Maksym Shevchenko (UNIAN)
The format of the Ukrainian trade mission in the
framework of the visit of Ukrainian President Petro Poroshenko to Malaysia and
Indonesia in early August has been updated – representatives of the Ukrainian
business were also involved in talks.
The Ukrainian officials have begun preparations for
this negotiation process in advance, noting the great prospects of cooperation
with the "Asian tigers" for domestic farmers, IT-sector,
pharmaceutical and defense industries. Malaysia and Indonesia, which represent
a new wave of "Asian Tigers" - countries showing strong economic
growth - look as very promising markets, indeed.
At the same time, the economy of Malaysia, a compact
island nation with an area equal to half of the territory of Ukraine, has three
times the size of our economy. Indonesia, being the most populous Muslim
country and the world’s 14th biggest state, has the economy eight times the size
of the economy Ukraine. Geographical remoteness of Ukraine from these countries
should not become an obstacle to the establishment of trade relations – that’s
what Kyiv decided.
The timeliness of the initiative is confirmed by
statistics. Contrary to the general decline of Ukrainian exports in January-May
2016 by 11.5% (mainly due to the Russian trade war), the exports to Malaysia
increased by 5.2% - up to $50 million. Even more showing is statistics for
trade with Indonesia, reporting a boost by almost 500%, to $81 million.
Given the difficult economic and geopolitical
situation, Ukraine is stepping up trade mainly with the EU, due to the DCFTA
but, because of the Kremlin-imposed transit restrictions on the Ukrainian
transit through the territory of Russia, the country reduces its deliveries to
Central Asia.
Under such conditions, the growth of exports to
distant Malaysia and Indonesia, trading with which can’t be affected by Russia,
a generator of war and provocations, is the evidence of economic interests of
businesses of the two countries, which needs to be strengthened with the
signals at the government level.
The nature of
agreements
The first agreement reached during the visit of a
trade mission to Malaysia provides for the avoidance of double taxation. In
particular, the deal sets out how the way the dividends are taxed, as well as
the interest, royalties, income from transfer of property, etc. Individual
terms of taxation of pensions, income of civil servants, artists, athletes and
students are also written down. Thus, the opening of representative offices of
Ukrainian companies in Malaysia and vice versa, as well as the implementation
of trade operations between the two countries will become less costly for
businesses.
In addition, the Malaysian side expressed interest in
the Ukrainian defense industry products, offering state concern Ukroboronprom
to establish joint production of armored vehicles and weapons. "Deputy
Defense Minister of Malaysia Mohd Johari Baharum proposed Ukroboronprom to
cooperate in the production of armored vehicles and anti-tank weapons. Mohd
Johari Baharum noted the high performance characteristics of Ukrainian weapons
and military equipment that Ukroboronprom presented at the exhibition
[international defense exhibition and conference DSA-2016, held April 18-21 in
Kuala Lumpur, Malaysia]," Ukroboronprom reported.
The Ministry of Economic Development of Ukraine
reported on the establishment of cooperation with Malaysia in tourism and
medicine, as well as the transport industry. "Malaysian companies can take
part in the operational management of Ukrainian airports," said Deputy
Minister Yulia Kovaliv. The agreements reached by the Ukrainian delegation in
Indonesia, have become more ambitious – the countries start negotiations on
establishing a free trade area. "We have agreed with President [of
Indonesia] Joko Widodo to begin consultations on a free trade area," said
President Poroshenko following a meeting with the president of Indonesia,
adding that Ukraine was ready to satisfy Indonesia's demand for agricultural
products. "Indonesia is a very interesting market for Ukrainian grain,
corn starch, sunflower oil and other areas," Poroshenko said.
According
to Ukraine’s Trade Representative Natalia Mykolska, four Ukrainian companies
during the visit of the trade mission signed memorandums on cooperation with
their Asian counterparts. "We have in a good sense ‘used’ the president's
visit to promote the interests of our exporters. After all, this is a classic
example, when representatives of business circles interested in export development,
and hence in the economic development of the state, travel as part of the
official delegations," said the Trade Rep.
What can Ukraine sell
The businesses believe that the general prospects for
strengthening the economic relations of Ukraine with the "Asian
tigers" are positive. "Malaysia this year, according to Doing
Business, occupies 18th position in the ranking (out of 189 countries). For
comparison: Ukraine at the moment is only 83rd. If you compare Malaysia with
other Asian countries, it has a certain advantage in the development of the industrial
sector in comparison with its geographic neighbors," Executive Director of
European Business Association Hanna Derevianko has told in the exclusive
comments to UNIAN.
According to her, the developed Malaysian industry can
become a big consumer of Ukrainian products. "Key industries of Malaysia
are engaged in processing oil products, manufacture of rubber and wood.
Besides, a fairly large share has the food industry, given the specificity of
the climatic conditions.
Accordingly, the government’s choice of this vector as
an alternative market for the export of Ukrainian goods and strategic
cooperation is quite reasonable. In addition, Ukraine can be seen as a kind of
hub for the entry of Asian goods into the EU markets in the light of the
Ukraine-EU DCFTA," said the head of the business association. Domestic
producers of fruits and vegetables have already expressed interest in the
Indonesian market. "The existing volume of apple production by domestic
enterprises at the level of 369,000 tonnes is enough to exceed three times the
existing imports of Indonesia.
In addition, Ukraine
exports its apples at a price of $218 per tonne, which is six-seven times lower
than the prices at which Indonesia is buying them on foreign markets,"
Ukrsadprom association said. By the way, as part of a trade mission,
pharmaceutical company Biopharma, the supplier of equipment for filling
stations, oil depots and storage facilities LP Production, IT-company MMI
Group, as well as a manufacturer of fertilizers and insecticides
Spetstechnologia have also signed memorandums of cooperation with the Malaysian
and Indonesian businesses.
According to Mykolska, Ukraine can significantly
increase the export of high-tech products to Malaysia and agricultural products
– to Indonesia. "Malaysia is quite actively purchasing innovation and
technology. Both goods and services...
Although geographically, Indonesia is a country in
Southeast Asia, its potential is the market of 261 million people, feeding whom
with rice is a difficult task. Solving this problem with the help of a country
with a powerful agricultural potential would obviously be easier," said
the trade representative. In turn, Ukraine can increase the volume of imports
of high-tech products made in these countries, including home appliances and
means of production.
And this is especially important given
undercapitalization of the Ukrainian business. Taking into account the interest
of Malaysia and Indonesia in the European market, as well as significant demand
for agricultural products and willingness to buy high-tech products, economic
cooperation with these countries could become strategically important for
Ukraine. Interest in the potential of cooperating with the "Asian
tigers" also increases the size of their markets – in January-May 2016,
the country's imported goods were worth $318.9 billion.
Thus, annual imports of Malaysia and Indonesia outruns
that of Canada. Therefore, if Ukraine manages to take a significant share of
attractive markets, this will more than compensate for the loss of the markets
in Central Asia because of the "fraternal assistance" from Putin's
Russia.
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