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<title>NOTES FOR AN ADDRESS BY THE HONOURABLE SERGIO MARCHI MINISTER FOR INTERNATIONAL TRADE TO THE CANADIAN BUSINESS DELEGATION BUSINESS SESSION</title>
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<p><font face="Arial" size="+1"></font><font face="Arial" size="+1">99/6 <u>CHECK AGAINST DELIVERY</u></font></p>
<p align="CENTER"><font face="Arial" size="+1">NOTES FOR AN ADDRESS BY THE HONOURABLE SERGIO MARCHI MINISTER FOR
INTERNATIONAL TRADE TO THE CANADIAN BUSINESS DELEGATION BUSINESS
SESSION</font><font face="Arial" size="+1"></font></p>
<p><font face="Arial" size="+1">KYIV, Ukraine</font></p>
<p><font face="Arial" size="+1">January 28, 1999</font></p>
<p><font face="Arial" size="+1"><em>(8:00 a.m. EST)</em></font></p>
<p><font face="Arial">This document is also available on the Department's Internet site: http://www.dfait-maeci.gc.ca</font><font face="Univers" size="+1"></font></p>
<p><font face="Arial">It is great to be here and to be with you in Ukraine -- a country of great promise but also of great challenges.</font></p>
<p><font face="Arial">This morning I want to speak very briefly about some of those challenges. I also want to assure you of our
commitment to working as hard as we can to alleviate them. Our aim is to clear the way for you to enter this market
more easily and to develop it more aggressively.</font></p>
<p><font face="Arial">Let me state at the outset that Canada believes in Ukraine. We have watched with admiration as it has moved to
democracy and a free market economy. It has established good relations with its neighbours, including Russia, and
boasts a well-educated work force. </font></p>
<p><font face="Arial">Ukraine has also been blessed with the world's best farmland and holds tremendous potential to be a regional
powerhouse.</font></p>
<p><font face="Arial">That's the bright side, and that is the side that has brought all of us to Ukraine today. But as businesspeople, you
are also well aware of the other side -- of the problems of doing business here and the structural challenges still to
be overcome.</font></p>
<p><font face="Arial">Jim Wright and others were here with some of you in October for a meeting of the Canada-Ukraine
Intergovernmental Economic Commission. I'm told it was a good meeting, where progress and concerns were
discussed frankly.</font></p>
<p><font face="Arial">Last night I had a chance to express continuing Canadian concerns directly to President Kuchma and to Deputy
Prime Minister for Economic Reform Serhiy Tihipko. Later today I will reinforce those messages when I meet with
Prime Minister Pustovoytenko.</font></p>
<p><font face="Arial">Our concerns are well known: we are dismayed by the pace of reform. We believe reform is essential to the future
prosperity of Ukraine and to the prospects for Canadian involvement here. </font></p>
<p><font face="Arial">Let me be clear: while our commitment to helping Ukraine through this difficult period of transition is unwavering,
our patience is not inexhaustible. We will continue to make the case that if Canadian business leaders, such as
yourselves, do not see significant progress in the days ahead, you are likely to seek other opportunities in other
lands.</font></p>
<p><font face="Arial">Both the IMF [International Monetary Fund] and the G-7 have made it clear that there will be no additional funding for
Ukraine. The time has come for Ukraine to put its own house in order and undertake the reforms that will allow it to
stand on its own and succeed by itself.</font></p>
<p><font face="Arial"> </font></p>
<p><font face="Arial">Let me just quickly address a number of specific complaints that we have heard from businesspeople like you. I
don't pretend that the list is exhaustive. If there are other, specific problems or concerns that you've encountered, I
would like to hear about them so that we can continue to press for change in areas of greatest interest to you.</font></p>
<p><font face="Arial">But here are five of the major problems, as we see them.</font></p>
<p><font face="Arial">First is a taxation system that is inconsistent and unpredictable. The tax rules in Ukraine are often unclear, making it
difficult to forecast business revenues or return on investment. And the ever-changing nature of the tax system
leaves companies open to expenses they cannot foresee.</font></p>
<p><font face="Arial">Second, there needs to be greater transparency in rules-making generally. Too often, new regulations are
introduced without warning or consultation, and the needs of business are too rarely considered in the formulation
of those rules. Moreover, once regulations are introduced, they are sometimes unfairly applied and/or even made
retroactive. </font></p>
<p><font face="Arial">While Ukraine is anxious to join the WTO [World Trade Organization], all too often its trade policy is inconsistent
with that body's guiding principles. If you want to join the club, you have to play by the rules. Period.</font></p>
<p><font face="Arial">Further, bureaucrats exercise a great deal of discretion in administering or enforcing regulations. All of this has
produced an unpredictable and uncertain business environment. And nothing will scare off trade and investment
faster than uncertainty and red tape.</font></p>
<p><font face="Arial">Third, Ukraine's failure to accept generally applied accounting principles makes it extremely difficult to evaluate
business opportunities, especially as they relate to joint ventures. More generally, Ukraine has no agreed testing
and accreditation system in place for any existing international standards. As a result, certification tends to be more
about producing revenues than ensuring competence.</font></p>
<p><font face="Arial">Fourth, financing is severely underdeveloped for export sales and business ventures. Investors are sometimes
made to feel unwelcome and Ukraine has been slow to respond to the efforts of our own Export Development
Corporation. In an age when money can be transferred at the press of a button, investors can and will move their
resources to more accommodating venues.</font></p>
<p><font face="Arial">And, regrettably, Ukraine has already seen Canadian dollars go elsewhere in Eastern Europe.</font></p>
<p><font face="Arial">Fifth and finally, the lack of clear property ownership rights is hindering the development -- and redevelopment --
of many commercial and residential properties.</font></p>
<p><font face="Arial">In each of these areas -- taxation, transparency, standards, financing and property rights -- Ukraine simply must
do better if international investors are to do more.</font></p>
<p><font face="Arial">I must say again, however, that to recite these difficulties is not to dispute the opportunities. One area that offers
great promise, for example, is energy conservation. </font></p>
<p><font face="Arial">According to some<strong> </strong>energy experts, and I quote, "Ukraine is the world's most wasteful and energy-intensive country.
And until policy makers solve this problem, economic recovery is not possible."</font></p>
<p><font face="Arial">Now, as Canadians, we understand cold weather. We understand the importance of getting energy costs into line.
We are also world leaders in energy-saving technology. And so there is a tremendous market here in Ukraine for
the very expertise we offer.</font></p>
<p><font face="Arial">Another area of great promise is education. Increasingly, we have come to see Canadian educational products as
export commodities like any other. </font></p>
<p><font face="Arial">Just yesterday, for example, I had the privilege of announcing the establishment of a Canadian Learning Centre,
which will be opened shortly at the Canadian Embassy. This Centre will support Canadian studies programs at
Ukrainian universities. It will also promote study-in-Canada programs for Ukrainian students.</font></p>
<p><font face="Arial">And later today, I will be signing a memorandum of understanding on behalf of the Canadian education community,
which wants to reach out to Ukraine. </font></p>
<p><font face="Arial">Energy and education are just two examples; there are many others. Certainly, companies such as Northland
Power and Lateral Vector Resources have realized the benefits of perseverance in this market. And I am confident
that many of you will be able to carve your own niche after first doing your homework.</font></p>
<p><font face="Arial">There is an old Ukrainian proverb that says, "With patience, it is possible to dig a well with a needle." To many of
you, it may seem that that is an apt description of trying to do business here!</font></p>
<p><font face="Arial">But you have persevered because you know the potential that lies buried here and you are prepared to do the
tough slogging to see it realized. This really is a ground-floor opportunity. I commend you on your foresight and
commitment</font></p>
<p><font face="Arial">In your efforts, you can count on your government's support. And you can be sure that we are doing everything we
can to replace those "needles" with backhoes so that you can roll up your sleeves and really get to work. </font></p>
<p><font face="Arial">With hard work and perseverance I am confident that you will succeed. </font></p>
<p><font face="Arial">Thank you.</font></p>
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