Business Ukraine 06/2018 by Business Ukraine magazine

issue 06/2018

INVESTING IN KHARKIV

Yaroslavskyâ&#x20AC;&#x2122;s luxury hotel plays host to Kharkiv economic forum for fifth time

BUSINESS UKRAINE MAGAZINE 06/2018: Earlier this year, Kharkiv was ranked by the Financial Times fDi service as the most cost-effective large city in Europe, underlining why many see it as Ukraine’s most attractive investment opportunity. As Kharkiv hosts the city’s annual international economic forum, this month’s issue of Business Ukraine magazine focuses on the capital of eastern Ukraine.

Ukraine’s European choice takes root despite political shortcomings Autumn 2018 will witness the long-anticipated launch of Ryanair flights from Kyiv and Lviv to seventeen EU destinations. The arrival of Europe’s leading budget carrier is part of a broader aviation boom that is seeing new services announced on a weekly basis and record passenger numbers at airports across the country. Each new flight serves to anchor Ukraine ever more firmly within the European community. Ukraine’s dynamic air travel industry is only one aspect of a broader European integration trend taking shape since 2014 that includes greatly improved road and rail links, steadily expanding trade with EU member states, and the oncein-a-lifetime breakthrough of visa-free travel. Thanks to these developments, Ukrainian society has never felt closer to the rest of Europe. The country’s current political leadership may have largely failed to live up to the European values espoused during 2014’s Euromaidan Revolution, but Ukraine’s European choice is alive and well nonetheless. Not all the symptoms of this deepening European trajectory are entirely positive, with massive economic migration the most obvious cause for concern. The loss of Ukrainian workers to EU labor markets is a significant blow to the country’s employers and represents a major demographic headache, but it also generates unprecedented flows of remittance money back to Ukraine while exposing millions of Ukrainians to the realities of life in the rules-based European Union. Many will choose to stay, but those who return to Ukraine will do so having gained valuable experience of the EU. Nor should we view this labor outflow as a terminal decline. With the freedom of movement created by visa-free travel, Ukrainians are likely to become more cosmopolitan, moving back and forth from Ukraine to various European destinations for employment, study and leisure. This is a radical departure from the situation just five years ago, when the majority of Ukrainian migrant workers looked to Russia for employment, keeping Ukraine’s collective imagination trapped firmly within the narrow confines of the post-Soviet world.

It is worth emphasizing that the integration of Ukraine is a two-way street. As more Ukrainians travel to the EU, more visitors from the European Union are also arriving in Ukraine. Kyiv expects to attract record numbers of international tourists this year, with more German, British and French arrivals than ever before. These tourists fuel the growth of the hospitality sector and break down barriers. Having encountered Ukraine’s vast untapped potential for themselves, some may eventually decide to become investors in their own right. Ukraine’s European integration is all the more remarkable because it is taking place against the backdrop of an ongoing undeclared war with Russia. The Kremlin had hoped to derail Ukraine’s European bandwagon, but Putin’s hybrid war has so far failed to cause the desired collapse in support for a European Ukraine. Many in Moscow will be hoping for a change in Ukraine’s trajectory following Ukrainian presidential and parliamentary elections in 2019. Ukraine’s pro-Kremlin political forces are already talking of the need for compromise and attacking Ukraine’s EU ambitions as a costly surrender of national interests. They are understandably eager to reverse the devastating decline in Russian influence occasioned by the Kremlin’s 2014 attack on Ukraine, but they find themselves up against a formidable opponent. Russia simply cannot compete with the soft power appeal of Ukraine’s European choice, which is precisely why Moscow resorted to force in the first place. This military intervention now looks increasingly selfdefeating. It has spurred Ukrainians along the road towards European integration while encouraging them to shed the psychological shackles of the “Russian World”. The coming election cycle is unlikely to change this overall picture. Indeed, it is becoming more and more difficult to conceive of any political shifts in Kyiv that could possibly reverse the historic processes currently underway.

About the author: Peter Dickinson is the publisher of Business Ukraine magazine and a nonresident fellow at the Atlantic Council

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investing in kharkiv

Kharkiv hosts annual economic forum International investment opportunities on the agenda in Europe’s most cost-effective large city

Late September will see Ukraine’s business, diplomatic and political classes focus on the country’s eastern capital as Kharkiv plays host to the city’s tenth annual International Economic Forum. Each year, this flagship gathering aims to bring together international investors, embassies, government bodies and representatives of the business community to explore the current investment climate and discuss the future prospects of the Kharkiv region. This early autumn event takes place with the host city generating unprecedented international attention. Kharkiv is currently more visible than ever on investment radars after being named Europe’s most cost-efficient large city in an authoritative 2018-19 survey conducted by the Financial Times fDi service. The 2018 forum, organized once again by the Kharkiv Regional Council and Kharkiv Regional State Administration, looks set to build on this momentum as outside audiences become increasingly aware of what the city and the surrounding region have to offer. Kharkiv is Ukraine’s second largest city with a population of more than 1.5 million. For more than a century and a half, it has enjoyed a reputation as a major regional academic and industrial center. Today’s Kharkiv is also home to one of Eastern Europe’s most dynamic IT clusters, while the nearby countryside boasts considerable untapped energy resources and some of Ukraine’s most arable farmlands. The city found itself thrust into the geopolitical frontlines for an extrended period in 2014 but managed to emerge relatively unscathed. Kharkiv has been largely peaceful ever since, providing sanctuary to thousands of Ukrainians fleeing the conflict in neighboring Luhansk and Donetsk regions. The sharp decline since 2014 in the Kharkiv region’s traditionally strong trade with Russia has meant a reorientation towards global markets, lending added impetus to initiatives like the coming International Economic Forum. 10

For the fifth year in a row, the forum will take place at the five-star Premier Palace Hotel Kharkiv in the heart of the city. The hotel, owned by forum general sponsor DCH Group, is part of the architectural ensemble lining Kharkiv’s iconic Freedom Square, which serves as the city’s centerpiece. The forum is one of a number of events held annually at the Premier Palace Hotel Kharkiv as part of efforts to promote the city on the international stage. This annual event calendar includes the AgroPort Forum, which each year brings together representatives of Ukraine’s agricultural industry and international partners, as well as events organized in partnership with the Ukrainian government and international bodies such as the United Nations.

Annual Kharkiv International Economic Forum “Innovations. Investments. Kharkiv Initiatives” 29 September at the Premier Palace Hotel Kharkiv

Kharkiv’s No.1 Investor Interview: Oleksandr Yaroslavsky has invested around USD 1 billion in Kharkiv

Ukrainian businessman Oleksandr Yaroslavsky is owner and president of Kharkiv-based DCH Group. Ranked by Forbes Ukraine as one of the country’s ten richest people, he has invested over USD 1 billion in the Kharkiv region alone. Yaroslavsky spoke to Business Ukraine magazine about his most recent acquisitions and explained why investors considering Kharkiv would be wise to hurry up. In the past two years, you have made a number of high-profile investments across Ukraine in a range of different economic sectors. What are the next steps in your investment strategy? I invest in projects where I see good prospects and which are personally interesting to me. There must be the potential for an attractive financial return. The specific sector of the economy does not matter. The main thing is the potential of the business. I was not a football fan prior to acquiring Metalist Kharkiv, but everyone remembers how Metalist performed during my presidency of the club. I did not previously know much about the aviation industry, but today Kharkiv International Airport is gaining a global reputation in terms of passenger traffic growth. Premier Palace Hotel Kharkiv was originally part of the city’s Euro 2012 preparations but is now a successful business in its own right. It consistently has high room occupancy rates, while the congress center regularly hosts important events. The story is the same with virtually all my assets.

One of your most prominent acquisitions was the 2016 purchase of Kharkiv Tractor Plant at a time when it had virtually ceased operations. This plant occupies a special place in local history. As a native Kharkivite, how important was it for you to make Kharkiv Tractor Plant operational once more? In Soviet times, Kharkiv Tractor Plant produced 50,000 units of equipment a year and supplied the whole of the USSR. The plant employed 45,000 people! We are now living in different times, of course, with changing technologies and evolving market conditions. Our current objective is to recover the plant’s previous market position. As you note, before we acquired Kharkiv Tractor Plant in 2016, production had ceased. Nothing is sacred, and competitors have inevitably occupied the market share the plant used to enjoy. You are also correct to suggest that Kharkiv Tractor Plant is not just another

asset for me. It is part of my city’s history and so I am putting my heart and soul into its development.

What are your plans for the development of the Kharkiv Tractor Factory brand on world markets? At present, we are fighting hard for every single millimeter of both domestic and international markets. We are actively pursuing market share all over the world, and potential clients in the former USSR, Europe and Asia are beginning to remember the Kharkiv Tractor Plant brand. A farmer from New Zealand recently purchased one of our tractors. He was originally from Ukraine and was eager to promote the Kharkiv brand. He was also impressed with the product, noting its competitive performance and high functionality. Based on the reactions we are encountering internationally, Kharkiv Tractor Plant has every chance of reestablishing itself as a leading global brand in the agricultural machinery market.

You are still widely known for your role as key investor in Kharkiv’s Euro 2012 preparations. The redevelopment of Kharkiv International Airport was one of the flagship projects of these preparations. The airport is now experiencing record growth in passenger numbers. If this growth continues, do you envisage the possibility of further expansion of facilities at Kharkiv International Airport? Before we took on the task of redeveloping Kharkiv International Airport, it was averaging 100,000 to 200,000 passengers per year. Last year, the figure was 800,000. This is the result of an effective management strategy. It allows us to attract new carriers and open new flights while developing strategic partnerships with low cost airlines like Wizz Air. If it were not for the challenging economic conditions in Ukraine as a whole, the airport’s growth rate would be even higher. Prior to 2014, the airport was reporting 20% annual passenger increases. Looking ahead, the airport still has considerable reserve capacity. The design we adopted envisaged serving up to 1500 passengers per hour, or more than two million a year. Naturally, we will expand at some point in the future. After all, a recent study by Airport Consulting Vienna concluded that Kharkiv International Airport has potential passenger traffic of 4.5 million a year. However, existing capacity is currently sufficient.

“With a competent approach, anyone investing in Kharkiv can expect to generate huge profits. I say this based on my own experience”

investing in kharkiv

About the interviewee: Oleksandr Yaroslavsky is the owner and president of DCH Group You have been linked with the redevelopment of Dnipro International Airport. This is widely seen as strategically important initiative for Ukraine. What is the current status of the project? This is indeed a strategically important initiative, both for Ukraine and for Dnipro itself. The current state of the airport is a disgrace for the city and for the whole country. I am ready to repeat what I have done for Kharkiv International Airport, but the state must take responsibility for the runway infrastructure and finance the necessary work. As soon is the state demonstrates the seriousness of its intentions, I will proceed with the airport terminal. I am prepared to start work at any time, but repeat that I will need two and a half to three years from the moment construction work begins. I am ready, and I expect the same readiness from the state. www.bunews.com.ua

What is your advice to international investors who are considering Kharkiv as a potential investment destination? My only advice is to hurry. Kharkiv is always ready to welcome investors, but the sooner they come, the greater the advantages they will enjoy. This city has something to offer in a wide range of sectors, from industry and tech to the sports and service sectors. It has the requisite infrastructure and an attractive agricultural industry. However, the early bird principle still applies. With a competent approach, anyone investing in Kharkiv can expect to generate huge profits. I say this based on my own experience. DCH Group has invested around USD 1 billion in the Kharkiv region. We are ready to share our experience and develop partnerships with new investors. I firmly believe the city has the potential to become Eastern Europeâ&#x20AC;&#x2122;s next economic miracle. 13

Kharkiv-based business group is one of Ukraine’s largest and includes a range of assets nationwide Oleksandr Yaroslavsky’s DCH Group is one of Ukraine’s largest financial and industrial groups with more than two decades of operational experience and current assets in a wide range of industries. The Group’s key activities are currently in finance, machinery, construction supplies, real estate development, transport, and the hospitality industry. Although present in numerous regions of Ukraine, DCH Group is Kharkiv-based and remains widely associated with the leading role it played in the transformation of the city’s infrastructure on the eve of the Euro 2012 European football championship. The DCH Group story dates back to the mid-1990s. Beginning in 1998, DCH Group president Oleksandr Yaroslavsky played a key role in the rise of UkrSibbank, helping to turn it into one of the leading players on the Ukrainian banking market before overseeing the sale of a controlling stake to France-based global banking industry giant BNP Paribas in 2006. The DCH Group investment archive also features Kyivstar, Nadra Bank, Cherkassy Azot, Merefiansky glass factory, and XXI Century construction company. The Group’s current assets remain markedly diverse and include everything from the Ukrainian Mining Company with its five open cast mines producing stone, gravel and high-quality granite, to Vozdvyzhenka residential estate in Kyiv and the Karavan Megastore Chain of shopping and entertainment complexes in Kharkiv, Kyiv and Dnipro. Meanwhile, a series of acquisitions since 2016 have bolstered the DCH Group portfolio considerably. These relatively recent additions include Dnipro Metallurgical Plant, Sukha Balka Mine in Kryvih Rih, and INGO Ukraine Insurance Company. Perhaps the most high-profile DCH Group acquisition in the past few years has been Kharkiv Tractor Plant. This iconic industrial asset dates back to the early decades of the twentieth century and remains the only enterprise in the post-Soviet region that produces both wheeler and crawler tractors in parallel. Over the years, this former poster boy of Soviet industrialization has produced a total of over three million tractors and other kinds of heavy machinery while serving as a symbol of Kharkiv industry. However, the plant was teetering on the brink of bankruptcy until DCH Group intervened in 2016. Following acquisition by DCH, production resumed in February 2017. Within six months of this restart, the plant had produced over 500 units of machinery. It is now undergoing further modernization as efforts continue to upgrade output and reenergize the plant’s international export network. Yaroslavsky’s status as the man credited with reviving Kharkiv Tractor Plant has underlined DCH Group’s credentials as the most prominent investor in the Kharkiv region, with the Group’s overall regional investments estimated at more than USD one billion. DCH Group remains best known in this respect for its central role in Kharkiv’s preparations to serve as a host city during the UEFA Euro 2012 football championship. Ukraine won the right to co-host the tournament in spring 2007, but it was not always clear whether Kharkiv would be involved. The capital of eastern Ukraine did not initially feature among the four Ukrainian cities favored to serve as host venues for group stage matches during the summer 2012 football championship, with both Dnipro and Odesa believed to be ahead of Kharkiv in UEFA’s plans. A highly ambitious investment agenda outlined by DCH Group www.bunews.com.ua

investing in kharkiv

DCH Group in focus

was to prove crucial in persuading UEFA officials to award Kharkiv host city status. This infrastructure upgrade would ultimately involve investments by DCH Group of approximately USD 300 million, making Yaroslavsky the largest private investor in Ukraine’s Euro 2012 preparations. Much of the construction and renovation work undertaken by DCH Group in the run-up to Euro 2012 continues to play a significant part in the day-to-day life of the city. The redevelopment of Kharkiv International Airport was probably the most important improvement completed by DCH Group during the city’s Euro 2012 preparations. The Group invested USD 110 million into the construction of entirely new terminal facilities together with surrounding infrastructure, while the Ukrainian state financed the redevelopment of the airport runway facilities. This investment continues to pay dividends, with Kharkiv International Airport currently among the busiest in Ukraine, boasting consistently strong passenger and flight growth figures throughout the past two years. In order to meet UEFA requirements ahead of Euro 2012, DCH Group also constructed Kharkiv’s first five-star hotel. The Premier Palace Hotel Kharkiv involved an investment of USD 130 million. It is located in the heart of the city close to Freedom Square and remains Kharkiv’s preferred prestige venue for business, political and society events. Meanwhile, Metalist Stadium received a USD 30 million facelift in order to host Euro 2012 group stage matches, while a further USD 35 million went on the construction of a state of the art football training facility and children’s football academy. Euro 2012 was not Yaroslavsky’s first foray into sports-related investments. For many years, he served as president of Metalist Kharkiv Football Club, overseeing the team’s rise to challenge the domestic dominance of Ukraine’s traditional football powerhouses Dynamo Kyiv and Shakhtar Donetsk. During Yaroslavsky’s tenure as club president, Metalist became a permanent fixture in the top three of the Ukrainian Premier League and regularly competed in the latter stages of UEFA club competitions. Away from football, DCH Group also has a longstanding relationship with Kharkiv Olymp Rugby Club, where Yaroslavsky has served as club president since 2005. This backing has helped Kharkiv Olymp emerge as the preeminent force in Ukrainian rugby. The club has won a record 13 league titles and currently provides the majority of the Ukrainian national team starting fifteen. 15

Kharkiv is Europe’s

most cost-effective

investment option Ukraine’s second city emerges as one of the most attractive investment propositions in Eastern Europe Kharkiv is a city with a rising international investment profile. In the European Cities and Regions of the Future 2018/19 rankings published by the Financial Times fDi service in February 2018, Kharkiv was ranked as the most cost-effective large city in Europe. Of the 40 large European cities studied, Kharkiv was found to have the lowest average annual salary for skilled and semi-skilled workers, the lowest minimum wage, lowest cost of establishing a business, and the most competitive rent for grade A office space. It also had the second lowest costs for electricity and corporation tax. “To date, a lack of international awareness has been the main limiting factor for Kharkiv’s investment drive, though local officials hope to change that by becoming more proactive in their international outreach. Already, they say, foreign delegations are arriving in the city in droves - and are very likely pleasantly surprised to find a place that is at odds with the global preconception about eastern Ukraine,” wrote fDi Intelligence’s Courtney Fingar. This positive assessment reflects growing international awareness of the diverse investment opportunities Kharkiv boasts. In addition to cost competitiveness, the city also has powerful industrial, educational and geographical advantages, as well as regional authorities committed to building on this potential. Since her appointment

in October 2016, Kharkiv Oblast Governor Yulia Svitlychna has made great strides towards leveraging the region’s strengthens and making Kharkiv an attractive investment destination. In 2017, these efforts helped to generate foreign direct investment (FDI) of approximately USD 388 million.

Capital of Eastern Ukraine

Kharkiv region is the third most populous region of Ukraine, with a population of just under three million. Meanwhile, Kharkiv itself is Ukraine’s second largest city with a population of more than 1.5 million. It is the most important economic, political and cultural hub in eastern Ukraine and served as the country’s capital for the first fifteen years of the Soviet era. Traces of this period can still be seen in the monumental architecture that dominates much of downtown Kharkiv, creating the unmistakable impression of a major metropolis. According to Ukrainian government data, in 2017 Kharkiv region was the only industrialized region of Ukraine to record a second consecutive year of industrial growth. At present, the region’s annual industrial growth rate is slightly higher than 6%. This period of sustained growth has enabled enterprises to take on more staff, with the number of workers in the industrial sector of the Kharkiv regional economy rising by three and a half thousand in 2017. :

“In the European Cities and Regions of the Future 2018/19 rankings published by the Financial Times fDi service Kharkiv was ranked as the most cost-effective large city in Europe” 16

investing in kharkiv

www.bunews.com.ua

Kharkiv’s Bombastic Bolshevik Legacy: Europe’s First Skyscraper Complex Kharkiv’s distinctive Derzhprom Building (literally “State Industry Building”) is a classic of world architecture. When it was first unveiled in 1928, it was Europe’s first skyscraper complex. This strikingly futuristic building is a monument to the early years of the Stalin era when Kharkiv functioned as the capital of Soviet Ukraine. It was conceived as the centerpiece of attempts to elevate the status of Kharkiv in relation to Ukraine’s historic capital city Kyiv. The ambitious and innovative design of the Derzhprom complex symbolized the Communist regime’s revolutionary vision of a rational and scientific future. It is widely recognized as one of the most important examples of the Constructivist architectural style favored by the Bolsheviks in the 1920s and 1930s. At the time of its completion, Derzhprom was the tallest structure in Europe and a source of enormous Soviet pride. Ninety years on, it continues to fascinate fans of architectural history. In a 2015 profile of Derzhprom published by the UK’s Guardian newspaper, Owen Hatherley described the building thus: “This is one of the very few built structures to give an impression of what a constructivist city might have been like: a delirious crashing together of Americanism and Communism. No building in the former Soviet Union expresses so vividly the undercurrents of utopian socialism and Americanised modernism that ran through the Communist revolution’s early years.” The Derzhprom Building has proven far more durable than the ideologies of twentieth century totalitarianism. It survived repeated demolition attempts by the occupying Nazi forces during WWII, and emerged intact from the collapse of the Soviet Union. Today it remains Kharkiv’s leading landmark and one of Ukraine’s most important architectural treasures.

University and IT Hub

One of Kharkiv’s greatest assets is the city’s academic excellence. Kharkiv has a long tradition as one of Eastern Europe’s most important university cities. Today it boasts 96 institutes of higher education alongside more than 170,000 undergraduate and postgraduate students, including thousands of international students from across the globe. Popular study subjects include IT, aerospace design, architecture

and construction. This rich academic tradition is also evident in Kharkiv’s status as a center of scientific research, with 217 research establishments in the city employing over 34,000 research staff. The city has a longstanding international reputation for academic achievement, with Kharkiv scientists and academics winning four Nobel Prizes in the twentieth century. This formidable brain fund has helped make Kharkiv home one of Eastern Europe’s largest IT clusters. Institutes such as the Kharkiv National University of Radio Electronics combine with an expanding network of private sector training courses to produce a steady flow of skilled IT professionals. Schools throughout the Kharkiv region

About the author: Olexii Ivanchenko is a specialist on Eastern Ukraine at the Ukrainian government’s investment promotion office UkraineInvest

Aerospace Industry Focus

Kharkiv is a key center of Ukraine’s aircraft manufacturing industry. Ukraine is one of only a handful of nations with an aviation industry and Kharkiv plays a central role thanks to a high quality workforce together with numerous design bureaus and manufacturing facilities. Today, Kharkiv is home to an expanding aviation industry cluster accounting for an estimated 70% of Ukraine’s overall aircraft-related production. Specialties including engine design and manufacture. This has proved appealing to international partners. For example, in late 2017 Kharkiv State Aircraft Manufacturing Company and US-based Oriole Capital Group reached agreement on a major investment into the Kharkiv enterprise involving aircraft production orders worth USD 150 million.

Multinational Presence

Kharkiv region has attracted a number of major multinational investors including Nestle (food production), Malteurop (malt and hops), Philip Morris (tobacco, iQOS), Amcor Rentsch (packing), and Gorenje (home appliances). In addition to this, international conglomerates like Schneider Electric are set to transfer their head offices from Kyiv to Kharkiv, while US nuclear company Holtec and private equity firm SigmaBleyzer both operate in the region. Machine building and engineering remain important elements of the Kharkiv economy and are part of a long tradition tied to the city’s industrial heritage and academic resources. For example, Kharkiv Turboatom is one of the largest enterprises of its kind in the world. The plant specializes in the manufacture of turbine equipment for hydro, thermal and nuclear power plants. Thanks to diversification, the main markets for Kharkiv Turboatom are currently Ukraine itself, EU member states, Latin America and the countries of Southeast Asia. The company provides ongoing maintenance services globally and has a large portfolio of customers in this segment, creating a steady cash flow that can serve as a platform for further expansion in the years ahead as Kharkiv Turboatom looks to broaden the company’s international horizons further.

Kharkiv’s Rising International Profile Kharkiv has always played an important role in the Ukrainian economy. The city’s potential on the global stage is now also coming increasingly into focus. Kharkiv first emerged on the international radar thanks to its role as one of Ukraine’s host cities during UEFA’s Euro 2012 European football championship. DCH Group owner and president Oleksandr Yaroslavsky was the driving force behind Kharkiv’s Euro 2012 preparations, investing over USD 300 million to upgrade local infrastructure and make sure visiting fans and officials encountered more than a mere makeover. At the time of Euro 2012, Yaroslavsky was president of Metalist Kharkiv Football Club, which was regularly riding high in both the Ukrainian Premier League and European competitions. The success of Metalist helped to thrust the international spotlight on Kharkiv and made Euro 2012 a logical continuation of this sporting strategy. Infrastructure investments ahead of Euro 2012 resulted in additions including a modern stadium, a new international airport and a five-star hotel, while Kharkiv’s roads also saw significant improvements. Of equal importance was the impact this had on local attitudes. The Euro 2012 upgrade, together with the international attention it garnered, provided a major boost to local pride and encouraged Kharkiv residents to see their city as a global hub rather than a provincial outpost. This change in thinking helped to create the right climate for the further evolution of the Kharkiv economy. Today’s Kharkiv is a city confident of its place in international economic affairs. Kharkiv International Airport serves as a gateway to the region and allows Kharkiv businesses to integrate into the global economy. As international interest grows, the city regularly plays host to investor gatherings and visiting delegations. The annual International Economic Forum, supported by the Kharkiv Oblast Administration and DCH Group, is now in its fifth year. Appropriately enough, the venue for the forum is the five-star Premier Palace Hotel Kharkiv, part of the city’s rich Euro 2012 legacy. Such events help inform international audiences of Kharkiv’s strategic strengths and vast investment potential. With the city’s international profile currently on the rise, there are more reasons than ever to feel optimistic about Kharkiv’s future.

investing in kharkiv

have also been at the forefront of efforts to adapt their curriculums in order to produce graduates with the requisite IT skills to prosper in the city’s fast-growing tech economy. This has attracted a wide range of international IT companies to Kharkiv including social media intelligence innovator Singularex, game developer Plarium, and outsourcing giant Akvelon.

Investing in the Future

All this bodes well for Kharkiv’s future development and the city’s ability to build on its considerable investment attraction potential. As fDi’s Courtney Fingar notes, “Quality and skills need to be part of any corporate location equation and here Kharkiv stacks up relatively well. Among large European cities, it posted the second highest expenditure on education and number of higher education institutions in the ranking. Of the 20 Ukrainian cities studied, Kharkiv had the highest proportion of companies in the knowledge sector, the second highest number of jobs created by FDI and the third highest level of FDI capital expenditure on R&D projects.” With stats like these to support it, Kharkiv looks poised to maintain and even improve on its current economic performance while adding to its growing international reputation. www.bunews.com.ua

About the author: Elena Derevyanko is Vice-President of DCH Group, Vice-President of the PR-League, Senator of the European Economic Senate, and a Doctor of Economic Sciences 19

Kharkiv International Airport

leads Ukraine’s aviation boom

International gateway to eastern Ukraine enjoying unprecedented growth in terms of both new destinations and passenger numbers

Ukraine’s air travel industry is currently experiencing a period of un-precedented growth and Kharkiv International Airport is at the cutting edge of this upward trend. For the past two years, the airport has broken record after record as passenger traffic soars and new flight services continue to appear on the departure board. The figures speak for themselves and illustrate why previously unfashionable Ukraine is fast winning a reputation as one of the most attractive markets in the European aviation industry. In the first eight months of 2018, Kharkiv International Airport saw passenger numbers increase from 2017’s January-August total of 537,700 up to 639,400, representing a year-on-year rise of 19%. Over the same period, the airport witnessed a 16% increase in international services from 1827 to 2124 flights. Meanwhile, June 2018 saw a new monthly record established with 114,600 passengers passing through the airport.

The foundations for this spectacular growth can be traced all the way back to almost a decade ago when the airport underwent fundamental reconstruction as part of Kharkiv’s preparations to serve as a host city during UEFA’s Euro 2012 football championship. When European football’s governing body first looked to determine which Ukrainian locations would serve as Euro 2012 hubs, Kharkiv was not originally on the priority shortlist of potential host cities. However, UEFA officials were eventually convinced to pick Kharkiv ahead of Ukrainian rivals such as Dnipro and Odesa due to the ambitious investment agenda put forward by Oleksandr Yaroslavsky in order to prepare the city for the championship. The redevelopment of Kharkiv International Airport was one of the centerpieces of these preparations, with Yaroslavsky investing a reported USD 110 million into the construction of new terminal facilities and related infrastructure while the Ukrainian authorities took on the airfield upgrade. When it was unveiled in

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the wider Kharkiv region and throughout eastern Ukraine. Kharkiv’s airport serves as the principle gateway for the entire east of the country and has a catchment area population that is by many estimates over ten million in size. As real incomes and spending power continue to rise throughout eastern Ukraine, this improving economic environment is visible in the climbing passenger stats at the airport. In order to serve more passengers, an airport must have more flights. In this respect, Kharkiv International Airport has been among Ukraine’s market leaders in recent years. The eastern Ukrainian air hub continues to attract new airlines and to announce new routes as carriers seek to tap into what is an increasingly lucrative regional market that is the equivalent to a medium-sized European country. International airlines currently flying from Kharkiv International Airport include Turkish Airlines, LOT Polish Airlines, Greek Ellinair, new Georgian carrier Myway Airlines, Pegasus, Belavia, SkyUP and many more, while Ukraine’s carrier UIA has added new international destinations including Milan to its scheduled Kharkiv services. The airport is also popular among low-cost carriers. Earlier this year, leading low-cost carrier in Central and Eastern Europe Wizz Air returned to Kharkiv International Airport with flights to Dortmund in Germany and Poland’s Katowice. Later this autumn, Wizz Air will launch flights from Kharkiv to London Luton in the UK, Vienna in Austria and Poland’s Gdansk and Wroclaw.

investing in kharkiv

2010, the new-look Kharkiv International Airport represented a quantum leap forward for Ukraine’s regional airports, most of which remained trapped firmly in the Soviet era at that time. The planners behind the makeover of Kharkiv’s air hub made sure that the new-look airport retained the architectural authenticity of its Soviet heritage, with the original terminal building incorporated into a twenty-first century redesign. Built in the 1950s and considered a classic of its era, the elegant and iconic facade of Kharkiv’s Soviet era terminal building remains central to the airport ensemble today. While the period charm of the exterior is still much as it was half a century ago, the interior of the building has undergone a complete reconstruction and modernization. It now serves as a VIP facility for important guests, visiting delegations and airline crews. Following its transformation, Kharkiv International Airport played a crucial role in the success of Kharkiv’s Euro 2012 host city duties and continued to experience robust growth in flight and passenger numbers until 2014, when Kharkiv’s location on the geopolitical frontlines led to a sharp and inevitable decline in airport traffic. The airport’s subsequent recovery has often bordered on the remarkable. Annual passenger growth figures for 2016 were close to 60%, earning the airport a place among Europe’s best performers from Airports Council International Europe (ACI Europe). The impressive performance of Kharkiv International Airport in recent years reflects the steadily improving economic climate in

investing in kharkiv

Five-star Kharkiv landmark The Premier Palace Hotel Kharkiv is a key part of the city’s Euro 2012 infrastructure inheritance

The Premier Palace Hotel Kharkiv is among the most recent additions to the eastern Ukrainian capital city’s collection of landmarks. Located on one side of the city’s colossal Freedom Square, it shares a skyline with the array of imposing early twentieth century structures that serve as the architectural legacy of Kharkiv’s role under the Bolsheviks as the first capital of Soviet Ukraine.

Fruit of Euro 2012

The Premier Palace Hotel Kharkiv was unveiled to the public in December 2011 as the first five-star hotel in the region. It was among the centerpieces in the city’s preparations to serve as one of eight host cities during the summer 2012 UEFA European Championship in Poland and Ukraine. The construction of the hotel was part of DCH President Oleksandr Yaroslavsky’s ambitious infrastructure upgrade ahead of Euro 2012. This elaborate upgrade helped convince UEFA officials to grant Kharkiv host city status and led to Yaroslavsky emerging as Ukraine’s largest single private investor in the country’s preparations. He reportedly invested USD 126 million into construction of the Premier Palace Hotel Kharkiv, making it one of the most expensive elements in the city’s preparations alongside the reconstruction of Kharkiv International Airport. Establishing Kharkiv’s first five-star hotel was an obligatory requirement in order to qualify as a potential UEFA host city. UEFA officials subsequently used the hotel as a regional headquarters during the championship itself in June 2012. 22

International Platform Since its international debut in summer 2012, the Premier Palace Hotel Kharkiv has become a mainstay of the city’s business life and a regular stage for international events connecting eastern Ukraine to the outside world. It currently plays host to a number of consulates and international organizations including the regional office of the European Bank of Reconstruction and Development (EBRD). Over the past four years, the hotel has served as the venue for more than 1500 events with an emphasis on business. Annual highlights include the AgroPort agricultural industry gathering and the International Economic Forum “Innovation. Investments. Kharkiv Initiatives.” The hotel is also involved in a number of charity initiatives, serving as the venue for the annual “When Dreams Come True” international charity ball, which seeks to support orphans and victims of the conflict in southeastern Ukraine. In addition to this fundraising effort, the hotel also functioned as an improvised international crisis center in summer 2014 following the attack on the MH17 civilian airliner above the eastern Ukraine conflict zone. Over the past seven years, the Premier Palace Hotel Kharkiv has earned a growing international reputation within Eastern Europe’s hospitality industry. In particular, it has benefited from the hotel’s role as host venue for senior delegations visiting the city. It has also begun to feature prominently in international hospitality sector rankings. For example, in 2016 American publication U.S. News & World Report rated the Premier Palace Hotel Kharkiv among Ukraine’s top five hotels.

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Kharkiv: Brain of Ukraine Eastern capital Kharkiv’s leading historic role in Ukraine’s nation-building efforts helps debunk the myth of an insurmountable east-west national divide

Despite its location in Ukraine’s eastern borderlands a mere stone’s throw away from Russia, Kharkiv has consistently played a central role in the Ukrainian nation-building experience. For centuries during the Cossack and tsarist eras, the city served as a hub of Ukrainian intellectual and cultural life. Kharkiv was briefly the capital of Soviet Ukraine in the 1920s to the early 1930s, a period that witnessed first the resurgence and then the destruction of Ukrainian cultural self-assertiveness. More recently, Kharkiv resisted Kremlin attempts in the spring of 2014 to claim the city for the so-called “Russkiy Mir” or “Russian World”, thus avoiding the fate of other major east Ukrainian cities and saving Ukraine from the catastrophe of partition. This heritage places Kharkiv at the very heart of Ukraine’s national story and makes a mockery of efforts to divide the country neatly into pro-European west and pro-Russian east.

Cossack Beginnings Historically speaking, Kharkiv is a relatively new city by both Ukrainian and European standards. Traces of ancient settlements dating back to the second millennium BC are evident in the vicinity of today’s city, but until relatedly recently the region remained largely characterized by wild steppe. From the beginning of the seventeenth century onwards, Muscovy gradually began to extend control over what is now the Kharkiv region, creating a defensive frontier line against the Tatars to the south. The region attracted Ukrainian Cossack settlers and refugees from conflict-ridden areas within Ukraine’s Hetman state on the nearby right bank of the Dnipro River. These communities often formed themselves into villages of freemen, the so-called “slobody”, from which the region’s traditional name “Slobidska Ukraine” arose. The first major Cossack settlement on the site of today’s Kharkiv dates from the middle of the seventeenth century. By 1655, it had attracted about 2,000 inhabitants. As Muscovy gained in imperial importance under Tsar Peter the Great and his successors, the town remained the capital of the Kharkiv regiment, the principal administrative and Cossack military unit in Slobidska Ukraine. Russia eventually abolished the Cossack regimental system in 1765 as St. Petersburg sought to consolidate its imperial grip on Ukraine, leaving Kharkiv to become a regional capital of the tsarist empire. The region’s Ukrainian Cossack nobility was absorbed into the Russian governing class while the ordinary Cossacks found themselves reduced from free peasants to the status of serfs.

Cradle of Ukrainian Identity

The early nineteenth century saw the foundation of Kharkiv University and the beginnings of the city’s reputation as a center of academic excellence. This stimulated the development of learning and cultural life in Kharkiv. Rather unexpectedly for the Russian authorities, it would also play a crucial role in the emergence of a modern Ukrainian national consciousness. Despite the considerable constraints imposed by the Russian imperial authorities on the development of a separate and distinct Ukrainian national identity, Kharkiv in the early 1800s became the driving force behind a Ukrainian cultural awakening. Kharkiv is where many of the most pioneering Ukrainian scholarly and linguistic works appeared along with the first periodicals, newspapers, journals, and almanacs in the Ukrainian language. Famous Ukrainian cultural figures associated with the city during this period include the writer Hryhorii Kvitka-Osnovianenko, composer Petro Hulak Artemovsky, literary scholar Izamail Sreznevsky, poets Mykhailo Petrenko and Amrosiy Metlynsky, and other members of the Kharkiv Romantic School. One of them, the historian Mykola Kostomarov, became the ideologue of the first modern Ukrainian political organization, the Brotherhood of Saints Cyril and Methodius, founded in Kyiv in the mid-1840s. He went on to suffer arrest, imprisonment and exile along with Ukraine’s national bard Taras Shevchenko. The arts also thrived alongside literature. The first professional Ukrainian theatre appeared in Kharkiv in 1789 and the development of Ukrai24

Capital of Bolshevik Ukraine

At the dawn of the tumultuous twentieth century, Kharkiv was an increasingly industrialized and Russified city that was home to a growing socialist movement, but it also retained its prominent Ukrainian dimension. Kharkiv’s Ukrainian intelligentsia engaged in all manner of patriotic activity exemplified by scholars and literary figures such as Dmyto Bahaliy, Dmytro Yavornytsky, Pavlo Hrabovsky and Borys Hrinchenko, the compiler of the first Ukrainian dictionary. In 1900, Kharkiv lawyer Mykola Mikhnovsky became the first person to issue a political program for the creation of an independent Ukraine. This led to the founding of the Revolutionary Ukrainian Party, the first political party to appear in Russian-ruled Ukraine. After the collapse of the Russian empire in 1917, Ukrainian activists in Kharkiv attempted to link up with the Central Rada in Kyiv and combine efforts to establish an independent Ukrainian state. This statehood bid was ultimately to prove unsuccessful. In December 1917, the Bolsheviks took control of Kharkiv and the city became a focus of early Soviet efforts to reassert Moscow’s authority over Ukraine. The subsequent struggle between Ukrainian, Bolshevik and White forces continued until the early 1920s when the Bolsheviks finally emerged victorious. In a snub to the independence ambitions of Kyiv, they declared Kharkiv the capital of Soviet Ukraine.

Rise and Fall of a Ukrainian Renaissance

Before his death in 1923, Lenin realized that in order to consolidate Soviet rule over the non-Russian territories of the empire, it was necessary to reach a temporary accommodation with the large non-Russian populations that now found themselves under Communist rule. This led to the relatively liberal New Economic Policy (NEP) and a more conciliatory approach towards the national languages and cultures of the non-Russians designed as a means of soft Sovietization. This policy of “indigenization” or “Ukrainization” was to have a particularly profound impact on the newly anointed capital of Soviet Ukraine. With the official switch to the use of Ukrainian in education and public life, a new Ukrainian cultural renaissance took hold. A dynamic Ukrainian intellectual community soon emerged with Kharkiv at its center, bringing with it a veritable explosion of creativity and sparking unprecedented public debate. In the literary and theatrical spheres, the writer Valerian Pidmohilny, the theatre director Les Kurbas, and the playwright Mykhailo Kulish spearheaded efforts to create a modern Ukrainian urban culture. Interestingly, it was in this eastern Ukrainian city that Ukraine’s historical links with Europe and the country’s European cultural orientation now entered the cultural mainstream. One of the leading Ukrainian communist writers of the time Mykola Khvylovy advanced the cultural slogan “Away from Moscow.” Meanwhile, senior local communist officials such as Mykola Skrypnyk and Oleksandr Shumsky along with economist Mykhai-

lo Volobuyev and Marxist historian Matviy Yavorsky all tested the practical limits of Soviet Ukraine’s proclaimed “sovereign” and “equal” status for Ukraine within the new Union of Soviet Socialist Republics. The national assertiveness released by official support for Ukrainization eventually drew the ire and concern of Stalin and the central authorities in Moscow. When they abandoned NEP in favor of immediate industrialization and collectivization in the late 1920s, they also reversed their nationalities policy. While subduing the peasantry, they began purging Ukraine’s non-Russian elites. In 1930, one of the first major Stalinist show trials took place in Kharkiv. The case of the so-called Union for the Liberation of Ukraine targeted those who had supported attempts to establish an independent Ukrainian state in 1917-20. During the following years, the purges carried out against the Ukrainian political, cultural and religious elite amounted to the decapitation of the Ukrainian nation. These efforts took place in parallel with a Soviet campaign to crush the Ukrainian peasantry. Millions of Ukrainians starved to death during the deliberately engineered Holodomor famine of 1932-33, a crime now widely recognized as an act of genocide by the Soviet authorities against the Ukrainian nation. In 1933, in a desperate act of protest against the ruthless liquidation of Ukraine’s modern renaissance and the genocide of its people, Skrypnyk and Khvylovy both committed suicide. One year later, the Communist authorities in Moscow decided to move the capital of Soviet Ukraine from Kharkiv to Kyiv. This was widely interpreted as the complete repudiation of Ukraine’s experiment with national communism.

investing in kharkiv

nian theatre is still closely associated with the city. Throughout the nineteenth century, Kharkiv had a vibrant art school whose representatives displayed a distinct interest in Ukrainian themes. These Kharkiv artists included Serhii Vasylkivsky (famous for his Cossack paintings), and the renowned impressionists Mykhailo Tkachenko and Mykhailo Berkos. Kharkiv was also the birthplace of Ukrainian cinema in the 1890s, which began with the short documentaries of Alfred Fedetsky.

Rejecting Russia

Opportunities to reaffirm Kharkiv’s Ukrainian heritage were severely limited for the remainder of the Soviet era. Instead, the city became an increasingly Russified metropolis, serving as one of the great industrial and academic capitals of the entire Soviet empire. Nevertheless, when Gorbachev relaxed political controls in the late 1980s, Kharkiv not only supported democratization but also embraced the resurgent Ukrainian independence movement. In the Ukrainian national referendum held in December 1991, an overwhelming 86.3% of Kharkiv voters supported Ukraine’s declaration of independence. The most recent challenge to Kharkiv’s Ukrainian credentials came during the tumultuous months of late 2013 and early 2014 when political unrest in Kyiv unseated a pro-Kremlin government and sparked Russian military intervention. Despite the pro-Russian stance adopted by key Kharkiv officials during the Euromaidan Revolution, the city withstood a serious test of its loyalties when an attempted takeover by proRussian forces in March and April 2014 fell flat. This rejection of the Kremlin’s clarion call was to prove decisive in derailing Putin’s dreams of a new Ukrainian empire. It also underlined Kharkiv’s historic status as a bastion of Ukraine’s statehood aspirations. Today the city remains a highly cosmopolitan and predominantly Russian-speaking place with strong ties to the tsarist and Soviet epochs. A vast metropolis of over one and a half million people, it defies definition in simplistic black and white terms. Nevertheless, the events of 2014 served as a timely reminder that Kharkiv has always occupied a central role in Ukraine’s nation-building narrative and will continue to do so.

About the author: Bohdan Nahaylo is a British-Ukrainian journalist, historian and veteran Ukraine watcher www.bunews.com.ua

Cossack heritage and stunning nature make Kharkiv an exciting tourism industry proposition When it comes to Ukraineâ&#x20AC;&#x2122;s tourist attractions, Kharkiv region may not necessarily be at the top of your list. Nevertheless, it has a wealth of interesting attractions to offer visitors looking to explore more of Ukraine beyond the increasingly mainstream delights of Kyiv, Lviv and Odesa.

www.bunews.com.ua

The modern history of Kharkiv region begins with the story of â&#x20AC;&#x153;Slobidska Ukraineâ&#x20AC;?, the area settled by Ukrainian Cossacks in the seventeenth and eighteenth centuries. This historic wave of settlement transformed the region and served to expand the area inhabited by Ukrainians by over one hundred thousand square kilometers, with :

investing in kharkiv

Kharkiv tourism treasures

KHARKIV COSSACK STARS IN REPIN’S CELEBRATED PAINTING Legendary seventeenth century Kharkiv-born Cossack leader Ivan Sirko is one of the central figures in Ilya Repin’s celebrated painting “Reply of the Zaporozhian Cossacks to Sultan Mehmed IV of the Ottoman Empire”. The artwork depicts a jovial band of Cossacks led by Sirko who are in the process of composing an obscene and irreverent letter to the Ottoman Sultan in response to his pompous ultimatum calling on the Ukrainian Cossacks to submit to Ottoman rule. While there is no concrete historical evidence the letter ever actually existed, it has come to serve as a symbol of the freedom-loving and egalitarian philosophy espoused by the Ukrainian Cossacks. Whether rooted in fact or fantasy, the version of the text passed down to later generations undoubtedly includes some of the most memorable insults ever addressed to a head of state, such as “What the devil kind of knight are thou, who cannot slay a hedgehog with your naked arse?”

: the boundaries of Slobidska Ukraine stretching for hundreds of kilo-

meters across the border into today’s Russian Federation. These lands were originally governed by Cossack “starshinas”, a prosperous class of Cossacks operating under the supervision of the Russian imperial military. Although these self-governing communities enjoyed a certain degree of autonomy, uprisings against Russian rule were relatively commonplace. In the second half of the eighteenth century, Russian ruler Catherine the Great finally moved to dissolve the Cossack Hetmanate in Ukraine. This meant the transition of Slobidska Ukraine into a fully-fledged province of the Russian Empire with its capital in Kharkiv. Today, visitors can still find numerous traces of this Cossack period throughout Kharkiv region. One of the most fascinating chapters of Kharkiv’s Cossack heritage is the story of celebrated Cossack leader Ivan Sirko, who was born close to Kharkiv in the early years of the seventeenth century. Sirko is an iconic Ukrainian national hero and one of the most famous of the Cossack Otomans (military leaders) of the Zaporizhian Host. Praised and lionized in many Ukrainian folk songs, poems and fairytales, Sirko remains one of the most mythologized characters from the mid-seventeenth century period of Ukrai-

nian state-building. Throughout the 1600s, Cossack forces engaged in successive military campaigns and a series of rapidly changing alliances with Poland, Russia and the Ottoman Empire in an ultimately failed attempt to create an independent country of their own. During this time, Sirko is said to have fought over fifty battles against the Ottoman Empire and never lost. His legend loomed so large in his own lifetime that Tatars used to invoke his name in order to frighten naughty children. This famed lived on into the modern era. When French President Charles de Gaulle visited the Soviet Union in 1966, he personally requested to visit the burial site of the celebrated Ukrainian Cossack leader. Perhaps the greatest tribute paid to Sirko was his appearance as a central figure in Russian artist Ilya Repin’s epic painting “Reply of the Zaporozhian Cossacks to Sultan Mehmed IV of the Ottoman Empire”. Two versions of this iconic late nineteenth century artwork exist, with one currently at the Kharkiv Art Museum. The picture depicts a group of Ukrainian Cossack chiefs led by Sirko enjoying themselves immensely as they compose an outrageously abusive and irreverent reply to an ultimatum they had received from the Ottoman Sultan Mehmed IV. It is widely regarded as one of the defining images of

the freedom-loving Cossack era, capturing the spirit of an age where the Ukrainian Cossacks sought to defy the various imperial powers encircling them. Tradition names Sirko as the principle author of this famously defiant letter to the Sultan, so his prominence in Repin’s painting is entirely appropriate. In order to hear more stories related to this colorful Cossack, you should visit Sirko’s reputed birthplace of Merefa, a small town near Kharkiv founded in the sixteenth century. Once in Merefa, you will find Artemivka, a rural area complete with a series of small “khatas” (traditional Ukrainian peasant cottages) resembling the one where Sirko himself once lived. Make sure not to miss the nearby 270-yearold immaculately preserved khata, which now serves as a private ethno-museum in the village of Ozeryana. These relics of the Cossack golden age are not the only treasures you might encounter in Merefa district. The town itself was once a wealthy and important regional hub that boasted considerable riches. In 1898, treasure hunters uncovered a valuable trove of Russian and Polish silver coins here, so you may wish to pack your shovel and search for buried bounty while you are visiting. Expat visitors to Kharkiv region might find it interesting to explore the legacy of earlier expat endeavors in eastern Ukraine. At the beginning of the 20th century, a vibrant Belgian community lived in Merefa and made a significant contribution to the region’s urban development. Belgian industrialists bought a glass factory and built attractive two-storied houses for Belgian workers. These Belgian houses are still operational, as is the football stadium they constructed, the only one in Kharkiv region built before the Soviet era. After exploring the history of Merefa, tourists can travel some 30 kilometers from Kharkiv to Stary Saltiv, a picturesque village with a fantastic riverside area on the banks of the Pechenizke Reservoir, which is widely known locally as the Saltiv Sea. Guests will be able to find tourist accommodation here and can enjoy yachting and other water sports. Close to this village you will also find a pine forest, one of many planted by nobleman Vasiliy Kolokoltsev, who lived in the area in the late nineteenth century. Kolokoltsev oversaw the construction of schools, hospitals, bridges and roads throughout the surrounding area, but his biggest passion was transforming the local sands into pine forest. Today visitors to the area can enjoy both the attractive riverside zone and the healing air of pine forests. To admire the remnants of the bygone noble lifestyle, you can visit the ruins of Kolokoltsev’s mansion in Verknya Pysarivka village, located on the banks of the Siversky Donets River. This mansion, like many www.bunews.com.ua

investing in kharkiv

“One of the most fascinating aspects of Kharkiv’s Cossack heritage is the story of celebrated Cossack leader Ivan Sirko, an iconic Ukrainian hero and one of the most famous of military leaders of the Zaporizhian Host” others in the region, is falling into a state of disrepair. Unless renovation works begin in the coming years, many fear this important piece of regional history will be lost to future generations entirely. There is hope that the decentralization reforms initiated by the Ukrainian government since 2014 can help to rescue Kolokoltsev’s mansion while also providing a boost to the local tourism industry in general. More money and greater authority have passed to local authorities throughout Ukraine since the onset of the decentralization reforms, encouraging grassroots change, self-organization and entrepreneurship. Both Merefa and Stary Saltiv are now centers of amalgamated communities and boast brand-new economic development strategies as well as growing ambitions for the future. Local authorities in the Kharkiv region are enthusiastic about the idea of developing the tourism potential of the area’s heritage sites and natural attractions. Many see it as a way of creating more local jobs in the tourism and recreation industries. Much will now depend on the emerging generation of young Kharkiv region residents and their ability to unlock their creative talent and leadership potential in order to start small businesses that will revitalize the community. This region of Ukraine has some way to go before catching up with the more advanced tourism strategies of the country’s Carpathian Mountains and Black Sea coastline, but it has both the heritage and the natural charms to become a popular tourist destination in the coming years.

About the author: Aryna Satovska is Managing Director at Republic Strategic Communications

Why Ukraine is Reappearing on US Investor Radar Screens

Andy Hunder, President of the American Chamber of Commerce in Ukraine, Member of the National Reforms Council and National Investment Council, Treasurer of AmChams in Europe When I was an eight-year-old boy growing up in London in the late 1970s, my schoolteacher asked our class to show on the map where in Britain our parents were born. When it was my turn, I walked to the other side of the blackboard where the world map hung and proudly exclaimed that my parents came from Ukraine.

But when everyone looked at the map, I was horrified to discover that the country I had so excitedly announced wasn’t there; instead, there was just a colossal landmass identified as the Union of Soviet Socialist Republics. I tried to convince the class that such a country really did exist, but I didn’t have much luck: it simply wasn’t on the map. That was my first attempt at promoting Ukraine in public, and it wasn’t a great success. These days, I make a living advocating for businesses in Ukraine, and I’m still running into barriers. As in my London classroom, many Ameri-

can and international investors haven’t yet detected Ukraine on their radar screens.

That’s not necessarily surprising. For many years, the country was mismanaged by a small cohort of greedy oligarchs and their cronies, and it became internationally recognized as a haven of corruption and vested interests, a terrain inhospitable to foreign investors. That now appears to be changing.

Just two months ago, President Petro Poroshenko invited me to the first meeting of Ukraine’s National Investment Council, a platform for dialogue between business, government, and the global investment community. Around the table sat two dozen leading global chief executives of companies with a combined market capitalization in excess of $900 billion. These top bosses had flown into Kyiv especially for the meeting.

And some of them are already benefiting from Ukraine’s resilient economy and financial reforms.

Cargill, for example — America’s largest privately owned corporation—is in the final stages of constructing a deep water terminal on the Black Sea near Odesa. The facility will accommodate postPanamax vessels and provide transshipment of Ukrainian grain to customers across the globe.

But Ukrainian farmers have been crippled in their efforts to export millions of tons of grain, due to the overloaded national railway system. Enter General Electric. GE Senior Vice President Jamie Miller was at the table and shared details of a recentlysigned diesel locomotive framework agreement with Ukraine, valued at over $1 billion. GE will provide thirty new locomotives to Ukraine’s state railway later this year, and will supply a total of 225 engines over the next decade, with up to 40 percent of parts and production taking place in Ukraine. Also at the table was Lakshmi Mittal, the London-based chairman and CEO of ArcelorMittal, the world’s number one steelmaking company. His business has already invested $9 billion over the years in Ukraine’s largest steel mill.

New York-headquartered companies Bunge and Westinghouse are also actively expanding in Ukraine. The former recently launched a new $280 million oilseed refinery, terminal, and grain storage in the port of Mykolaiv. The latter now supplies nearly half of Ukraine’s nuclear fuel—which is significant in a country where nuclear power accounts for 55 percent of electricity generation. The American Chamber of Commerce in Ukraine has been monitoring the investment climate since 1991. Unmistakably, Ukraine has implemented more reforms since the Revolution of Dignity in 2014 than it did over the previous two decades.

This positive trend is highlighted in the World Bank’s Doing Business ranking, the institution’s signature report on the ease of do-

ing business around the world. Ukraine leapt an impressive sixtyone positions between 2013 and 2018, from 137th place to 76th. The criteria indicate better—usually simpler—regulations for businesses and stronger protections for property rights. Our own survey earlier this year demonstrated that 63 percent of members of the American Chamber of Commerce saw their business grow in Ukraine in 2017. Out of 600 member companies, 82 percent reported that they are planning to expand their business in Ukraine this year. Ukraine’s National Bank has done a commendable job cleaning up the banking system, imposing more stringent regulations, and closing ninety of the country’s 180 banks. This cleanup of a dysfunctional banking sector dominated by oligarch-owned banks has resulted in fewer but bigger and more transparent lenders.

By no means is Ukraine out of the woods yet, however. Much still needs to be done to prove to investors that there is no going back to the old ways of doing business.

Continuation of the IMF program is absolutely essential to return investors’ trust. Ensuring the rule of law through full-scale judicial reform, removing unlawful pressure on business, and assuring protection of intellectual property rights are just a few of the key reforms Ukraine still needs to undertake. The country is also not done eradicating the oligarchic system and replacing it with a functioning market economy. Unlike forty years ago, my former schoolteacher and all of my old classmates would probably find it relatively easy to find Ukraine on a world map today. But the country doesn’t yet fully register in international business circles. Now is the time for strategic global investors to take another good look at Ukraine and what it has to offer.

Source: Atlantic Council (http://www.atlanticcouncil.org/blogs/ ukrainealert/why-ukraine-is-reappearing-on-us-investors-radarscreens)

63 percent of members of the American Chamber of Commerce saw their business grow in Ukraine in 2017. Out of 600 member companies, 82 percent reported that they are planning to expand their business in Ukraine this year

Expert view

IMPORTANCE OF GENUINE PRODUCTS USE AND IPR PROTECTION Supporting the need of an increasing world population in a sustainable way requires ongoing innovation in all agricultural cropping systems, including seeds and crop protection products, that support improved productivity and nutritional content. Protection of intellectual property rights is essential. It is one of the key drivers of innovation within any industry where the capital is invested in research. Research investments are generally long-term, and the level of investment is directly related to the effectiveness of the intellectual property protection available. In order to attract investment, necessary to develop improved products, investors must have an opportunity to earn competitive returns on their original investment. Robust intellectual property protection shall attract more investments that are so needed for Ukraine today. The Transnational Alliance to Combat Illicit Trade (TRACIT) and the Economist Intelligence Unit have recently released the Global Illicit Trade Environment Index ranking 84 countries as means for the international community to address illicit trade and prioritize finding solutions. Ukraine was ranked at the bottom ten of the Index which demonstrates economic and political environments that are unsuccessful in preventing activity such as illegal trading of goods or counterfeit activity. Illegal production and trade of counterfeit crop protection products and seeds is a major problem in the agricultural industry at large, causing dangerous consequences that affect the entire agricultural production chain: from farmers to food retailers, consumers, and government. Illegal and illicit international commerce in crop protection products are worth over $6.5 billion and also represent up to 20% of the Ukrainian market.

Illegal crop protection products may contain toxic substances that damage the environment and lead to death of bees, reduce yields, foster pest resistance and threaten food security. Illegal seed products can contain grain or inferior seed that performs poorly and threatens the livelihood of farmers, rural development and negatively impacts food security. The negative impact for the Ukrainian economies includes economic harm due to taxes that are not collected, and jobs opportunities lost. Concerted cooperation (national and international) among government agencies is required to detect and prosecute illegal production and trade to deter new entrants to the illegal industry. Production of counterfeit and illegal crop protection products has ex-

Natalia Litostanska Co-Chair of the Chamber Seeds Committee Corteva Agriscience, Agriculture Division of DowDuPont ploded over the past decade and is growing rapidly. The producers have become increasingly sophisticated. It is increasingly a global phenomenon as illicit products leave the countries where they are produced and enter the international market. For example, we routinely identify illicit “made-in-China” crop protection products entering Ukraine and other countries in Eastern Europe. In line with the EU-UA Association Agreement, one of the key obligations for Ukraine is to ensure an adequate level of intellectual property rights (IPR) protection. In this context, the Chamber Seeds Committee has three goals: 1) To increase enforcement and penalties against persons offering illicit seeds and pesticides to distribution partners and farmers, including the detection and prosecution of such activities as a high priority.

2) To reduce demand for illicit seeds and pesticides by establishing a cooperative public-private partnership involving legitimate industries and government to establish prevention and awareness programs that prevent farmers and distribution partners from becoming victims of persons offering illicit pesticides.

3) To promote greater respect for intellectual property rights, by harmonizing Ukrainian IP legislation with the EU Directives and Regulations in part of IPR protection. The recently registered Draft Law #7538 “On Amending Certain Legislative Acts of Ukraine on Improving the Legal Protection of Inventions and Utility Models” is definitely a welcomed initiative containing a number of positive novelties. At the same time, it has certain shortcomings that may undermine the positive aspirations behind this Draft Law. In particular, Clause 5 Article 31 covers actions that are not recognized as a violation of IPR in crop protection. This provision substantially limits protection of IPR in Ukraine given the weaknesses in the domestic judicial system and in procedures for registration of crop protection products (CPP), and is not in line with the EU Directives. Such controversial changes may lead to uncontrolled imports and production of commercial batches of CPP that violate IP rights pretending that they are destined for non-commercial usage or R&D.

We call the Parliament of Ukraine to take into account the best European practices in the area of IPR protection and ensure their full-scale roll-out to Ukraine with no loopholes and bottlenecks leaving room for abuse.

Expert view

INNOVATIONS IN THE CROP PROTECTION PRODUCTS SPHERE? FORGET IT…

Nataliia Gusieva Co-Chair of the Chamber Seeds Committee Bayer LTD

There is a legislative bottleneck for innovations in crop protection in Ukraine. In line with the amended Law of Ukraine On Pesticides and Agrochemicals, while importing samples of unregistered crop protection products (CPP) into Ukraine for the purposes of state trials and research, an importer shall submit a confirmation of such product’s state registration in the country of manufacture. In reality, the above requirement happens to be completely unjustifiable and, in many cases, impossible to implement for objective reasons. Besides, such an unexpectedly and artificially created requirement does not exist in legislation of the EU Member States and other high-developed economies.

- the National Budget has already lost revenues of over UAH 107 million; - the leading R&D companies have already reduced their investments into the R&D in Ukraine by 60%; - an anticompetitive environment on the CPP market.

For the third year the above situation has been blocking access to innovations in crop protection, which has already resulted in: - a 95% decrease in the innovation rate in CPP sphere; - Ukrainian agrarians are forced to apply older generation products, thus decreasing competitiveness of local agricultural produce, which creates an unnecessary competitive disadvantage; - about 90% of innovative CPP proved to be blocked; - local end-users receive agricultural products treated with older generation products;

THE CHAMBER SEEDS COMMITTEE The Chamber Seeds Committee represents world’s most innovative and progressive seeds and plant protection companies, that is why the first aim of the Committee is to ensure access to innovations for Ukraine’s seeds and crop protection business. Our Companies already registered 1196 different plant varieties in Ukraine. We are confident that innovations can lead to additional investments in Ukrainian agriculture which also means more working places created and more taxes paid to the state budget. The Companies of the Committee are constantly listed among 100 biggest taxpayers according to the State Fiscal Service of Ukraine, jointly paid more than 1.3 billion UAH in taxes and registered 466 new crop protection products only last year. Another important issue is to drive recognition of the equivalence of the system of certification and control of seed production to the requirements of the European Union. It is important to continue negotiating with the European Union at the highest level in order to obtain a decision on the recognition of the equivalence of the seed certification system of Ukraine to

The issue can be resolved by the soonest adoption of Draft Law #6606 On Amendments to the Article 4 of the Law of Ukraine “On Pesticides and Agrochemicals” on Importation of Crop Protection Products into Ukraine dated 21.06.2017, which had already been on the Parliament’s agenda for 6 times, however it never came to voting. Draft Law #6606 is an EU approximation initiative aimed at removing the provision, which is contradictory to the EU legislation subject to harmonization under the EU-UA Association Agreement and should be supported as top priority and included into the Government’s Roadmap for Harmonization. Once adopted, the Draft Law will help to remove an artificial and unfair blockage of local framers’ access to innovations and ensure enhanced safety & quality of yields and competitiveness of domestic agricultural produce, an inflow of investments into R&D in crop protection and advancement of the local R&D science as well as improve doing business positions of Ukraine.

Artem Koval Chamber Policy Officer (Seeds Issues) akoval@chamber.ua the requirements of the EU and we are grateful to the Ministry of Agrarian Policy and Food of Ukraine for leading this process.

Now we are working together with the Ministry of Ecology and Natural Resources of Ukraine and all stakeholders to create a better mechanism of destruction of obsolete pesticides, and to ensure better ecological situation in our country. The first step to do it is to implement a mechanism of transboundary movement of obsolete pesticides for proper disposal in an environment-friendly manner at the specialized factories in other countries. We also support the State Service of Ukraine on Food Safety and Consumer Protection in a fight against illegal crop protection products. The Chamber Seeds Committee is a partner to both business and Ukrainian Government. We are proud to represent the voice of large taxpayers in seeds sphere and innovators in a view of bringing more investments and prosperity to the country.

B2G Dialogue MEETING WITH THE PRESIDENT OF UKRAINE PETRO POROSHENKO The business community, united by the American Chamber of Commerce in Ukraine, the European Business Association and the Union of Ukrainian Entrepreneurs, met with President Poroshenko. AmCham Ukraine President Andy Hunder voiced 3 strategic priorities for the Chamber: to continue cooperating with the International Monetary Fund, to ensure the rule of law through full-scale judicial reform, and to establish the Higher AntiCorruption Court, as well as other sector-specific issues important to AmCham Ukraine Members.

CALL TO ACTION FROM BUSINESS TO UKRAINIAN GOVERNMENT, PARLIAMENT, IMF AND UKRAINEâ&#x20AC;&#x2122;S INTERNATIONAL PARTNERS On July 12, the American Chamber of Commerce in Ukraine, the European Business Association, the Union of Ukrainian Entrepreneurs, and the Independent Association of Banks of Ukraine held a joint press conference. Panelists spoke with one voice, calling Ukrainian authorities, the IMF and Ukraineâ&#x20AC;&#x2122;s other international partners for a united effort to negotiate a workable deal in order to unlock $1.9 billion in funding from the International Monetary Fund and associated financing from other bilateral partners.

B2G Dialogue MEETING WITH ANDRIY KOBOLYEV, CHIEF EXECUTIVE OFFICER OF NAFTOGAZ OF UKRAINE Meeting participants discussed the status of implementation of daily balancing of the natural gas market and position of Naftogaz in regard to existing challenges in this sphere, readiness of the IT platform, necessary for the daily balancing functioning, as well as possible ways of cooperation with all stakeholders to accelerate this process.

MEETING WITH TARA BLAKE, DIRECTOR, INTERNATIONAL PROJECT FINANCE AT THE OVERSEAS PRIVATE INVESTMENT CORPORATION (OPIC) Tara Blake presented an extensive overview of OPIC activities and innovative financial solutions throughout Eurasia and, in particular, Ukraine. She explained details and procedures of OPIC investment standards and policies as well as updated on the investment success stories in various countries.

INFRASTRUCTURE COMMITTEE MEETING ON STATE BUILDING REGULATION AND REGULATORY PROCEDURES IN CONSTRUCTION The Chamber Infrastructure Committee Members met with Hennadiy Zubko, Vice Prime Minister – Minister of Regional Development, Construction, and Housing and Communal Services of Ukraine and Oleksiy Kudryavtsev, Head of the State Architectural and Construction Inspection of Ukraine. Focus of the discussion – the status and perspective of development of the State Building Regulations and the level of necessary conditions for control over construction.

B2G Dialogue AGRICULTURAL COMMITTEE MEETING WITH THE LEADERSHIP OF THE MINISTRY OF AGRARIAN POLICY AND FOOD OF UKRAINE The Chamber Agricultural Committee Members met with Maksym Martynyuk, First Deputy Minister of Agrarian Policy and Food of Ukraine and Olena Kovalova, Deputy Minister of Agrarian Policy and Food of Ukraine. The parties – representatives of business and government – reached a compromise regarding preliminary volumes of wheat export in 2018/2019 marketing year, followed by signing of a respective Memorandum of Understanding on gran export next day.

AGRICULTURAL COMMITTEE MEETING WITH VOLODYMYR LAPA, HEAD OF THE STATE SERVICE OF UKRAINE FOR FOOD SAFETY AND CONSUMER PROTECTION The Meeting was devoted to the discussion of issues of certification of barley for export to China and need for development of bylaws to the Draft Law #6673 “On Amendments to Some Legislative Acts of Ukraine regarding Settlement of Some Phytosanitary Procedures” that was adopted by Verkhovna Rada of Ukraine in the second reading. The Chamber Food & Beverage Committee Members also met with Volodymyr Lapa to discuss international trade issues and national food safety control system reform.

MEETING REGARDING ECOLOGICAL & RADIOLOGICAL CONTROL ISSUES AT THE SEA PORTS OF UKRAINE The Meeting participants discussed the acute issues with ecological & radiological control of cargoes at the sea ports of Ukraine with Ostap Semerak, Minister of Ecology and Natural Resources of Ukraine, Volodymyr Omelyan, Minister of Infrastructure of Ukraine and Raivis Veckagans, Acting Head of Ukrainian Sea Ports Authority.

MEETING WITH SVITLANA GLUSHCHENKO, DEPUTY MINISTER OF JUSTICE OF UKRAINE ON EXECUTION OF JUDGEMENTS Meeting participants discussed current issues that exist in the sphere of execution of judgments, including encouragement of voluntary executions of judgment and automatization of processes inside the Ministry of Justice, as well as key priorities of its work.

B2G Dialogue MEETING WITH PAVLO KOVTONYUK, DEPUTY MINISTER OF HEALTH OF UKRAINE, AND OLEG PETRENKO, HEAD OF THE NATIONAL HEALTH SERVICE OF UKRAINE The Meeting was devoted to the ongoing state of the reform, private clinics’ participation in healthcare reform, and challenges with estimating the tariffs for secondary care healthcare services.

MEETING WITH OLEKSANDR LINCHEVSKIY, DEPUTY MINISTER OF HEALTH OF UKRAINE High-quality medical services are crucial for improvement of public health and disease prevention. As a follow-up to the Round Table, the Chamber Healthcare Committee Members discussed the Draft Concept of Professional Licensing of Doctors with Oleksandr Linchevskiy.

ROUND TABLE “PROFESSIONAL LICENSING OF DOCTORS: CHALLENGES OF IMPLEMENTATION” The Chamber Healthcare Committee widened its area of expertise by including health and medical services providers’ issues and, jointly with the Ministry of Health of Ukraine, held a roundtable discussion on the Draft Concept of Professional Licensing of Doctors. WORKSHOP ON IMPROVING ACCESS TO INNOVATIVE MEDICINES IN UKRAINE The AmCham Ukraine continues to work in extending access to innovative medicines for Ukrainians through active B2G cooperation. The Workshop was aimed at creating an innovation-driven healthcare environment in Ukraine by facilitating dialogue between stakeholders from the government, researchers, academics, and the private sector.

WELDI Business Breakfast: “How to Swim with the Sharks” How can you succeed in a challenging environment? How can you keep moving forward despite various difficulties? How can you find motivation to never give up? During this WELDI session, Valeria Gontareva, the first female Governor of the National Bank of Ukraine (2014-2018) and one of the most famous bankers in Ukraine, provided insights on how she fights for what she believes in, sets and meets goals, and leads responsibly. SPONSORS OF EVENT

WELDI Business Breakfast: “International Etiquette: A Practical Guide for Business Women” “You never get a second chance to make a first impression” – the words of timeless style icon and little-black-dress-lady Coco Chanel perfectly describes an amazing Women’s Executives Leadership Development Initiative session with bon genre guide Tatyana Polyakova. She shared her valuable experience in business etiquette and netiquette, as well as tips in cross-cultural communication. SPONSORS OF EVENT

Lights, Camera, Action! Business Networking Cocktail The AmCham Ukraine, jointly with Chamber Member Company Lavrynovych & Partners Law Firm, gathered the business community in Odesa on the last day of Odesa International Film Festival. Guests of the cinema-themed cocktail party enjoyed networking, discussed movies featured at the festival, tasted wine and took memorable photos with â&#x20AC;&#x153;realâ&#x20AC;? worldfamous actors and actresses.

EVENT SPONSOR

Annual American Independence Day Picnic held in Kyiv The American Chamber of Commerce in Ukraine celebrated Americaâ&#x20AC;&#x2122;s birthday by hosting its 27th annual American Independence Day Picnic on July 7 at the Kyiv International School. More than 3000 guests were treated to traditional American apple and cherry pies, and had the opportunity to take pictures with a giant American birthday cake! Just like the cake or pie, the picnic was enjoyed by guests of all ages. There was catchy music, contests, a big entertainment zone for kids, interactive photo zones, and activities. Guests also got to enjoy a lot of tasty American food, refreshing drinks, and a variety of treats. The icing on the cake was an exciting gifts drawing and great performance by headliner Antytila.

Annual American Independence Day Picnic held in Kyiv

ALL THAT JAZZ Networking Cocktail Every June, Lviv attracts musicians and fans from all over the world for the Leopolis Jazz Fest. The American Chamber of Commerce in Ukraine couldnâ&#x20AC;&#x2122;t miss the opportunity to gather its current and prospective members for a networking cocktail during this festival. More than 150 guests came to spend the evening with AmCham and enjoyed the venueâ&#x20AC;&#x2122;s wonderful atmosphere, breathtaking rooftop view, tasty cocktails, modern interpretative jazz music, and networking with fellow members. EVENT SPONSOR

Russia still overshadowing Ukraine in the heart of the European Union Ukraine cannot take continued EU attention for granted as Russia reasserts itself in Brussels A new political season is now underway in Brussels but Ukraine will have its work cut out remaining high on the EU agenda as we head towards the end of the year. Thoughts in the European capital are already turning towards upcoming elections to the European Parliament in May 2019, meaning a lull in lobbying as the focus shifts to campaigning. Even without this electoral distraction, Ukraine would find itself competing with a host other major issues while also struggling to avoid being obscured by Russia’s perpetually prominent presence in EU circles. The crisis unleashed in Ukraine by Vladimir Putin in 2014 is still very much unresolved, but Ukrainians cannot take continued European attention for granted. Instead, Kyiv needs to develop new strategies to maintain the country’s position as one of the continent’s top strategic priorities while persuading Brussels decision makers to resist the urge to mend fences with an unrepentant Kremlin.

From Brexit to Syria

The European Union currently has a lot on its plate. In addition to the war in Ukraine, Brussels today faces a host of pressing issues that represent direct threats to the future of the EU. These include the ongoing migrant crisis and parallel rise of far right political sentiment, the war in Syria, growing nationalist populism, and last but not least, Brexit. It is noteworthy that Russia is involved to some degree in virtually all of these problems. Russia’s military intervention in Syria has contributed significantly to the flow of refugees arriving in Europe. The Kremlin’s sophisticated multimedia propaganda efforts boosted the push for Brexit and fanned the flames of Catalan separatism. Moscow has also provided significant support to a range of anti-EU nationalist and populist parties 46

across the European Union, in many cases helping them to enter parliament and strengthen their positions in domestic politics. This is not mere Machiavellian scheming on the Kremlin’s part. Russian posturing as a bastion against globalization (or American domination, as viewed from the Kremlin) have made Moscow equally appealing in recent years to European parties on both the far left and the far right of the political spectrum. This has helped to breathe new life into notions of Russia’s importance to the European political dialogue that largely fell out of fashion in the 1990s.

Juncker: End Russia-Bashing

There is still significant resistance to Russia within the EU, as witnessed by the widespread expulsions of Russian diplomats in spring 2018 following the Kremlin nerve agent attack in the UK. Nevertheless, there are growing indications that a consensus is taking shape on the need to reengage with Russia. This was most obviously apparent in the recent call by European Commission President Jean-Claude Juncker for an end to “Russia-bashing”. French President Emanuel Macron has also spoken recently of the need to work with Russia. Indeed, the French head of state was one of a number of EU leaders to ignore an informal boycott and visit Moscow during the 2018 FIFA World Cup. The most bizarre indication of this apparent European thaw towards Russia was the appearance of Vladimir Putin as guest of honor at the midsummer wedding of the Austrian Foreign Minister.

Kremlin Soft Power

Against this backdrop of gradually improving EU-Russian relations, Kremlin-

tied organizations remain active in Brussels staging events designed to legitimize Russia’s occupation of Crimea and the Donbas while also popularizing Ukrainian politicians and opinion leaders who espouse pro-Kremlin positions. These activities take advantage of Moscow’s strong network of influencers throughout Europe and particularly in Brussels itself, where Russia can call upon the support of numerous NGOs, business partners, political allies, sympathetic journalists and members of the post-Soviet diaspora, not to mention its own intelligence assets. The collective message they seek to project is clear and coherent: the West is exploiting Ukraine in order to encircle Russia. In reality, the say, Ukraine has no agency of its own. It will never become part of the European family and should remain within the Russian sphere of influence. This message resonates with many EU pragmatists who would much rather go back to business as usual with Russia. After all, facilitating a better business climate is the very essence of the European Union project. As things currently stand, the EU has actually become a barrier to doing business with Russia. Lobby groups continue to fight hard against further sanctions designed to punish Russia for its attack on Ukraine. This resistance is one of the reasons for the successful promotion of the Nord Stream II pipeline project.

cultural and economic events are also an increasingly common feature on the Brussels calendar.

Ukraine’s own stuttering progress since 2014 makes it even harder to convince EU member states to accept the costs associated with a united front against Russian aggression. EU leaders (and European electorates) see corruption scandal after scandal in post-revolutionary Kyiv and marvel at the obscene wealth of Ukrainian politicians. Meanwhile, many of the promised reforms fail to materialize and Ukraine’s civil society comes under increasing attack from within, making it difficult to argue that all the sacrifices are actually worth it. Nevertheless, Ukraine still has plenty of friends in Brussels. The European Parliament regularly hosts Ukraine-related conferences on such topics as the fight against corruption, implementation of the Minsk agreements, the plight of Ukrainian political prisoners held by the Kremlin, human rights in Crimea, and the status of Ukraine’s large IDP community. Ukraine-related

The coming year will be crucial for Ukraine domestically, with presidential and parliamentary elections set to take place in spring and autumn. With Brussels also preoccupied by its own forthcoming parliamentary election, there is a danger that EU-Ukraine ties could slide down the political agenda. This makes the role of Ukrainian civil society even more important. Most of all, Ukraine must push the EU to maintain its resolve towards the Kremlin. Russia has a major impact on EU affairs, but Brussels must not allow this strategic significance to overshadow the need to defend international law and protect Ukraine’s European choice.

Ukraine Fatigue

eu integration

Ukrainian President Petro Poroshenko pictured with the President of the European Council Donald Tusk during a working visit to Brussels in 2017

Wanted: Ukrainian Success Stories

Looking ahead, much will depend on quality of the information about Ukraine available in Brussels. It is crucial to make sure Ukraine has a louder voice in the EU capital, whether the message is coming from the Ukrainian state, the media or civil society. Some of Ukraine’s communications priorities are self-evident. There is a strategic need for greater coverage of the many success stories that post-Maidan Ukraine can offer. We hear much of the problems Ukraine faces, but breakthroughs and successes rarely receive the international attention they deserve. Greater cooperation within the Ukrainian community would also help. Numerous different Ukrainian organizations currently send out digests of Ukrainian news to MEPs and other Brussels decision makers. This duplication dilutes the message and means busy MEPs inevitably risk missing key information as their assistants seek to condense six or seven weekly bulletins on Ukraine into a single brief report.

Crucial Year Ahead

About the author: Marta Barandiy is the founder and chairperson of the Brussels-based NGO Promote Ukraine www.bunews.com.ua

Ukraine’s European choice has changed the geopolitical landscape but some remain unconvinced While conducting a series of regional visits earlier this year, we at the New Europe Center think tank noticed that European integration as imagined by the Kyiv political classes is somewhat out of step with the perceptions of ordinary Ukrainians beyond the capital. What does the EU really mean to the Ukrainian public? To be able to gain a clearer picture of these attitudes, we decided to involve polling company GfK Ukraine, with the support of USAID/ ENGAGE and PACT. Ultimately, we were interested in finding out what people in various regions regarded as evidence that Ukraine was moving - or not, as the case may be - towards Europe. What did they see as the main obstacles to this process in their own regions? What level of integration with the European Union did they consider most desirable? The results showed that, just as we are seeing in domestic politics, there is enormous fragmentation among Ukrainians on the question of European integration. Certain broad trends are visible. The most noticeable opinion expressed was that Ukrainians only believe in the success of European integration when they begin to see improvements in social services. This primarily means hospitals, kindergartens and schools. Nearly 40% of Ukrainians consider this the clearest indicator that European integration has reached their region of the country. In other words, Europe continues to have a clear social face for Ukrainians. Additionally, it is increasingly becoming a deeply personalized issue for ordinary Ukrainians, with a clear focus on improvements in their family lives rather than at the level of state affairs. There are clear signs that most Ukrainians care far more about rewarding their family members then about punishing corrupt politicians in distant Kyiv. For 33% of surveyed Ukrainians, successful European integration will be evident in better transport infrastructure such as renovated roads along with safe and comfortable public transportation. One could argue that better roads are not really a true indicator of European integration because good roads also exist in places like Belarus, a country with no ambitions to join the EU. Nevertheless, many Ukrainians traditionally associate good transport infrastructure precisely with the EU. A similar number of those surveyed said that successful European integration means new jobs and foreign investors based in their towns. This is another clear message to the Ukrainian government on the need to improve the business climate in Ukraine. It is also a reminder for foreign investors that international companies in Ukraine’s regions are not merely businesses but also represent meaningful signals for ordinary people that Ukraine is moving closer towards the rest of Europe. Amongst the key obstacles to European integration at the oblast level, Ukrainians named bribery among local officials and a lack of budget funding (37% each). The most unexpected responses, at least for me personally, were regarding the desired level of closeness between Ukraine and the European Union. Despite being the stated strategic goal of Ukrainian diplomacy, it turns out that full

membership of the European Union only really matters to about 33% of Ukrainians. However, this was also the most popular choice. The next most popular choice was free trade without any restrictions. The top three responses wrapped up with “the current level is fine.” This suggests that Ukrainians do not have particularly rosetinted glasses when it comes to Ukraine’s potential future membership in the EU. On the contrary, they appear to be quite realistic about Ukraine’s chances of eventually gaining member state status, or at least this is one of the explanation for their responses. Another explanation could be growing disappointment over Ukraine’s European integration process in general. Despite the fact that 50% of Ukrainians still support Ukraine’s European choice, the number of those who support the “neither EU nor Eurasian Union with Russia” option is rising and now stands at around 30%. Ukraine’s politicians have undoubtedly made their own contribution to undermining the appeal of European integration and the increase in support for a more neutral path. The current government has aided this process by failing to deliver on key reforms that might bring noticeable improvements to people’s everyday lives. Since the public tends to associate the current government directly with the EU vector, disappointment in their actions inevitably leads to disappointment in the country’s European choice. Perhaps predictably, we are now seeing populist politicians from the opposition camp actively promoting the idea that the EU does not want Ukraine. They argue that European integration has brought Ukrainians nothing but impoverishment and deteriorating living standards along with such unpopular results as increasing utilities prices and the devaluation of the national currency. The good news for Ukraine’s Euro-optimists is that only 14% of surveyed Ukrainians said the country should stop trying to draw closer to the EU altogether. Here, the regional factor was fairly significant and predictable. The desire for full EU membership was strongest in Ukraine’s western oblasts at 54.5%, while in eastern oblasts attitudes towards EU membership were worse than indifferent with support at just 13.2%. The largest proportion of Ukrainians who think Ukraine should abandon EU integration efforts entirely was among residents in the government-controlled parts of Ukraine’s eastern oblasts, where 25% backed an end to integration. The debate over Ukraine’s European choice remains very much alive and the argument is clearly far from won. With presidential and parliamentary elections looming on the horizon, the task facing Ukrainian advocates of EU integration is clear. They must seek to explain to the electorate that while the results of Ukraine’s European choice are currently less than ideal, the alternatives remain far worse.

eu integration

What does the EU mean to ordinary Ukrainians?

About the author: Alyona Getmanchuk is the founder and director of the New Europe Center think tank www.bunews.com.ua

legal

Legal Tech will not create

a world without lawyers

Innovation is rapidly changing the legal industry but tech tools cannot replace the human factor

About the author: Andriy Dovbenko is the owner of EVRIS law firm Everywhere in the world today, businesses are changing rapidly under the influence of new technologies. The legal industry is no exception. Jokes about lawyers being stubborn to innovation are starting to fall flat in the face of an emerging harsh reality where the introduction of innovations is becoming more of a necessity than a matter of choice. Anyone doing business in Ukraine needs to understand how technologies are affecting legal services and how this can ultimately help both law firms and their clients. All new technologies and developments relating to the legal business and its clients are united under the name Legal Tech. This is the commonly accepted abbreviation of the original English-language term “legal technology”. At the present time, the bulk of developments in the Legal Tech sphere concern individuals or small and mediumsized businesses and relate to a broad range of relatively basic legal tasks including wills, leases, primary online consultations, state registration, and searches for court decisions. Legal industry professionals assess the development of such technologies in a variety of different ways. Some are afraid that robots will take away their livelihood and render their services redundant. However, such concerns are largely limited to young professionals who traditionally begin their careers doing routine document work, some of which is now done faster and more accurately by computer programs. Despite the partial validity of these concerns, I believe that a good specialist with a great desire to develop in jurisprudence will never find themselves without work. On the contrary, thanks to the automation of processes, people in the legal field will increasingly find that they have more time to address the kinds of complex and sophisticated legal issues that cannot yet be resolved with the help of artificial intelligence solutions. In addition, customers will only benefit from the development of Legal 50

Tech: it solves simple tasks independently and inexpensively, while also making it possible to address large-scale matters in a much shorter timeframe. In the investment industry, there are many complex nuances and intricate processes requiring human intervention outside the scope of today’s Legal Tech capabilities. Issues often extend beyond the letter of the law and require a human factor that technological solutions cannot provide. It takes a real “live” lawyer to understand local peculiarities and to use personal contacts in order to obtain the necessary information required to develop a solution to any given problem. Nevertheless, new technologies can be useful in the field of investment. For example, the automated search of large databases of court decisions or state registrars is a particularly popular and time saving function. With the help of computers, the process of collecting documents and legal expertise can be undertaken in a much briefer period. Something that could previously have lasted months is now possible in a relatively short timeframe. Mergers and acquisitions can also be assisted by special applications. The field of applications or “apps” also offers huge scope for Legal Tech innovation improvements. With personal phones now firmly established as full-fledged work tools, we are seeing the rise of applications where the lawyer can communicate with clients, providing them with the necessary documents, consulting with colleagues, and so on. Additionally, we are increasingly seeing law firms transfer data and entire services to cloud storage. This brings with it significant concerns regarding cybersecurity. These concerns are in many ways a serious consideration for any legal services business. On the one hand, the use of devices connected to the internet opens up potential loopholes for cyber-fraudsters, meaning that lawyers whose activity relies heavily on confidentiality should carefully select services and programs to use at work, especially those that are able to connect directly to office machines and company networks. On the other hand, a new area of activity has emerged covering the protection of client rights in cyberspace. In short, there is nowhere to hide from Legal Tech, and it does not matter whether you manage huge investment deals or lead a more modest medium-sized company. Investments in the field of legal innovation are growing every year. In January this year, the amount invested in start-up funds in this area reached USD 49 million. The number of companies providing services introducing artificial intelligence in legal practice is also growing. Thanks to a combination of these factors, the overall volume of the legal market in general is also increasing. This points to the promising prospects for new technologies, and is not, as it turns out, an indication that we are moving towards a world without lawyers. www.bunews.com.ua

reforms

Fostering compliance culture in Ukraine UNIC certification initiative aims to incentivize integrity among the Ukrainian business community

Given Ukraine’s well-documented battle with corruption, the emergence of a new business community driven by the principles of integrity and compliance sounds almost too good to be true. The Ukrainian Network for Integrity and Compliance (UNIC or the Network) is a new initiative that unites local and international companies active in Ukraine who consciously chose to do business in a transparent and ethical manner. Less than a year since the initiative was first unveiled, some members are already preparing for certification in accordance with UNIC standards. Doing business in Ukraine remains challenging, with corruption issues helping to prevent greater international and domestic investment. Due to these difficulties, the economy lacks the capital to create new products, services, jobs, and tax payments. In this climate of frustration and unrealized potential, it is little wonder that the launch of UNIC in October 2017 tapped into long overdue demand for transparent and ethical approaches to doing business in Ukraine. Initiated by the Business Ombudsman Council in Ukraine with support from the European Bank for Reconstruction and Development and the Organization for Economic Cooperation and Development (the Network’s main founders and donors), UNIC serves as a platform for promoting responsible business approaches. It is also a source of expertise and dialogue on implementing integrity and compliance standards at as many Ukrainian companies as possible. The Network hosts educational events promoting compliance culture in business circles. These efforts have resulted in stable initial growth in interest towards the UNIC: member companies currently represent 46 cities and towns of Ukraine and are drawn from the pharmaceutical, agricultural, banking, construction, finance, trade, food, manufacturing, legal services, and other industries. UNIC membership offers a combination of benefits and obligations. Members pledge to maintain their good reputation, to improve their integrity and adherence to transparency practices, and to assess their corruption risk by implementing an internal compliance program. Having achieved a high level of integrity and compliance, they eventually pass UNIC certification based on the internationally recognized ISO 37001:2016 standard. It is no easy task to instill rigorous ethical and integrity principles to govern decision-making on all company levels. However, for a Ukrainian business of any size, UNIC certification provides tangible benefits such as helping to attract investment, improve the quality of contractors, and enhance the company’s reputation.

Signal to Foreign Investors

Investment, commercial financing, tenders, and new orders – all this should be easier to realize for a company certified as adhering to a recognized international standard. Additionally, UNIC certification can provide these businesses with compliance practices to facilitate access to various funding formats and ease their entrance into foreign markets. UNIC certification is also a recommended step for local companies applying for funding from international financial institutions operating in Ukraine. For medium-sized businesses that do not yet feel

ready for certification, the Network’s educational programs offer valuable insights on using compliance culture to streamline internal processes and improve management systems, both of which are prerequisites for companies looking to secure external funding. UNIC experts can offer insight into compliance practices successfully implemented in Ukraine, along with case studies and the chance to engage in dialogue with larger companies that have successfully developed internal compliance systems. Meanwhile, UNIC membership gives small businesses opportunities to share and adapt successful compliance practices from larger companies that have already come a long way in developing their integrity culture. UNIC certification is also an opportunity for large businesses to prepare for future due diligence by foreign investors and to improve their chances of receiving external funding, since the demands made of certification applicants are similar to those of the international financial institutions funding Ukrainian companies. Using the UNIC platform to share experiences and to learn new practices can help mid-sized businesses formalize internal processes and decrease dependence for success on specific employees and contractors. It is also worth noting that the Network’s mid-sized member companies tend to pass contractor prequalification processes with international companies much faster than many of their peers, with UNIC membership serving as a “quality assurance” of sorts.

Reputation and Community

The Network aims to serve as a platform uniting compliance champions into a community whose membership is both prestigious and practically useful. UNIC certification can be a worthy investment, strengthening the reputation of a business and validating its commitment to compliance. This is especially true considering the high demand among local large and mid-sized companies for funding or partnerships. Another invaluable opportunity all UNIC members enjoy is sharing practical examples of best practices while implementing integrity and compliance measures in Ukraine’s business environment. Introducing profound changes to the internal functions involved in compliance processes is something the Network’s events help mid-sized businesses to achieve. Moving from UNIC membership to certification sends a powerful signal to foreign investors in Ukraine about a member company’s future prospects and reliability. The greatest single value that small businesses gain from UNIC membership is probably networking with larger companies, since at this stage they often tend to lack the necessary funding to attract external consultants to improve their internal management. Participating in UNIC education programs gives small businesses access to the kind of expertise they need in order to grow and evolve further in the Ukrainian business environment. Based on the initial response to the launch of UNIC, it is clear that demand for ethical and transparent approaches to doing business is on the rise in today’s Ukraine. It is also notable that local companies are driving this growth. UNIC has set out to demonstrate the practical and economic viability of integrity and compliance in Ukraine. The introduction of a UNIC certification procedure based on international standards will hopefully help to make this process more visible to the business community and the public alike.

About the author: Ganna Gerasymchuk is Head of the UNIC Secretariat

opinion

Building Brand Ukraine Learning from the Israeli experience From startup innovation to diaspora mobilization: Israeli image-making insights for Ukraine How should Ukraine seek to brand itself before international audiences? The New Europe Center and the Ukrainian Jewish Encounter assembled distinguished state officials, academics, diaspora and civil society leaders at the Hyatt Kyiv in summer 2018 to share insights and experience from the Israeli state-building project and discuss how the lessons of Israel might be applicable to modern Ukraine. For many years, Israel’s diplomatic efforts have focused on branding itself as a modern, innovative, open and cosmopolitan country. All of these themes resonate loudly in contemporary Ukraine. Meanwhile, Israel’s twentieth century experience demonstrates that a nation can emerge from grave historical trauma to become successful, and perhaps this is the most important lesson of all for Ukraine. The Ukraine of today is at a different yet similarly complicated stage of its own self-determination. Participants agreed that Ukraine could learn much from the public diplomacy and branding challenges faced by Israel over the past seven decades.

Focus on Strengths

Natalia Popovych, Co-Founder of the Ukrainian Crisis Media Center, discussed the parallels between Israel’s nation-building efforts and the modern Ukrainian experience. She concluded that challenging conditions could even benefit the evolution of a “startup nation” culture in Ukraine, much as it has done in Israel. Over recent decades, Israel has built up a remarkably successful intellectual brand, buttressed by the growth of its software and IT sectors. Similar opportunities currently exist for Ukraine in the country’s IT and agricultural sectors, she argued. For this to happen, Ukraine needs to be more visible. Both Popovych and Vasyl Myroshnychenko, Partner at CFC Consulting, were encouraged by the positive coverage generated by high-profile international events hosted in Ukraine including the 2018 UEFA Champions League Final, the 2017 Eurovision Song Contest, and the annual international jazz festival in Lviv. The success of these events has highlighted the need for more low-cost carriers to bring would-be travelers to the country and open Ukraine’s doors wider to outside audiences. Robert Singer, CEO of the World Jewish Congress (WJC), offered a straightforward piece of advice for Ukraine as it seeks an effective branding strategy. His message was to shift focus to the positive. Ukraine will struggle to sell the country’s post-Maidan achievements in a positive light if the narrative focuses on fixing a crisis rather than promoting a victory. He argued that today’s Ukrainians have a unique opportunity to remake their country’s international image. To achieve this goal, every organization involved in constructing the narrative should let talk

of opportunities and strengths overshadow negative stories. Yes, Ukraine must continue drawing international attention to ongoing Russian aggression, but it should also be honest about its achievements including economic growth and successful reforms along with cultural and athletic successes. Amid the ongoing conflict with Russia, it is especially important for Ukrainian society to be able to communicate its point of view. With this in mind, the role of journalists and citizens is just as important as official government channels.

Ukraine must not let the “fog of war” reduce media transparency, because it relies on these same channels to transmit its message internationally. Ukraine’s openness will make it much more attractive to foreigners in the long term. Ron Prosor, former Israeli ambassador to the UK and the United Nations, implored Ukrainians to “fight for every inch” in response to the proliferation of disinformation about the country. Citizens can even take the lead in correcting false narratives over social media, he stressed. A collective grass roots effort to counter disinformation will ultimately be more effective and have a broader reach than any official government response.

Mobilizing the Diaspora

Israel and Ukraine boast two of the world’s largest diaspora communities. The WJC created a Digital Ambassadors Club that works to counter anti-Israeli narratives and stories while seizing upon the power of the vast Jewish diaspora. Ukraine should look to harness the power of its own massive diaspora as well, particularly in cyberspace, a vast domain Mr. Singer regards as the [new] “theater of battle.” The Ukrainian diaspora can serve as a bridge to worldwide opinion makers. Organizations such as the Ukrainian Leadership Academy and Ukraine’s “Plast” scouting group are already developing a new class of patriotic Ukrainian civic leaders and filling the gap where apathy has taken hold among young Ukrainians. Ukraine could also follow Israel’s lead and promote the idea of young Ukrainians taking a “gap year” to devote to leadership development and civic service, with the Ukrainian Leadership Academy already a path-breaker in this direction. Solid coordination between Ukrainian state organs and the country’s robust civic organizations will help. By constructing a broader and more optimistic narrative about Ukraine’s future, both official and unofficial channels can support Ukraine’s public diplomacy goals and improve perceptions of Ukraine abroad. Delivering key messages clearly and consistently will prove crucial. After the dissolution of the Soviet Union, one of Ukraine’s biggest challenges was to demonstrate its distinctiveness from Russia. Deliberate disinformation has further clouded this important aspect of identity. The present geopolitical focus on Ukraine now offers the country a chance to tell its own story in its own words. Constructing a new narrative about Ukraine as a success story rather than a victim will help the world get to know the real Ukraine beyond the stereotypes.

About the author: Markian Kuzmowycz is an intern at the New Europe Center (Ukraine) and a Master’s candidate at the Fletcher School of Law and Diplomacy at Tufts University (USA).

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interview

Medical network brings global

accreditation standard to Ukraine Doctor Sam is the first healthcare provider in Ukraine to secure globally recognized JCI accreditation Summer 2018 saw a breakthrough in the Ukrainian healthcare industry that highlights the increasing ability of local service providers to meet the highest international standards. In mid-August, the Doctor Sam Medical Network became the first in Ukraine to acquire Joint Commission International (JCI) accreditation. The Joint Commission is a United States-based body offering medical services accreditation, reaching global scale through Joint Commission International. It is widely recognized as the gold standard in the international healthcare industry, but until recently was not represented on the Ukrainian market. Doctor Sam Founder and Chief Executive Officer Sam Aganov is no stranger to JCI accreditation procedures. Prior to launching this project in Ukraine in 2014, he spent most of his professional life in California as a healthcare executive. While working in the US, he had often been involved in the Joint Commission accreditation renewal process. This experience convinced him that securing JCI accreditation should be part of the Doctor Sam vision in Ukraine from the very beginning. The Doctor Sam Medical Network began to take shape in the mid2010s and currently features three clinics in Kyiv. Following initial clinic openings in 2015 and 2016, the focus turned towards making sure the network met JCI standards. “From the very start of the project, we knew that we were going to seek JCI accreditation and we wanted to do it for all three clinics at once,” says Aganov. Securing JCI accreditation was a long-term undertaking that involved extensive preparations for the Doctor Sam team in order to meet rigorous international standards, which cover everything from adherence to internationally recognized policies and procedures to the legibility of doctors’ handwriting. Aganov says he initially spent considerable time working with staff individually in order to explain the rationale and philosophy behind the standards he was seeking to introduce. “At first it was an uphill battle but then it became fun,” he says. “The turning point was when my staff began to see how much better and safer their work would become by adopting these standards. It was also vital for them to appreciate the logic behind the standards in question and to understand how they came to be, otherwise there would be no guarantee that the practices we were introducing would stick.” After rigorous preparations, the Doctor Sam team finally welcomed a JCI accreditation delegation in mid-August. JCI officials spent days inspecting all the Doctor Sam clinics in Kyiv as well as engaging with staff. Individual patient treatment histories and procedure compliance underwent detailed review. The process was thorough but transparent, says Aganov. It was also expensive, but he believes it was a price worth paying. “There are cheaper internationally-recognized options available but JCI is the best. The expense shows that you are committed to quality. That was very important for us.” In terms of both time and money, this investment has clearly paid off.

About the interviewee: Sam Aganov is the Founder and Chief Executive Officer of the Doctor Sam Medical Network While the JCI assessment process can last for up to ten days, the JCI headquarters in Chicago conferred accreditation on all three Doctor Sam clinics within hours of receiving the report from their field team in Kyiv. Aganov sees this as a victory for Ukrainian healthcare and vindication of the ambitious targets he set for the Doctor Sam Medical Network four years ago. “When we first started talking about the idea of seeking JCI accreditation, many people told us we were crazy,” he recalls. “Even the most optimistic said that while we might eventually be able to achieve JCI standards, it would take at least twenty years. They argued that Ukrainian medical staff were simply not used to the methodology, culture and philosophy involved. There was a belief that the country’s healthcare industry was not ready, but we have now demonstrated that it is entirely possible in Ukraine. As a result, I predict we will soon see more Ukrainian healthcare providers applying for JCI accreditation.”

healthcare

Debunking Ukrainian healthcare myths Ministry of Health campaign seeks to challenge widespread medical mythmaking in Ukrainian society Not content with implementing the most sweeping healthcare sector changes since Ukraine first gained independence 27 years ago, the country’s Ministry of Health has recently begun a debunking campaign targeting the many healthcare falsehoods and medical myths that remain all too commonplace in modern Ukrainian society. The campaign targets widely held but groundless beliefs that date back to Soviet times or older folklore traditions. The objective is to improve public education on health issues while reducing the influence of outdated and unscientific beliefs. For non-Ukrainians, these myths often provoke a chuckle and are easy to dismiss as mere superstitions. However, many Ukrainians have grown up taking such beliefs for granted despite the fact that they often have no basis in evidence-based medicine. Anyone who has spent time in Ukraine will be familiar with many of the folksy myths that Dr. Suprun and the Ministry of Health are seeking to address. These include such classics as “You must wear surgical shoe covers in hospitals to avoid spreading infections”, “Drafts of cold air can make you sick”, “Sitting on cold surfaces can cause bladder infections”, and “Snapping your fingers can cause arthritis”. The ministry is using its official Facebook and Twitter accounts to spearhead its myth busting efforts, with regular posts designed to challenge long-held assumptions. One example is the myth about the necessity to wear shoe covers inside a hospital or clinic. For non-Ukrainians, this requirement has long elicited eye rolls and knowing sighs, as this is simply not required in even the best Western hospitals and clinics. There is no medical reason to wear these shoe covers in hospitals except for in surgical rooms where an infection risk might theoretically exist – but that is the only area of a medical facility in which wearing plastic shoe covers makes any medical sense. Another common myth in Ukraine is the notion that sitting near an air draft can cause illness. This often deeply held belief is particularly evident in the summer months when open windows on public transportation become a source of great tension and anxiety. Attempts to open windows on trains and buses can often provoke an uproar of complaints and even accusations of attempted murder, particularly from older passengers. In reality, fresh air is healthy and moderate ventilation is good for everyone. People become ill because of infections in the air but not from stray drafts of air on a hot summer’s day. Similar misgivings are often evident with regard to air conditioning. While people can become ill due to unclear filters, they will not get sick from air conditioning itself. Lengthy exposure to extremely cold streams of air is an entirely different matter, but nobody will contract a fatal illness from an open window on a crowded summertime bus. Other myths addressed by Dr. Suprun and the Ministry of Health include the idea that snapping fingers causes arthritis (medical studies show that it has no effect), that

magnet bracelets can somehow improve blood flow (they do not because iron in blood in non-ferromagnetic), and that sitting on cold surfaces can lead to bladder infections. This Ministry of Heath’s myth-busting campaign is gaining traction on social media as well as in traditional media. The campaign has proved so popular that it has generated some fakes and memes of its own. One particularly eye-catching meme featured a fictitious post by Dr. Suprun warning against the consumption of chocolates and sweets, with Ukrainian President Petro Poroshenko, who famously made his fortune as the owner of the country’s largest confectionary company, responding to Suprun’s post by asking: “Have you lost your mind?” While most of the myth busting takes the form of practical advice to overcome superstitions, occasionally posts address controversial issues such as homeopathy. Dr. Suprun recently posted “top five facts about homeopathy”, with all five facts being a repeat of the mantra “Homeopathy Does Not Work.” This is a major issue in the field of Ukrainian healthcare. An August 2017 survey by the sociological firm Rating Group showed that 30% of Ukrainians trust homeopathy. Although this makes it a minority viewpoint, it still represents a very significant portion of the public. Homeopathy even enjoys the support of some Ukrainian MPs and is believed to be a billion-dollar industry in today’s Ukraine. However, as Dr. Suprun notes, there is no scientific evidence to support the industry’s claims. She points out that at best, homeopathy has a placebo effect on patients. In a country that has historically struggled to modernize its medical system, many reformers see myth busting is an important public service. In a post-totalitarian society where instinctive suspicion and lingering superstition still often trump faith in facts, a straighttalking and practical campaign to dispel disinformation is now finding a receptive audience among the Ukrainian public. Ukraine clearly needs a healthy dose of reliable medical advice, and the Ministry of Health is seeking to provide just that.

About the author: Yarema Bachynksy has worked in Ukraine since 1996 on multiple development assistance projects

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LVIV FASHION WEEK SS 2019 OCTOBER 25-28

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Will Ukraine’s new currency law mark the beginning of an entirely new regulatory era?

legal

Currency control reform in review

currency control law. President Poroshenko signed Ukraine’s new Law “On Currency and Operations in Currency” in July 2018. It will become effective in February 2019. This new law generated considerable initial optimism within the business community. However, upon closer reading, many experts have raised concerns and expressed disappointment. The philosophy established by the 1993 decree on currency controls was “everything is prohibited unless specifically allowed.” What we now have appears at first glance to be the exact opposite, or “everything is allowed unless specifically prohibited.” This change in emphasis could offer numerous advantages to those engaged in complex transactions who had previously struggled with a system that was unable to accommodate their requirements. Overall, it repAbout the author: Constantin Solyar is a partner at Asters specializing in taxation, corporate law and private clients practice Ukraine has established a new currency control law that is set to come into force in February 2019. This new legislation aims to establish the free flow of capital across borders, a central pillar of the EU economy and something Ukrainians have never previously experienced. However, not everyone is convinced that the envisaged changes will be as radical as the hype would suggest. Ukraine has not witnessed major changes to the country’s currency control regulations for a quarter of a century. The last big shakeup came in 1993 with the introduction of a prohibitive system where, for example, a license from the National Bank of Ukraine (NBU) was necessary in order to have a foreign bank account or wire money abroad. In practice, this license often proved impossible to secure. In line with this system, purchasing goods and services abroad requires a long list of documents subject to frequent rejection as incomplete or otherwise unacceptable. This system is now so archaic that the NBU itself is among the leading drivers seeking to replace it. Nevertheless, when viewed from the perspective of the regulator, the existing prohibitive measures are somewhat understandable given the need to protect the value of the national currency in a country where currency outflows typically dwarf inflows and foreign investment remains low. With the passing of time, Ukraine’s prohibitive currency measures have proven both unfair and increasingly ineffective. They have been in place so long that many now know how to avoid them. No license is required to set up a foreign shell company if you receive shares as “a gift” from your lawyer. Profits can then go direct to the shell company, which only exists on paper. This company can trade and accumulate cash in a foreign jurisdiction. It can be a “holding” shareholder of your Ukrainian assets accumulating dividends from Ukraine in hard currency. Even when you pay Ukrainian taxes on these sources of income, you may still find the idea of having a foreign conduit company attractive because there is no mandatory conversion of your hard currency profits into the “unstable” Ukrainian hryvnia. Ultimately, many professionals in this field admit that prohibitive measures are only genuinely efficient if they are temporary. Otherwise, they inevitably lose their effectiveness. It seems that government policymakers are now also starting to recognize this, leading to the relatively rapid adoption of the new www.bunews.com.ua

resents a potentially huge simplification of regulations. The new law abolishes the previous requirement for individual licenses, implying that Ukrainian nationals will be able to maintain foreign bank accounts and wire money abroad freely. Additionally, the law terminates the 180-day deadline to repatriate hard currency from foreign buyers of Ukrainian goods and some types of services. This rule also previously applied to Ukrainian buyers when they made advance payment for foreign goods or services and had to import them within 180 days. Another positive change is that the new law prevents the Ministry of Economy from imposing draconian sanctions in response to violations of the currency control regime. Probably one of the most significant benefits relates to transactions involving relatively minor sums. Transactions relating to the export or import of goods amounting to less than UAH 150,000 will now be outside the scope of currency control legislation, meaning that payments for small amounts can take place freely. Reportedly, such transactions constitute 40% of all transactions while accounting for just 3% in terms of aggregate turnover. Despite these apparently positive changes, many in the Ukrainian business and legal communities remain skeptical over the practical effectiveness of the new currency law in the short-to-medium term. Crucially, the law empowers the NBU to impose virtually the same prohibitive measures as those currently in existence if faced by “indications of unstable financial conditions within the banking system”. This right comes with certain procedural and timing limitations on the imposition of such measures. The law clearly states that prohibitive measures cannot last for longer than 18 months during any two-year period. However, a loophole in the text allows the regulator to keep existing prohibitory measures in place permanently if it enacts them before the new law comes into force in February 2019. This places the future of Ukraine’s new currency control regime firmly in the hands of the National Bank, which must now adopt the necessary regulations that will establish future limitations and prohibitions. Most observers expect the NBU to work with existing instruments rather than introducing anything new. Interestingly, as part of the adoption of this new currency control law, the government must prepare and submit draft tax legislation to parliament that will contain anti-international tax avoidance measures and cover one-time individual asset declarations. The adoption of these laws will serve as an official indicator for the National Bank to remove currency prohibitions. The message is clear: we can only expect to see the genuinely free flow of capital once there are effective mechanisms in place to tax these monies in Ukraine and combat tax avoidance in line with recent international tax developments. 63

Is now the time to invest in Ukrainian real estate?

Economic growth is pushing prices up but coming elections introduce an element of political risk The Ukrainian real estate market is attracting increasing attention from international investors. Many see opportunities in the country’s improving economy and EU integration prospects, but with a major election cycle on the horizon, there is also widespread caution. Is now the right time to invest in Ukrainian real estate? Between 2013 and 2017, Ukraine’s hryvnia currency plummeted around 70% in value. During the same period, sharp drops were also evident across the Ukrainian real estate market. Premium rental rates decreased by 20-25% while sale prices for fixer-upper properties in the center of Kyiv fell by 40-50%. Since early 2017, there have been numerous indications that Ukraine is beginning to emerge from this prolonged slump. The country has made great strides towards restarting its economy and reorienting towards the EU. GDP growth is now slightly above 3% and forecast to climb even higher in 2019. Ukraine’s trade turnover with the EU increased by 27% in 2017 as the EU-Ukraine Partnership Agreement began producing promising results. As Ukrainian producers and exporters align themselves with EU standards and develop their understanding of EU markets, significant further trade growth is an entirely realistic expectation. Political uncertainties cloud this otherwise appealing investment environment. Ukrainian presidential and parliamentary elections will take place in 2019, with most observers expecting reform momentum to stall until both votes are over. Some international real estate investors see this political uncertainty as a reason to press the pause button, while others point to the improving economic climate as a strong argument to press ahead before rising prices undermine the competitiveness of the present investment opportunities.

Older Properties Offer Best Returns

From 2015 to mid-2018, Kyiv has witnessed a building boom that many are calling a “bubble”. For international property investors the sustainability of this construction craze is a moot point because the best deals remain on the secondary market of historical buildings in the city center. Prices for investmentclass fixer-upper properties have been at the bottom for the past two years at around USD 1500-2000 per square meter. With sales prices for these flats reset to early 2000s levels, coupled with rising demand and a tight supply of premium long-term downtown rental housing, current annual yields can be 10-12% when you buy the right property in the right location and renovate it to suit expat tastes. Moreover, renovated historic properties in AAA locations have strong price appreciation potential. Within the next five years, it is likely that sale prices will reach 2014 levels of USD 4,000 per square meter. This would mean that Kyiv prices would reach about 50% of current rates in Paris. That might sound fanciful but it is actually a conservative forecast for prices in the center of a major European capital with a growing economy where real estate is traditionally the most trusted asset and holder of value. What is the catch, you might ask? While the quantity of unrenovated apartments in prime locations in Kyiv

remains sizable, the number of properties for sale is limited. This is due to low carrying costs for property owners (low communal charges and minimal property taxes) and current sale prices that are well below historical highs. This means that the quantity of good purchase opportunities at any one time can be quite low. Consequently, many properties are only on the market for an extremely short time. In this challenging investment environment, investors need a broker with excellent market intelligence and should be prepared to move quickly when good deals appear on the market. It is worth noting that Kyiv has many derelict historical buildings in prime locations that would be excellent candidates for conversions to luxury apartments, but virtually all of these buildings are subject to legal disputes among multiple owners. The Kyiv authorities do not currently have the legal tools to force the sale of these properties, so investors will probably need to wait at least another year or two before overall conditions improve for the purchase and renovation of these buildings on a mass scale. What opportunities do new buildings offer for investors? The vast majority of new apartment buildings are not investment grade properties for several reasons: prices for apartments in new business-class buildings are much higher than prices for fixer-uppers, resulting in unattractive purchase price-to-rent ratios. Additionally, there are virtually no new buildings in prime locations for premium rentals. While it is theoretically possible to get attractive returns if you buy an apartment in a new building at pre-construction prices, current rents are much lower outside the city center, while there is a growing supply of new buildings that will hold down rents in those districts. Prices for elite apartments in some new buildings have appreciated slightly over the past year, with some developers starting to ask for USD 2500 per square meter during the pre-construction phase. Clearly, these developers are feeling more confident about the pickup in the economy. However, the target audience is primarily wealthy local buyers and these apartments are not necessarily investmentgrade properties due to locations in the Pechersk and Holosiiv districts beyond the downtown area.

The Mortgage Factor

Now that Ukraine’s economic recovery is well underway, many investors are asking when mortgages might return to the housing market. As of autumn 2018, it is difficult to predict exactly when mortgages will again become a viable option in Ukraine. The key roadblock remains inflation. Ukraine’s National Bank (NBU) has targeted 8.9% inflation for 2018, but it currently appears that inflation will be remain in the low teens. In order for mortgages to return to Ukraine, annual inflation would need to come down to 4-7% and the NBU would need to decrease the refinancing rate (currently at 17.5%) to 7-10%. If this happens, we could expect to see lending rates of 9-14% on 10, 15, and 20-year mortgages. Many market observers expect banks to begin lending in a conservative fashion by offering home equity loans to affluent borrowers who are existing customers (rather than offering new mortgages). There is certainly pent-up demand for home equity loans in Ukraine that borrowers could use to refinance or repair their homes or to finance complete renovations of empty shell and core flats. Western banks could look to offer

About the author: Tim Louzonis (tim@aimrealtykiev.com) is a co-founder of AIM Realty Kiev and AIM Realty Lviv, real estate agencies that specialize in real estate for foreign investors and expats. Tim is a long-time expat with Ukrainian roots. He first came to Ukraine as an exchange student in 1993 and returned in 2008.

real estate

variable-rate loans. However, Ukraine currently lacks a benchmark for variable rate loans like LIBOR in the US, so the NBU would need to solve this problem. At present, Ukrainian regulations forbid hard currency lending and nobody expects this to change in the short term. It is theoretically possible that some banks could lend to foreign buyers. Nevertheless, based on their experience elsewhere in Central and Eastern Europe, the Western banks that operate in Ukraine have been far stricter with investor lending (as opposed to owneroccupier lending) in order to clamp down on speculation and to manage risks. What does all this mean for foreign buyers? For now and in the near future, any significant change is unlikely. Credit may return to Ukraine’s housing market and push up property prices on Kyiv’s broader housing market, but only in the medium to long term.

Key Price Drivers

While it is unlikely that mortgages will return in 2019, many other positive market developments in the near term should begin to improve the overall investment climate in Ukraine and exert upward pressure on Kyiv’s real estate prices. Current economic growth is steady and expected to improve slightly in 2019. With the market entry of low cost airline Ryanair and other established low cost carriers also expanding their routes, Kyiv is set to attract far larger numbers of international visitors. This will expand social and business ties between Ukraine and the West, while also driving demand for short-term rental apartments and affordable accommodation options. In early 2019, real estate investors can also expect to see the benefits of an escrow law that passed in 2018. Some banks are planning to act as escrow agents and this will help with counterparty risk mitigation during real estate transactions. Ukrainian notaries currently perform this role, but it is a cumbersome process requiring a good broker capable of managing the “human factor” to minimize risks. In February 2019, Ukraine’s law on currency liberalization will be implemented, further relaxing Ukraine’s existing currency controls, which should ultimately improve conditions for foreign direct investment. What about the effect of Ukraine’s exchange rate on real estate? Despite continued worries about fluctuations, the exchange rate remains close to where it was at the start of 2018. Nor is this an exclusively Ukrainian issue. It is helpful to keep in mind that since the beginning of 2018, the US dollar has risen by about 5% against major world currencies like the pound sterling and the euro. Even www.bunews.com.ua

if the hryvnia experiences a significant decline, buyers should be aware that historically speaking, Kyiv real estate prices decrease on a percentage basis far less than the hryvnia during a devaluation. For example, a 20% currency devaluation can translate into a 5-7% drop in real estate prices, so if the hryvnia devalues by less than 10% you should not expect to see a significant impact on real estate prices. Gentrification and urban renewal are additional medium term price drivers that buyers of fixer-uppers downtown should take into account. The global urban renewal trend is just beginning to take root in Ukraine and today’s buyers of Kyiv apartments in historical buildings are part of the vanguard. For gentrification to gain momentum, it will require the renovation of derelict buildings in Kyiv’s historical center as well as improvements to infrastructure and services downtown. This would require a cultural shift. Currently, affluent locals in Kyiv overwhelmingly prefer to live in new buildings, but in the coming years we can expect the emergence of a prosperous Ukrainian yuppie class that will value the vitality and convenience of life in a revitalized downtown.

Waiting Could Prove Costly

Does it make sense for property investors to wait on the sidelines until after Ukraine’s coming election cycle? Many Ukraine observers are predicting a general continuation of the political status quo even if a new president wins election, with a resumption of incremental reforms once the election cycle is complete. Even without aggressive reforms, current levels of modest economic growth will likely continue or slightly improve in 2019. Additionally, Kyiv’s tourism promotion agency is predicting a record number of visitors in 2019 and more than half of these visitors will be business travelers, including investors investigating the market. If you are already considering investing in Kyiv property, you probably do not have much to gain by waiting. Current yields are attractive, prices for fixer-uppers have been at current levels for almost two years, and a price increase looks imminent. If you decide to wait until after elections, you might find yourself competing with a lot more buyers in a market where the number of good deals at any one time is limited. The choice is yours. (Special thanks to Robert Kossmann at Raiffeisen Bank Aval for his contributions to this article.)

Decoding Kremlin TV Julia Davis aims to introduce international audiences to the dark realities of Russia’s weaponized media

Since 2014, the outside world has become increasingly familiar with the concept of Russian information warfare. From the conflict in Ukraine to the Brexit referendum and the election of US President Donald Trump, international audiences have repeatedly come face to face with the Kremlin’s sophisticated multimedia arsenal of disinformation tools and diversionary tactics. What many do not realize is that Vladimir Putin’s infowar activities actually began almost twenty years ago, with Russian domestic audiences his first victims. The early years of Putin’s presidency saw a concerted effort to muzzle independent Russian media and recreate the centralized editorial control of the Soviet era. This dominance of the domestic information space has gone on to play a crucial role in the Putin model of governance, allowing the Kremlin to carefully curate current affairs narratives while preventing dissenting opinions from gaining traction. Russia’s servile mainstream media landscape has also functioned as a convenient testing ground for many of the information warfare techniques subsequently deployed against international targets. This weaponization of the Russian media failed to attract much international attention until the spring 2014 seizure of Crimea, when it suddenly became a major global security issue. The role of Russian disinformation in Donald Trump’s presidential campaign has generated additional interest in the Kremlin’s media strategies, with a whole new generation of journalists and commentators trying to identify hidden Russian influence operations and decipher Moscow’s true intentions. Few have made more of an impact than Kyiv-born American analyst and commentator Julia Davis, who has emerged as one of the most popular social media observers of Kremlin TV. A native Russian speaker, Davis is the founder of Russian Media Monitor and a featured expert in Russian Disinformation with the Atlantic Council’s Dis66

information Portal. Every day, she tweets out English-language translations of revealing Kremlin TV quotes to her tens of thousands of Twitter followers. These quotes often make it into mainstream Western media coverage of Russia, providing international audiences with additional insight into what the Kremlin is saying to Russian audiences. She spoke to Business Ukraine magazine about her media monitor role and explained why she believes unveiling the Kremlin’s domestic messaging can help awaken international audiences to the true intentions of Putin’s Russia.

Your social media coverage of Kremlin TV has proved very popular, with particular attention focused on what Russians are saying about President Trump. How has Russian media coverage of Trump fluctuated since his election in 2016? Russian media coverage of Trump is twofold: he is portrayed as a weak and ridiculous amateur, but at the same time as a potentially useful tool of the Kremlin. There is no contradiction in this nuanced portrayal. The Russians exhibit affinity towards Trump solely for his destructive behavior towards the West, which suits Putin perfectly. Russian media, heavily dominated by the Kremlin’s mouthpieces, is consistent on one point: they believe Trump would give Putin’s Russia whatever it wants, if only he was not being constrained by other executive branches of the US government. They maintain the hope that Trump’s election will still pay off for Russia. Have you been surprised by the reaction among American audiences to your coverage of the Russian media? For the most part, American audiences were unfamiliar with the Russian media. They are often shocked by the openly anti-American sentiments dis-

played on Russian state television. I fully expected them to be shocked. This rude awakening was very necessary, since Putin’s Russia views us as an adversary to be fought and undermined every step of the way. The American public should have their eyes wide open in order to avoid falling prey to the ploys of our foes, foreign and domestic.

Some analysts compare the Kremlin-controlled mainstream Russian media to the kind of politically partisan coverage provided by individual US networks such as Fox News. Are such comparisons valid? Fox News is leaps and bounds ahead of Russian state TV, but their trajectory of cult-like adoration for President Trump is disturbingly familiar. Even pet opposition leaders on Russian state television are trained not to criticize Putin. He is usually mentioned only in glowing terms. On Fox News, you can still hear some criticism of Trump, although for the most part this is only for the purpose of ridiculing his critics. Fox News seems to be adopting the Russian model: discrediting any dissenting points of view as “fake news” and claiming everybody lies, while at the same time arguing that all is fair because there is a war against the leader, therefore there is no shame when you are caught misstating the facts or even outright lying. Fox News is inching closer to the modus operandi of the Russian state media, which is essentially an echo chamber that celebrates the spectacular successes of their dear leader and eviscerates his real and perceived opponents. Fortunately, we are not there yet. As long as there are voices like Shepard Smith on Fox News, there is still hope. How does Kremlin TV messaging tend to differ from the public face Russia presents to international audiences? The disparity between the messages of the English-speaking Russian media and their domestic broadcasting is quite stark. English-speaking Russian state media outlets like RT and Sputnik attempt to blend in with their Western counterparts. Their language towards the US is condescending, but it is generally not openly adversarial. In contrast, domestic state media in Russia flagrantly expresses anti-American sentiments. This includes hoping for the downfall of our society, pining for the crash of the US dollar, waiting for another “Great Depression”, and openly plotting to undermine transatlantic unity and Western democracies all over the world. I am working to awaken American audiences to the realization that Putin’s Russia is not our friend and does not wish us well. Unveiling the Kremlin’s messaging to domestic audiences is very revealing in that sense. The Russian media has played a central role in Putin’s Ukraine War, dedicating remarkable amounts of broadcast time to atrocity propaganda and negative reporting on Ukraine. How has this coverage evolved since 2014 and what - if anything - can this evolution tell us about the Kremlin’s future intentions in Ukraine? Anti-Ukrainian propaganda tends to ebb and flow alongside Russia’s ongoing www.bunews.com.ua

media

“I am working to awaken American audiences to the realization that Putin’s Russia is not our friend. Unveiling the Kremlin’s messaging to domestic audiences is very revealing in that sense” offensive. Coverage has evolved from a flood of fakes and demeaning insults targeting Ukraine as a nation, towards presenting Ukraine as a viable threat to Russia’s national security. The portrayal of Ukrainians as “Nazis” has been a constant feature throughout this steady stream of falsehoods. We are currently witnessing another feverish period of anti-Ukrainian propaganda. Putin will likely attempt to take advantage of the fact that the American establishment is distracted by the upcoming midterm elections, the Mueller investigation, and the daily circus of Trump’s Twitter feed. Meanwhile, Ukraine remains at the forefront of Putin’s revisionist ambitions. Many observers see the 2014 attack on Ukraine as a watershed moment in the history of post-Soviet Russia media, leading to the more-or-less open weaponization of state-controlled platforms and the muzzling of Russia’s few remaining independent voices. To what extent does this represent a departure from the Kremlin’s approach to the media prior to 2014? Margarita Simonyan, RT’s editor-in-chief, has compared the channel to a branch of Russia’s Defense Ministry. Meanwhile, Russian Foreign Ministry spokesperson Maria Zakharova has admitted that RT was created to wage infowars against the West. RT first rose to prominence following the 2008 war with Georgia, masquerading as an “alternative news” media outlet. It was essentially a sleeper tool, to be activated when needed. Following Ukraine’s 2013-14 Euromaidan Revolution, RT was unleashed as an overt weapon of state-controlled propaganda against former Soviet republics and democracies all over the world. It is vitally important to continue alerting worldwide audiences as to the true nature of this duplicitous tool that is being used by the Kremlin to create and widen divisions within our societies.

About the author: Julia Davis is the founder of Russian Media Monitor and a featured expert in Russian Disinformation with the Atlantic Council’s Disinformation Portal

culture

Ukrainian comic book superheroes join the hybrid war against Russia

The team behind “The Will” comic book franchise aim to create an inspirational and entertaining Ukrainian alternative to the potent cultural imperialism of Vladimir Putin’s “Russian World” When the Kremlin attack on Ukraine began in spring 2014, it came accompanied by claims that Ukraine was an intrinsic part of the “Russian World”. As Russian hybrid forces fanned out across eastern Ukraine, official voices in Moscow placed great emphasis on protecting the rights of Russian-speaking Ukrainians, while Kremlin agents spoke of creating “Novorossiya” (“New Russia”) amid the wreckage of a partitioned Ukraine. In the information sphere, Soviet Ukraine’s WWII experience alongside Russia served as the chief totem in a propaganda campaign designed to underline the common inheritance binding the two nations together, while supporters of Ukrainian sovereignty found themselves depicted as dangerous extremists. At one point, the Kremlin even expressed alarm and indignation over the alleged “Ukrainization of Ukraine”. Moscow’s message was loud and clear: Ukrainians would remain firmly within the “Russian World”, whether they liked it or not.

Defining the Russian World

Despite its centrality to the current conflict in Ukraine, nobody has yet been able to say exactly what the “Russian World” is. For some, it means anywhere the Russian language is spoken. For others, it refers to the lands of the old tsarist and Soviet empires. The term also implies a russocentric worldview and hints at alignment with Kremlinstyle authoritarian conservatism. In the final analysis, the concept of a “Russian World” may actually be more rooted in culture than politics. It is a lifestyle choice rather than ideology and is held together by the

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social glue of shared TV shows, pop music, movies and fashions. This is certainly the view of Denis Fadieiev, one of four Ukrainians behind a comic book publishing phenomenon that aims to strike back against the Kremlin’s cultural imperialism while encouraging Ukrainians to take greater interest in their own history. “The current war is all about cultural conquest,” he says. “It is no coincidence that the so-called Russian World was particularly popular in Crimea and Donetsk. This is why they are now under occupation. If people there had grown up with their own Ukrainian popular culture instead of endless Russian TV shows about Moscow police officers and war in Chechnya, they would have fought back.”

Hollywood History for Ukraine

Fadieiev and his colleagues are the creators of the steampunk comic book “The Will”. Set in the aftermath of the Bolshevik Revolution and loosely based on actual historic events and personalities, the comic series offers a Hollywood blockbuster interpretation of Ukraine’s failed early twentieth century independence bid, complete with dashing heroes, arch-villains, amazing inventions and a seemingly endless supply of ghoulish Soviet zombies. It is an unapologetically glamorized and decidedly upbeat fantasy vision of Ukrainian history that seeks to counter what Fadieiev dismissively calls the “poor me” version of the national narrative. “There is currently far too much emphasis on Ukraine’s supposedly miserable fate as a perpetual vic: tim, when what we really need as a nation is positive content.”

: The first volume of “The Will” appeared in May 2017 and proved an

instant hit. With sales of over ten thousand copies, it became comfortably the biggest-selling Ukrainian-language comic book ever published. This enthusiastic reception has since led to the launch of a number of spinoffs including a board game and miniature figures, with a computer game in the works and talks underway over a possible feature film. The success of “The Will” also made a comic sequel inevitable. Volume II was unveiled at Ukraine’s annual Comic Con event in Kyiv on 22-23 September and was among the highlights of the entire event. This latest installment expands the geographical scope of the franchise considerably, with plot twists taking the main characters from Egypt to Lviv. Once again, Bolshevik leaders Lenin and Trotsky appear. Ukrainian anarchist icon Nestor Makhno makes his debut alongside many of the historical personalities who led Ukraine’s statehood bid. Plotlines employ considerable poetic license while remaining broadly rooted in the realities of the era. In the alternative universe created by “The Will”, for example, America does not enter World War I in 1917 and the war continues beyond 1918. There is also considerable attention to detail. In reference to his

Russian Imperial Army service during the 1904-05 Russo-Japanese War, Ukrainian Hetman Pavlo Skoropadsky appears in the comic armed with a samurai sword. “We do not know whether the real Skoropadsky ever owned a samurai sword, but he did fight the Japanese so he might have acquired one at some point,” explains Fadieiev. “We include these little details to add to the authenticity of the story and to encourage readers to delve deeper into the background behind the action.”

A Hybrid War Necessity

Fadieiev sees his comic series as an effective way of promoting greater public interest in Ukrainian history and argues that the almost complete absence of similarly engaging local content made Ukraine an easy target for cultural domination by neighboring Russia. Part of the first generation to post-independence Ukrainians, he complains that many of his compatriots do not know nearly enough about Ukraine’s history and are not particularly eager to learn. Rather than lecturing them, he advocates entertainment. “Sadly, knowledge of our own history is still very limited in today’s Ukraine. I believe pop culture is the best way to improve the situ-

Russian Reaction

The broader significance of “The Will” on the information front of the hybrid war with Russia is not yet clear. Nevertheless, the Russian reaction strongly suggests that the project has struck a nerve in Moscow. Numerous Russian outlets reported on the launch of the comic, with most voicing criticism over the appearance of a narrative that directly challenged orthodox Russian and Soviet views of twentieth century history. This angry response reached a climax with a

suitably breathless prime time show on Russian state TV focusing on the comic. Fadieiev cannot disguise his delight as he recounts the horrified expressions on the faces of the show’s hosts. He calls the show “the best advertisement we could possibly have dreamed of.” Fadieiev sees Russia’s negative reaction as a backhanded compliment indicating a sophisticated appreciation of the role played by pop culture in modern hybrid warfare. “The Russians were extremely quick to recognize how dangerous our comic is for them because they appreciate the importance of cultural conquest. Projects like ours show how it is possible to challenge or even replace Russia’s traditional dominance in the information and entertainment spheres. That makes us a huge threat.” Fadieiev believes this heightened Russian sensitivity towards cultural control is rooted in the bitter experience of the Soviet collapse. “The Soviet Union was defeated by Hollywood movies, blue jeans and the American dream. Once you understand this, you will quickly appreciate the importance of the cultural front in the current conflict.”

culture

ation. It is the ideal medium to engage with wider audiences and provide them with a better idea of their own history and national identity. We can educate people while entertaining them. It has to be interesting otherwise people will simply ignore it.” Despite the relative success of “The Will”, Fadieiev and his partners continue to manage the project in addition to their day jobs in the computer gaming industry. He says he sees the comic as his contribution to the country’s war effort, calling it both a hobby and a patriotic passion. “We are not publishers by profession. We are just a group of simple guys who saw a need and decided to create something new for our country.” This unexpected foray into the world of comic book publishing is very much in line with the ethos of contemporary Ukraine, where the harsh necessities of the ongoing hybrid war with Russia have given rise to a nationwide volunteer movement that has seen people thrust into all manner of unfamiliar roles, often alongside their regular employment. Fadieiev says it is only natural that he and his comic book collaborators sought to make their own contribution. “There is a war on. What we have tried to do is create a game-changing weapon on the information front.”

Pioneering Project

With a readership in the mere thousands, Fadieiev’s comic franchise will not win the culture war on its own or singlehandedly transform the way Ukrainians view their country’s past. Nevertheless, he sees the comic as a trailblazing pioneer and hopes it will inspire others to attempt similarly ambitious endeavors. “We are little guys with big ambitions,” he says. “People might not necessarily understand where we are coming from, but they will eventually. When they look back in ten years or so, they will see how important this was for our country and our culture.”

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Ukrainian ID Forum offers inspiration for the new Ukraine One of the highlights of the 2018 summer season in Ukraine was the inaugural Ukrainian ID Forum held in Kaniv, the final resting place of Ukraine’s national bard Taras Shevchenko. The forum sought to make the connection between Ukraine’s social and economic development, arguing that only a comprehensive plan to reenergize Ukraine’s cultural and social spheres can succeed in creating the basis for a flourishing twenty-first century Ukrainian economy. The event was organized by Natalia Zabolotna’s Ukrainian Humanitarian Development Foundation. Zabolotna remains best known for her tenure as chief of the Art Arsenal complex in Kyiv, which she transformed into a symbol of Ukraine’s cultural revival and strengthening sense of national identity in the years following the 2004 Orange Revolution. The Ukrainian ID Forum is her latest initiative. Following the success of this inaugural event, it will now become an annual feature on the Ukrainian calendar, with the second forum scheduled for summer 2019.

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and finally...

Kyiv ranks among world’s most photographed cities

Kyiv has always been a photogenic place. From lush parklands and rolling hills to sandy beaches and the meandering majesty of the Dnipro River, the Ukrainian capital boasts the kind of natural riches befitting Europe’s famously fertile breadbasket. The city’s eclectic architectural ensemble and graceful boulevards add to the effect, combining with a seemingly endless supply of fairytale golden domes to make Kyiv one of the most visually appealing capitals on the planet. A recent ranking of the world’s most photographed cities confirmed Kyiv’s reputation as a head turner, with the Ukrainian capital featuring in fifteenth place globally despite enjoying far less international prominence than any number of larger and more frequently visited rivals. Released in August 2018, the ranking is the work of international stock photo community Dreamstime.com. Officials trawled through the stock photo archives and crunched the numbers in order to identify the most photographed cities across the world. Perhaps unsurprisingly, New York City took first place. Other top ranking cities included global capitals like London, Paris, Beijing and Moscow alongside tourist favorites such as Barcelona, Istanbul and Bangkok. Despite finishing last among the top fifteen featured cities, Kyiv was arguably the standout entry of the entire ranking. The Ukrainian capital is neither a megacity in its own right nor a well-established international tourist destina-

tion. Instead, it seems that Kyiv earned its place in this elite company by virtue of sheer good looks alone. We can expect to see even more Kyiv images appearing in stock photo databases in the coming months as the Ukrainian capital’s international profile continues to rise. The city has generated considerable positive attention in recent years by hosting major international events such as the 2017 Eurovision Song Contest and the 2018 UEFA Champions League Final. This has led to a slow but steady stream of enthusiastic reports in the international media profiling Kyiv as one of Europe’s few remaining undiscovered tourist treasures. Meanwhile, budget airline Ryanair’s autumn 2018 Ukraine market entry will make Kyiv significantly more competitive as a city break destination at a time when the city’s airports are already reporting unprecedented passenger growth. The impact of this increased exposure and improving accessibility is already evident, with Kyiv city authorities expecting to establish a new annual record of over two million foreign guests by the end of 2018. As more visitors arrive, the number of photos testifying to Kyiv’s ample charms will also continue to rise. The Ukrainian capital city’s effortless elegance is the perfect antidote to tired old stereotypes of drab Soviet brutalism, and in Kyiv’s case, a picture really is worth a thousand words.

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