KIEV, Aug. 7 â€“ Mykola Azarov, Ukraineâ€™s new economic tzar, vowed to cut corporate taxes and implement other incintives for businesses in order to boost the countryâ€™s economic growth rate into double digits.
Azarov, who was Friday appointed as the first deputy prime minister in charge of economic policy and the finance minister, said the tax cuts will be implemented in 2008.
"The new government will start in 2007 to prepare a new tax reform," Azarov said in comments posted on the website of his political party, the Regions Party. "I think 2008 will be the year for a real tax reduction... These reforms will take three to four years."
The plans to cut corporate taxes to 20% from 25% and the value added tax to 18% from 20% represent a key economic policy issue of the Regions Party, the leading force in the government of Prime Minister Viktor Yanukovych.
The party is backed by some of the countryâ€™s wealthiest businessmen, including Rinat Akhmetov, the owner of Ukraineâ€™s biggest privately held company, Metinvest, estimated to be worth up to $15 billion. The company, involved in coal mining and steel production, had been preparing for an IPO.
"We will create the best possible conditions for investments and businesses," Azarov said. "We plan to achieve annual growth in gross domestic product of at least 10-15%."
The plan to boost the growth come as the economy has been already accelerating in June led by stronger demand for steel, Ukraineâ€™s main exports commodity.
Ukraineâ€™s economy expanded 9.3% on the year in June, the strongest economic growth over the past 18 months, helped by growing external demand for steel.
The economy expanded 5% on the year in January-June, accelerating from 4% growth in January-May, 2.7% in January-April and 2.2% in January-March, according to the government.
Azarov was mostly responsible for Ukraineâ€™s economic policy in 2002-2004, when Ukraine's economy had posted growth rates of up to 12%, driven by booming exports of products like steel and chemicals.
However, the growth slowed down to 2.6% in 2005 after world steel prices had fallen more than 30% and the government of then Prime Minister Yulia Tymoshenko had worsened investment climate by pushing for large-scale re-privatization.
â€śAzarov's appointmentâ€¦ suggests that he will be the economics heavyweight in the cabinet,â€ť Timothy Ash, an analyst with Bear Stearns International in London, said. â€śHe has significant experience in this areaâ€¦ He is very opinionated, and â€?interventionistâ€™ by instinct.â€ť
Azarov has been recently calling for the National Bank of Ukraine to work to support the economy and ensure that Ukraine runs a current account surplus, but he also indicated the importance of ensuring a stable exchange rate.
â€śAzarov suggests he hopes to â€?influenceâ€™ the NBU, which is obviously worrying in terms of central bank independence,â€ť Ash said. (tl/ez)