Ukraine-Canada Opportunities information session

Friends,

We would like to invite you to the online information session “Ukraine-Canada Opportunities”, organized by CUCC in partnership with the Province of Manitoba, Canada and WTC Winnipeg, that will take place on March 03, 2021, at 18.00 CET (10 AM CST). This event is addressed first of all at the Canadian business but may be of interest for Ukrainian entrepreneurs as well. Speakers are the representatives of Ukrainian Embassy in Canada and the Canadian Embassy in Ukraine, AGI, UkraineInvest and the CUCC team. To find out more, click the link

We would like to take this opportunity and announce the next online event with the Province of Manitoba, which is aimed at Ukrainian businesses and will take place at the beginning of April. More details on this event will follow.

Emma Turos, CUCC and ICBAC members met with the Head of State Property Fund of Ukraine Dmytro Sennychenko

The meeting was dedicated to discussion of a proposed amendments to the Law of Ukraine “On State Property Fund of Ukraine” and other legislative acts of Ukraine to promote investment through privatization and lease of state property”.

The purpose of the bill is to accelerate privatization by: improving the institutional mechanisms of privatization, establishing an efficient organizational structure of State Property Fund of Ukraine and clarifying certain aspects of legislation concerning privatization and corporate governance of state assets to ensure effective and responsive management while an SOE is being prepared for privatization.

According to Dmytro Sennychenko, Head of State Property Fund of Ukraine, suggested novelties will allow to protect state property rights, interests of foreign investors and make the privatization procedure more user-friendly. The Fund expects to attract a record sum of 12 bln UAH from privatization in 2021.

We will continue to follow the news on this.

More info on this meeting (in Ukrainian) http://www.spfu.gov.ua/ua/news/7179.html

New General Secretary of ICBAC – Emma Turos, CUCC-Ukraine

On January 25, 2021 Alfred F. Praus, President of the Ukrainian-Austrian Association, after serving for two years as ICBAC General Secretary, handed over the General Secretariat of the International Council of Business Associations and Chambers in Ukraine, which is rotated yearly, to Emma Turos, Managing Director of the Canada-Ukraine Chamber of Commerce.
We are looking forward to a fruitful and interesting work within the ICBAC framework and new projects to be completed. Stay tuned.

http://icbac.org/

H&M to open stores in Ukraine in 2018

Swedish clothing brand H&M will open its first store in Ukraine in 2018. The information appeared in the company’s six-month report for 2017.

“New H&M store markets planned for 2018 are Uruguay and Ukraine,” the document read.

H&M has been one of the most anticipated international brands in Ukraine, along with Ikea. Rumours of its entrance have been circulating for many years, but this is the first-ever official confirmation of such plans.

This spring H&M entered the markets of Kazakhstan and Colombia, and the brand has been a success there, according to the report. New openings are planned in Iceland, Vietnam, and Georgia.

The company also reported 9 percent growth in sales to over $13.3 billion during the first six months of 2017.

H&M (Hennes & Mauritz AB) is now present in 69 countries and is the second largest retailer in the world after Spanish Inditex Group. It includes H&M, COS, & Other Stories, Monki, Weekday, and Cheap Monday as well as H&M Home.

Another anticipated Swedish brand, homeware manufacturer Ikea, also has set its eye on Ukraine.

In early June the representative of the company told the Kyiv Post that Ukraine was “one of the markets that Ikea is exploring for expansion opportunities.”

Source: kyivpost.com

Ukraine extends aircraft maintenance and overhaul offer

More recently, the aviation industry has indicated signs of recovery with considerable growing demand forecast over the next decade in regions such as the Asia-Pacific and Middle East. In these regions, to operate a large number of aircraft produced in Ukraine and the countries of the former Soviet Union. Now Ukraine expands aircraft maintenance and repair offering in anticipation of probable contracts.

Commercial and military aircraft maintenance and repair is an essential requirement to safely transport passengers, troops or cargo. In Ukraine, the major role in the aircraft maintenance and repair plays the state enterprise «PLANT 410 of Civil Aviation» (SE PLANT 410 CA).

The SE PLANT 410 CA, which is a part of Ukrainian defence industry concern UkrOboronProm, is one of the leading enterprises of aviation cluster of Ukraine, specializing in heavy airframe maintenance and modification services and component maintenance, repair, and overhaul services for commercial and regional aircraft.

SE PLANT 410. Photo by Dylan Malyasov

The SE PLANT 410 CA as of today, executed overhaul more than six thousand aircraft and forty thousand the aviation engines. The enterprise occupies an area of over 236,000 square meters adjacent to the Kyiv International Airport (Zhuliany). Production area is equipped with all the necessary technological tools, tooling and equipment and makes up for more than 170,000 square meters, where overhaul.

The SE PLANT 410 CA represents the powerful aircraft-repair enterprise, that can carries out a full work cycle of overhaul of aircraft An-24,-26,-30,-32 and aviation engines D-36 of a series 1, 1А, 2А, for aircraft Yak-42, An-72,-74, repair of units of aviation technique, and also the works connected with restoration of aviation details.

SE PLANT 410. Photo by Dylan Malyasov

On performance of works on overhaul, modernization, re-equipment and maintenance service of aircraft such as “Antonov”, the plant has certificates of interstate aviation committee, Ukrainian national aviation authorities, the certificate of conformity of the Russian aviation authorities. The system of quality of the plant is certificated under the international standards of series ISO, and also airspace complex AS / EN. Taking into account, that works on repair of military planes performed, the factory has the certificate of the standard of the NATO – AQAP 2120, and also the license of the Ministry of industrial policy for repairing of military aviation technique.

SE PLANT 410. Photo by Dylan Malyasov

One of the directions of development is the realization of the program maintenance and repair of Soviet-made helicopters. The enterprise conducts restore after overhaul, re-motorization, and modernization of Mil Mi-8 medium twin-turbine helicopters, for use in a national economy and Ukrainian Defence Forces. Realization of the project carried out together with joint-stock company “Motor Sich”.

The SE PLANT 410 CA has also successfully completed MI-8MSB helicopter overhaul and upgrade having fitted it with a Motor-Sich-made advanced TV3-117VMA-SBM1 engine, avionics, Air Ambulance Technology-made intensive care units. The retrofit helicopter was handed over to the Customer on 11.08.2016.

Currently, other three Mi-8T helicopters are undergoing overhaul and upgrade.

SE PLANT 410 CA0

The Armed Forces of Ukraine, the National Guard and Border Guard also act as clients of the SE PLANT 410 CA enterprise. In 2016 enterprise specialists repaired 6 aircraft, according to aircraft equipment overhaul and modernization schedule, that was reported by UkrOboronProm.

During repair each vehicle was completely dismantled and all components and devices were repaired/replaced by new ones. In addition, these aircraft also have new modern digital navigation and communication systems.

The SE Plant 410 CA is a leading enterprise in Ukraine, providing overhaul of D-36 engines, installed on military transport aircraft An-72, in service with the National Guard of Ukraine and Border Guard. In addition, the same engines are installed on An-74 and Yak-42 aircraft, operated in many countries.

SE PLANT 410 CA Photo by Dylan Malyasov

The collective of a factory makes huge efforts on preparation for certification on norms and rules of the European organization on safety in aircraft EASA (PART-145, PART-147, PART-66, PART-M). It will allow to diversify the work not only on technique such as Antonov, but also to carry out maintenance service of planes of foreign manufacture. The enterprise already has such customers. For today maintenance service more than 15 airliners Boeing-737 is carried out. On the areas of a factory planes MD-80,-82,-83 are served. Also, plant fruitfully works with business aircraft.

SE PLANT 410 CA Photo by Dylan Malyasov

This and the active efforts of the foreign economic activity of the plant, the enterprise consistently receives new orders for aircraft repair and modernization not only from domestic customers, but also firmly entrenched in the international market, which provides foreign exchange earnings to the state. The main foreign clients of the SE PLANT 410 CA is the Republic of India, Republic of Kazakhstan, the People’s Republic of Bangladesh, Hungary and other countries. Over the past two years, exports to foreign countries increased by 2 times, from UAH 168.4 million UAH in 2014 up to 345.3 million UAH in 2016.

Source: defence-blog.com

Ukraine’s tech sector is booming but needs awareness and confidence

Despite several turbulent years, Ukraine’s economy is now showing real promise. The country recently received its latest tranche of IMF funding and is making a huge effort to stamp out corruption. With a large base of highly skilled technology professionals and a highly-developed information technology sector, Ukraine’s economy has all the ingredients required to create Europe’s next big technology hub.

Technology is certainly one of the main industries driving Ukraine’s economic growth. The country has a huge number of skilled technology professionals and is already one of Europe’s top outsourcing hubs. Ukraine is home to over 4,100 firms that outsource skills to other countries and it exports approximately $2 billion in software development and service each year. Its sophisticated IT sector offers the highly skilled workforce that is required to create a successful technology hub.

Ukraine also has a burgeoning e-commerce sector. E-commerce Europe (the European association representing e-commerce businesses) states that the country’s online shopping market is worth approximately €1 billion; with a typical annual spend, per shopper, averaging at €286. With a wide consumer base that is willing to spend money online, Ukraine has the market for e-commerce and consumer tech businesses.

The final ingredient that is required to create a successful technology hub is innovation. From my experience of working with businesses in the Ukrainian tech sector, this is something which exists in abundance in Ukraine. It is well-known that programmers who are educated in Ukraine receive world-class teaching and, after graduating, have access to jobs where they can develop their programming skills in the outsourcing sector. With so much talent being nurtured in the technology sector in Ukraine, innovation is available in abundance. Unfortunately, however, domestic opportunities for these entrepreneurs are currently lacking.

Today, we are losing our brightest tech talent to more developed tech start-up markets, including Silicon Valley, London and Tel Aviv. Investor confidence in the Ukrainian market is fragile to say the least, so technology entrepreneurs seek instead to turn their ideas into businesses elsewhere in the world.

So, how should Ukraine encourage and retain its most promising technology entrepreneurs?

The solution is two-fold: increase investor confidence in the Ukrainian technology sector and create awareness of the investment opportunities for Ukrainian entrepreneurs who are running their businesses from Ukraine.

As concerns investment, increasing confidence in Ukraine’s technology market is the key. It is important for the government to highlight Ukraine’s openness to new technology ventures. A great example of this is the recent Twitter exchange between Ukraine’s Prime Minister and Elon Musk which received global attention. This exchange told the world that Ukraine is open for business.

As investors gain confidence in the market, they may choose to embrace the opportunities to invest in low-cost / high yield Ukrainian technology businesses. After all, it is much cheaper to scale a technology business based in Ukraine compared to a business in one of the better-known technology hubs.

Education is hugely important, to increase awareness of the investment opportunities for entrepreneurs in Ukraine, We must ensure that the most promising Ukrainian talent is aware that there are ways to create successful businesses in their own country.

As a venture capitalist, it is my responsibility to consciously invest in businesses with commercial potential but also in businesses that have the potential to change society. It is for this reason that I am so passionate about transforming Ukraine into Europe’s next technology hub.

About author

Stepan Chernovetskyi is the founder and CEO of Chernovetskyi Investment Group, a venture capital firm specialising in funding promising technology businesses based in the CIS region. He began his career at Pravex Bank, where he was finally appointed the Senior Vice President. After that, he became Head of the Supervisory Board of PJSC, a company specialising in real estate investment and construction. Stepan also runs a charity which helps orphans, large families and elderly people in Georgia.

Source: emerging-europe.com

IKEA plans expansion to Ukraine

The Swedish furniture and home goods chain IKEA plans to expand to the Ukrainian market, the head of PrJSC Mandarin Plaza’s board Oleksandr Chernytsky said.

According to him, IKEA may rent one of the country’s largest sales and amusement centers, Yuzhny, with an area of 450,000 square meters.

Construction of the facility is planned to begin at the end of 2017 at 9 Hlushkova Street in Kyiv’s Holosiyivsky district.

“IKEA is also looking in our direction. Their representatives have already voiced their plans: they came here for this reason, we met. The chances they will come here are good,” Chernytsky said, adding that renters of space at the trade center will include other well-known international operators, “whom Ukraine has long been waiting for,” he said.

Businessman Vahif Aliev, according to Chernytsky, has purchased rights to a land plot with the Liodovy [Ice Skating Rink] Stadium at 9 Hlushkova Street in Holosiyivsky district for construction of Ukraine’s largest shopping mall and sports complex.

The Liodovy Stadium, which was Ukraine’s first outdoor sports complex with skating tracks, was built in 1975.

Aliev is an investor and owner in a number of Kyiv shopping malls, such as Lavina Mall, Blockbuster Mall and Ocean Mall.

PrJSC Mandarin Plaza was created in 2000. It develops, builds and manages shopping and office complexes.

According to the national state register, the sole stakeholder of the enterprise is limited stock company Stadis AB (100 percent Malmo, Sweden). Aliev is listed as the ultimate beneficiary.

Mandarin Plaza’s charter capital as of May 29, was Hr 21.7 million.

Source: kyivpost.com

Rada passes bill in support of foreign investment in Ukraine

The Verkhovna Rada of Ukraine has cancelled the registration of foreign investment and simplified the procedure for issuing permission to employ foreigners, as well as the procedure for issuing temporary residence permits.

Some 239 deputies voted in favor of the draft law in its second reading on Tuesday.

The bill cancels registration of foreign investment, replacing it with formal notification for state statistics purposes.

It also spells out the basic aspects of applying for permission to hire foreigners and persons without Ukrainian citizenship. The changes are expected to simplify procedures for attracting foreign managers and qualified foreign workers, who are necessary during the first stages of setting up subsidiary operations in Ukraine.

In addition, the adopted bill changes procedures for issuing temporary residence permits, giving foreigner investors the right to reside in Ukraine, as well as foreigners working at (and not necessarily for) Ukrainian enterprises. Deputies expect the new law will make it easier to reside in Ukraine while monitoring enterprise activities.

According to Samopomich Party faction deputy Serhiy Kiral, the legislation applies specifically to four categories of highly-paid IT specialists – graduates of the world’s top 110 universities, as well as artists. According to Kiral, there are currently 9,000 such [foreign] employees in Ukraine today.

Petro Poroshenko Bloc faction deputy Viktor Pynzenyk said the current law obliges foreign employees to receive work permits each year.

‘The [new] law provides permission for three years, and ensures that low-qualified workers are not hired. The law also establishes minimum salary requirements,” he said.

Pynzenyk said the new law would not revolutionize the country’s investment climate, but should be viewed as a small step on the path to creating a more favorable climate for foreign investment in Ukraine.

Source: en.interfax.com.ua

Made in Ukraine. TOP-10 of Ukrainian things that attracted international attention.

Grain, steel and sunflower oil have been recognized as the most famous goods of Ukrainian exports for centuries, but recently Ukraine’s reputation in the international arena has been growing thanks to outstanding achievements in information technology, high fashion, aviation, architecture and design.

1. Unmanned aerial vehicles.

The Kiev company Drone.ua produces drones, which are sold in Ukraine and Europe, and established a joint venture in Lithuania called “UAV.tools” to distribute its own technologies in 15 European countries. Soon the company will open its offices in the UK and Moldova and plans to enter the markets of South Africa and South America.

2. Planes.

The Ukrainian aviation industry has a long history of building huge aircraft, such as Mriya and AN, and also designing much smaller devices for a specific purpose. The airplanes of the company “Aeroprakt” are used by tour operators and rescuers in Singapore to monitor the coastline, British and Danish pilots with their help conduct training flights, and Australians extinguish fires. The company “Aeroprakt” has its own representative offices in 40 countries of the world.

3. Detectors of radiation.

After the nuclear disaster in Fukushima in 2011, the global demand for devices for measuring radiation significantly increased. The Ukrainian company “Ecotest” took this opportunity to export radiation detectors of its own production to 70 countries of the world. “Ecotest” has also developed a new Svg-3 Radiacmeter for the German company Bruker, which will soon be used by European defense agencies and NATO.

4. Software.

Petcube” is a Ukrainian startup that allows you to play with your dog or cat when you are not at home. Using the program installed on your smartphone, you can see and communicate with your pets and even play with them using an installed laser. In 2014 Europas named Petcube the best hardware of the year.

5. IT products.

Ukrainian IT-development and consulting are also on the rise. Lviv and Kharkiv have their own IT clusters, and some Ukrainian companies have offices abroad. For example, Softserve has offices around the world and develops centers in Eastern Europe. The company has developed the Biolock system, which allows you to constantly monitor the status of the driver while driving.

6. Kayaks and boats.

The Ukrainian company Borika produces components of boats and kayaks and sells them mainly to Germany. Also the company cooperates with the Italian manufacturer of waterproof covers for cell phones. But boats from the company Brig even filmed in Hollywood blockbusters.

7. Modern architecture.

Ukrainian constructivism of the early twentieth century has its own response in Ukrainian modern architecture and design. For example, the Studio of Sergei Makhno performs projects in Portugal, Georgia, Germany, Monaco and France. In particular, the studio has already completed 360 projects in 16 countries and plans to open an office in London this year.

8. Fashion.

Fashion magazine Vogue has several times shown on its pages traditional Ukrainian costumes. The photo of the Princess of Denmark in embroidered by the Ukrainian company Vareniki was published, and Hollywood stars posed in dresses from Olena Dats, which has its own stores not only in Ukraine, but also in Paris, Los Angeles and Dubai.

9. Books.

The publishing sector of Ukraine demonstrates success due to the growing demand for Ukrainian literature. For example, the Ukrainian publishing house “Factor” printed 40 thousand German-language books for children in Austria.

10. Filters for water treatment.

Scientific potential is a key tool for Ecosoft, the Ukrainian filter manufacturer, to enter global markets.

Source: business-in-ukraine.online

Reforms bring a business-friendly Ukraine

For so long mired in corruption and bureaucratic red tape, in the past three years Ukraine has enacted numerous reforms to improve the climate for doing business. Now, writes Natasha Turak, the battle is on to convince investors that the conflict-affected country is a safe bet.

The story is familiar by now: for decades a complicated legacy of corruption, cumbersome bureaucracy and political upheaval has dogged Ukraine’s economic ascent. The country possesses a range of diverse and potentially lucrative sectors, yet has staggered behind its regional neighbours due to internal complications and now conflict.

In the past three years, however, the former Soviet state has enacted more reforms than ever before in its history, with the goal of improving transparency, law enforcement and economic growth.

Ukraine has risen in the World Bank’s Doing Business ranking from number 152 in 2012 to number 80 today. These are crucial steps, according to many of the stakeholders in the country’s business landscape – but as with any country facing such seismic change, there remains more work to be done.

Varied opportunities

Looking at the fundamentals, Ukraine offers enticing investment opportunities across a number of sectors including agriculture, IT, ports and shipping, energy, healthcare and manufacturing. Human talent is abundant and labour costs are low. Yet a survey of corporate executives by international law firm Kinstellar found that 82% of respondents view Ukraine as a difficult place to do business, citing political risk, security risk, corruption and regulatory risk as their top concerns.

Fear of political instability due to the war with Russian-backed separatists in the east of Ukraine deters many investors, and a complex regulatory environment can lead to substantial delays in basic processes such as applications and licensing. Many in the business community, however, cite recent government reforms as reasons for optimism.

“Ukraine has done an incredible amount in a very short period of time – with the police, with judicial reform, with anti-corruption,” says Lenna Koszarny, CEO at Horizon Capital. “More has been done in the past two-and-a-half years than in the 20 years preceding. Clearly, when a country hasn’t pursued structural reforms for 23 years, there is a lot to do. The process has just started.” Her firm is Ukraine’s largest private equity fund, and has invested more than $500m in Ukrainian and regional companies to date.

Mass changes

Among Ukraine’s reforms are: three anti-corruption bureaus established in 2015 for prevention, investigation and prosecution; an electronic system for asset and income disclosure that has led to the resignations of thousands of public servants; a public e-procurement system meeting World Trade Organisation requirements; decentralisation allowing more financial resources to local regions; banking sector and judicial reform; secured macroeconomic stability; a reduction of personal and payroll taxes; and the start in late 2016 of a government effort to repeal hundreds of outdated regulations on taxes, customs, and foreign exchange restrictions.

“The biggest reform of the past three years is decentralisation, which was fundamental because it broke the Soviet vertical of power where all decision making and finance was held at the top,” says Daniel Bilak, a director at UkraineInvest, the national investment support agency founded in November 2016.

“We need to make the business environment a safer and more attractive place,” he adds. “Difficulties with the rule of law and property rights protection have clearly undermined investor confidence. This is why there is huge judiciary reform under way at the Supreme Court level all the way down to the appellate court. People are starting to feel these reforms, but it doesn’t happen overnight.”

People power

Arguably Ukraine’s best asset is its human talent. Of its 45 million inhabitants, 70% hold a secondary education degree or higher and, according to the World Economic Forum, Ukraine produces 130,000 engineering graduates per year – the most in Europe – and is ranked number one for IT engineering in central and eastern Europe (CEE). The countrys IT sector generates about $3bn annually.

Labour costs are also among the lowest in the CEE region; the average monthly salary is $179, according to 2015 figures, significantly below the regional average.

“I’ve been here 10 years, and what Ukraine has to offer is a solution for Western countries facing a shortage of IT personnel,” says Hans Uithol, CEO of Dutch professional services company HYS Enterprise, which runs all its operations from its 150-strong team in Ukraine’s port city of Odessa. “It’s not about money; it’s about the availability of people,” he adds.

More than 100 international companies operate software R&D labs in Ukraine including BMW, Volvo and IBM – Samsung alone employs 1000 Ukrainian engineers for its research projects. IT outsourcing sales have grown twentyfold since 2003, and represent 40% of all Ukraine’s exports to the US.

Meeting challenges

All of this has happened despite a lack of dedicated infrastructure supporting tech entrepreneurs, says Bohdan Kupych, vice-president of business development at Kiev-based tech holding company KM Core. “There is no access to capital for entrepreneurs. It’s boot strapping, family and friends’ money… that’s where we work.” KM Core has invested about $100m in several tech projects in Ukraine. “We help companies get started to the point where they can attract additional investment,” he adds.

“There are some start-ups that manage to gather capital, but once they enter the growth stage they’re forced to look outside the country,” says Yuri Warczynski, co-founder of HYS Enterprise. “That is a disadvantage for Ukraine, but also an opportunity for venture capitalists, for angel investors, for anybody ready to invest in start-up accelerators here in Ukraine.” Notably, the founders of WhatsApp and PayPal were both born and raised in Ukraine but found success in the US.

An additional challenge is the impact Ukraine’s war has on investor perception, says Oleg Shkuropat, Odessa branch manager at Danish-founded Ciklum, one of Ukraine’s leading IT outsourcers with 3000 employees across the country. “The growth of our office here in Odessa has decreased, because of the war in the east and the conflict with Russia,” says Mr Shkuropat. “It’s hard to convince clients to build out their R&D centres anywhere further from Kiev or the country’s west. This office used to grow by 40 to 50 people per year, but in the past three years we’re growing by six to seven people per year. Other companies have been less fortunate and closed down.”

HYS Enterprise’s Mr Uithol believes the biggest efforts “should lie in showing the region is safe”, adding: “We cannot emphasise enough that now it is really safe to invest here, and your capital is secure.”

Rewarding the risks

Despite the apparent hurdles left by decades of mismanagement, Ukraine’s fundamental strengths have provided significant returns for those committed to navigating the country’s investment landscape. “Having discussed the current problems, there are in fact a lot of companies here that have made a lot of money,” says Mr Bilak.

Many of those successful companies are in agribusiness, one of Ukraine’s most lucrative sectors – the country holds 33% of the world’s black earth soil, considered the most fertile for agriculture, and its land bank is capable of feeding 500 million people. More than 70% of Ukraine’s territory is agricultural land, valued at more than $100bn, and the country is the world’s top exporter of sunflower oil and the third largest exporter of corn. The agriculture industry has grown by 14% a year since 2003 and constitutes 38% of all Ukrainian exports.

US-raised Ukrainian John Shmorhun, CEO of AgroGeneration, represents just one of these success stories. Founded a decade ago, the company employs 1400 people across 12 farms in Ukraine and produces 400,000 tonnes of crops per year.

“The reason Ukraine is so important is that we are profitable, in spite of all the hurdles and without subsidies. We were forced to be efficient from the very start,” says Mr Shmorhun. “If you want profitable, efficient farming, come to Ukraine.”

Growing pains

With additional investment into management, irrigation, logistics and equipment, Ukraine could double or triple its annual grain harvests of 60 million tonnes a year. “Ukraine needs $50bn to $60bn in foreign direct investment [FDI] for its agriculture over the next five to six years,” says Mr Shmorhun. “Ukraine doesn’t need smart people, labour or soil, it already has that. All we need is the investment.”

He says land reform is the biggest issue for agricultural investors – something Mr Bilak says is under discussion, as large companies in the sector face complex land ownership laws and cannot own the land on which they work. “Land reform, pension reform and public administration reform – those are the three big reforms being worked on right now,” adds Mr Bilak.

“Investors need to get over the war,” says Mr Shmorhun, who states that the conflict occupies 7% of the country, while 93% of it remains perfectly operable. “Things are moving in the right direction. My message to investors is look at the companies and their success rate over the years. Judge for yourself,” he adds. “When you can make these types of margins, why not? The war doesn’t affect us. Agriculture in Ukraine is revolution-proof. We’ve proven it.”

Room for modernisation

Ukraine is bordered by seven countries, four of them in the EU, and its infrastructure offers connections to key central and western European markets – many of its manufacturing plants are already integrated into European and global supply chains. Thirteen seaports, 170,000 kilometres of roadways, 22,000 kilometres of railways and more than 20 passenger airports support an export-oriented economy, complemented by Ukraine’s Deep Comprehensive Free Trade Agreement with the EU, which lifts tariff and non-tariff barriers for Ukrainian exports.

The ports and shipping sector is vital to exporting the country’s agricultural produce, yet according to the State Property Fund of Ukraine (SPFU), 70% to 90% of the ports’ infrastructure is outdated. FDI is essential to upgrading the ports to boost exports.

This endeavour is complicated, however, by the country’s privatisation regime. It has 3500 state-owned enterprises, and so far, ports are not up for privatisation, says Andriy Gaidutskiy, SPFU’s deputy chairman. Multinationals such as Cargill and ArcelorMittal therefore develop the ports, investing in projects including grain terminals and logistics, on a concession basis.

TIS Group of Terminals in Yuzhny, 27 kilometres east of Odessa, is Ukraine’s busiest maritime hub, operating five maritime terminals for ore, coal, fertilisers, grain and containers. “There is definitely a reason to do business in Ukraine,” says TIS CEO Andrey Stavnitser, citing Ukraine’s global standing as an agricultural producer.

“Yuzhny is the deepest port in Ukraine, which makes it perfect for large-scale commodity trade. TIS has invested in excess of $500m in maritime and land transport infrastructure, and now Yuzhny is the third largest port in the whole Black Sea,” he adds.

“Despite all the bureaucratic challenges, a private business of brick and mortar such as TIS works under international standards and can provide its partners with flexible and reliable services,” says Mr Stavnitser. The government is forming new concession legislation, and assets from ports to power plants are being prepared for concession or privatisation with the help of international consultants.

“The process is moving forward – not too fast, but it definitely is. Moreover, existing ports will also be open for large-scale privatisation, which is another reason to consider Ukrainian reforms seriously. I stress that private business is driving all the positive changes – and does this efficiently and promptly, pushing the government for faster and more efficient solutions as needed,” adds Mr Stavnitser.

Changing mindsets

Numerous other sectors in Ukraine present investment opportunities, among them energy – with everything from oil and gas exploration to coal, where French ArcelorMittal has invested $170m into a coke plant in central Ukraine, to renewables, where Turkish Atlas Global Energy has invested $20m into a wind farm in western Ukraine. Two hydropower plants were privatised in 2016, with more planned for this year.

“The biggest reform we are seeing is a change of mindset, especially in many government officials,” says Andy Hunder, president of the American Chamber of Commerce in Kiev, which represents 600 companies. “There is a lot of resistance – we’re seeing a clash between old and new. The new people, especially over the past three years, are coming in and they want change. Things are moving, albeit slower than we would like, but we have hit rock bottom and now we are climbing out.

“The voice of business can definitely be heard. A lot still needs to be done, but we are in this together and pushing together.”

So what advice would Mr Hunder give investors in Ukraine? “The most important thing is to have a clear strategy and play by the rules,” he says. “If you understand the realities and risks of doing business here, you can really see your success.”

Mr Bilak adds: “We’re in this transition period between old and new Ukraine that began three years ago. Up until three years ago, people were afraid of the system; now the system is afraid of the people. You have to pull many weeds out before you have a garden and that is the process we’re in. You are seeing, and will continue to see, fundamental change.”

Author: Natasha Turak

Source: thebanker.com