Ukraine Urged By OECD To Step Up Economic Reform

PARIS, France -- The Organisation for Economic Cooperation and Development issued a highly critical report on Ukraine's economy for 2007, saying economic reforms are lagging behind its neighbours and the growth of recent years is threatened.

Angel Gurría, Secretary-General of the OECD
In particular a lack of reform is discouraging foreign investment in the ex-Soviet republic, the report said.

'A number of factors that have underpinned growth since 1999 have exhausted, or will soon exhaust, their potential,' the OECD warned.

'One of the major disappointments of Ukraine's performance to date has been its relative failure to attract foreign direct investment,' the report said, noting that the stock of foreign direct investment per capita was 16 pct of the level in Poland.

'Entrepreneurs face very high levels of legal, regulatory and policy uncertainty, making any long-term undertaking highly risky. The uncertainty and unpredictability of state action stem in many cases from a lack of transparency. These factors in turn fuel widespread corruption.'

The report also warned of an over-reliance on energy-intensive industries, a reminder of the country's heavy reliance on Russia as an energy supplier.

Greater exchange rate flexibility is also needed as 'a first step in a phased transition towards an inflation-targeting regime,' the report said.

Source: Forbes