kraine's conduct on international markets resembles a fussy and wily provincial pedlar who haggles away and pesters passers-by hoping to quickly palm them off with some unpopular stuff. Nevertheless, despite all these things, we are not hopeless also-rans. The thing is that, regrettably, the development of Ukraine's foreign trade is under an overwhelming influence of a set of negative factors. Low competitiveness of goods and services producers. First, Ukrainian production has extremely high energy consumption because of worn-out fixed production assets and obsolete technologies. Ukraine spends 5.5 times more energy to produce one dollar of GDP than the states of central and eastern Europe and 12 times more than the countries of the Organization for Economic Cooperation and Development [OECD].
Second, the poor domestic demand sharply restrains the use of available production capacities; this results in increased production costs per unit.
Third, many big enterprises, like enfeebled giants, maintain excessive capacities and social amenities, such as kindergartens, homes, hospitals, sanatoria and others. This increases the production cost of final products. It is no wonder, therefore, that the prices of some Ukrainian-made products are 30-70 per cent higher than those on international markets.
Fourth, the current schemes of financing exports are still far from perfection. High interest rates on Ukraine's credit market and limited access to long-term loans lead to a situation where Ukrainian exporters have to pay six or 10 times more for the use of financial resources than their Western competitors.
Fifth, management efficiency at enterprises clearly fails to meet modern standards of management: there are convulsive time-serving efforts instead of a long-term strategy for economic development.

y the way, polls have been conducted at 21 exporting enterprises to show that operational costs are at about 40 per cent in Ukraine, while their rate for advanced countries is 3 or 5 per cent. There is hardly any point yet in speaking about effective mechanisms to promote products into foreign markets or about diplomatic or political support for our exporters because of the scantiness of resources. In addition to this, virtually nothing has been done to create a ramified sales and service network abroad.



Undeveloped market economy institutions

he state has so far failed to create conditions to make national business more competitive. Offering preferential treatment to individual business entities creates a "virtual" economic reality which leads to sad results. Suffice it to recall the AvtoZAZ-Daewoo car-making joint venture. Ukrainian exporters find it rather hard to compete on foreign markets in a situation where ownership rights and business rules are not defined because up till now no land code or civil code has been adopted in the country.

krainian-style privatization has also failed to create an army of really solvent owners to become strategic investors ready to invest considerable funds in the development of production. The institutions in the banking and insurance systems are fairly week. The scheme of state guarantees for credits has proved to be inefficient: by expert estimates, an 2.5bn-plus worth of government-guaranteed credits has not been returned.

o complete the picture, the utterly unpleasant situation should be recalled that exists in the sphere of intellectual property protection. For instance, the domestic software market is filled with pirate products to over 90 per cent. Products of science and technology are often sold for a song, although, should they have been commercialized, such products could have yielded hundreds of dollars in economic effect. Inadequate government regulation mechanisms. We will mention just some of the sore spots. Here belongs primarily the unreasonable export policy, that is, the striking inability of the state to properly identify structural priorities in foreign trade. Here also belong the confiscatory tax policy and tough restrictive credit policy, which strips enterprises of current assets and investment resources to modernize production. It is also foreign policy that is not always predictable and poses additional risks for exporters. It is also the absence of stable rules for government regulation of export to minimize the costs of foreign trade operations for enterprises. It is also - although, there is no need to continue the list.

ndeveloped market infrastructure for export support. Here we refer first and foremost to the absence of reliable and efficient systems of financial support and insurance for export, the absence of effective mechanisms to promote goods in international markets, including with the use of off-set schemes, of reliable technical servicing and others.