Draft Law of Ukraine

"On State Support of Export Insurance and Crediting"

This draft provides for the following support:

• to introduce partial compensation of percentage rate for the account of the state budget for credits rendered to Ukrainian producers and exporters for execution of export transactions;
• to support Ukrainian producers through partial compensation for the account of the state budget of percentage rate on credits provided to foreign buyers under their obligation to buy goods made in Ukraine.
• to establish system for guaranteeing invariability of proposals of Ukrainian producers during their participation in tenders held abroad;
• to establish system of export credits insurance against commercial and non-commercial risks;

In accordance with this draft the Cabinet of Ministers of Ukraine is granted the right to support other types of export insurance and crediting.

This draft defines a number of significant terms, such as, in particular: "export", "Ukrainian exporter", "Ukrainian goods", "Ukrainian producer". For example, Ukrainian goods shall be understood as the goods originated in Ukraine; Ukrainian producer, according to this draft, shall be understood as the business entity producing Ukrainian goods. Proceeding from these definitions, state support shall be rendered to all producers of Ukrainian goods irrespectively of the fact who are their founders. So, the draft, while defining concepts, does not discriminate any foreign investors as to the support of export.

This draft provides for stimulation of export credits provision through partial compensation of percentage rate from the state budget funds. The Cabinet of Ministers of Ukraine shall establish the procedure of partial compensation. Taking into account the fact that state budget funds are limited, it is rather doubtful that the state will be able to compensate rates of all export credits.

This draft does not stipulate which exporters from the available may enjoy such support and how they will be selected. Proceeding from the fact that this draft determines only general principle for rendering state support of export crediting and insurance to Ukrainian producers mainly for manufacture of highly-technological products, this draft may become an instrument to support not all the exporters, but only those close to the government. The negative aspect of such, in fact, addressed support of individual exporters may be application of compensatory measures by countries-importers in compliance with WTO Agreements.

According to this draft Ukrainian Export Development Corporation (hereinafter - corporation) will be set up to provide credit and insurance support. This corporation will incorporate public joint stock companies whose control stock is owned by the state. This draft specifies that the Cabinet of Ministers shall determine legal entities to be incorporated in the Corporation and authorize the insurer to execute export insurance. That is, this draft envisages the possibility of export insurance support from the part of only one insurer. This, in its turn, may result in the situation when such authorized insurer will support only exports of some enterprises.