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. Last Updated: 07/27/2016

Ukraine's President Rolls Out Reforms

ReutersYushchenko honoring fallen Soviet soldiers in Kiev on Tuesday, the 16th anniversary of the Soviet withdrawal from Afghanistan.
KIEV -- The new Ukrainian government in the coming weeks will present a list of up to 30 companies whose privatization will be revisited, Ukrainian President Viktor Yushchenko said at a foreign investment conference in Kiev on Tuesday.

Those companies not on the list will be granted de facto amnesty from future probes, Yushchenko said.

"We will come up with a list of those enterprises that were bought in a lawless way," he said. "This list will be limited, it won't be open-ended. After this list, we will accept everything as it is."

In a speech at Renaissance Capital brokerage's first annual Ukraine conference, Yushchenko spent almost an hour laying out the plans for wide-reaching reforms and promising investors that his government -- appointed earlier this month -- will transform the country.

Yushchenko did not specify which companies would be targeted for review. But immediately following his scripted remarks, he told reporters that the government is eyeing about 30 firms.

Conference attendees, who included foreign investors and the captains of Ukrainian industry, welcomed Yushchenko's outline of reform, though some cautioned that challenging privatizations could send shockwaves through the Ukrainian economy.

"What Yushchenko said was great -- there's going to be a small number of companies [reviewed], and then they're going to draw a line under it," said Roland Nash, chief strategist at Renaissance Capital.

But reigning in Ukraine's powerful oligarchic clans could be extremely difficult and might do unintended damage to the investment climate, he added, just as the drawn-out assault on Yukos by Russian authorities has soured many investors' views on Russia.

"The problem will come if the process drags on or they can't credibly draw a line under it. Theoretically, this could get out of control," Nash said.

The authorities already reversed the privatization of Kryvorizhstal, Ukraine's largest steel plant, earlier this week.

The plant was sold off for $800 million to a consortium led by former Ukrainian President Leonid Kuchma's son-in-law Viktor Pinchuk and the country's richest man, Rynat Akhmetov, despite significantly higher bids from companies such as U.S. Steel Corp. and Russia's Severstal.

On Tuesday, Yushchenko said Kryvorizhstal was "stolen" and that the firm would be auctioned off again.

"We will open a public and transparent tender, and you will see how we will earn three to four times more" than the earlier winning bid, Yushchenko said.

The government has indicated that Kryvorizhstal might stay in state hands for the time being.

The 300 investors and market players in attendance -- about two-thirds representing European or U.S. companies plus Russians and a few Ukrainians -- enthusiastically received Yushchenko's reform agenda, and some said they were already preparing new investments into Ukraine.

But many cautioned that the president has yet to put his money where his mouth is.

"Yushchenko has a Western mind, a vision," said John Connor, a portfolio manager at Third Millennium Russia Fund, a mutual fund managing $55 million in Russia. "I've been in Russia for 30 years, and I've never heard a Russian with a vision like that before."

Connor said his fund is planning new investments -- and that the new administration, with its anti-corruption and pro-transparency drive, made all the difference.

"Things are so negative in Russia. Having some stocks in Ukraine and the Caspian countries is a bit of an upper. Everyone I talk to pushes me to do Ukraine," he said.

"Kiev is no longer associated with scandals and with planes being shot down," said Daniel Klein, director of business development at the law firm Marks & Sokolov, referring to a Russian passenger jet accidentally shot down by the Ukrainian Air Force in 2001.

"This is the beginning of the development of this country. This is what should have happened in 1991," when Ukraine gained independence from the Soviet Union.

Arkady Volsky, head of the Russian Union of Industrialists and Entrepreneurs, said Russian firms will look positively at the new Ukrainian government's policies.

"For Russian businesses, new opportunities are going to arise," he said. "We invested, we are investing, and we are going to invest in Ukraine."

Yushchenko pledged to streamline the government beginning next week, to establish an independent judiciary and to foster an ongoing dialogue with foreign investors.

The number of deputy ministers will be cut by one-half to two-thirds, and the number of state committees slashed by half, he said.

He also renewed his pledge to speed Ukraine into the World Trade Organization, saying he hoped the country could fulfill entry requirements by November. Yushchenko said that the technical prerequisites for market economy status have already been met.

Yushchenko pledged to simplify the process of establishing an enterprise. Today, starting a business in Ukraine requires 62 permits "and every permit requires a bribe," he said.

"Police in this country will not be taking bribes," he said. "The one request I make to this conference is: Don't offer bribes to anyone."

Yushchenko said a council of international investors will be established to channel business' concerns to the government, and that the country will soon overhaul its visa regime.