Business Ukraine April 2016 by Business Ukraine magazine

April 2016

s month Thi

SPAIN IN UKRAINE cial Focu

Sp e

ANTONOV EYES INDIAN MARKET

Aerospace giant Antonov signs major memorandum with India’s Reliance Defence as Ukraine looks to expand presence in one of world’s largest markets Also inside: Monthly American Chamber of Commerce in Ukraine Newsletter

Summer

terrace is now

Ramada Encore Kiev @_simply_better

THE YEAR â&#x20AC;˘ OF

EAI EM

For the best rates and more information visit: www.ramadaencorekiev.com or call +38 044 205 1515 103, Stolichnoe Shosse, Kiev, 03131, Ukraine

HOT EL

open!

WYNDHAM HOTEL GROUP

2014

*Join Wyndham Rewards today and receive points or airline miles for every qualifying stay. See www.wyndhamrewards.com for details. ÂŠ 2003-2016 Wyndham Rewards, Inc. All rights reserved. All hotels are independently owned and operated excluding certain Wyndham and International Ramada hotels which are managed by our affiliate or through a joint venture partner.

BUSINESS UKRAINE: APRIL 2016 This month Business Ukraine magazine explores the relationship between Ukraine and Spain with coverage of everything from free trade opportunities to the iconic Odesa street named after an eighteenth century Spanish aristocratic adventurer. Also in the month’s issue: Ukraine’s retail sector shows signs of recovery, and what can Ukraine learn from the Estonian economic miracle?

April 2016

month This

SPAIN IN UKRAINE Sp e

s cial Focu

ANTONOV EYES INDIAN MARKET

Putin’s Plan: from Hybrid War to Potemkin Peace Virtually every European capital city has a symbolic memorial dedicated to ‘the unknown soldier’. These monuments are places of public reverence and communion, where heads of state and ordinary citizens alike gather to pay their respects and honor those who made the ultimate sacrifice for their country. In Russia’s hybrid war against Ukraine, things are somewhat different. The Kremlin does not honour its current crop of unknown soldiers with any monuments. Instead, they are buried without fanfare in unmarked graves, their very existence an embarrassment to the leader who sent them off to war. Any wellwishers seeking to pay tribute run the risk of being attacked by state thugs or investigated by the security services. This is the new Russian reality of Putin’s undeclared war in Ukraine. It is a hybrid Kremlin campaign built on subterfuge and waged by faceless troops in the service of imaginary states. It is also the world’s worst kept secret, but one which Russia stubbornly clings to. No amount of evidence to the contrary has been able to budge the Kremlin from its position of blanket denial. Instead, the world has been fed a series of increasingly absurd excuses about captured Russian soldiers who simply got lost, went on vacation, or conveniently resigned on the eve of their deployment to the east Ukrainian war zone. These schoolboy antics have fooled virtually nobody and failed to stop the imposition of sanctions against Russia. Nevertheless, Russia’s relentless denials still matter. They prevent the international community from engaging Moscow in a constructive manner, making meaningful progress towards a durable peace virtually impossible. No conflict can ever hope to be resolved while the principle combatant insists on being treated as an innocent bystander. EU and US leaders have long been guilty of playing along with this Russian charade. While chastising the Kremlin in broad terms, all too often they have avoided speaking plainly about Russian military aggression – presumably because they wanted to allow Putin a face-saving exit. At a time when Churchillian eloquence is clearly called for, we have frequently had to make do with conApril 2016

ciliatory messages couched in the language of equivalency. This preference for euphemisms and diplomatic understatement has had a disastrous impact on perceptions of the conflict. It has prevented international audiences from grasping the full gravity of the security threat posed by Putin’s actions, making it difficult to rally public opinion behind a tougher response to Russia. It has also bolstered Kremlin disinformation efforts, fostering the kind of ambiguity and confusion that are central elements of the Russian hybrid war. It now threatens to make a mockery of the peace process. The Minsk peace plan has so far proved unworkable, largely because Russian leaders insist it has nothing to do with them. Instead, the Kremlin calls on Ukraine to grant autonomy to its puppet regimes and to accept fig leaf elections designed to legitimize the Russian occupation of the Donbas. Putin clearly hopes to move from hybrid war to ‘Potemkin peace’, complete with the illusion of renewed Ukrainian control over the Kremlin-managed ‘People’s Republics’ in east Ukraine. In reality, Ukraine will have swallowed a poison pill that can be activated at the Kremlin’s convenience. Western attempts to reach compromises with the Kremlin at Ukraine’s expense have paved the way for this potential Potemkin peace. However, it is not too late to send a clear message to Moscow. If Ukraine’s allies genuinely seek a long-term solution in the Donbas, they must inform Putin – and the watching world - that they regard the east Ukraine conflict as an act of Russian aggression and hold Russia responsible for initiating the peace process by withdrawing. Well-intentioned efforts to reason with Russia have proved futile. It is time for the clarity of an uncompromising stance. Peter Dickinson, Business Ukraine magazine 3

ALL-NEW JAGUAR F-PACE

ABOVE ALL, ITâ&#x20AC;&#x2122;S A JAGUAR

Welcome to Jaguar as youâ&#x20AC;&#x2122;ve never seen it before. Now you can enjoy the dramatic drive and beauty Jaguar is renowned for, with added practicality. Inspired by F-TYPE, its powerful, muscular looks give the All-New F-PACE a head-turning road presence. And it delivers the connected steering feel and sharp, responsive handling of a sports car too, thanks to its aluminium double wishbone front and Integral Link rear suspension. A master of sporting performance and everyday practicality, F-PACE raises the game. jaguar.ua

Winner Imports Ukraine Ltd, Identification code 20054535

www.bunews.com.ua

Indian partnership

cover story

Antonov secures Ukrainian aerospace giant signs memorandum with India’s Reliance Defence as part of broader strategic cooperation

April 2016

Ukraine’s flagship state-owned aerospace company Antonov signed a major memorandum with India’s Reliance Defence on 27 April, paving the way for joint production of Antonov aircraft and marking a significant strengthening of bilateral strategic ties between the two countries. The agreement covers both military and commercial transport aircraft, and will now see Antonov and Reliance Defence partnering to participate in a forthcoming tender for Hindustan Aeronautics Limited that could lead to orders for up to 200 aircraft and contracts totaling billions of US dollars. Officials from Reliance Defence, which is part of the Anil Ambani-led Reliance Group, confirmed that under the terms of the cooperation agreement, the two companies will collaborate on the assembly, manufacture, maintenance, repair and overhaul of Antonov aircraft for both Indian and global markets. The agreement will be seen as a major international vote of confidence for Ukraine’s aerospace giant Antonov. With geopolitical tensions making continued close cooperation with Russia problematic, the state-owned Ukrainian company is eager to build on its existing global market reach. The partnership agreement with Reliance Defence provides the company with improved access to lucrative Indian markets by meeting the country’s ‘Made in India’ regulations governing local production. The agreement foresees the development and production of a new twin-engine turboprop transport aircraft based on Antonov designs and technologies. The Indian Air Force currently operates more than 100 Antonov An-32 aircraft. This existing Antonov fleet is nearing the end of its last upgrade cycle and will shortly be due for replacement. Antonov First Vice President Oleksandr Kotsiuba told Business Ukraine magazine that the signing of the memorandum marked a new stage in the company’s cooperation with Indian partners. “We have vast experience of interaction with India in terms of aircraft delivery, operation, and cooperation with production enterprises. We

welcome this new direction in Ukrainian-Indian aviation sphere collaboration.” This Indian partnership agreement comes as Antonov continues to develop and market its latest transport model, the An-178, which was first unveiled in spring 2015 and is currently undergoing the certification process. The new An-178 is a next generation aircraft broadly based on Antonov’s An-148 and An158 family of jets, the first of which debuted in 2004. It is designed as a direct upgrade to the previous generation of Antonov cargo carriers. The An-178 can carry cargos of up to 18 tonnes, allowing it to occupy a relatively empty niche in the air freight market between the smaller, short haul carriers and the really big boys of the industry. “We have already signed agreements on An-178 deliveries with Azerbaijian and China. In addition to these orders, the Kingdom of Saudi Arabia and India have expressed their intension to operate this model,” Kotsiuba confirms. The memorandum between Antonov and Reliance Defence was one of a number of agreements inked in Kyiv during a highlevel delegation visit to the Ukrainian capital in late April that highlighted the growing strategic ties between the two nations. In line with these agreements, Ukraine’s state-owned SpetsTechnoExport will now work together with Reliance Defence on the modernization of armoured vehicles for the Indian Army, while there will also be cooperation in the development of unmanned aerial drones and gas turbines for the Indian Navy programme. SpetsTechnoExport Director Pavlo Barbul told Business Ukraine magazine that the agreements are the result a three-month negotiation period and productive bilateral meetings held at the annual DefExpo international arms expo in New Delhi earlier this year. “For Ukraine, this agreement creates the ability to attract the resources, expertise, finance and facilities of the Republic of India. The overall aim is to unite our efforts in order to jointly create products for the Indian market.” 7

spain in ukraine

Spain in Ukraine Spanish Ambassador: Events taking place in today’s Ukraine will determine Europe’s future Spanish Ambassador to Ukraine Gerardo Angel Bugallo Ottone arrived in Kyiv to take up his position in October 2013 – literally on the eve of the historic events that have transformed Ukraine over the intervening two-and-a-half years. Ambassador Ottone says his Ukrainian posting has proven one of the most challenging and rewarding of his entire diplomatic career, providing him with first-hand insights into events that have reverberated across the entire continent and, he believes, that promise to shape the future development of the European Union as a whole. Ambassador Ottone spoke to Business Ukraine magazine about the challenges facing post-Maidan Ukraine, the opportunities presented by the Ukraine-EU Association Agreement, and the need for the European Union to play a more decisive role in supporting Ukraine’s transition.

What is your assessment of the post-Maidan reform process in Ukraine and what do you view as the key priorities for the new government? The goals of the Revolution of Dignity are deserving of full European support. It is no exaggeration to say that events in today’s Ukraine will determine the future of Europe. Ukraine now faces two key challenges – external and internal. The internal challenge is rooted in the fight against corruption. It is already clear that from an economic point of view, the oligarchic system has reached its natural limits. The only option for Ukraine is closer economic integration into the European Union, which means strengthening the rule of law. This is an essential prerequisite to attract the kind of international investment Ukraine needs in order to get the economy back on the right track. So this battle against corruption will prove decisive in determining the future development of the country. The people of Ukraine have already made their position clear. The Euromaidan protest movement was all about rejecting the kleptocracy of the post-Soviet years. They were saying no to the oligarchy. It is true to say that Russia’s post-Maidan military intervention April 2016

About the interviewee: Gerardo Angel Bugallo Ottone is the Spanish Ambassador to Ukraine temporarily forced the Ukrainian authorities to reach out to the country’s oligarchs for support, but they must now move beyond this stage because it has no future. The oligarchic system simply does not work. We should not fall into the trap of being overly negative about the progress made since 2014. On the contrary, it is crucial to maintain a sense of perspective and recognize the

scale of the challenges facing Ukraine. Reforms like the introduction of the ProZorro digital government procurement system are major breakthroughs. The country I see today is radically different from the Ukraine I first encountered in 2013, and it is important to acknowledge this change. However, these changes risk becoming meaningless if they do not continue. The reform drive should

: 9

spain in ukraine

: now focus on building up confidence in the

country’s rule of law, with key areas being the judiciary and state prosecution service. Any national reform programme on this scale is like riding a bike – if you do not keep moving, you will soon fall off. How have perceptions of Ukraine among your government colleagues in Madrid and in the Spanish media evolved over the past two-and-a-half years of political upheaval and military conflict in Ukraine? It has taken some time for people in Spain to develop a detailed understanding of what was actually happening in Ukraine. My colleagues in the Spanish Foreign Ministry have a clear picture of the issues at stake, and personal visits to the country from senior members of the government have helped to foster greater clarity. Mainstream Spanish media coverage of Ukraine has largely been informed and accurate, even when coming from Moscow-based Spanish correspondents. Problems have only been evident on the far-left and far-right fringes of the political spectrum. The extreme right in Spain seem to regard Putin as the embodiment of ‘Mother Russia’, while those on the extreme left tend to see him as the reincarnation of the Soviet Union. Meanwhile, the Russian media has sought to push its own narratives to Spanish audiences, often with the help of obscure ‘experts’ and unknown ‘publicists’.

Spain underwent its own transition from authoritarian regime to parliamentary democracy in the late 1970s. What lessons can Ukraine learn from Spain’s experience in the post-Franco era? I do not think there is much Ukraine can learn from Spain’s post-Franco transition. Franco’s Spain was a dictatorship, but it did not have the same rule of law problems present in post-Soviet Ukraine. It was not a corrupt country and it had a developed economy. This made the political transition to democracy far easier. I think the transition of Poland after 1991 offers far greater direct parallels to the processes Ukraine must now undergo. In terms of EU integration, comparisons with the experience of post-Franco Spain are also of limited use. Franco died in 1975. By 1978, Spain was already in a favorable position to integrate into the EU. In terms of timing, Spain was historically lucky. We were welcomed with open arms and our European integration was widely acknowledged as a 10

“The goals of the Revolution of Dignity are deserving of full European support. It is no exaggeration to say that events in today’s Ukraine will determine the future of Europe.” logical geopolitical step. Ukraine faces far greater challenges due to the current internal situation within the EU and because of the Russian factor. On a fundamental level, the EU needs to accept that Maidan is a European problem. If we fail in Ukraine, we will pay a heavy price. A failed state the size of Ukraine would be a nightmare scenario for the whole of Europe. Instead, Europe needs to take ownership of the Ukraine crisis. This does not necessarily mean offering Ukraine the prospect of future EU membership, but it should not be entirely excluded either. The same is true of NATO membership. NATO is not an aggressive organization. It is all about providing security and protection for countries looking to develop democratically. It is strategically and morally wrong to exclude Ukraine from both the EU and NATO. At this stage, it is crucial not to lose track of the bigger picture. Ukraine is a very important country seeking to rid itself of a corrupt, oligarchic system and struggling to resist Russian attempts to prevent this transformation. Russia is trying to derail Ukraine’s EU integration. The Kremlin must stop Maidan from setting a triumphant precedent. It is in our interests to make sure that Ukraine’s transition succeeds.

Which areas of Spanish-Ukrainian bilateral trade do you expect to benefit the most from the introduction of the free trade component of Ukraine’s EU Association Agreement? The free trade area came into effect on 1 January 2016. From this date onwards, Spain has privileged access to the Ukrainian domestic market. In the short-term, the agreement opens up new markets through the progressive removal of customs duties. As a result, it will undoubtedly facilitate the entry of goods and services where Spain enjoys competitive

advantages. This includes fruits, vegetables, fish, mechanical appliances, ceramics, textiles and pharmaceuticals. But the DCFTA is much more than just a free trade agreement. It also includes a mediumterm process of standardization scheduled to last four years. During this period, Ukraine must fulfill a range of requirements connected to the gradual alignment and adoption of EU norms and standards, including on food safety and technical regulations. The proper implementation of these rules and standards presents significant opportunities for Spanish companies linked to sectors such as civil engineering, infrastructure, banking and insurance – all areas where Spain has proven itself hugely competitive at the international level.

What is your advice to Ukrainian companies looking to develop ties with Spanish partners and establish themselves on the Spanish market? It is always highly recommended to seek professional business help and advice when thinking of starting your own business anywhere in the world. As long as you get good advice from your Spanish legal representatives and accountants, then there should not be too much to worry about. In time, Ukrainian companies entering the Spanish market will get to understand how the system works in Spain. Additionally, we as a government are aware that starting a business abroad can be a daunting undertaking in many ways. This is why the Spanish State Department for Trade of the Ministry of Industry, Tourism and Trade offers an English-language website providing a step-by-step guide to the process of starting a business in Spain. And of course, any Ukrainian company interested in doing business in Spain is welcome to contact the Spanish Embassy in Kyiv, where you will be guided and counseled on your first steps. www.bunews.com.ua

spain in ukraine

Spain offers Ukrainian companies an attractive EU market Association Agreement opens EU markets for Ukraine at a time when Spanish economy is growing In recent times, I have written a lot about the recovery of the Spanish economy. Spain is currently emerging as one of the fastest growing economies in the developed world. In 2015, while GDP in the US grew 2.5% and the European Union economy advanced just 1.5%, Spain registered 3.2% GDP growth. The dynamics of growth are also changing. In 2013, initial signs of recovery were based on external demand. Since 2014, domestic demand has been gaining momentum. Domestic demand contributed 3.7% to GDP growth, with investment taking the lead at 6.4% of GDP growth, while external demand represented a negative contribution to growth of minus 0.5%. Despite the negative contribution of external demand, Spain still posted a current account surplus for 2015 of EUR 12.6 billion, representing 1.4% of GDP. It is important not to forget that a positive current account balance as a percentage of GDP also provides an indication of the levels of international competitiveness for any country. Usually, countries recording a strong current account surplus like Spain have an open economy heavily dependent on export revenues. Most analysts regard Spain’s current export performance as sustainable based on the country’s price competiveness, which comes thanks to economic reforms adopted in the last few years. It is therefore not surprising that multinational firms continue to look to Spain, as UNCTAD’s 2015 World Investment Report shows. According to this source, Spain ranked twelfth globally for inflows of Foreign Direct Investment, and second among European countries, with almost EUR 23 billion in FDI. There are now over 12,000 foreign companies based in Spain representing all sectors of the economy, with a focus on added value sectors such as ICT, automotive and car manufacturing, biotechnology, chemistry, logistics, e-commerce, and aerospace among others.

Competitive business environment

Spain represents an attractive market for Ukrainian companies. It is the fifth largest market in the European Union with more than 46 million consumers and an annual inflow of over 65 million tourists. In terms of GDP, the Spanish economy ranks fourteenth in the world. It boasts a much higher income per capita ratio than similarly sized economies such as Brazil, Russia, Mexico, China, and India, with double or triple their levels. Spain also provides Ukrainian investors with the advantage of falling taxation costs (in 2016 corporate tax has been reduced to 25%). Moreover, it is noteworthy that the average effective corporate tax rate is much lower at nominal rates due to a range of interesting tax incentives companies can apply. These include tax benefits for companies that carry out R & D. Newly created companies also benefit from preferential terms, enjoying a tax rate of 15% in the first two periods when their tax base is positive. Spain can also offer a beneficial tax regime for foreigners. Any foreign worker who resides in Spain for employment reasons can choose to be taxed under Individuals Income Tax or Non-Resident Income

Tax at a competitive flat tax rate of 24%. Another very beneficial fiscal incentive for the internationalization of companies established in Spain is the participation exemption regime. Dividends and capital gains are exempt from tax if received by a Spanish entity (on equal terms if the company is owned by foreign or Spanish capital) that holds at least 5% of the share capital or equity of a foreign entity for a continuous period of at least one year.

Spain as global platform for Ukrainian companies

As Ukrainian companies seek to expand their global reach and take full advantage of the free trade component of the Association Agreement with the EU, it is also worth bearing in mind the potential Spain represents as a platform for conducting international business in third countries. As an EU member state, it offers entrepreneurs the opportunity of access to the world’s biggest free market area. Furthermore, Spain’s geographical location allows for relatively easy access to markets across the whole of the Mediterranean area, including northern Africa and the Middle East. The country’s extensive business, economic, historic, linguistic and cultural ties with Latin America also create the foundations for greater penetration of these countries. Ukrainian businesses looking to establish a presence in Spain will also benefit from the presence of a large Ukrainian diaspora in the country, including thousands of experienced and highly qualified professionals. The Ukrainian population in Spain currently numbers around 80,000 people established throughout the country.

Golden visa options

Spain’s Golden Visa programme creates opportunities for Ukrainian entrepreneurs to gain fast-track permission to live and work in Spain. Ukrainian investors who want to start an innovative business or company in Spain that will create local jobs can apply. The programme is also open to those ready to make a significant investment into the Spanish economy. This means the purchase of real estate assets valued at above EUR 500,000, shares or bank deposits of EUR 1 million, or public debt of EUR 2 million. Ukraine and Spain are natural partners with a range of common values and interests. Our similar outlooks on key global issues and international challenges have made it possible to develop increasing governmental and private sector contacts in recent years. Mutual knowledge and greater awareness is steadily expanding, creating opportunities for Ukrainian and Spanish multinational companies to develop common alliances and shared strategies to invest in both countries, or to operate in third countries from Spain. In order to help facilitate the development of bilateral trade ties, the Spanish Embassy in Kyiv, as the official representative of national agencies ICEX Spain Trade and Investment-Invest in Spain, offers comprehensive, efficient and confidential consultation services at no cost during all stages of the investment process. This includes consulting at the planning, evaluation, and startup stages, and post-investment services.

About the author: Jaime R. Fernandez Sanchez (kiev@comercio.mineco.es) is the Head of the Economic and Commercial office of the Spanish Embassy in Ukraine

www.bunews.com.ua

Chornbyl kids enjoy Spanish family friendship Spain has hosted over 25,000 Ukrainian children affected by 1986 Chornbyl nuclear disaster April 2016 witnessed an upsurge of international interest in the 1986 Chornobyl disaster, with a flurry of media coverage dedicated to the thirtieth anniversary of the tragedy. This attention helped to highlight the devastating legacy of the disaster and the ongoing impact of Chornobyl on the lives of ordinary Ukrainians. Thousands continue to suffer from poor health and other difficulties as a result of the world’s worst nuclear energy accident. Over the years, Ukraine’s Chornobyl victims have received significant support from international charities, with efforts generally focusing on the provision of medical support and treatment. Perhaps the most comprehensive and emotionally uplifting initiative has been the programme to host Ukrainian children affected by Chornobyl in Spanish families, giving them an international perspective on life and, in many cases, creating a whole new world of opportunities.

Spanish solidarity for Chornobyl victims

Spanish support for the victims of Chornobyl dates back to the immediate aftermath of the disaster. With the Soviet Union in a state of advanced decay, it was soon clear that the Communist authorities were struggling to cope with the scale of the human tragedy. Images of suffering appeared in the Spanish media, striking a chord with many Spanish families. Spain’s civil society soon rose to the challenge and began creating support networks and exchange programmes to bring Ukrainian children affected by the disaster to Spain in order to receive treatment and benefit from the loving hospitality of Spanish families. The arrival of Ukrainian independence in 1991 and the establishment of a Spanish Embassy in Kyiv in 1993 helped create conditions for a more systematic approach, allowing Spanish NGOs to multiply and consolidate their programmes. Orphans and those living in areas affected by the Chorrnbyl disaster were able to travel to Spain in greater numbers. They became known simply as ‘los ninos de Chernobil’ (‘Children of Chornobyl’). In the past 20 years, over 25,000 Ukrainian children have been able to visit Spain within the framework of these programmes. They are accompanied by guardians and hosted by volunteer Spanish families. Trips typically take place during the summer holiday season or the December festive period. Initial efforts focused on providing health benefits to participating Ukrainian kids. Spain was able to offer levels of medical support that were unavailable in the final years of the Soviet Union and the early years of Ukrainian independence, while there were also concerns regarding the continued consumption of contaminated foodstuffs. The emotional wellbeing of visiting Ukrainian children was also a priority. “These holidays are designed to offer Chornobyl children an extended period of time living in the kind of secure and loving family environment that many of them lack,” Explained an official from the Spanish NGO ‘VEN CON NOSOTROS’. The association of Spanish NGOs behind the ‘Children of Chornobyl’ initiative is composed entirely of volunteers. They run dozens of individual exchange programmes. As well as organising holidays with volunteer Spanish host families, the NGOs also manage a range of additional humanitarian initiatives related to Ukraine.

While the material aspects of these programmes should not be underestimated, the psychological benefits of participation have also been considerable. Children affected by the legacy of Chornobyl are able to put their hardships to one side while exploring a new and welcoming environment. They learn Spanish and interact with children from another culture. Bonds of love and affection are often formed between Chornobyl children and their Spanish host families. These bonds often prove enduring, with phone calls, letters, emails and support packages throughout the year, together with the possibility of a fresh trip the following summer. Over the years, the ‘Children of Chornobyl’ initiative has expanded to encompass other underprivileged groups in Ukrainian society. New orphanages have joined the list of participating institutions, while needy families throughout Ukraine have been able to benefit from the programmes developed since the Chornobyl disaster. The solidarity first shown towards the victims of Chornobyl continues to serve as an inspiration for these efforts.

Building bridges between Spain and Ukraine

This long-running civil society initiative has helped connect communities in Spain and Ukraine. Many Spanish host families have visited Ukraine, helping to introduce the country to the outside world. For the Ukrainian children participating in the programme, it has often proved a life-changing experience. Yulia Badiuk was first hosted by a Spanish family in 1995, when she was just 7 years old. She recalls being initially scared, but cherishes the loving relationship she still enjoys with her Spanish host family. “My Spanish family took me around Spain, starting in Malaga and ending in incredibly green Santander. Every year we went to Tarragona where they also had relatives. For all those years, Mari Carmen and Antonio treated me like their own child. Thanks to them I now speak Spanish and was able to see places many children can only dream about.” Misha Karabanov, who first went to Spain as a 12-year-old in 1998, says he considers his Spanish host family his ‘second parents’ and Spanish his ‘second native tongue’. “Many of the happiest times in my life are tied to Spain. I have made many friends in Spain and we have maintained our friendships through all these years. Despite the distance between us, I know I can count on them at any moment.”

About the author: Fernando Girón Pascual is Head of the Consular Section of the Spanish Embassy in Ukraine

www.bunews.com.ua

IdrisKa Tour President Idris Kazimi expects season to be successful as Ukrainian economy stabilizes

How long has IdrisKa Tour been active in the Spanish segment of the Ukrainian international tourism market? We have been offering Ukrainian tourists the opportunity to explore Spanish holiday options for the past eight years.

How has the market for Ukrainian tourism to Spain developed over the years of your involvement in this segment? Spain has always been an appealing destination for Ukrainians. We have focused our efforts on the development of strong marketing campaigns in order to help popularize Spanish tourism opportunities among Ukrainian audiences. One of our key goals has been to highlight the full scope of tourism options on offer throughout Spain.

Which Spanish destinations have traditionally proved the most popular among Ukrainian tourists? Based on the experience of holiday seasons in previous years, the most popular Spanish tourist destination among Ukrainian holidaymakers remains the Costa Blanca. What kind of effect have the economic challenges of the past two years in Ukraine had on the tourism business? Unfortunately, the political crisis in Ukraine has led to a rather deep economic crisis in the country. Inevitably, this has had a negative knock-on effect on the purchasing power and levels of disposable income of ordinary Ukrainians. However, the situation April 2016

spain in ukraine

Ukrainian tourism in Spain: 2016 summer season optimism

is gradually stabilizing. It is now possible to say with confidence that the 2016 tourism season will be successful.

How do you expect the introduction of your new charter flights to impact on Ukrainian tourism to Spain? I am sure the instruction of new charter flight routes will help to further boost the popularity of Spanish destinations among Ukrainian tourists. When choosing a holiday destination, convenient and economic travel options always play a significant role.

What is the most unusual request you have ever had from a Ukrainian customer seeking to spend their vacation in Spain? I think the most extraordinary inquiry we have ever had was from a Ukrainian customer looking for a one-day trip to Spain. When you take the distances involved and the length of the flights to Spain and back into consideration, this customer was clearly what could be termed as an extreme tourist.

Which Spanish destinations would you most like to add to your charter flight portfolio? Spain is a large and fascinating country. Every single region is attractive in its own way and has something unique to offer visiting tourists. This diversity is one of the reasons why people fall in love with Spain. It is also the reason why I would rather not limit our services to any particular regions of the country. 15

Spanish artist honours iconic Malevich Kyiv-born Malevich famed for iconic ‘Black Square’ but Ukraine accused of neglecting legacy The installation of the ‘Monument to 100 Years of Suprematism’ outside the National Ukrainian Academy of Arts by Spanish artist Carlos Garcia Lahoz is a symbolic gesture that gives rise to a much-needed debate about the legacy of Kazimir Malevich. It roots the work of the great avant-gardist in Kyiv, the city of his birth, brings focus to the years he spent teaching at the very same academy, and points to the need for reassessment of the influence of Ukrainian traditional culture on development of global art history. Nevertheless, it sparked considerable controversy – not least because a Spanish artist, and not a Ukrainian, was commissioned to produce this nationally important monument.

Malevich was here. Where is Malevich?

In 1919, having attained the ultimate point of abstraction, the godfather of the Russian avant-garde movement, Kazimir Malevich, declared that the Suprematist experiment was complete. Its objective had been to pave the way towards a visual representation not of objective reality, but of ‘pure artistic feeling’. His iconic ‘Black Square’ (1915) became an emblem for the cerebral approach to painting, an embodiment of his defiant manifesto that proclaimed art as a visual language designed for communicating concepts and the immaterial. We think of Malevich as a visionary figure who sought to break with tradition, a scholar whose painting had more to do with philosophy than craftsmanship. It might surprise many, therefore, to learn that until the age of twelve, the young son of a Polish sugar factory manager knew nothing of professional artists, and only studied drawing briefly in Kyiv from 1895 to 1896. Peasant embroidery, the decorated walls and stoves of village dwellings, and religious icons were the chief artistic inspirations of his childhood, which was spent in the villages of Ukraine, far away from contemporary centres of cosmopolitan culture. The influence of these formative years on the later work of Malevich has been largely overlooked in scholarship until recently, although it is precisely the experience of Ukrainian traditional culture, and not European bourgeois art of the late nineteenth century, that crowned his style with an acute awareness of colour and form. The need to mark the famous artist’s Kyivan legacy has been raised numerous times in post-Soviet Ukrainian public debates, and was brought to the foreground under President Yushchenko. A bronze prototype of the sculpture designed by Igor Grechanyk was informally agreed upon as the model for a statue honouring Malevich, although no provision was made to fund the production and installation of the sculpture. Today, a provisional structure in Vladymyro-Lybidska Street in Kyiv serves as a pressing reminder that the capital could do better. Indeed, the removal of Lenin monuments in recent years has crudely chipped away at the urban environment of Ukrainian cities, and only in isolated cases has this empty space been filled in a meaningful way.

Carlos Garcia Lahoz: artist and mediator

The monument to Suprematism erected outside the National Ukrainian Academy of Arts on 23 February

2016 - exactly 138 years since Malevich’s birth in the very same city - attests to the lasting and profound influence that his ideas continue to exercise today. The broad-shouldered Spaniard behind this 1.5 tonnes of concrete cast gracefully into the shape of three elevated squares is Carlos Garcia Lahoz. “The grey square symbolizes talent, the red one represents passion, and the black square reflects commitment and sacrifice. These are the three elements that are essential to produce genuine art,” the Spaniard explains. “I adapted the original vertical design to create a composition of three flat squares, a space where people could sit and talk, rest, read a book, or even get drunk if they aspire to a more direct contact with the work!’” A former director of an international fish importation firm, Lahoz retired after 20 years in the business, deciding to apply his entrepreneurial mindset and incessant drive to build up an impressive artistic resume. For several years now, he has been organizing exhibitions for Ukrainian artists in Spain, drawing the attention of local communities to the challenges that Ukraine faces. The Malevich sculpture, titled ‘ART’, is a part of a larger project of urban sculpture, ‘Eight European Cities United by ART’, that began in Zaragoza in 2013, and continued in the western Ukrainian city of Lutsk in 2015. He recounts the controversy that surrounded the installation of the Malevich work in the months and weeks leading up to it, when certain members of the academy’s administration and even city administration were angered at the prospect of a foreigner laying claim to Kyiv’s Malevich legacy. “The sculpture is by no means a Malevich Monument as such! Yes, like many of my other sculptures it is influenced by Suprematism in both form and colour. However, last year I completed a different project titled ‘Malevich Tribute’, a sculpture and three works dedicated specifically to the man himself. Together with students of the academy, we created a sculpture based on a Malevich original that hangs in classroom 330, where he is said to have taught. The workshop took several days, and was followed by an exhibition, dance performances, and discussions.” As an outsider, Carlos has been able to facilitate an interactive reassessment of Malevich’s history together with both the students and professors of the academy, who, like many staff of post-Soviet institutions, often need a gentle push to overcome the formality and the traditional hierarchy that prevails. “In the past seven years, I’ve been to Ukraine fourteen times, each time to work on a specific

About the author: Myroslava Hartmond is the owner of Triptych: Global Arts Workshop (www.t-gaw.com), Ukraine’s first private fine art gallery since 1988, and a Research Associate of the Centre for International Studies, University of Oxford, where she explores the role of cultural diplomacy in Ukraine 16

www.bunews.com.ua

spain in ukraine

project or several. I can say from experience that I see in Ukraine a society that is at once radicalized, and with little tolerance for the opinions of others. There are things that I truly dislike. For example, the erroneous concept of ‘competitiveness’ in society. It seems that in Ukraine, the most common way of competing is destroying and disqualifying the work of others in your sphere, and this bothers me a lot. However, there are ways to slowly overcome this. This is why I have always sought to build good relations with administrations and institutions, to apply my experience where it can have the most impact. I’ve exhibited in many museums and public spaces, always with my own resources.” Indeed, owing to the fruitful cooperation that he has cultivated with the academy in Kyiv, discussions are already underway about another joint project next year, this time at the Taras Shevchenko National Museum. This will be an exhibition of painting and sculpture, which will unite the works of Taras Shevchenko and Francisco Goya, mediated by the sculpture of Carlos Garcia Lahoz, who, like Goya, was born in Zaragoza.

Creating art for social change

In the spring of 2016, Carlos completed another major project during his stay in Kyiv, his first exhibition in a private gallery, ‘Noches del Autor’ (‘Nights of the Artist’). This series of eight ‘reflections’ were created specifically for display at Triptych: Global Arts Workshop. It revealed a more private and subdued side to his work. The exhibition project took place under the auspices of the Embassy of Spain in Ukraine, and included an interactive social outreach programme for people with visual disabilities, developed together with a local NGO, ‘Suchasnyi Pogliad’ (‘Modern Outlook’). The project was the basis for a documentary film about the need for social reform to improve the lives of people with visual disApril 2016

abilities, created by a group of socially minded young Ukrainian filmmakers. It will serve to promote a crowdfunding campaign for improving disabled facilities in cultural institutions. Carlos’s work is not only designed to highlight pressing topics, but also serves as the basis for social outreach work. Since 2013, he has been a member of the Red Cross Prisoner Programme in Spain, leading cultural workshop programmes at Zuera Prison, a maximum-security facility in Aragon. One of the large metal sculptures that they created together, ‘We Are All Part of Society’, was later installed outside the judiciary of Aragon. He recalls his amazement at discovering that ‘the prisoners were more free to express themselves than any of us’. ‘Nights of the Artist’ was born out of Carlos’s experience of the Euromaidan protests, which left him sleepless for many months afterwards. They contain figures of nocturnal creatures crafted in modelling acrylic against a diffuse backdrop of a gradient sea. Frogs, ants, dragons, sharks, lizards, and spiders become symbols of the situations that Carlos intended to process through the creation process. Visitors were encouraged to touch the artworks and experience the relief and variety of textures on the picture. “There are many people who make a point of going to every single opening event that takes place, thinking that this means they are committed to the arts. In reality, the only thing they commit to is the free wine that they drink upon their arrival. Picasso said that ‘inspiration exists, but it has to find you working’. The social work that I do is part of my path as an artist, and I campaign today for greater solidarity and inclusiveness in the creative sector. I hope that the work that I do inspires others to work together for change.” 17

Ukraine joins global Cervantes celebrations Spanish literary genius passed away in 1616 but his legacy remains relevant 400 years later This year sees literary events around the global to mark 400 years since the death of Cervantes, with Ukraine set to take part in the cultural tributes. Spanish literary legend Miguel de Cervantes Saavedra – such was his complete name – was born in Alcala de Henares (Madrid) on 29 September 1547. He died in Madrid on 22 April 1616. Memorial events are being coordinated by a National Commission presided over by Their Majesties the King and Queen of Spain. The programme of anniversary activities will help worldwide audiences become better acquainted with Cervantes’ life and work, as well as the historic, cultural and literary context in which he lived. It also seeks to promote scientific research relating to Cervantes and his legacy, to promote tourism routes linked to Cervantes, and to raise awareness of the continued relevance of his message today and the universal values contained in his work.

Exploring the real Cervantes

Commemoration events will take place in Ukraine throughout the year. The first event was was an exhibition dedicated to the writer held at Kyiv’s cavernous Mystetskiy Arsenal arts venue within the framework of the Ukrainian capital’s popular annual book fair. This exhibition will also run at Kyiv’s Book and Printing Museum from 18 May until 30 June. It aims to shed some light on the personality and life of Cervantes and redress the balance after centuries of being overshadowed by the persona of his most famous creation, Don Quixote. The exhibition offers insights into the Spanish literary master’s life and times, his passion for writing, and his other occupations. While serving as a soldier he actually took part in the famous Battle of Lepanto. He also worked as a spy and church clerk. He was excommunicated several times and is believed to have descended from converted Jews. The exhibition highlights all this by intertwining events of his life with the text of ‘El Retablo de las

Maravillas’, one of the eight entremeses (interludes) written by Miguel de Cervantes and published in ‘Ocho comedias y ocho entremeses’ (1615), which were unfortunately never performed during his lifetime. This play captures the essence of Cervantes’ time: the ironical remarks by the characters Chirinos and Chanfalla about love, social disparities, the importance of education, and the love of writing connect perfectly with the most passionate episodes of Cervantes’ own life. Furthermore, the dualism between fact and fiction structured in the play connects with Cervantes’ two parallel personalities: that of the writer and the adventurer. The inauguration of the above-mentioned exhibition at the Book and Printing Museum will take place on 18 May. Since this is also International Museum Day, there will be a variety of activities to mark the occasion and to show how Ukrainian art has also embraced to Cervantes’ work. Visitors will be able to hear arias of Don Quixote performed by Kyiv opera singers, examine Ukrainian historic translations of Cervantes’ works, and admire print illustrations by Ukrainian painter and sculptor Oleg Denishenko.

Don Quixote: icon of totalitarianism?

On 27 June at Kyiv’s Book and Printing Museum visitors will have the opportunity to

participate in an enriching debate between two special guests. On the one hand, the Spanish philosophy professor Rafael Alvira will come to Kyiv to dwell on the ‘heroism’ in Cervantes. He will interact with the hispanist and president of the Ukrainian Hispanist Society Oleksandr Pronkevych, arguably the best Cervantes scholar in Ukraine. Pronkevych will be able to apply Prof. Alvira’s heroism theory to Ukraine and warn of possible manipulations, linking it to his long-year research on Don Quixote as a manipulated figure in the post-Soviet world. Pronkevych has argued that Don Quixote is portrayed by some as a symbol of resistance and by others as an icon of totalitarianism. In September, another milestone in the year of Cervantes’ celebrations is planned, this time linked to that of another great icon of Western literature: Shakespeare. Coincidentally, both literary legends died in the same year. There will be yet another roundtable devoted to Don Quixote and Hamlet as refugees of their time and cultural space, linking their reality to that of today’s refugees and displaced people in Ukraine. This roundtable will take place in September at an international conference in Zaporizhia at the Shakespeare Resource Center of the Classic Private University (70b Zhukovskogo Street).

About the author: Tamara Zabala Utrillas is the Cultural Counselor at the Spanish Embassy in Kyiv

www.bunews.com.ua

Odesa’s Deribasivska Street is fitting homage to Spanish aristocratic adventurer who founded city

Ukraine’s most celebrated street is undoubtedly Odesa’s central strolling strip, Deribasivska Street. It is an elegant, cobble-stoned pedestrian magnet for tourists and locals alike, a fashionable boulevard where people come to see and be seen. The street is a landmark in its own right and one of Odesa’s key attractions. It is also the most prominent reminder of the Spanish role in the foundation of Ukraine’s cosmopolitan Black Sea capital.

The Spanish founder of Odesa

Deribasivska Street is named after Jose de Ribas y Boyons (1749-1800), an aristocratic Spanish officer and adventurer who served as one of the most trusted generals of Russian Empress Catherine the Great. The son of the Spanish Consul to the Kingdom of Naples, Jose de Ribas joined the Imperial Russian Army in 1772 as an ambitious 23-yearold. It was to prove a good career move. He would eventually play an instrumental role in the military campaigns to wrest much of modern Ukraine from Ottoman hands at the end of the eighteenth century, before going on to serve as one of the principle architects of Odesa. Jose de Ribas was both a victorious admiral and a gifted general who won a series of sea battles and

led his Cossack troops to victory at the legendary sieges of Ochakov and Izmail, pushing the borders of the Tsarist Empire all the way to the Danube. But it is predominantly as a builder that Jose de Ribas is today remembered. He is widely acknowledged as the founder of Odesa and the first in a long line of foreign administrators to shape the evolution of the city. Jose de Ribas is credited with first giving Catherine the Great the idea of building a port city on the site of Khadjibey, the Ottoman garrison town he had captured without a fight during the Russian imperial conquest of Ukraine’s Black Sea coastal regions. The Empress accepted his proposal and appointed him chief administrator of the project. The foundation of Odesa was to be his ultimate legacy, overshadowing his many military triumphs. In one of the two statues dedicated to him in today’s Odesa, he appears as builder and town planner, with a spade in one hand and a plan of the future metropolis in the other.

Ukraine’s most Mediterranean street

Odessa not only owes its current form and typically Spanish checkboard street layout to its first governor, Jose de Ribas, but also its elegant Central

spain in ukraine

Spanish roots of Ukraine’s most iconic street

City Garden, originally designed by Jose and his brother Felix before being donated to the city by the latter in 1806. However, the most fitting homage to Jose de Ribas is the iconic street dedicated to him in central Odesa. It is surely appropriate that this bustling, strangely Mediterranean street, lined with hotels, boutiques, restaurants and outdoor cafe terraces, acknowledges one of Spain’s greatest contributions to the making of modern Ukraine. It may come as a surprise to learn that members of the De Ribas family still live in today’s Odesa, maintaining family ties to the city their illustrious ancestor helped create. You might even bump into one of them while taking a stroll on Deribasivska Street, which continues to serve as the focal point of Odesa city life and testament to the vision of the Spanish aristocrat who started it all.

About the author: Dr. Iago Gil Aguado is Deputy Head of Mission at the Spanish Embassy in Ukraine

April 2016

More and more Ukrainians want to study Spanish Increasing numbers of Ukrainian schools adding Spanish to curriculum to meet growing demand Spanish is among the world’s most widely spoken languages, serving as the majority language in more than 20 countries including Spain itself and much of Latin America. Predictably, Spanish language education is in high demand in polyglot Ukraine, with schools struggling to keep up with growing demand for tuition.

Five specialist Spanish schools nationwide

There are currently five schools in Ukraine where Spanish is the primary foreign language on the curriculum. At present, over two thousand pupils study at these schools. These Spanish-speaking schools are located in a number of Ukrainian cities: the Sofía School in Lviv boasts 640 students and 19 Spanish teachers. In the Ukrainian capital, Kyiv’s School No. 176 has 620 students and 12 Spanish teachers, while School No. 64 has 500 students and 10 teachers. In southern Ukraine, 234 students are enrolled at Kherson’s School No. 54, while the Academic Lycée associated with Kherson State University has an additional seven students and one teacher. As well as these specialized Spanish-language schools, there are almost fifty more Ukrainian schools where Spanish features as a second foreign language. In addition to these state schools, Spanish is also an option on the curriculum at many of Ukraine’s private schools including Pechersk International School and Kyiv International School. There are many reasons why Ukrainian parents decide to send their children to Spanish-speaking schools, but awareness of the global importance of the Spanish language is the overriding motivation. Spanish is not only one of the most important languages in the world in terms of the number of speakers (it is the native language for 470 million people and spoken by as many as 559 million). It is also important in terms of its geographical reach. Spanish is the national language in Spain and throughout much of Latin America. Crucially, it is also common in the United States, where the world’s second most important Hispanic community lives. The global Spanish-speaking community is also growing. At present, 6.7% of the world’s population speaks Spanish – significantly 20

larger than the numbers who speak Russian (2.2%), French (1.1%) or German (1.1%). Current forecasts suggest that by 2030, the Spanish-speaking community will account for 7.5% of the global population.

Ukrainian demand rising for Spanish skills

For most Ukrainian parents, location continues to play a major role in their choice of schools. However, in recent years, there has been a gradual move towards more flexible attitudes – especially when it concerns limited opportunities to study specialist subjects like Spanish. Schools offering Spanish-language tuition are increasingly encountering interest from potential pupils who do not live in the immediate neighborhood. Even in such cases, some residential rules still apply – for example, a resident of Right-Bank Kyiv would be expected to apply to Kyiv’s School No. 64, whereas a child living in Left-Bank Kyiv would enroll at School No. 176. Demand is rising for the limited number of places at Ukraine’s Spanish-language state schools. For example, Kyiv’s School No. 176 has received over 200 primary school applications for the coming 2016-17 academic year, despite having only 60 available places. The situation is similar at Kyiv’s other Spanish specialist school, where demand currently exceeds supply by 40%. In light of this growing demand, more and more schools are looking to include Spanish in their curriculums. In the Right-Bank Kyiv district where School No. 64 is located, two additional schools plan to introduce Spanishlanguage tuition in the coming academic

year. The situation is similar throughout Ukraine’s growing private education sector.

Embracing Spanish culture

Studying Spanish is not just a matter of improving linguistic skills. Ukrainian pupils also study different aspects of Spanish and Ibero-American culture. Schools offering Spanish-language tuition participate enthusiastically in activities organized by the Spanish Embassy, especially the popular annual drama festival in Kyiv. This contest is open to all Ukrainian schools offering Spanish-language tuition. Those willing to participate choose a play written by a Spanish playwright, be it classical or contemporary, and prepare everything needed - the set, the costume design, lighting, and music. They then stage the play in Spanish. Although Ukraine does not yet have a Cervantes Institute, Ukrainians may take exams and obtain official ‘Spanish as a foreign language’ diplomas (‘DELE’ for Diploma de Español como Lengua Extranjera) in several cities in Ukraine annually in May and October. The Spanish Embassy in Kyiv also has an excellent relationship with Ukraine’s Spanish specialist schools and supports them by organizing activities, offering academic support – such as the participation of embassy personnel in different events – and via the provision of educational materials. The Spanish Embassy supports Spanish teachers directly. This support includes organizing, together with the Hispanic Society of Ukraine, an annual course in Spanish-language training run by Spanish teachers. Meanwhile, grants to support study in Spain itself are also available. www.bunews.com.ua

La Vaca Tapas offers imported Iberian delicacies including professionally sliced jamon Spain boasts one of Europe’s most vibrant dining scenes, with more Michelin-starred restaurants than almost any other country on the continent. However, these high standards have not yet translated into a global eating out phenomenon, with relatively few Spanish restaurants around the world when compared to similar culinary superpowers like France and Italy. Luckily, Kyiv can offer an authentic Spanish dining experience thanks to the arrival of La Vaca Tapas, which opened for business one year ago in April 2015. This understated yet stylish venue promises to give guests a taste of the real Spain, with a menu featuring dishes from a variety of Spanish regions made using authentic ingredients imported direct from the Iberian Peninsula. Located close to Kyiv’s central railway station on Petlyura Street, La Vaca Tapas (literally ‘The Bull’ Tapas Bar) has a modern and unpretentious feel, with an interior dominated by wooden paneling and giant chalkboards promoting popular dishes. Pop art renditions of 1950s Spanish tourism posters add to the retro chic while proclaiming the joys of Pamplona and Seville. Spanish ceramic tiles reminiscent of the kind used for the numbering of individual Spanish residential houses have been employed to decorate parts of the restaurant interior, bringing an added touch of authenticity. Restaurant Director Olga Tolmacheva says the aim was to create ‘a cozy atmosphere where guests can feel at home while both dining and socializing.’ The venue’s menu offers a veritable culinary tour of Spain including a selection of over 25 tapas options. Popular tapas choices include snacks featuring Spanish manchego semi curado cheese made from sheep’s milk, and imported jamon serrano reserva bodega. As arguably the signature dish of Spanish cuisine, jamon is understandably a major feature of the La Vacas Tapas menu and one of the venue’s most popular delicacies. The restaurant even boasts a fully qualified jamon carver trained in the samurailike art of slicing the meat into wafer thin slices that literally melt in the mouth. As well as a choice of tapas entrees, guests can start their dining experience with a range of soups. The cocido meat soup is so thick you can literally stand your spoon up in it, while the Castilian tomato soup comes with poached egg and lashings of garlic. With the sizzling Ukrainian summer season now on the horizon, La Vaca April 2016

Tapas will also soon be introducing cooling gazpacho soup to help Kyiv diners beat the heat. Main courses include an array of steaks and the mammoth ‘zarzuela’ platter featuring 700g of seafood in tomato sauce. Naturally, there are also a number of paella dishes to choose from including paella de marisco negro, which gains its distinctive black colouring from cuttlefish ink. Among the desserts, the Business Ukraine magazine correspondent responsible for this review was particularly taken by the Crema Catalana – a rich yet light custard-like delight served with apple puree. The wine card at La Vaca Tapas features some of Spain’s most popular tipples including Jaume Serra Cava sparkling white wine. The venue also makes its own fun and fruity sangria cocktails using Spanish wine combined with spirits and fruits. Lager lovers, meanwhile, can enjoy a cool glass of imported Spanish Estrella beer. For added ambience, every Friday evening guests to the venue are invited to unwind to live Spanish guitar performances. Prices at La Vaca Tapas are surprisingly democratic, especially given the fact that many items on the menu are imported direct from Spain. The average price per person for a generous dinner is around UAH 350, with some starters available

spain in ukraine

Authentic Spanish tapas dining in downtown Kyiv

for as little as UAH 30-40. Lovers of Spanish cuisine will be pleased to learn that La Vaca Tapas also offers a ‘Spanish Store’, allowing visitors to stock up on takeaway treats such as Jamon Curado, Fuet Casaponsa sausage, and Argan Chorizo sausage. Students of Spanish culinary traditions are also welcome to attend weekly travel brunches at the venue. These educational lectures take place at the restaurant every Saturday from around 12:00, offering insight into the cuisine and culture of different Spanish regions.

La Vaca Tapas 6 Petlyura Street Tel.: +38-067-5026604 Open: 11:00–23:00 daily www.lavaca.com.ua 21

www.bunews.com.ua

Over 60,000 Ukrainians visited Spain in 2015 despite tough economic climate and devaluation According to the official Ukrainian government statistics, over 60,000 Ukrainians vacationed in Spain in 2015, making it one of Ukraine’s top European holiday destinations. The number of Ukrainians spending their summer holidays in Spain has grown considerably over the past decade, with even the economic challenges and depreciating currency of the past two years failing to deter tens of thousands from making the journey. This Ukrainian contingent is a tiny fraction of the 68 million tourists who visit Spain each year. Spain is currently the number three destination in the world behind France and the United States, with the tourism industry playing a major role in the country’s economy. As part of this month’s special focus on Ukraine-Spain relations, Business Ukraine magazine takes a look at some of the most appealing tourism options available in the land of paella, flamenco, sangria and sunshine.

Alicante and the Costa Blanca

Spain was the first country to develop a mass tourism market and it has remained at the forefront of the industry as it has emerged as one of the world’s most profitable businesses. The Costa Blanca region, together with the city of Alicante, have been mainstays of the Spanish tourism trade since the 1960s and continue to offer some of the best beach options. As well as traditional beach holidays, the region also boasts stunning mountains and a wealth of fascinating historic landmarks – with a special emphasis on the Moorish era and the Reconquista period in Spanish history.

Majestic Madrid as culinary capital

The majority of tourists in Spain stick to the coastal regions, but this is a big mistake. The Spanish capital city, Madrid, is one of Europe’s finest tourist destinations. As well as an array of cultural treasures led by the Prado Museum, Madrid is also a global culinary capital. The city’s 3,000-plus restaurants are joined by culinary markets and new spaces that have reinvented themselves to offer an innovative gastronomical experience. Visitors can enjoy dishes steeped in history at restaurants like Botin, the oldest in the world, or boldly test out original creations by young chefs. If you’re looking for an exciting challenge, search for the best calamari sandwich at establishments around La Latina, Literary Quarter and Plaza Mayor. You can find this heaven-sent culinary icon in its traditional version of battered squid in a crunchy baguette, or in its more modern incarnation of signature tapas.

April 2016

Continue your gastronomical tour with visits to gourmet markets like the monumental San Miguel Market next to Plaza Mayor, where you’ll find local delicacies and regional wines; the trendy San Anton Market in the heart of the Chueca neighbourhood; San Ildefonso Market, inspired by the street food market concept; and Huerto de Lucas Market, an organic food haven. And don’t forget the city’s traditional markets like San Fernando and La Paz, with stalls showcasing the high quality of Madrid’s regional products.

spain in ukraine

Ukrainian tourists drawn to Spain

Endless summer in Tenerife

For some fainthearted tourists, Spain can get a little too hot during the peak of the summer season. This is not a problem in Tenerife, with its year-round moderate sunshine and monotonously gorgeous weather. Tenerife’s greatest asset is undoubtedly the fact that the sun shines every single day. Some have called it the world’s best climate, and it is hard to argue with that assessment. The trade winds that wash over the island are a perfect accompaniment, providing a wonderful contrast to the sun of Tenerife. There is much more that can be said in the island’s favour, but everything else revolves around the uniquely pleasant and gentle sunshine conditions it offers.

Wine tours

Those looking for something more than simply sunning yourself on the beach or clubbing all night can opt for one of 25 unique wine routes running across Spain. These wine tours offer insight into the landscapes, fragrances and flavours that make up the rich tapestry of this vast and diverse country. Options include the Alicante Wine Route, with its unique landscapes and myriad panoramas of vineyards. The Arlanza Wine Route offers insight into more than 450 hectares of vineyards, where millenary technology and culture shake hands with the most modern wineries. The Bullas Wine Route is a captivating stroll through wine history and culture. This is Spain’s quintessential land of wine archaeology, in perfect harmony with nature and wine culture. Meanwhile, the Cigales Wine Route is something of a hidden secret among wine tourism destinations, located in the historic centre of Castile and Leon. This particular tour is full of culture, landscapes, history, heritage, gastronomy and tradition. Spain’s wine industry is one of the oldest in world and has all the attributes to become a major heritage tourism focus. Ukrainian tourists are advised to check it out before it becomes too mainstream.

New Government of Ukraine: How to Stay the Course on the Reforms Agenda Andy Hunder, President of the American Chamber of Commerce in Ukraine

Judicial Reform We expect the new leadership to focus on the successful implementation of judicial reform, which ultimately will ensure proper investorsâ&#x20AC;&#x2122; and creditorsâ&#x20AC;&#x2122; rights protection as well as establishment of the rule of law throughout the country. Lack of clear and predictable rules keep many interested investors away from Ukraine, hampering economic growth.

Open & Transparent Privatization

Another important aspect is clear and transparent privatization of state-owned enterprises which, if conducted in a fair and open way, may bring in billions of dollars of new investments, stimulate creation of new jobs, as well as turn loss-making state enterprises into modern and profitable ones.

Cutting Red Tape

The appointment of a new Prime Minister and Government of Ukraine is not only a challenge but also an opportunity for Ukraine to reboot the reforms process and reach a qualitatively new level of transformation. Ukraine is undergoing turbulent times, and it is critically important to follow the course of reforms set out by the previous Government.

Investors and the business community in Ukraine require essential actions to be taken in order to continue investing and attracting new investment to the country. At these decisive times, the American Chamber of Commerce in Ukraine considers it essential to focus on 5 aspects, which drastically influence overall doing business in Ukraine: the continuation of the IMF program, full-scale implementation of the judicial reform, transparent and fair privatization of the state-owned enterprises, red tape reduction and a decisive fight against deep-rooted corruption.

IMF Program

First of all, it is crucial to take due account of Ukraineâ&#x20AC;&#x2122;s obligations to its international partners and creditors, to make sure the transition period does not throw Ukraine back on the path of much needed reforms. Continuation of the IMF program is very important for the country and its citizens at large, as well as the business in the country and potential investors looking to enter the Ukrainian market. 2016 Chamber Official Service Providers:

April 2016

The fourth aspect is the need for deregulation. This can be done by wider usage of the electronic services in permits issuing and public procurements as well as harmonizing deregulation priorities with business needs. Automation will cut needless paperwork, reduce state expenditures and alleviate corruption.

Fighting Corruption

Ukraine suffers from pervasive corruption. We believe that by carrying out effective and comprehensive reforms agenda in anti-corruption sphere and by creating a graft-free culture based on modern European values the level of corruption in Ukraine will decrease significantly.

Thank You to the previous Government Ministers

On behalf of the membership of the American Chamber of Commerce in Ukraine, I would like to express my most sincere gratitude to Arseniy Yatseniuk personally, and to his team, most of all to ministers Natalie Jaresko, Aivaras Abromavicius, Andriy Pivovarsky and Oleksiy Pavlenko for their openness to dialogue, professionalism, dedication and support of investors operating in Ukraine.

We look forward to working closely together with Prime Minister Volodymyr Groysman and his team in securing a level and fair playing field for promoting the ease of doing business in Ukraine. The American Chamber of Commerce in Ukraine will continue advocating the new Government for acceleration of reforms process and aligning the reforms agenda with the needs of investors and the business community in Ukraine.

3DQWRQH 8 &

& 0 < .

Ukrainian shopping mall sector

showing signs of recovery

More retail and entertainment complexes to open in 2016 as economy returns to growth After two years of steep decline, the Ukrainian economy is finally beginning to show signs of recovery. Key indicators such as GDP are returning to positive territory, while the street-level situation also suggests that Ukraine is now entering a period of modest economic growth. The commercial real estate market is among the many sectors showing discreet signs of recovery.

From market freeze to thaw

Many of the shopping malls that were in the pipeline when the current economic crisis began in late 2013 are finally expected to open their doors for business in 2016. After two years of relative inertia, almost half a million square meters of shopping space is scheduled to open in 2016, with a similar amount expected to hit the market in 2017. According to retail sector research conducted by Colliers International, at the end of 2015, the total amount of quality retail space in Kyiv per thousand residents was 368 square meters (SQM). This total is significantly lower than comparative figures for neighbouring regional capital cities such as Bucharest (441 SQM), Buda-

pest (564 SQM) and Warsaw (623 SQM). These unfavorable comparisons are hardly surprising given the economic difficulties Ukraine has faced over the past two-and-a-half years. The existential crisis sparked by the Euromaidan protests and subsequent Russian military intervention in Crimea and east Ukraine has seen household incomes plummet throughout Ukraine, reducing the consumer spending power needed to fuel the retail sector. This slump has been accompanied by a sharp drop in the value of the Ukrainian national currency, the hryvnia, along with galloping inflation. In other words, retailers and commercial real estate developers active on the Ukrainian market have found themselves confronted by a perfect storm of negative conditions. Many developers reacted to these uniquely unfavourable market conditions by halting new commercial real estate projects. Unsurprisingly, 2015 saw a record low number of shopping malls enter the Kyiv market. Despite these bleak market conditions, Ukraineâ&#x20AC;&#x2122;s formerly robust retail industry has proved remarkably resilient. Even the most severe of economic crises cannot last forever, and the first signs of a :

www.bunews.com.ua

retail

April 2016

: fledgling recovery in the retail sector were already becoming evident

in the second half of 2015. According to data from German market research institute GfK, the relative stabilization of the hryvnia in the second part of the year played a major role in boosting consumer confidence. This led to a rise in spending, which in turn enabled retailers to stabilize turnovers in hryvnia terms. This moderate recovery, following the shocks of 2014 an early 2015, resulted in rising occupancy. Shopping mall vacancy rates in the Ukrainian capital at the end of 2015 stood at 5%, down from a high of 7.3% at the end of the previous year. Arricano Real Estate Chief Marketing Officer Nataliya Dmytrenko confirms this upward trend in occupancy. She points to the experience of Prospekt Shopping Mall, which opened at the end of 2014 at the very peak of the market turbulence. During 2015, the mall’s retail occupancy rate rose 20%, climbing from 73% to 93%.

Made in Ukraine: recipe for retail success

One of the most visible impacts of the Ukrainian retail sector malaise has been the lack of new stores from major international retail brands. Many of the biggest global retail brands have chosen to put Ukrainian expansion plans on ice, with far fewer new outlets opening in 2014 and 2015 than in previous years. Over the past eighteen months, the most active market players have been Turkish brands, with Colin’s and LC Waikiki particularly active. Meanwhile, consultants continue to work with at least two more Turkish retailers – Cotton and DeFacto – over Ukrainian market presence. The biggest retail hit of the past year has undoubtedly been the trend towards ‘Made in Ukraine’ products of all shapes and sizes. This is partly due to the competitive advantages enjoyed by Ukrainian manufacturers, who have benefited in relative terms from the devaluation of the currency and the reduction in labour costs. However, the popularity of locally made produce is also a symptom of the broader national awakening that has accompanied the Euromaidan Revolution, and the mood of national resistance to Russia’s hybrid war. Buying Ukrainian goods has become an expression of patriotism and a symbol of national pride at a time when many previously apolitical Ukrainians are embracing their national identity for the first time. Demand for Ukrainian goods has led to a rising number of outlets springing up throughout the Ukrainian retail sector, with many designed specifically to cater to this emerging market. Ukrainian designer Andre Tan has been one of many fashion industry professionals to capitalize on public hunger for ‘Made in Ukraine’ labels. He currently has 20 outlets across Ukraine, with plans to open a further 20 over the coming year. “Lately it has become fashionable to buy items by Ukrainian designers,” says Tan. “When a customer has to choose between a Chinese or Ukrainian dress, they now tend to opt for the Ukrainian manufacturer. In the past, it was the other way round.” Ukrainian menswear brand Arber has experienced similar growth over the past year. As a result, Arber General Director Vadym Zolotarevskiy says the brand plans to expand from the current total of 120 stores to 470 stores by 2020. The passion for Ukrainian fashions has also led to the appearance of entire department stores located inside a range of shopping malls and leisure complexes. Specialist department stores like Names UA, UDress, and UA Made all trade on the current credibility of Ukrainian designers and offer a platform for both well-established brands and emerging Ukrainian fashion talent. 36

Coming soon: 2016 shopping mall arrivals The current year will witness an array of new arrivals on the Ukrainian commercial real estate market. According to Colliers, there is about 749,000 SQM of retail space under construction in the Ukrainian capital. As the political and economic situation continues to stabilize, projects frozen in 2014 will be the first to hit the market. Major projects scheduled for completion in 2016 include Kyiv’s Lavina Mall (180,000 SQM) and Blockbuster Mall (240,000 SQM), Lviv’s Victoria Gardens (54,500 SQM), Evrobazar in Sumy (23,000 SQM), and Kharkiv’s Nikolskiy (52,000 SQM). The flagship opening of the year will undoubtedly be the widely anticipated unveiling of the renovated TSUM complex in downtown Kyiv. This unveiling comes following years of reconstruction work that has seen the historic building virtually gutted, with only the façade remaining of the previous structure. The iconic TSUM building is a popular Kyiv landmark located on the city’s signature Khreschatyk Street, making its redevelopment a symbol of Ukraine’s retail sector recovery. The new-look TSUM complex is scheduled to open in August 2016, with many already dubbing it ‘the Ukrainian Harrods’ in anticipation of what is expected to be a sharp shift upmarket and away from the megastore’s proletarian past. TSUM Marketing Director Julia Pysmennaya says 70% of the retail space in the complex has already been leased. “Based on our experience, you could say that the situation on the Ukrainian retail market has stabilized and tenants have adapted to current market conditions. Some people have engaged in belt-tightening in terms of costs, size of network and procurement, while others have seen opportunities to develop,” she shares. “We can see from our clients that they have adapted to the new reality and are ready to move forward with their business. The occupancy rate of TSUM is developing according to plan and we expect to open with minimal vacancies.”

2016 Commercial Real Estate Industry Forum On 24-25 May, Kyiv will play host to the national ‘New Comers 2016 Forum’ for retail real estate industry professionals. The event promises to bring together executives from the construction, facility management and shopping mall side of the business along with their colleagues in the retail sector. Representatives of shopping malls including TSUM, Gagarin Plaza, Lavina Mall and Smart Mall have already confirmed their participation in the two-day forum. For further information, or to register for the event, please email Olga Solovei at o_solovei@ureclub.com or call +38067-6567681. www.bunews.com.ua

Ukrainian shopping malls must seek to be unique Ukraine’s increasingly sophisticated consumers are becoming more and more demanding There are numerous large-scale shopping mall projects currently under construction in Kyiv. As a result, there will soon be about 400,000 square meters of leasable area available in addition to the existing retail space in the Ukrainian capital. Is there enough demand to meet this rapidly expanding supply? The Kyiv market is still far from saturation point. According to research by leading commercial real estate consultants, the ratio of shopping space per resident in Kyiv is significantly less that in most Central European capital cities and the largest cities in Russia. At the same time, the population of the Ukrainian capital continues to grow, especially as a direct result of increased migration from the areas in the east of the country affected by conflict. These factors mean that Kyiv is still currently the most attractive market in the country for developers. Arricano develops commercial real estate in various regions across Ukraine, which allows us to can compare the relative rates of market development as well as the differences among target audiences and regional variations in terms of attitudes towards new projects and retail industry innovations. Kyiv remains the clear leader in terms of the number of shopping malls – both operating and under construction – and in terms of the numbers of European brand names opening stores. Kyiv also leads the way in technological and marketing innovations employed by developers.

How difficult is it today to entice international retailers to Ukrainian shopping malls? Despite a number of negative factors such as geopolitical tensions, the devaluation of the national currency, and the decline in consumer demand, international retailers continue to bring new brands to the Ukrainian market. According to data provided by JLL, in the fourth quarter of 2015 a wide range of international brand names entered the Ukrainian retail market. The list of retail market entrants includes Italian menswear brand Maestrami, Dutch lingerie brand Hunkemoller, and German children’s clothing brand Sanetta. Meanwhile, household names like French brand Dior have returned to the Kyiv market. The entry of these and other retailers confirms once again that the Ukrainian market has high long-term appeal, offering the possibility of developing new international networks. When the overall political and economic background in the country improves, I am confident many of the international retail brands that previously decided to take a break from the Ukrainian market will revisit the issue of expansion in Ukraine.

Many shopping malls have experienced falling occupancy rates during the past two years of economic difficulties. How has the changing market environment affected the relationship between landlords and tenants? I believe that the market currently belongs to consumers. A struggle is now taking place between different shopping malls for customer loyalty. Thanks to this heightened competition, the relationship between tenants and lessors is also evolving into more of a partnership. It is an equal partnership without any hierarchy – the efficiency of one element in the equation directly affects the results of the other. In today’s Ukrainian retail market, the mix of tenants plays a key role in 38

About the interviewee: Mikhail Merkulov is Director General of Arricano Real Estate Plc determining the competitiveness of any shopping mall. It is crucial to strike the right balance of product categories and zoning. For example, you need to develop a varied food court while also providing a wide range of entertainment and edutainment options.

As the number of shopping malls in Ukrainian cities continues to grow, how is the art of attracting customers evolving? In today’s Ukrainian market, it is not enough for a shopping mall project to be high quality – it must also be promising in terms of future development. Developers need to think about long-term sustainability. It is always possible to find an immediate target audience for a shopping mall in a built-up residential area, but it is important to stimulate continued interest and to enhance loyalty. The art of engaging consumers requires attention to a range of factors including technological innovations, modern design, effective marketing, and a unique mix of tenants. This quality of uniqueness is essential if the shopping mall is to become part of everyday modern life. It is difficult to define exactly what constitutes uniqueness, but there are a number of maneuvers and solutions that can help to make a shopping mall stand out from the competition. For example, uniqueness could mean a non-standard tenant mix or the presence of new anchors. It could mean original architecture and design, unusual services, or innovative technological solutions like virtual fitting rooms and other mowww.bunews.com.ua

April 2016

emotional engagement, every weekend visitors to the mall can receive free fashion advice from a professional stylist. Each mall needs to find the right balance between emotional experiences and attracting the kind of tenants who are ready to engage in innovative ideas. Malls must be ready to involve communities and conduct their own marketing activities. These are all essential elements in the struggle to attract increasingly demanding customers.

retail

bile applications. A shopping mall’s unique selling point might even be a particularly busy events programme. The list is almost endless. One thing I would emphasize is the importance of generating an atmosphere and fostering emotional engagement. Even as recently as ten years ago, this approach was regarded by many as ineffective. Cynics struggled to see how functional buildings could generate any kind of emotional response. However, today this has become the number one marketing challenge for all shopping malls. Everyone wants to find ways to make their mall a unique experience and a favourite destination. Marketing can also play an important role in attracting loyal customers. At Arricano we often hold public events across Kyiv involving our business partners and the local authorities. We offer our guests the chance to try innovative edutainment projects where both children and parents can participate free of charge. They enjoy a positive emotional experience while also gaining knowledge and engaging as families. We also develop similar projects in cooperation with our tenants, who increasingly tend to understand the importance of such partnerships. Working together creates synergies and multiplies the impact we can have, generating greater flows of visitors. The right tenant mix remains a crucial factor. All shopping malls suffer from the perception that they are ‘almost identical’ until people discover that some malls really do offer a unique combination of shops. For example, Prospekt shopping mall boasts Ukraine’s first hypermarket dedicated to the creative arts, as well as an entire department store featuring clothing from a wide range of Ukrainian fashion designers. In terms of

What should shopping malls be looking for when they approach the issue of making sure their tenant mix is right for their target audience? The ideal tenant mix is the mix that best meets the needs of the target audience. It is therefore important to study detailed portraits of typical customers. You need to research every aspect of the customer profile, including their income levels, their interests, and their individual quirks and personalities. It is also vital to keep your eye on the ball, since the interests of the target audience, as well as the target audience itself, are subject to change. Audiences evolve and develop in different directions - it is very important not to miss these changes and to keep up-to-date with developing tastes. In practical terms, it is virtually impossible to determine any single formula for the perfect collection of tenants. The mix will be different for every individual shopping mall. In the kind of dynamic market context we currently have in Kyiv, the most crucial task facing any shopping mall is to make sure they are meeting customer expectations.

Crisis creates ideal environment for retail revolution

Ukraine’s economic woes offer retail sector impetus to evolve but IT options still underexploited Ukraine’s economy has experienced serious turbulence over the past two years of revolution and armed conflict, with the retail sector suffering more than most. Falling purchasing power has hit retailers hard, while recordbreaking inflation and currency devaluation have combined to create challenges for even the most successful companies on the Ukrainian retail market. This has created long-term uncertainty that has forced the Ukrainian retail industry to develop fresh approaches and adapt to the new realities of the market. Successful businesses always try to find opportunities in any crisis, and this has definitely been the case during Ukraine’s recent retail sector slump. Faced with no alternative but fast adaptation to changing market realities, the retail sector has produced a number of impressive success stories, with some of the most innovative approaches involving both brick-and-mortar and online solutions.

Retailers respond to new market realities

What are the key trends we see today in the Ukrainian retail sector? Perhaps the most striking trend has been the arrival on the Ukrainian market of a whole bunch of new brands of local origin. Unsurprisingly, these brands have shaped consumer preferences, offering them high-quality goods and apparel at competitively moderate prices. This process is also taking place in Ukrainian grocery retail, with imported products increasingly replaced by local goods. As a result, some of the largest supermarket chains active in Ukraine such as Metro C&C, Auchan, Novus and Silpo have all changed their product policy. There have been changes in the nature of the relationship between retail space landlords and their tenants. With vacancy rates in shopping malls pushed up by the declining economic climate, many tenants have gained a better sense of their own bargaining power and have begun to advocate for their rights more forcefully. This has meant negotiating better leasing terms and winning opportunities to expand their presence and strengthen their brands.

End of the mega-mall era?

Over the past couple of years, a major negative trend on the retail market has been the delayed launch of numerous new shopping malls. This 40

requires little further explanation, but it is worth noting that the adverse economic climate has forced the postponement of grand openings even when the property itself is ready for business. The current fate of the Respublika shopping mall, where building work is completed but the complex remains non-functioning, is a visible reminder of today’s business reality in the Ukrainian retail sector. This year will see the trend towards frozen shopping mall construction projects reversed – at least in a number of cases. The most high-

profile opening of 2016 will be the TSUM department store in central Kyiv, while Victoria Gardens in Lviv will be one of the most attention-grabbing new arrivals in Ukraine’s regional capitals. A range of very ambitious shopping mall and entertainment complex projects are also scheduled for completion in 2016, although many industry observers remain unconvinced that XXL efforts like Lavina Mall (100,000+ SQM) and Blockbuster Mall (200,000 SQM) will meet their publicly stated deadlines. I am personally convinced that the trend towards developing large-scale retail projects in Ukraine should soon become a thing of the past. In the world of modern retail, it is increasingly clear that small is beautiful. If we look at the experience of Ukraine’s Central European neighbours, we see that the average commercial real estate project in 2015 and 2016 featured around 30,000 SQM gross leasable area (GLA). A similar move towards smaller shopping complexes is also evident in Russia, which has experienced a major drop in occupancy over the past two years. Ukrainian commercial real estate developers must now catch up with these clear regional trends, which in turn mirror broader global patterns of retail evolution.

Retailers must embrace Ukrainian IT excellence

What else can we expect from the Ukrainian retail sector as it emerges from the stormy business environment of the past two years? One key development will be the increasing use of new technological platforms and a more diverse, multimedia approach to reaching potential consumers. The next generation of shopping centres looks set to reflect the growing importance of digital technologies and the

About the author: Olga Solovei is the CEO and Co-founder of the Ukrainian Real Estate Club blending of different retail formats. Shopping malls will become more diverse. They will serve as public spaces rather than specifically commercial locations. The relentless rise of social media will also start to make itself felt in the very essence of the shopping experience, transforming the entire business model of shopping malls and individual outlets. The Simon Property Group, which is the owner of the biggest chain of shopping malls in the world featuring over 300 locations, has recently unveiled ambitious plans to digitize the stock of all their tenants. This will provide a massive boost to crossover shopping, combining both the hands-on experience of physically browsing throughout stores, with the convenience and intimate immediacy of online access. This hybrid approach to retail offers a world of opportunities to Ukrainian companies. Ukraine is one of the world’s leading IT outsourcing hubs, with a rapidly expanding and highly skilled IT sector. It boasts a wealth of innovative companies that have gained experience working with world-leading brands and institutions. This enormous IT potential could be profitably applied to the country’s retail sector, where the challenges of recent years have created a business climate receptive to change and open to new ideas. The majority of Ukrainian IT companies continue to look to international customers for business, but they may find that there www.bunews.com.ua

Creative career experience for Kyiv kids

Kidlandia theme park finds family-based success by combining entertainment and education What did you want to be when you grew up? This is one of the eternal questions children all over the world are asked. At the Kidlandia complex in the Ukrainian capital, Kyiv kids can try out a range of career options in a magical miniature world designed to offer entertaining and educational insights into future professions. Located inside the Blockbuster retail and entertainment center, Kidlandia first opened its doors to the public in March 2014. The 4,700 square meter theme park features an intricately detailed childsized replica of a modern town, complete with road signs, street names, lampposts and 45 different establishments including everything from a bank and a supermarket to fitness club, beauty salon, medical clinic and police station. This miniature urban environment allows children to try out over one hundred different professions, with professional guides offering insights and allowing kids to engage in educational role-playing while dressing up in the appropriate work uniforms. In order to help youngsters learn the value of money, transactions take place using a special Kidlandia currency modelled on the Ukrainian hyrvnia. To maintain as much authenticity as possible, other Kidlandia documents also mirror their grown-up Ukrainian equivalents. Kidlandia staff are specially coached, receiving regular internal training updates as well as support from the theme park’s professional partners. Guidance also comes from child psychologists, who help to make sure every activity is both interesting and useful, with an emphasis on developing teamwork, decisionmaking abilities, independence, creativity, and leadership skills.

Investing in the future

The theme park has averaged over 250,000 visitors annually during the first two years of operations, with numbers continuing to grow. Given the background of national political instability, economic hardship and military conflict that has accompanied Kidlandia’s arrival on the Kyiv scene, this is a particularly noteworthy achievement. Kidlandia General Manager Elena Rusanova confirms that the theme park’s popularity has been relatively unaffected by the challenging economic climate in the country. She attributes this success to Kidlandia’s ability to present parents with the option of fun activities coupled with an investment in their child’s future. “Despite the difficult economic environment and the ongoing crisis, the Ukrainian 42

family entertainment segment has remained quite robust,” she explains. “While many people have been forced to consider cutting down on everyday expenses, they tend to avoid saving when it comes to their children. Instead, people still want to invest in educational and leisure activities for their kids.” Rusanova claims this durability has been good for the Blockbuster center as a whole, attracting families who then also go on to become customers of other businesses within the complex. Based on the success of the Kyiv Kidlandia theme park, Rusanova sees potential for the expansion of the brand and the possible development of national and international franchise networks. “Our experience in Kyiv has demonstrated how Kidlandia can serve as a powerful anchor for shopping and entertainment centers. This has brought it to the attention of Ukrainian and international commercial real estate developers. We are always happy to share our experience and welcome negotiations on possible Kidlandia franchises with Ukrainian and international companies,” she comments.

Corporate partners add to authenticity

The theme park has already attracted a range of corporate partners, with many of the stores and shops in the Kidlandia theme park carrying the logos and brand names of their real-life Ukrainian counterparts. This is all part of the Kidlandia philosophy of making this miniature world as close to the real thing as possible. As Rusanova explains, Ukrainian and international companies increasingly recognize that it is also good for business. Current partners include companies like the ‘Sil-

po’ supermarket chain, ‘Yagotinskoye Dlya Ditey’ dairy produce company, ‘Oberig’ medical center, ‘Shell’ petrol station, ‘Nova Poshta’ courier service, ‘Ukrbud’ construction company, and many more. “Kidlandia serves as a unique platform for what is a new and highly effective form of brand promotion. It allows companies to reach a large number of potential future consumers, acquainting them with the brand and its key values. We are constantly working to involve new partners in order to build a realistic and sufficiently diverse urban infrastructure. Companies also often approach us independently, seeking to participate in the Kidlandia theme park experience,” says Rusanova. “It is good to see brands thinking globally and recognizing that Kidlandia is not just a way to promote their brand to today’s target audiences, but also a platform to communicate with younger audiences and educate their potential future clientele.” The management of Kidlandia are optimistic about expansion of the franchise in the coming years, and expect to develop further corporate partnerships as their miniature city keeps pace with the development of the Ukrainian capital itself. Rusanova says she remains focused on the core objective of the theme park – educating young Ukrainians. “We are making a contribution to the education of the next generation,” she offers. “It will be a generation of leaders, of open-minded and creative people.”

Kidlandia Theme Park

Blockbuster Entertainment Center 34V Moskovskiy Avenue, Kyiv, Ukraine Email: marketing@kidlandia.ua www.kidlandia.ua www.bunews.com.ua

estonian experience

The Estonian economic miracle and Ukraine

Inspired by e-Estonia: can Baltic success story offer reform and innovation insights for Ukraine?

Poland is widely cited as the nation offering the most useful post-Cold War reform model for today’s Ukraine. But while 1990s Poland appears to offer many obvious similarities in terms of country size, social conditions, and geographical location, there are also important lessons to be learned from transitional experiences elsewhere in the former Eastern Bloc. In terms of Soviet inheritance, the Baltic States offer the most direct comparative success stories. With the highest nominal GDP per capita in the Baltics, tiny Estonia has emerged over the past 25 years as one of the world’s leading digital innovators. The Estonian government and economy have excelled at harnessing the opportunities presented by the internet, building a savvy national brand around the ‘e-Estonia’ slogan, while also introducing novelties like e-residency and giving birth to global tech brands like Skype. This knowledge-based approach to post-Soviet transition has obvious appeal for post-Maidan Ukraine, where traditional Soviet–era heavy industries are either cut off by Russia’s hybrid war or becoming increasingly moribund at a time when the high-tech segments of the Ukrainian economy are accounting for a growing share of GDP. Ukraine clearly has the human resources to thrive as a global high-tech leader, but developing the right business climate for an Estonia-style economic miracle remains a formidable challenge. Business Ukraine magazine spoke to Estonian MP and former Prime Minister Juhan Parts about the lessons of the Estonian experience, the challenges of Ukraine’s formidable reform agenda, and the role the EU can play in securing the country’s successful transition.

Wanted: a much more fundamental approach to reform

Like many informed observers of Ukraine’s reform process, Parts sees the need for far greater outside engagement from the country’s international partners in order to overcome what are deeply embedded historic obstacles. Having played a key role in the post-Soviet transition in his own country, he believes current initiatives are not sufficiently broad in their scope or ambition. Instead, Parts advocates a far more comprehensive strategy. “I’m sorry to say it, but the present policies of Ukraine’s European and American partners are too civilized. We need to realize that the situation requires

unique solutions if we are to help Ukraine combat corruption. I am not advocating outside governance – that would be too radical. Nevertheless, it is clear that we do not have a sufficiently broad-based approach. Different partners are supporting different reforms in specific sectors – the Americans are involved in the reform of the police service, while the EU is financing reform within aspects of the civil service. However, you cannot cook soup in only one part of the pot.” Parts argues that Ukraine’s international allies should acknowledge their own mistakes and recognize the need to move the reform agenda to an entirely new level. “We need to address fundamental issues because at present there are no fundamental solutions. The banking system does not work, property rights do not work, and investors are not coming. International investors need to have faith in the long-term future of the country, and this trust can only come from fundamental changes to the rule of law.”

Addressing Ukraine’s dysfunctional democracy

Parts identifies Ukraine’s fledgling party political system as a key priority, pointing to the continuing culture of backroom horse-trading as evidence of dangerous dysfunction. “One reform area to focus on is cleaning up the party political system,” he says. “It is not normal to have the kind of trading that takes place behind the scenes in the Ukrainian parliament. Legislative productivity is low. Everybody knows that most Ukrainian MPs are not working in the interests of the Ukrainian people. This is due to the lack of a functioning party political system, the absence of party political financing regulations, and the lack of a genuinely free and independent media. We Europeans, together with America, need to recognize our huge responsibility for helping to reform this political culture. It is important for us not to make too many compromises because of the war.” This ‘tough love’ approach would certainly be popular among Ukraine’s outnumbered reformist MPs. The country’s growing but politically underrepresented civil society would also applaud more international pressure – indeed, many senior members of the NGO community have already called on the international community to adopt exactly this kind of tougher stance. However, it is far from clear whether the requisite political will exists within the EU for bigger role in the Ukrainian reform drive. Parts says he has long been aware of cautious attitudes in many of EU capitals towards greater engagement with Ukraine. Despite the sense of urgency created by the Russian hybrid war in Crimea and east Ukraine, this cau- :

About the interviewee: Juhan Parts is an Estonian MP and former Estonian Prime Minister

www.bunews.com.ua

: tion remains a significant factor. He describes such hesitancy as ‘sad’, but

believes the EU should make it clear to Ukraine that membership is attainable if the country can meet the required standards. “NATO and the EU cannot be closed clubs. Future Ukrainian membership of both must remain a possibility. It is frustrating that some of the older EU member states seem to regard further enlargement as problematic. I do not agree with this at all. Nobody has the right to take the prospect of membership off the table,” he offers, qualifying this optimism by adding, “for the time being, Ukraine should probably concentrate on doing its homework. Nobody can confer membership as a gift.”

Building a viable post-Soviet state

Parts was Estonian Prime Minister when his country joined both NATO and the EU in quick succession in spring 2004, giving him unique insight into the processes leading up to these breakthroughs, and also the impact they had on the changes taking place in the country. He says that while the prospect of future EU membership served as a spur for reforms, many of the specific changes required for EU entry matched the country’s broader post-Soviet transformation agenda. “Future EU membership was not initially the main argument for reforms in Estonia,” he recalls. “We were primarily aware of the need to build up our independent state. This meant promoting European values and building up the economy. Most of the goals tied to EU membership also matched our national objective of developing a modern democratic state and economy.” There are clear lessons here for Ukraine as it attempts to build a genuinely independent and democratic state while also seeking to integrate into existing European structures. The geopolitical circumstances confronting Ukraine are infinitely less advantageous when compared to the environment enjoyed by 1990s Estonia, with Russia incomparably more assertive today than it was in the immediate aftermath of the Soviet collapse. Nevertheless, the Estonian experience still offers a series of pointers for Ukraine as it attempts to follow the Baltic States along the road to Europe. High on the list would be Estonia’s success in creating a competitive business environment capable of attracting foreign investment.

Estonia offers e-government inspiration

Estonia’s ability to capitalize on the advantages offered by digital technologies has been the headline-grabbing aspect of the country’s post-Soviet transformation. Unsurprisingly, this digital approach serves as a source of considerable inspiration for many within Ukraine’s own reform camp. The Ukrainian high-tech sector is currently one of the strongest segments of the country’s economy, leading many to suggest that it could be an engine for broader change throughout Ukrainian society. E-government offers the potential to become a major weapon in the fight against corruption, as the success of Ukraine’s ProZorro digital government procurement system has already demonstrated. This online approach to the notoriously corrupt field of state procurement is widely cited as evidence that reforms can be

successful in post-Maidan Ukraine. Inevitably, there are now calls to replicate this achievement throughout the state apparatus. Parts acknowledges the transparency and efficiency advantages conveyed by Estonia’s digital revolution, but cautions against attempts to apply individual aspects of the Estonian model to Ukraine in a selective manner. “Estonian e-government is like a big house built on strong foundations,” he explains. “In order for it to function effectively, you must first create these foundations. That means well-kept and integrated government databases. Every citizen must also have a personal electronic identity. Only then will e-government initiatives become a sustainable investment. It is pointless to talk about individual e-government projects in isolation.”

Ukraine will remain in geopolitical spotlight

Parts comes across as a pragmatist in his approach to Ukraine. The former Estonian PM acknowledges the scale of the challenges the country faces, but also believes Ukraine will remain in the geopolitical spotlight for the foreseeable future, despite skepticism towards the country’s reform efforts and growing signs of ‘Ukraine fatigue’ among many of the country’s international partners. “Nobody has forgotten about Ukraine yet. This is a huge security issue for the whole of Europe. Ukraine is likely to be a leading strategic geopolitical theme for the next 50 years. Otherwise, we risk falling back into the imperial politics of the nineteenth century.” The geopolitical importance of Ukraine’s transition towards European democracy may be sufficient to guarantee the country the continued attention of the international community, but Parts also advises his Ukrainian colleagues against assuming this provides them with a license to ignore their reform commitments. “Ukraine’s current leadership need to understand that they cannot expect to manipulate Western politicians for the long-term,” he cautions. If they heed this advice, he hopes they will receive the EU backing they require. “If Ukrainians want to be part of the European community of nations, the wealthier nations of Europe need to adequately respond to this dream.”

“Ukraine is likely to be a leading strategic geopolitical issue for the next 50 years. Otherwise, we risk falling back into the imperial politics of the nineteenth century.”

www.bunews.com.ua

Versobank’s Riho Rasmann on the potential benefits of e-banking for the Ukrainian economy How directly can the Estonian experience of e-banking be applied to today’s Ukraine? Most e-bankng solutions in Estonia started out as in-house developments based on the needs of customers. They were also designed to reduce costs and move towards greater automatization of banking operations. It might prove difficult to simply transplant existing Estonian e-banking solutions and software to the Ukrainian banking sector, but it is possible to research best practices and look to successful ideas for inspiration.

What role can e-commerce in general play in the development of the Ukrainian economy? E-commerce has became an essential part of everyday life for people and businesses all over the world. It can definitely play a role in the development of the Ukrainian economy. Five or ten years ago, nobody could foresee how quickly e-commerce would develop and change the behaviour of customers. Different e-commerce solutions make it possible to market and sell Ukrainian goods and services domestically and also abroad, leading to quicker growth and lower operational costs. But in order to export, you need goods and services that are globally competitive in terms of both quality and price. E-commerce has widened the market drastically and customers today have a far wider choice. They can compare products without leaving their computer or phone. Many Ukrainians have concerns over the security of online banking and online commercial services. How can e-security be improved in Ukraine, and what should banks and service providers be doing to communicate security issues to the public? Security is one of the cornerstones of all banking services. There are many technical solutions to improve the security of e-banking operations. These involve different customer authorization methods, software and systems protection, encryption technologies, and so forth. Internally, banks can do a lot to improve their own systems like building more complicated firewalls and introducing more complicated authorization systems. It is the responsibility of each individual bank to keep pace with

the latest developments. Educating banking customers is an even greater challenge. The Estonian experience with one of e-banking’s core products – payment cards – illustrates this point. It took considerable time to teach customers in Estonia that they must memorize their PIN codes and not write them on the back of their cards. The same applies to things like internet banking passwords. Customers must be taught that the security of their funds is also their responsibility and not only up to the bank. One cannot blame the police for car theft if the keys were left in ignition and the doors were unlocked.

Based on the Estonian experience, which sectors of the Ukrainian economy would you expect to benefit most from the growth of ebanking and e-commerce? All e-banking and e-commerce initiatives aim to increase efficiency. It makes no difference which sector of the economy is involved, or whether the initiative is related to public services or everyday life. However, in terms of compatability, the service sector and international trade are particularly suitable for such innovations. E-banking will also bring benefits to B2B and P2B relationships. Everything from utility bills to phone and cable TV bills can be paid using e-banking, with service providers billing your bank directly. Greater e-banking penetration would allow for a range of issues to be addressed online including the payment of taxes. What role could e-banking play in the modernization of the Ukrainian state? E-banking can play a major role in simplifying interaction between the state, citizens, and commercial structures, but this also requires effort and trust from all sides. Technical issues are not so critical - everything depends on the readiness of the partners. Interaction between citizens and a wide range of state bodies can be managed via the electronic identification provided by e-banking services. This is true for both individuals and companies. For this to work, the state must trust that whoever logs into the system is actually the person they claim to be. This trust works both ways. For ex-

About the interviewee: Riho Rasmann is the Chairman of the Management Board of Versobank AS April 2016

ample, It took me no more than ten minutes to complete my 2015 personal tax report because I have authorized different banks and other institutions to send my financial data to the tax authorities, who then provided me with a pre-compiled tax report. All I needed to do was check it and make any corrections if necessary. The next online innovation from the Estonian tax authorities is expected to be up and running within one and a half years and will focus on SMEs. It will allow them to authorize their banks to send account statements directly to the tax authorities. Tax payments will be calculated and automatically transferred from the company account without any additional reporting. There are endless possibilities to make interaction between the state, citizens, and commercial structures more efficient and less burdensome, but trust between players remains the key issue. Based on the experience of Estonia, I can tell you that this is not an easy task. You have to change the mentality and behaviour of the whole country. However, once the process has started and you have achieved the first successful steps, the next steps will become much easier.

estonian experience

Can Estonian e-banking offer Ukraine inspiration?

How could a rise in e-banking impact on Ukraine’s international trade relations and business climate? E-banking helps to build a more efficient and transparent banking system as a whole. This is a crucial step towards smoother international trade relations. A strong and reliable banking system is the basis for the development of any economy. Ukraine’s banking sector is currently undergoing major reforms. How could the expansion of e-banking services contribute to this process? I think the further development and wider penetration of e-banking will make the whole banking sector, and also the whole commercial sector, more transparent. It also contributes to the efficiency of the banking sector and helps to make it more profitable, allowing banks to meet rising capital requirements.

Brain TV puts spotlight on Ukrainian IT sector Booming Ukrainian IT industry gets its own TV channel in bid to boost skills and recruitment Ukraine’s IT sector has provided some of the country’s most optimistic news stories over the past year. At a time when Ukraine is struggling to overcome the devastating economic impact of a Russian hybrid war in its industrial heartlands and the occupation of Crimea, the relentless growth of the IT industry has produced some much-needed optimism while offering inspiration for young Ukrainians looking to choose their future career path. However, with annual growth rates of around 25%, the sector is currently in very real danger of outpacing itself. In order to maintain its current breathless expansion, Ukraine’s IT sector will need to attract a whole new generation of specialists, while also honing the entrepreneurial skills of those already in possession of the technical abilities to produce world-beating IT innovations.

IT TV arrives in Ukraine

The latest initiative to help promote IT awareness among Ukrainian audiences is Brain TV, a new digital channel designed to offer tutorials on all aspects of the IT industry while highlighting the individuals and companies shaping the sector. The Kyiv-based Brain TV project launched in April and is currently available in Smart TV format and on the Divan TV platform, which theoretically gives it global reach. However, the initial priority audience is inside Ukraine itself. “Our primary goal is to expand the Ukrainian IT industry community,” explains the channel’s Executive Director Bozhena Sheremeta. “There are a lot of IT schools springing up in today’s Ukraine, but many are overcharging for the services they provide, pricing many potential students out of the market. We wanted to provide access to IT educational materials to a wider audience.”

Focus on educational content

In true startup tradition, Sheremeta currently leads a small full-time team of colleagues supported by dozens of volunteers. The channel is backed by the BrainBasket initiative and relies on funding from financial sponsors drawn from within the Ukrainian IT sector including Ciklum, ControlPay, Terrasoft and Jooble. Content is a mix of interviews, live-streamed coverage of Ukrainian IT events, and educational materials donated by partners including Ukrainian IT schools and America’s Harvard University. As the channel grows, there are plans to add more English-language original content and develop talk shows and news programming. “This year, the goal is to develop the whole concept of the channel and gauge audience reaction. We plan to communicate regularly with our audience via social media and will be conducting our first viewer survey on Facebook in May,” says Sheremeta.

Supporting Ukraine’s growing IT economy

The arrival of Brain TV is arguably long overdue, given the growing importance of the Ukrainian IT sector for the Ukrainian economy as a whole. IT companies currently contribute around 3% of the country’s 48

GDP, placing the industry behind agriculture and metallurgy as one of Ukraine’s top three economic drivers. However, analysts believe the IT contribution to GDP could rise to as high as 15% by 2020 – a staggering expansion that would allow the country to ease its reliance on the traditional industrial sectors inherited from the Soviet era. The increasing importance of the IT sector is already changing the profile of the Ukrainian economy. Many analysts view it as a positive strategic trend towards a more knowledge-based economy offering the kind of skills and services that will allow Ukrainian companies to integrate into global markets. To achieve these ambitious growth projections, IT industry leaders have set the target of increasing the number of IT professionals in the country by 2020 from the current total of approximately 100,000 up to 200,000. Sheremeta says that as well as boosting numbers, it is also vital to foster the non-technical skillset required to succeed in the international IT industry. She sees Brain TV’s educational programming as one way of promoting this goal, and advocates greater focus on business skills and marketing awareness as a way of promoting a more entrepreneurial outlook within the industry. “At present, outsourcing companies are recruiting from a limited pool of employees who might otherwise be working in the startup sector. This is understandable, as the terms offered by outsourcing companies are very attractive. They can offer good salaries and the kind of stability that many people see as a priority. Nevertheless, it is starving the upstart segment of human resources.”

IT professionals need business savvy

Sheremeta regards the growth of the startup sector as a crucial component part of the country’s ongoing IT evolution, and wants to see greater focus on training programmes geared towards practical professional skills. “Technological training courses are not enough. People need access to training in subjects other than programming and coding. Entrepreneurial skills are essential to all startups. We need to be encouraging IT professionals and students to learn more about things like digital marketing and producing a winning pitch capable of impressing international investors.” Sheremeta’s focus on the business aspects of the IT industry is no accident. Prior to taking on the challenge of managing the Brain TV project, she was employed at a startup incubator, worked in IT sales and digital marketing, and also served for a period as an IT journalist. The 23-year-old IT expert says she had often considered the idea of a TV channel dedicated to the Ukrainian IT sector before she was approached in late 2015 with the idea of heading up the Brain TV initiative. “I think the channel is something that can have a major impact on the evolution of the sector,” she offers. “We are trying to develop an entirely class of Ukrainian IT entrepreneurs. The launch of the channel was the first step. We are just getting started.” www.bunews.com.ua

it industry

April 2016

Ukrainian travel site wins lastminute.com investment Innovative Ukrainian online tourism platform offers a connoisseur’s approach to global travel options Where are you planning to spend this year’s summer holidays? As you surf the internet for ideas, there is a good chance you will find yourself using TRIPMYDREAM, a Ukrainian tourism website with global ambitions that recently won international recognition and secured a groundbreaking investment partnership with lastminute.com group. This breakthrough came at the annual Seedstars Summit in Lausanne, Switzerland – one of the world’ premier startup events – with TRIPMYDREAM named as Best Travel Startup. Since winning this award, life has been hectic for the team behind the TRIPMYDREAM project. Co-founder Andrey Burenok says he has been interviewed by virtually every major Ukrainian media outlet. He has also found himself in demand as a guest lecturer at Ukrainian universities. The IT industry is very much in fashion in today’s Ukraine, and Burenok is the high-tech version of a designer label.

From corporate careerist to startup superstar

It hasn’t always been like this. Burenok’s personal journey is a stereotypical post-Soviet fairytale, beginning in sleepy Chernihiv at the turn of the millennium. When the 35-year-old entrepreneur first arrived in Kyiv as a young graduate, he was so poor he had to lodge in the suburban urban jungle on the outskirts of the Ukrainian capital, sharing an apartment with a babushka. He survived on noodles and scrimped on public transport, he recalls. Then came stints at Samsung, TNK-BP, and Swedish media group MTG. These roles presented Burenok with the possibility for considerable professional growth, and for a time he saw himself as the quintessential corporate careerist. Burenok made the switch from the high-powered corporate world to the dynamic environment of internet startups around three years ago. As he explains it, he had long since recognized that every sphere of business activity was moving online and had begun to think about developing his own product. After hiring his current TRIPMYDREAMS business partner, Taras Polischuk, to work on internet solutions at MTG, Burenok’s broad desire to create a startup began to take concrete shape. “I realized that Taras was a genius and decided we had to do something together,” he recalls. Burenok’s epiphany came while experiencing logistical problems during a skiing holiday in Italy in early 2013. A seasoned international traveler, he estimates that during his corporate career he was spending upwards of 200 days travelling around the world for both business and leisure. He knew the travel industry inside out, and was well aware of the shortcomings of the many existing online tourism platforms. The challenge was clear – to create a ‘one-stopshop’ online product catering to the needs of seasoned travelers looking for maximum choice at minimum prices. The result was TRIPMYDREAM, a sleek site that focuses on saving travelers time and money while also offering vacation inspiration. “Our lack of prior experience in the travel industry was actually an asset, because it allowed us to think outside of the box,” he offers. The business model involves engaging potential customers as early as possible in the process of booking a holiday, then claiming a commission from booking partners ranging from airlines and hotels to car rental and travel insurance companies.

The benefits of aiming high

The company’s first partner was global online tourism reservations giant Booking.com – a coup brought about after Burenok boldly approached the company’s CEO Darren Huston on professional networking platform 50

LinkedIn. It proved a textbook example of social media’s ability to transcend borders and build business bridges, earning the Ukrainian startup a prestigious partnership and instantly positioning the new site as a potentially major player. “If you want to achieve something, just knock on the door,” says Burenok of his audacious Booking.com approach. “If you don’t try, you’ll never know if you had a chance.” The company’s latest triumph in Switzerland will bring USD 500,000 in equity investment from Italian-owned lastminute.com group, but it is the added clout this collaboration provides that excites Burenok most. “We don’t need the money as much as we need the expertize,” he explains, recalling how he sold his apartment in order to finance the initial stages of the TRIPMYDREAM project. “Lastminute.com can provide us a huge platform across Europe and globally. They can offer traffic, expert knowledge, and content.” Burenok is clearly enthused by his company’s new Italian colleagues, speaking of the partnership they are forging as ‘La Familia’. “We are becoming one family,” he smiles.

Ukraine’s entrepreneurs and IT experts must unite

The success of TRIPMYDREAM has provided considerable inspiration for other Ukrainian IT professionals. The Ukrainian IT sector is increasingly making headlines as one of the world’s leading outsourcing destinations, but much of the industry remains focused on completing set tasks for foreign clients rather than creating unique and original products. Burenok sees this as part of the natural evolutionary process of the industry and predicts a growing emphasis on IT entrepreneurship as the sector grows in confidence and gains experience. “Ukraine’s IT industry has a lot of further growth ahead of it. The primary focus is still currently on outsourcing contracts, but this experience will eventually equip Ukrainian IT companies with the skillsets and knowhow to create their own products,” he offers. Burenok’s own business background makes him acutely aware of the need for IT startups to combine technical knowledge and commercial savvy. He says combining these talents will allow the IT sector to move to the next level and transform Ukraine into a genuine startup nation. “The future development of the IT sector will now depend on the ability to find the right blend of entrepreneurial brains and technical brains. Ukraine has a huge number of both entrepreneurs and IT specialists. The hunger is there - the challenge for them now is to cooperate.” www.bunews.com.ua

OSCE role allows Russia to act as aggressor and mediator Former Ukraine observer: Russian presence and Western appeasement weaken OSCE mission The OSCE Special Monitoring Mission (SMM) to Ukraine has been responsible for keeping track of the conflict in the country’s east since fighting first erupted in April 2014. The organization has gained huge international exposure via its prominent role in Ukraine, but it has also attracted significant criticism. The most vocal complaints have focused on the presence of Russians within the monitoring mission. As a key member state of the OSCE, Russia has every right to send observers to join the monitoring mission to Ukraine. Nevertheless, critics have argued that these Russian observers make a mockery of the OSCE’s efforts to monitor a conflict they regard as fuelled and directed by the Kremlin. Polish international relations expert Lukasz Adamski was among the first batch of monitors to join the OSCE mission to Ukraine in spring 2014. He left the OSCE SMM after completing a six-month stint in Ukraine, and has since spoken of his frustration over the limitations of the monitoring mission. Now back in Warsaw, 35-year-old Adamski currently heads the Research and Projects Office at the Centre for Polish-Russian Dialogue and Understanding (not to be confused with the Kremlin-backed ‘Foundation Polish-Russian Centre for Dialogue and Understanding’). He spoke to Business Ukraine magazine about his experiences with the OSCE in Ukraine, and explained why he reserves his most stinging criticism for the Western countries he accuses of seeking to appease Moscow. You served in the initial OSCE monitoring mission from March-September 2014. What motivated you to sign up for the mission? There were two main reasons. Russian aggression against Ukraine demanded a rapid reaction from the international community, including political support for Ukraine. Once the OSCE was designated one of the main tools to be deployed in Ukraine, I decided to apply for the post of reporting officer – the person responsible for preparing SMM reports related to the security situation, democracy, rule of law and human rights observance in Ukraine. Additionally, I saw this role as an opportunity to develop my experience as an analyst of international politics. I felt that working in an international organisation would give me a better understanding of foreign policy issues. You have previously stated that you did not extend your 6-month contract as an OSCE monitor in east Ukraine because you ‘didn’t see any sense in working for the organization.’ How did the realities of the monitoring mission in Ukraine differ from your expectations? When I applied for the job of reporting officer in March 2014, I was convinced that the OSCE should collect evidence of Russian aggression against Ukraine in Crimea, as well as evidence of Russian interference in the rest of Ukraine. I assumed that every reasonable and objective observer of Ukraine’s situation would understand that the country was a victim of Russian aggression. From my perspective, the most urgent task was preventing Russian subversion in southern and eastern Ukraine. I thought that as the OSCE reporting officer, I would be able

to prepare analytically solid reports and thus influence the decisionmaking process of the OSCE and – more broadly – the international community. I soon realized I was mistaken. To some extent, I was guilty of being a little bit naïve. According to established OSCE practice, reports should not provoke major controversies. Instead, they should be politically acceptable to all member states, with the emphasis on ‘balance’ rather than ‘objectivity’. In addition to this approach, I also quickly learned that I was only one of several links in the chain of report preparation. Information provided by OSCE monitoring teams had been often already been ‘sterilized’ by the time it reached me. As a result, the reports posted on the OSCE website were often far removed from that what I personally wished to include, and what should have been included. The quality of the OSCE mission’s human resources was also a source of disappointment. There is no doubt in my mind that the overwhelming majority of the mission’s members were unprepared to deal with the politics of the situation they found themselves in. Many of them were former police officers or military officers who could report what they had seen, but they were not capable of understanding the political significance of what they had seen. They were able to collect information, but could not analyze it effectively. It is obvious that you cannot collect the necessary information, not to say evidence of Russian aggression, if you are unable to find the right interlocutors, identify problems, ask the right questions, and read between the lines. Many of the monitors sent to Ukraine by OSCE member states were simply not prepared for the task. Furthermore, very few of them spoke fluent Russian. I met only one fellow monitor who spoke Ukrainian. My impression was that many monitors were not interested in getting into the politics of the situation. Instead, their priority seemed to be maintaining their well-paid positions for as long as possible. Some were afraid that the mission’s mandate might end abruptly. They feared a Russian veto if the mission abandoned political correctness and reported openly.

In your previous interviews, you have spoken critically of the Russian role in the OSCE monitoring mission to Ukraine. Specifically, you commented: ‘when a state is both a party to a conflict and a mediator, it makes no sense.’ Based on your experience with the OSCE in Ukraine, do you believe the mission was fatally flawed from its conception? Firstly, it is important to note that the SMM mandate did not explicitly mention Crimea, which effectively prevented the mission from developing its activities in the peninsula. Secondly, Russia was a party to the conflict but OSCE member states, including Ukraine, agreed in March 2014 that Russian monitors could participate in OSCE SMM activities in Ukraine. This gave Russia the opportunity to influence the mission via monitor reports, and, in some cases, via direct contact with politically unexperienced Western observers. For example, Russian members of the SMM would tell OSCE colleagues :

About the interviewee: Lukasz Adamski is Head of the Research and Projects Office at the Centre for Polish-Russian Dialogue and Understanding in Warsaw. He was formerly a member of the OSCE Special Monitoring Mission to Ukraine.

www.bunews.com.ua

geopolitics

April 2016

: that federalization is the only possible solution for Ukraine, or that the

Russian language should be recognized as the second state language. They would refer to the experience of Finland or Switzerland, forgetting to mention that every country is specific and state bilingualism is more the exception than the rule in Europe. These narratives seemed convincing to some Western monitors, especially those viewing Ukraine from an uninformed and narrow perspective. The most important flaw in the mission lies in the OSCE decisionmaking process, which reflects the will and political expectations of the organisation’s member states. The OSCE operates on the principle of consensus. This is the legal basis of its activities, which – in case of Ukraine –serves to prevent any attempts to use the mission as a political instrument to defend the victims of aggression. In this sense, my criticism is not directed against the mission management and my former colleagues, many of whom worked very hard. My criticism is primarily against those Western states and societies that pursue a policy of appeasement towards Russia. It seems to me that the OSCE could have done much more in the first months of its activities in Ukraine. However, this might have put the monitoring mandate at risk and could also have posed a threat to the future of the organization as a whole. Was this cautious approach justified? Was it beneficial to Ukraine, given the political conditions in the country at the time? These are separate issues, but it is important to ask such questions. The OSCE Special Monitoring Mission to Ukraine is seen by many as a continuation of the organization’s monitoring role during the 1990s Balkan Wars. What do you regard as the key similarities and differences between the monitoring challenges in Ukraine and the Balkans? The differences are obvious. In the Balkans, we faced conflicts between different nations. Russia supported the integrity of Yugo-

slavia against separatism. Sentiments of solidarity with Orthodox Christians, mainly Serbs, were also visible in Russia, but one should not overestimate its political significance. In Ukraine, Russia is a party to the conflict and is present in both Crimea and the Donbas. The Kremlin’s policy towards Ukraine is rooted in an obsolete and politically dangerous vision of Russian identity encompassing all Eastern Slavs. This leads us to the conclusion that the conflict in Ukraine is not only a war between two states, but also a conflict of identity for both Russians and Ukrainians, provoking enormous emotions among both political elites and the public. In the case of the Balkans, the situation was different. You have said that the MH17 incident was a watershed moment for many in the OSCE monitoring mission. Following the attack on the airliner, you say many realised they were not dealing with an internal civil war but rather an international conflict. How did these changing attitudes impact on the mood within the OSCE monitoring mission? The mission worked extremely hard during the days following the MH17 attack. Many observers witnessed the crash site and were personally shocked, which is absolutely understandable. It opened the eyes of those who had previously underestimated the significance of Russian interference in the conflict. Based on your assessment of the OSCE’s strengths and weaknesses in east Ukraine, what role do you see for the OSCE in future conflict zones? I would propose to either use the OSCE only in small regional conflicts, or to apply the ancient Roman principle: ‘nemo iudex in causa sua’ (literally: ‘nobody should be a judge in their own case’). In line with this principle, OSCE member states involved in conflicts would be barred from participating in monitoring missions. www.bunews.com.ua

Networking events

Turkish Art on Andriyivskiy Uzviz The Ukrainian capital’s art space ‘Triptych: Global Arts Workshop’ on Andriyivskiy Uzviz played host to a colourful exhibition by Turkish artist Canan Berber in April. The exhibition was held under the patronage of the Turkish Embassy in Ukraine and featured Berber’s trademark bright and striking imagery highlighting the cultural diversity of her Turkish homeland. 56

www.bunews.com.ua

Kyiv Expat Author Explores Lawless 1990s Fryday Kyiv hosted an evening with well-known American lawyer and author Alex Frishberg in April at 22 Speakeasy. Frishberg took guests on a virtual voyage through the lawless world of 1990s Ukraine via a performance based on his novel ‘The Steel Barons’. Frishberg’s book recounts the rise of the oligarch class during the early years of Ukrainian independence – a time when people became millionaires overnight and the lines between outlaws and lawmakers were often blurred. To find out more about more upcoming events search for ‘Fryday Kyiv’ on Facebook.

April 2016

and finally...

Chornobyl mural tribute to Ukrainian chronicler of disaster

As part of anniversary events to mark 30 years since the Chornobyl nuclear disaster, Australian Street artist Guido van Helten and Ukrainian arts coordinator and filmmaker Geo Leros collaborated in April to create the first street art mural project inside the Chornobyl zone itself. Working in the photorealistic style and painting inside the unfinished reactor 5 at the Chornobyl power plant, Guido van Helten created an artwork based on a photograph taken at the time of the disaster in 1986 by renowned Ukrainian photojournalist and chronicler of the Chornobyl tragedy Igor Kostin. Guido van Helten said he chose to recreate the work of Igor Kostin in the mural as a tribute to the Ukrainian journalist’s efforts to document the tragedy and its aftermath. Kostin sacrificed his health in

order to tell the story of Chornobyl to the world. He passed away in 2015. “I wanted to create a work that honoured the sacrifices Igor Kostin made in order to document this disaster. I also wanted this work to underline the importance of photo journalism as a medium for sharing important information with the world,” commented the artist. Ukraine’s Chornobyl atomic energy plant was the scene of the world’s worst atomic energy disaster in April 1986. The tragedy was exasperated by the initial refusal of the Soviet authorities to warn the population about the scale of the danger they faced. Instead, traditional May Day public holiday parades took place in nearby Kyiv and other Soviet cities, while senior Communist Party members quietly evacuated their own children to safer locations.

The Kremlin’s handling of the Chornobyl tragedy is widely regarded as one of the key events leading up to the collapse of the Soviet Union. It shattered faith in the Soviet state and led to widespread public fury. Independent Ukraine continues to live with the legacy of the disaster. Meanwhile, the site has become a ghoulish tourist attraction and remains a testament to Soviet incompetence and inhumanity. The Chornobyl reactor mural is part of the ArtUnitedUs project, a global street art initiative centred on Ukraine aiming to promote global peace and international understanding. For further information please contact saygeoleros@gmail.com

Letters to the editor: editor@bunews.com.ua Advertising inquiries: +38-067-4032762 Business Ukraine is distributed every month at a wide range of leading business centres, hotels and restaurants in Kyiv and throughout Ukraine as well as on incoming flights to the Ukrainian capital. Registration: KV 15006-3978PR Published by: Open Borders Media Director: Susanna Dickinson

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