Table of Contents
III. Literature Review4
VI. Prince Chart6
This report analyzes the current probability that Ukraine will be admitted into the European Union after Poland acquires presidency on July 1st 2011, and how it will influence the commerce conditions in regards to potential investors. Although the current ‘Power Vertical Strategy’ position of the government bears resemblance of an Authoritarian Russia, European Union officials have been in talks with procuring a relationship with Ukraine. In attempts to dissect the impact of Ukraine’s potential entry into the European Union a Prince chart was assembled. The political risk factors considered are the external conflicts, the corruption status, and quality of bureaucracy. A fervent debate between the western democratic influences and the weakening bond that Ukraine has with it’s Soviet past confer the impression that investors would generate a profit. Introduction
Recent talks between the European Union and Ukrainian officials has generated an impending alliance, however Russian Prime Minister Vladimir Putin has augured that he will shut his borders to Ukraine imports if they in fact join the Free trade agreement. (Press TV, 2011)(Financial Times, 2011) The country is split, having a concentrated aspiration of democracy but also contingent on their natural gas supply from Russia. (Huffington Post, 2010). The proposed alternative to the EU agreement is the Customs Union with Russia, Belarus, and Kazakhstan, which is imagined to make $6.5-9 billion in annual gain (Financial Times, 2011). Although the influence of the European Union has been reduced due to the current uprisings in the Arab countries, as long as Russia continues to allure the Ukrainian President Viktor Yanukovych, the western countries will be alert and eager to instruct on conduct that would gain an EU partnership. It would be an adverse result if the fate of the Ukrainian economy fell to the hands of Russia, and would be most ill-fated for their hopes of democracy if China were to gain control of the second largest country in Europe, for this reason the European Union’s admission of Ukraine would appear inescapable. The Free Trade Agreement presents the European investors with an affirmative incentive, making Ukraine’s business environment flourish.
There are two major contenders for Ukraine, President Yanukovych of the Party of Regions and Prime Minister Mykola Azarov of the Our Ukraine Party. Yanukovych has been granted a reform in November cutting the amount of cabinet members he had from twenty-four to sixteen allowing him dominance when it comes to economic decisions, and due to his stance from earlier in his career he plans on getting closer ties with Russia. The Prime Minister, in contrast, has focused all his efforts in achieving European Union citizenship for Ukraine. The government stability in Ukraine can be characterized through its many public trials of government officials, granted they have only reached independence in 1991 (BBC News, 2011) and generally young governments take time to gain a proper footing, this type of risk can deter some investors, however the larger the risk the higher the payout. The past quality of bureaucracy in the Ukraine has their ease of doing business index at 147 out of 183 on the pitiable end of the spectrum (World Bank, 2010). Due to their poor economic ranking, the business entry rate is also very small with a mere 8% in 2007, and to put it in perspective the United Kingdom had 18% (BBC News, 2011). Granted this is a negative period for the entire global financial market during the times of the data compilation. Corruption within the Ukrainian government has been a...