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Tuesday, May 12, 2020

ANALYSIS/OPINION:

Quoting Charles Dickens, our descendants can once day look back and call what we are going through as “the best of times, the worst of times.” For decades national defense analysts and the medical community have warned that the United States is getting too dependent on China for low-cost products and labor.

Products concept, research and development (R&D), production, marketing and sales. The profit of sales provide financial resources to start the process over. The R&D phase requires investment, testing, often having to start over, and refinement. R&D offers no guarantee of success and investment recovery. China has a long history of minimizing uncertainty of future sales and maximizing profits by reverse engineering successful products and undercutting the original developer. China also has a very large work force not protected by labor laws and wage regulations that are standard in Western governments, South Korea, and Japan.                 


By minimizing R&D not only can China sell products at cheaper prices, but it can use the profits to pursue its other progressive initiatives. China’s Road and Belt program is connecting the country with the Middle East, Africa and Europe. Five-year plans are considered long-range in Western countries and compared to 50 in China.

For the sake of cheap production costs, the United States has been willingly surrendering its production superiority to China. Unfortunately, especially for the innocent lives being lost throughout the world, it took a pandemic for the American people to realize its vulnerability to becoming too dependent on another nation. This problem was created by industry and consumers.

On February 29, Secretary of State Pompeo proposed a way ahead. To “move the global economy forward” Mr. Pompeo identified Australia, New Zealand, South Korea, Japan and India as a diversification portfolio. Without including countries of the Americas, Africa, Europe, and that’s not global. Mr. Pompeo is a very astute secretary of State, but what he proposes takes us back to thinking five-year planning is long-range.  

At the end of World War II, Secretary of State George Marshall proved the broad scope value of effective economic planning and investment. For a $12 billion dollar investment, the Marshall Plan was critical in rescuing a war-devastated Western Europe from economic ruin, removed trade barriers and modernized industry. The Marshall Plan also helped the economy of the United States because it produced outstanding trade partners and a quickly-rebuilt Western Europe that could finance NATO.

If Ukraine and its leaders move in the right direction Secretary Pompeo might apply the same logic of Secretary Marshall. Case in point is Ukraine.  This is a country that survived Hitler and Stalin, and has endured Vladimir Putin’s invasion of the Crimea. The country’s location and rich natural resources made Ukraine an attractive target through the centuries. Hitler, in particular, understood the value of Ukraine’s natural resources and agriculture capabilities. After the 1939 invasion he proclaimed that Germany will never go hungry again.

Now more than ever, Ukraine needs favorable business opportunities for Western companies looking to diversify from China. As global trust in the manufacturing hub of the world is fading and the world prepares for life after lockdown, Ukraine will execute on the demands of its people and reinvent itself to cater to American companies looking to leave China for greener pastures.

As Former President of Georgia Mikhail Saakashvili said, “There are many opportunities in Ukraine. Multiple enterprises are leaving China, leaving us an opportunity to direct them to Ukraine.” How can we convince them to move to the Ukrainian market? Only by offering more open tax and regulatory conditions.

Reducing bureaucratic red tape, providing tax incentives and favorable locations for office space, and creating a safe and prosperous business environment that differentiates itself from other off-shore candidates will allow Ukraine to become the next global leader in IT and high-skilled services for the new, post-COVID-19 world.

Ukraine is far more than what can be taken from the ground. According to the World Bank, Ukraine has 1600 companies providing information technology (IT) services which already provides services to 100 companies on the Fortune 500 list, operated by 185,000 IT specialists. IT companies produce 20 percent of Ukraine’s exports. Overall, Ukraine has 4000 technological-oriented companies within the country.  

The difference between Marshall’s program and Mr. Pompeo’s opportunity is that the U.S. government and the EU do not need to increase financial investment. Just the opposite is true. Once Ukraine is operating at its potential, foreign aid from Washington will be unnecessary. The Ukrainian people have already spoken out against their country’s situation. In 2019, they successfully went on the offense against corrupt politics and overwhelmingly elected Volodymyr Zelensky as president, marking a new era in the country’s politics.

By creating and marketing a Special Economic Zone in Ukraine, and by providing tech companies and institutional investors with access to a growing pool of educated professionals in a stable environment will go a long way in restoring foreign investor confidence in the country and showing the world that the reforms promised by the president were not just lip-service.

Attracting global companies and offering them the best tax regime and zero bureaucracy we can only increase our transatlantic integration. Our Western partners will defend their economic interests as strongly as they defend their political and military interests.

• Markiyan Lubkivskyi is the former Ukrainian ambassador to Croatia and Bosnia and Herzegovina, deputy secretary of state of Ukraine and adviser to the head of the Security Service of Ukraine.


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