Business Ukraine 05/2019 by Business Ukraine magazine

Issue 05/Summer 2019

UKRAINE FEEDS THE WORLD Ukraine is now No. 3 EU food supplier and worldâ&#x20AC;&#x2122;s top grain exporter

16,5 5 5

₴

$ €

Ukraine

WHY CHOOSE

BUSINESS UKRAINE 05/2019: Once known as the breadbasket of Europe, today’s Ukraine is now increasingly feeding the world. Ukrainian agribusinesses are currently the No. 3 suppliers of foodstuffs to the EU and the world’s No. 1 grain exporters. Turn to page 10 for more.

Visa-Free EU Travel Helps Ukrainians Escape Putin’s Russian World This summer, millions of Ukrainians will fly off to destinations throughout the EU for their annual holidays. Many will buy tickets online, booking their vacations mere days in advance after scouring the internet for the best available bargains. To most Europeans, there is nothing particularly remarkable about any of this. However, for people who grew up in post-Soviet Ukraine, such casual freedom represents a civilizational watershed. For decades following the Soviet collapse, Ukrainians wanting to travel beyond the narrow confines of the former USSR faced a long and often humiliating bureaucratic battle to demonstrate the legitimacy of their intentions. Guilty until proven innocent, they were obliged to spend days filling in application forms and collecting documents, followed by anxious weeks awaiting news of their visa verdict. Rejections were potentially life-changing events, indelible black marks that blocked off entire avenues of opportunity for the unlucky recipients. In this environment, it is hardly surprising that the psychological barriers of the Soviet era remained relatively intact long after the physical fences had come down. The advent of visa-free EU travel is now transforming this picture and drawing Ukrainians slowly but surely closer to the rest of Europe. In the two years since the lifting of visa restrictions in June 2017, around three million Ukrainians, or approximately 7% of the entire population, have used their biometric passports to enter the EU. Many have travelled on numerous occasions, with the added convenience of budget airlines helping to make European city breaks one of contemporary Ukraine’s fastestgrowing pastimes. Critics of Ukraine’s visa-free breakthrough like to claim that it is anything but liberating. They blame the easing of visa requirements for facilitating a sharp escalation in the labor migration trend of recent years and argue that it has cost the country millions of additional lost workers. Visa-free travel

has certainly made it easier for labor migrants to enter the EU, but the fact remains that the post-2014 exodus is primarily an economic phenomenon caused by the sharp disparity in wages on either side of the Ukraine-EU border. Anyone tempted to work abroad over the past five years would likely have found a way of getting there, legally or illegally, as was the case throughout the decades preceding the visa-free era. The true significance of visa-free travel for Ukrainians lies not so much in the practical benefits it offers, but in the broadening of horizons it facilitates. As they become increasingly accustomed to visiting other European countries, Ukrainians are growing more familiar with their European neighbors. This is helping to foster a sense of belonging within the wider European community of nations, a club that Ukrainians can finally aspire to on something approaching equal terms. Meanwhile, many EU citizens are now encountering Ukrainians for the first time and discovering that they often have much in common. A new era of engagement is gradually dawning as the unnatural isolation of Russian imperialism recedes into the past. This will have profound consequences, both for the future of the country and for Moscow’s ambitions to return Ukraine to the Kremlin orbit. Putin’s Russian World is primarily an empire of the mind that relies on the unifying force of a common past far more than any abstract notions of ethnic kinship. For the millions of Ukrainians who came of age alongside Russia while segregated from the outside world, memories of the shared Soviet experience continue to exert a powerful grip on the imagination. However, with the whole of Europe now more accessible than ever, the emerging generation of Ukrainians are less likely to be seduced by this rose-tinted nostalgia. Instead, ties to the rest of Europe will strengthen further in the years to come as holidays in Spain and undergraduate studies at Polish universities take the place in the Ukrainian consciousness once occupied by pioneer camp and Red Army service.

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

All Change at the Rada Ukraine braces for historic cull of MPs as voters look set to reject old guard in July election

Ukraine’s ballot box revolution continues: the Ukrainian parliament is expected to undergo radical change in July as the current crop of MPs are voted out in favor of a new generation led by President Zelenskyy’s “Zelennials” Ukrainians are set to vote out the vast majority of current MPs on 21 July in a parliamentary election that will mark a generational shift in the country’s political landscape. The election is a continuation of the ballot box revolution begun earlier this year when almost three-quarters of Ukrainian voters backed fortyone-year-old political novice Volodymyr Zelenskyy for the presidency over his experienced but tainted incumbent rival Petro Poroshenko. The message is clear – after almost three decades of chronic corruption and false dawns, the Ukrainian electorate wants fundamental change and is willing to gamble with the country’s future in order to get it.

Rise of the Zelennials

Polls predict President Zelenskyy’s Servant of the People party will secure 40% to 45% of votes in the upcoming parliamentary election. Much like President Zelenskyy himself, most of the MPs elected to represent his party will be unknown quantities, with the party list containing an eclectic mix of activists, business figures and novelty candidates together with a sprinkling of more experienced political operatives. Commentators are already dubbing this new intake of Zelenskyy MPs as the “Zelennial” generation, with many predicting they will dominate Ukrainian politics for the next five years. However, it looks unlikely that President Zelenskyy’s party will become the first in independent Ukrainian history to secure an outright parliamentary majority on its own. Instead, Servant of the People MPs will probably have to form a coalition with one or more of the other parties that pass the 5% threshold and enter the new parliament alongside them. Polls predict four additional parties will to join Servant of the People in Ukraine’s next parliament. The pro-Kremlin “Opposition Platform – For Life” party lies in second place with around 12% support, while Petro Poroshenko’s European Solidarity, Yulia Tymoshenko’s Fatherland, and rocker-turnedpolitician Slava Vakarchuk’s The Voice are all polling at approximately 7-8%. Vakarchuk’s newcomer status and emphasis on distancing his party from the current generation of politicians makes him the most likely partner in any future ruling coalition. Together, Vakarchuk and Zelenskyy could realistically se8

cure more than 50% of seats in the new legislature, representing arguably the most dramatic shift in the country’s political landscape since Ukraine gained independence in 1991.

Old Guard in Eclipse

Why are Ukrainian voters so eager to vote for anyone other than the current crop of politicians? This mood reflects the widespread rejection of today’s politicians for failing to lead the country away from the institutionalized corruption that helped spark not one but two separate post-Soviet revolutions since 1991. The huge sacrifices of the 2014 Revolution of Dignity and the subsequent undeclared war with Russia have amplified frustration with a political class that seems unable to reform itself, leading to a surge in support for new faces. For the vast majority of Ukrainian voters, gambling on inexperienced and untested political forces seems a better option that backing the same old figures who have consistently delivered disappointments for almost three decades. The verdict is likely to be equally damning for those who entered parliament as self-styled reformers following the 2014 revolution. Having failed to live up to their own lofty rhetoric, most of these so-called Euro-Optimist MPs have either already admitted defeat or find themselves facing tough battles in single mandate constituencies. The biggest loser of the election may be Vladimir Putin. In Ukraine’s last peacetime parliamentary vote seven years ago, pro-Russian forces were able to secure over 50% of seats and form a ruling majority. In July’s election, the only openly pro-Moscow party with any hope of passing the 5% threshold will struggle to get more than 15% of the overall vote. This collapse in support illustrates the self-defeating nature of Russia’s ongoing Ukraine war. The conflict has turned Ukrainian public opinion away from hackneyed notions of Slavonic fraternity with Russia, while also serving to disenfranchise voters in Occupied Crimea and the Donbas, which had previously served as the twin bastions of Russian electoral support in Ukraine. The results of the upcoming parliamentary vote are now expected to underline the decline of Russia as a serious electoral force in Ukrainian politics.

banking industry

Coming Soon UAH 1000 Banknote UAH 1000 will enter circulation in October as the National Bank of Ukraine updates currency

If you thought it was difficult to get change from a UAH 500 note, just wait until autumn 2019! National Bank of Ukraine (NBU) Governor Yakiv Smolii recently presented the country’s new UAH 1,000 banknote, which will enter circulation on 25 October and immediately become the bane of cashiers across the country. The new banknote features a portrait of Ukrainian scientist Volodymyr Vernadskiy, one of the fathers of modern geochemistry and founder of the Ukrainian Academy of Sciences, which appears on the opposite side of the bill. The UAH 1,000 banknote will be the highest value denomination issued by the NBU to date, ending the 13-year reign of the UAH 500 as the country’s largest bill and representing a new landmark in the modern history of Ukraine’s national currency. The launch of the UAH 1,000 banknote is part of a broader revision of the Ukrainian currency that will see smaller denomination coins and notes gradually phased out over the coming few years. The NBU is seeking to adjust the country’s cash flow to reflect the new economic realities of rising prices and growing salaries following the 2014-15 devaluation of the hryvnia. From 1 October 2019, the one, two and five kopek coins will cease to be legal tender, while the twenty-five kopek coin will undergo a gradual withdrawal from circulation. By 2022, new coins will fully replace the one, two, five and ten hryvnia banknotes. The story of the hryvnia stretches back to the early days of Ukrainian history and the Kyiv Rus era, when “hryvnia” was the term for one form of coinage then in use. During Ukraine’s ultimately thwarted statehood bid of 1917-21, the Ukrainian authorities chose “hryvnia” as the name for the new national currency. The Central Rada in Kyiv passed the necessary law introducing the hryvnia as the monetary unit of the fledgling state on 1 March 1918. The hryvnia banknotes of the time featured the trident crest and other state symbols that would later reappear in today’s independent Ukraine. 10

The currency launched in spring 1918 eventually suffered the same fate as Ukraine’s early twentieth century statehood ambitions, but the hryvnia was destined to make a comeback in the 1990s following the collapse of the Soviet Union and the dawn of Ukrainian independence. Printing of the first post-Soviet hryvnia banknotes actually took place in Canada in 1992, but the launch of the currency did not happen until September 1996 in order to allow the Ukrainian economy to overcome a period of extreme turbulence and hyperinflation. The modern hryvnia has experienced periods of relative stability alongside a number of sharp drops in value. The first major devaluation came in summer 1998 as the meltdown of the Russian economy sent shockwaves through neighboring Ukraine. With memories of the mid-1990s hyperinflation still fresh in people’s minds, queues soon formed at exchange booths as the hryvnia lost almost half its value in a matter of days. The global credit crunch crisis of 2008 ignited the next big scare for the hryvnia, which rapidly fell from five to eight against the US dollar. In retrospect, these panics now appear relatively minor when compared to the collapse of 2014-15. With Crimea under Kremlin occupation and Russian tanks advancing in eastern Ukraine, the hryvnia went into freefall, reaching an all-time low of UAH 30 to the US dollar before eventually stabilizing at a greatly reduced rate. Ukraine’s national currency has since enjoyed somewhat better days, with the improving Ukrainian economy and shrewd monetary policies pursued by the NBU allowing for relative stability despite the adoption of a floating exchange rate. Indeed, the hryvnia currently ranks as the fourth-best performing currency in the world against the dollar, according to data for January-June 2019 compiled by business news outlet Bloomberg. Ukraine’s national currency advanced around 5.5% against the US dollar during the first half of this year, with gains of 2.5% in the month of June alone.

Ukraine Feeds

agriculture

the World Ukraine is now the third largest supplier of agricultural produce to the European Union and the worldâ&#x20AC;&#x2122;s largest grain exporter. With trade volumes experiencing double-digit growth and investment flowing into the Ukrainian agribusiness sector, the country looks set to play an increasingly major : role in global food security

www.bunews.com.ua

agriculture

: Annual European Commission data released in late June confirmed

that Ukraine is now the third largest exporter of agricultural products to the EU. Ukrainian food exports to the European Union rose by 14% during the one-year period ending on 1 May 2019 to reach a new high of EUR 6.3 billion. This increase allowed Ukraine to climb from fifth to third position among the EU’s primary foodstuffs partners, highlighting the free trade benefits of the 2014 EU-Ukraine Association Agreement and helping the country to reclaim its reputation as the breadbasket of Europe. According to European Commission figures, the United States is currently the number one agricultural exporter to the European Union with an annual volume of EUR 12.9 billion. America is followed by Brazil (EUR 11.7 billion), with Ukraine (EUR 6.3 billion) ahead of China (EUR 5.9 billion) in the number three spot. Nor is Europe the only place where Ukrainian foodstuffs are gaining market share. Over the past five years, the geographical distribution of Ukraine’s agricultural exports has expanded significantly, as the country’s agribusinesses have looked beyond the traditional markets of the former Soviet Union and sought to expand their presence in Asia, Africa and beyond. This diversification is partly a response to the economic aspects of Russia’s ongoing hybrid war against Ukraine, which has included trade embargos and barriers to the transit of Ukrainian cargos to formerly lucrative markets in Central Asia. It is also the product of longer-term efforts to modernize Ukrainian agricultural practices leading to higher yields, greater infrastructure capacity, and larger harvests available for export. These improvements have created a rising tide of agricultural exports flowing out of major Ukrainian ports such as Odesa and Mykolaiv to destinations across the globe. Ukraine exported agricultural produce worth USD 8.97 billion in the January-May 2019 period, representing a year-on-year increase of USD 1.58 billion or 21.4%. Thanks to this latest growth, foodstuffs accounted for 42.9% of overall Ukrainian exports during the first five months of the year, making the sector a key source of foreign currency earnings for the Ukrainian economy as a whole. The geographical scope of Ukraine’s agricultural exports in early 2019 highlights the country’s broadening international horizons. China was Ukraine’s top market, accounting for 8.9% of total agricultural exports worth USD 795 million. India was in second place (8.3%, USD 741 million), followed by Egypt (8.2%, USD 737 million), Turkey (7.6%, USD 684 million) and the Netherlands (7.1%, USD 641 million). Other major EU markets included Spain (USD 503 million), Italy (USD 333 million), Poland (USD 301 million) and Germany (USD 250 million). Fittingly for a nation known historically as a breadbasket, Ukraine’s top agricultural export remains grain. As the annual grain export sea-

son ended on 30 June, Ukraine was poised to claim Russia’s crown as the world’s number one grain exporter with a yearly total of 49.7 million tons sold to international clients, representing a 26% increase on the 2017-18 cycle. This volume was possible thanks to a record 70 million ton harvest in 2018, but Ukraine’s Ministry of Agrarian Policy and Food believes this was no one-off and expects further gains during the current cycle. Indeed, according to the president of the Ukrainian Grain Association Mykola Horbachev, Ukraine’s current upwards trajectory will continue in the coming years with the country expanding grain exports by at least 40% to reach annual volumes of 70 million tons. Speaking in Kyiv in mid-June, Horbachev said monthly export volumes of 6 million tons during the current season had demonstrated that Ukraine’s agricultural infrastructure is already capable of coping with such growth. Grains will likely remain one of the pillars of Ukraine’s agricultural export industry, but the range of commodities sailing out over the Black Sea from Ukrainian ports or heading west across the country’s EU borders is far wider. There has been a concerted effort to gain access to new international customers in recent years, with Ukrainian food exporters securing entry to 85 new markets for a variety of agricultural produce in 2018 alone. This process is continuing. In mid-June 2019, for example, Ukraine received the necessary veterinary certification to begin milk and dairy produce exports to Saudi Arabia. Weeks earlier, nearby Qatar certified Ukrainian meat, fish and dairy imports. The rise of Ukraine as an agricultural superpower comes as no surprise. The country is home to around one-third of the world’s famously fertile black earth stocks and boasts an ancient national folklore rich in agrarian symbolism. With the global population set to soar beyond the 10 billion barrier in the coming decades, Ukraine’s unrivalled agricultural wealth will become a resource of the highest strategic importance, while also serving to attract international investors to the country’s agribusiness sector. Recent years have seen a steady stream of major investments into Ukraine’s agricultural infrastructure, with domestic and international companies alike financing the construction of storage and processing facilities while upgrading wagon fleets and port capacities. Meanwhile, President Zelenskyy’s team have spoken of ending Ukraine’s agricultural land sale moratorium and creating a longawaited land market. This would be a hugely controversial move in a society where the emotional attachment to farmland runs deep, but it would also represent a potential bonanza for the national economy that may prove hard to resist. Regardless of how this land sale saga develops, it is already clear that Ukraine is destined to play an increasingly prominent role in global food security. www.bunews.com.ua

business set-up in Ukraine Scan this QR-Code to learn more about it!

legal

Ukraine must cultivate culture of compliance Ario Dehghani says Ukrainian companies need to take compliance seriously now or risk losing out later The past five years have witnessed a dramatic broadening of Ukraine’s global business horizons as Ukrainian companies have branched out beyond the traditional comfort zone of the former USSR to increase their presence in EU markets and beyond. This expansion is increasingly exposing Ukrainian companies to the scrutiny of international regulatory frameworks and serving to make compliance one of the hottest buzzwords within the country’s business community. Many Ukrainian business owners still have only a superficial understanding of exactly what this term entails, according to international compliance expert Ario Dehghani, who warns that the clock is already ticking for those yet to grasp its importance. Dehghani believes Ukrainian companies need to start taking compliance seriously now if they wish to be internationally competitive in the future, and warns that those failing to address compliance issues today risk finding themselves left behind within the next few years. German national Dehghani recently joined Ukrainian law firm Sayenko Kharenko as a counsel, where he will specialize in providing a range of compliance and white collar criminal defence services. He brings with him a wealth of experience in the international compliance sphere, having spent eight years prior to his 2016 arrival in Kyiv as part of the international compliance team at Hogan Lovells in Munich. During that period, he saw the team expand from three lawyers to over thirty, as compliance became an increasingly important focus for EU businesses. A similar process is now underway in Ukraine, he says, as Ukrainian businesses find themselves confronted by compliance-related issues on an increasingly regular basis. What exactly does compliance mean? Dehghani defines it in simple terms as ‘following the rules and the laws as set out at the internal, domestic and international levels’. He advises clients on all of these areas, helping Ukrainian businesses to create and implement their own internal compliance codes or to adopt the necessary measures in order to meet international regulatory standards. Key focuses currently include the EU’s General Data Protection Regulations (GDPR), the UK’s Bribery Act,

and the US Foreign Corrupt Practices Act (FCPA). However, these are just the tip of the international compliance iceberg, making the issue relevant to a large and expanding number of Ukrainian companies. Compliance is a central pillar of today’s global economy. Any Ukrainian business looking to sell their products in the European Union will find themselves subject to an entire regulatory framework, while having a foreign member of staff, client or partner is also in many cases sufficient to create a series of potential compliance challenges. Nor is it merely an issue of ticking boxes and meeting bureaucratic benchmarks. Dehghani cites specific examples from his own recent experience of Ukrainian companies that are already confronting the cost of compliance shortcomings. “I met the CEO of a Ukrainian IT company who urgently wanted my assistance to make his business GDPR-compliant. It turned out that they had lost eight international clients within the previous few weeks just because they did not meet GDPR standards. This is one specific example of how the practicalities of international business are forcing Ukrainian companies to take compliance more seriously.” Dehghani says the number of such examples will only increase as the costs of noncompliance mount for Ukrainian businesses looking to expand their reach internationally. He believes some within the Ukrainian business community continue to underestimate the importance of compliance due to the currently limited scope for penalty enforcement inside Ukraine, but argues that this is a shortsighted approach. “It is not just an issue of keeping potential problems at bay,” he says. “Compliance is also about building up a strong international brand that is capable of attracting both clients and investments.” While enforcement risks will inevitably grow along with Ukraine’s own rising international profile, Dehghani says the Ukrainian business community must not wait for this process to develop. Instead, they should be looking to build up a culture of compliance now in order to improve the country’s future competitiveness. “This must be done in practice and not just on paper,” he underlines. The German specialist points to a Harvard University study of Dow Jones companies that highlighted the benefits felt by businesses implementing sophisticated compliance systems, and argues that the Ukrainian business community has all the necessary incentives to lead the development of compliance culture in their own country. “There are lots of reasons why investing in compliance will help Ukrainian companies to become more successful,” he says. “But ultimately, if you do not do your compliance homework now, in five years you will be out of the race.”

About the interviewee: Ario Dehghani is a counsel at Sayenko Kharenko newlaw firm specializing in compliance and white collar criminal defence

opinion

Global regulation efforts

must not be selective Accusations of selectivity risk undermining efforts to create a more transparent global economy

About the author: Andriy Dovbenko is a businessman and venture investor A transparent economy is a win for everyone, but using this as a slogan for trade wars runs the risk of long-term defeat. In an ideal world, the two elements should never coexist. In practice, however, they often do, regardless of how regrettable that may be. Not long ago, the EU expanded the list of countries subject to sanctions over their unwillingness to cooperate with the EU on matters of tax law regulation. If, earlier, only miniature offshore states found themselves placed on such lists, now we are also seeing the inclusion of far larger and more competitive global economies. It is worth pausing to explore why this might be an alarming trend. To begin with, it is important to understand that “unwillingness to cooperate” implies a refusal to disclose final beneficiaries, a low level of tax rates, and a lack of response to requests from the relevant European fiscal authorities. Countries that fall under these criteria face categorization as tax havens by default. In the past, there were only five such nations. The finance ministers of European Union countries have now expanded the blacklist to include a further 10 nations. Among them are countries such as the United Arab Emirates. You could argue that this is not surprising. After all, if the UAE does not want to play by the generally established rules, then there is every reason to expect such consequences. This is true enough, but there are also a number of nuances to consider. For example, according to the requirements 18

laid out by the European Union, the most severe violator of tax regulations is the United States (or rather, the US Virgin Islands). However, this country is not on the blacklist. Nor is Russia, which would certainly struggle to qualify in any sense as a transparent or open country in terms of taxation. For some reason, European ministers do not seem bothered by this. It is hard to escape the conclusion that the tax rules established by the EU and their application are selective. This sets a dangerous precedent. It risks transforming noble ideas into a tool for selfish purposes. As a result, we have an unfair environment fostering preferences for some and difficulties for others under what could otherwise be termed as the unconditionally correct ideas of combating the financing of terrorism and money laundering. This fuels perceptions that control over the global economy exercised by the world’s leading powers is becoming more and more fortified. Traditionally, for the past few decades at least, the United States has performed many of the functions of world gendarme. We are now seeing evidence of European regulators trying to assume leading roles in this direction, with varying degrees of success. At the same time, as already noted, the EU has no complaints against the US, while its general attitude towards Russia also provokes suspicions of an unseen corruption component. Indeed, current EU approaches to tax law regulation are reminiscent of the outrageous “blindness” towards issues related to money laundering within the highest echelons of the Russian authorities, which raised so many questions that a request from 40 European Parliament deputies was sent to the European Commission. The EU’s current approach could certainly prove tactically beneficial for European businesses. However, this risks blurring the ethical lines in the long term. Electorates across the continent are already expressing declining trust in the lofty principles that provide the official foundations of European politics. Reasons for this decline are not hard to find. One obvious example is the advocacy by certain European countries of the Kremlin’s Nord Stream II pipeline project, which runs contrary to all ethical ideas of European unity as well as the spirit of diplomatic agreements. More recently, we have the decision of the Parliamentary Assembly of the Council of Europe (PACE) to allow Russia to return, despite Moscow’s refusal to address any of the issues that led to Russia’s suspension in 2014. Supporters of Russia’s return attempted to portray the move as an important step forward, but such rhetoric does not convince. There is an obvious problem here. When you take on the functions of an international arbitrator, as the EU and the US seem eager to do, then you need to be consistent in your actions. As long as accusations of selectivity are unaddressed, the legitimacy of such arbitration will remain under question. These suspicions harm the EU itself at a time when Euro-sceptics are gaining momentum thanks in part to concerns over the growing power of Brussels. One can only hope Europe’s democratic institutions are able to ensure that the authorities they create function in a truly transparent and consistent manner. www.bunews.com.ua

Reinventing Ukrainian retail

Arricano CEO Mike Merkulov says culture of innovation is key to 4 years of double-digit dollar growth

About the interviewee: Mike Merkulov is CEO of Arricano Real Estate Plc Over the past year, Ukraine’s retail sector has seen some of the country’s largest real estate transactions, with mall complexes changing hands as major investors bet on further retail growth. The industry has also attracted headlines thanks to the recent arrival of global brand names such as H&M and Decathlon. Meanwhile, a number of gigantic new hyper-malls are set to open to the Kyiv public in the coming months, adding yet more retail options for the increasingly well-served Ukrainian capital. This sustained spike in retailrelated activity reflects the improving fortunes of a sector that is experiencing a period of steady if unspectacular expansion as rising salaries and GDP growth continue to boost the spending power of Ukrainian consumers. Arricano Real Estate Plc is at the forefront of the Ukrainian retail sector’s upwards trajectory, with its recently published 2018 annual report highlighting a fourth consecutive year of double-digit growth in dollar terms. The publicly listed company is among the leading retail real estate developers and operators of shopping centers in Ukraine, with a portfolio of five malls and a sixth currently under construction in Kyiv’s Lukyanivka district. Arricano’s net operating income of USD 20.9 million in 2018 represents year-on-year growth of 15% and is virtually double the USD 10.8 million reported five years previously in 2014, placing it well ahead of Ukraine’s broader retail industry curve. Arricano Real Estate Plc CEO Mike Merkulov attributes this strong performance to a culture of innovation within the company and argues that tech-friendly thinking is now an essential ingredient for anyone hoping to survive in the rapidly changing Ukrainian retail environment. 20

“The entire international retail industry is currently going through a period of transition. There are a lot of disruptive factors such as the rise of e-commerce and changing consumer behavior,” observes Merkulov. In Ukraine, retailers have had to accommodate these global trends while also addressing the challenges created by an economy struggling with the impact of geopolitical instability and military conflict in the east of the country. For Arricano, this has meant a radical rethink of corporate strategy, with the process beginning in 2015 as the scale of the changes taking place on the Ukrainian retail market first became apparent. This produced a new risksharing model that has redefined the relationship between the company and its shopping mall tenants. Instead of relying on a flat rental fee, the company introduced an additional revenue-based component to rental agreements, creating levels of partnership that required far closer cooperation than ever before. This conscious step away from the traditional and more passive model of retail real estate management has significantly reduced the distance between Arricano and the purchasing public. The company must now adopt a more hands-on approach to getting the right tenant mix, while also offering existing retailers as much support as possible. This often means introducing tenants to cutting-edge technologies and helping them find new ways of engaging with consumers who expect ever-improving levels of convenience. “When we reevaluated our corporate strategy in 2015, one of the riskiest decisions we took was to make turnover per square meter a key goal, de-

engagement and convenience. E-commerce has its own limitations in terms of the shopping experience it can offer. You cannot try on clothing virtually, for example, or get a feel for the quality of goods. Having said that, it is difficult to imagine malls in five or ten years with people still carrying their purchases around in shopping bags. Instead, things will probably be delivered direct to your home or packaged in a more practical manner.” Merkulov sees it as his task to anticipate expectations on the fast-developing retail market. Arricano experts are currently working with Ukrainian IT talent to fine tune a groundbreaking app that will serve as a shopping assistant. This digital tool should launch before the end of 2019 and will be available to all tenants. It will allow users to enter their personal details in order to identify available clothing in their size, as well as other items tailored to their specific tastes. Meanwhile, the company’s new project in Kyiv’s Lukyanivka district, which is set for completion by 2021, already incorporates what Merkulov sees as the most important coming retail real estate trends. Plans for the Lukyanivska Shopping Center project feature several towers including a mix of co-working spaces and serviced apartments, creating stable and organic demand for the services offered inside the shopping center itself. With a number of vast new mall complexes expected to open in Kyiv over the coming year, is there not a danger of retail oversupply? Merkulov admits to being somewhat skeptical towards the hyper-mall business model and questions whether many Kyiv residents with the requisite spending power also have the time to travel to these huge venues and spend the necessary hours exploring what is on offer. However, he expects the current growth trend in Ukraine’s consumer spending to continue in line with the gradually improving national economy, and points to rising international interest in the sector as further evidence that he is far from alone in adopting an optimistic outlook. “Over the past year, we have spoken to more international investors who are looking to enter the Ukrainian retail real estate market than during the previous three years put together. There are still problems relating to negative past experiences and rule of law issues, but there is clearly rising interest among funds, developers and investors.” Merkulov remains convinced that the key to retail sector success in the coming years will be keeping pace with rising expectations as Ukrainian consumers become increasingly demanding. “Our strategic priorities are educating tenants on what technologies are available and providing access to new tools,” he says. “Ultimately, retail itself is not the problem. If we look around us, people are actually consuming more and more. The problem is retailers losing touch with their clients. We just need to make sure we have the tools in place to maintain this relationship as it evolves.”

retail

spite the fact that this was not something we could directly influence,” recalls Merkulov. “Our logic was simple: if our tenants do not grow, then we will not grow either.” This led to a number of measures designed to stimulate better sales among existing tenants, with Arricano organizing free sales training for shop personnel. Held in the cinema halls of shopping centers during morning lulls, these training sessions were soon attracting hundreds of participants and led to upswings in sales. This year, Arricano has also opened up its digital platforms to tenants, providing access to the company’s more than 200,000 followers across a variety of social media including Instagram, YouTube, and Facebook. “The paradigm is shifting,” says Merkulov. “We are now here to support our tenants in their growth, rather than simply pushing them for higher rents. This is what I like most about our current relationship.” Inevitably, not every retailer is able to meet the expectations implicit in the partnership model established by Arricano. Although tenants know they can expect support if they are not performing, they are also aware that they will eventually be replaced if there are no improvements. Changes also sometimes become necessary in response to shifts taking place in the local and national environments. When Ukraine’s hryvnia currency tumbled to historic lows in early 2015, Arricano replaced 50% of retailers at one mall in order to adapt to the new consumer realities of the market. Although occupancy rates at present are close to 100%, Merkulov says his team are constantly on the hunt for new retailers in order to achieve the perfect balance of tenants. This is not an exact science and necessarily varies from mall to mall based on the characteristics of the local environment. As an example, Merkulov points to the recent growth in sales of sporting goods at an Arricano mall situated in Left Bank Kyiv, something he associates with a trend towards healthier lifestyles in the largely residential surrounding neighborhood. “A shopping center is a living organism that you cannot simply rent out and forget about,” he comments. Merkulov says innovation will remain at the core of Arricano’s corporate philosophy as the company looks to maintain its competitive advantages in an industry with a long record of embracing new technologies. While acknowledging the dramatic impact of e-commerce on traditional retail models, he rejects the zero-sum thinking that led many e-sales evangelists to proclaim the death of offline shopping. Instead, Merkulov envisages the next generation of malls as lifestyle hubs offering an experience that goes beyond traditional shopping to embrace a far wider range of activities from dining to entertainment, work and socializing. “The philosophy underpinning the malls of the future will be ‘live, work, play’, and there will be fewer and fewer reasons for visitors to go elsewhere,” predicts the Arricano CEO. “People will still come to malls in order to buy things, but they will expect greater emotional

“The philosophy underpinning the malls of the future will be ‘live, work, play’ and there will be fewer and fewer reasons for visitors to go elsewhere”

www.bunews.com.ua

Ukraine embraces renewable energy Renewables offer attractive returns for investors and enhanced energy security for Ukraine countries in their transition towards a sustainable energy future, estimates that Ukraine also has particularly large potential for solar and wind energy. These positive assessments of the country’s renewables capacity are broadly in line with Kyiv’s own vision for the development of the sector. Current plans envisage an increase in the share of renewables within the country’s overall energy mix to 25% by 2035, with some industry observers estimating that far higher percentages are entirely feasible.

Strategic Priority

About the author: Olha Bosak is a Board Member of AICE Hydro and the founder of Energy Salon XXI When we talk about Ukraine’s renewable energy potential, the very first thing to consider is size. Ukraine is Europe’s largest country. It is rich in rivers and lakes, forests and steppe. The continental climate of Ukraine, with its warm summers and freezing winters, makes it attractive for wind, hydro, solar and biomass energy. Ukraine enjoys more than 290 sunny days per year. It boasts particularly strong winds in spring. The climate in the coastal regions of the Black Sea and Azov Sea offers a good mix of sea breezes and the dry climate of the steppe. Ukraine is also uniquely fertile, with agricultural lands covering 70% of the country, or approximately 41.5 million hectares. This makes Ukraine’s bioenergy potential obvious. Indeed, according to forecasts from the International Energy Agency, bioenergy represents 32% of Ukraine’s potential future renewable energy production. Given the massive amounts of agricultural and industrial waste produced in today’s Ukraine, there are reasonable expectations for significant bioenergy sector increases in the coming years. Growth in this sector is already impressive, standing at around 33% per year. No wonder the Energy Post rates Ukraine as having the best biomass/biogas power production potential in the entire region. Meanwhile, the International Renewable Energy Agency, an intergovernmental organization supporting 22

The term “renewable energy sources” was first defined in Ukraine 25 years ago, which gives an indication of how relatively new the concept is to the country. Despite the current hype surrounding renewable energy, Ukraine is still heavily dependent on nuclear energy and fossil fuels, with around half of all electricity supplies coming via the country’s nuclear power stations and 40% generated by coal. Ukraine’s nuclear power sector remains reliant on Russia for fuel and other services, but this relationship is now in decline thanks to growing cooperation with Westinghouse. Similar efforts are also underway in the gas sector, where Ukraine has traditionally been vulnerable to Russian pressure. Ukraine’s efforts to reduce energy dependence on Russia make the development of renewables particularly important. The structural changes that are currently underway in Ukraine’s energy sector lay the groundwork for the country’s future prosperity. They also pave the way for its economic and geopolitical independence. Political statements and legislative changes in recent years have repeatedly demonstrated Ukraine’s commitment to energy sector reforms and support for renewables. However, the country’s renewable energy policy remains very much a work in progress. Most analysts agree that further changes are required to create a suitable support system for renewables, such as the introduction of more efficient market mechanisms that will help balance energy generation and demand within the national power system. The adoption in 2017 of an Electricity Market Law was widely seen as a positive step for the development of Ukraine’s renewable energy sector, serving to help define the role of renewables in the new electricity market. Further important steps currently underway include the launch of a national electricity market and the introduction of an auction system for future renewables projects. In May 2019, the law governing competitive conditions for electricity production and alternative energy resources came into force. The government must now develop a more detailed procedure for auctions that will manage potential risks and eliminate scope for abuses.

Attracting Investment

Ukraine’s renewables sector has been one of the key focuses of international investment into the country over the past three years. For example, Norwegian companies Scatec Solar and NBT AS are among the largest investors in Ukraine’s renewable energy industry. The European Bank for Re-

energy

construction and Development (EBRD) co-finances a 30MW solar plant in the Cherkasy region constructed by the Norwegian solar developer Scatec Solar and a 250 MW windfarm in the Kherson region constructed by the local developer SyvashEnergoProm and co-owned by renewable energy groups Total Eren of France and NBT of Norway. In addition to EBRD financial support for the sector, the Green for Growth Fund, the Netherlands Development Finance Company, and the Nordic Environment Finance Corporation all also provide funding. I recently launched the Energy Salon XXI to serve as a cross-sector network that can build much-needed bridges between international investors and local stakeholders. We held the first Energy Salon XXI event earlier this summer, hosted by Olha Bosak Management Consulting together with Dentons law firm in cooperation with Norwegian companies Scatec Solar and NBT. The aim of this initiative is to open up new business opportunities while improving dialogue. International investment in Ukrainian renewable energy projects can be mutually beneficial for both Ukraine and the many individual international companies entering the Ukrainian market. By developing the renewable energy market, Ukraine can achieve the strategic goal of diversifying its energy sources, leading to greater energy security and independence. The involvement of international investors also offers clear benefits for the national economy, creating jobs and passing on valuable knowhow while generating business for local companies.

Global Energy Revolution

For more than a century, coal, petroleum, and natural gas have fuelled the world. We are currently going through a period of historic transiwww.bunews.com.ua

tion. Few would now doubt that renewables are the energy source of the future. A lively global discussion continues over the right balance between fossil fuels and nuclear power on the one hand, and renewable sources such as hydropower, solar, wind, geothermal and biomass energy. As one of Europe’s largest energy markets and biggest consumers, Ukraine has an important role to play in this ongoing debate. Despite the fact that Ukraine is something of a newcomer to the renewable energy market, the country can still play a revolutionary role in its development. Growth rates in the sector are impressive, with a recent overview by the National Commission for State Energy and Public Utilities Regulation finding that Ukraine launched 71 MW of wind power plants, 568.3 MW of solar power plants, and 16 MW of biogas plants during the second quarter of 2019 alone. This is part of a six-fold increase in the country’s renewable energy capacity in recent years. If Ukraine’s renewables sector continues to grow at this pace, a major transition in the country’s power sector is inevitable. Much will depend on the continued existence of the requisite political will, along with the effective implementation of legislation governing key areas such as the country’s electricity market and auctions for renewables projects. International institutions including the EBRD have already demonstrated their confidence in the development of the Ukrainian renewables sector. While renewables currently account for approximately 1.8% of the country’s electricity production, this means business opportunities to foster growth are correspondingly high. As with many areas of the Ukrainian economy, there is a sense that those who join the early waves of investment into the renewables sector will enjoy the greatest rewards. 23

Chornobyl tourism industry prepares for HBO dividend Ukraine’s most infamous site may become its biggest tourist magnet – but is Chornobyl ready? The stunning success of the recent HBO TV series “Chernobyl” has thrust the 1986 nuclear disaster in Soviet Ukraine back into the public eye. The five-part series captivated millions around the globe, leading to predictions that it would generate a new wave of tourism to Ukraine as viewers seek to gain first-hand experience of the sites associated with the tragedy. Can Ukraine now use this opportunity to highlight the progress the country has made since the dark days of Soviet totalitarianism 24

so memorably depicted in the smash hit show? At this early stage, evidence of a Chornobyl tourism boom is limited and largely circumstantial. Broadcasts of Chernobyl episodes in May and June 2019 coincided with a slight spike in Kyiv flight searches, while the Ukrainian capital city’s tourism promotion agency has said they expect the number of people visiting the Chornobyl site to rise this year to 100,000 compared to 72,000 in 2018. Sergii Ivanchuk, who owns Chor-

tourism

www.bunews.com.ua

“Chornobyl is like a giant museum of the Soviet Union. Visitors can compare this to the vibrant life of today’s Kyiv and see how much Ukraine has changed” : nobyl tourism company SoloEast, told CNBC that he is now receiving

around 40% more bookings and inquires for the 2019 summer season than during the same period one year ago. Other tour operators report similar upward trends. The biggest single indication of heightened interest in Chornobyl tourism has probably been the flurry of reports on the subject appearing throughout the international media since the HBO show went viral. The very concept of Chornobyl tourism has long been the subject of heated debate, with many regarding it as inappropriate to turn the scene of the world’s worst nuclear disaster into a quirky vacation destination complete with kitsch souvenirs and novelty photo opportunities. These ethical issues have reemerged as international media attention has focused on the Chornobyl tourism industry, especially when risqué photos began appearing on social media of visitors posing in various states of undress. At one point the creator of the HBO show, Craig Mazin, felt obliged to enter into the online discussion with a tweet calling for behavior befitting the site of a human catastrophe: “If you visit, please remember that a terrible tragedy happened there. Comport yourselves with respect for all who suffered and sacrificed,” he posted. For many Ukrainians, the idea of promoting the country’s Chornobyl associations may also seem counterproductive. Ever since gaining independence in 1991, Ukraine has struggled to emerge from the Soviet shadows and project itself on the global stage. In this context, the fact that international audiences often knew nothing about Ukraine expect for Chornobyl was symptomatic of the country’s broader image problems. Ukrainian MP Anna Romanova is sympathetic to these sensitivities, but believes renewed tourist interest in Chornobyl could serve as an opportunity for Ukraine to challenge prevailing international stereotypes and change outside perceptions of the country as a whole. As the head of the Ukrainian parliament’s Subcommittee on Tourism Development and Resorts for the past five years, Romanova has been at the forefront of efforts to attract international visitors and improve the country’s tourism appeal. She argues that Chornobyl tours could help illustrate how far Ukraine has come since the end of the Soviet era. “The entire exclusion zone is like a giant museum to the Soviet Union and the Cold War,” she says. “Visitors can go there and see the propaganda slogans still hanging on the walls and adorning buildings. They can get a feel for the way people lived in the USSR, and then they can compare this to the modern, vibrant life of today’s Kyiv. It is a rare chance for us to show the world how much Ukraine has changed.” Romanova’s message of post-Soviet transformation is particularly pertinent given the defensive indignation the HBO series has provoked inside neighboring Russia. While many Russian commentators have admitted that the show was startlingly accurate, stuffy official responses have served to highlight the difficulties modern Russia still has when forced to address

the grim realities of the Soviet past. As if to underline the point, the Kremlin has reportedly commissioned a rival TV series that will feature an imaginary CIA agent as the arch-villain of the plot, scheming to destroy the nuclear reactor at Chornobyl while blameless Soviet officials fight valiantly to save the day. This culture of denial is emphatically absent in contemporary Ukraine, where filming for the HBO series took place at a number of Kyiv locations with official blessing. In order to create the right impression on visitors, Romanova believes a major overhaul of Ukraine’s Chornobyl tourism infrastructure is necessary. During a recent trip to the exclusion zone as part of a regular tour group, the MP found herself waiting in line for several hours at checkpoints that she describes as being reminiscent of international border crossings. While continued security measures are an inevitable aspect of any expanded Chornobyl tourism industry, she would like to see the number of entry points expanded and radically improved in order make entry to the exclusion zone as convenient as possible. According to Romanova, much of the current infrastructure dates back to the 1990s and is long overdue an upgrade. She is currently working on plans to revamp the government’s approach to handling tourism flows in and out of the zone. Regulation of Chornobyl tourism service providers also requires attention, according to the MP. At present, just five tour operators have permits to take visitors into the Chornobyl exclusion zone. This is insufficient to handle anticipated increases in tourist numbers, with operators already finding themselves forced to turn away potential customers due to a lack of capacity. Meanwhile, there is a specific shortage of English-language tour guides with the requisite specialist knowledge to offer visitors an informative experience. The language issue is particularly relevant because the vast majority of Chornobyl tourists come from Western countries. Two-thirds of the 72,000 visitors in 2018 were foreigners, with the top ten nationalities being English, German, Dutch, Polish, Czech, American, Swedish, Slovak, French and Australian. This preponderance of Western visitors makes the Chornobyl site exceptional in today’s Ukraine, and means that any positive impressions created during visits will have a better chance of reaching strategically important audiences throughout the Western world. Romanova believes that if Chornobyl’s tourism potential is suitably developed, it could attract an additional one million visitors to Ukraine each year and generate in excess of USD 1 billion annually. The scope for further development is indeed huge. In addition to the site of the disaster and the abandoned ghost town Pripyat, the entire exclusion zone is now a unique nature reserve that offers a world of potential tourism opportunities, while discussions are already underway regarding the launch of river cruises. “It is a tourism magnet that we must make the most of,” says Romanova. “If it is handled correctly, it can become a big win for Ukraine’s economy and for the country’s international image.”

tourism About the interviewee: Anna Romanova is an MP and head of the Rada Subcommittee on Tourism Development and Resorts

www.bunews.com.ua

Cashing in on the road to Chornobyl

Photo essay: Dmitry Mossienko spends the morning watching a steady stream of international Chornobyl tourists flowing through an enterprising Ukrainian petrol station situated on the route from Kyiv to the exclusion zone Hollywood has a magic all of its own, and the recent smash hit HBO TV series “Chernobyl” has certainly given the world’s worst ever nuclear disaster the Hollywood treatment. Debate continues to swirl over the historical accuracy of this skillfully produced TV masterpiece, but there is no questioning the show’s ability to stir up emotions among global audiences. As any business guru will tell you, where there are

emotions, there is also money. The race is now on to see who can capitalize on the popularity of the HBO series and make a fortune from the international interest it has succeeded in generating. One enterprising filling station on the road to Chornobyl is already cashing in on the steady flow of tourists travelling up from Kyiv to the exclusion zone. The BRCM filling station in Novi Petrivtsy is a

tourism

www.bunews.com.ua

north from the Ukrainian capital, but its strategic position on the way to Chornobyl is fast turning it into an unlikely tourist Klondike. The popularity of this filling station offers a glimpse of the possibilities if the flow of Chornobyl tourists visiting Ukraine increases from a trickle to a flood. “Try to get here before eight o’clock if you can, because the first tourists will begin arriving soon after,” counsels Sergiy, the boss of the filling station in Novi Petrivtsi, when I tell him of my plan to observe the Chornobyl traffic as it passes through his little fiefdom. Following Sergiy’s advice, I arrive at 7:30am, just early enough to enjoy a brief period of tranquility and inspect the station. It boasts eight pumps offering two types of gasoline, diesel and LPG. All very convenient. As promised, the first minibuses taking visitors up to Chornobyl begin to arrive at eight o’clock. Tourists shuffle out of the vehicles and quickly gravitate towards the station’s generously proportioned minimarket. For most of the new arrivals, the top priority is a morning

www.bunews.com.ua

cup of coffee. The station staff are prepared and have everything in place. In fact, they have their coffee operation organized in a manner that could teach many downtown Kyiv cafés a thing or two. Imported coffee machines fizz and buzz, dispensing espressos, lattes and cappuccinos efficiently to the growing crowd of customers. One tall, grey-haired gentleman disembarks from a recently arrived minibus adorned with Chornobyl branding and quickly makes his way over to a specially designated smoking area set up by the station’s owners. He lights a cigarette with obvious pleasure and soaks up the already powerful rays of morning sunlight. I step closer in order to introduce myself, and his Scandinavian accent immediately gives him away as a visiting Swede. Carl, it transpires, is a nuclear scientist by profession. He remembers the Chornobyl disaster vividly and recounts how Swedish specialists first noticed abnormally high levels of radiation at their nuclear power plant in the days following the accident in Soviet Ukraine. “People who were visiting the plant were producing higher radiation readings than those who were leaving,” he says with a :

tourism

: typically well-organized and generously supplied stop-off on the route

: rather sad smile as the conversation takes him back thirty-three years

to that fateful spring of 1986. As we talk, Carl’s wife reemerges from the minimarket with a cup of coffee and his trip down memory lane ends abruptly. They return to their vehicle and prepare to head north. As Carl’s group pulls out of the station, a new minibus carrying a group of British tourists rolls up. I soon find myself in conversation with Tim from Birmingham. Like Carl, Tim is a nuclear technician, although his heavily tattooed sleeves are a reminder that he is from a younger generation to his Swedish counterpart. As Tim sips his morning coffee, we chat about nuclear power in the UK and he explains how the Brits are trying to strike a healthy balance between renewable and nuclear energy sources. Tim cannot conceal his excitement to be travelling up to Chornobyl, despite the fact that this will be his fifth trip. He is one of the relatively few who began coming to Chornobyl long before HBO’s hit series made it a fashionable destination. Nevertheless, this is the first time his journey has involved a stop at this particular filling station. He says the range of services on offer comes as a pleasant surprise, and positively raves about the quality of his morning brew. Coffee is far from the only item in demand. Tour groups swarm through the minimarket stocking up on soft drinks, cans of beer and all manner of snacks as they replenish their supplies in preparation for the trip ahead. This is obviously part of the daily routine at the filling station. At one point during the morning rush, a large delivery truck takes advantage of a brief pause to slide up close to the minimarket and begin unpacking fresh stocks. Within a few minutes of well-rehearsed unloading, they have refilled the minimarket fridges and shelves. Meanwhile, some tour groups are attracted to the bottles of Italian red wine on sale. As every experienced Chornobyl visitor knows, a glass of red wine is highly recommended after exposure to radiation. A debate breaks out over the authenticity of the merchandise, as if a Ukrainian filling station has no business stocking quality Italian wines. I intervene to set their minds at rest. The brand in question has its own wineries in Tuscany, I assure them, and the quality of the wines is not in any doubt. Indeed, it is just what the doctor ordered. As we approach nine o’clock, the early morning tourist traffic shows no signs of abating. I take a step back to observe the filling station in operation. It functions like a well-oiled machine, with no crowding or chaos despite the constant pressure of new arrivals and relatively large parties. There is a sense that the station management has anticipated everything in advance, despite the relative novelty factor of so many tour groups from Western Europe and beyond. www.bunews.com.ua

tourism

“As more and more tourists visit Ukraine to see Chornobyl for themselves, clever businesses that cater to this growing demand appear doomed to succeed” The minimarket even has a fledgling souvenir section specifically for Chornobyl tourists. There are copies of Maria Koshevaya’s “This is Chernobyl” book, T-shirts bearing Chornobyl branding and radioactive symbols, and an array of Chornobyl-themed mugs. This selection will surely grow in the coming months as the tourism industry around Chornobyl evolves. For the time being, visitors can at least secure a memento to go with their inevitable selfie sessions inside the exclusion zone and at ground zero of the disaster itself. With the arrival of mid-morning, the tourist traffic finally recedes. Minimarket employee Olya treats me to an excellent latte and the life of this particular filling station returns to normal. As I survey the newly sedate scene around me, I reflect on the impact Chornobyl tourism is already having on businesses touched by this growing industry. The impact of the HBO TV series has thrust one of modern Ukraine’s darkest chapters back into the limelight and generated huge international interest in everything relating to Chornobyl. As more and more tourists come to Ukraine to see the site of the catastrophe for themselves, clever businesses like this filling station that cater to this growing demand appear doomed to succeed.

About the author: Dmitry Mossienko is editor-in-chief and co-publisher of OILMARKET magazine (photo by Yum Garmanchuk)

WEST UKRAINE’S LIFESTYLE GUIDE №122/April 2019

MEET SOFIA STEFANOVSK A SMART, STRONG & BEAUTIFUL

TIME TO CELEBRATE!

HAPPY EASTER AND SPECTACULAR CITY DAY!

The best of Lviv since 2008 WANT TO KNOW MORE? FOLLOW US ON: www.lvivtoday.com.ua www.facebook.com/LvivToday

AmCham Ukraine Annual American Independence Day Picnic 2019 The American Chamber of Commerce in Ukraine celebrated the Fourth of July by hosting the most awaited summer event â&#x20AC;&#x201C; 28th Annual American Independence Day Picnic on July 6 at the Kyiv International School. More than 4000 guests experienced cool entertainment, participated in contests, tried their luck in drawing of fabulous gifts and tasted truly American food inspired by famous U.S. Route 66, like California potato slices, Arizona burgers, New Mexico fajitas, Kansas corn and Illinois hot dogs. AmCham Ukraine Picnic 2019 was fun for all ages â&#x20AC;&#x201C; kids play areas, cowboy western dance masterclasses, lasso show, paper airplanes competition, sack race, exciting financial academy and stunning photo zones. Guests enjoyed great live music by DuckandCover band which consists of talented employees of the U.S. Embassy in Kyiv, Alloise, Fireplace, DJ-sets and awesome performance by Druha Rika as a headliner.

AmCham Ukraine Annual American Independence Day Picnic 2019

Zelenskyy Starts Off on the Right Foot with the Business Community By Andy Hunder, President of the American Chamber of Commerce in Ukraine, Treasurer of AmChams in Europe

“I obviously mistook the dress code,” confessed Viacheslav Klymov standing tieless onstage where Ukraine’s president sat clad in his Sundaybest in Kyiv, Ukraine, on June 20. The newly-elected president replied to the head of the Union of Ukrainian Entrepreneurs not to fret and instantly removed his own tie in front of the audience of seven hundred business leaders. As the president next welcomed me on stage, I inquired whether I should also detach my neckwear. President Volodymyr Zelenskyy teasingly replied: “It’s OK. Your tie is green.” Zeleny in Ukrainian means green. It was the color of the extremely successful election campaign that brought the new president to power one month ago with a whopping 73 percent of the vote. During his first month in office, Zelenskyy is already showing that things will be done differently in Ukraine. At the meeting with international and local investors and businessmen, the president promised that under his leadership Ukrainian authorities will not stand in the way of business. The president announced that he will cut red tape and immediately abolished 161 archaic business regulation directives. One such obsolete decree, for example, prohibited the manufacturing of school uniforms us-

ing foreign produced textiles. He promised that the muscular Security Service of Ukraine (SBU) will focus on upholding state security, instead of shaking down businessmen and soliciting bribes, as it has been accused of doing in the past. Zelenskyy pledged that Ukraine will move into the top ten on the World Bank’s Ease of Doing Business index in the next five years. The annual report ranks countries according to their regulations on businesses and protections of property rights. In 2019, Ukraine ranked 71st out of 190 countries. The president vowed to continue working with the International Monetary Fund, reassuring investors that Ukraine defaulting on its international borrowing is not an option. Zelenskyy added that the state will provide the infrastructure allowing businesses to flourish and will focus on investment in education and technology. He stated that his team will eradicate corruption in the courts, starting with the launch of the Anticorruption Court and pushing through much needed judicial reform. Many in Ukraine and around the world still do not know what to expect from Zelenskyy, since he ran an opaque campaign and is new to politics. But at the meeting with the business community, he came across as down-to-earth, affable, and sharp-witted. The former TV star comedian, unsurprisingly, is a good communica-

tor, hitting the right messages that the audience wanted to hear. He has a lot on his plate. Various estimates show that around forty percent of Ukraine’s economy is in the shadow, with endemic tax evasion. By implementing proper tax collection, it shouldn’t be too difficult to boost state coffers with billions of dollars of uncollected revenues. During the three-hour meeting, Zelenskyy took questions and heard about the challenges businesses face. Many lamented the widespread smuggling of goods, blaming customs authorities of being sluggish and unable, or unwilling, to fight contraband and wage war on the smugglers that are depriving the government of much-needed revenues. For years, the American Chamber of Commerce has been advocating to make Ukraine an outstanding place to do business. The essential basics required include a host of predictable factors, such as rule of law; macroeconomic economic growth; a fair, predictable, and transparent tax policy; secure investment rights, especially proper enforcement of intellectual property rights; land reform; infrastructure investment; and state-owned enterprise reform and privatization. Three other important to dos are reducing the outflow of talent migrating abroad; increasing spending on healthcare, and fully liberalizing the energy market. So far, Zelenskyy seems to embrace our agenda. Halfway through the meeting, the head of the Presidential Administration passed a handwritten note to his boss onstage. A massive smile appeared on the president’s face when he read it. The note said that Ukraine’s constitutional court had just ruled that parliamentary elections can be held early, on July 21, as Zelenskyy and his team wanted. Zelenskyy’s Servant of the People party is currently polling at about fifty percent. It is expected to form a significant part of the new parliament and government. The president and his team are likely to end up with a lot of power and, subsequently, a chance to implement much-needed reforms. The majority of business leaders that I spoke with after the meeting were upbeat about what they had heard. However, there are no illusions that the job ahead will be simple. The hard part begins now, and Zelenskyy must deliver on the promises made. Source: Atlantic Council

MEETING WITH U.S. SENATOR ROBERT PORTMAN Ukraine’s macroeconomic situation, IMF cooperation, current status of Ukraine’s reform agenda, energy independence – key focuses of the high-profile meeting, organized jointly with U.S.-Ukraine Business Council. President of the American Chamber of Commerce in Ukraine Andy Hunder, AmCham Ukraine Board of Directors’ Members Alexander McWhorter, Citibank, Sergey Yanchyshyn, Oracle, and Andriy Tsymbal, KPMG, together with Dale W. Perry, ERU Corporation, delivered the voice of Chamber Members, highlighting TOP-3 strategic priorities pivotal for business – macroeconomic stability, cooperation with the IMF and rule of law.

MEETING WITH THE PRESIDENT OF UKRAINE VOLODYMYR ZELENSKYY “Taking care about companies, operating on the ground in Ukraine, and attracting Foreign Direct Investment should be #1 priority for the President of Ukraine”, Andy Hunder, President of the American Chamber of Commerce in Ukraine, delivered the voice of business at the meeting with the President of Ukraine Volodymyr Zelenskyy on June 20. Over 700 businessmen attended the meeting. Andy Hunder voiced 10 strategic steps for Ukraine’s economic growth, namely – ensure rule of law, macroeconomic stability and continue cooperation with the IMF, guarantee fair, predictable and transparent tax policy and decrease shadow economy, secure investment, including proper IPR enforcement, and launch land reform, develop vital infrastructure, reform state-owned enterprises’ sector and launch transparent privatization, reduce outflow of talents abroad, increase governmental spending on value-based healthcare significantly and enhance food safety, drive Ukraine’s energy independence with a fully liberalized energy market.

MEETING WITH THE PRESIDENT OF UKRAINE VOLODYMYR ZELENSKYY

CHAMBER MEMBER TOUR: SIGMA SOFTWARE Nordic Traditions, Ukrainian Spirit, Superior Software â&#x20AC;&#x201C; AmCham Ukraine Members had an exciting Member Tour to Sigma Software Group office. The company provides cutting-edge technology solutions and consulting within IT. Valery Krasovsky and Irina Shimko shared the success story of growing from a small Kharkiv-based company to a global IT consultancy with over 1000 specialists and offices in 14 cities and 5 countries.

Jazz Me Up Networking Cocktail As Herbie Hancock, American musician once said: â&#x20AC;&#x153;Jazz is about being in the momentâ&#x20AC;?. Every summer, Lviv becomes a Jazz capital of Ukraine and a place-to-be for all music lovers. AmCham Ukraine Members, partners and friends had a great opportunity to enjoy the wonderful atmosphere of the venue, breathtaking Lviv rooftop view, tasty cocktails, modern interpretation of jazz music and networking. PREMIUM SPONSOR

B2G Dialogue MEETING WITH OLEKSANDR VLASOV, ACTING HEAD OF THE STATE FISCAL SERVICE OF UKRAINE AmCham Ukraine Members met with the leadership of the State Fiscal Service to discuss peculiarities of the recently launched operation “Bastion” aimed at combating illegal movement of goods across Ukraine’s customs border, further steps to counteract smuggling as well as cooperation between business community and the State Fiscal Service.

MEETING WITH ROMAN TRUBA, DIRECTOR OF THE STATE BUREAU OF INVESTIGATIONS AmCham Ukraine leadership discussed possible areas of cooperation with representatives of the State Bureau of Investigations. Roman Truba emphasized that the Bureau’s main objective is to combat the systemic offences committed by senior state officials, judges and law enforcement officers without affecting business.

MEETING WITH IVAN BAKANOV, HEAD OF THE SECURITY SERVICE OF UKRAINE Cyber security, fighting shadow economy in different sectors, counteracting smuggling, IPR enforcement are on the top of the agenda – AmCham Ukraine together with other representatives of the business community met with Ivan Bakanov to discuss current issues and strengthen further cooperation. MEETING AT THE SITUATION CENTER FOR ENSURING CYBER SECURITY OF THE SECURITY SERVICE OF UKRAINE Protection of the state interests in cyber space, combating cyber terrorism and cyber espionage, counteracting cybernetic threats, responding to cyber incidents in the field of state security, ensuring cyber hygiene – key topics discussed during AmCham Ukraine meeting at the Situation Center for Ensuring Cyber security of the Security Service of Ukraine. MEETING WITH JUDGES OF THE CASSATION ADMINISTRATIVE COURT WITHIN THE SUPREME COURT AmCham Ukraine Members discussed current judicial practice within tax and customs spheres with Raisa Khanova, Secretary of Judicial Chamber on Disputes on Taxes, Duties and Other Mandatory Payments of the Administrative Cassation Court and Igor Olender, Judge of the Cassation Administrative Court.

B2G Dialogue ROUND TABLE ON COMPETITION UNDER THE NEW ELECTRICITY MARKET AmCham Ukraine Energy Committee Members had a productive discussion on the conditions for competition under the new electricity market. The importance of electricity cross-border trade, electricity import via “Burshtyn Energy Island”, possible technical and regulatory challenges, the necessity of joint efforts of authorities and the transmission system operator – key focuses of the event.

AGRICULTURAL COMMITTEE MEETING WITH THE LEADERSHIP OF UKRZALIZNYTSYA Ensuring smooth and uninterrupted export of grain cargoes is one of the highest priorities for AmCham Ukraine. The Chamber Agricultural Committee Members met with Andrey Ryazantsev, Business Development Director of Ukrzaliznytsya, to discuss plans of Ukrzaliznytsya for the new agricultural season, tariff system for cargo transportations, mechanism of distribution of wagons and locomotives between Ukrzaliznytsya customers and low-density stations.

MEETING WITH MINISTRY OF HEALTH AND NATIONAL HEALTH SERVICE REPRESENTATIVES ON REIMBURSEMENT OF MEDICINAL PRODUCTS AmCham Ukraine Healthcare Committee Members discussed implementation of new regulation for holding internal reverse auctions and formation of the Register of Medicinal Products subject to reimbursement.

PHARMA TALKS SESSION “ACCESS TO TREATMENT – PATIENTS VIEW” Participants discussed the challenges of decisionmaking process, transparency in managing patient’s organization, improvement of governance, regulations and investment climate as the tools for better access to treatments.

WELDI BUSINESS BREAKFAST “WOMEN AT THE HELM: THE SUBTLE ART OF MANAGING MONEY” “Give a woman a dollar, and she can put it to good use. Teach her about how money really works, and she can change the world”, said Linda Davis Taylor, CEO and chairman of Clifford Swan Investment Counselors. Investing and managing financial resources is a subtle art, no matter we are talking about business, investment itself, macrofinancing or government spending. During the WELDI Business Breakfast participants had a chance to discover the secret of managing money by outstanding women leaders and real financial gurus – Oksana Markarova, Minister of Finance of Ukraine; Satu Kahkonen, Country Director for Belarus, Moldova, and Ukraine of The World Bank; Olena Voloshyna, Head of the International Finance Corporation in Ukraine; Saida Djarbolova, CEO and Chairwoman of the Management Board of ING Bank Ukraine. PREMIUM SPONSOR

PARTNER

WELDI BUSINESS BREAKFAST “KNOWING YOUR VALUE” Love what you do, believe in yourself and learn every day – that’s how the leaders grow and break gender stereotypes. During the WELDI session, participants had a productive discussion on perception of woman in business as well as gender gap problem. PREMIUM SPONSOR

PARTNER

Speakers: Kira Rudik, AmCham Ukraine Board of Directors Member, CEO of Ring Ukraine, one of the TOP-33 Ukraine’s best managers according to Focus magazine, and Inna Volosevych, Deputy Director of Info Sapiens.

World Blood Donor Day Donating blood is an easy way to help people and save lives. On the eve of the World Blood Donor Day, AmCham Ukraine gathered people who really care and came to donate blood for Kyivâ&#x20AC;&#x2122;s local hospitals. A lot of socially responsible business representatives and citizens joined our initiative and became donors. This time over 20 liters of blood were gathered. SPONSORED WITH LOVE BY

PARTNERS KYIV

The “Bar on 8” terrace at Kyiv’s Hyatt Regency Hotel offers splendid views of St. Sophia Square in the ancient heart of the Ukrainian capital 52

lifestyle

Eastern Europeâ&#x20AC;&#x2122;s Culinary Capital

Beyond the borsch: Kyivâ&#x20AC;&#x2122;s vibrant and increasingly inventive dining out scene is helping the Ukrainian capital gain a reputation as the most exciting gastronomic destination in the entire region :

www.bunews.com.ua

: As Kyiv’s international profile continues to

rise, the impressive dining out scene in the Ukrainian capital is starting to receive the kind of recognition it deserves. Whereas tourism articles about the city once limited their gastronomic commentaries to descriptions of salo, borsch and other traditional staples of Ukrainian cuisine, travel writers now routinely gush over everything from the eclectic range of venues on offer, to the stylish interiors and slick dish presentation that are now commonplace in Kyiv restaurants. This enthusiasm is hardly surprising. The Kyiv restaurant industry has undergone a comprehensive upgrade in recent years, marking a generational shift away from the garish ostentation of the postSoviet era as Ukraine’s biggest city has embraced its New Europe credentials in the wake of the 2014 Revolution of Dignity. Today’s vibrant Kyiv restaurant industry is a long way away from the limited dining out options on offer during the early years of independence. Throughout the 1990s, the Ukrainian capital boasted only a handful of plausible venues, most of which were well beyond the budgets of all but the wealthy few. Restaurant interiors often reflected this elitism, with an excess of palatial flourishes and gold trimmings seemingly designed to overawe diners. Despite the high price tag, service standards were often comically bad, with inattentive waiters and a lack of customer care the rule

rather than the exception. These modest beginnings make today’s world-beating scene all the more impressive. Indeed, the recent reinvention of Kyiv’s restaurant sector reflects the dramatic changes taking place in Ukrainian society as a whole. As Chairman of The Ukrainian Connoisseurs Club (TUCC), British expat and longtime Kyiv resident Terry Pickard has observed the transformation of the city’s restaurant industry up close. He has been organizing regular TUCC dinners at top Kyiv restaurants for almost two decades and says the changes he has witnessed are little short of remarkable. “When TUCC first began rating restaurants seventeen years ago, there were probably only half a dozen that could be considered good quality. Now there are well over fifty,” he reflects. Pickard identifies three key factors behind the improvements in Kyiv’s dining out options: better service, greater culinary diversity, and the emergence of a new generation of Ukrainian chefs with the skills and creative confidence to complete on equal terms with their international peers. “It is no longer imperative for a Kyiv restaurant to hire a foreign chef in order to be successful. Many of TUCC’s mostly highly-rated venues have excellent Ukrainian chefs instead,” he observes. “The standard of waiting staff has also improved tremendously. They now typically receive training and obviously take pride in their profession. Ladies are

served first, etiquette rules are followed, and it is quite amazing how many service personnel have good English-language skills.” This has resulted in a restaurant scene that offers excellent quality at highly competitive rates. “You can enjoy a superb dining out experience in today’s Kyiv and it will only cost you half the price of London,” says Pickard. Fellow Brit Sam Kearley is also a veteran of the Kyiv dining out scene. As co-founder of The Big Meet social community, for the past few years he has regularly hosted networking evenings at many of the newest venues to open in the Ukrainian capital. Kearley says one of the most striking improvements has been the increasing diversity of the city’s restaurant selection. “While there was no shortage of good dining out venues five years ago, today there is a positive abundance of world-class restaurants in Kyiv. Whether you are in the mood for some national Ukrainian cuisine with a fusion twist, seafood fresh from Nordic waters, or aged steaks, the city now has most bases covered.” Kearley also points to the positive contribution made by expatriate restaurateurs, who he credits with adding to the dining diversity of the Ukrainian capital by opening up new venues offering oriental menus. “While Ukrainians are not typically fans of spicy food, many of the restaurants opened by expats have become clear favorites among the international community in Kyiv,” he notes.

The Bassano Dolceteka terrace at the Toronto-Kyiv complex opposite Kyiv’s St. Nicholas Roman Catholic Cathedral

lifestyle

Guide to Kyiv restaurant scene proves big hit for French author

Maud Joseph’s labor of love is now in third edition and growing as Kyiv dining out options expand When Paris native Maud Joseph first unveiled her English-language guide to Kyiv restaurants in summer 2016, she could not have guessed that she would be presenting second and third editions within the space of just a few years. The French connoisseur now says the speed of these updates is testament to the impressive growth of the Kyiv dining out scene. The latest edition of The Pink Guide: Best Kyiv Restaurants went on sale in early summer in the Ukrainian capital. It profiles 130 venues, a more than threefold increase on the 40 restaurants included in the original guide. Meanwhile, the print run of 2,000 copies is double the number published when the second edition came out in July 2017. The guide features striking photos of venue interiors and flagship dishes along with snappy texts based on Maud’s incognito personal visits to each separate restaurant. Venues appear thematically in categories indicating their suitability for everything from breakfasts, business lunches and romantic dinners, to just having a coffee or grabbing some takeaway. Maud explains that she first got the idea to produce an English-language Kyiv restaurant guide after becoming something of an informal restaurant critic among her circle of friends and acquaintances within Ukraine’s French community. Following her arrival in Kyiv together with her husband in 2013, the Parisian soon became a regular visitor to the city’s restaurants and began sharing her impressions socially. It was only a matter of time before she combined her passion for dining out in the Ukrainian capital with her professional background in the communications industry to produce the first guide. It has since become a small publishing business, with the latest edition available in bookstores across the country as well as Kyiv outlets such as gastronomic emporium Good Wine. The author is predictably enthusiastic about the quality of Kyiv’s restaurant inwww.bunews.com.ua

About the interviewee: Maud Joseph is the author and publisher of The Pink Guide: Best Restaurants Kyiv dustry and says she has witnessed significant improvements over the past six years. “There has been a new vibe to the scene ever since the (2014) Revolution of Dignity,” she shares. “Kyiv is becoming a real hipster city with new venues opening all the time. There is now evidence of attention to detail in everything from levels of service to the presentation of individual dishes. Interiors of new restaurants often look like they’ve come straight from the pages of a top international design magazine.” Since she began covering the Kyiv restaurant scene, Maud has identified a number of trends within the industry. During her early days in the Ukrainian capital, everyone appeared to be opening Georgian restaurants. This seemingly inexhaustible appetite for

Caucasian cuisine has now given way to a new wave of Asian restaurant openings, with Chinese and Vietnamese-themed venues currently the most popular. Restaurant culture itself has also become more glamorous, she says, with Kyiv venues now particularly eager to talk about their chefs, who have become celebrities in their own right. Maud hopes her guide can help foreign visitors get more out of their time in Ukraine, and believes the thriving Kyiv restaurant industry is a great advert for the country as a whole. “Most people would not necessarily expect to encounter such high-quality venues in Ukraine and are pleasantly surprised,” she shares. ‘The impression these restaurants create is of a young, dynamic, festive and creative country.” 55

Ukrainian healthcare reform pits public against politicians Ukraine’s radical healthcare reform drive has met with stiff political opposition but opinion surveys indicate high levels of public approval for the key changes so far identifying and selecting a family doctor. For example, in October 2016, only 55 percent of Ukrainians knew their family doctor. Following passage of the new healthcare law in the autumn of 2017, the number rose to 66 percent by late 2018, and increased to 81 percent by March 2019.

Service Satisfaction

About the author: Michael Getto is an electoral and public policy consultant who administered democracy and governance reform programming in Ukraine and other former Soviet republics for 16 years Ukraine’s healthcare reform process has been among the most hotly debated issues of the past few years. Political criticism has been particularly vocal, but the available public opinion poll data suggests that the changes introduced since 2016 may be working far better than opponents of reform would like to admit.

Family Doctors

One of the core principles of Ukraine’s new healthcare system is the idea of family doctors serving as primary care physicians. Patients sign declarations with the family doctor of their choice who they can replace at any time. The National Health Service of Ukraine (NHSU) pays family doctors for the patients they sign up, and each doctor may have up to 2,000 patients. Government money follows the patient to the doctor of their choice. Since April 2018 when declarations began, more than 27.8 million Ukrainians have signed up with the family doctor of their choice. Polling shows 78 percent of Ukrainians saying they have concluded declarations with their family doctor, according to March 2019 research conducted by the Kyiv International Institute of Sociology (KIIS). Polling shows a steady increase of patients 56

While family doctors are primary care physicians under the new healthcare system, it is important to know if patients are satisfied with the service they are receiving. Research results are positive and show strong patient satisfaction with their family doctors. In March 2019, satisfaction with family doctors was at 70 percent, which takes into account the 27.8 million citizens to have selected their family doctor. Meanwhile, dissatisfaction had dropped by half since autumn 2018 and fell to single digit percentages.

Free Medicine

The Available Medicines Program provides free or low cost medicines to patients with chronic conditions including asthma, diabetes II and cardiovascular disease. Around 240 medicines, produced by almost 50 companies including Ukrainian firms and companies from 12 foreign countries, are available via the program. Patients go to a participating pharmacy with their doctor’s prescription and pharmacists provide patients with the available free or low cost medicine. The NHSU then reimburses the pharmacy. Data from both the Ministry of Health and survey research reveals that about 20 percent of the population regularly uses this program. While initial surveys showed more than 90 percent approval of the new program (who does not like free medicine?), are patients satisfied with the specific components of the program? This requires a deeper research dig to test satisfaction with the choices of available medicine, quality of medicine, and

overall public perception. The majority of participating patients are satisfied with key components of the program and 63 percent believe it is successful, according to KIIS research conducted earlier this year. Satisfaction with the quality of available medicines is also on the rise, increasing from 50 percent (Rating Group survey, October 2018), to 66 percent according to KIIS data collected in March 2019.

International Procurement

To curtail corruption and ensure sufficient inventories of medicines, Ukraine established a transparent procurement competition for international organizations. Three organizations passed through this open and competitive process. These were the United Nations Development Program, the United Nations Children’s Fund (UNICEF), and Crown Agents. These organizations now strategically purchase the required medicines in bulk, resulting in cost savings of more than USD 55 million over a period of three years. This initiative saves money while working to reduce opportunities for corruption, making it a frequent target of attacks from business interests and politicians, many of whom stand accused of benefiting from rigged tenders prior to the program’s implementation. Consequently, public perception was initially skeptical over the program’s success. Over time, however, the public is beginning to see positive results, while the Ministry of Health has improved its public information engagement. In June 2018, research by the Rating Group found that only 26 percent of the Ukrainian public believed the program was successful versus 52 percent who believed it was a failure. That sentiment has changed to a slight plurality in March 2019, according to KIIS research, with 44 percent believing the program successful against 42 percent who still feel it is not working.

Under the previous healthcare system, average salaries for Ukrainian doctors were USD 180 per month. Despite the Ukrainian Constitution guaranteeing free medical services for all, this low compensation forced patients and doctors to resort to an informal system of bribes and gifts in order to receive so-called “free medical services”. Under the new system, the NHSU pays directly to the family doctor of the patient’s choice. Sums are higher for the elderly and families with children, with lower budget allocation for young adults who generally require less medical care. As a result, family doctor salaries have doubled and in some cases quadrupled under the new program. In addition, patients now know that cash bribes and gifts are no longer required in order to receive medical services. This is a key reason why family doctor satisfaction with the new system is at more than 70 percent. Research indicates that cash bribes for medical treatment have declined since October 2016. At that time, one in four patients admitted to paying cash for medical services. As there is a certain element of shame in admitting to paying cash bribes, it is reasonable to assume that graft levels were almost certainly higher. Anti-corruption messages from Acting Health Minister Suprun and her team at the ministry may also have contributed to a decline in cash bribes, with the percentage of bribe payers declining to 20 percent of those surveyed in July 2017, according to research conducted by the Rating Group. With the launch of the family doctor program introducing payment of services through the NHSU, cash bribes declined further still, falling to just seven percent, according to subsequent Rating Group research carried out in October of 2018. Cash bribe payments appear to be holding steady within the statistical margin of error according to a March 2019 survey by KIIS that put the figure at 9%. The practice of giving gifts for medical services has also declined. Since tracking began in June 2018, the percentage of patients who provided gifts to their doctors declined from 27 percent (more than one in four patients according to the Rating Group) to between 14-17 percent, according to the Rating Group in October of 2018 and KIIS in March 2019.

Organ Transplants

After years of debate and months of fighting myths about organ transplantation, the Ministry of Health persuaded the Ukrainian www.bunews.com.ua

opinion

Curing Corruption

parliament to approve a law allowing organ transplants in Ukraine. As a result, public opinion has changed favorably toward voluntary donation of organs for transplant. Initially there was plurality approval, according to a study by the Rating Group in October of 2016. That improved to a solid 63 percent majority by July 2017

Unclear Prospects

The transformation of Ukraine’s healthcare system since 2016 has been challenging

and often controversial, but as former US President John Adams once said, “facts are stubborn things”. In the case of Ukrainian healthcare, the available polling data clearly indicates that the Ukrainian people are responding positively to their new healthcare system. However, this does not mean that political opposition will end. Indeed, with the advent of the Zelenskyy presidency and a new parliament on the horizon, the future of Ukraine’s healthcare reforms remains far from clear. 57

Apartment Renovations in

Kyiv’s Historical Buildings Older Ukrainian properties can offer investors a potentially attractive return if skillfully upgraded Thousands of older apartments in central Kyiv have yet to undergo modern renovation. This has created a deficit of high-quality rental housing in Kyiv’s historical downtown despite rising demand for such properties and attractive current yields for investors. How can we explain this? If you ask a Ukrainian for his or her thoughts about buying and renovating one of these older apartments, you will typically hear a litany of reasons why this is a terrible idea. One of the most common arguments is that renovating apartments can be an expensive hassle fraught with risk. Such fears are widespread but are they reasonable? Should you be wary of buying an apartment in one of Kyiv’s historical buildings and tackling renovation work? This article will discuss the various reasons to buy or not to buy an apartment in Kyiv’s historical buildings. It will look at the real and imagined risks of renovating one of these apartments, before addressing how to manage such risks in order to earn an attractive return on your investment.

To Buy or Not To Buy

There are a number of reasons to buy an apartment in an older Kyiv building rather than in a new building. Older apartments usually have prime locations that offer the convenience of urban living to those who appreciate walkable and centrally located neighborhoods. Older flats typically feature solid construction and much better sound insulation, along with more spacious layouts and higher ceilings than flats in new buildings. When well renovated, apartments in historical buildings can also compete with standard rents in some of the nicest new buildings in Kyiv. However, most apartments in luxury buildings are not available for rent from their Ukrainian owners. These new properties also usually provide much lower yields for investors due to higher purchase prices. For both practical and cultural reasons, Ukrainians with the necessary financial means generally choose not to live in apartments in older buildings. One reason is a strong emotional desire to flee the perceived shabbiness Ukraine’s Soviet past. Kyiv’s historical buildings can often have rundown communal areas such as staircases and hallways. Local buyers will also frequently tell you that Kyiv’s center is “loud and polluted”. They will cite the lack of access to large supermarkets and other services, and the shortage of secure

parking. Indeed, while city planners in many European cities are creating initiatives towards car-less futures, Ukrainians with money still prefer to drive everywhere if they possibly can. They rarely choose to walk and almost never use public transportation. While living in renovated apartments in older downtown buildings may not be the lifestyle choice of many affluent Ukrainians, there is widespread recognition that foreigners with generous housing budgets are willing to pay top dollar to live in such rental apartments. So why are more Ukrainians not buying and renovating apartments in older buildings as investment properties? Why are thousands of apartments in Kyiv’s historical downtown still waiting for renovation? Part of the problem is the perception that such undertakings can easily get out of hand and run dramatically over budget.

Realistic Risk Evaluation

In addition to a lack of special tax incentives to renovate historical buildings, many in Ukraine are afraid of the perceived expense and risks associated with renovating an apartment in an older building. Yet to those with practical experience, most of the risks of renovating older apartments in Kyiv are no secret. In reality, competent contractors and engineers who have experience working with historical buildings do not find the solutions to these problems particularly challenging. If you choose to renovate one of these apartments, a good contractor will know exactly what to do in most situations. For example, he and his team will probably replace the floor beams, pipes, heating, and electrical wiring. In some cases, in order to improve the structural integrity of your apartment, you may need to reinforce load-bearing walls and the floor above your apartment. While this may sound like a major undertaking, in Kyiv using steel beams provides very solid support and costs only a fraction of what it would in most Western countries. For example, one Kyiv apartment owner recently installed beams to support a load-bearing wall in the apartment above, and the cost was less than USD 2,000. An American engineer examining this work said it would have cost USD 12,000 to USD 14,000 in the US to do the same job. Of course, none of this obviates the need to perform proper due diligence of the building before you buy. You will want to check that the water pressure is adequate (especially when buying top floor apartments), and that the building has sufficient electrical load capacity for modern appliances. Even though there are also engineering solutions that can increase water pressure and electrical load capacity, it is best to know as much as possible about these issues prior to buying your apartment.

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

Buying and renovating an apartment in one of Kyiv’s older buildings offers clear-eyed investors opportunities to benefit both from the negative perceptions of local buyers who are spurning such properties, and from the comparatively lower costs in Ukraine versus Western countries. For example, the cost to purchase a larger fixer-upper apartment in Kyiv could be as low as USD 1200 – USD 1400 per square meter plus a further USD 1000 per square meter to introduce European-level design, appliances, and furniture. These prices are far lower than you would pay for a similar renovation project in a Western European capital. It is helpful to keep in mind the costs of buying and renovating versus buying an already-renovated historical apartment in Kyiv. While buying plus renovating in Kyiv could cost you USD 2200 to USD 2400 per square meter, buying an already-renovated apartment could cost you USD 3000 or more per square meter. It is also highly probable that you and your prospective tenants will not like the design of this apartment and will need to spend more money in order to change it. Nor can you be sure that the necessary infrastructure works are reliable.

The Human Factor

While the engineering challenges of renovating an apartment in Kyiv’s historical buildings are obvious and manageable, the human factor still comes into play. Firstly, you need to find a trustworthy and competent contractor with the necessary technical expertise and experience of renovating similar properties. In addition to having the technical ability, this contractor must also have the resources to handle the scale of your renovation project. A lack of www.bunews.com.ua

labor could lead to significant delays. If you buy the right property in a good location and renovate it to suit the style and tastes of premium international tenants, then the payback period on your property investment could theoretically be as short as eight years. However, if you opt to use a contractor who does not have the necessary team in place, it could take him a year or more to complete your renovation. This would significantly lengthen your payback period. The cost of building materials, equipment and furniture can also materially affect your investment return. If you choose to cooperate with a small-scale contractor who does not have a number of parallel projects underway, you might find yourself paying retail price for materials instead of benefiting from the economies of scale offered by a larger contractor with higher purchasing volumes who enjoys wholesale discounts from good suppliers.

Beyond the Conservative Consensus

For many people, buying real estate can be a highly emotional experience. When it comes to the prospect of buying and renovating one of Kyiv’s older apartments, the fear of the unknown can be overwhelming for most local buyers, who usually choose the easier route of buying property in a new building. While not always devoid of their own biases, professional investors are often much better than the public at looking beyond conventional wisdom and making purely numbers-driven decisions. Groupthink can be slow to change anywhere in the world, and today in Kyiv it can be a friend to savvy property investors who are willing to do their homework and ditch their fears. 59

Ukraine’s IT industry needs the soft skills to make the most of its world-class talent American tech entrepreneur John Sung Kim wants to help Ukraine’s IT sector reach the next level “Some of the greatest Ukrainian patriots aren’t even Ukrainian,” the eminently quotable public intellectual Yevhen Hlibovotsky is fond of saying. While he did not have had John Sung Kim in mind, he might have. Kim, forty-five, is a wealthy Korean-American entrepreneur who built and sold two companies (one IPO, one cash sale) in Silicon Valley before moving to Kyiv in 2016. He is also an evangelist for Ukraine’s tech scene. Kim is dead set on changing Ukraine by teaching engineers and entrepreneurs how to attract venture capital and build world-class startups of their own. However, that is not all. He also wants to change the country’s mentality. That means helping people in the tech sector move beyond the short-term time horizons he currently sees everywhere, and towards longer-term, big-picture thinking. When he can convince top talent to take a lower salary combined with equity in a company instead of just more cash, that will be a game changer for the country, he says.

World-Class Talent

There is certainly no shortage of raw tech talent in Ukraine. “The top three percent of talent in Ukraine is world-class,” Kim says over coffee in Kyiv. He is convinced the country’s top IT engineers are good enough to work at Google and Facebook, and the second layer is outstanding, but with one caveat: “They lack soft skills.” Kim has three things in mind when he talks about soft skills: business-level English, mannerisms and mentality, and work ethic. Plenty of Ukrainian IT engineers speak English well enough, but most lack the right mannerisms and mentality, and their work ethic often stinks. Kim has been living in Kyiv for nearly three years now, and he knows what he is talking about when it comes to the country’s tech scene. He spends around 90 percent of his time recruiting IT engineers for his company, JetBridge, a managed outsourcing and outstaffing company based in the Ukrainian capital. One of the ways Kim measures the time horizons of his recruits is through what he calls the “bread today, steak tomorrow” exercise. He asks interviewees if they could have the option of bread today or steak tomorrow, which would they choose? In other words, “Would you like stock options in this company or an additional USD 500 per month with no equity?”

Based on Kim’s experience, people in the eastern parts of Ukraine tend to want the bread now because they do not trust that the company will be there tomorrow. In western Ukraine, people are more inclined to say steak. Neither is necessarily the right answer. “In Silicon Valley, the mentality is ‘Keep the bread, keep the steak. In a month, I want the steak restaurant,’” Kim says. Such thinking represents a radical shift for today’s emerging generation of Ukrainian tech professionals, but he is sure that once engineers start asking for equity in a company, Ukraine will massively change. Once they become owners, engineers will have a stake in the product, and that will affect their work ethic. Short-term thinking is not the only challenge Kim faces. The IT talent he talks to does not typically prepare for meetings, with most trying to take notes on their phones, if they take notes at all. Kim, who does not glance at his phone during the entire two hours while we talk, urges his students to use a paper notebook to allow them to maintain eye contact, and to research someone online before an interview to see if he or she has written anything that might be the basis of a conversation. Ask intelligent questions and show an interest in the person, he says. The quality that perhaps drives Kim the craziest, though, is the “Fine, forget it” approach. Ukrainian entrepreneurs and engineers might pitch him for startup capital, but they never seem to follow up or try again. He is now working to retrain them to ask, “What metrics would you need to see in order for us to get another meeting?” Very few startups in Ukraine have pitched him a second time, which he finds shocking. After all, persistence is the key to securing backing in Silicon Valley. Another issue, he says, is the fact that no one knows how to pitch. In Ukraine, pitches almost always open with a history lesson rather than data or dates, which Kim believes is a more effective way of getting a positive response.

Going the Extra Mile

Kim says the hardest part of recruiting in the Ukrainian IT sector is finding people who will go above and beyond the expected forty-hour workweek. He always asks recruits how many hours they worked in their previous job, and no one has ever told him more than forty hours. “Sometimes you are going to have to show up on Saturday,” Kim says with a shrug. In Silicon Valley, they have a phrase for this: “Let’s bust it out over the weekend.” So far, Kim has not seen many Ukrainians with this mindset. Instead, most of the country’s IT engineers have a side hustle. This means that in the absence of a strict manager, engineers in Ukraine tend to stray from their day jobs. In spite of this criticism, Kim does not blame Ukrainian IT engineers for their lack of soft skills. “They don’t have role models,” he says, adding that he wants to be one of those role models himself. Kim is

About the author: Melinda Haring is the editor of the UkraineAlert blog at the Atlantic Council and a senior fellow at the Foreign Policy Research Institute

tech

From Silicon Valley to the Breadbasket of Europe: American tech entrepreneur John Sung Kim is the CEO of JetBridge, an outsourcing and outstaffing company based in Kyiv not making any money from his current company in Ukraine. Anything profit he makes goes back into the business. He also teaches a class called “executive communication” at Taras Shevchenko University and is eager to connect venture capitalists in California with Ukrainian entrepreneurs. Kim sees a huge reservoir of good, lowcost talent in Ukraine. The country has not yet had a unicorn (a privately held startup company valued at over USD 1 billion) but he believes it is only a matter of time and mentorship.

Blown Away by Ukraine

When Kim sold his second startup, DoctorBase, in 2015, he decided to take a break after what had been fifteen years of pure grind, and to travel the world. “People make USD 10 million or more and they either buy a yacht or build a legacy,” he says. Kim opted to build a legacy, but was not sure exactly where. The jovial entrepreneur comes from a Korean-American family background, and Ukraine was not on his radar at the time. However, his co-founder is of Ukrainian heritage, so he agreed to visit the country. Kim says he was blown away by what he found, and it did not hurt that he also fell in love with a Ukrainian woman. Kim now spends 50 percent of his time in Kyiv and 50 percent in San Francisco. He explains that JetBridge is registered in Delaware, because “it’s impossible for foreigners to work here,” as others have lamented. According to Kim, foreign entrepreneurs like himself www.bunews.com.ua

have three options in today’s Ukraine: invest in a Ukrainian company and potentially lose one’s investment; marry a Ukrainian and wait for two years to get residency; or work for a Ukrainian company, pay taxes, and buy a fake address. Until the government reforms the courts and place of residence registration (propiska) system, the best option for foreign entrepreneurs who want to do business in Ukraine is to register their businesses abroad, Kim believes.

Chance to Make a Difference

The endlessly energetic entrepreneur has more than just his Silicon Valley experience to draw on. He says that South Korea may also offer some development lessons for Ukraine. The small country was not always an “Asian Tiger” economy or exporter of hightech. Education played an enormous role in South Korea’s development. Years ago, the South Korean government set up programs that brought foreigners there to teach English, technology, and the arts. Since then, there has been an explosion in dance, pop music, tech, and innovation. Ukraine has everything it needs to do the same thing, he argues. Ultimately, Kim wants his future Korean-Ukrainian-American children to look back at what he did in Ukraine and say, “Wow.” As he told his San Francisco-based business partners, “We have an opportunity to be Lewis and Clark in Ukraine. We can make a huge difference here.” 61

society

US authority switches from Kiev to Kyiv United States Board on Geographic Names becomes latest to adopt Ukrainian-language spelling The United States Board on Geographic Names (BGN) confirmed in early summer 2019 that it has become the latest international body to adopt the official Ukrainian-language transliteration when referring to the Ukrainian capital city. The BGN’s decision to begin using “Kyiv” rather than “Kiev” in its international database is welcome news for Ukraine that will likely have significant spelling and national identity implications far beyond the United States itself. According to a statement released by the Ukrainian Embassy in Washington DC, this change to the BGN international database will encourage airports around the world to adopt the “Kyiv” spelling for the Ukrainian capital city, as the International Air Transport Association (IATA) traditionally uses the BGN database for reference purposes. As such, it could serve as a tipping point in efforts to persuade the international community to end the Cold War practice of transliterating Russian-language versions of Ukrainian place names, and to adopt modern Ukrainian-language versions instead. Many Ukrainians will see the BGN decision as a strategic victory and an indication that ongoing efforts to assert a more independent national identity are not in vain. Ukraine has recently launched a global campaign via its embassies and social media to promote the use of Ukrainian-language transliterations of Ukrainian place names. “Ukraine has been an independent nation for more than 27 years but the Soviet-era versions of many geographic names persist in international practice. The continued use of Soviet-era place names rooted in the Russian language is unacceptable,” read a social media statement that accompanied the start of the initiative. The #KyivNotKiev push has already scored a number of eye-catching successes, including the early 2019 decision of the UK’s Guardian newspaper to adopt the “Kyiv” spelling in its editorial style guide. Ukraine itself made the switch to “Kyiv” in the early years of independence and most foreign governments now use the Ukrainian spelling in official documents. However, the persistent use of “Kiev” by much of the English-language media has remained a source of irritation in Ukraine, with many regarding it as a mark of disrespect towards a country that is struggling to emerge from the Soviet shadows and shake off historic associations with Russia. Critics of the “Kiev” spelling have traditionally rejected it as a Russian language version

Ukraine has recently launched a global campaign under the hashtag #KyivNotKiev to encourage international organizations and media outlets to adopt the Ukrainian-language transliterations of Ukrainian place names of the city’s name and therefore an unwelcome relic of tsarist and Soviet imperialism. They argue that unlike harmlessly Anglicized versions of European place names such as Munich (Munchen), Prague (Praha), and Rome (Roma), the spelling of the Ukrainian capital has important political implications, making the change from “Kiev” to “Kyiv” more akin to the post-colonial transition from “Bombay” to “Mumbai” or from “Ceylon” to “Sri Lanka”. The adoption of Ukrainian place names and the renaming of towns, cities, streets and squares has been a constant feature of Ukraine’s post-Soviet nation-building process. This trend has accelerated significantly since the start of Russian hostilities in spring 2014 and the adoption of decommunization laws in 2015 that outlawed many Soviet-era place

names. Keys changes in recent years have included the renaming of the major industrial city Dnipropetrovsk as Dnipro. Since 1991, independent Ukraine has had mixed success in convincing international audiences to adopt modern Ukrainian names and spellings. The old habit of referring to “The Ukraine” is no longer as ubiquitous as it once was, but it remains commonplace among older generations, with American President Donald Trump a particularly prominent repeat offender. Elsewhere, “Lviv” is now almost universally preferred to “Lvov”, “Lwow”, “Lemberg” or ‘Leopolis” when referring to the cosmopolitan capital of western Ukraine, but the Ukrainian spelling for the country’s largest Black Sea port city “Odesa” has struggled to gain any traction against the far more internationally familiar “Odessa”.

Make Time Complete Body Check-Up • One Day Health Assessments • Men & Women’s Health Check-Ups • Laboratory Testing and Diagnostics • Pre-Employment Medical Examinations +38 (044) 490 76 00 www.amcenters.com KYIV

•

ODESA

•

LVIV

•

TBILISI

•

BATUMI

•

ALMATY

•

NUR-SULTAN

Ukraine’s monthly English-language current affairs publication since 2007

sport

Ukraine Win U-20 FIFA World Cup

Future looks bright for Ukrainian football after teen team records historic World Cup win in Poland

Ukraine’s U-20 FIFA World Cup winners celebrate at Boryspil International Airport in Kyiv after returning in triumph from Poland Ukraine won the FIFA U-20 World Cup in some style on 15 June, coming from behind against South Korea in the U-20 World Cup Final to emerge as 3-1 winners. Victory over Korea capped a series of impressive performances throughout the four-week summer tournament in Poland that saw Ukraine record wins against the US, Qatar, Panama, Colombia, and Italy. This was Ukraine’s fifth appearance at the FIFA U-20 World Cup, which takes place every two years. Prior to this year’s triumph, Ukraine had never made it beyond the first knockout round of the tournament. There was little sense of expectation surrounding the squad as they began their campaign in late May, but Ukraine’s performances improved steadily throughout the tournament, peaking with the side’s convincing victory in the final itself. Most of the players who won the U-20 World Cup in Poland currently play their club football in Ukraine, with Ukrainian Premier League giants Dynamo Kyiv and Shakhtar Donetsk each providing five players to the 21-man squad. The most notable exception is 20-year-old goalkeeper Andriy Lunin, who signed for Real Madrid from Ukrainian team Zorya Luhansk in summer 2018 in a deal worth a reported EUR 8.5 million. Although the Ukrainian shot 64

stopper has yet to make any first team appearances for the Spanish legends, his big money recruitment already looks a sound investment. Lunin was among the stars of the 2019 U-20 World Cup, making one particularly breathtaking save in the final to deny the Koreans a late equalizer and earning himself the tournament’s Adidas Golden Glove award to go alongside his U-20 World Cup winner’s medal. Ukrainian football fans will be hoping the unprecedented success of the country’s youth team can now carry over to the senior side, which has traditionally struggled to live up to its considerable potential. Although Ukraine famously provided the backbone of the great Soviet Union sides of the 1980s, the Ukrainian national football team has never managed to reach similar heights following the collapse of the USSR. Ukraine’s record since 1991 includes just three appearances at major tournaments (including one as co-hosts of Euro 2012) along with a miserable sequence of five separate qualification playoff defeats. The Ukrainian national team’s best ever performance came at the 2006 World Cup in Germany, where they reached the quarterfinals before losing 0-3 to eventual winners Italy.

Ramada Encore Kyiv Hotel marks Seventh Anniversary

Partners and friends gathered at the Ramada Encore Kyiv Hotel in June to celebrate the venueâ&#x20AC;&#x2122;s seventh anniversary. This early summer event has become a Kyiv society tradition in recent years, with guests including members of the diplomatic and international business communities. This yearâ&#x20AC;&#x2122;s celebrations featured a series of awards for the hotelâ&#x20AC;&#x2122;s partners and a range of entertainment including the Red Foxes Dance Studio and the Tony Remol Band. The headliner of the evening was Ukrainian pop star and actress Kamaliya, who sang for guests. Kamaliya attended the celebration together with her husband, Kyiv-based British businessman Mohammad Zahoor, who will be partnering with DBI Hotels in his future hotel projects. With a wide range of cuisine from around the world on offer including Asian specialties, guests enjoyed the festive atmosphere at Ramada Encore Kyiv late into the night.

networking events

www.bunews.com.ua

Retail Real Estate in Focus at RAU Investment Forum 2019 The expanding Ukrainian retail real estate sector was in focus in June at the RAU Investment Forum 2019. Hosted by the Ukrainian Retail Association together with strategic partner Dragon Capital, the event drew hundreds of executives and investors to Kyivâ&#x20AC;&#x2122;s cavernous Art Arsenal venue to discuss the development of the Ukrainian retail industry. Key speakers included Concorde Capital CEO Igor Mazepa, UFuture Investment Group founder Vasily Khmelnitsky, and Dragon Capital CEO Tomas Fiala.

networking events

www.bunews.com.ua

ArtAsters Initiative Celebrates Tenth Anniversary The ArtAsters initiative, which brings together Asters law firm and the U.S.-Ukraine Business Council (USUBC) to showcase Ukrainian artistic talent, recently celebrated its tenth anniversary with an exhibition by Yuriy Sivirin, a well-known young Kyiv-based contemporary artist. Asters Senior Partner Armen Khachaturyan commented at the opening, “The goal of ArtAsters is presenting Ukrainian art in all of its diversity. Yuriy Sivirin is 70

the youngest of all featured ArtAsters artists and his works fit perfectly into the project concept.” USUBC President Morgan Williams added, “This summer marks the tenth anniversary of the ArtAsters project presenting masterpieces of Ukrainian culture to the business community. It is our great pleasure to provide space for a new generation of Ukrainian contemporary artists represented by Yuriy Sivirin.”

networking events

Ukraineâ&#x20AC;&#x2122;s German-Speaking Business Community Celebrates Sommerfest Members of the Austrian, German, Swiss and Ukrainian business communities in Kyiv came together in June for the traditional Sommerfest event hosted by AHK Ukraine in partnership with the Austrian, German and Swiss embassies. Now in its fourth year, this summertime event intends to serve as one of the largest annual networking platforms for the German-speaking community in Ukraine. Austria, Germany and Switzerland all rank among Ukraineâ&#x20AC;&#x2122;s key international trade partners and leading foreign investors.

www.bunews.com.ua

Ukrainian ID Forum in Kaniv calls for Revolution of Values Ukrainian and international opinion formers from the worlds of politics, business, diplomacy and journalism gathered in Kaniv in early June for the second annual Ukrainian ID International Economic and Humanitarian Forum. This ambitious event, which has been widely dubbed “The Ukrainian Davos” by the media, aims to serve as a platform for discussion on the future direction of the new Ukraine. Conceived in 2018, it comes at a time when the country seeks to find its place in the world following the historic changes of the past five years since the 2014 Revolution of Dignity and the onset of Russian military aggression. The theme of this year’s two-day early summer event was the need for a “Revolution of Values” that would allow Ukraine to address the pressing social challenges the country currently faces. According to event organizers, these include alienation from ideas of national identity, widespread substance abuse, gender inequality and large-scale labor migration to the EU. With Ukraine widely perceived as currently being at a crossroads in the country’s history, discussions were predictably lively and far-ranging in nature. This year’s most venerable forum participant was Ukraine’s first president of the post-Soviet era, 85-year-old Leonid Kravchuk. The former Ukrai72

nian head of state spoke of the symbolic importance of the event’s venue Kaniv, a small Ukrainian town overlooking the Dnipro River 140km south of Kyiv in Cherkasy Oblast that serves as the last resting place of nineteenth century Ukrainian national bard Taras Shevchenko. Event organizers see Kaniv as the spiritual heart of Ukraine and hope the location will add weight to the lofty ideals on the forum agenda. Kravchuk heartily agreed with this sentiment. “Here in Kaniv, we can take our inspiration from Taras Shevchenko to create new ideas for Ukraine that people can believe in and get the country moving in the right direction,” said the ex-president. Ukrainian ID founder and CEO Nataliia Zabolotna expressed her hope that the forum would lead to a “Constitution of Values” based on a broad interpretation of human security that embraces everything from protection against military conflict and information warfare to greater cultural engagement and ecological awareness. “As representatives of Ukrainian society, we are tired of being held hostage by other people’s plans for us. The main message from the forum is that the struggle for a healthy society needs to be led by each and every one of us as individuals, while guided by a clear set of values,” she commented.

networking events

www.bunews.com.ua

and finally

Kyiv tours with Gogol as your guide

With more and more international tourists now discovering Kyiv, one Ukrainian IT company has launched a new app offering visitors the chance to enjoy interactive smartphone tours of the Ukrainian capital featuring literary great Nikolai Gogol as virtual guide. The Touristl app was unveiled in June 2019 and is now available from the Apple Store and Google Play free of charge in both English and Russian languages. It is the brainchild of Constantin Kuleshov, CEO of Ukrainian IT company ServReality, which specializes in augmented reality projects. Kuleshov says he was motivated to launch this novel tourism initiative by a desire to help international audiences learn more about his homeland while also improving Ukraine’s image abroad. Kuleshov’s IT company ServReality works exclusively with international clients from countries such as the US, UK and Israel, and he says this interaction has made him acutely aware of the limited knowledge most foreigners have about Ukraine. “People don’t tend to know much about Ukraine, and the information they do have is often negative in nature,” he reflects. “This has implications for my business. After all, there is a direct link between the reputation of my company and Ukraine’s reputation. If the country is associated with cheap things, people will be less inclined to pay a fair price for our services. I wanted to help position Ukraine as a progressive place of innovative technologies.”

Work on the app began in September 2018. Kuleshov estimates he has invested around USD 100,000 in the project, with approximately 20 of his more than 100 employees contributing to the development of the tourism tool. The Kyiv tours with Gogol are part of more ambitious plans to offer similar augmented reality guides to other Ukrainian cities and global tourism destinations. Each featured city will offer a famous local historical personality as virtual guide, with the long-term objective of monetizing the project via cooperation with restaurants, hotels and other businesses focusing on tourist traffic. Nineteenth century writer Gogol is an interesting choice as the app’s first virtual guide. Widely recognized as one of the giants of Russian literature, Gogol was actually born in Ukraine’s Poltava region in 1809. He grew up immersed in Ukrainian folklore and staged Ukrainianlanguage plays during his youth in his uncle’s home theatre. Gogol’s earliest literary works such as “Evenings on a Farm Near Dikanka” and “Mirgorod” focused heavily on Ukrainian folk themes, earning him a reputation as an emerging Ukrainian literary talent. In more recent times, many in the Ukrainian cultural community have embraced Gogol as one of their own, staging festivals celebrating his works and promoting Ukrainian creativity.

Letters to the editor: editor@bunews.com.ua Advertising inquiries: +38-067-4032762 Business Ukraine magazine is distributed every month free of charge at a wide range of leading business centres, embassies, international organizations, hotels and restaurants throughout Kyiv. Registration: KV 15006-3978PR Published by: Open Borders Media Director: Susanna Dickinson

No reproduction, use or adaptation of contents, logos, titles or designs is permitted in any manner without the prior written consent of the publisher. The opinions expressed by individual authors and contributors each month in Business Ukraine magazine do not necessarily reflect the position of the publishers. The publishers of Business Ukraine do not accept legal responsibility for the goods and services advertised within the publication.

www.bunews.com.ua

Hotels

Restaurants

Event venues

DBI Hotel Management: your complete hospitality solutions for efficient hotel & resort management, including construction, architecture, design, audit, marketing & revenue management. More than 15 years of experience in hotel management. A team of 50 professionals who will take your business to a new level.

+38 044 205 15 20

info@encorekiev.com

ramadaencorekiev.com

dbihotels.com