is dramatic. Currencies are not enough, "- says Ukrainian economist Alexander Okhrimneko. The failure of exports in recent years is also associated with the closure of the Russian market and a sharp drop in world prices for agricultural products and ferrous metals.

But the currency restrictions imposed by Ukraine, affected not only exporters, but even more so the Ukrainian population and foreign investors, says Vadim Iosub of "Alpari".

Foreign exchange restrictions - it is a problem of the entire Ukrainian economy. "Neither of which the mass attraction of foreign investments under such tight money can be no question, and internal resources are not sufficient to run the restoration process. State guarantees to attract investors Ukraine is unlikely to - a country for investors with a high risk level and global uncertainties. Features of the authorities to regulate the situation in the country were questionable, "- says Andrievsky.

Oh how sad picture of foreign investment in Ukraine, the statistics said. During the first quarter of the year 2016 balance of the financial account balance was plus 260 million dollars, whereas in the first quarter of the year was a plus 2013 4,9 billion dollars.

Thus, the balance of foreign direct investment amounted to plus 1,3 billion dollars against 1 billion in the first quarter of the year 2013. However, there is nothing to rejoice. This was largely due to the increase in capital Ukrainian banks by foreign investors, indicating Ukrainian economist Alexander Okhrimenko.

But the balance of portfolio foreign investment was minus 57 million dollars in the first quarter against their growth 2,85 billion dollars in the first quarter of 2013-th. Even worse is the case with foreign investment in private business, indicates Okhrimenko. During the first quarter of the year 2016 from Ukraine has gone abroad of private foreign investment to 730 million dollars more than it is. For comparison: in the first quarter of the year 2013 the Ukraine has gone private investment in 2 billion dollars more than was needed, that is, the situation was reversed.

For Ukraine, where the share of exports is 40-50% of GDP, the devaluation of the hryvnia was disastrous, and the words that a weak hryvnia will help exporters turned out to be fairy tales. "The theory that a weak national currency helps exporters in Ukraine does not work. It can work and work in Russia, where the main type of export is oil and gas, which are mined in Russia itself. In Ukraine, the main export is grain and metal, and for their production it is necessary to use imported gas, diesel fuel and mineral fertilizers. Therefore, for export, a flexible (unstable) exchange rate is as destructive as for imports, "explains Okhrimenko.

Two years later, to the National Bank of Ukraine at last it came, and he understood the need for removal of foreign exchange restrictions. But the trick is that now the regulator can make things worse. Ukrainian regulator drove himself in a vicious circle: if the head of the NBU is now sharply Gontareva remove currency restrictions, currency outflow abroad could again derail the currency market of Ukraine, does not exclude Okhrimenko.

That is why the Ukrainian regulator began to mitigate foreign exchange restrictions is extremely slow. So, from June 9 2016, the exporters are required to sell on the interbank market is not 75%, as before, but 65% of export earnings. Ukrainians in the exchanger can now buy a currency at a time not on 6 thousand. UAH, and already 12 thousand. UAH, and so on. D. However, while all these point breaks have not led to the normalization of the situation on the currency market. This requires a large liberalization of the market and time.

For business and for Lviv Bus Plant in particular, this means one thing - a new foreign tender, able to start production, to give thousands of Ukrainians work and Ukrainian budget - tax revenues, drift away into the hands of another country.

A source: LOOK

Author: Olga Samofalova

Tags: Ukraine, Egypt, Economy, Industry, Research

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