KYRGYZSTAN: Okays Ukraine Entry to WTO

By IPS Correspondents Reprint | | Print |

Kuban Abdyman

BISHKEK, Nov 19 2007 (IPS) - With an eye on admission into the World Trade Organisation (WTO), Ukraine has repaid 27.3 million dollars owed to Kyrgyzstan as outstanding ‘state debt’ incurred in the years up to the collapse of the Soviet Union in 1991.

Ukraine had resisted the payment, and in long drawn out negotiations, contested Kyrgyzstan’s claim that the money was owed by the government. The debt, it repeatedly insisted, was owed by Ukrainian business enterprises towards their Kyrgyz partners.

Moreover, it was accumulated during the Soviet period, and the present government was under no obligation to meet the financial obligations of the previous regime, Ukrainian authorities had argued.

Kyrgyzstan was able to get its ways in this issue because of membership in the WTO. A member since 1998, it is the only CIS state in the world trade body apart from Latvia, which was admitted at the same time, and Georgia two years ago.

Russia and Ukraine, with the biggest economies among CIS states, have tried to join the WTO but disagreements with Georgia and Kyrgyzstan respectively have come in the way.

Now, Ukraine has settled its outstanding dues with Kyrgyzstan. Both ministries of foreign affairs and finance were involved in the long, and very difficult negotiation process. The talks conducted in the capital cities, Kiyev and Bishkek, stretched over more than one year.

Kyrgyzstan is a small Central Asian state with a population of 5 million and a weak economy. On gaining independence it was saddled with a huge debt of 2 billion dollars owed to international financial institutions and some neighbours from the erstwhile Soviet Union.

The most intensive part of the negotiation between Kyrgyzstan and Ukraine took place in November, with both sides reaching an agreement on Nov. 15.

According to the pact between the two countries, Kyrgyzstan was to receive 27.3 million dollars. The money was paid into the National Bank of Kyrgyzstan. Simultaneously, Kyrgyz officials gave the all-important clearance for the WTO to open its doors to Ukraine.

As the negotiations concluded, the secretary of the Kyrgyz ministry of economical development and trade, Aziz Aliev, announced: “Kyrgyzstan has obtained the reimbursement of the debt from Ukraine and (the) mentioned amount was received by our national bank.”

Later he told IPS in an interview that the final round of negotiations lasted from 6 a.m. on Nov. 13 to late evening on Nov. 15. Ukraine’s foreign affairs minister and Kyrgyzstan’s minister of finance were involved.

In the run-up to the meeting the presidents of both countries had a crucial phone conversation on the issue, and agreed to solve the problem as quickly as possible. “All the questions of debt reimbursement were deliberated on by specialists from the Kyrgyz finance ministry,” Aliev confirmed.

However, the Ukrainian delegation still refuses to endorse Kyrgyzstan’s debt claim. After the signing of the bilateral agreement, Ukraine clarified its official position. “All this money (was) transferred as humanitarian aid and they should be put to use for social development of ordinary people in Kyrgyzstan,” the Ukrainian ambassador to Kyrgyzstan, Vladimir Tyaglo, told the media.

Kyrgyz officials are silent about this assertion. An official, who did not want to be identified, said: “It does not matter how the money is being viewed (in Ukraine). The main thing is that the money was transferred. Chances of getting the money from Ukraine was minimal.”

Most agree that Kyrgyzstan was able to attempt the impossible because of its membership in the WTO. The outcome is being described as the country’s first result of membership in the WTO in nine years.

But an independent economist in Bishkek commented that Ukraine’s public declaration that the money paid to Kyrgyzstan was “humanitarian aid” is a humiliation. “It is not acceptable,” Professor Ailchy Sarybaev at the Humanitarian University in Bishkek told IPS.

“Ukraine did not recognise the transferred money as state debt to Kyrgyzstan. Ukraine has demonstrated its arrogance with the announcement that the money is humanitarian aid. With this step Kiyev has humiliated Bishkek, and we should not allow them this kind of relationship with us,” he asserted.

For Ukraine, the bilateral agreement has cleared all hurdles to its entry in the WTO. It is likely that Ukraine will be announced as a new member of the world trade body before the end of the year.