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					UNIAN Stock Market
                       Ukrainian Independent News Agency (UNIAN) founded in March 1993.
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23 June 2008, Monday, №97
NBU’s Official Exchange Rate, June 23, 2008
Hryvnia to international currency

100 USD - 484.9700 (June 20 – 485.2500)
100 EUR – 757.0382 (June 20 – 751.2155)
10 RUR – 2.0525 (June 20 – 2.0563)
According to the NBU


NBU’s Official (Discount) Rates for Banking Metals, June 23, 2008
Hryvnias per 10 troy ounces

959 XAU 10 Gold – 43647.30 (June 20 – 43344.96)
961 XAG 10 Silver – 845.79 (June 20 – 835.60)
962 XPT 10 Platinum – 99709.83 (June 20 – 100689.38)
964 XPD 10 Palladium – 22842.09 (June 20 – 22515.60)
According to the NBU

CEO: Oshchadbank Should Boost Capital by 700 Million Hryvnias in 2008

If state-owned Oshchadbank is to maintain its market share, it should increase its capital by at least 700
million hryvnias this year, according to Oshchadbank‟s CEO Anatoliy Huliy in an interview with The
Weekly Mirror newspaper.
Huliy also said that the bank‟s financial plan for 2008 only provided for a capital increase of 200 million
hryvnias. He also added that the bank hoped to collect the necessary money till July 1.
Huliy stressed that to keep up with the average capitalization growth on the Ukrainian market,
Oshchadbank would need some 500 million hryvnias more to boost its statutory capital.
“The capitalization of the Ukrainian banking system grows three times faster than that of the state-owned
banks. This matter was raised during one of the latest meetings of the NBU Council, and I completely
supported the Council‟s opinion that Oshchadbank‟s and Ukreksimbank‟s combined share had to be
increased to at least 20-30 percent. Today, it stands at 8 percent only,” Huliy said.
“The council asked the state banks‟ representatives how much money they would need to feel comfortable
and to look ahead with confidence. We said that we would need some 500 million hryvnias in addition to
what was stipulated by our current financial plans. This will be needed only to keep up with the market, to
maintain our market positions, and not to undertake an expansion.”
If Oshchadbank is to offer more favorable lending terms for Ukraine‟s leading industries, including
energy, additional 1 billion hryvnias should be injected in its capital. “Besides ensuring social payments,
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we cover such an important field of operations as investment in energy. To boost the sector to a new level,
we would need at least 1 billion to add to our capital. Then, we would be able to offer power and gas
companies much more favorable lending terms than any of Ukraine‟s commercial banks possibly could.
But insofar as we meet with little understanding, we have to continue consultations,” Huliy concluded.
VAT Oshchadbank, or The Public Savings Bank, was registered on December 31, 1991.
As of January 1, 2008, the bank‟s assets were worth 19.29 billion hryvnias, compared to liabilities of
17.09 billion hryvnias. Its equity totaled 2.2 billion hryvnias, and its statutory capital stood at 922 million
hryvnias.
In 2007, Oshchadbank posted a net profit of 207.18 million hryvnias. In the first-quarter of 2008,
Oshchadbank‟s net profit climbed 47.7 percent year-on-year, to 85.92 million hryvnias.
As of March 31, 2008, its statutory capital stood at 922 million hryvnias.
The state owns 100 percent of the Oshchadbank‟s stock.

Altus-Capital’s Shares Listed on PFTS

VAT Altus-Capital Close-End Corporate Fund‟s shares have completed the listing procedure and have
been included in the PFTS list (ticker – IFALCP), according to the PFTS press-service.
PFTS has also listed the shares of VAT ZNKIF Altus Share Fund and VAT ZNKIF Altus Bond Fund
(tickers – IFALSF and IFALBF, respectively).

VAT Akordbank Registered by NBU

The National Bank of Ukraine registered a new commercial bank – VAT KB Akordbank – on June 4,
according to the NBU deputy chairman Volodymyr Krotyuk.
Earlier, UNIAN reported that the Antimonopoly Committee had allowed two Ukrainian citizens – Danylo
Volynets, the chairman of state-owned Oshchadbank, and Volodymyr Pechoval – to establish the new
bank. Akordbank is based in Kyiv.
According to Krotyuk, since January 2008 the NBU has registered four new banks: Kyiv-based
International Investment Bank in March, Dnipropetrovsk-based Aktabank in April, Kyiv-based Zlatabank
in May, and Akordbank in June. All banks were registered as public corporations and all have a statutory
capital of no less than 10 million euros.
UNIAN reference: As of June 1, 2008, 177 licensed banks operated in Ukraine.

Mriya Agro Holding Generated $90.1 Million through GDR Issue

Dragon Capital Investment Company has completed the private placement of global depositary receipts of
Cyprus-registered Mriya Agro Holding Plc. 20 percent of the company‟s stock were sold for a total of
$90.1 million. Dragon Capital, the issue‟s organizer and underwriter, reported the news.
In all, 4.25 million Mriya‟s GDRs were issued by The Bank of New York, which was 5 GDRs per one
share in the company. Each GDR sold at $21.20. Following the private placement, Mriya‟s capitalization
hit $450.5 million.
Some 35 private and institutional investors from Ukraine, Russia, USA and EU subscribed to the GDRs.
The demand exceeded the supply by two times.
Beginning on July 1, Mriya‟s GDRs will be floated on the Frankfurt Stock Exchange.
The company will use funds generated through the private placement to increase its cultivated area to
190,000 hectares by the end of 2008, to construct infrastructure – including several new elevators in the
Western Ukraine – and to purchase new agricultural machinery.
UNIAN reference: Mriya Agro Holding is an agricultural company which cultivates over 100,000 hectares
of land in four regions of the Western Ukraine. It grows wheat, barley, rape, sugar beets, buckwheat,
potatoes and other crops. It also has facilities to store some 200,000 tons of produce.

Expert: Ukrainian Stocks May Climb 3-7 Percent by End of June
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Liquid Ukrainian stocks still have a chance to rally during the last week of June, climbing between 3
percent and 7 percent on average, according to Ineko-Invest‟s CEO Oleh Morkva. In this case, the PFTS
index will close above 800 in the first half of 2008.
However, this will happen only if “the external news background is positive during the week, and if no
new scandal of crisis rocks the political and economical life in Ukraine.” If world indices continue their
slide through the week‟s end, the PFTS index will struggle to remain above 750 points in June.
“The lack of consensus among political elites as well as the imbalanced and hardly predictable situation in
the economy and on the investment market in particular have undermined investor confidence and have
kicked off a very pessimistic scenario of the market development in June,” Morkva said.
During the final decade of June, the trading activity on the PFTS market for risk instruments may boom by
50 to 100 percent on rating deals. “However, there are no preconditions for the stocks to soar by 15-25
percent, so the PFTS index will not reach May‟s level of above 900 points.” This level can be attained no
sooner than at the end of July, according to Morkva.

Golden Gate Corporation’s Upcoming Bond Issue Rated uaBBB

Credit-Rating, a nationally recognized credit rating agency in Ukraine, reported that it had assigned a
preliminary long-term rating of uaBBB to the upcoming issue of (A-series) registered interest bonds by
Kyiv-based Golden Gate Corporation. The bonds, worth 200 million hryvnias, will mature in three years.
In the course of its analysis, Credit-Rating considered the issuer‟s financial statements for years 2005
through 2007 and the first-quarter of 2008, as well as the internal information provided by the issuer
Golden Gate Corporation‟s main operations include corporate management, wholesale trade in
construction materials, and other commercial services.
A borrower or a debt instrument with uaBBB credit rating has sufficient creditworthiness when compared
to other Ukrainian borrowers or debt instruments. This level of creditworthiness is susceptible to adverse
changes in commercial, financial, and economic conditions.
Factors supporting the credit rating:
- The bond issue is secured by two Golden Gate‟s members, VAT Pivdenzakhiddorbud and VAT Building
Administration No. 813. The two companies‟ net sales in 2006-2007 stood at 347.1 million hryvnias and
587.8 million hryvnias, respectively. Their net profit amounted to 16.5 million and 40.5 million hryvnias,
and their EBITDA profit margin stood at 8.1 percent and 10.8 percent, respectively.
- VAT Pivdenzakhiddorbud and VAT Building Administration No. 813 have considerable business
experience: between 2003 and 2007 the two companies – both as contractors and general contractors –
built and reconstructed roads and bridges for a total of 3.3 billion hryvnias.
- Golden Gate Corporation owns production facilities and subsidiary companies capable of carrying out
nearly all stages of the construction process. It also has a capacity to partially supply its projects with
building materials produced in-house.
- The corporation has a backlog of orders up till 2010, worth estimated 2.8 billion hryvnias. In particular,
its subsidiaries plan to construct and reconstruct some 165 kilometers of roads.
Factors limiting the credit rating:
- Both VAT Pivdenzakhiddorbud and VAT Building Administration No. 813 have a considerable debt
load. As of March 31, 2008, their potential indebtedness – including all available credit facilities –
exceeded their 2007 EBITDA by 4.5 times.
- The quality of the issuer‟s corporate management is rather low because the corporation has no
consolidated system of financial accounting.
- The regulations concerning real estate development and financing are vague and subject to change, as is
the taxation of development projects.

Expert: State-Owned Banks Should Boost Their Market Share
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The two existing state-owned banks should expand their share of the Ukrainian banking market, according
to Valeriy Heyets, the director of the Institute of Economy and a member of the National Bank‟s Council.
His statement came during an interview with The Weekly Mirror newspaper.
“Such a big state as Ukraine would be ill-advised to cede its entire banking sector to the foreign capital.
That‟s why I have suggested that the NBU Council should consider increasing the state-owned banks‟
market share,” Heyets said.
“The state should take care of the competitive environment in order to make loans cheaper and lending
periods, longer. In the current circumstances, this can be only done by boosting the share of the state-
owned banks,” Heyets explained. “Contrary to some misconceptions, this move won‟t hamper
competition. Competition is hampered by monopolies. But today, the state-owned banks have a market
share of less than 8 percent, so they can‟t possible pretend to any monopoly.”
Heyets believes that when the state-owned banks increase their market share to some 25-30 percent, they
will become an additional support for the economy. He also said that these banks should focus on
financing investment processes.

NBU Allowed Swedbank Invest to Trade in Precious Metals

The National bank of Ukraine has allowed ZAT Swedbank Invest to perform operations in bank metals,
according to Swedbank‟s press-service.
Swedbank Invest has also received a permit to act as a depositary and to invest funds in stocks of other
companies.
UNIAN reference: ZAT Swedbank Invest (formerly ZAT TAS-Investbank) has operated on Ukraine‟s
banking market since 1996.
As of April 1, 2008, the bank‟s assets were worth 3.81 billion hryvnias, compared to liabilities of 3.34
billion hryvnias, and its equity stood at 472 million hryvnias. Its statutory capital totaled 382 million
hryvnias.
During the first quarter of 2008, the bank‟s net profit increased by 24.9 percent year-on-year to reach
19.86 million hryvnias. In 2007, the bank earned a net profit of 60.08 million hryvnias.
Swiss-based Swedbank AB owns 100 percent of ZAT Swedbank Invest‟s stock.

Concorde Asset Management to Launch New Fund This Month (Updated)

Concorde Asset Management plans to launch a new investment fund dubbed Oligarch this month,
according to Concorde‟s chief analyst Kostyantyn Fisun.
The close-end fund with an operating period of three years will issue 500 million hryvnias in shares. Fisun
hopes the fund will soon generate between 50 million and 100 million hryvnias. A portion of its shares
will be sold to foreign investors in the form of global depositary receipts.
The money will be invested in the stock of Ukraine‟s biggest industrial and financial groups, which are the
basis of “oligarch indices” calculated by Concorde.
“While most markets are slumping, oligarch indices have behaved differently,” Fisun said. He added that
most of the indices‟ basket stocks have enormous growth potential. “Following the consolidation of their
assets, Ukraine‟s financial and industrial groups have formulated long-term development strategies, and
some of them will soon consider IPOs.” All of this positively affects the market value of the “oligarch
stocks.”
According to an earlier UNIAN report, Concorde Capital announced the launch of a series of business-
group indices which cover stocks representing Ukraine‟s leading industrial and financial groups. Six
indices were established: for Konstantin Grigorishin‟s group, Kostyantyn Zhevaho‟s group, Interpipe/East
One, Industrial Union of Donbas (ISD), and SCM.
According to Concorde‟s general director Ihor Mazepa, the business-group indices will make it possible to
trace the changing market value of the groups‟ publicly-traded assets and to evaluate personal successes of
the respective oligarchs in the development of their businesses.
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Nadra Bank Repays $55.5 Million of Syndicated Debt Facility

Nadra Bank has repaid a $55.5 million one-year tranche of a $85 million syndicated credit facility
launched in June 2007, according to the bank‟s press-service.
The credit facility provided for two tranches: a one-year tranche of $55.5 million and a two-year tranche
of $29.5 million, at a rate of Libor + 1.5 percent and Libor + 2.1 percent respectively. The syndicate was
jointly arranged by BayernLB, Raiffeizen Zentralbank and Standard Bank.
UNIAN reference: Nadra Bank was founded on Oct. 26, 1993.
As of March 2008, the bank‟s assets amounted to 23.15 billion hryvnias, compared to liabilities of 21.30
billion hryvnias. The bank‟s equity stood at 1.84 billion hryvnias, and its statutory capital totaled 390.36
million, as of March 31.
In the first quarter of 2008, Nadra‟s net profit fell by 82.9 percent year-on-year, to 27.8 million hryvnias.
In 2007, the bank saw its net profit increase by 86.8 percent to reach 348.6 million hryvnias.
As of March 2008, the bank‟s major shareholders were two Cyprus-registered companies: Novartik
Trading Limited with a stake of 61 percent and Manmade Enterprises Limited with a 30.74 percent stake.
According to Fitch Ratings, the bank‟s beneficiary owners are Vadym Pyatov, Serhiy Lahur, Tymoteusz
Fleiszar and Ihor Hylenko who jointly control 86.6 percent of the bank‟s stock, including 31.4 percent
owned by the bank‟s president Hylenko. International portfolio investors hold 7.8 percent of the bank‟s
stock, including 6.7 percent owned by East Capital.

Moody’s rated UkrSibbank’s Loan Participation Notes at Ba2

Moody‟s Investors Service has assigned a Ba2 long-term foreign currency rating to the senior unsecured
loan participation notes (LPNs) expected to be issued on a limited-recourse basis by Ukrainian MTN
Finance Plc, a UK - based special purpose vehicle (SPV), for the sole purpose of funding loans to
UkrSibbank. The issuer may issue LPNs in currencies other than US dollars. US dollar being the currency
of the loan agreement between the SPV and UkrSibbank, the issuer will enter into currency swap
agreements to protect the SPV against adverse currency risks.
According to the LPN documentation, in case if (i) any payments to be made by any swap counterparty
are insufficient to pay the amounts due to the noteholders on the relevant interest payment date or maturity
date in full (whether by reason of a swap counterparty default or otherwise), or (ii) any relevant swap
agreement is terminated for any reason, UkrSibbank will be required to make up a shortfall in the SPV to
compensate the notes holders. As such, the notes holders are relying solely on UkrSibbank‟s credit quality
to service and repay the debt. The obligation of UkrSibbank will rank senior unsecured and will be pari
passu with other senior unsecured obligations of the bank. The amount, interest rate and tenor of the LPNs
will be determined at a later stage depending on the market conditions. The rating of the notes, which
pierce the sovereign ceiling for Ukraine for foreign currency long-term debt, is on review for possible
upgrade, in line with the respective ceiling.
UkrSibbank, as the ultimate borrower under the transaction must comply with a number of covenants such
as negative pledge, limitations on mergers and consolidation as well as maintenance of a capital adequacy
ratio above the minimum level prescribed by the local regulations.
The Ba2 senior unsecured debt rating is based on UkrSibbank‟s fundamental credit quality and takes into
account all relevant country risks. The Ba2 long-term rating for senior unsecured debt issued under
foreign law also reflects Moody‟s view that those instruments would be less likely to be captured by a
foreign currency payments moratorium than would be the case for bank deposits.
UkrSibbank is headquartered in Kiev, Ukraine, and it has reported total assets of US$7.3 billion under
IFRS as at 31 December 2007 and net profit of US$70.5 million for the year ended 31 December 2007.

Fitch Assigns UkrSibbank’s Upcoming $2 Billion LPN Program Expected BB- Rating

Fitch Ratings has today assigned Ukrainian MTN Finance Plc‟s upcoming $2 billion LPN program an
expected Long-term „BB-‟ (BB minus) rating for notes with maturities in excess of one year and an
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expected Short-term „B‟ rating for notes with maturities of less than one year. The notes are to be used
solely for financing loans to Ukraine‟s Joint-Stock Commercial Innovation Bank “UkrSibbank” (UkrSib,
Long-term Issuer Default (IDR) „BB-‟ (BB minus) with Stable Outlook, Short-term IDR „B‟, Long-term
local currency IDR „BB‟, Individual „D‟, Support „3‟ and National Long-term „AAA(ukr)‟ with Stable
Outlook). At the same time, Fitch has assigned an expected „BB-‟ (BB minus) rating to the program‟s
upcoming Series 1 issue. Fitch understands that the issue is expected to be a senior bond maturing in
excess of one year.
The final ratings of the program and the issue are contingent upon the receipt of final documentation
conforming materially to information already received.
Ukrainian MTN Finance Plc, a UK-domiciled special purpose vehicle (SPV), will only pay noteholders
principal and interest received from UkrSib. Issues under the programme will be rated separately. The
SPV‟s claims under the loan agreement will rank at least equally with the claims of other senior unsecured
creditors of UkrSib, save those whose claims are preferred by any bankruptcy, insolvency, liquidation or
similar laws of general application. Under Ukrainian law, the claims of retail depositors rank above those
of other senior unsecured creditors. At end-2007, retail deposits and current accounts made up 19 percent
of UkrSib‟s total liabilities, according to the bank‟s audited IFRS accounts.
The programme stipulates that the SPV may enter into a swap agreement should notes be issued in
currency other than USD (the loans to UkrSib are USD-denominated). Fitch notes that in the case of
default by a swap counterparty, noteholders bear foreign exchange risk. The Series 1 issue is not expected
to contain a swap arrangement.
The agreement contains a number of covenants, including the bank‟s full compliance with capital
adequacy requirements of the National bank of Ukraine, with the minimum regulatory capital ratio
currently being 10%. Importantly, the noteholders will have a put option should BNP Paribas and its
subsidiaries cease to own, in aggregate, in excess of 50 percent of voting shares of UkrSib.
According to the National bank of Ukraine, UkrSib was the third-largest bank by assets at end-2007.
UkrSib is a universal bank, focusing on corporate, retail and investment banking. The bank operates the
fourth-largest nationwide branch network, consisting of over 1,000 banking units and outlets. A
controlling 51% stake is held by France-based BNP Paribas (Long-term IDR „AA‟ with Stable Outlook,
Short-term IDR „F1+‟, Individual „A/B‟, Support „1‟ and Support Rating floor „A-‟ (A minus)), with the
remaining 49 percent controlled by two Ukrainian shareholders, Oleksandr Yaroslavsky and Ernest
Haliyev, who also own several large industrial enterprises in the country.

Expert: Ukrainian Stocks May Still Post 20-30 Percent Annual Gains in 2008

A 30 percent slump of the PFTS index since January 2008 can still be offset during the next three or four
months so that the annual capitalization growth hits 20-30 percent even despite the looming two-fold hike
of gas prices in 2009, according to Ineko-Invest‟s CEO Oleh Morkva.
“By the end of June‟s second decade, daily trading volumes on the PFTS floor had grown almost by half.
The week before last, the average volume stood at 44.7 million hryvnias, while the last week‟s average
turnover was 63.1 million. Last week, second-tier stocks saw much less interest than the blue chips, and
the share of the PFTS basket stocks in the total trading reached 58.3 percent compared to 49.6 percent last
week.”
“During the last week, the PFTS index lost 29.99 points, or 3.65 percent, dropping from 822.26 on June
13 to 792.27 on June 20. The week‟s trading volume stood at 1.13 billion hryvnias, of which 252.37
million or 22.24 percent was trading in shares. The week before last, the trading volume was 20 percent
smaller.”
“Last week, the aggregate demand for PFTS-traded shares fell by 10 million hryvnia, or 10.94 percent, to
81.89 million. The aggregate demand slumped by 12.3 percent, to 139.27 million hryvnias. The week‟s
leader was Zakhidenergo which saw 51.97 million in weekly trading.

Expert: PFTS Slump Caused by Speculations
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The slump on the PFTS stock exchange last week was caused mainly by speculative activity of domestic
players, according to PIO Global Ukraine‟s asset management director Serhiy Utkin.
To prove his opinion, Utkin cites extremely low trading volumes over the week. “It means that there was
no seller competition on the market, and speculative activity was rampant.” Another factor to adversely
affect the Ukrainian market was the week‟s negative news background. Most of the bad news came from
the U.S. Some corporate reports as well as fresh statistics proved worse than expected, indicating
continuous problems on the world financial market.
However, on Friday, June 20, the PFTS index managed to recover slightly, and this trend may continue
through the next few days.
“Despite a considerable slump of the PFTS index, there are no fundamental reasons for panic. During the
summer, the market will hardly grow. It may display a sideways trend at best. We expect the market to
recover in the beginning of the autumn. And there are good ground to expect a rally, as Ukrainian
companies show stable performance, inflation is in decline, and general economic forecasts are favorable
for Ukraine,” Utkin said.
According to an earlier UNIAN report, on June 19 the PFTS index hit its 14-month low, falling to 782.6
points.

PepsiCo, Inc. to Gain Control over DP Sandans

The Antimonopoly Committee of Ukraine has allowed PepsiCo, Inc., based in New-Bern, USA, to
purchase a controlling stake in DP Sandans, an affiliate of Kyiv-based VAT Lebedyansky Experimental
Cannery. The AMC press-service reported the move.
DP Sandans‟ main business is the sale of juices and non-alcoholic beverages.
Earlier, UNIAN reported that PepsiAmericas, Inc. – the second-largest bottler of Pepsi-Cola products in
which PepsiCo, Inc. holds a 41.1 percent stake – had acquired a controlling stake in TOV Sandora,
another Ukrainian juice producer.

GRAWE to Gain Control over INPRO Insurance

The Antimonopoly Committee of Ukraine has allowed Grazer Wechselseitige Versicherung
Aktiengesellschaft (GRAWE), based in Graz, Austria, to purchase a controlling stake in Lviv-based ZAT
INPRO Insurance Company.
On April 10, 2008, UNIAN reported that Grawe Group had inked a deal to purchase the Lviv-based Inpro
insurance company. The value of the deal was not disclosed.
UNIAN reference: Grawe Group has been present on the Ukrainian market since 1998. Until now, it has
been operating exclusively in the life insurance sector.
In 2007, Grawe Ukraine held the second strongest position on the life insurance market. It collected
151.04 million hryvnias in insurance premiums and paid 3.44 million hryvnias of insurance indemnities.
ZAT Inpro Insurance Company was founded in 1992. It offers all types of life, property and transport
insurance. In 2007, the company collected 26.27 million hryvnias in premiums and paid 12.56 million
hryvnias in compensations.

Fitch Rates Ukraine’s Eurobonds BB-

Fitch Ratings has today assigned Ukraine‟s upcoming five-year $500 million eurobond a BB- (BB minus)
rating. The rating is in line with Ukraine‟s Long-term foreign currency Issuer Default rating (IDR) of BB-
(BB minus) with Stable Outlook.
Fitch revised the Outlook for Ukraine‟s IDRs to Stable from Positive in May 2008, citing an unconvincing
policy response from the authorities to mounting risks to the country‟s macroeconomic and financial
stability from rising inflation and deteriorating external finances. Amelioration of current risks involving a
much firmer commitment by the authorities to restore the conditions for sustainable growth would be
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positive for the ratings. However, further worsening of risks to the economy‟s prospects would add to
negative pressure on the ratings.
In May 2008, consumer-price inflation reached 31 percent, one of the highest rates among Fitch-rated
sovereigns, from 17 percent at end-2007. A 49 percent rise in food prices is contributing to Ukraine‟s
soaring inflation, but overly loose monetary conditions have also played a part. Strong capital inflows
fuelled broad monetary growth of 51 percent in 2007, as the central bank bought foreign exchange to
maintain the hryvnia‟s peg to the U.S. dollar. Fitch expects Ukraine‟s current account deficit to swell to
7.5 percent of GDP in 2008, as domestic demand booms. Ukraine could face a doubled gas import price in
2009, potentially adding $1.5 billion to the already soaring import bill. Fitch projects Ukraine‟s external
financing needs, including short-term debt, at 133 percent of official reserves in 2008, against a BB
median of 77 percent.
The response from a government dogged by ongoing political instability has been unconvincing. The
central bank revalued the UAH peg by just 4 percent in April, spurning IMF advice to move to a more
flexible regime that could help absorb the terms-of-trade shocks to which Ukraine is exposed. Bank credit
to the domestic private sector rose 78 percent in the year to March 2008, a worryingly high pace given the
weaknesses of the sector. Sensitivity to banking-sector fragilities may be inhibiting the central bank‟s
willingness to tighten domestic monetary conditions more aggressively. On fiscal policy, the authorities‟
latest 2008 budget projects a deficit of about 1 percent, only a 0.5pp tightening from the original 2008
budget. President Yushchenko has vetoed privatisation plans to influence budgetary policy. Meanwhile,
lack of economic policy clarity risks high inflation becoming entrenched in Ukrainians‟ expectations.
Nominal wages grew 40 percent in May 2008 from a year before, risking a wage-price spiral.
However, Fitch believes Ukraine‟s longer-term prospects remain bright. The country joined the WTO in
2008, starting Ukraine on the road to a free-trade area agreement with the EU, a process that should exert
sustained pressure on the government to improve the country‟s structures and institutions, and
underpinning the prospects for sustaining the pick-up in FDI receipts that began in 2005. Despite political
noise, a fundamental consensus exists between the major parties and blocs on Ukraine‟s path towards a
market economy, while a genuine democracy has emerged from the 2004 Orange Revolution.

Yushchenko Proposes Joint Economic Commission with Portugal

Ukraine‟s President Viktor Yushchenko will suggest establishing a joint Ukrainian-Portuguese economic
commission during his visit to Portugal on June 23 and 24, according to the deputy head of the
Presidential Secretariat Oleksandr Chaly.
Chaly said that Ukraine would like the commission to gather for its first meeting as soon as in September
or October in Kyiv.
Chaly also said that one of the main goals of Yushchenko‟s visit was to give an impetus to the
development of bilateral economic relations with a special focus on regional cooperation.
Ukraine is also interested in Portuguese experience of hosting the European football championship in
2004. “We have a special interest in inviting Portuguese construction companies to participate in Ukraine
preparations for Euro-2012,” Chaly said.
Yushchenko will try to ensure Portuguese support for Ukraine‟s Euro-Atlantic aspiration. Ukraine expects
Portuguese leaders to support Ukraine‟s admission to the NATO Membership Action Plan during the
December summit of the defense alliance.
Yushchenko will also raise the issue of living and working conditions of Ukrainian labor migrants in
Portugal. “The President wants to ensure the maximum social protection of Ukrainian migrant workers
and to support their Ukrainian identity.” In particular, Yushchenko will discuss problems connected with
the implementation of the current mutual employment treaty which regulates the matters of job placement
for Ukrainians in Portugal. The president will also discuss an eventual permission to use Portuguese-
registered car license plates in Ukraine which would be important for Ukrainian migrant workers going
back home for holidays.

ZAT Khartron Incorporated to Gain Control of VAT Khartron
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The Antimonopoly Committee of Ukraine has allowed Kharkiv-based ZAT Khartron Incorporated to
purchase a controlling stake in VAT Khartron, based in the same city. The AMC press-service reported
the development.
UNIAN reference: ZAT Khartron Incorporated‟s principal business is the lease of property in Kharkiv.
 VAT Khartron was established in 1959 as an enterprise for the design and production of flight control
systems. In the former USSR, it was one of the three leading producers of rocket and space flight control
systems, including those for SS-18 and SS-19 intercontinental ballistic missiles.
Rocket carriers equipped with Khartron‟s control systems – Tsyklon, Energia etc. – have launched over
1,000 satellites of Kosmos, Tselina, Okean, Koronas, Kupon series. The company also developed control
systems for Kvant, Kvant-2, Kristall, Spektr, and Priroda modules of Mir Orbital Station, and used this
experience to develop an automatic docking system for Zarya block of the International Space Station.
VAT Khartron‟s statutory fund totals 21.37 million hryvnias. Currently, the State Property Fund of
Ukraine holds a controlling stake of 50 percent plus one share in the company. ZAT Askond owns 20
percent, and Russia‟s ZAT NPP Konvers-Elektropribor has 4.56 percent. The remaining 25.44 percent
belong to other corporate and private shareholders.

				
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