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EBRD warns Ukraine over worsening business climate

Source: Thomson Reuters Foundation - Tue, 5 Feb 2013 17:27 GMT
Author: Reuters
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KIEV, Feb 5 (Reuters) - Ukraine needs to step up its fight against corruption to improve its deteriorating business climate, the European Bank for Reconstruction and Development said on Tuesday.

The international lender, which invests about ${esc.dollar}1 billion a year in the former Soviet republic, has been receiving an increasing number of complaints from companies working in Ukraine, EBRD President Suma Chakrabarti said.

Businesses have complained, in particular, about their treatment by tax and customs officials and courts, he told reporters on a visit to the country.

"The scope and scale of our investment will depend on the business climate," Chakrabarti said.

"In recent months, as you all know, the business climate has deteriorated."

Chakrabarti did not provide any specific examples of complaints, but Ukrainian business lobby groups complained last year tax authorities, seeking to plug the growing budget deficit, were forcing companies to make advance tax payments.

Complaints about straightforward corruption are also common.

"We want to see much more action to tackle corruption at all levels," Chakrabarti said.

"It is not just about passing laws, of course. Implementation is needed. We need concrete steps on these issues."

He said he had raised those concerns when he met senior Ukrainian officials including President Viktor Yanukovich.

Observers say corruption is commonplace in Ukraine, just like in many other ex-Soviet nations.

In 2011, the European Union suspended financial aid to the Ukrainian government after Kiev failed to pass a law on public procurement ensuring that all purchases by the state are transparent and competitive.

Securing foreign investment is becoming an increasingly important - and tough - task for Ukraine as its economy has gone into recession due to the falling global demand for steel, the country's main export.

Net foreign direct investment in Ukraine fell 29.4 percent in January-September 2012 to ${esc.dollar}2.6 billion, according to official statistics. (Reporting by Olzhas Auyezov; editing by Ron Askew)

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