October 31, 2013
Ambassador Pyatt’s Speech at the National University of Kyiv-Mohyla Academy
Tuesday, October 29, 2013, Kyiv, Ukraine
Thank you President Kvit for your kind introduction. It is an enormous pleasure for me to be here at Kyiv-Mohyla Academy with you today. Since its founding, Kyiv-Mohyla and its alumni have played a formative role in Ukrainian intellectual, political, religious and civic life. So I feel very comfortable sharing my thoughts about Ukraine’s future and the many opportunities and challenges it faces with you – Ukraine’s future leaders.
You, and your peers at universities throughout Ukraine, will be called upon to help forge Ukraine’s path into the future. I believe that path leads to a more democratic, energy independent and prosperous Ukraine, that has become a member of the European family of nations; a Ukraine that plays a key role in European, Eurasian and global affairs. Let me explain.
Since my arrival in Kyiv, I have had the opportunity to meet with, observe and listen to Ukrainian leaders, students, business people, intellectuals, the media and the general public. I am inspired by what I hear, by the enthusiasm of students like you, by the energy of NGO workers tackling some of Ukraine’s toughest social issues and by the commitment of journalists working to overcome press censorship and intimidation.
I have also been impressed by your political leaders and by the seriousness with which the Ukrainian Government is approaching signing the Association Agreement with the European Union in November, which is aimed at cementing Ukraine’s institutional relationship with Europe.
My overall impression however, is one of an inward-looking Ukraine. A Ukraine so focused on its internal problems that debate here misses all that is swirling around you. I am here to argue that by looking outward and engaging with Europe and the wider world Ukraine will find its place among the world’s independent, democratic and prosperous nations.
Believe me: introspection is not unique to Ukraine. We in the United States have also looked inwards during long periods in our development. Some might even say we are doing so now. Americans, like Ukrainians, focus on family, friends, on earning a living wage and providing the best possible start in life for their children. But, over time Americans have learned that to grow and prosper we must become active global citizens. Our nation has to engage, to observe and understand the world around it, and then to jump right in and be part of the tremendous changes that are happening every day, in every corner of the globe.
Ukraine needs to do the same. Your moment is now and the EU Association Agreement and its accompanying Deep and Comprehensive Free Trade Agreement are the tools with which Ukraine can assure its sovereignty and independence by anchoring itself to European institutions.
But the United States is not just urging Ukraine integrate more closely with Europe – we are doing it as well. The United States and the European Union are currently negotiating the Trans-Atlantic Trade and Investment Partnership, or T-TIP, a comprehensive trade treaty which aims to grow the trans-Atlantic economy and provide the United States with many of the benefits from trade with Europe that Ukraine seeks through the Association Agreement, specifically the Deep and Comprehensive Free Trade Area. We are not recommending you take a course that we are not willing to take ourselves. I am hopeful that with T-TIP and the D.C.F.T.A., we are ALL on a common road to prosperity.
I have said it repeatedly: the United States supports the Ukrainian people’s European choice. We are your friend in this enterprise. A sovereign, territorially sound, democratic, economically prosperous, and European Ukraine has always been at the center of our hopes for our bilateral relationship. We stand ready to help Ukraine’s economy become connected to global markets, to help you strengthen your democratic processes and institutions and to help you take advantage of the many changes coming your way.
We fervently hope that the government will take the few remaining steps necessary to sign the association agreement at next month’s Vilnius Summit, including the release of former Prime Minister Tymoshenko so that she can get the medical treatment she needs abroad. This is your choice – and no one else has the right to tell you otherwise or interfere with your aspirations to better your nation by integrating with your European neighbors. No one.
With change comes opportunity. The opportunities the EU presents Ukraine include: greater access to European markets for Ukrainian goods; the opportunity to grow domestic industries like IT, agroindustry and energy development; the ability to position Ukraine as Europe’s gateway to Eurasia; the opportunity to improve relationships and increased trade with all of your neighbors; and the opportunity to attract new, dynamic investments and new ideas to Ukraine.
There is no better way to improve Ukraine competitiveness than by harmonizing its standards with the world’s biggest market. To give you one example of the potential benefits, reducing the need for multiple product standards by signing the DCFTA will significantly lower production costs for domestic producers. At the same time, EU-standard production runs will make Ukrainian products more competitive on world markets.
Just a few weeks ago I met with representatives of companies working in the information technology sector here. They could not stop talking about the potential they see in Ukraine’s market, in its students, its programmers, its innovators. Your IT sector has the potential to become a major export-oriented industry that drives employment and boosts your global competitiveness.
Exposure to European and other global markets will showcase Ukraine’s high literacy rate, an education system focused on science, technology, engineering and math and the great talent that lives and works here. In Yalta, I was thrilled to see how Ukrainian students developed one of the best inventions of 2012 – a glove that transforms sign language into spoken language.
Meanwhile, a Ukrainian programmer created Contre-Jour, one of the world’s most popular physics-based puzzle video games. Ukraine is an innovation economy that will have, in Europe, the opportunity to fully realize its potential.
Ukraine also has the opportunity to realize its geographic potential as a bridge between Europe and Eurasia. As a Black Sea littoral state, it can be a springboard for the markets of Central Asia, the Caucuses and beyond. Ukrainian experts should be consulted to help companies understand how to best export goods to Turkmenistan, Kazakhstan or even China.
Get the policy environment right and investments will flow into Ukraine as companies build manufacturing facilities to serve these markets or look to Ukrainian companies to ship goods to new markets. Ukraine may even be able to act as a bridge between the European Union and neighbors further east.
Ukraine will not only expand its business horizons to the East and West, but North and South as well. To the South, Turkey, a country expanding its own relationship with the European Union, presents opportunities for export, investment and collaboration, and an example of the benefits from smart economic reform.
To the North, Ukraine’s important and deep relationship with Russia will remain. Economic and cultural ties will only expand as the Ukrainian market grows. Recently, President of the European Council Herman Van Rompuy told students in St. Petersburg that an Association Agreement with the European Union would not damage Ukraine’s long-standing ties with Russia, raising the question “Why should it have to be a case of ‘either/or’?” President Obama agrees with our European colleagues, when he says that “… this is not a zero sum game.”
Ukraine’s association with the European Union can also bring new opportunities for Russia, as trade and business collaboration expand and new market opportunities present themselves. The adjustment period will be challenging, but the long-term interests of Ukraine and ALL its neighbors will be well served by a closer relationship with Europe.
Earlier, I touched upon Ukrainian success and future potential in the IT field.
BUT – and I can’t stress this point strongly enough – opportunities abound in every field. Take energy. Ukraine is poised on the brink of an energy revolution. Shale gas presents an opportunity for Ukraine to become more energy independent, create jobs, and potentially revive the competitiveness of key manufacturing and industrial sectors. I know American companies are prepared to share the U.S. experience with their local partners.
We have enjoyed many economic benefits from this new technology. In fact, a recent report indicated that the average American family gained twelve hundred (1200) dollars in additional discretionary income last year as a consequence of our shale energy revolution. I am convinced that Ukrainian, U.S. and European companies can work hand-in-hand with local and regional authorities to bring these ambitious plans to fruition.
But shale gas is not the only energy sector in which Ukrainian expertise and innovation will have an impact. The U.S., Europe and Asia are also developing renewable technologies. Companies looking to tap into Ukraine’s solar, biomass, coal bed methane and wind power potential also want to tap into Ukrainian brain power and innovation to explore opportunities here.
In addition to expanding its energy supply, Ukraine can benefit by reducing its demand, through energy efficiency projects, such as the ten-million-dollar loan guarantee program the U.S. Agency for International Development just launched in Lviv to assist with municipal heating reforms and clean energy projects.
Ukraine’s potential is not limited to exploring new energy technologies; it has a role to play in energy markets in Europe as well. Improved national policies and commitment to modernization can enable Ukraine to serve as a regional gas hub and electricity exporter for Central and Eastern Europe. This is a strategically important development in which U.S., European and Ukrainian interests are converging and will play an important role in global affairs in coming years.
With Opportunities come Challenges
I’ve spent the last few minutes sharing my enthusiasm with you about all of the opportunities open to Ukraine as it embraces its European identity and proudly steps onto the world stage. Now, let’s talk about the flip side of the coin – the challenges and responsibilities that come with embracing a new role and new opportunities. They are many. They are important.
The need to be faced head-on and overcome, so that you, your children and grandchildren can continue to reap the benefits they will bring. I am confident that Ukraine has the talent, the skill, some of it in this room, and the vision to overcome these challenges and reap their many rewards.
I have offered you a dynamic vision of Ukraine’s future. A future where Ukrainian goods find new markets in Europe and around the world. A future where domestic industries thrive, where Ukraine serves as Europe’s gateway to new markets and attracts new, dynamic investments and ideas.
Signing a piece of paper in November will not get you there. Hard work, tough choices, uncomfortable changes will. President Yanukovych has often said that the Summit in Vilnius is the beginning, not the end of Ukraine’s European aspirations.
To export into European markets Ukrainian businesses will have to adapt. They will have to learn to apply new standards, new technical regulations, and they will have to learn new ways of doing business. Change is good, especially if it leads to bigger and better opportunities. These new opportunities will not just be in Europe – they will be here in Kyiv, in Donetsk, Dnipropetrovsk, Lviv and in other cities and towns around Ukraine where local companies will be looking for investors, hoping to partner, to expand and innovate.
To attract and retain interested partners there will be work to do. For all of its innovative and scientific potential, Ukraine lacks fundamental intellectual property right protections which could bring cutting-edge companies to this market. Internet piracy remains rampant. Large parts of the Ukrainian government itself, not to mention private business and citizens, use unlicensed or pirated software. Mistakes in the government’s management of the royalty collecting societies have drawn Ukraine further from international standards.
This will need to change. A country that has brilliant contemporary musicians like Okean Elzy and Jamala should also be concerned about the pervasive presence of illegal download sites and unlicensed public performances. Ukraine currently has a software export market valued at one-point-five ($1.5) billion dollars and an internal IT market valued at three-point-one ($3.1) billion – imagine what that COULD be if piracy were eliminated! Imagine the companies that would come here to stay, to share their know-how and recruit young Ukrainian minds to add to it – IF they felt confident their intellectual property would be protected.
Change needs to happen, and we are happy to see the government is taking the first steps in that direction. In the justice sector, successful legislative and Constitutional reform, in line with European standards, will also mean greater opportunities for the protection of human rights and improvement of the business climate. Ukraine has made huge strides in introducing legislation to do this. The new Criminal Procedure Code that came into effect in November 2012 is a prime example.
In the first eight months, 25 percent fewer people were being detained while awaiting charges or trial. Over 13,000 fewer people are sitting in detention, and people are complying with alternative release conditions. The establishment of a system to provide free legal aid to people who cannot afford lawyers, and the Law on Bar raising professional standards for all lawyers, will improve the protection of human rights in Ukraine.
Work is on-going on two other significant laws – reforming the procuracy’s power and the Law on the Judiciary. Your government wisely submitted both, along with suggested Constitutional amendments regarding the judiciary, to the Venice Commission and Council of Europe for their opinion on whether these meet European standards.
The Venice Commission said all of the drafts represent major improvements in line with European standards, and made additional recommendations. We fully support these laws and the required Constitutional amendments which incorporate those Venice Commission recommendations and we pledge our continued support for their effective implementation.
The same goes for the investment climate. To attract the best companies, the best partners, and the best interest rates, Ukraine will have to work on changing laws on business ownership, making transparency the number one priority. It will have to continue to examine its tax code and ensure equal treatment for all under the law.
As Ambassador, I often hear U.S. companies complain about the difficulties they encounter in Ukraine – I am eager to have the tenor of those conversations change. I want U.S. businesses to praise Ukraine for the ease of doing business here.
I am pleased that Ukraine has improved in the World Bank’s Ease of Doing Business ratings, and applaud the good work of Ukrainian government agencies that have made reform a priority. But much more remains to be done – it’s not enough to have good laws and regulations on the books; they need to be implemented properly and fully.
The proof of that improvement will come when investors bring their ideas and investments to Ukraine. This will come – I am convinced of it – but only with plenty of hard work by you and your peers to change the business environment and say NO to the habits of lawlessness and intimidation that have kept our commercial relationship much smaller than it should be.
Now, I am not telling you all to go out and become accountants, or lawyers, or civil servants for that matter. I’m asking you to do what you do best – to observe, to study, to think, and then to share your thoughts with others. Study the experiences of the United States, the European Union, your neighbor Poland, and big emerging markets like Mexico, as they crafted investor-friendly legal regimes, as they strengthened their democratic institutions, institutionalized their support of human rights and expanded opportunities for all citizens. Acknowledge that this did not happen overnight, that it took time, that many lessons were learned, lessons that you now have the opportunity to learn from, and to improve upon. Think about how you will contribute to Ukraine’s future.
And as you think, as you plan, participate. Participate in the great political process that is democracy. Meet the next challenge Ukraine faces – the elections in 2015 – head on. Work to ensure they are as good, or better than the 2010 elections which were generally admired and accepted as free and fair.
I urge you to go out and vote, to grasp the myriad of opportunities I have discussed today. Educate yourselves and your peers so that you are prepared to step up to your responsibilities as Ukraine’s next generation of leaders. And as you do, know this: you have no better friend in this endeavor than the United States.
We stand ready to support you, the Ukrainian people, as you find your place in Europe, as you strive to ensure Ukraine’s energy independence and as you work to strengthen your democratic processes and institutions.
As United States Ambassador to Ukraine, I am eager to see what I and my team can do with you in the next three years, and beyond, to achieve these goals. I thank you for the opportunity to speak with you today and am happy to take questions. Dyakuju za uvahu!