SigmaBleyzer and the Ukrainian Growth Funds (UGF) have been investing in Ukraine for seven years. The current UGF portfolio includes over 70 Ukrainian companies from many sectors of the economy, which are located in most geographic regions of Ukraine. SigmaBleyzer is one of the largest international investors in Ukraine. It manages the largest private equity fund in the country with $100 million under its management.

In early 2000, SigmaBleyzer helped create the International Private Capital Task Force (IPCTF) which along with Thunderbird, The American Graduate School Of International Management, has just completed a yearlong benchmarking study of countries with transition economies, which contains a detailed "Action Plan For Ukraine". The "Action Plan" outlines nine government policy areas, in which Ukraine must make significant progress in order to attract additional Foreign Direct Investment (FDI), accelerate economic activity and develop a strong, independent, market economy.

An important meeting was held with the Cabinet of Ministers of Ukraine on February 28, 2001, to focus on the results and recommendations of the IPCTF. Representatives of many international businesses and Ambassadors from several countries also attended the meeting. A forty-five minute presentation made by SigmaBleyzer's President and CEO, Michael Bleyzer, outlined the major policy actions which must be taken by the government of Ukraine if there are to be major increases in Foreign Direct Investment (FDI) over the next five years.

Based on seven years of experience investing and operating in Ukraine, the results of the major IPCTF study, the recent meeting with the Cabinet of Ministers, and the recent meetings with some government leaders in Ukraine, the management of SigmaBleyzer has stated in Washington they believe the following:

(1) SIGNIFICANT TURNAROUND........Ukraine has made a significant turnaround in its economic performance in 2000 and the first quarter of 2001. This growth follows 10 consecutive years of slow reforms and year-on-year economic declines.

(2) POLITICAL CRISIS........The recent political crisis, which followed the disappearance and apparent murder of journalist Georgiy Gongadze, has all but paralysed the Ukrainian government. Most politicians have switched from focusing on important policy and reform issues to the politics of destruction or survival, depending on which side one is on.

(3) POLITICAL PARALYSIS-ECONOMIC RECOVERY...Interestingly, this paralysis at the top has not led to any slowdown in Ukrainian economic recovery. On the contrary, the economy seems to be accelerating further in the first quarter of 2001, with Ukraine now leading the CIS in industrial growth. However, it is not clear how sustainable this progress will be without serious additional steps in the government policy area (as detailed in the IPCTF recommendation) and corresponding increases in capital investments, both foreign and domestic.

(4) ATTENTION FROM RUSSIA.......On the other hand, the recent crisis attracted significant attention and improved the appetite for influence from Ukraine's big neighbor to the East. Russia has clearly improved its positions in Ukraine over the last several months, demonstrating a high level of consistency in their plans to "re-build" the Union with Belarus, Moldova, Georgia, Ukraine and other former Republics of the Soviet Union. Significant Russian capital investments are being made in Ukraine to control key sectors of Ukrainian economy.

(5) BREAKING POINT........Ukraine is truly at a "BREAKING POINT". Whether it "BREAKS" East or West may determine the balance of power in Central Europe for the next decade or longer. Most Ukrainian people, including the politicians and business people, openly say they do not want to "GO EAST". However, most believe Ukraine is sliding in that direction.

(6) FINANCIAL ASSISTANCE--Most of the international financial assistance received by Ukraine in the last ten years, including foreign aid, as well as multilateral and other bilateral programs from international financial institutions, did not deliver the desired results. The same can be said about financial assistance to Russia and many other countries of the former USSR. Instead of helping to develop democracy and a market economy, these substantial funds helped the same power structures stay in control, and institutionalised a long-term dependency system similar to welfare.

(7) U.S. POLICY TOWARDS UKRAINE.....U.S. policy towards Ukraine is not well defined, and certainly not well communicated or understood by Ukrainians, Russians, or even American and Western business people working in Ukraine. The U.S. policy must begin with the recognition, at the highest levels of the U.S. government, of the critical strategic importance of Ukraine to the National Security interest of the United States. Therefore, a long-term, unwavering commitment to bring democracy and a market economy to Ukraine is needed today by the United States in policy and action. Only in this way can Ukraine be truly independent and provide stability in Central and Eastern Europe.

(8) COALITION WITH WESTERN EUROPE.......The approach recommended for the U.S. is also very critical for countries in Western Europe; therefore, a strong coalition must be built in the West, with leadership from the U.S., to bring change, independence, economic freedom, democracy, liberty and the protection of human rights to Ukraine.

(9) UKRAINE IS READY.......Ukraine is ready for this change now. The actual influence and leverage the United States has in Ukraine with Ukrainian people, businessmen, and most politicians significantly exceeds the perception of the U.S. government, and therefore remains largely under utilized. This must be changed to help Ukraine move through this "Breaking Point" in a decisive fashion, and become a strong, democratic, prosperous, independent nation.

SigmaBleyzer plans to be back in Washington, D.C. again soon meeting with political, business, and other leaders in Washington, D.C. concerning SigmaBleyzer's views on the Ukrainian crisis and their recommendations for immediate action by the U.S. government, U.S. businesses and others involved in promoting democracy and a market economy in Ukraine. SigmaBleyzer believes a strong coalition of U.S. leaders, businesses, and organizations must be encouraged to work together to push a new action plan for Ukraine forward as rapidly as possible.

E. Morgan Williams,
President ArtUkraine.com
Ukraine Market Reform Group
Washington, D.C.
703 753 8843 (USA)
E-Mail: Morgankiev@yahoo.com