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63
O. Bezzubchenko
FEATURES OF UKRAINE'S PARTICIPATION IN THE WORLD MARKET FOR
GOODS AND SERVICES.
The current state of the global market for goods and services is searched in the article. The place Ukraine on the world economic scene, the structure and dynamics of foreign trade relations with countries in the world are defined. Particular attention is paid to transformation the existing structure of exports of goods and services in Ukraine
УДК 339.942(477:564.3)
Y. Dubenyuk BACKGROUNDS OF THE ECONOMIC COOPERATION BETWEEN UKRAINE AND THE REPUBLIC OF CYPRUS
The article is devoted to systematization and characteristics of the main pre-conditions of bilateral economic relations realization between Ukraine and the Republic of Cyprus, much attention is paid to the assessment and the comparative characteristics of the social and economic indices of the national economic development of the countries.
Key words: economic relations, natural, demographical, historical, economic and political pre-conditions.
Cyprus is considered as a strategic economic partner of Ukraine not only due to some common features in economic development, but also taking into account some events in historical, ethnological, cultural and other spheres. Now the Republic of Cyprus is one of the main investors of the Ukrainian economy, having invested about 11 billion dollars, creating about 3 thousands enterprises, providing the jobs for several thousands of Ukrainians. Ukraine also has invested about 6,5 billion dollars in Cyprus and the highest dynamics’ indices of the Ukrainian investments into Cyprus economy have been achieved within the last several years.
As for another sphere of the cooperation between the countries - foreign trade -unfortunately the volume of trade turnover between Ukraine and the Republic of Cyprus is only about 300 million dollars, which doesn’t correspond to the economic potential of both countries. So many attempts should be made in order to increase this amount and to make the foreign trade relations more effective for both countries, to make our goods and services more competitive not only on the Cyprus market, but also on the market on the whole European Union as well as to diversify the structure of merchandise and service trade of Cyprus. This is also one more reason to make the relations between Ukraine and the Republic of Cyprus more dynamic. In 2012 Cyprus will be the Head Country in the European Union Council and Ukraine can get use of that event for making its joining to the EU closer and faster. Also for this aim the possibility of the Bilateral Intergovernmental Commission creation is discussed now. So the investigation of the main elements of the potential of the above-mentioned countries for working out the further directions of economic relations’ realization is necessary and in time.
The main aspects of the Ukrainian economic relations realization are investigated in the papers of such national economists and scientists as Makogon Y., Kozyk V., Filipenko A., Krovyak A., Getman O. and others. But the peculiarities of bilateral economic relations of Ukraine exactly with the Republic of Cyprus as one of the strategic partners of the country are not of so much attention in the national scientific research papers.
The research paper is aimed at working out the ways of expanding the economic relations between the Republic of Cyprus and Ukraine on the basis of analysis of their realizations’ pre-conditions. In order to achieve this purpose it’s necessary to solve the following tasks: to characterize the natural resources potential of the counties, to make the comparative assessment of the economic development indices of the Republic of Cyprus and Ukraine and to point out the political backgrounds for further economic relations’ realization.
The share of the Ukrainian economy in the world economy is considered to be only about 0,2 per cent. But the economic potential of Ukraine is rather big. The country has the 6th place in the rank of the European countries after Russia, Germany, France, Italy and Great Britain. It should be resulted in the high position of Ukraine in the international territorial division of labour, but in real the share of Ukraine in the volumes of world trade is not much significant. The opportunities for international cooperation, foreign investments activity haven’t used. But at the same time much of the Ukrainian goods and services are rather famous and popular in many countries, for many regions and countries Ukraine is considered to be important partner in the economic cooperation. The European Union as a whole and the Republic of Cyprus in particular are the strategic partners of our country. So it’s necessary to make the detailed assessment of foreign economic relations between the countries in order to point out the perspective ways of their improvement and activization. Before providing analysis of bilateral trade and investment activity of Ukraine with the Republic of Cyprus it’s desirable to throw light upon the pre-conditions of cooperation between the countries. They can be divided in following groups: natural, demographical, historical, cultural, economical and political (Scheme 1.).
Scheme 1. Pre-conditions of the Ukrainian-Cyprus Economic Relations
All these pre-conditions are also interconnected as it can be from the scheme.
Making the general characteristics of each item for the Republic of Cyprus and Ukraine it’s necessary to point out the following. As for the natural resources, Ukraine is much richer than the Republic of Cyprus. The main natural resources of the Republic of Cyprus are copper, pyrites, asbestos, gypsum, timber, salt, marble, clay earth pigment.
As for Ukraine it is rich in coal, iron ore, manganese (70 per cent of the former USSR), primary kaolines (about 60 per cent) nickel and uranium, and others. The reserves of sulfur are the largest in the world, the reserves of mercury ore are the second largest. Also more than 5% of world reserves (31 per cent of the former USSR) of iron ore are concentrated in Ukraine. Ukraine’s total reserves of iron ore are estimated at 27,4 billion tons and composed
of rich (1,9 billion tons), as well as of poor ferriferous quartzes (24,1) and brown iron ores (1,4). 60 of the 83 iron ore deposits included in the estimate, are in the Kryvy Rig basin, whose reserves equal 18,7 billion tons. Ukraine’s second largest iron ore deposit is the Kremenchug basin explored in 1924-1928.
Ukraine ranked first in the former USSR as to manganese ore reserves. These ores are widely used in ferrous metallurgy. The Velyky Tokmak (Zaporizhya oblast) and Nikopol (Dnipropetrovsk oblast) deposits are among the world’s largest deposits of manganese ores. Their total reserves stand at 2,2 billion tons. Manganese ores are also deposited in the Carpathians. The reserves are estimated at 9,1-30,7 million tons. Small copper ore deposits are located in the Volyn and Podillya regions. Their commercial reserves are not large, compared to those the Republic of Cyprus has.
Titanium ores have been explored in the area of the Ukrainian crystalline shield. One of the major deposits is the Irshan deposit (Zhytomyr oblast). A titanium ore deposit in Dnipropetrovsk oblast with virtually unlimited reserves, is of the most practical importance. Titanium is known to be used in building rockets, submarines, making artificial rubies, sapphires, synthetic rubber, etc.
Ukraine has raw materials for aluminum production: boxites, alunites and nefelines. Small reserves of mercury are available in the center of the Donbas and in Transcarpathia; of chrome in the Buh area; of barite in Transcarpathia. Polymetalic ores occur in Transcarpathia.
Also, Ukraine has a large supply of table and potash salt, cement raw material and other minerals. The largest deposits of rock salt are concentrated in the Donbas where, at relatively low depths, are resources of very high quality (Slovyansk, Artemivsk). As for the quality and quantity of the resources above-mentioned Ukraine stands out not only among the European countries, but countries of the world, and can export many of those resources. About 25 per cent of all the cocking coal of the former USSR is concentrated on the Ukrainian territory. Coal is the main fossil fuel of Ukraine. It is mined in the Donetsk and Lviv-Volyn basins. Donetsk Basin (Donbas) is the largest in Ukraine. It is located on the territory of Donetsk and Lugansk oblasts. The area of the basin is about 60,000 sq. km. (50,000 sq. km. within Ukrainian border). Uranium ore that is used in nuclear power plants, is mined in Dnepropetrovsk and Kirovograd oblasts. Ukraine is rich in building materials (granite, marble, labradorite, chalk, marl, sandstone). The largest reserves of granite and labradorite are found in Zhitomir oblast.
Ukraine’s territory is promising in terms of gold mining. Gold reserves are believed to be in three large geological structures: the Carpathians, the Ukrainian crystalline shield and the Donets chain of hills.
There are also oil and gas deposits in the country, but their reserves are not significant (the reserves of these fossil fuels were partly depleted during the Soviet period). The shelves of the Black Sea and the Sea of Azov are as promising in terms of geological prospecting. Large and commercially accessible mineral and raw material resources are concentrated in those areas. According to expert estimates, the efficiency of production of many of them at present can be already very high. Discovered here are 11 natural gas fields, some 50 promising oil fields, iron ore deposits, placers of heavy metals, etc. The Sea of Azov is most promising in terms of oil prospecting. Ground clay deposits saturated with gas hydrate, will be of great importance. Pearl production in the coastal area of the Crimea (small pearls are found in some mussel shells here, and there is an estimated 100 thousand tons of mussels) gives promise too.
The capacities for effective prospecting and exploration have not been exhausted in Ukraine. Practically all regions of Ukraine have fair prospects for prospecting and exploring new mineral deposits. The most promising in this regard are the northwestern, central and southeastern parts of Ukraine i.e. areas where the Ukrainian crystalline shield ingresses or lies
close to the surface. Of great economic importance here can be deposits of many metals, above all nonferrous, including gold.
Another issue of the analysis for the backgrounds of the economic cooperation between the countries is the climate. The Republic of Cyprus has Mediterranean one with hot dry summers from June to September and mild, wet winters from November to March which are separated by short autumn and spring seasons of rapid change in weather patterns in October, April and May. It allows Cyprus to develop summer tourism sector (3 “S” - Sea, Sun and Sand) almost all the year and to get much incomes of that. Besides, during the coldest months snow lies in considerable depth for several weeks and also attracts a certain amount of tourists for skiing. But of course comparing to Ukraine, the number of winter tourists are not so much. As for Ukraine it has 2 climatic zones - moderate that is the most favorable both for industrial location and for the agricultural development and Mediterranean subtropics in the southern shore of Crimea that is most favorable for the tourism development.
Sunshine in the Republic of Cyprus is abundant during the whole year, particularly from April to September when the daily average exceeds 11 hours. It makes possible to use the sun for energy producing as an alternative way. Ukraine also has the possibility to use the sun energy, but only on southern part of Crimea. On the other hand among the alternative ways of electricity production in Ukraine the energy of wind is very important and perspective.
Another issue very important for the countries’ tourism sector development is availability of recreational resources that can be use in the treatment such as mineral water and mud. As for Ukraine mineral waters may become an important source of thermal power in Ukraine. The mineral waters that Ukraine has have varied chemical compositions and are known for their medicinal properties. Mineral waters are available in all regions of Ukraine. They are used everywhere as table water and for medical treatment. Of particular value are medicinal mineral waters. Well known in the world are Ukrainian medicinal mineral waters, like Naftusya. Minearal water deposits are located at Morshyn, Oleska (Lviv oblast) Myrgorod (Poltava oblast), Slovyansk (Donetsk oblast), in areas which are adjacent to the Black Sea and the Sea of Azov and located in Odessa, Mykolayiv, Zaporizhya and Donetsk oblasts, and in the Crimea. The Carpathian region has a large supply of carbonaceous mineral water of Narzan type. In some areas, these types of water have a high iron, silica acid and arsenic content. Large radon water supply is characteristic of many regions of the country where the egress of the Ukrainian crystalline shield is. The levels of this water stretch from the country's southwest across its central part and as far as the Sea of Azov. In some areas (Khmelnyk, Vinnytsya oblast) the content of radon is very high. Rodon water is also produced in Zhytomyr, Myronivka, Bila Tserkva, Polonne (Khmelnysky oblast) and some other part of Ukraine. This water is used in medicine. Ukraine has a large supply of sulfide water. The Precarpathia and Poldillya areas have the largest supply of this type of mineral water. Here it is used for medical purposes at such resorts as Shklo, Nemyriv, Lyubin Velyky (Lviv oblast), Cherche (Ivano-Frankivsk oblast). It is very likely that this water should be also in the Black Sea region. Ukrainian iodic, bromide and iodic-bromide waters nave valuable medicinal properties. Their supplies are concentrated in Precarpathia, Carpathiaan region, Black Sea region, Sea of Azov region and in the country’s east.
As for the medical mud (silt, peat) it is also among Ukraine’s mineral and raw material resources. The largest reserves of this mud are in Odesa oblast (solt lakes Alibei, Kuyalnyk, Shagani, Khadzhibei); in Mykolaiv oblast (Tyligul, Berezan); Kherson oblast (Genichesk, Salkov, Krugle), Dnipropetrovsk oblast (Solony Lyman lake), Donetsk oblast (Ripne, Slipne lakes), in the Crimea (Kizil Yar, Uzungar, Tobechits, Chokrak lakes). Peat mud is widespread in Ukraine. Medicinal peat mud is located in the northern and central parts of the country. This mud is used at resorts Shklo, Morshyn (Lviv oblast), Myrgorod (Poltava oblast). The waters of the Black Sea and the Sea of Azov have medicinal properties. This water
(particularly the Black Sea) is highly mineralized.
One more item of the natural resources that is of particular importance for Ukraine is the soils. Ukraine has a great variety of soils - about 650 types. Ukrainian soil science has determined and studied the characteristics of 1,217 soil varieties. And the territory of Ukraine is relatively small and does not have sharp natural contrasts. Among the great variety of Ukrainian soils, there are seven major types - podzolic and turfy; brown forest and brown-podzolic; gray-forest; black-earth and chestnut-colored; brown and marshy; malty turf. Each of them in turn consists of a number of subtypes. Turf-podzolic and turfy soils occur mostly in the northernmost part (Polissya area) of Ukraine. In Ukraine, soils of medium and low degree of podzol are widespread. Turf-pinery soils occur in areas with high moisture content and grown with pine forests, as well as on sandy terraces of creeks. Typical of these soils (in the absence of certain agrotechnical measures) is a low content of humus, adverse physical properties, low crop capacity. In the Polissya area (specifically in its western part), where there is the egress of chalky rock, one the most fertile soils occur: turf-carbonate. Brown-forest and brown-podzolic soils occur in the forest areas of the vertical zones of the Carpathians and the Crimea, in the Carpathian foothills and the Transcarpathia, as well as (rather seldom) in the Opillya area. Podzol-brown and brown-podzolic soils are widespread in the area of the Carpathian low hills and foothills. Intrinsic in them is high acidity, as well as a high exchange aluminum content. Gray forest soils are to be found in the forest-steppe zone and the southern parts of the Polissya area. Widespread in Ukraine are black-earth and brown soils, the former ones being most fertile and occupy the largest area in Ukraine (nearly 60% of all farmlands). They have a high humus content (4-9%), moderately moist. The layer thickness is 1-1,5 meters. Brown and red-brown soils occur in the south and the subtropical areas (on the southern side of the main range of the Crimean Mountains). The humus content is 3-3,5%. Meadow and marshy soils do not in full measure come within the zonal distribution principle, although the best climatic conditions for their formation and functioning are exactly in areas with sufficient moister content: the western and northern parts of Ukraine. Salinity is typical of meadow and marshy soils in steppe areas. The most frequent among marshy soils are: marshy-mineral, uliginous-clay and humus-clay subtypes, as well as subtypes with layers of peat of different thickness (turf-clay, peat-clay and peatbogs). Peat layer thickness may vary (10-500 cm and more). Alkali soils are widespread in southern Ukraine. Saline lands occupy a smaller area in Ukraine. They have a much lower salt content than alkali soils. Black earth and gray forest-steppe soils, as well as brown-earth soils occur in the mountain area of the Crimea. The southern steep slopes overhanging the Black Sea are covered with brown and brown-red soils. Generally, Ukraine’s soils are characterized by high natural fertility. Prevalent are varieties of black-earth soils the most fertile of them being typical black-earth, regular black-earth and southern black-earth soils (they account for 18,1%, 27,7% and 8,9% of the total area of the country’s farmland). Some 10% of farmland is occupied by subpodzolic and regarded black earth; some 6%, by black earth and turf soils on solid rock, black earth on loamy-sand and sand rock, and meadow-black earth soils. Large areas are taken up by turf-subpodzol (nearly 7%), subpodzolic (5%) and gray-forest (6,7%) soils which are characterized by relatively high natural fertility. Brown (some 9%), meadow (2%), turf (1,3%) and other soils also occur. Given scientifically-based farming, Ukraine’s soil cover makes for efficient agricultural development, high agricultural output and excellent stable harvests.
The soils of Cyprus are not so much good for agriculture, but still the farmers explore new technologies to get maximum effect of their use in this sector. The island’s major soil types consist of imperfect, gravelly lithosols found in the Troodos mountains and agriculturally productive vertisols located in the Mesaoria Plain and along the southeastern coast. Other, less-productive soils include solonchaks and solonetz soils. These latter are
found only in isolated saline pockets throughout the island.
The comparative characteristics of the natural resources of the countries are shown tin the Table 1.
As for the characteristics of the economic potential for cooperation between the countries it’s necessary to underline the prior role of heavy industry for the Ukrainian economy and the tertiary sector for the Cypriot one. One of the main and export oriented industries of Ukraine is mining-metallurgical one, concentrated in the eastern part of the country. It is considered also as one of the biggest on the European territory. It produces ferrous-metals, iron and steel in large quantities. In the volume of Ukrainian GDP mining industry accounts for 5,8%.
Table 1
Comparative Characteristics of the Ukrainian and Cyprus Natural Resources ___________________________and Geographical Conditions_______________________________
Characteristic Ukraine Cyprus
Territory, sq km 603 628 (0,44% of the world territory) 9 251
Neighboring countries Poland, Belarus, Russia, Slovakia, Hungary, Moldova, Romania (all land border) Egypt, Syria, Turkey, Greece (all by sea)
Population, ‘000 45778,5 803,8
National structure of population 77,8% - Ukrainians, 17,3% - Russians, 4,9% - others 75,5% - Greek Cypriot community, 10,0% - Turkish Cypriot community, 14,5% - foreign national residing in Cyprus
Official language Ukrainian Greek
Soils Chernozem (black topsoil) Solonchaks and solonetz
Availability of the sea + Black Sea, Azov Sea + Mediterranean Sea
Coastal line, km 2782 648
Rivers About 73 thousands of rivers, the main are Dnepr, Desna, Dniester, Siversky Donets, Southern Buh, Prypyat, Dunai There’re no constant rivers, the largest is Akaki with its inflows Pedieos and Yalias
Relief Flat terrain with small hills Indented and rocky with a fertile plain
Mountains Crimean (south) and Carpathian (west) Mountains Troodos massif
Biological resources 20 per cent of the territory are the forests 42 per cent of the whole island (not the Republic of Cyprus)
Climate Moderate (the plains and both the mountain ranges) and Mediterranean subtropics (the southern shore of Crimea) Mediterranean
Mineral resources Coal, iron ore, manganese, nickel and uranium, building materials (granite, marble, labradorite, chalk, marl, sandstone) and others Copper, pyrites, asbestos, gypsum, timber, salt, marble, clay earth pigment
Alternative ways of electricity production Wind (eastern part), sun (southern part of Crimea) Sun
Deficit resources Oil, natural gas and the forest resources Oil, natural gas, all the mineral resources
As it has been already noticed, the mining industry of the Republic of Cyprus has been on the decline (practically non - existent) for the last three decades. The only mining activity is the Skouriotissa Copper Mines where by the application of the leaching - SX - EW method is succeeded the production of high purity copper cathodes (99,999%). Concerning the
prospecting of metals a great interest was shown for copper and precious metals, especially gold. There is extensive quarrying of rocks and industrial minerals in Cyprus. There are about 230 quarries producing of various materials. They produce for local use havara, sand and gravel, aggregates (from limestone and diabase), building stone, limestone, clay, gypsum etc. and for export building stone, gypsum, bentonite, umber and ochre etc. There is also local production and exports of quick and hydrated lime, portland and other types of cement, gypsum plasters etc. There is also great interest from foreign companies for prospecting of gypsum. The average annual production of various materials is shown in metric tones on the Table 2. Concerning the durable goods manufactured in Ukraine they mainly include mining and metallurgical equipment, diesel locomotives, and tractors. Ukrainian chemical industry produces large amounts of coke, mineral fertilizers, and sulfuric acid. Ukrainian food-processing industries yield granulated sugar and meat, fruit, and dairy products. Light industry and consumer goods sectors of Ukraine are underdeveloped in comparison to its heavy industry and agriculture.
Table 2
Average Annual Production of Natural R Resources of the Republic of Cyprus
Natural resource Volumes, metric tons
Cooper 3000
Aggregates 10000000
Filing materials 2000000
Limestone for cement 2000000
Clay for cement 400000
Clay for bricks and tiles 350000
Building stone 50000
Crude dimension stone 30000
Bentonite 170000
Umber 6000
Marble 2000
Lime 12000
Gypsum 300000
As for the Republic of Cyprus the industrial sector is represented by the ship refurbishing and repairs, cement manufacturing, gypsum production, beverage processing, metal products, light chemicals, paper and wood. So as we can see, the level of the economy diversification is higher in Ukraine and it can be its advantage in foreign economic relations improvement with the Republic of Cyprus.
The economic indices for the comparative analysis of the countries are shown in the Table 3.
The economy of Cyprus can be generally characterised as small, open and dynamic, with services constituting its engine power. Since the accession of Cyprus to the European Union on the 1st of May 2004, its economy has undergone significant economic and structural reforms that have transformed the economic landscape. Interest rates have been liberalized, while price controls and investment restrictions have been lifted. Moreover, other wide-ranging structural reforms have been promoted, covering the areas of competition, the financial sector and the enterprise sector. Full liberalization of the foreign direct investment regime in Cyprus has also been implemented. Moreover, a tax reform was implemented in 2002, which significantly lowered the tax rates.
The tertiary or services sector is the fastest growing area and accounted for about 81% of GDP in 2010. This development reflects the gradual restructuring of the Cypriot economy from an exporter of minerals and agricultural products in the period 1961-73 and an exporter of manufactured goods in the latter part of the 1970s and the early part of the 80s, to an international tourist, business and services centre during the 1980s, 1990s and the 2000s. The
secondary sector (manufacturing) accounted for around 17% of GDP in 2010. The primary sector (agriculture and fishing) is continuously shrinking and only reached 2% of GDP in 2010.
Table 3
Main Economic Indices of Ukraine and the Republic of Cyprus
Characteristic Ukraine The Republic of Cyprus
GDP, million euro 103922,7 17465,1
Rate of growth of real GDP, % +4,1 +0,8
GPD per capita, euro 2284 21671
Unemployment rate, % 8,0 6,2
Rate of inflation, % 9,1 2,6
Structure of economy Industry (with construction) - 39,1%, Agriculture - 7,2%, Services - 53,7% Industry (with construction) - 16,4%, Agriculture - 2,3%, Services - 81,3%
Structure of employment Industry (with construction) - 23,0%, Agriculture - 15,9%, Services - 61,1% Industry (with construction) - 19,3%, Agriculture - 7,4%, Services - 73,3%
Structure of industry (data for 2009) Manufacture of metal products - 21,3%, Electricity, gas and water supply - 17,4%, Manufacture of food products -15,6%, Manufacture of machinery-11,4%, Mining and quarrying - 11,4%, Others - 22,9% Manufacture of food products - 25,0%, Electricity supply - 15,0%, Manufacture of other non-metallic mineral products - 12,7%, Manufacture of beverages - 5,5%, Manufacture of wood and of products of wood, except furniture - 4,6% Mining and quarrying - 1,9%, Others - 35,3%
Foreign trade turnover 112170 million USD 7605,2 million euro
Export 51430 million USD 1144,3 million euro
Import 60740 million USD 6460,9 million euro
Main trade partners Russia, Germany, China, Turkey, Italy, Poland Greece, United Kingdom, Russia
Public debt, million euro 30710,9 10618,48
Public debt, % of GDP 30,5 60,6
Foreign public debt, million euro 17261,5 5615,06
Foreign public debt, % of GDP 16,6 32,15
Deficit of the budget (per cent of GDP) 0,6 5,3
Rank in the GCI 89 40
The economy of Cyprus is open, as shown by the share of total imports and exports to GDP being around 91% in 2010. The major trading partners of Cyprus are Greece, United Kingdom and Russia. The private sector, which is dominated by small and medium-sized enterprises, has a leading role in the production process. The Government’s role is mainly to support the private sector and regulate the markets in order to maintain conditions of macroeconomic stability and a favourable business climate, via the creation of the necessary legal and institutional framework and secure conditions of fair competition.
During the last years, Cyprus has exhibited rising living standards, as shown by the high level of real convergence with the EU. The per capita GDP was standing at around 98% of the average for the EU 27 in 2009. However, the international economic crisis has had a major
impact on world growth and on EU. Cyprus weathered the storm reasonably well and was relatively less affected from the crisis, compared with the other European economies. This can be partly explained by the strong and healthy banking system of Cyprus, which had very limited exposure to toxic products.
The crisis primarily affected the construction, real estate and tourism sectors of Cyprus. Given the deceleration of the economy, the Government of the Republic of Cyprus adopted a number of fiscal measures to support the real economy, which were in line with the wider European effort for economic recovery. The measures targeted the tourism and construction sector, which are the areas hit the hardest. These measures were implemented both in 2009 and 2010. Despite the deceleration of the economy in 2009, Cyprus exhibited positive economic growth in 2010, of the magnitude of 0.8%. The services sector, including tourism, was the main driver of growth. However, it is emphasised that there are still risks for the economy, as there is still a lot of uncertainty in the world economy.
The global economic crisis has also affected the labour market in Cyprus. In numbers, the unemployment rate reached around 7.0% in 2010, compared to 5.3% in 2009. The “Prevention - Action Plan” promoted jointly by the Ministry of Labour and Social Insurance and the Human Resources Development Authority in response to the crisis, primarily focused on labour market measures, which included the provision of training programmes and job placements for the unemployed, recent graduates, and those with weak job security during the economic downturn with the aim to mitigate the pressure on the labour market.
The economic crisis, unavoidably, affected public finances, which deteriorated markedly in 2009, reasons being the temporary fiscal stimulus measures adopted by the Government, in order to mitigate the negative impact of the crisis on the Cyprus economy and the significant deceleration of the economy. As a consequence, fiscal deficit was around -5.3% of GDP and public debt increased to around 61% in 2010. It is noted though, that the target of a fiscal deficit of 6.0% of GDP set by the EU for 2010 was overachieved and that public debt is well below the average of EU.
The overriding objective of the economic policy of the Government of Cyprus is to enhance long-term growth and the standard of living of all citizens, maintain macroeconomic stability and implement structural reforms which improve the functioning of the market mechanism. Cyprus’s accession in the euro area on January 1st 2008, had the immediate result of losing its monetary policy autonomy. The Central Bank of Cyprus has become part of the European System of Central Banks (ESCB), which, together with the European Central Bank (ECB), conducts monetary policy for the whole euro area, based on conditions prevailing in this region. Fiscal policy is geared towards consolidating public finances, with a view to reducing further public debt and thus addressing the long-term sustainability of public finances. Particular emphasis is placed on the need to curtail current expenditure and restructure public spending, in favour of capital expenditure, research and education, which can boost the economy’s growth potential. Emphasis is also attached to targeted social spending. The fiscal policy is based on four key pillars:
• The implementation of a Medium-Term Budgetary Framework (MTBF), institutionalising expenditure rules, giving more independence to spending ministries and, at the same time, increasing their accountability for achieving important quantifiable targets.
• The reform of the social welfare system, in favour of those who are in greater need.
• The modernisation of the public sector, which will result in leaner and more productive public services.
• The improvement of tax collection, within the present system, by focusing on tackling tax evasion and improving tax administration.
The promotion of structural reforms will enable Cyprus to develop a robust and flexible economy, exhibiting the desired resilience to external shocks, while enhancing the efficiency
of the market mechanism and raising the production potential of the economy. The programme of structural reforms, outlined in detail in the Lisbon National Reform Programme, aims at boosting productivity and competitiveness that will deliver high growth and living standards for the citizens of Cyprus. Ongoing reforms are the following:
• Reforms in the labour market, aiming at boosting supply of labour among females and address the high gender pay gap, increase employability and labour force adaptability— particularly through lifelong learning—and raise the employment rate. Enhancing physical and human capital is also key in increasing productivity and boosting the economy’s potential growth. Development of human capital is especially important in an economy, dominated by the services sector.
• Furthermore, reforms are being carried out, aiming at strengthening competition, especially in the area of professional services, improving the overall business climate and streamlining the regulatory framework and cutting red tape.
• Reform of the social security and of the heathcare provision systems. Both are crucial for tackling the long-term sustainability of public finances.
• Implementation of policies aimed at upgrading the physical infrastructure and improving the functioning of network industries will be intensified, taking into account environmental concerns.
A number of challenges must be addressed in the coming years, such as productivity improvements which, so far, have not been impressive. In addition, the heavy administrative burden of regulations must be reduced, the use of modern technology and equipment must be further encouraged and more resources must be devoted to research and development and innovation. Cyprus also faces a major challenge of achieving fiscal consolidation in the short term (given the deterioration of the public finances due to the global economic crisis) and long-term sustainability, in view of the budgetary impact of an ageing population. The projected demographic changes, with the old-age dependency ratio doubling over the coming decades in the EU and Cyprus, have led to growing concerns on the long-term sustainability of the public finances.
Moreover, due to the global economic crisis, Cyprus faces a number of challenges in the tourism and construction sector, given that these areas depend on a large scale on foreign demand. The Government of the Republic of Cyprus has adopted specific measures to support these two sectors, but further measures are envisaged to be employed, such as the enrichment of the tourist product, via the building of new marinas and golf courses.
So taking into account the characteristics of each issue of Ukraine and the Republic of Cyprus we can determine the pre-conditions of the countries’ cooperation. The natural preconditions of cooperation between Ukraine and the Republic of Cyprus are the following. Ukrainian agricultural and climate peculiarities allow it to export much of agricultural products; moreover about 300 million dollars are invested by Cyprus into the Ukrainian agricultural branch. From the other side natural resources allow both Ukraine and Cyprus to develop the tourism sphere, but the spheres of the countries’ specialization can be different. Ukrainian climate and tourism potential make possible to develop not only the summer kinds of tourism, but also winter (skiing), and many kinds of tourism, that are not depended on the season (recreational, sport, green, scientific, business etc.). So from this point of view Ukraine can be interesting tourism direction for the Cypriots and nowadays Cypriot businessmen successfully invest into the tourism sphere of Ukraine. Cyprus is becoming more and more interesting for the Ukrainian tourists and according to the latest data Ukraine is now on the 23rd position of the Cyprus rank as a tourist generating country. More detailed analysis of the international tourism cooperation will be made later.
The demographical and historical pre-conditions of the Ukrainian and Cyprus cooperation are much interconnected. Huge Greek Diaspora lives now in Ukraine, and also
much Ukrainian, especially from the eastern part of it live and work in the Republic of Cyprus. So this fact improves the relations between countries both at the private or family level and at the governmental one.
The results of political pre-conditions have the form of international bilateral agreements, protocols and other official documents. Before joining Cyprus to the European Union there were 10 documents of the kind, but now one of the is not valid (Trade Agreement between the Government of the Republic of Cyprus and the Government of Ukraine from the 21st February 2000; it was entered into force 22 December 2001 and terminated 1 May 2004) due to the rules of the EU. Among the valid agreements are the following:
1. Convention between the Government of the Republic of Cyprus and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation of Income and Property from the 29th of October 1982 (Moscow, entered into force 21 December 1991);
2. Protocol on the Establishment of Diplomatic Relations between the Republic of Cyprus and Ukraine from the 19th of February 1992 (New York, entered into force the same date);
3. Exchange of Notes between the Government of the Republic of Cyprus and the Government of Ukraine confirming the continued application of the Treaty between the Republic of Cyprus and the Government of the Union of Soviet Socialist Republics on Legal Assistance in Civil and Criminal Matters, signed at Moscow, 19th January 1984 from the 17th of April 1996 and the 3rd of March 1997 (Moscow, entered into force 3rd March 1997);
4. Air Service Agreement between the Government of the Republic of Cyprus and the Government of Ukraine, with Annex from the 21st of February 2000 (Kiev, entered into force 8 July 2001);
5. Protocol on Consultations between the Ministry of Foreign Affairs of the Republic of Cyprus and the Ministry of Foreign Affairs of Ukraine from the 21st of February 2000 (Kiev, entered into force the same date);
6. Agreement between the Government of the Republic of Cyprus and the Cabinet of ministers of Ukraine on the Abolition of Visa Requirements for Holders of Diplomatic and Service Passports from the 15th of July 2004 (Nicosia, entered into force 20 January 2005);
7. Agreement between the Republic of Cyprus and Ukraine on legal Assistance in civil Matters from the 6th of September 2004 (Kiev, entered into force 18 March 2006);
8. Agreement between the Government of the Republic of Cyprus and the Cabinet of Ministers of Ukraine on Co-operation in Crime Combating from the 16th of February 2006 (Nicosia, entered into force 4 January 2008);
9. Agreement between the Government of the Republic of Cyprus and the Cabinet of Ministers of Ukraine on the Co-operation in the field of Culture from the 26th of June 2009 (Nicosia, entered into force 25 June 2010).
It’s also necessary to underline that both the Republic of Cyprus and Ukraine are the members of the international organizations such as the United Nations, World Trade Organizations, Council of Europe, Organization on Security and Cooperation in Europe and others. The Republic of Cyprus has also become a member of the European Union in the 1st of May 2004, and Ukraine as we know is also seeking the membership there. It’s planned to become the Associative Member of EU till the end of 2011 and the Republic of Cyprus can also assist these Ukrainian priorities.
As for the economic pre-conditions it’s necessary to develop and deep the relations not only in the investment activity, but also in trade, innovative, scientific and others spheres. Ukrainian scientific potential and innovations can be of much interest for the Cypriot investors and also it’s possible to organize and make the use of joint companies in the scientific, marketing, industrial cooperation spheres.
Table 4
Membership of Ukraine and the Republic of Cyprus in the International ____________________Organizations and Regional Blocks________________________
Organization, block Ukraine The Republic of Cyprus
United Nations + (1945) + (1960)
Commonwealth - + (1961)
Non-Aligned Movement - + (1960)
Council of Europe + (1995) + ( 1961)
Organization on Security and Cooperation in Europe + (1995) + (1975, 1995)
World Trade Organization + (2008) + (1995)
World Bank + (1992) + (1962)
Regional blocks Commonwealth of Independent Countries (1991), Organization for Black Sea Economic Cooperation (1999) Euro-Mediterranean Partnership (1995), European Union (2004) (Eurozone - 2008)
So the countries have the great economic, political, historical potential of close and intensive cooperation. Ukraine is much richer in natural resources than the Republic of Cyprus, in many items it can be considered as self-sufficient. But the common feature is the significant dependence of both countries on the gas and oil imports, so it’s interesting to cooperate the attempts to decrease this dependence and to work out and explore innovations that can reduce consumption of these resources and find the alternative ways of the energy supply (producing). Also the location of Ukraine and the Republic of Cyprus allows to point out the opportunity to be the transit countries in the world economy and to get much use of that. The results of the economic indices analysis show that the Republic of Cyprus is more developed than the Ukrainian economy. Even despite of the political factors (division of the country) the government manages to maintain high economic growth. Its measures taken to decrease the influence of the world economic and financial crisis were really successful. On the basis of those pre-conditions the countries’ governments make much to intensify cooperation, signing the Agreements, Protocols and other official documents to make the business for the residents in both countries easier, and as a result to achieve the maximum positive effect on the cooperation realization.
List of Sources
1. Annual Balance of Payments Data [електронний ресурс]. - Режим доступу: http://www.centralbank.gov.cy/nqcontent. cfm?a_id=757
2. Central Bank of Cyprus [електронний ресурс]. - Режим доступу: http://www. centralbank.gov. cy
3. Cyprus-Ukraine Business Association [електронний ресурс]. - Режим доступу: http://www.mfa.gov.ua.cyprus/en/3573.htm
4. Economic Bulletin. December 2010. Nicosia: Central Bank of Cyprus, 2011. - 204 p.
5. Finance Cyprus: Investment Guide & Business Directory. Country Profiler / Ministry of Commerce, Industry and Tourism, Nicosia. - 160 p.
6. Ministry of Finance [електронний ресурс]. - Режим доступу: http://www.mof.gov.cy
7. National Economic Accounts. Nicosia: Statistical Service. - 30 p.
8. President: Support of Ukraine's European aspirations by Cyprus gives hope for fruitful cooperation during its 2012 presidency in European Council [електронний ресурс]. -Режим доступу: http://www.president.gov.ua/en/news/20653.html
9. State Statistic Service of Ukraine: [електронний ресурс]. - Режим доступу:
http://www.ukrstat.gov.ua/
10. Statistical Service of Cyprus [електронний ресурс]. - Режим доступу: http://www. cystat.gov. cy
11. Про соціально-економічне становище України за 2010 рік. - Київ: Державний комітет статистики України. - 70 с.
Статя надійшла до редакції 07.10.2011.
Я.А.Дубенюк
ПЕРЕДУМОВИ ЕКОНОМІЧНОЇ СПІВПРАЦІ МІЖ УКРАЇНОЮ ТА
РЕСПУБЛІКОЮ КІПР
У статті систематизовано та розглянуто основні передумови реалізації двосторонніх економічних відносин між Україною та Республікою Кіпр, значну увагу приділено оцінці на порівнянню соціально-економічних показників розвитку національних економік.
УДК 339.56(477)
І. А.Іваненко
АНАЛІЗ ВПЛИВУ ЗОВНІШНЬОЇ ТОРГІВЛІ З КРАЇНАМИ СНД НА ВВП УКРАЇНИ
У статті виявлено вплив динаміки зовнішньої торгівлі з країнами СНД на економічний розвиток України на підставі кореляційно-регресійного аналізу, в якому результуючим показником є ВВП, а чинниками - обсяги експорту та імпорту.
Постановка проблеми. В умовах глобалізації господарської діяльності та лібералізації міжнародної торгівлі для багатьох країн особливого значення набуває розвиток перспективних напрямів і форм зовнішньоторговельних зв’язків, розширення ринків збуту та диверсифікація джерел постачання. Особливу актуальність ці питання мають для держав, які завершують етап ринкових перетворень, здійснюючи перехід від замкнених національних господарств до економіки відкритого типу, в тому числі для України. З огляду на значну ресурсну та технологічну взаємозалежність, тривалу співпрацю у економічній сфері, спільну історію економічного розвитку, багатосторонні економічні зв’язки, транспортні комунікації та інші обставини, розвиток та раціоналізація зовнішньоторговельних відносин в рамках СНД є пріоритетним напрямком економічного співробітництва регіону. Для України країни СНД залишаються одними з найважливіших зовнішньоторговельних партнерів. Так, в 2009 р. найбільший обсяг експорту вітчизняних товарів і послуг був призначений для країн СНД, що склав 17282,64 млн. дол. або 35,4% від загального експорту за період. Обсяг імпорту товарів і послуг у 2009 р. з країн СНД становив 20472,24 млн. дол. або 40,6% від загального імпорту [1]. Незважаючи на те, що абсолютні показники експорту та імпорту у 2009 р. демонструють негативну динаміку з огляду на кризові явища у світовій економіці, відносні показники продовжують знаходилися на досить високому рівні, як й у попередні роки. Отже, зовнішньоторговельні відносини з країнами СНД мають для України велике значення та потребують докладного дослідження з урахуванням сучасних тенденцій регіонального та світового економічного розвитку.
Аналіз останніх досліджень і публікацій. Аналізу різних аспектів зовнішньоекономічної співпраці України з країнами СНД присвячено праці провідних
