BUSINESS UKRAINE MAGAZINE 09/2018 This month’s issue focuses on German-Ukrainian ties as officials and business executives from the two countries converge on Berlin for the annual bilateral business forum. Germany is one of the largest foreign investors in Ukraine and a key trading partner with turnover in the first eight months of 2018 totaling EUR 4.7 billion.
Only the Kremlin Can Cure the World of Russophobia What do the American media, the Norwegian Helsinki Commission, the UK security services, the Montenegrin parliament, and Ukrainian civil society have in common? According to the Kremlin, they are all shameless Russophobes. In late November, the government of Denmark became the latest member to join this eclectic group when the Russian Foreign Ministry dismissed recent Danish references to Russian aggression as “vivid testimony of the phobias plaguing the minds in Copenhagen.” Moscow’s motivation in all this is not difficult to grasp. The habit of labelling any criticism as Russophobia has become indispensable to the Kremlin in recent years as it clings to the increasingly implausible deniability that lies at the heart of Russia’s hybrid war against the Western world. Russophobia is the only way to make sense of an international environment where Russia continues to protest its innocence while facing virtually daily accusations of fresh offences. Indeed, if Moscow were genuinely not guilty of sending troops into Ukraine, launching chemical weapons attacks in England or hacking the German government, then an irrational phobia would be the only rational explanation for these diverse and seemingly unrelated claims. This makes the Kremlin’s enthusiasm for playing the Russophobia card perfectly understandable, but it leaves the key question of why unanswered. While official references to Russophobia have skyrocketed since 2014, there has been no accompanying attempt to explain what made the outside world suddenly become anti-Russian in the first place. The Kremlin appears to regard Western hostility as so natural and self-evident that any further analysis is redundant. Such thinking betrays Moscow’s own instinctively adversarial approach to relations with the West, while also hinting at the obsessive rivalry that continues to drive a nation still stewing in its Cold War defeat. In reality, Russia’s obsession with the West is by no means mutual. Regardless of Kremlin claims to the contrary, Russophobia was actually the last thing on anyone’s minds prior to 2014. Most international observers lost interest in Moscow way back in the early 1990s and find today’s hybrid hostilities just as baffling as Russia’s lingering resentment over the collapse of the Soviet Union. Far from rejoicing in Moscow’s humiliation, Western audiences typically saw the end of Soviet communism as a collective victory for the universal human values of freedom and dignity. As a result, they simply cannot fathom what the Kremlin is hoping to gain from challenging the verdict of 1991 and struggle to take Putin’s brand of defiant imperial nostalgia seriously. The return of the Soviet national anthem at the start of his reign barely warranted a mention, while the rehabilitation of Stalin and the mounting bombast surrounding the Red Army victory over
Nazism failed to set alarm bells ringing. Even after the 2014 invasion of Ukraine, many have remained reluctant to recognize Russia as an unambiguously hostile power. If the West is collectively guilty of anything, it is wishful thinking rather than Russophobia. No single country has faced more Russophobia accusations than Ukraine, and it is in Ukraine that the Kremlin’s role as architect of anti-Russian sentiment is most immediately apparent. As the conflict in eastern Ukraine grinds on for a fifth year with no end in sight, it is tempting to assume the two countries have always been sworn enemies. However, there was nothing inevitable about the deterioration in bilateral ties that brought Russia and Ukraine to the current state of undeclared war. On the contrary, they emerged from the Soviet wreckage joined at the hip and remained so indistinguishable that independent Ukraine’s second president Leonid Kuchma eventually felt moved to publish a book during the early Putin years entitled “Ukraine is not Russia”. Moscow chose not to take the hint. Instead, the Kremlin pushed on with attempts to make sure Ukraine remained an imperial possession in all but name. This led directly to the 2004 Orange Revolution and the 2014 Euromaidan Revolution. At that point, most policymakers would have been tempted to explore alternative approaches. Not Russia. Rather than back down, Putin sent the troops in. Kremlin leaders like to blame the subsequent collapse of Russian influence in Ukraine on Russophobia, yet most Ukrainians grew up regarding Russians more as siblings than neighbors. Even now, with Crimea under occupation and Russian tanks parked in Donetsk and Luhansk, millions of Ukrainians reserve their ire exclusively for the Kremlin while expressing positive opinions of Russia itself. Moscow’s ability to sour this intimate relationship so spectacularly must rank as one of the greatest foreign policy blunders of the twenty-first century, and attempts to blame everything on a Russophobic minority cannot conceal Russia’s ultimate responsibility for the debacle. In an ideal world, the Kremlin would stop throwing around accusations of Russophobia and acknowledge the leading role it has played in the descent towards a new Cold War. Repeated acts of Russian aggression have forced the international community to take punitive action when virtually everyone would have preferred business as usual. If Moscow insists on defining this as Russophobia, so be it – but they must also realize that most of the world is now contaminated, and only the Kremlin has the cure.
About the author: Peter Dickinson is the publisher of Business Ukraine magazine and a nonresident fellow at the Atlantic Council
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Germany in Ukraine
German Chancellor Angela Merkel and Ukrainian Prime Minister Volodymyr Groysman shake hands during the German leader’s 1 November 2018 visit to Kyiv The third annual German-Ukrainian Business Forum takes place in Berlin on 29 November against an optimistic backdrop of steadily growing bilateral trade between the two countries. Total trade volumes reached EUR 4.7 billion in the first eight months of 2018, representing a year-on-year increase of around 8%. Even more encouraging from Ukraine’s perspective is the 20% rise in the country’s exports to Germany during January-August 2018. One of the factors driving this increase in exports is the growth of Ukraine’s automotive industry, which boasts a strong and expanding German presence. In 2017 alone, German automotive companies operating in Ukraine generated EUR 500 million in export revenues. German companies are also prominent in the Ukrainian manufacturing, banking, energy, construction, retail, engineering and agribusiness sectors. In total, there are over 2,000 German companies active in Ukraine, making it one of the largest international business communities in the country and among Ukraine’s biggest foreign investors. Germany and Ukraine are also currently closer politically than at any time since the dawn of Ukrainian independence in 1991. Berlin is a prominent backer of Ukraine’s post-Maidan reform process 10
and a key partner in efforts to move towards a peaceful resolution of the conflict in eastern Ukraine. Together with French President Francois Hollande, German Chancellor Angela Merkel brokered the February 2015 Minsk Agreement that sought to create a roadmap for peace. She has remained intimately engaged in the peace process ever since while also playing a vital role in maintaining EU sanctions against Russia over the Kremlin’s ongoing military intervention in eastern Ukraine. As Ukraine’s European integration gains momentum, ties with Germany will inevitably deepen. Ukraine is already exporting record volumes to EU markets and becoming integrated into the value chains of the European Union economy. As this process intensifies, German companies will increasingly encounter the potential Ukraine represents as the continent’s last remaining major emerging market. With vast natural resources and one of the world’s most highly educated workforces, Ukraine is in many ways the ideal partner for technologically advanced German companies seeking new growth opportunities. The question is whether German business is ready to take the plunge before others seize the opportunities currently on offer.
germany in ukraine
German-Ukrainian Chamber of Industry and Commerce
Now is the time to invest in Ukraine German companies benefit as Ukrainian economy integrates into EU industry value chains
About the interviewees: Andreas Lier (right) is the President of AHK Ukraine and Managing Director at BASF TOV in Ukraine. Alexander Markus (left) is the Chairman of the Board of the German Chamber of Industry and Commerce (AHK) in Ukraine The president of the German-Ukrainian Chamber of Industry and Commerce (AHK) Andreas Lier has a simple message for any compatriots who are weighing up possible Ukrainian market entry. “Now is the time to get active,” he says. “Waiting on the sidelines could end up being costly because others will seize the opportunities. Countries like China are not waiting.” 12
This somewhat bullish assessment is partly due to positive recent trends in the German-Ukrainian economic relationship that have seen bilateral trade climb by 8% year-on-year in the first eight months of 2018 to reach EUR 4.7 billion, continuing a growth pattern that stretches back to the lows of 2014-15. It also reflects the feedback Mr. Lier receives from AHK’s 130 member companies in :
12 months, UAH, per annum
germany in ukraine
: Ukraine. “Our members feel the pulse of the Ukrainian economy
on a daily basis,” he says. “They confirm that it is getting stronger and stronger and faster and faster.” Business Ukraine magazine sat down with Mr. Lier and his AHK colleague Alexander Markus, who serves as the German chamber’s Chairman of the Board in Ukraine, on the eve of the 29 November German-Ukrainian Business Forum in Berlin. The pair had just returned from the second annual Ukrainian Automotive Forum held in Lviv, the Western Ukrainian city that acts as a key focus of the country’s fast-growing automotive component industry. German companies are at the forefront of this expansion. According to different estimates, every second or third German-manufactured car now features components made in Ukraine. “It was a very positive event,” says Mr. Lier of the forum. “The Ukrainian automotive industry is becoming increasingly integrated into European manufacturing value chains and becoming more attractive as an investment opportunity for German companies. To give you an idea of what that means for the Ukrainian economy, we are talking about more than 30,000 work places and EUR 500 million in exports to Germany in 2017.” As new German automotive companies eye Ukraine, many of those to have already established a presence are busy expanding. Mr. Markus runs through a roll call of the numerous German automotive companies that have opened additional production facilities in Ukraine since entering the market. He believes the country has now firmly established itself on the industry’s regional investment radar. “I am having talks virtually every other week with interested parties from the German automotive industry,” Mr. Markus says. “They are not guaranteeing they will choose Ukraine, but they are looking at the country alongside the likes of Romania, Bulgaria and Slovakia. That is already a very good sign. In terms of FDI attraction, it indicates that Ukraine is now often on the shortlist.” In order to support the further growth of the Ukrainian automotive industry, AHK has organised the creation of an Automotive Cluster initiative and staged a foundation meeting on the sidelines of the recent Lviv automotive industry forum. The goal of
this cluster initiative, explains Mr. Lier, is to give market participants a stronger collective voice while also encouraging professional training and fostering a positive image of Ukraine as a reliable and attractive automotive partner. Promotional efforts will benefit from the positive record of German automotive companies active in Ukraine. In an industry where precision is everything and quality measured in parts per million, Ukrainian teams have more than proven themselves. “The Leoni plant in western Ukraine has for many years been recognized as the leading quality provider in the company’s global operations, and they are present all over the world,” offers Mr. Markus. The progress on display within the automotive industry is only part of a broader deepening in German-Ukrainian economic ties that Mr. Lier expects to continue as Ukraine integrates further into the EU economy and German companies become more aware of the opportunities the country represents. “We are currently seeing Ukraine at its best since becoming independent 27 years ago. It is now in seventy-first place in the World Bank’s annual Doing Business report. Six years ago in 2012, Ukraine was in the one hundred and fifty third position,” he says. “Completely new export markets are opening up as the country turns away from its traditional post-Soviet focus towards Asian, Middle Eastern, African and EU markets. There is a shift from heavy industry to light industry and a growing focus on value-added products, while compliance with EU standards creates global opportunities.” Mr. Lier places particular emphasis on Ukraine’s growing light industry sector, arguing that this makes the country particularly appealing as a manufacturing hub on the EU doorstep. “The entire Ukrainian economy is integrating itself more and more into Central European value chains in a range of different industries,” he says. The AHK president in Ukraine offers the specific example of the furniture industry, where Ukrainian producers are currently enjoying a rising European profile. “We are already seeing how Ukraine is occupying a more important position in the European furniture industry’s value chain. The same is true in many other sectors. There is growing recognition within the German business community of the advantages this creates.”
“The entire Ukrainian economy is integrating itself more and more into Central European value chains in a range of different industries. There is growing recognition within the German business community of the advantages this creates”
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germany in ukraine
German business in Ukraine: reform wish list
Ukraine’s German Advisory Group offers insights into the business community’s reform priorities
About the author: Robert Kirchner is Deputy Team Leader of the German Advisory Group Ukraine After the severe economic crisis of 2014-2015, Ukraine has returned to growth mode since early 2016. However, the country’s gross domestic product (GDP) has by no means revived to its precrisis levels of 2013. If the economy were to grow by 3% in real terms annually for the next few years, the country would not reach 2013 levels again until 2022. Higher economic growth rates and more investment are key prerequisites if Ukraine is provide its citizens with the kind of future prospects that will allow them to build their future here. If this does not happen, the already intensifying process of Ukrainian labour migration to neighbouring EU member states will continue to accelerate. How can Ukraine increase the country’s investment appeal? Most observers agree that this largely depends on the government’s ability to continue improving the business climate. According to the World Bank’s annual Doing Business survey, conditions in Ukraine have already improved significantly in recent years thanks to post-Maidan reforms. In 2012, the country occupied 152nd position, whereas this year it has climbed to 71st place. Nevertheless, numerous limitations and barriers remain in place that weigh heavily on the thinking of companies looking at Ukraine as a potential investment destination. This explains why hesitation 16
remains the dominant attitude towards Ukraine among many foreign investors. Due to this hesitancy, we have yet to witness a reversal of negative trends in Foreign Direct Investment (FDI) flows. In order to identify the key obstacles to a better business climate and propose solutions, the German Advisory Group in cooperation with the German-Ukrainian Chamber of Industry and Commerce (AHK Ukraine) has recently conducted a study based on feedback from German companies operating in Ukraine. The study identified 28 specific bottom-up reform recommendations based on the conclusions of six different working groups. The focus was on reforms with the potential to make a direct impact on the business climate and investment while also reducing administrative barriers and bureaucracy to help create a level playing field. As these proposals naturally differ in scope and impact, the authors of the study sought to identify a Top 10 list of reforms that Ukrainian decision-makers should consider addressing as top priorities because they promise to produce relatively quick results.
Access to Energy
The top two priorities identified by the study of German business in Ukraine are both reforms likely to have a very direct and practical impact on business activity and international investment in the country. Receiving energy is of key importance for any investor in order to be able to operate in Ukraine. The present state of access to electricity, with an average of 281 days required until a new business can expect an active energy connection, is likely to deter investors. Resolving this issue should be a top priority as it could have a significant and immediate impact on the business climate. Likewise, negotiating increases in the number of transportation permits for trucks entering the EU from Ukraine is of key importance for permitting an increase of goods exports to European Union markets at low mark-ups for transportation costs. While both of these initial issues are slightly more complex than the other Top 10 proposals, they are also likely to have a very noticeable impact on investment activity if successfully resolved.
Bureaucratic Burden
The second category of proposed measures focuses on removing unnecessary bureaucratic and administrative burdens, which in practical
terms often create corruption risks. Improved execution of court decisions for claims against the state is a particularly high priority, as is eliminating penalties for late or non-registration of tax invoices not provided to buyers. The study also identified the need to limit arrests of money on bank or tax accounts in criminal proceedings, the acceptance of EU invoice prices, and the simplification of documentation requirements for transport and tax. Removing unnecessary bureaucratic burdens is an endless challenge for countries around the world, but it is a particularly important priority for Ukraine. By eliminating the various remnants of the country’s overregulated post-Soviet system, Ukraine can reduce the scope for corruption while at the same time freeing up the resources of companies to do business, generate economic growth, and provide employment. The final category of reform recommendations are relatively easy-to-implement measures geared towards creating a level and competitive playing field that will not discriminate against new, foreign or private sector companies. This means ensuring fair competition between state-owned and private banks. It means easing access to new crop protection products in the agribusiness sector, and it means combating fictitious private entrepreneurship.
Practical Recommendations
This recent study and subsequent reform proposals on how to improve the Ukrainian business climate forms an important complement to the existing agenda of other international institutions active in Ukraine’s reform process. While many of these institutions tend to focus on strategic issues such as the establishment and impact of an anti-corruption court or the issue of land sale reform, this new study of reforms from the perspective of German business provides an additional micro-perspective on the processes taking place in today’s Ukraine. The focus on German companies operating in Ukraine necessarily gives a specific direction to the recommendations. At the same time, all other companies operating in Ukraine would also benefit from the proposed reforms. This would help to secure widespread support from the business community for any attempts to implement these proposals.
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germany in ukraine
Bayer unveils USD 200 million Ukrainian seed plant investment Zhytomyr region facility will process seeds destined for Ukrainian market and EU export In September 2018, German company Bayer officially opened a state-ofthe-art seed processing facility in Ukraine’s Zhytomyr region. The new facility is the largest of its kind in the country and one of the biggest in Europe. Investment into the new plant amounts to USD 200 million. It is part of a long-term investment into expanding DEKALB corn seed processing in Ukraine. The facility will feature two dryers and a logistics center. It is set to begin operations to support customer demand for high-quality corn seed in Ukraine in time for the 2019 planting season. The plant will process around 750,000 units of seed annually to supply 2,500 Ukrainian farmers with DEKALB corn seed developed using traditional breeding techniques, with further expansion planned to support international markets. “This investment demonstrates Bayer’s strong commitment to Ukraine. www.bunews.com.ua
With more than 25 years of history in Ukraine, we have always been a key player in developing the country’s agricultural sector,” commented Jens Behrens, CEO of Bayer Ltd in Ukraine. “Bayer will continue working with farmers in Ukraine and is also planning to export its high-quality corn seed to EU member states.” The new Bayer seed processing facility will employ around 85 permanent and 220 seasonal employees to support the processing, storage and timely distribution of corn seed. “This facility is conveniently situated in one of Ukraine’s most productive agricultural regions, where many Ukrainian farmers plant their crops. Thanks to team engagement, state-of-the-art technology and optimized logistics, we will be able to meet the ever-growing demand of Ukrainian farmers for superior-quality corn seed,” noted Remi Dei-Tos, Bayer Site Lead Ukraine. 19
germany in ukraine
Ukrainian brains & German KnowHow
Complementary qualities make Germany and Ukraine natural partners, but German businesses are still learning about the opportunities in today’s Ukraine
About the interviewee: Daniel Bilak is Chairman of the Ukrainian government’s investment promotion office UkraineInvest and Chief Investment Advisor to the Prime Minister As Ukraine looks to continue the process of broadening its export and investment horizons, all international business forums are important platforms for the country. However, few events carry quite the same weight as the annual German-Ukrainian Business Forum in Berlin, which has emerged in the past three years as one of the annual highlights on Ukraine’s international trade calendar. Daniel Bilak, who serves as Chairman of the Ukrainian government’s investment promotion office, UkraineInvest, sums up the mood succinctly. “We are looking for high quality investment with added value. That is exactly what German companies bring. They can help us build an Industry 4.0 economy in Ukraine, combining innovation technology with manufacturing. This is what Germany does best.” Germany currently ranks as one of the top five investors in Ukraine, with around 2500 German companies operating in the country, accounting for over USD 500 million in investments over 20
the past three years alone. Mr. Bilak regards the German-Ukrainian economic relationship as an ideal match that plays to the strengths of both sides. “I see German business as one of the key drivers of innovation in Ukraine,” he offers. “It is a great marriage. We have the people, the education, and the brains. They have the systems, the production lines, and the knowhow.” One of the brightest examples of the burgeoning GermanyUkraine relationship is in the automotive sector, where German companies are leading the development of a fast-expanding Ukrainian automotive hub providing components for automobile production. The sector generated exports to Germany worth EUR 500 million in 2017 and is seen as strategically important because it is helping Ukraine to integrate into the European automobile parts supply chain; Mr. Bilak says that every second car manufactured in Germany carries automobile parts from Ukraine. He is also encouraged to witness many of the German pioneers behind the growth of the sector now seeking to expand their footprint in Ukraine. “We are currently seeing German automotive companies moving towards R&D and manufacturing in Ukraine. That is exactly the kind of progression we want. We want to see German companies coming into the country and taking advantage of Ukraine’s educated workforce.” In order to maximize the benefits of Ukraine’s employment advantage, efforts are currently underway to launch a new initiative designed to improve the vocational training available to Ukrainian students. UkraineInvest is working with the German Chamber of Industry and Commerce (AHK) and German companies together with the Ukrainian Ministry of Education and Science to model Ukraine’s technical curriculum on the German dual education system, making it more relevant to the needs of modern business. Mr. Bilak sees this as a way of building on what has traditionally been one of Ukraine’s greatest strengths. “I’ve had discussions with German executives who have told me it is three times quicker to train Ukrainians than many of their Western European counterparts. With the right work experience in German companies and vocational training, this makes the country even more competitive.” As with all of Ukraine’s international promotion efforts, dialogue with potential German partners inevitably involves overcoming misconceptions and the damaging impression created by deliberate disinformation. This is particularly true due to the considerable influence Russia enjoys in the German information space, which first gave rise to the concept of the “Putinversteher” (liter- :
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: ally “Putin understanders”) back in 2014. Mr. Bilak admits this
can sometimes make dialogue an uphill struggle, but believes the best solution is first-hand experience. “I find that I get asked quite a lot about the conflict in the east of Ukraine. Many Germans do not necessarily appreciate that Lviv – or “Lemberg” as they call it – is actually closer to Frankfurt than it is to Donetsk. They also often think Kyiv is on the frontlines of the conflict. So one of my main objectives is to encourage Germans to physically come to Ukraine and see for themselves. Once they have visited Kyiv and sensed the vibrancy of the city, everything tends to change. They come away with an awareness of the trajectory the country is on and have a completely new perception of what today’s Ukraine is all about.” As one of Ukraine’s leading promoters, Mr. Bilak is acutely aware of the need to raise the country’s international profile and closely monitors outside impressions. He sees the increasing awareness of Ukrainian opportunities within the German business community as part of a broader change in the narrative that is taking place against a backdrop of growing Ukraine trade with the EU and greater engagement in EU labor and production markets. “We are seeing a deepening and broadening of interest from German companies at a time when the entire narrative around Ukraine is shifting,” he says. “A few years ago, people were saying that Ukraine remained corrupt and nothing had really changed. Investors now recognise that Ukraine is becoming an integral part of the Central European economic space. In 2016, Ukraine was
an outlier and the messages about the country were still largely negative. Over the past year or so, that began to change. Ukraine is now regularly invited to pitch for investment alongside countries like Poland, Hungary, Slovakia, Romania, Bulgaria and Serbia. This is tough competition, but it means that Ukraine is now considered as competing in the same league as many EU countries.” Mr. Bilak says he recognizes the limitations of the government’s promotional efforts and believes it is crucial for potential German investors to engage with the current German business community in Ukraine in order to gain a credible and accurate impression of the country’s business climate. Ultimately, he says, Ukraine must strive to make German businesses feel at home in the country as welcome guests. “We may not yet be part of the European Union, but we are part of Europe,” he says. “German businesses hear this message, but they need to feel it too. They want to feel the stability, predictability and security of a European country.” In this respect, Mr. Bilak sees Ukraine’s Association Agreement with the European Union as having a central role to play. “The EUUkraine Association Agreement has been genuinely transformational,” he reflects. “We are pushing ahead with implementation as quickly as we can and this is creating a sense of familiarity for German partners who also go through the same regulatory processes. The main challenge now is to encourage German businesses to visit Ukraine and experience the country for themselves, so they can see that this is European country where they can be comfortable doing business.”
Ukrainian Prime Minister Volodymyr Groysman and fellow officials meet with members of the regional business community at Eurocar in western Ukraine, which is part of the country’s fast-expanding automotive industry cluster
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North Rhine-Westphalia First choice in Germany for international companies
North Rhine-Westphalia (NRW) is strong, dynamic and ideally located. The state is the most important economic region in Germany and has for years been one of the most popular locations for foreign companies in Europe. For them, the location is a real success factor – NRW is an innovative and cosmopolitan state with plenty of room for investment. NRW is a highly diversified and attractive business location with conditions that offer investors optimal opportunities for success. Above all, companies value its central location in the heart of Europe. With 17.9 million inhabitants, NRW is the most populous of Germany’s 16 federal states. Around 160 million people live within a radius of 500 km around the state capital Düsseldorf – equivalent to almost one third of all EU consumers. From no other location in Europe can so many people with such high purchasing power be reached within such short distances as from NRW. The state accounts for 21.5 percent of Germany’s purchasing power. The inhabitants of NRW annually spend more than 360 billion euros on private consumption and already constitute an interesting consumer market in themselves. In 2017, the state generated 21.2 percent of the German GDP at 692 billion euros, or 4.5 percent of the European GDP (EU-28). This would put NRW among the top 20 in a worldwide comparison if it were an independent state.
Strong business location for foreign companies These favorable location conditions also convince foreign investors. In a comparison of the 16 German states, NRW has established itself by a wide margin as Germany’s No. 1 investment location for international companies. With 179.3 billion euros or 26.1 percent at
the end of 2016, the state recorded the largest share of a total of 686 billion euros of direct investment in Germany. There are now approximately 20,000 foreign companies based on the Rhine and Ruhr. They include global players such as 3M, BP, Ericsson, Ford, Huawei, QVC, Toyota and Vodafone, as well as numerous SMEs. Among the international investors in NRW are also more than 70 from the Ukraine – including Eridan, General Print Technologies, KT Exclusive and Welfare Shoes.
Best conditions for transport and logistics There are good reasons for this. The state’s excellent infrastructure plays an important role in the choice of location. All major European cities can be reached within three hours from the two major international airports in Düsseldorf and Cologne/Bonn, Germany’s third-largest cargo airport. A dense network of waterways, railways and roads provides fast routes to sales and procurement markets in Europe and the rest of the world. In Duisburg, the world’s largest inland port with more than 131 million tons of goods handled per year ensures reliable connections to Belgian and Dutch seaports. Another reason is the many available industrial and commercial sites which provide ample room for investment. As a creative and innovative business location, NRW
is characterized by its diversity. Here, science and research deliver first-class performance. The more than 110 technology centers and non-university research institutes in the state form the densest research network in Europe and provide ideal conditions for technology transfer. And the wide range of studies offered by the 70 universities and universities of applied sciences ensures that companies from all industries can find qualified employees here. In addition, more than 100 international trade fairs take place here every year, offering plenty of opportunities for networking and the establishment of partnerships and business cooperation.
Germany’s industrial heartland striding towards digitalization NRW is the industrial heartland of Germany. In 2017, industry turned over around 350 billion euros and thus formed the basis for the success of many sectors. The state is home to large industrial corporations of world standing as well as dozens of smaller companies which are leaders in their respective business fields. One out of four German world market leaders from all economic sectors comes from NRW. 20 of the 50 highest grossing German companies have their headquarters in NRW, including Bayer, Bertelsmann, Deutsche Post DHL, Deutsche Telekom, E.ON, Henkel and thyssenkrupp. Moreover, around 712,000 small and medium-sized enterprises (SMEs) form the economic backbone of the state. These champions and “hidden champions” produce top achievements. However, this broad economic base of NRW is not only looking at past accomplishments but heading towards future technologies to ensure the international competitiveness of the state. The industry is taking great steps towards the digital transformation of traditional structures along the entire value chain. With its high density of industrial and commercial enterprises, NRW offers countless customers and cooperation partners for digital technologies. Another advantage of the location is the strong ICT industry. As a provider of intelligent software and hardware components, it is an important driver for digital change. No other federal state in Germany boasts a similar
density of ICT enterprises ranging from SMEs and software startups to telecoms giants. Around 210,000 people work in ICT companies in NRW. They generate around one third of all German sales in this segment at 103 billion euros. This market strength is due, among other things, to the high concentration of telecommunications companies in NRW. Deutsche Telekom, for example, is based here and Vodafone controls its German business from here. It is in particular the interfaces between strong industrial structures and the multitude of innovative ICT companies that provide the prerequisites for the digitalization of production and logistics processes. The startup Mapudo utilizes this proximity to industry successfully for its online marketplace for materials. It automates the distribution as well as the procurement of metal and plastic products for both large and small companies. The founders benefited not least from the fact that NRW is Germany’s most important steel region.
The digital economy on the rise The classic economy and young digital companies are jointly driving digital change. Accordingly, these great market prospects in NRW accelerate the development of the ecosystem for startups. Although everyone talks about Berlin when it comes to startups in Germany, surveys such as the German Startup Monitor show that NRW is on the advance. Today, the state is already ahead of Berlin and all other German
regions in terms of the number of digital startup companies. Every fifth German startup today comes from NRW, and their number is rising. Startups find important prerequisites for growth In NRW. In addition to customer proximity, these also include support from the political community and numerous networks including incubators as well as public and private accelerators. Most of all, startups value the considerable pool of qualified specialists in NRW. There are around 764,000 students at the state’s universities. That is more than in the Paris metropolitan area and four times as many as in Berlin. Around 80,000 of them are studying in the fields of computer science and electrical engineering, bringing core competences to the digital economy. So it is not surprising that companies in the digital economy in NRW can cover three quarters of their staffing requirements with local employees. This talent pool has also been one of the reasons why the online travel portal Trivago has chosen to stay in Düsseldorf with its new company headquarters. Since its foundation in 2005, the company has grown to become the world’s largest hotel search engine. After being sold to the US investors Expedia, the company is now listed on the US stock exchange but Trivago has built its new corporate headquarters in its home town Düsseldorf. Here it can attract enough employees for its enormous growth. In the past two years alone, Trivago has more than doubled its workforce from 500 to over 1,200 employees.
NRW.INVEST
accompanies the settlement process The state-owned economic development agency NRW.INVEST conducts international marketing for NRW, Germany’s No. 1 investment location. In doing so, it campaigns worldwide for foreign direct investments for NRW. In Eastern Europe, NRW.INVEST operates branch offices in Poland (Warsaw) and Russia (Moscow and St. Petersburg). Together with the head office in Düsseldorf, a team of experts provides comprehensive information and contacts from NRW and supports companies with investment projects or business locations in NRW. Contact information NRW.INVEST GMBH Economic Development Agency of the German State of North Rhine-Westphalia (NRW) Völklinger Straße 4 40219 Düsseldorf, Germany Tel.: +49 211 13000-0 E-mail: nrw@nrwinvest.com www.nrwinvest.com
germany in ukraine
Recent improvements in Ukrainian business law
Changes to corporate and currency law offer cause for optimism among Ukrainian business community Over the last five years, Ukraine has consistently improved its business climate for Ukrainian and foreign investors alike. The registration system for real estate has improved, the procedural codes for civil and commercial court proceedings have undergone modernization, public procurement procedure became transparent, and much more. Recent changes have also improved the country’s corporate law and currency law.
pected that many holdings can significantly simplify their structures. Overall, Ukraine’s new corporate law provides company participants with significant freedom in the regulation of their corporate relations. It facilitates active participation in the company’s management, provides for more mechanisms of control by the participants over the activities of the executive body, and moves national corporate legislation closer to European standards.
Ukrainian corporate law used to be rather inflexible, particularly where the interests of several shareholders required reconciliation. In the past, joint venture partners often opted to establish a joint venture company under a foreign jurisdiction with a 100% Ukrainian subsidiary in order to benefit from the increased flexibility and reliability of developed jurisdictions. Recent changes in Ukrainian corporate law, including a new Law on Limited Liability Companies, have brought significant flexibility to Ukrainian corporate law, allowing shareholders in a Ukrainian LLC to better care for their interests. Shareholders can now agree on the voting obligations of particular shareholders. They can agree on absentee voting. General meetings can take place in the form of tele/videoconference or via other means of electronic communication, and can take place abroad. There is also a simplified decision-taking mechanism for sole shareholders. The somewhat strange quorum for shareholder meetings, which formerly stipulated that a minimum 60% of shareholders must be present at a shareholders meeting, has been abolished. The new law provides more options for the protection of minority shareholders. The shareholders’ agreement can foresee pre-emptive rights during capital increases, but this is subject to agreement. Pre-emptive rights for share acquisition can also be waived or limited in the charter or the shareholders’ agreement. Additionally, the law provides for a standard set of items to be resolved unanimously either by qualified or by simple majority of participant votes. The charter, however, may provide for a higher voting threshold to adopt these decisions. Furthermore, shareholders can now agree on more exit mechanisms such as put and call options or drag along and tag along rights. In combination with an irrevocable power of attorney to make use of these rights, even the enforcement of shareholder rights becomes much easier. While in the past it was unclear whether an LLC could have a supervisory board, the new corporate law expressly allows this. The new law also significantly enhances clear and simple holding structures. Whereas in the past only a company with several shareholders could become the sole shareholder in a Ukrainian LLC, and such sole shareholding was limited to one LLC, these restrictions are no longer in place. Therefore, the second string of minority shareholdings in holdings is not required anymore, and it is ex-
In 2018, Ukraine underwent major currency regulation reform. The new Currency Law shall replace the Decree on Currency Regulation No. 15-93 that had been in effect since the early days of Ukrainian independence. This step is in line with Ukraine’s strategy towards implementation of the EU-Ukraine Association Agreement. The Law introduces new currency regulation policy based on freedom of contract and replaces the currently practiced exceptional principle, which requires a license for all cross-border transfers of capital with a few specific exceptions. Under the terms of the new law, market instruments receive express priority over administrative instruments. Restrictions will be established exclusively by laws, but the National Bank of Ukraine has broad discretion in the issuance of new regulations. Upon the Law becoming fully operative on 7 February 2019, residents of Ukraine shall have the right to open accounts abroad and use them for currency transactions. They will be able to acquire currency values abroad and transfer them in and out of Ukraine. Non-residents shall have the same rights as residents of Ukraine. In particular, this includes the right to open accounts in Ukrainian financial institutions and to perform currency transactions using such accounts. The Law cancels or eases most of the existing currency restrictions. The list includes the “catch-all” licensing requirement (to be replaced with simplified e-limits); registration of foreign loans; the mandatory 180-day term in export/ import transactions (to be extended to 365 days); restrictions and penalties in payments between entrepreneurs (so-called “payment discipline”); and reporting of currency assets abroad and their return to Ukraine. However, the Ukrainian parliament has kept in place a limit of EUR 10,000 for individuals for undeclared cross-border transfers of cash currency assets. The Law empowers the NBU to introduce protective measures that, according to NBU officials, would allow the national bank to support economic stability. These include compulsory sale of foreign currency revenue; limitations of terms in export/import of goods; regulating capital flow transactions; permits for and/or limits on entering into certain currency transactions; allocation of funds (reserves) for currency transactions; and temporary regulation and supervision of certain entities involved in currency transactions. These protective measures can only be subject to introduction in situations where the NBU determines instability within the Ukrainian banking system, a deterioration of the country’s balance of payments, or a threat to the stability of the country’s banking/financial system. Furthermore, introduction of these measures is subject to certain temporary time limits. Nevertheless, it is not yet clear exactly how much liberalization Ukrainian businesses and international companies operating in Ukraine will enjoy once the new legislation comes into force starting from the beginning of February 2019.
More Flexibility for Shareholders
Deregulation in Currency Law
About the author: Dr. Julian Ries is a Partner at INTEGRITES
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WORKCONSULT — BERATUNG, LÖSUNGEN UND SERVICES FÜR DEN ARBEITSMARKT WORKCONSULT — КОНСАЛТИНГ, ПОШУК РІШЕНЬ ТА НАДАННЯ ПОСЛУГ В СФЕРІ РИНКУ ПРАЦІ Fachkräfte für Sie gewinnen und weiterbilden – das ist unser Thema. In Deutschland und Ukraine. Mit intelligenten Weblösungen und engagierten Consultants und Lehrkräften. Mehrere Büros in Deutschland und Ukraine. Unsere Schwerpunkte: IT-Experten, Gesundheitsberufe, Bauberufe
BLENDED LEARNING UND OUTSTAFFING ЗМІШАНЕ НАВЧАННЯ І АУТСТАФІНГ Hochmoderne e-Learning-Lösungen + Lern- und Arbeitsumgebungen auf internationalem Top-Niveau. Online-Präsenzlernen in virtuellen und realen Klassenräumen. U. a. Sprachkurse für Deutsch, Englisch, Russisch in verschiedenen Unterrichtssprachen – auch berufsbezogen. IT-Kurse zu modernen Technologien, wie z. B. Blockchain. Outstaffing von IT-Positionen: Management Ihrer internationalen IT-Experten in unseren Büros.
PUBLIC-PRIVATE PARTNERSHIPS ПУБЛІЧНО-ПРИВАТНЕ ПАРТНЕРСТВО Zusammenarbeit mit öffentlichen Verwaltungen und Hochschulen. Mit in Deutschland marktführenden Arbeitsmarktlösungen. Hochwertige IT-Unterstützung von Städten und Gemeinden. Für moderne Bürgerservices, mehr Investitionen und neue Arbeitsplätze.
PRAKTISCHE UNTERSTÜTZUNG VON INVESTOREN ПРАКТИЧНА ПІДТРИМКА ІНВЕСТОРІВ Als deutsch-ukrainische Unternehmensgruppe wissen wir aus eigener Erfahrung, worauf es ankommt. Wir kennen die Herausforderungen und denken in Lösungen. Gemeinsam mit Netzwerkpartnern. Als aktives Mitglied der Deutsch-Ukrainischen Industrie- und Handelskammer.
KONTAKT DEUTSCHLAND КОНТАКТИ НІМЕЧЧИНА Workconsult GmbH Ralf Bultschnieder, rb@workconsult.de Vlad Prykhodko, vp@workconsult.de Harkortstr. 5, 04107 Leipzig Tel. +49341242560-0 www.workconsult.de Weitere Büros in Berlin, Hamburg, Mannheim, Bielefeld
KONTAKT UKRAINE КОНТАКТИ УКРАЇНА LLC „Workconsult“ Pavel Somych, ps@workconsult.ua Eugen Andreiko, ya@workconsult.ua Sobornosti St. 50, Poltawa, 36000 Tel. +380532565344 www.workconsult.ua Weitere Büros in Poltawa und Kiew
germany in ukraine
European audiences still unaware of
Ukrainian investment opportunities Ukraine’s improving business climate has yet to translate into a suitably high international profile
About the author: Yuri Donets is the General Director of SCHNEIDER GROUP Kyiv. He has broad GM/CFO/COO-related experience obtained with multinational leaders in the FMCG, manufacturing, retail, construction and direct marketing sectors Ukraine’s status as the seventy-first nation in annual World Bank Doing Business ranking reflects the current reality that it is still a challenging place for large-scale investments. Nevertheless, the overall investment picture for small and medium-sized businesses in Ukraine has improved dramatically in recent years and is deserving of far more international attention than it currently receives. Part of the problem is a matter of perception. The Ukrainian business community itself plays a major role in establishing negative narratives about the country, thanks in large part to a near-constant flow of complaints about the insufficient pace of reforms, continuing corruption, a lack of trust in the judiciary, and so on and so forth. All these issues are genuine concerns and require serious government attention. However, it is quite possible for small business owners, entrepreneurs and international investors to enter the Ukrainian market and entirely avoid any of the negative consequences from these pet peeves, as long as they maintain 28
basic compliance standards in their everyday business activities. Ukraine is actually losing significant additional GDP growth points each year due to these exaggerated negative perceptions. It is also losing out due to the failure to promote the country’s enormous business opportunities internationally in a professional and effective manner. This means everything from Ukraine’s cost-competitive and highly skilled workforce to the advantages of the EU Association Agreement and the country’s convenient geographical location on the EU’s doorstep. It also means highlighting the widely underestimated fruits of the country’s post-2014 reform process. The past few years have witnessed a range of positive changes throughout the business environment, starting with registration procedures while encompassing things like currency laws and accounting processes. The taxation system has undergone simplification in order to support the growth of SMEs and the private sector. A major breakthrough in accounting regulations is now well on its way towards implementation. Another example of progress in the Ukrainian reform agenda is the Ukrainian government’s e-procurement system, ProZorro. Many international readers will no doubt be surprised and interested to learn that this system has become the golden standard for procurement transparency, simplicity and efficiency worldwide since its implementation following Ukraine’s 2014 Revolution of Dignity. It has earned Ukraine considerable international plaudits including a World Procurement Award as well as gold in the Open Government Award contest in 2016. Today, any business can use ProZorro and take part in governmental tenders that match its competitive advantage criteria. The biggest challenge is the fact that not many companies actually know about this cost-free business opportunity. Small and medium-sized business opportunities are particularly attractive in the priority sectors of the Ukrainian economy such as IT, agriculture, manufacturing, energy, logistics and infrastructure. Everyone knows the advantages of being a business pioneer. However, the international business community has yet to realize that the timing is now ideal to benefit from pioneer status in Ukraine.
Instead of drawing attention to opportunities for smaller strategic investments, the major stakeholders engaged in promoting Ukrainian success stories tend to focus their efforts on headlinegrabbing investment initiatives such as the arrival of Ukraine’s first IKEA and H&M stores. With attention firmly fixed on the appearance of global brands in Ukrainian shopping malls, international audiences are only now starting to notice that Ukraine has been the number one IT outsourcing country in the region and a software development powerhouse since 2015. The striking success of the Ukrainian IT industry is due to the efforts of thousands of relatively small companies and individual entrepreneurs. Together, they have created one of the fastest-growing sectors of the Ukrainian economy. This IT sector currently provides services for hundreds of major international companies including numerous German businesses. Many more stories of successful cooperation between Ukrainian and European Union companies remain off the media radar. The reasons for this low profile are often pragmatic and do not reflect dissatisfaction with the results of cooperation. On the contrary, many Ukrainian executives say they prefer to keep a low profile for two practical reasons – to avoid attracting competition and to escape the attentions of the Ukrainian fiscal authorities, who might be interested in the opportunities presented by a successful international venture to replenish state budgets. Despite the many attractive features it offers, German-speaking investors who are planning to enter the Ukrainian market must bear in mind numerous local nuances. For example, the business registration process takes just a few days once you have submitted the required package of documentation. However, in order to proceed in a fully compliant manner, you should also provide information about the legal address of your entity in Ukraine as well as having a suitable Ukrainian national ready for appointment to the position of interim director for registration purposes. Previous experience has shown that these two relatively simple requirements are often a surprise for international investors entering the Ukrainian market for the first time.
CONTAINER TERMINAL ODESSA
“Container Terminal Odessa” is a subsidiary of HHLA International GmbH, group member of one of the leading European logistic holding companies – HHLA AG (Germany). For the last eight years, HHLA CTO paid taxes to various budgets in an amount exceeding 2 billion UAH. Since 2010, the company, jointly with State Enterprise “Ukrainian Sea Ports Authorities”, has been constructing a new container terminal at the Quarantine Mole at Odessa port. It is one of the largest infrastructure projects in the Ukrainian maritime industry, aimed to the terminal capacity increase by 600 thousand TEU. Total investments exceed 5 billion UAH. Construction commenced in April 2010, while pilot handling of the first two container vessels took place in September 2014. For 2017 nearly 40% of overall container volumes handled at the new berths of the Quarantine Mole. German holding HHLA AG is one of the largest European group, operating Altenwerder, Burchardkai and Tollerort container terminals handling three quarters of overall container volumes in the port of Hamburg. HHLA also includes leading European rail operator Company Metrans.
Why Kyiv is the New Berlin
The Ukrainian capital has emerged since Euromaidan as the latest pretender to Europe’s hipster crown
A giant mural of a cyclist looms over the recently renovated Kyiv Velodrome in the heart of the downtown area. The velodrome reopened to the public in 2017 as part of extensive urban renewal efforts in the Ukrainian capital “Here’s why Kyiv should be your next city break” ran the headline earlier this year in London’s Standard newspaper. Such glowing coverage is becoming increasingly commonplace in the international media as the outside world discovers the charms of the Ukrainian capital. The 2013-14 Euromaidan Revolution may have thrust Kyiv into the global spotlight, but it took subsequent successes such as the 2017 Eurovision Song Contest and the 2018 UEFA Champions League Final to convince international audiences that there is much more to Ukraine’s biggest city tha n revolutionary drama. This epiphany was arguably long overdue. Ukraine has expe30
rienced a national reawakening since 2014, with the political upheavals of Euromaidan and the ongoing crisis of Russian aggression fueling a surge in patriotic sentiment that is nowhere more evident than on the streets of the country’s capital. There is a tangible sense of swagger about post-Euromaidan Kyiv, with a vibrant contemporary arts scene and internationally acclaimed fashion industry setting the tone for a city that is enjoying the limelight after decades in the geopolitical dark. Kyiv designers are now headline-grabbing attractions in Paris and Milan, while Ukrainian pop stars like Kazka storm the Shazam Global Top 10. This growing self-confidence is also evident in everything from
1. Nonstop Nightlife
There was a time when the Kyiv clubbing scene was all about gangster chic and icy supermodel ostentation. In those dark and decidedly undemocratic days, rudeness was a virtue and status was a weapon. The era of golden interiors and frosty receptions is now thankfully long gone, with nocturnal Kyiv currently becoming better known for the skill of its barmen and the inventiveness of its ever-expanding cocktail menus. From laidback live music to all-night raves, the Ukrainian capital has a remarkably varied selection of nightlife options and enjoys a burgeoning reputation as one of Europe’s top party towns.
2. “Made in Ukraine” Chic
The patriotic wave that swept Ukraine in response to Russia’s 2014 invasion sparked a surge in demand for all things “Made in Ukraine”. As the “Made in Ukraine” movement gained momentum, it became increasingly apparent that many Ukrainian products were more than capable of competing with their international alternatives. Entire department stores have since sprung up to cater to this newfound enthusiasm for locally produced items, with stock ranging from street fashions to furniture and kitchen utensils. In a world of increasingly globalized identikit consumerism, the “Made in Ukraine” craze has provided a refreshing change. It also offers visitors some excellent souvenir ideas.
3. Street Art City
One of the most visible manifestations of Kyiv’s post-Euromaidan embrace of hipster status is the remarkable rise of street art throughout the city. In Soviet times, the Communist Party commonly employed giant murals to promote proletarian themes and totalitarian messages. Today’s explosion of eclectic Kyiv street art could hardly be more different. The result of diverse efforts by dozens of different artists and various organizations, it has
evolved organically since 2014 to become one of Kyiv’s newest tourist attractions. Many of the most celebrated mural painters from across the world have come to the Ukrainian capital over the past four years to add to the city’s street art collection, reflecting the international interest the trend has managed to generate. Unsurprisingly, street art tours are now a regular feature offered by most Kyiv tourism companies.
4. Dining Delights
germany in ukraine
Kyiv’s creative cafe culture to the city’s booming IT industry, which is transforming the entire profile of the regional economy. As a result, a place that once served as the poster boy for postSoviet provincialism is now becoming synonymous with startup savvy. Many compare the current Kyiv vibe to the mood in newly reunified Berlin, which emerged in the 1990s as the unofficial hipster capital of Europe. Here are five reasons why the Ukrainian capital has one of the strongest claims to Berlin’s hipster crown.
The Kyiv restaurant scene has experienced a dramatic rise in both quality and variety over the past four years without suffering an accompanying hike in prices. The result is a dining out environment that can rival many of Europe’s more established gastronomic destinations at what is often a fraction of the cost. Kyiv’s restaurant renaissance also embraces ambience, with new venues typically offering tasteful interiors and stylish dish presentation that are both in many ways ahead of their European peers. Perhaps most remarkably of all, service standards have undergone a quantum leap away from the sullen and sulky “Soviet scowl” approach that characterized the service industry in 1990s and 2000s Kyiv. Instead, today’s dining out experience typically comes complete with professional and attentive service staff who actually appear to enjoy their job.
5. The Ultimate Budget Destination
If the above factors are not enough to entice you, Kyiv’s trump card is the fact that it offers the best value for money of any capital city in Europe. The devaluation of Ukraine’s hryvnia currency in 2014-15 has brought prices crashing down for those with international currency. As a result, everything from dining out to booking a taxi is now remarkably cheap, while at the same time standards have remained high. For international visitors with dollars or euros to spend, this creates the perfect combination of European quality at emerging markets prices. The one weak link in Kyiv’s budget destination appeal used to be the lack of affordable flight connections. However, the recent arrival of Ryanair on the Ukrainian market, coupled with the rapid expansion of services by other budget carriers such as Wizz Air, is helping to make the Ukrainian capital reachable for the kind of fares that will attract a new generation of European weekenders. As word continues to spread, expect to see many more rave reviews of Kyiv in the international media throughout 2019.
„Flexible packaging is our world. Machines for extrusion, printing and converting are our passion.“
Windmöller & Hölscher KG Київ /Українi · Тел.: + 38 044 254 2231 · info@wuh-ua.com · www.wuh-group.com
www.bunews.com.ua
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Special focus Ukrainian real estate
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www.bunews.com.ua
real estate
Coming soon to the Kyiv residential real estate market: Intergal City by developer INTERGALBUD
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real estate
A year of relative calm fuels
property market optimism
Ukraine’s real estate sector witnessed modest growth in 2018 with some major strategic investments Ukraine’s property market is far more dependent on macroeconomic factors than many more mature markets. At present, these factors indicate calm. The Ukrainian economy is showing signs of slight but stable improvement, with 3% GDP growth expected this year. The National Bank of Ukraine is doing its best to maintain the hryvnia currency exchange rate within a reasonable corridor, and is managing to keep inflation at bay. Ukraine’s political scene is heating up as the country prepares for a year of presidential and parliamentary elections, but there is no indication of an impending crisis. Nor does the smoldering conflict in the east of the country appear likely to escalate significantly in the near future. These relatively favorable conditions are fueling increased interest in the Ukrainian property market and driving a new wave of investment. Signs of growing interest are evident in the available state statistics and in the many construction cranes that are once again dotting the skylines of Ukraine’s major cities. According to the official data, during the first nine months of 2018 the total amount invested in construction nationwide was UAH 86.5 billion, or 5% more than the same period in 2017. Equally interesting is the number of property deals in the first half of 2018, which was 10% up on the previous year. These figures provide an accurate impression of an industry well on the way to recovery following the lows of 2014-15. The main foreign investors in the Ukrainian property market are international retail chains and their development departments. A good example is Ceetrus (formerly known as Immochan Group) which delivered two Kyiv retail projects at the beginning of 2018, the Petrivka retail park and the Rive Gauche shopping and leisure center. The company has also announced ambitious plans to invest in the development of new format Auchan stores. Meanwhile, local
Commentary: Alexei Chernyshov Founder of VI2 Partners investment company Supervisory Board Chairman of URE Club
It is worth noting that over the past two years, the Ukrainian real estate market has stabilized following the almost complete freeze it experienced in 2014. The most attractive segments of the market such as logistics, shopping and office centers are primarily attracting the attention of local investors. International investors are still very careful and tend to focus on large and middle-sized projects of high quality. One characteristic specific to the Ukrainian property market is that many projects are difficult to classify according to European or international standards. Nevertheless, these projects have shown themselves capable of producing stable financial results and even generating incremental growth. Despite the fact that the real estate market has overcome the worst of the 2014-15 slump and is recovering, a number of factors at the state level continue restrict the growth of FDI. These include nontransparent policy, corruption, and the practice of asset grabbing. Investors typically prefer to focus their attention on securing a return on their investment rather than spending their time keeping their assets safe, as is still often the case in Ukraine. 34
retailers continue to develop their real estate portfolios by extending their chains throughout the country. Major market players like Silpo, ATB and Epicenter are all currently demonstrating significant growth rates in this direction. The other strategic property investor worth mentioning is Dragon Capital, which has been particularly active in 2018 through Dragon Capital Investment Limited. Dragon has consistently been the major real estate investor in the country for the last three years and has maintained its strategy of acquiring revenue-generating commercial property over the past twelve months. The company has already closed six major deals in 2018 and is not finished yet. Acquisitions so far have included Viktoria Gardens in Lviv, Sky Park in Vinnitsa, Eco Tower office center in Zaporizhia, Platinum Business Center in Kyiv, and two logistics projects close to the Ukrainian capital. The most recent Dragon deal was the acquisition of the centrally located Kyiv business hub Horizon Park Business Center from Ukrsotsbank. While the cost of this agreement was not public, it was widely reported as the largest deal of the year. Horizon Park Business Center is the seventh and biggest office complex in the Dragon real estate portfolio. Two further deals are reportedly in the pipeline. This would take Dragon’s 2018 real estate investments to a total of USD 100-150 million, or over USD 400 million since 2016. Such ambitious acquisitions suggest considerable optimism in the future trajectory of the Ukrainian retail and office markets. As the leading independent investment company in Ukraine, Dragon Capital is certainly in a position to see the big picture. The company’s spending spree may be slightly ahead of the curve, but it is not entirely out of step with the growing activity on display throughout the Ukrainian property industry.
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real estate
Kyiv apartments get smaller as residential market grows The residential real estate market continues to expand in the Ukrainian capital The residential real estate market in Kyiv is currently growing at a rate of approximately one million square meters annually and demand remains high. This is perhaps not surprising given the estimated average living space per Kyiv resident of just 22 square meters, which is far below EU averages. While Ukraine’s overall population is in decline, the country’s capital city is experiencing sharp upwards population growth. Inevitably, newcomers will only put up with cramped conditions for so long. In addition to the desire for more space, the other key driver fueling the growth of Kyiv’s residential property market is the relative stability of property prices, which have been climbing slowly but steadily for the past two years. The average rate per square meter in a new Kyiv residential building was USD 850 in October 2018, up from USD 800 one year earlier. Konstantin Oleinik of UTG says the upward pricing trend in Kyiv residential real estate reflects an increase in the quality of housing reaching the market. This includes the use of new construction technologies as well as improvements in associated infrastructure projects. Meanwhile, he also points out that increases in construction costs have significantly outpaced rising property prices, with building expenses rising by 16% to 20% so far in 2018. While the Kyiv residential market continues to expand, construction is unlikely to match the levels reached in 2017. In the second half of 2017, work began on 29 residential complexes in the Ukrainian capital, compared to 19 new developments in the first half of the current year. By November 2018, 220 residential projects were engaged in sales in Kyiv, but only two of these projects entered the market in November itself. Mr. Oleinik says the slowdown in construction and delivery of new properties to the market is thanks to a combination of factors. “This situation has arisen for two key reasons. It is due to legislative changes to building regulations and to the stabilization of consumer demand. This is creating the prerequisites for an increase in housing prices.” Market analysts also identity a continuing trend
towards smaller residential apartments. In 2017 a record number of apartments reached the market (28,190 apartments compared to 20,265 in 2016), but the average size of these new apartments was just 60.8 square meters. This marked a slight decline compared to the 2016 average of 64.7 square meters. Kyiv’s shrinking apartments are part of a long-term trend. Back in 2011, the average size of new apartments was 92.9 square meters, a figure that seems fantastical in today’s market conditions. This trend is partly attributable to the expansion of property ownership to young families with lower spending power and the influx of people to Kyiv from less wealthy regions of the country. Another key trend is the move away from individual residential buildings towards the development of complexes. This has been gathering momentum for the past two years following on from the success of projects such as Comfort Town on Kyiv’s Left Bank and a number of major residential complexes in the more exclusive Pechersk District in the heart of historic Kyiv. The rising popularity of residential complexes reflects growing demand for greater comforts in the immediate vicinity of homes as well as access to security and everyday infrastructure. There are currently a series of large complexes under construction in Kyiv including Faina Town, Svitlopark, Rybalskiy, Respublika and more. Access to accurate information remains an obstacle for anyone wishing to study the real estate market in the Ukrainian capital. One of the greatest barriers to comprehensive analysis of the Kyiv residential real estate market is a lack of authoritative data on overall apartment sales. Expert estimates of apartment sales in 2017 vary wildly from 10,000 to 40,000 apartments in new developments. Virtually all analysts expect the number of sales to decline slightly in 2018, but it is impossible to provide any definitive data. While it is relatively easy to assess numbers of new buildings, it is considerably more difficult to calculate the number of sold properties in any given development. Instead, the focus remains on market trends and broad dynamics. Most observers agree that new buildings are more popular with Ukrainian customers than
existing properties, with over half of all residential real estate purchases involving new constructions. Another somewhat ambiguous element of the market is the risk of purchasing property under construction. Viktoria Bereschak, editor-in-chief of real estate media project 3m2.kiev.ua, advises potential customers to conduct their own thorough background checks on developers before handing over any money. “The risk of unreliable investments in apartments that are not yet complete but under construction is still high,” she warns. “Any projects featuring low prices or unknown developers should be double-checked with particular vigor. The lack of banking sector lending and real estate mortgages encourages developers to begin sales at an early stage of the development process, so there is a high risk for investors and clients that the building may not be completed on time or at all.”
About the author: Olga Solovei is Executive Director of the Ukrainian Real Estate Club www.bunews.com.ua
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Retail and office sectors ride the GDP wave Ukrainian commercial real estate sector benefits from country’s gradually improving economic climate
By the end of November 2018, it was already possible to talk about a year of progress for the Ukrainian office real estate market. High demand has fueled growth in rental rates, while office buildings emerged as the targets of choice for investors, leading to a number of headline-grabbing deals. This progress was not restricted to office space alone. There was cause for optimism throughout all segments of the commercial real estate sector, especially when compared to the considerably more modest results of the previous four years. The main reason for this improving commercial real estate performance is the ongoing recovery of the Ukrainian economy, which posted a 3.8% GDP increase in the second quarter of 2018 and will likely end the year with an annual growth rate of above 3%. Meanwhile, Ukraine’s national currency, the hryvnia, has remained more or less stable throughout the past year. This has created a favorable climate across the country’s commercial real estate market.
Office Real Estate
Low development activity combined with relatively strong demand continue to create upward pressure on office rents throughout Ukraine and particularly in Kyiv itself. Prime office rent remained 38
at around USD 28 per square meter per month in the Ukrainian capital during the first nine months of 2018. This figure is unlikely to change before the end of the year. Prime yields for office properties in Kyiv slightly compressed to around 12% during Q1 2018 and remained generally stable in Q2-Q3 2018. Prime office yields will likely remain at current levels in Q4 2018. The overall development dynamic on the office property market in Kyiv is currently low, with new supply reaching around 26,400 square meters in Q3 2018. During the first nine months of 2018, cumulative new office supply in Kyiv reached around 51,000 square meters with no new delivery planned in the sector before New Year 2019. Demand for office space in Kyiv is relatively strong, largely driven by relocations and expansions as well as renewals and renegotiations involving the city’s fast-growing IT sector as well as retail companies. Cushman and Wakefield estimates that the total volume of secondary investment transactions in the office property market in Kyiv reached around USD 84 million in the first nine months of 2018 with an additional USD 108 million due by the end of the year.
real estate
Industrial Real Estate
Retail Real Estate
The development dynamic in the warehousing and logistics property sector in the Greater Kyiv area remains very low. In Q3 2018, new supply increased by 6,700 square meters, while the total figure for the first nine months of the year was around 18,400 square meters. Low development activity combined with strengthening demand led to a further decrease in vacancy rates and upward pressure on effective occupancy costs in the most sought-after properties during the third quarter of 2018. By the end of September 2018, primary vacancy in the sector fell to 2.8%, whilst monthly asking rents for prime warehousing space remained in the range of USD 3.5-5 per square meter. Acquisition interest in logistics and warehousing properties in the Greater Kyiv area and across Ukraine remains high, both for owner-occupation and investment purposes. Although there were no investment transactions in the Greater Kyiv area in autumn 2018, in the first half of the year total volume of secondary investments in the sector exceeded USD 24 million, with an additional USD 20 million expected to be completed by the end of the year. In the short term, the current gradual increase in commercial activity and the resultant strengthening of occupier demand, combined with low development dynamics, will result in a further fall in vacancy rates and upward pressure on rents in the logistics property sector in the Greater Kyiv area over the coming months.
There were a number of new arrivals on the Ukrainian retail property market in 2018. In Kyiv, these included the initial phases of Retail Park Petrivka and Rive Gauche by CEETRUS (formerly Immochan), as well as Smart Plaza Polytech shopping center incorporated into a multi-family residential building by UDP. In addition, Ukrainian DIY retailer Epicentre opened new hypermarkets in Kyiv and Mykolaiv. More properties are set for commissioning by the end of the year, but many of the biggest projects are currently on hold, creating future opportunities for retailers to penetrate the market once these projects get back on track in the next year or so. 2018 was largely positive in terms of occupier demand in the retail property sector. A number of Ukrainian and international fashion brands and food supermarket chains demonstrated reasonably high expansion activity, taking advantage of their dominant negotiation positions in relation to many shopping centers. Additionally, numerous F&B operators increased their presence, both in shopping centers and at high street locations. The past nine months witnessed several high profile new market entrants arriving in Ukraine, including such long-awaited retailers as H&M, Decathlon (part of Auchan Group) and Turkish retailers DeFacto and Koton. Meanwhile, IKEA is planning to launch in Ukraine in the coming year.
About the authors: UREClub in cooperation with Cushman&Wakefield www.bunews.com.ua
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Lviv Real Estate
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real estate
Investment Guide
www.bunews.com.ua
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tate market. With a stunning architectural ensemble, vibrant tourism industry and close proximity to the European Union, the city is poised to become a popular choice for international real estate investors seeking to add something Ukrainian to their property portfolios. However, in order to access the potentially attractive gains on offer here, investors will need to tailor their strategy to the specifics of the Lviv market, which is in many ways very different from its Kyiv counterpart. Mastering the Lviv property market requires plenty of patience and a nuanced understanding of what remains a highly challenging but hugely enticing investment opportunity.
Lviv Old Town
Kyiv’s historical Golden Gate neighborhood is home to scores of embassies and international organizations that together support a healthy demand for long-term premium rental apartments. Lviv’s Old Town is quite different. Unlike its Kyiv counterpart, Lviv Old Town is largely an entertainment and leisure district crammed with hotels, restaurants, cafes and small shops alongside relatively few offices and apartments. The Old Town is the geographical heart of the city and the first place most visitors will encounter as they explore Lviv. However, this does not necessarily make it a natural focus for real estate investment. Most of the money currently flowing into Lviv’s property market is coming from two key sources: the earnings of IT industry workers and remittances from Ukrainians working abroad. The bulk of these investment funds are going into new buildings far beyond Lviv’s Old Town, with the one notable exception being the gradual gentrification of commercial spaces for restaurants and cafes near Market Square. This is no surprise. Lviv residents may praise their city’s architectural beauty and heritage when they are speaking to visitors, but comparatively few are actually “putting their money where their mouth is.” Instead, they overwhelmingly prefer new buildings while shying away from the kind of classic architecture that excites many potential international investors. This strong bias among well-off Ukrainians against living in older downtown buildings is something that Leopolitans share with Kyiv residents. As a result, many of the historical gems in Lviv’s UNESCO-recognized Old Town currently lie in a sorry and dilapidated state, complete with dark and crumbling stairways and uninviting entrances. Residents of these buildings are often a mix of penniless pensioners and local tourists staying in shabbily renovated short-term rental apartments and makeshift hostels, with some individual apartments rented out as small offices.
When business-minded foreign visitors first encounter Old Town Lviv’s faded architectural glory, many exclaim “But look at Krakow, look at Prague! This place is so undervalued and has so much potential!” Such initial enthusiasm is entirely understandable. However, hope is not a strategy, as the saying goes. Instead, any potential investors need to build a solid business case for investing in these romantic but often poorly maintained properties. Successful investment projects in the heart of Lviv Old Town are possible but remain far from simple. After all, if it were so easy and obvious, local investors would have seized on these opportunities long ago.
real estate
: In recent years, Lviv has emerged as Ukraine’s number two real es-
Obstacles Facing Investors
One key roadblock to renovating property in Lviv’s Old Town is weak demand for premium long-term rentals. Despite Lviv’s rising international profile, the rentals market is actually quite small in terms of both quantity of tenants and average rents, meaning far fewer investment opportunities when compared with Ukraine’s capital. Why is this? While Lviv does have a few expat managers, the city does not have any international schools or other conveniences that routinely feature in standard expat employment packages. This makes it difficult for expats with children to relocate to Lviv. As a result of this expat shortage, demand for large three- and four-bedroom rental apartments in the premium segment of the city is virtually non-existent, while even demand for premium one- and twobedroom apartments is quite modest. Many of the European expat managers based in Lviv tend to commute back to their home countries several times per month and often elect to rent smaller apartments on a long-term basis or even stay in hotels for weeknights. If you do opt to buy a little piece of Lviv history, you should expect to spend plenty of time on renovation works. Apartments in Lviv’s Old Town will typically require extensive capital investments in order to restore them to their former glory. In many if not most cases, this will include complete replacement of plumbing and electrical systems, upgrading electrical load capacity, and reinforcing structurally compromised walls, ceilings and floors. However, investors will struggle to justify such outlays if they plan to target long-term rental clients in current market conditions. It is true that over the medium to long-term, we can expect that demand for premium long-term rentals will rise as more foreign manufacturers set up operations in Lviv to take advantage of the EU-Ukraine Association Agreement and the city’s location on the doorstep of European Union markets. However, the exact timing of this coming expat wave remains uncer: tain and the subject of much speculation.
“Most of the money currently flowing into Lviv’s property market is coming from two key sources: the earnings of IT industry workers and remittances from Ukrainians working abroad”
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real estate
“Lviv’s booming tourism and IT sectors offer ample opportunities for international real estate investment with rising demand and limited supply creating a recipe for potential success” :
Targeting Tourism and the IT Industry Following the 2014-15 financial crisis in Ukraine, prices for apartments in Lviv’s Old Town fell to the levels not seen since the early 2000s. They have remained close to these levels for the past two years or so. This means that available per square meter purchase prices are now quite low (sometimes less than USD 1000 per square meter for fixer-uppers), but these prices are not sufficiently low to offer attractive current yields for investors who are considering buying and renovating properties to offer as long-term rentals. So what investment strategies should property investors deploy in Lviv? The city’s tourism and IT sectors are currently growing exponentially and therein lies the answer. Lviv’s hospitality sector is not keeping up with rising demand for quality accommodation. There is a sharp deficit of branded hotels, while professionally run serviced apartments barely exist at all. Instead, the vast majority of Lviv’s short-term rental apartments target budget travelers and often suffer from poor management and limited comfort. There are a few strategies investors can consider employing in order to take advantage of these opportunities. For example, an individual buyer could purchase an apartment, renovate it to suit the tastes of upmarket foreign tourists, and then offer it as a short-term let. This strategy is arguably more difficult to execute than a long-term rental strategy since it has more “moving parts”. To maximize investor returns would require professional management, savvy marketing, and yield management that takes into account both seasonality and special events that justify peak pricing such as Lviv’s popular Easter and Christmas holidays along with flagship occasions like the city’s annual jazz festival. However, all of this could be difficult for an individual buyer to implement. In practical terms, they would probably be much better off teaming up with a professional management company or an investment fund specializing in short-term lets. Finding professional partners might be the most realistic investment approach. Even taking into account a professional manager’s fee, gross an-
nual yields of 10% or more are certainly possible. With demand and prices expected to rise in the coming years, this makes it an appealing long-term prospect. In this investment model, the challenge for an individual buyer is not making the numbers work, but instead finding a professional management company to operate their short-term rental property. Economies of scale are also worth considering. For many international investors, the best way to implement a short-term rental strategy is to minimize expenses and maximize yield either by obtaining several apartments within close proximity to each other or, ideally, by acquiring a small building with several apartments and ground floor commercial space. While requiring greater initial outlays, this strategy would allow an investor to renovate a building’s common areas and engineering systems and offer a more premium product. For investors who would prefer greater income stability, one possible hybrid strategy would be to sign a long-term rental contract with one of Lviv’s numerous IT companies to house visiting clients, and then provide basic additional services including laundry and cleaning. Each year Lviv IT companies rent out scores of apartments, but the quality of the properties on offer leaves significant room for improvement. The Lviv IT sector is global in outlook and focuses on international contracts, meaning a steady flow of business visitors throughout the year. Catering to this market may be a route to real estate investment success in today’s Lviv.
Finding the Right Niche
Local preference for new housing over old and attractive current prices provide international investors with a golden opportunity to invest in Lviv’s historical Old Town and acquire properties with strong potential for price appreciation. Maximizing current income while serving the short-term rental market will require good business execution and shrewd market positioning, but property investors can draw inspiration from well-proven strategies that have already worked in similar Central European cities like Prague or Krakow. Special thanks to Aaron Fust and Leon Guerrero (Lion City daily rentals) for their contributions to this article.
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.
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The best of Lviv since 2008 WEST UKRAINE’S LIFESTYLE GUIDE
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Ukraine’s Business Community’s Thanksgiving recognizing those who make a difference in changing Ukraine to become a better place where to do business.
In 2015, the year after Ukraine’s Revolution of Dignity, Natalie Jaresko, Minister of Finance who was instrumental to restructuring Ukraine’s post Yanukovych era debts, received the first award. Ukraine’s mobile phone operators, who had just launched third generation mobile communications in the country, also got an award, as did the European Bank for Reconstruction and Development, Ukraine’s largest investor, for boosting investment into the local economy.
Andy Hunder, President of the American Chamber of Commerce in Ukraine, Member of the National Reforms Council and National Investment Council, Treasurer of AmChams in Europe As McDonalds prepared to open its first restaurant in the Soviet Union back in 1990, the fast food company embarked on a program to train their future staff members to smile, be nice and to say thank you to customers. During the training session one of the young new hamburger restaurant recruits raised his hand and asked the American instructor: “Why should I say thank you? I’m the one with the meat!’ Soviet customer service was notorious for showing no gratitude. Much of that is now history.
Saying thank you has become such an important component in business, thanking customers, staff, and commercial partners. As John F. Kennedy once wrote: “We must find time to stop and thank the people who make a difference in our lives.” Four years ago, the American Chamber of Commerce in Ukraine launched a thanksgiving event that is turning in to an annual ritual. In autumn AmCham members are asked to nominate projects or individuals that have made an outstanding contribution to the development of favorable business in Ukraine, or promoting the country internationally. The thanksgiving award is then presented onstage at an exclusive black-tie dinner ceremony in mid-November
In November 2016, U.S. Secretary of Commerce Penny Pritzker received the award for her continuous support of Ukraine. The Business Ombudsman Council, a first point of contact for companies seeking redress against unfair government treatment, was awarded for simplifying bureaucracy. The highlight of the 2016 ceremony was the presentation of the award to Ukraine’s Paralympic Team for their unbelievable will to win, who had returned from the Rio Olympics with a record 41 gold medals.
Ulana Suprun, the passionate and professional acting Minister of Health, was awarded in 2017 for developing the healthcare system in Ukraine. Last year I also presented a special award to Morgan Williams, President of the U.S.-Ukraine Business Council for 10 years of outstanding leadership and dedicated service promoting U.S. – Ukrainian business relations. On November 17th this year’s awards were presented to Ukraine’s National Investment Council and Ukraine Invest – two investment promotion agencies established to advance Ukraine as an investment destination. The acting Minister of Finance, Oksana Markarova, was recognized for reinforcing Ukraine’s macroeconomic stability, while she is still hammering out the revenues and spending in the nation’s 2019 budget and continuing to negotiate with the International Monetary Fund.
The American Chamber of Commerce in Ukraine has many people it is grateful to, people who are changing Ukraine each day, every day. Thanksgiving is a time to thank all those making Ukraine a better place where to do business. In 2019 thanksgiving will take place after the spring Presidential elections and right after next October’s elections to Ukraine’s parliament. We hope that we will have plenty to be thankful for.
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THANKSGIVING BLACK-TIE DINNER AND AWARD CEREMONY Thanksgiving Day is the most heartwarming holiday of the year. It’s all about good vibes, positive emotions, and genuine thankfulness. It was the fourth year in a row when the American Chamber of Commerce in Ukraine united Chamber Members at Thanksgiving Dinner in an atmosphere of gratitude and appreciation. Guests enjoyed this special evening with an authentic holiday meal and Turkey Parade, wonderful performances, and great networking with fellow Chamber Members, partners, officials, and diplomatic community. The Thanksgiving Choice of Business Community Awards 2018 was presented to the Office of the National Investment Council of Ukraine and UkraineInvest - Ukraine Investment Promotion Office for promoting Ukraine as an investment destination. The Award for Strengthening Ukraine’s Macroeconomic Stability - to the Acting Minister of Finance of Ukraine Oksana Markarova. PREMIER PARTNERS OF AMCHAM THANKSGIVING SEASON 2018
PARTNERS OF THE EVENT
THANKSGIVING BLACK-TIE DINNER AND AWARD CEREMONY
KAZKA band
THANKSGIVING BLACK-TIE DINNER AND AWARD CEREMONY
MEETING WITH PRESIDENT PETRO POROSHENKO
The business community, united by the American Chamber of Commerce in Ukraine, European Business Association, and Ukrainian Entrepreneurs Union – met with President of Ukraine Petro Poroshenko. Chamber President Andy Hunder voiced 5 strategic priorities for the Chamber – macroeconomic stability and cooperation with the IMF, rule of law and the full-scale judicial reform, including the launch of the Higher Anti-Corruption Court, reform of the state-owned enterprises’ sector and transparent privatization, level playing field, fair competition and fight against grey markets, Ukraine’s energy independence with a liberalized market – as well as other sector-specific issues vitally important to AmCham Ukraine Members.
MEETING WITH U.S. SECRETARY OF ENERGY RICK PERRY
AmCham Ukraine President Andy Hunder met in Kyiv with U.S. Secretary of Energy Rick Perry. In focus - deepening cooperation with the American Chamber of Commerce in Ukraine and the U.S.Ukraine Business Council (USUBC). Andy Hunder addressed top-priorities for the Chamber Energy Committee in spheres of upstream, midstream, downstream, and also renewables, coal, and nuclear.
B2G Dialogue PRESENTATION “EXPORT BRAND OF UKRAINE IN ACTION” The event was organized jointly by the Chamber, the Export Promotion Office and the Ministry of Economic Development and Trade of Ukraine. AmCham Ukraine Members had an opportunity to discover export opportunities for Ukrainian business firsthand. The Meeting was devoted to the presentation of new export brand, which is of utmost importance for creating united and consistent brand of our country abroad.
INVESTMENT OUTREACH TRIP “VINNYTSIA: INVEST & WIN” Representatives of the Chamber Member Companies visited Vinnytsia to discover its investment potential. Main objective of the meeting was to present the investment attractiveness of Vinnytsia city as well as to discuss the priority sectors of economy for Vinnytsia region. The discussion was followed by visits to production facilities of UBC Group and Аgrana Fruit Ukraine.
CHAMBER MEMBER TOUR AND BUSINESS OMBUDSMAN COUNCIL CUSTOMS REPORT In the framework of the brand new series of events - Chamber Member Tours, the Chamber visited METRO Cash & Carry Ukraine. During the event METRO Cash & Carry Ukraine presented its brand, products and services, which open new opportunities for business and customers. Chamber Members also had an opportunity to learn more about Business Ombudsman Council Report “Main Problems Faced by Business in Customs Sphere” delivered by Iaroslav Gregirchak, Deputy Business Ombudsman.
B2G Dialogue MEETING WITH KYRYLO KORENIUK, ACTING HEAD OF THE LARGE TAXPAYERS’ OFFICE OF THE STATE FISCAL SERVICE OF UKRAINE The Chamber Members met with Kyrylo Koreniuk, Acting Head of the Large Taxpayers’ Office of the State Fiscal Service of Ukraine and his Deputies. In focus of the discussion: priorities of the State Fiscal Service of Ukraine by the end of 2018, peculiarities of the transfer pricing reporting, VAT refund process and other important for business community issues within the tax sphere. PRESENTATION OF THE PILOT PROJECT “PROZORRO.SALES” Event was devoted to presentation and discussion of the pilot project of electronic system “ProZorro.Sales” focused on the sale of the small privatization objects. Bringing it to light: during two months of realization of the project, 166 objects were sold for UAH 290 mln, while the starting price was increased in 2.2 times during bidding. MEETING WITH OLGA KRENTOVSKA, FIRST DEPUTY MINISTER OF SOCIAL POLICY OF UKRAINE The Chamber HR Committee Members met with Olga Krentovska, First Deputy Minister of Social Policy of Ukraine. The Meeting was devoted to the discussion of issues of modernization of services of the State Employment Service of Ukraine, reform of the labor market in Ukraine, and presentation of the Draft Law regarding development of the labor market and intensification of employment.
MEETING WITH OLEKSANDR KOMARIDA, DIRECTOR GENERAL OF THE PHARMACEUTICAL DIRECTORATE OF THE MINISTRY OF HEALTH OF UKRAINE The Meeting was devoted to the discussion of current status of the Pharmaceutical Directorate of the Ministry of Health of Ukraine, its priorities and the roadmap of implementing state policy in the pharmaceutical sector.
CHAMBER HALLOWEEN PARTY Guests of the Halloween Party organized by the American Chamber of Commerce in Ukraine actively participated in thematic contests and enjoyed the evening in the company of witches, magicians, and scariest movie characters. PARTNERS OF THE EVENT
HALLOWEEN BLOOD DONATION Traditionally the Chamber’s Halloween Party was not just about costumes and carving pumpkins. In partnership with DonorUA and Park Inn by Radisson the Chamber held one more initiative during Halloween season - Blood Donation. As a result, the participants donated 23 liters of blood and this is a record number for all Chamber blood donations. The American Chamber of Commerce in Ukraine is very grateful to all heroes who were not afraid and took part in the initiative, and keep saving lives. PARTNERS OF THE EVENT
SPONSOR OF THE EVENT
“GET TO KNOW THE CANDIDATES” BUSINESS NETWORKING COCKTAIL During traditional “Get to Know the Candidates” Business Networking Cocktail all guests had a great opportunity to network with potential Board Members, discuss their vision of the future expansion of the Chamber’s successful operations in Ukraine as well as get first-hand knowledge about their background and future ideas. One of main purposes of this event was to help them to make a right choice while casting vote for Board of Directors 2019. Results will be announced on December 6, 2018 during AmCham Annual General Membership Meeting. SPONSOR OF THE EVENT
Ukraine prepares to feed the world
Agribusiness 2019 Forecast: Ukrainian agricultural companies eyeing African and Asian expansion The Ukrainian agricultural sector is on track to export produce worth USD 18 billion this calendar year. If achieved, this total would represent a new record for an industry that is playing an increasingly central role in Ukraine’s economy and dominating the country’s international trade. The agricultural industry currently accounts for approximately 17% of Ukrainian GDP. Many expect it to occupy an even greater share of the national economy in the coming years as broadening international horizons and efficiency innovations at home help to fuel growth. The timing of this agribusiness boom could hardly be better. With a rapidly rising global population pushing food security towards the top of the international agenda, agricultural powerhouse Ukraine appears ideally placed to benefit from growing international demand for foodstuffs. Much will now depend on the ability of domestic Ukrainian agribusinesses to rise to the challenges presented by the need to modernize production and meet the logistical and regulatory demands implicit in global expansion. These issues look set to dominate the agriculture sector in 2019.
EU, Asia and Africa
The geography of Ukraine’s agricultural exports already reflects the changing trade priorities of the past few years. For much of the post-Soviet period, Ukraine’s international agricultural trade remained firmly focused on the countries of the former USSR. That is no longer the case, with India currently on track to be the number one destination for Ukrainian agricultural exports in 2018. In the first nine months of this year, India imported USD 1.4 billion worth of Ukrainian agricultural produce, or more than 10% of the overall total, with Asian countries collectively accounting for almost 44% of Ukrainian farming exports followed by the EU’s 31.5%. In terms of individual countries, the Netherlands, China, Egypt, Spain, Turkey and Italy are currently behind India as the top destinations for Ukrainian agricultural exports, reflecting the diversification of recent years. Larysa Bondarieva, Deputy CEO at Credit Agricole Bank, believes this trend will continue during 2019 as Ukrainian agribusinesses look to consolidate existing positions and enter new global markets. “The potential of Asian 58
markets will be the subject of further exploration efforts by Ukrainian agricultural companies in 2019,” she says. “India will remain a key destination for Ukrainian exports, while we will also see markets like Indonesia and Egypt growing in importance.” Ms. Bondarieva identifies sub-Saharan African in particular as a potential focus for the coming year, pointing to Ethiopia as an example of a fast-growing African market that offers huge opportunities for Ukrainian exporters. As the region is home to some of the world’s most rapidly expanding populations and economies, this certainly makes sense. Nor is the objective purely to export raw materials, with many Ukrainian companies exploring the possibilities of finding new markets for value-added goods. “More and more Ukrainian agribusinesses are looking at sub-Saharan Africa and exploring ways to export valueadded items alongside more basic commodities,” comments Ms. Bondarieva. She believes this may require considerable powers of persuasion, explaining that many potential African partners are also eager to establish processing and production facilities of their own at the point of arrival in order to protect their local markets and create added-value products.
Value-Added Exports
An emphasis on value-added exports looks set to be an increasingly prominent feature on the Ukrainian agricultural market in 2019, Ms. Bondarieva says. Ukraine’s traditional focus on commodities exports has meant that country has failed to benefit from the potentially far larger revenue streams created by value-added produce ready for store shelves. Instead, those further along in the production chain have typically enjoyed the biggest profit margins, often multiple times higher than the revenues coming to the original source in Ukraine. This makes the expansion of facilities to create more value-added produce a major priority for many Ukrainian agribusinesses. Until recently, the need to invest significantly in new production facilities and the barriers created by tighter regulations governing saleable produce had combined to deter many Ukrainian exporters from pursuing this line. However, that now appears to be changing, with the opening up of EU markets and the broadening of global horizons encouraging Ukrainian agribusinesses to
agriculture
explore export upgrades. “We are seeing a growing number of requests from our Credit Agricole colleagues in Italy and France regarding financial support for Ukrainian companies seeking to purchase production equipment,” says Ms. Bondarieva. “It is too early to talk about a booming market, but there is a clear trend among Ukrainian agribusiness companies towards seeking new valueadded export opportunities. They are investing in equipment and they are investing in training and education for their employees. This involves considerable expense, but it also places them among the leading international market participants and opens up huge opportunities for the future.”
Infrastructure Upgrades
Whether value-added or otherwise, Ukraine’s agricultural exports must still reach international markets. In recent years, growing volumes have exposed the inadequacies of Ukraine’s often outdated and inefficient agricultural infrastructure. The country’s railway cargo services in particular have struggled to handle the strain of bumper harvests, with complaints about insufficient wagons becoming commonplace as producers face the frustration of being unable to deliver their crops to waiting international markets. Many agribusinesses have responded to these shortcomings by investing in their own wagon parks, often numbering in the hundreds of units. Ms. Bondarieva believes the creation of individual company wagon fleets will continue during 2019 alongside parallel demands for the right to purchase and maintain private sector locomotive engines. A major obstacle will be the potential loss of revenues to the state rail service, which is currently the monopoly provider and uses freight cargo revenues to offset losses incurred by Ukrainian passenger trains. This creates powerful incentives to prevent agribusiness companies from using their own locomotives, but pressure in this direction is likely to mount during the coming year due to the scale of the losses involved and the strategic importance of the agricultural industry for the broader Ukrainian economy. Ms. Bondarieva is confident that agricultural infrastructure in general will remain one of the key investment sectors in Ukraine during 2019. It is worth noting that over the past five years, the majority of nine-figure USD investment projects in the country have been agricultural infrastructure upgrades of one kind or another. Ukrainian and international investors alike have shown a willingness to finance major undertakings including processing
plants, port redevelopments and cargo capacity improvements. Larysa says this will remain a long-term focus and points to interest from international partners such as China, which has shown a particular appetite for infrastructure investments.
Ag-Tech Innovation
As Ukrainian agribusinesses look to improve output and streamline the logistical issues of transporting cargoes to export markets around the world, a growing feature of the domestic industry is the use of new technologies. The booming Ukrainian IT sector is finding an attractive outlet in the country’s agribusiness industry, with the numerous obvious synergies between the two sectors providing fertile ground for innovation. Ms. Bondarieva believes the agriculture industry’s receptiveness to new technologies is amplifying the natural advantages created by Ukraine’s traditionally strong tech sector. “Almost all the major agricultural companies in the country are now employing ag-tech tools for tasks like monitoring the weather and soil conditions and I see considerable appetite for more. Ukrainian agribusinesses are proving to be fast adopters and enthusiastic adapters of ag-tech breakthroughs, with a readiness to invest.” Ms. Bondarieva says support for the development of Ukraine’s ag-tech segment will be among Credit Agricole Bank’s strategic focuses in 2019, and sees it is a way of bringing the Ukrainian agricultural industry closer to its goal of a leading role in global food security. “Ukraine still suffers from a lot of inefficiency issues connected to farming practices,” she offers. “By expanding ag-tech knowledge, this gives the industry the chance to close the gap.”
About the interviewee: Larysa Bondarieva is a Deputy CEO at Credit Agricole Bank in Ukraine www.bunews.com.ua
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Ukraine up in Doing Business ranking
business news
Ukraine advanced to seventy-first position out of 190 countries in the 2019 edition of the World Bank’s annual Ease of Doing Business ranking, rising five places and maintaining the country’s steady progress of recent years. Ukraine has seen consistent if unspectacular improvements to the country’s annual score in each of the past five editions, advancing from the 112 spot in 2014 to today’s seventy-first position, representing an improvement of 41 places.
Ryanair expands Ukraine flights
Europe’s largest airline Ryanair has announced flights from Kyiv to five additional European destinations from April 2019. The airline will add services to Dublin, Manchester, Athens, Sofia and Paphos in Cyprus, taking the total number of destinations available from Ukraine to 22 in 11 countries. This expansion of Ukraine services comes just weeks after the airline began flying from Kyiv and Lviv. Ryanair officials are also in talks with Kharkiv, Kherson and Odesa airports with a view to launching services in 2019.
Ukraine-China trade up by 21%
Bilateral trade between Ukraine and China totaled USD 5.8 billion during January-August 2018, representing a 21% year-on-year increase. This strong growth puts the two countries on course to pass the USD 10 billion barrier within the coming few years. With economic ties deepening, Ukraine’s Minister for Economic Development and Trade Stepan Kubiv in November invited his Chinese colleagues to begin joint consultations on a possible China-Ukraine Free Trade Agreement.
Coming Soon: Ukraine-Turkey free trade
Kyiv Airport Posts 56.3% Passenger Growth Kyiv’s Igor Sikorsky International Airport has reported a 56.3% year-on-year rise in passenger numbers during the first ten months of 2018 and now leads the way among Ukraine’s major air hubs as the country’s aviation industry boom continues to gain momentum. By the start of November, the airport had handled 2.42 million passengers so far this year. The 2.5 millionth passenger of 2018 checked in on 13 November. These striking passenger growth figures have been relatively consistent throughout 2018, with the month of October posting a year-on-year increase of 48.6%.
Meanwhile, the airport’s flight portfolio is growing alongside passenger volumes. The number of flights using the airport climbed 32.9% during January-October 2018 to reach 25,900. The most popular international destinations this year include Rome, Dubai, Warsaw and Minsk. Kyiv International Airport (also known locally as Zhuliany Airport after the Kyiv neighborhood where it is located) has benefited from the expansion of flights by budget carrier Wizz Air and the arrival of numerous new airlines over the past few years as Ukraine’s air travel segment has experienced unprecedented growth.
Ukraine and Turkey will sign a free trade agreement before the end of 2018 following November talks between Ukrainian President Petro Poroshenko and Turkish President Recep Tayyip Erdogan. Bilateral trade between Ukraine and Turkey is currently growing at an annual rate of approximately 20% and is expected to reach USD 4 billion in 2018. Turkey has also emerged in recent years among the top five investors in Ukraine with one of the country’s fastestgrowing business communities.
China’s UnionPay to launch in Ukraine
The National Bank of Ukraine has given the green light to Chinese payment system UnionPay International (UPI) to begin operations in Ukraine. The decision opens the way for Ukrainian banks to issue UPI payment cards. UPI becomes the fourth major international card payment system to launch in Ukraine, and is the world’s largest system in terms of number of issued payment cards. The arrival of UPI reflects the growing commercial ties between Ukraine and China.
Building a better business climate Interview: PepsiCo Ukraine General Manager and ACC Board of Directors member Irina Kozlova What have been the key business trends for PepsiCo Ukraine during 2018? We are seeing growth in consumer spending which provides us with the opportunity to expand product categories where we are present on the market. The relatively stable and largely predictable situation regarding currency exchange rates has also provided us with solid foundations for further business growth. We need to recruit more employees to support this growth and so one of the biggest challenges we
presently face relates to the current shortage of labor resources on the Ukrainian market. In broad terms, the trends we have witnessed in 2018 are quite positive, but there are also some significant challenges. What are your growth expectations for the coming year? We believe current trends will not change significantly next year. The coming elections (Ukraine will hold presidential and parliamentary votes in 2019 – Ed.) will have some impact on consumer confidence, as is always the case. Nevertheless, the recent extension of cooperation with the IMF gives sufficient grounds to believe that we can expect exchange rate predictability. Continued labor migration of Ukrainians to EU markets will most likely remain high on the business agenda next year and might have an even greater impact on business. It also has the potential to trigger higher than forecasted inflation. Elections look set to dominate the political agenda during the coming year in Ukraine. As a senior executive at one of the biggest international brands in the country, what roles do Ukraine’s presidential and parliamentary votes play in your strategic planning for 2019? Our strategy remains unchanged. We continue to work towards further business growth and creating working places as a long-term investor and one of the biggest contributors to the Ukrainian economy. Today we are already preparing to install the first production line of our Lay’s potato chips in 2019, and we are also implementing our own agricultural program for potato suppliers.
You currently serve on the Board of Directors at the American Chamber of Commerce (ACC) in Ukraine. How challenging is it to combine this position with your leadership role at PepsiCo? Many aspects of the mission and activities of ACC are familiar to me due to the business stan-
dards and ethics of the international company where I work. We have a lot in common and this results in firm partnerships in different projects like Weldi. I am glad to contribute by sharing international expertise and best practices of doing business. It is my pleasure to contribute to improvements in Ukraine’s business climate and I am ready to go on.
You have been closely involved with the work of the Chamber Tax Committee this year. What do you see as the Committee’s most important contributions to improving the Ukrainian business climate? The Committee’s experts have been participating in efforts to improve the tax administration in Ukraine which is in fact one of the main components of improving the wider business climate. We are actively involved in the work of the Expert Council on preparation of integrated tax consultations under the Ministry of Finance of Ukraine. Our experts are engaged in constructive dialogue with the Ministry of Finance, the Parliamentary Committee on Tax and Customs Policy, and the State Fiscal Service of Ukraine. We have provided feedback regarding the work of the e-cabinet of taxpayers along with proposals for its improvement, many of which were taken into consideration. Based on your experience as a member of the ACC Board of Directors, what do you see as the priorities for ACC as an organization in 2019 and beyond? The Chamber plays a huge role as a communicator between Ukrainian business and government and has packed agenda for 2019. To get an impression of this agenda, it is enough to highlight just a few of the most important focuses for the Chamber in the FMCG sector. The list includes promotion of best world practices in packaging waste management, supporting deregulation in the sector, ensuring gradual implementation of EU principles related to food safety, quality and labelling, facilitating the creation of favorable conditions for international trade, and much more.
About the interviewee: Irina Kozlova is the General Manager of PepsiCo Ukraine and a member of the Board of Directors at the American Chamber of Commerce in Ukraine where she serves as Board Treasurer and leads the Chamber Tax Committee 62
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Are you prepared to become
an ambassador for Ukraine?
Oschadbank’s Andriy Pyshnyy argues the case for focusing on Ukraine’s post-Maidan achievements I recently took part in the fifth “Conductors of Change” forum in Kyiv. This annual event seeks to analyze the progress Ukraine is making in the country’s historic reform agenda. It is the product of heightened post-Maidan expectations that Ukraine would undergo rapid transformation following the victory of pro-European forces in early 2014. Did everything work out as anticipated? Certainly not. Are there still reasons to be proud of Ukraine’s subsequent achievements? This was the focus of the forum, much as it is a central theme of many discussions in today’s Ukraine. Opinion among forum participants was divided. At the beginning of our panel discussion, our host invited us to look back on the past four years and asked us to identify the specific emotions we felt in relation to the reform process. Did we feel pride, admiration, gratitude, disappointment or anger? More than half opted for negative emotions and selected disappointment and anger. I personally found it difficult to give any one definitive answer to this question. Looking back at the situation in 2014, I feel a real sense of pride in our achievements and in our ability to master the unprecedented challenges we faced. However, when I turn my attention to the current situation and the many problems we have yet to resolve, I share the anger and disappointment expressed by my fellow forum participants. Nevertheless, these frustrations cannot completely eclipse the very real results of our work. This contrary cocktail of emotions might not be such a bad thing. In fact, it may well be the ideal energy drink to fuel us forward towards further reforms. As we attempt to place the events of the past four years into their proper context, I believe it is vital to recall how desperate the situation looked in spring 2014. Entire regions of Ukraine were under military occupation and we were completely unprepared for a war that was rapidly unfolding all around us. The country faced an unprecedented drop in GDP and business found itself confronted by a terrible liquidity crisis. Meanwhile, the watching international community held its collective breath. This was in many ways to prove the moment of truth for Ukrainian statehood. Ukraine survived, and so did Oschadbank. The new team who joined Oschadbank in spring 2014 arrived at what could hardly have been a more difficult time. We immediately implemented a range of bold measures and, in so doing, managed to prevent the loss of staff while also saving money. Meanwhile, the unavoidable losses incurred by the bank in Crimea and eastern Ukraine became the basis for the first international arbitration damages claims filed against the Russian Federation by a Ukrainian stateowned company. The next step was the launch of an entirely new development strategy. In this process, cooperation with international financial institutions was to make all the difference. My first business trip as Chairman of the Oschadbank Management Board was to Sloviansk in eastern Ukraine, where we renewed welfare payments soon after the libera64
tion of the city in July 2014. My second trip was to the London offices of our strategic partner the European Bank of Reconstruction and Development (EBRD). Working together, we produced a strategy document with the disarmingly simple title “Modernization”. This document provided a clear vision of the changes required in order for Oschadbank to become an attractive investment proposition. Earlier this year, we sat down with our EBRD partners once again and summed up the implementation of this vision. It was 90% complete.
What exactly has changed? Quite a lot
For the past three years in a row, Oschadbank has taken first place in the annual “50 Leading Banks of Ukraine” ranking. It has earned recognition on several occasions as a premium banking segment leader. We have led the way in reducing unprofitable and outdated regional branches across the country, while at the same time creating remote channels and establishing a new generation of branches that currently numbers almost 600. In early 2014, Oschadbank had just five 24-hour self-service banking zones nationwide. There are now 450. For four consecutive years, Oschadbank has been the market leader in terms of deposit portfolio growth. Today, the bank’s deposit portfolio amounts to over UAH 71 billion, representing almost 22% of the individual deposits in the entire Ukrainian banking system. Back in 2014, the bank’s share was just 7%. There has been similar growth in the number of banking cards issued by Oschadbank, with the current seven million total placing the bank in second place nationally. The bank has maintained a leading position in the secondary housing mortgage market with a share of 30%, while eight out of every ten “warm credits” worth a total of UAH 2 billion nationwide were issued by Oschadbank. We rank fourth nationally in the loan market for farmers and state support programs in the agribusiness sector. This year alone, UAH 450 million has been provided in financing for the purchase of agricultural machinery, while UAH 117 million has been paid out in state compensation. Our digital progress has been particularly striking. We have built the country’s number two online banking portal practically from scratch, and currently have more than three million digital banking customers. The services they enjoy offer levels of convenience and functionality to rival anything you will encounter today globally. Thanks to this digital transformation, over 50% of all transactions including routine processes such as utilities payments now take place online. Clients can also open a deposit account via their smartphone without having to visit a branch at all. Seven years ago, Oschadbank was languishing in thirty-second position nationally in terms of merchant acquiring, but we now occupy second place in the market. Nobody expected this progress, but we established our priorities and systematically began to gain market share, engaging with everyone from Mystetskiy Arsenal and Vulychna Yizha (“Street Food”) to the Kyiv Metro and the UEFA Champi-
opinion
About the author: Andriy Pushnyy (center) is the Chairman of the Management Board of Oschadbank ons League. We currently serve such brands as McDonald’s, Auchan, Velyka Kyshenya, WOG fuel stations, Turkish Airlines, Nova Poshta, H&M and many other well-known Ukrainian and global companies. In the past few years, Oschadbank has created a completely new line of services for small and medium-sized businesses (SMEs) as well as an unprecedented SME support program called “Build Your Own!” that provides credit support along with training and advice for current and future entrepreneurs. Our message is simple: Ukraine needs two million new entrepreneurs and we intend to help create them. So far, these SME support efforts have proven successful. We currently have a loan portfolio of over UAH 3 billion and 20,000 new customers. Meanwhile, 50,000 active and potential entrepreneurs have signed up to the “Build Your Own!” website. This is helping to generate valuable feedback while creating a priceless database for the country’s future economic development. Our achievements would not have been possible without state support. In this context, we must give credit to those who took on the leadership of the country during the tumultuous days of spring 2014. Back then, Ukraine ranked 137th in the World Bank’s authoritative annual Doing Business ranking. By the time the most recent edition appeared in autumn 2018, the country had climbed to 71st position. Achieving such an advance in the space of four years is no simple task, but Ukrainian society and the country’s political leadership have managed it. I believe acknowledging this progress is eswww.bunews.com.ua
sential if we are to move further forward. Many of my fellow participants at the “Conductors of Change” forum agree with this sentiment and are ready to share this message. When asked whether they were prepared to become international ambassadors for Ukraine, 77% answered in the affirmative. I hope that readers of Business Ukraine magazine will also be ready to represent the country on the international stage, especially because many are foreigners who have valuable personal experience of everyday life in Ukraine. Global audiences hear more than enough negative news about Ukraine. It is time they heard the genuine experiences of those who actually live and work in the country. Why did you choose Ukraine? What persuaded you to move here in the first place and why do you continue to invest your time and energy into the future of the country? What makes you believe Ukraine’s transition is possible? Raising the country’s profile can also help keep Ukraine on the right track. The more international friends Ukraine has, the greater the demands are on the country’s political leadership to maintain the highest standards. This international support serves to vaccinate the country against the populism that is perhaps the greatest single threat to Ukraine’s future progress. I invite all of our international friends to consider themselves informal ambassadors for Ukraine. Spread the news of our country and encourage your compatriots to give Ukraine a chance. Together we will achieve more. Together we will get it right. 65
Gala Dinner Honors Bohdan Hawrylyshyn and Looks to Future The inaugural Charity Gala Dinner and Silent Auction of the Bohdan Hawrylyshyn Family Foundation took place in Kyiv in November. The event aimed to raise funding for youth programs launched by economist, scientist, visionary and Ukrainian patriot Dr. Bohdan Hawrylyshyn, who passed away in 2016 after a lifetime spent in support of Ukraine. 66
“Our goal is to help create a critical mass of young Ukrainians who will study the best available world practices of statebuilding and then use this experience in order to contribute to the transformation of Ukraine,� commented Christine BatruchHawrylyshyn, who serves as president of the Bohdan Hawrylyshyn Family Foundation.
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Ola Rondiak Exhibition Marks Revolution of Dignity Anniversary
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Ukrainian-American Artist Ola Rondiak welcomed guests to Kyiv’s Ivan Honchar Museum in November for the opening of a solo exhibition to mark the fifth anniversary of Ukraine’s Revolution of Dignity. Entitled “IDENTITY, INTERRUPTED”, the exhibition draws on the dramatic realities of the 2013-14 revolution while also illustrating the intertwining of Ukrainian history with the personal biography of the artist, who grew up in America before moving to Ukraine in the 1990s and emerging as an artistic chronicler of the country’s post-Soviet journey.
The revival of a Ukrainian national consciousness and the process of building Ukraine’s new political identity since 2013 have coincided with a period when the artist reflected on her own interrupted Ukrainian identity. Rondiak’s artworks depict women in various emotional states as a metaphor for Ukraine itself. Her unique and distinctive style relies on an eclectic approach encompassing painting, collage and the use of iconic folk emblems alongside innovative visual interpretations of traditional Ukrainian Motanka dolls. The exhibition will run until 9 December. www.bunews.com.ua
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International Contemporary Art in Zhytomyr A cavernous industrial location in Zhytomyr became an eclectic arts hub in November thanks to one of the most ambitious cultural undertakings Ukraine has witnessed in recent years. This transformation was thanks to “NO DISCO BEHIND�, an international contemporary arts initiative curated by Austrian
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artist Gerhard Fresacher and backed by Zhytomyr-based Austrian company Eurogold. The one-night-only show attracted a large crowd drawn from local high society and nearby Kyiv, with Austrian Ambassador to Ukraine Hermine Poppeller leading the diplomatic presence.
networking events
IREX Celebrates Fiftieth Anniversary Friends and colleagues of IREX gathered in Kyiv in November to celebrate the global non-profit organization’s fiftieth anniversary. Operating in 122 countries around the world, IREX has implemented more than 17 projects in Ukraine since its arrival in 1995. These include the hugely popular America House Kyiv initiative along with projects in the media sector such as Learn to Discern, which aims to improve media literacy among Ukrainian audiences and help counter disinformation efforts.
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Photography in Focus as Asters Unveils New Logo Asters law firm and the U.S.-Ukraine Business Council (USUBC) welcomed guests to the legal services provider’s Kyiv offices in November for the latest ArtAsters reception. This regular arts event seeks to bring together members of the international business and diplomatic communities in the Ukrainian capital to explore the works of prominent Ukrainian artists. On this occasion photography was in focus, with an exhibition featuring some of the best works from the extensive portfolio of popular Ukrainian
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photographer Igor Gaidai. Asters Senior Partner Armen Khachaturyan commented on the exhibition: “Igor Gaidai is a brand name in Ukrainian photography. Each of his projects over the past two decades has helped introduce Ukraine to the world while demonstrating exquisite artistic quality.” Guests of the event also witnessed the unveiling of the new Asters logo following the recent merger between Asters and EPAP Ukraine, creating the largest law firm in the country.
networking events
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sport
Kharkiv enters bid to host 2021 UEFA Super Cup
Ukraine’s second city Kharkiv has launched an official bid to stage the UEFA Super Cup in 2021 at the Metalist Arena stadium. The city’s candidacy will benefit from Kharkiv’s considerable experience of staging major football matches. The former Ukrainian capital was one of the country’s four host cities during UEFA’s Euro 2012 European championship and regularly hosts international ties featuring the Ukrainian national team. The 40,000 capacity Metalist Arena is also currently serving as a temporary home for Shakhtar Donetsk in both the Ukrainian Premier League and the UEFA Champions League as the Donbas side contin-
ues its nomadic existence due to the ongoing Russian occupation of hometown Donetsk. Ukraine has a good record of successfully staging major UEFA matches in recent years. Many observers expressed surprise and skepticism when UEFA first awarded Ukraine the right to co-host Euro 2012, but the tournament was widely hailed as a triumph. Meanwhile, the Ukrainian capital Kyiv earned rave reviews in May 2018 for its hosting of the UEFA Champions League Final. UEFA officials praised Kyiv for its “flawless” staging of the Champions League showdown between Liverpool and Real Madrid, which ended with the Spanish side taking
the biggest prize in club football courtesy of a 3-1 victory at the Olympic Stadium. Kharkiv will now compete against rival bids from Belfast, Minsk and Helsinki for the right to stage UEFA’s showpiece Super Cup game, which sees the winners of the Champions League and Europa League compete each year to be crowned Europe’s top side. Kharkiv certainly has the requisite infrastructure in place, with a modern airport and five-star hotel both dating back to the city’s Euro 2012 preparations. A final decision on the identity of the 2021 host city is due in May or June 2019.
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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.
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