How the President and Prime Minister tried to advertise investing in Ukraine

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2014/10/05 • Economy

Article by: Kateryna Shumylo

…and whether business owners believed them 

On October 2 the government spoke with the businesses: Petro Poroshenko and Prime Minister Arseniy Yatseniuk met with the representatives of the companies which are part of the European Business Association and the American Chamber of Commerce.

An hour before the event began, a line of foreign investors already emerged in the Fairmont Grand Hotel hall: an undoubtedly consoling image for a President of any country at any time, and for Ukraine (the decrease of whose GDP the World Bank predicted at 8% by the end of 2014, and inflation at 19%), it was overall unexpected.

Petro Poroshenko and Arseniy Yatseniuk noted the biggest challenges Ukraine is facing today in their introduction. Ending the war in Donbas, putting an end to corruption, energy dependence and energy efficiency is something the country much achieve in the foreseeable future.

Petro Poroshenko once again presented Strategy 2020 (the document was already presented twice last week: first its theses were sounded by the President, and then once again by the deputy head of the President’s Administration Dmytro Shymkiv), however, the businessmen were noticeably interested. “The war had a great influence on Ukraine. It is difficult to attract foreign investors when there are Russian tanks on Ukrainian soil,” concluded Arseniy Yatseniuk.

Before the Q&A session, the investors, the President and Prime Minister were left to converse ‘in private’: the press was asked to leave the hall. This was done out of considerations for ‘comfort’ of the attendees, and not because the sides had something to hide, one of the organizers told Forbes. “They wished to speak more openly than they would in a diplomatic meeting,” he explained.

Forbes decided to make sure personally and asked the participants of the meeting about what had happened behind closed doors.

Behind closed doors

The majority of the issues business was interested in had to do with security, taxes and reforms that had already begun. “The block of questions its quite predictable. The idea of the meeting is to show that there is clear political will to do everything to improve the investment climate in Ukraine,” says Taras Kachka, Vice President for Strategic Development of the American Chamber of Commerce in Ukraine.

“It is good this meeting happened,” concludes Kyivstar president Petro Chernyshov, who managed to ask his main question: how long there was left to wait for the 3G auction. “We are some of the few companies who don’t need convincing to invest, the situation is opposite. We say: ‘Here, take our money,’ we give it to them and the refuse. They are not holding the auction, and it involves huge amounts of money,” says the top manager.

To this, the Prime Minister noted that the appropriate order had been signed. However, he is personally against allowing the companies under Russian control to participate, not meaning Kyivstar, whose positioning is that of an international investor. “Arseniy Petrovych said: you are welcome,” says Chernyshov, noting at the same time that he stands for equal access to the auction without barring participants due to national principles. “We are saying that everyone should be allowed, but we have no support in this issue,” he says.

General Director of one of the leading automobile importers in Ukraine, Winner Imports Ukraine, Bohdan Kulchytsky also made many useful conclusions due to the meeting. “There were no promises or advice on part of the country’s government, there was dialogue,” he notes. “The investors wanted to find out about the situation in the business environment and how the state is able to help. I liked how they [the President and Prime Minister] approached the questions that were posed to them.”

Despite the positive reviews of the meeting, investors do not hasten to promise to give money to Ukraine the very next day. “Investments will only come after the end of the war,” all businessmen interviewed by Forbes make it very clear (some officially, some anonymously).

“Investments are very dependent on the economy, and the economy is dependent on war. Nobody will invest at this time,” says Bohdan Kulchytsky. “It is necessary to stop aggression and ensure stability. Then big investments will come, Ukraine has good prospects.”

The real term of positive dynamics is no earlier than the fourth quarter of 2015. “The companies said that in the fourth quarter of the next year they are ready to invest hundreds of millions of dollars,” says Hanna Derevyanko, executive director of the European Business Association. In order to receive this money at least within a year, it is already important to produce positive signals which are currently scarce.

According to Ihor Burakovsky, director of the Institute for Economic Investigations and Political Consultations, the meeting with the business is definitely useful. However, the influx of capital to the country will be much more dependent on practical execution of the declarations. “As of today we have a list of intentions and priorities given by the President and Prime Minister. All the written parameters are absolutely correct, but my main question as an expert is who and how intends to do it? How will this all look technically?” He asks.

The representatives of international companies are unlikely to be blinded by the prognoses numbers in the strategy, if they do not correspond to real possibilities and economic potential. “For example, the index, to double the GDP within six years. Simple calculation shows that in order to achieve this we have to grow by 12% each year. I think it is best to reexamine our expectations and prognoses and make the expected result more realistic,” Burakovsky recommends.

The scale of reforms Ukraine needs is unprecedented, as it means a full reconstruction of the economic model. “What did war show? That there is no army. What did the crisis show? That there is no reserve of strength for economic development. What did various studies show? That corruption is not just a problem, but a resource that sucks out the individual’s will to work,” the economist says. “The government is ineffective, and the matter is not in the names by the mechanism in general.”

Translated by: Mariya Shcherbinina
Source: Forbes

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  • Jacob Schønberg

    Ukraine must protect foreign investments from all kinds of corruption and make such investment profitable the first few years (to have some rapid payback on investments).
    I think it would be the best idea to specifically invite some companies – I tried as a private person but it has to be official state office that do it. I would like to help in any way possible though. I believe this is very important! Many greetings Jacob Schonberg, Danish citizen

  • nysq1

    It seems like there are many who want very low taxes-which they will propably get, as Ukraine is in a desperate situation. Didn’t like the one that stated “it is necessary to stop agression” -did he imply that UA is an agressor?