Business Ukraine 06/2019 by Business Ukraine magazine

Issue 06/2019

VINNYTSIA CITY GUIDE

WHY CHOOSE

BUSINESS UKRAINE 06/2019: Vinnytsia has long been one of Ukraine’s leading agribusiness hubs and has managed to attract considerable domestic and international investment. In recent years, the city has also regularly topped nationwide surveys covering everything from ease of doing business to quality of life. Find out more with our Vinnytsia City Guide in this month’s issue of Business Ukraine magazine.

Ukraine’s Ballot Box Revolution is Vladimir Putin’s Worst Nightmare Vladimir Putin is fond of claiming Ukrainians and Russians are one people, but the contrasting fortunes of the two countries’ electorates in recent months offers a timely reminder of just how far apart these nations have become. In July, Ukrainians voted for a complete overhaul of their parliament, handing a landslide victory to President Zelenskyy’s youthful Servant of the People party and completing the ballot box revolution that began with the comedian-turnedpolitician’s presidential election win just three months earlier. While this unprecedented political transition was underway in Ukraine, Russian riot police were busy crushing pro-democracy protests in Moscow. The demands of the protesters were hardly revolutionary - they merely sought representation in forthcoming elections to toothless local councils. Nevertheless, the Kremlin responded with wildly disproportionate levels of violence that sent an unambiguous message of zero tolerance to any future opponents of the regime. As Russia took these latest steps in the country’s long post-Soviet journey back towards authoritarianism, the contrast with Ukraine’s increasingly vibrant democratic culture could hardly have been more striking. The consolidation of Ukrainian democracy is bad news for the Putin regime on a number of levels. In practical terms, it robs Moscow of the chance to regain the imperial influence it has lost due to ongoing Russian aggression in Ukraine. Ukrainian pro-Kremlin parties saw their collective support slump to well below 20% in this year’s election cycle. Given the shifts in Ukrainian public opinion since the onset of Putin’s war, it is hard to imagine a set of circumstances that could facilitate a return to the days in the not-too-distant past when Russian candidates were capable of securing around half the vote in Ukrainian elections. Ukraine’s presidential and parliamentary votes have also gone a long way towards debunking the narratives that serve as central pillars in Russia’s information war. The stunning success of Jewish Russian-speaker Volody-

myr Zelenskyy, coupled with the miserable failure of the country’s nationalist parties, has made a complete mockery of Kremlin attempts to portray Ukraine as a country in the grip of a fascist takeover. The Zelenskyy phenomenon poses an even greater threat on the Russian domestic front. The meteoric rise of the former comedian is a nightmare scenario for the Kremlin that clearly demonstrates what genuinely free and fair elections in the post-Soviet space can deliver. Indeed, Zelenskyy made exactly that point on the night of his presidential election victory, portraying his success as something for others across the former USSR to emulate. Nor is he as easily demonized as his predecessors, whose emphasis on Ukrainianization projects made them all-too-easy targets for the Kremlin propaganda machine. On the contrary, the Russian-speaking Zelenskyy enjoys genuine popularity inside Russia itself and is not afraid to use it. He has even vowed to push back against the Kremlin infowar by launching Russian-language media platforms and contesting the information space previously ceded to Moscow without a fight. All this could hardly have come at a worse time for Vladimir Putin. The Russian dictator still has five years left to serve of his current and constitutionally final term in office, but speculation regarding his plans for 2024 is already approaching fever pitch. With unrest growing in the country over economic stagnation and falling standards of living, this uncertainty is particularly dangerous. The last thing Putin needs is a bright young thing in neighboring Ukraine demonstrating to ordinary Russians that fundamental change is entirely possible if democracy is able to take root. This makes Volodymyr Zelenskyy a uniquely awkward adversary for the Kremlin. Ominously, it also makes his downfall a Russian priority. If it proves impossible to undermine Zelenskyy’s appeal, the Kremlin may decide it has no choice but to crush him or put its own future survival at risk.

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

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Fitch Upgrades Ukraine Ratings agency Fitch upgrades Ukraine to “B” amid optimism over new government’s agenda

As the autumn business season got underway in Kyiv, the country’s investment climate received a boost with news that Fitch Ratings has upgraded Ukraine’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to “B” from “B-“. In both cases, the outlooks are positive. Fitch, which is considered one of the “Big Three” global credit ratings agencies alongside Moody’s and Standard & Poor’s, said the improved outlook reflected Ukraine’s positive macroeconomic fundamentals along with a growing sense of optimism surrounding the initial appointments and reformist agenda of the incoming Zelenskyy administration. “Ukraine has demonstrated timely access to fiscal and external financing, improving macroeconomic stability and declining public indebtedness, while a shortened electoral period has reduced domestic political uncertainty. Expected macroeconomic policy continuity, together with the new government’s strong stated commitment to structural reforms and engagement with international financial institutions, mean that Fitch expects further improvements in creditworthiness,” the agency noted in a 6 September statement confirming the Ukrainian upgrade. This encouraging Fitch assessment of Ukraine’s prospects is the latest example of the “Zelenskyy effect”, with the former comedian’s remarkable success in Ukraine’s 2019 presidential and parliamentary elections sparking an upswing in optimism over the direction the country is heading. There have been a number of positive economic indicators since Zelenskyy’s landslide victory in April’s presidential election. The Ukrainian hryvnia has enjoyed a period of unheard-of international popularity and emerged as the best-performing currency against the US dollar in the first half of 2019. Meanwhile, Ukrainian GDP growth surged in the second quarter of the year to reach 4.6%, almost double the consensus forecast for the country among international financial institutions. 10

At this very early stage in his reign, the country’s new head of state cannot take all the credit for the improving outlook of the Ukrainian economy. Indeed, many observers have been quick to point out that the incoming Zelenskyy administration is actually reaping the benefits of economic policies initiated during the preceding five-year Poroshenko presidency. There is much truth to such claims, but it is also true that Zelenskyy’s emergence has struck a chord internationally and succeeded in shaking up the gloomy narratives that have long shrouded attitudes towards Ukraine. This newfound enthusiasm is rooted in Zelenskyy’s status as a completely fresh face in Ukrainian politics, coupled with his overwhelming popular mandate for change and thumping parliamentary majority. A number of well-received initial appointments have bolstered perceptions that Zelenskyy will pursue meaningful reforms, while his strikingly young government’s ambitious agenda of privatization and land sales together with deregulation and digitalization has generated approving nods throughout the investment community. This upbeat beginning has led to a flurry of international media reports talking up Ukraine’s prospects. Bloomberg set the tone in late August with a piece entitled “As Europe Struggles, Ukraine’s Economy Heads for an Upswing”, in which the author noted, “President Volodymyr Zelenskyy, who won control of parliament last month, has set his sights on expansion of 5% or more in the coming years. A reform plan is fueling optimism among investors and has made the hryvnia this year’s best-performing currency.” In the cynical world of Ukrainian political commentary, few expect this unfamiliar and disorienting positivity to survive beyond the first frosts of autumn. Indeed, concerns over recent perceived anti-democratic steps suggest the honeymoon may soon be over. Nevertheless, Zelenskyy’s rise has already challenged many of the negative stereotypes that have sullied Ukraine’s image for decades. www.bunews.com.ua

Lviv IT Park receives green light

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The Innovation District IT Park in Lviv received construction approval in early September, paving the way for the start of building work in autumn 2019. The Innovation District IT Park is set to become a multifunctional 100,000 square meter space dedicated to innovation that will host up to 10,000 IT specialists and serve as a focal point for Lviv’s thriving tech sector. The USD 180 million project’s backers include Galereja Centre, Brookfield & Partners, and Horizon Capital.

Ukraine No. 2 in East Europe for air travel

Ukraine is now the number two country in Eastern Europe in terms of airline passenger traffic, according to new figures covering the first half of 2019. In a study by Poland’s pasazer.com, Ukraine leapfrogged Romania to occupy second place behind Poland among a group of ten featured Eastern European countries. Ukraine’s total for the six-month period was 10.7 million passengers, representing a 20% year-on-year increase and placing the country ahead of third-placed Romania (10.5 million), the Czech Republic (8.1 million) and Hungary (7.6 million).

Kharkiv Airport Sets New Passenger Record Passenger numbers at Kharkiv International Airport rose by 48% year-on-year during August 2019 to set a new record of 140,400 people. This surpassed the previous monthly high of 130,700 passengers established one month earlier in July 2019. Kharkiv’s surge in passenger volumes during the peak summer season has helped push annual growth at the airport to 29% for the first eight months of the year. The most popular destinations from Kharkiv are currently

Sharm El Sheikh (Egypt), Istanbul and Antalya (Turkey), Tel Aviv (Israel), Kutaisi (Georgia), and Barcelona, Warsaw and Vienna in the EU. Kharkiv International Airport is part of Oleksandr Yaroslavsky’s DCH Group and is the largest airport in eastern Ukraine. It underwent comprehensive redevelopment ten years ago as part of Kharkiv’s preparations to serve as one of four Ukrainian host cities during UEFA’s Euro 2012 European Football Championship.

Baker Tilly wins tender to audit Ukroboronprom

Baker Tilly will carry out an unprecedented audit of Ukraine’s vast state-owned defense sector concern Ukroboronprom following a transparent tender process held in September via the Ukrainian government’s award-winning ProZorro digital platform. News of Baker Tilly’s selection brings to an end a two-year saga to identify an auditor and makes possible a landmark audit of the giant concern. It comes alongside the recent appointment of Ukraine’s reformist former Minister of Economy and Trade Aivaras Abromavicius as the new CEO of Ukroboronprom.

Ukraine to introduce UAH 5 coin in autumn 2019

National Bank of Ukraine (NBU) Governor Yakiv Smolii expects the new UAH 5 coin to enter circulation in autumn 2019 as the country’s currency modernization drive continues. The launch of the UAH 5 coin, which features a portrait of seventeenth century Ukrainian Cossack leader Bohdan Khmelnitskiy, is part of a broader revision of the Ukrainian currency that will see smaller denomination coins and notes gradually phased out. The NBU is seeking to adjust the country’s cash flow to reflect the new economic realities of rising prices and growing salaries following the 2014-15 devaluation of the hryvnia and subsequent years of GDP growth. By 2022, new coins will fully replace the one, two, five and ten hryvnia banknotes. Meanwhile, on 25 October the new UAH 1000 banknote will enter circulation and become the country’s largest denomination bill. 12

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Leading emerging market bond broker expands from Latin America to Ukraine BCP opens Kyiv office as company president Randy Pike describes Ukraine as “white hot”

About the interviewees: Randall E. Pike (left) is president of BCP Securities, LLC. James Brooke (right) is Managing Director of BCP Securities Ukraine (Photography: Veronica Green Photography and Alexander Bugaenko) Randy Pike held his first Ukraine corporate bond conference in Kyiv back in June 2014, a time when the crisis sparked by Russian military aggression in Crimea and the country’s eastern borderlands was at its height. Despite this somewhat inauspicious start, his team plowed ahead, returning every June to offer a conference where Ukrainians had the opportunity to pitch their companies to foreign investors. This patience and persistence appears to have paid off. With Ukraine’s president and parliament now aligned for the first time since the country gained independence in 1991, Pike, who is president of US-based emerging market bond broker BCP Securities, is taking the next step, with the opening BCP’s Ukraine office in September. “Ukraine is white hot,” Pike says of the surge in foreign investor interest in Ukraine following the country’s recent presidential and parliamentary elections. “This is a year, when, wow – everybody seems to be on the same page.” Many business journalists in Kyiv believe BCP will benefit from first mover’s advantage. In a sign of the changes currently underway in the investment climate, BCP is the first international corporate bond broker to plant its flag in Ukraine since war and recession scared away international investors five years ago. Pike founded BCP 30 years ago. Since then, it has grown to become a leading broker dealer for emerging market corporate bonds. Over 14

the last 12 years, this fully licensed US investment bank has helped raise USD 15 billion for companies, largely in Latin America. BCP has grown into a partnership of 15 financial professionals, most of whom have worked together as a team for the last 15-20 years. The BCP Ukraine office will be located in the heart of Kyiv and headed by James Brooke, known to many in the Kyiv business community as editor of the Ukraine Business News morning email. In late July, Brooke got a taste of the growing investor interest in Ukraine during a visit to New York. “The Ukrainian parliamentary election had taken place on Sunday, and on the following Monday morning, BCP sales people started calling around to see if anyone wanted to hear about Ukraine. Doors just flew open,” recalls Brooke. In a day and a half, Brooke briefed eight different hedge funds and major institutional investors in Manhattan. “Asset managers were intrigued to learn that BCP was expanding to Ukraine and excited by what is going on in Ukraine.” Pike also recalls the enthusiastic response. “In one day, all the biggest investors wanted to see him. And these were guys who didn’t want to come to the Ukraine conference just weeks earlier in June.” BCP’s business stands on three pillars. It originates bond deals, drawing on relationships built up over years with 1,500 financial institutions including private banks, hedge funds

and asset managers. “For a Ukraine bond, we will have 40 sales people spending the week on the phone, and they are going to sell it,” Pike said in early August, when he spent two weeks meeting Ukraine corporate finance officers in Kyiv. Building on relationships with institutions specialized in emerging market risk and reward, BCP has a strong record for selling new issuances. A look at their ‘tombstones’ – notices of transactions over the last two years – shows that issuers repeatedly return to BCP. “Our clients are very loyal to us and we are very loyal to them,” comments Pike. BCP also distributes research coverage to every issue “for the life of the bond.” Covering 250 emerging market bonds, including 18 from Ukraine, Pike explains, “BCP is the only one in EM hiring for research. The research team is lead by Ben Hough, a managing partner who was a top portfolio manager for two decades in New York.” This flow of information by an independent research unit generates business for BCP in the secondary market. One month after a recent Brazilian bond placement, Pike said his trader in Rio de Janeiro checked the volume of trades. BCP accounted for 80% of the first month’s volume. “This is another reason why issuers love us,” says Pike. The company makes about 25,000 trades a year, turning over USD 10 billion in bonds. Today, BCP has trading desks in Greenwich, Miami, Los Angeles, Madrid, Mexico, Rio de Janeiro and Singapore. Meanwhile, the bulk of BCP’s bond work is with Mexico, Brazil and Argentina. Despite this focus on Latin America, the expansion to Ukraine is not entirely out of Pike’s comfort zone. BCP worked extensively in Russia from 2003-2010. As a legacy, the company has several Russian-speaking staff members. Pike’s first exposure to the Russian language was in April 1975 when he piloted a US Air Force intelligence gathering plane over Laos, listening to Soviet radio traffic surrounding the fall of Saigon. Fast forward to last month and Pike was in a classroom five afternoons a week, taking Russian language lessons in Kyiv’s Podil riverside district.

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Vinnytsia Investment Guide Central Ukrainian city punches above its weight in the struggle to attract international investment

Located two hours southwest of Kyiv by train, Vinnytsia is one of Ukraine’s smaller oblast centers, but it punches well above its weight when it comes to attracting both domestic and international investment. This month sees Austrian sportswear giant HEAD begin construction work on a major new manufacturing plant in the city, which will be located close to the existing plant of Barlinek, Poland’s largest wooden floorboard producer. US-based global agribusiness market leader Bunge has recently increased its investments in Vinnytsia, while flagship Ukrainian brands including Nemiroff, Roshen and UBC Group all have strong local presences. This success is down to a combination of convenient location, accommodating local authorities, and the economic appeal of small town prices coupled with big city ambitions. It helps that today’s Vinnytsia is also a particularly pleasant place to be. Thanks to successful cooperation with international partners 16

over a number of years, the city now has one of Ukraine’s most convenient public transport systems and literally buzzes with trams. It is easily navigable and elegantly laid out on either side of the Southern Buh River, with just enough surviving Tsarist era architecture to take the edge off the far more plentiful examples of dour Soviet functionality. Vinnytsia’s history stretches back into the fourteenth century, when the city was the site chosen for a fortress built by the Lithuanian dukes to defend against Tatar raiders. For the next few hundred years, Vinnytsia was part of the Grand Duchy of Lithuania and then the Polish-Lithuanian Commonwealth, with a brief interlude as one of the northernmost Ukrainian acquisitions of the Ottoman Empire. Following the partitions of Poland at the end of the eighteen century, it became part of the Russian Empire. Even when judged by Ukrainian standards, Vinnytsia suffered a partic-

vinnytsia investment guide

ularly volatile twentieth century experience. The city served briefly as capital of the Ukrainian People’s Republic in the ultimately unsuccessful bid to establish an independent Ukrainian state following the 1917 Russian Revolution. In the wake of the Bolshevik victory, the region suffered huge loss of life during the Holodomor manmade famine orchestrated by the Soviets in the early 1930s, and served as the scene of numerous large-scale massacres as Stalin’s Great Terror raged across Ukraine towards the end of the decade. Vinnytsia’s WWII experience was complicated by the presence on the outskirts of the city of Adolf Hitler’s Werwolf military headquarters. This was to be the most eastern command post used by the Nazi leader during the war. His presence so deep inside Soviet territory meant the imposition of a severe security regime throughout the surrounding region and the brutal treatment of the local population. Hitler spent a total of almost five months in Vinnytsia over a period stretching from summer 1942 to autumn 1943. It was here that he made the fateful decisions leading directly to the decisive German defeat in the Battle of Stalingrad. The retreating Germans destroyed the entire Werwolf complex, leaving nothing behind but the strewn debris of exploded concrete bunkers. The only structure to remain intact was a swimming pool allegedly constructed for Hitler’s perwww.bunews.com.ua

sonal use but never actually used. Today the site serves as a Memorial Complex to the Victims of Fascism, with plans in place to turn it into a major historical attraction recounting the horrors of the Nazi occupation of Ukraine. Since the Soviet collapse, Vinnytsia has emerged as one of independent Ukraine’s most dynamic and forward-looking regional capitals. It regularly tops international surveys of Ukrainian cities and has longstanding cooperation agreements in place with numerous foreign partners and international financial organizations. With a population of just under 400,000, Vinnytsia is convenient in size, allowing for meaningful trials of municipal reforms prior to implementation in larger and more challenging Ukrainian cities. In recent years, the city has often been publicly associated with the national authorities in Kyiv. Vinnytsia is one of the bastions of former president Petro Poroshenko’s chocolate empire, while the city’s ex-mayor Volodymyr Groysman went on to serve as Ukrainian prime minister from early 2016 until summer 2019. The dawn of the Zelennial era has since put a stop to jokes about Vinnytsia as Ukraine’s unofficial second capital. Nevertheless, the future remains bright for this enterprising and engaging city located in the very heart of the Ukrainian breadbasket. 17

Value-Added Vinnytsia

Regional economic strategy looks to build on Vinnytsia’s agriculture and manufacturing strengths

September saw an official capsule-laying ceremony in Vinnytsia to mark the beginning of construction at what will eventually be a major production facility for Austria-based global sporting goods giant HEAD. The EUR 80 million project is set to become one of the world’s largest winter sports production facilities. Once operational in 2021, the plant will create up to 1,000 new workplaces. Following the selection of Ukraine in 2018 from among a range of possible locations in Central and Eastern Europe, HEAD officials identified the central Ukrainian city as the most suitable Ukrainian destination for the future plant. “We decided to choose Vinnytsia among six potential (Ukrainian) cities because they have the most professional support and good location,” commented HEAD COO Gerald Skrobanek. The decision by HEAD to build a major production facility in Vinnytsia is the result of long-term efforts by the local authorities to attract international investment to the region in order to climb further up the value-added production chain. Vinnytsia Regional State Administration Head Valeriy Koroviy says this strategy is central to the region’s economic development, and points to other flagship investments such as the Vinnytsiabased production plant of Polish wooden paneling market leader Barlinek, which currently employs over 1200 people, and the export-oriented manufacturing plant of Ukrainian home appliances producer UBC Group. This trend also extends to the agriculture sector. For centuries, Vinnytsia has been one of the most bountiful granaries of the famed Ukrainian breadbasket. It remains the country’s leading farming region today, accounting for approximately 12% of national agricultural output. As you drive through the rolling fields and lush panoramas of Vinnytsia Oblast, this agrarian fertility is evident at every turn. However, these traditional rural scenes now also feature increasingly commonplace examples of cutting-edge technologies, reflecting an ongoing agribusiness upgrade that is transforming the sector’s production capacity. Governor Koroviy says investment in the Vinnytsia agribusiness industry has doubled in recent years to reach UAH 9.5 billion in 2018, with growing inflows from both foreign and domestic investors. He points to the 18

About the interviewee: Valeriy Koroviy is the Head of the Vinnytsia Regional State Administration abundance of state-of-the-art machinery in use on Vinnytsia region farms, and compares this favorably with the situation just five years ago, when the general trend was still to import used and outdated equipment from neighboring EU countries. One of the region’s key domestic agribusiness companies is Ukrainian poultry sector market leader MHP, which has invested around USD 1 billion into Vinnytsia Oblast in recent years. Meanwhile, strategically significant international investments include a USD 14 million corn processing plant currently under construction that brings together the Ukrainian branch of US-based global agribusiness giant Bunge and Spanish corn and rice processing market leader Dacsa Maicerias Espanolas. This high-tech processing facility aims to increase Ukraine’s capacity to produce value-added products for export to international markets, and is part of a trend away from reliance on the export of raw materials. As the sophistication of Vinnytsia Oblast’s export portfolio grows, the region’s geographical horizons are also expanding. In 2013, 23.7% of all Vinnytsia exports went to Russia. Five years later in 2018, the figure had dropped to just 2.7%. This historic collapse in trade with Russia initially created huge challenges for Vinnytsia businesses, but Governor Koroviy says it has since helped stimulate expansion into new markets and transformed the region’s global reach.

“Following the annexation of Crimea and events in eastern Ukraine, trade with Russia came to a standstill. It was a shock to the system for the Vinnytsia business community,” he recalls. “Nevertheless, the picture has changed fundamentally during the intervening five years. Our main export markets are now India and China, followed by Poland and the rest of the European Union.” As Vinnytsia looks to attract investment and boost its value-added output, much will depend on the region’s ability to provide the personnel to fill new workplaces. Along with the rest of the country, Vinnytsia has been hard-hit in recent years by a wave of labor migration that has seen millions of Ukrainians drawn to the EU by the promise of salaries that are often three or four times higher than they could expect to earn at home. Governor Koroviy says the trend came as something of a shock to local business owners, but believes the labor market situation is now approaching a new equilibrium. “The process of labor migration cannot be stopped but it can be slowed,” he reasons. “We have calculated that salaries need to rise to a level that is around 70% of the sums people could receive doing comparative work in the EU. If Vinnytsia region employers can offer such terms, they will be able to keep hold of their workforce and even entice people to come home.” This process is already well underway, with average monthly salaries in Vinnytsia region doubling over the past two years to reach just over UAH 10,000 by July 2019. Koroviy argues that a further increase is required in order to reach the tipping point, but he believes the situation is no longer critical. In the long-term, however, the only durable solutions remain higher salaries and streamlined workforces, with investments in technologies allowing businesses to pay higher wages to fewer skilled staff. This is very much in line with global trends and fits Vinnytsia’s plans to carve out a more sophisticated value-added niche for itself on international export markets. “I advise all potential investors that they are mistaken if they view Vinnytsia primarily as a source of cheap labor,” says Governor Koroviy. “If you want to maintain a highly qualified staff, you will need to increase salaries and also reduce workplaces via technological advances.”

vinnytsia investment guide

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Bunge and Dasca invest in the

booming Vinnytsia breadbasket High-tech corn processing plant will boost Ukraine’s ability to export value-added produce In recent years, Ukraine’s agriculture sector has experienced a winning combination of record harvests, rising revenues and expanding export horizons. Unsurprisingly, this has made it one of the most attractive segments of the Ukrainian economy for international investment. Vinnytsia Oblast in central Ukraine has emerged as a key engine of this growth. Traditionally among the country’s most productive agricultural regions, it is now finds itself at the heart of the booming Ukrainian breadbasket. This is helping to attract significant investment to the region. One of the latest agricultural investment initiatives in Vinnytsia Oblast is the construction of a high-tech corn processing plant. This is a joint undertaking bringing together the Ukrainian branch of US-based global agribusiness giant Bunge and Spanish corn and rice processing market leader Dacsa Maicerias Espanolas. Construction work began earlier this year on the future Dasca-Bunge-Ukraine complex in the village of Demkivka in Vinnytsia’s Trostyanets district. The USD 14 million plant is set to begin operations by the end of next year, with a full production cycle anticipated by the fourth quarter of 2020. The planned plant will utilize state-of-the-art technologies, with building taking place in two stages. A grain elevator is due for completion by the end of 2019, with the grain and flour plant set to launch towards the end of 2020. Once operational, the plant will have a production capacity of almost 300 tons per day. The project is likely to provide an additional boost to the development of the agricultural sector in the southeastern region of Vinnytsia Oblast, as it will involve extensive cooperation with local farmers and agribusinesses. Crucially, it will also increase Ukraine’s capacity to produce value-added products for export to international markets. This transition towards value-added products is widely recognized as one of the key priorities for the Ukrainian agriculture sector, where the current focus on raw material ex-

COMING SOON TO VINNYTSIA OBLAST: Design plans show the future Dasca-Bunge-Ukraine corn processing plant in the village of Demkivka in Vinnytsia’s Trostyanets district. Expected to be operational in the final quarter of 2020, this high-tech USD 14 million facility will have a capacity of approximately 300 tons per day. The plant will focus on value-added production bound for global export markets, making it a strategically important addition to the Ukrainian agricultural infrastructure ensemble. ports deprives the country’s agribusinesses of the larger profit margins available for more value-added output. This makes the coming Dasca-Bunge-Ukraine corn processing plant a strategically important addition to the country’s agricultural infrastructure and paves the way for greater foreign exchange earnings and tax revenues. Officials at Bunge Ukraine recognize this strategic significance and see the DascaBunge-Ukraine corn processing plant as a springboard to enhanced export potential to global markets, with the twin factors of cooperation with a Spanish partner and the move towards value-added production combining to boost export options considerably. “This project is of great importance to us,” comments Oleg Bigdan, Director of Legal Affairs and GR at Bunge Ukraine. “The company’s corn cereals and flour products will be exported worldwide. Exports will go to countries in Europe, North Africa, and the Middle East. Partnership with a Spanish company will also allow us to open up new export markets. Raw materials were exported from Ukraine earlier, and this project is aimed at exporting value-added products.”

Bigdan says the choice of Vinnytsia Oblast as the location for the future Dasca-BungeUkraine corn processing plant reflects the region’s thriving agribusiness sector and abundance of suppliers. “The Vinnytsia region was selected for our investment project because, first of all, the planned corn processing plant needs to be supplied with quality raw materials,” he explains. “Corn volumes in Vinnytsia region are currently growing rapidly. The number of farmers able to grow such a product is also quite large.” Bunge, ltd. is one of the leading agricultural processors and exporters in the world. In Ukraine, it is one of the largest exporters of sunflower oil and cereals. The forthcoming corn processing plant will be the latest in a series of major agricultural investments by Bunge in Ukraine. Existing Bunge investment projects in the country include an oil extraction plant in Dnipro that operates under the “Oleyna” trademark, and a production and reloading complex for oilseeds together with a grain terminal in southern Ukraine’s Mykolaiv. The company’s investments in Ukraine total more than one-third of a billion US dollars.

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vinnytsia investment guide

A People-Oriented City Vinnytsia has attracted international investment by treating potential partners as welcome guests

September sees construction work get underway in Vinnytsia on a major new manufacturing plant for Austrian sporting goods giant HEAD. UkraineInvest Chairman Daniel Bilak says the project is a symbol of Vinnytsia’s investor-friendly attitude and sees it as the kind of flagship undertaking that could help to draw additional international brand names to the city. “The HEAD plant is an example of exactly the kind of investment Ukraine is looking to attract, offering export-driven high added value manufacturing while creating well-paid workplaces for skilled employees,” he comments. This success was hard-won. Working on a referral from the National Investment Council under the President’s Administration, the 22

government’s investment promotion agency, UkraineInvest, first had to convince HEAD executives that Ukraine was the right choice for a new production base that would be replacing three existing plants in the Czech Republic. They then worked with the Austrian sports manufacturer to identify the ideal location inside Ukraine. Vinnytsia came out on top, both due to objective factors such as pricing and location, and thanks to the can-do attitude of the regional authorities. “In terms of understanding how to interact with potential investors, Vinnytsia is one of the places in Ukraine that really gets it,” says Bilak. “The local authorities have a philosophy of treating investors like guests in their own home. I believe HEAD : www.bunews.com.ua

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^ŝŶĐĞ ϮϬϭϱ WĂƌƚŶĞƌ Ăƚ ,ĞŶŶŝŐĞƌ tŝŶŬĞůŵĂŶŶ ŽŶƐƵůƚŝŶŐ DĞŵďĞƌ ŽĨ ƚŚĞ ŽĂƌĚ͕ ĞƵƚƐĐŚĞƌ tŝƌƚƐĐŚĂĨƚƐŬůƵď ^ĞŶŝŽƌ ĚǀŝƐŽƌ Ăƚ ZŽůĂŶĚ ĞƌŐĞƌ ^ƚƌĂƚĞŐǇ ŽŶƐƵůƚĂŶƚƐ ĚǀŝƐŽƌ ƚŽ ƚŚĞ WƌĞƐŝĚĞŶƚ ŽĨ ƚŚĞ ŶƚƌĞƉƌĞŶĞƵƌƐΖ ƐƐŽĐŝĂƚŝŽŶ ŽĨ hŬƌĂŝŶĞ ,ĞĂĚ ŽĨ ZĞƉƌĞƐĞŶƚĂƚŝŽŶ ^D ĂŶĚ dŚǇƐƐĞŶ ^ƚĂŚůŚĂŶĚĞů ĞƌůŝŶ 'ŵď,

ĞĂƌ dŚŽŵĂƐ͕ tŚĂƚ ĂŶ ŽƵƚƐƚĂŶĚŝŶŐ ĂĐŚŝĞǀĞŵĞŶƚ͊ ϯϬ ǇĞĂƌƐ ŽĨ ǁŽƌŬŝŶŐ ĂŶĚ ůŝǀŝŶŐ ŝŶ <Ǉŝǀ – ĂůǁĂǇƐ ĨƵůůǇ ĚĞĚŝĐĂƚĞĚ ƚŽ Ă ǁŝĚĞ ǀĂƌŝĞƚǇ ŽĨ ďƵƐŝŶĞƐƐ ƚŚĞŵĞƐ ĂŶĚ ĞŶŐĂŐĞĚ ŝŶ ĞƐƚĂďůŝƐŚŝŶŐ ůŝŶŬƐ ďĞƚǁĞĞŶ hŬƌĂŝŶŝĂŶ ĂŶĚ 'ĞƌŵĂŶ ďƵƐŝŶĞƐƐ͘ tĞ ▪ ▪ ▪ ▪

hƚĞ tŝŶŬĞůŵĂŶŶ <ŝĞƘůŝŶŐ &ĂŵŝůǇ <ůĞĞ &ĂŵŝůǇ ĂŶĚ ƚŚĞ ĞŶƚŝƌĞ dĞĂŵ ŽĨ ,ĞŶŶŝŐĞƌ tŝŶŬĞůŵĂŶŶ ŽŶƐƵůƚŝŶŐ

ƐŝŶĐĞƌĞůǇ ĐŽŶŐƌĂƚƵůĂƚĞ ǇŽƵ ŽŶ ƚŚŝƐ ĂŶŶŝǀĞƌƐĂƌǇ ĂŶĚ ǁŝƐŚ ǇŽƵ ŵĂŶǇ ŵŽƌĞ ŚĞĂůƚŚǇ͕ ŚĂƉƉǇ ĂŶĚ ƐƵĐĐĞƐƐĨƵů ǇĞĂƌƐ ŝŶ ǇŽƵƌ ƐĞĐŽŶĚ ŚŽŵĞ – <Ǉŝǀ͘

vinnytsia investment guide

: officials were attracted by that, and by the fact that the city obvi-

ously welcomed them.” The arrival of HEAD is the latest step forward for Vinnytsia and reflects an outsized investor appeal that has also attracted the likes of Poland’s largest floorboard manufacturer Barlinek and US agribusiness giant Bunge. Today’s Vinnytsia is home to a major manufacturing facility of Ukrainian home appliances company UBC Group, while KNESS Group began work earlier this year on what will become the largest solar panel production plant in the country. Bilak argues that this diverse selection of investment success stories bodes well for Vinnytsia’s future development. “The one thing you can be sure of when it comes to potential investors is that they will talk to existing investors,” he says. “After all, you are judged by the company you keep. In the case of HEAD, they certainly seemed impressed by the neighborhood.” Beyond purely economic factors, Vinnytsia also has much to recommend itself as a place to live and work. The city regularly tops international surveys of Ukraine’s regional centers and typically receives exceptionally high marks in opinion polls of local residents. It has managed to cultivate a reputation as a reliable partner for international financial institutions as well as the country’s strategic partners such as Switzerland and the European Union. Bilak believes this positive image is primarily the result of smart city management and the effective use of limited resources, which have combined to create a standard of living that few other regional capitals in the country can match. For example, Vinnytsia has leveraged international partnerships to create one of

Ukraine’s most efficient and convenient public transport systems, with busy fleets of trams and practical cycling lanes lending the city a quintessentially European air. “It’s a very people-oriented city. If I had to move away from Kyiv, I would choose to live in Vinnytsia,” says Bilak matter-of-factly. “Even in the suburbs, when you go for a stroll in the early evening you feel as if you could be anywhere in Europe.” In addition to manufacturing, Bilak sees huge potential synergies between Vinnytsia’s tech and agribusiness sectors. The Vinnytsia region is among Ukraine’s leading agricultural producers, while the city has Ukraine’s sixth largest IT sector and is home to 11 of the country’s top 50 IT companies. This makes it a logical candidate to lead the kind of ag-tech boom that could help Ukraine move away from raw materials exports and begin to make progress up the production food chain. “Ukraine’s two great advantages are brains and grains,” says Bilak. “This translates into huge ag-tech potential in everything from drones and aps to new types of crops and seeds. Vinnytsia is ideally positioned to serve as a hub in this process.” There is certainly unlikely to be a shortage of brains any time soon. Long a regional academic center, Vinnytsia’s higher education sector received a further boost in 2014 when Donetsk State University chose to relocate to the city after being forced to flee the conflict in the Donbas. Vinnytsia officials did all they could to make the new arrivals from Donetsk feel welcome, and the university was able to reestablish itself in central Ukraine within a matter of months. This unexpected arrival has had the effect of reinvigorating the local higher education industry by injecting a competitive edge that has helped raise the bar for the city’s entire student population. “The relocation of Donetsk State University was probably one of the best things that ever happened to Vinnytsia,” says Bilak. “With Donetsk University working hard to demonstrate that it was still a top drawer institution, this put enormous pressure on the city’s other universities, leading to a brain boom across Vinnytsia. The challenge now is to harness this potential.”

About the interviewee: Daniel Bilak is the Chairman of UkraineInvest

www.bunews.com.ua

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Vinnytsia sets the standard for good local governance in Ukraine Central Ukrainian city consistently takes first place in International Republican Institute surveys

About the author: Michael R Druckman is Ukraine Country Director at the International Republican Institute Over the past several years, the International Republican Institute (IRI) in Ukraine has been able to monitor the impact of the country’s landmark 2015 decentralization reforms by using its Nationwide Municipal Survey tool. IRI’s survey is the largest regularly conducted poll in Ukraine, drawing from a sample of more than 19,000 residents of

24 cities across Ukraine, including Mariupol and Severodonetsk in the Donbas region. The poll asks a wide spectrum of questions on everything from city services to how citizens view their educational facilities. It covers instances of local corruption, public safety, and citizen observations on both national and local government institutions and officials. Over the past four years, the city of Vinnytsia has consistently stood out. In survey after survey, Vinnytsia has taken top slot among Ukraine’s 24 oblast centers. What is most noteworthy, however, is that Vinnytsia does not just score well in a specific municipal service or public perception, but rather across multiple sectors and indicators in the survey. The main aggregated score in IRI’s annual Nationwide Municipal Survey is on service delivery, which consists of 22 separate service scorecards in each city. These include everything from streetlights and road conditions to educational and medical facilities. In the most recent survey conducted in 2018, Vinnytsia scored 3.6 out of a possible five, almost 10% ahead of second-placed Lutsk. To be fair, it is important to recognize that Vinnytsia received a head start thanks to the reforms that then-Mayor Volodymyr Groysman independently implemented during his term in charge of the city prior to the 2013-14 Euromaidan Revolution. These reforms helped Vinnytsia stand out during the 2010-2014 Yanukovych administration as one of the few bright spots of democratic development in Ukraine at that time. Several Ukrainian cities including Lviv and Cherkasy subsequently mirrored the reforms championed under Mayor Groysman, but it was not until the post-Euromaidan reforms on local governance in 2015 that the decentralization of power in Ukraine towards municipalities got underway. This gave Ukrainian cities the opportunity to implement reforms on a far more comprehensive level. Building on the city’s groundbreaking reform of its public transporta-

vinnytsia investment guide

tion system (making it one of the most modern and efficient in Ukraine through the use of e-ticketing among other innovations), Vinnytsia also led the country in the creation of Administrative Service Centers, a “one-stop shop” for municipal services that houses previously disparate departments and officials under a single glass-encased roof. Following Mayor Groysman’s elevation to Speaker of the Ukrainian Parliament in 2014 (and subsequently to the post of Prime Minister), his former deputy Serhiy Morhunov won election as mayor. He has maintained the reform-driven agenda established by his predecessor. In terms of attitudes among local populations regarding the direction their cities are moving in, residents of Vinnytsia are some of the most optimistic in the country, with 65 percent of residents in 2018 saying things in their city were going in the right direction, compared to only 38 percent on average nationally. Moreover, this optimism also extends to the national outlook of local citizens. Although the average at the time for those reporting that Ukraine was heading in the right direction was only 16 percent, 24 percent of Vinnytsia’s respondents said things were on the right track. When it comes to perceptions of corruption, Vinnytsia once more stands apart from most of its peer cities, with residents feeling that corruption is not the primary obstacle that prevents business from www.bunews.com.ua

coming to their city. Only 25 percent of Vinnytsia’s residents say that local corruption prevents businesses from coming to their city, while the 24-city average for Ukraine is almost double this at 47 percent. Instead, 42 percent of Vinnytsia respondents identified a lack of investment funds as the primary issue. Finally, the residents of Vinnytsia feel that local authorities treat them well when it comes to interaction with city officials for municipal services. Almost a quarter of Vinnytsia residents reported being treated in an “excellent” manner by the local authorities, surpassing fellow cities by a considerable distance. Meanwhile, only 8 percent said they were treated poorly, also significantly below the 24-city national average. Based on the results of IRI surveys covering the entire country, Vinnytsia is clearly one of Ukraine’s most optimistic, transparent and well-governed cities. IRI will be heading back into the field this autumn for its 2019 Nationwide Municipal Survey. While we expect to see many changes given the tectonic shifts in national politics that have taken place this year, we can be reasonably confident that Vinnytsia will continue to be one of the exemplary cities and a place that leads by example when it comes to deepening good governance practices in today’s Ukraine. 27

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Ten Reasons Why Trump Should Visit Ukraine

Andy Hunder, President of the American Chamber of Commerce in Ukraine, Treasurer of AmChams in Europe Barack Obama never visited Ukraine as president, and he was the only US president that didn’t visit independent Ukraine while in office. President Donald Trump should. Ukraine has embarked on a massive overhaul of the country and here are ten reasons why the US president should pay a visit. 1. Opportunities for US business are significant. US companies have been working in Ukraine with the support of the American Chamber of Commerce since 1992. Hundreds of member companies have success stories to share. The McDonald’s restaurant at the Kyiv central train station is among the busiest in the world. Cargill, America’s largest privately-owned corporation, is unveiling a $150 million deep water terminal on the Black Sea near Odesa. General Electric delivered thirty new diesel locomotives from Erie, Pennsylvania, to Ukraine’s state railway earlier this year, and will supply a total of 225 engines over the next decade within an agreement valued at over $1 billion. Ukraine’s IT sector is booming and supporting US Fortune 500 corporations. New York-headquartered Bunge has launched a $280 million oilseed refinery, terminal, and grain storage in the port of Mykolaiv. But still US investment in Ukraine has been sparse. Many US companies have yet to discover Ukraine. 2. US interests in Ukraine’s energy sector. American companies are just scratching the surface in Ukraine’s potentially highly lucrative energy industry. Pennsylvania-headquartered Westinghouse already supplies nearly half of Ukraine’s nuclear fuel, which is significant in a country where

nuclear power accounts for 55 percent of electricity generation. GE is set to deliver wind turbines for the country’s booming renewable energy market. Ukraine has done well to wean itself from Russian gas. The delivery of US liquefied natural gas (LNG) would further assist Ukraine becoming independent of Russian gas. With coal supplies to the power stations severely hampered due the war in eastern Ukraine, the US has shipped anthracite hard coal to Ukraine. Oil and gas upstream exploration and production, midstream transportation, and downstream refining, processing, purifying and distribution is in dire need of US technology and equipment. 3. Unravel the Fake News about Ukraine. Ukraine has an image problem: it has not told its story well, with others speaking for the country often in a distorted manner. Russia’s hybrid war in Ukraine includes a major disinformation campaign in addition to military, economic, and cyber assaults. To make matters worse, no major US newspaper or TV network has a news desk in Ukraine. Much of the reporting on Ukraine in the international media comes from correspondents based in Russia. 4. American voters of Ukrainian descent. There are roughly one million Americans of Ukrainian descent living in the United States. Ukraine’s diaspora has historically been more supportive of the Republicans, but it always monitors how the administration is supporting their motherland. A Trump visit to Ukraine would be perceived well by the Ukrainian diaspora. Also, a number of influential American Jews have ties to Ukraine.

5. The Budapest memorandum. Twenty-five years ago, Ukraine was the world’s third largest nuclear super power. It inherited a nuclear arsenal bigger than that of the UK, China, and France combined, when it declared its independence from the Soviet Union in August 1991. By 1996, Ukraine voluntarily gave up its nuclear arms and acceded to the Nuclear Non-Proliferation Treaty in exchange for security assurances from Britain, the United States, and Russia in the form of the Budapest Memorandum. As Ukraine has been under fire from Russian military forces for five years, the United States should review the assurances and step up. Global security and any future prospects of nuclear

non-proliferation are at risk if promises endorsed by US and UK are not adhered to.

6. Chance to broker a deal to end the war. The Russian-backed war in Ukraine has entered its fifth year, with some 13,000 people killed, a quarter of them civilians, and as many as 30,000 wounded. The talks to end the war require a new boost. The person who brokers peace would make history. 7. Trump and newly-elected President Zelenskyy are likely to get along well. Both Presidents Trump and Zelenskyy came to power on an anti-establishment platform. Both have had thriving television careers, both are successful former businessmen. The chemistry between the two could kick-off well and result in a warm friendship. 8. It’ll be a morale boost for the young Ukrainian parliamentarians and government officials. Ukraine’s newly elected parliament is young and inexperienced. The new speaker of parliament is thirty-five years old, the same youthful age as the newly-appointed prime minster. A Trump visit to Ukraine might inspire and stimulate the newly elected MPs to follow through and deliver muchneeded reform.

9. Ukraine needs help eradicating oligarchic control of the economy. A handful of greedy and unsavory individuals have accumulated vast amounts of wealth for themselves with help from crooked courts and corrupt government officials, taking much of their ill-gotten-gains out of Ukraine. The oligarchic economy must end and be replaced with a functioning market economy. This requires international support. The current system remains a barrier for American businesses investing in many sectors in Ukraine especially media, energy, banking, infrastructure, and mining. 10. Because Obama never did. The American Chamber of Commerce will be delighted to welcome the president of the United States in Ukraine. We’ll share the stories, the challenges, and opportunities of doing business here. Ukraine is going through massive changes and now is the opportunity not to be missed. Source: Atlantic Council

Election Night LIVE ELECTION NIGHT. WHO’S IN THE NEW PARLIAMENT The American Chamber of Commerce in Ukraine has been closely monitoring the parliamentary race and its importance for the business community. On July 21, the 3rd Election Night Live event gathered AmCham Ukraine members, partners, friends, media representatives and opinion leaders at O’Brien’s Pub in central Kyiv to watch live broadcast of exit polls, discuss preliminary results of early parliamentary elections and hear comment, forecast and analysis provided by a panel of experts.

B2G Dialogue MEETING WITH DANYLO GETMANTSEV, HEAD OF THE VRU COMMITTEE ON FINANCE ISSUES, TAX AND CUSTOMS POLICY AmCham Ukraine members met with Oleg Ustenko to discuss possible ways to accelerate economic growth and ensure macroeconomic stability, reduce the shadow economy in all spheres, which in turn will stimulate the reduction of corruption and additional revenues to the state budget, as well as improve Ukraineâ&#x20AC;&#x2122;s business climate and create favorable conditions for attracting Foreign Direct Investment.

MEETING WITH DANYLO GETMANTSEV, HEAD OF THE VRU COMMITTEE ON FINANCE ISSUES, TAX AND CUSTOMS POLICY Predictable, fair and transparent tax and customs policy is always among the TOP priorities for AmCham Ukraine members. During the meeting participants discussed further plans on digitalization, improvement of tax administration, reform of liability for contravention of tax and customs legislation, taxation of income and international taxation. MEETING WITH SERGIY VERLANOV, HEAD OF THE STATE TAX SERVICE The participants had a great opportunity to discuss plans of the MinSergiy Verlanov provided an update on recent changes that business istry of Finance and the State Tax Service and get an understanding will face in the work of the newly established authority as well as of what business community should expect in the nearest future. other important issues within the tax sphere.

B2G Dialogue MEETING WITH MYKHAILO FEDOROV, DEPUTY PRIME MINISTER, MINISTER OF DIGITAL TRANSFORMATION OF UKRAINE Enabling further rapid development of Ukraine’s IT industry, ensuring predictable tax system and promoting Ukraine’s IT brand – hot issues of IT industry that AmCham Ukraine members delivered to Mykhailo Fedorov. Participants also discussed state’s digital agenda, transformation of IT-related governmental structure, legislative agenda and implementation of the “State in Smartphone” initiative.

MEETING WITH OLEKSANDR DANYLIUK, SECRETARY OF THE NATIONAL SECURITY AND DEFENSE COUNCIL AmCham Ukraine members met with Oleksandr Danylyuk to discuss economic security issues in various spheres in the context of national security. MEETING WITH DMYTRO RAZUMKOV, HEAD OF THE VERKHOVNA RADA OF UKRAINE AmCham Ukraine members met with Dmytro Razumkov and shared and Housing and Communal Services, and Danylo Getmantsev, Head the vision of business on ensuring sustainable growth in key sectors of the VRU Committee on Finance issues, Tax and Customs Policy, of the economy. Andriy Gerus, Head of the VRU Committee on Energy joined the discussion.

B2G Dialogue MEETING WITH U.S. EXPERT: AMERICAN RAILWAY TRANSPORTATION SYSTEM IN CONDITIONS OF LIBERALIZATION U.S. railway market trends, railway transport market reform, private traction regulation in the U.S. – main topics discussed at the meeting with John W. Orrison, Infrastructure Advisor, Railway Transport, Office of Technical Assistance, U.S. Department of the Treasury.

MEETING WITH ANDRIY RYAZANTSEV, BUSINESS DEVELOPMENT DIRECTOR OF UKRZALIZNYTSYA Freight railway transportation top on the agenda at the meeting of AmCham Ukraine members with Andriy Ryazantsev. Participants discussed automatic indexation of tariffs, UZ converging tariff classes with the new tariff formation mechanism and opportunities of private traction. MEETING WITH SUPERVISORY BOARD OF THE STATE-OWNED ENTERPRISE “UKRAINIAN SEA PORTS AUTHORITY” AND PRESENTATION OF THE LANDLORD PORT MODEL TOP strategic priorities for the Ukrainian Sea Ports Authority and port sector’s development and presentation of the Landlord Port model – key focuses of the very first meeting of the business community with the new Supervisory Board of Ukrainian Sea Ports Authority.

MEETING WITH STEVEN STOCKTON, INFRASTRUCTURE ADVISOR, INLAND WATERWAY TRANSPORT, PRESIDENT OF STOCKTON GLOBAL STRATEGIES LLC AmCham Ukraine members met with Steven Stockton and Adam Whiteman, Infrastructure Advisor from the Office of Technical Assistance of the U.S. Department the Treasury, to discuss possible ways to ensure safe, efficient and environmentally sustainable inland water transportation system, challenges of finding ecological balance and key issues related to the operation of the water internal transport. MEETING WITH VLADYSLAV KRYKLII, MINISTER OF INFRASTRUCTURE OF UKRAINE AmCham Ukraine members met with Vladyslav Kryklii to discuss key topics in the sphere of infrastructure. Namely, the necessity to adopt respective legislative initiatives covering railway transport, inland water transport and concession as well as promotion of marine economic complex development.

The Grand Opening of the Grain Terminal by MV Cargo & Cargill On September 6, the grand opening of the state-of-the-art grain terminal Neptune in the seaport Pivdennyi in Odesa took place. This is the joint project of MV Cargo with Cargill, one of the U.S. largest global corporations. The project is worth $150 million and was co-financed by the European Bank for Reconstruction and Development and International Finance Corporation. Neptune, the biggest U.S. investment of the year in Ukraine, became one of the deepest grain terminals in the Black Sea with a brand-new 16-meter berth. Masha Efrosinina and AmCham Ukraine President Andy Hunder, who has been witnessing the creation of the terminal from the very beginning, hosted the official part of the event. This is a big success story by the proud members of the American Chamber of Commerce in Ukraine. The gala concert on the occasion of the 25th Anniversary of TIS group of terminals featured Zlata Ognevich, music band Boombox and Franz Ferdinand.

B2G Dialogue

BANKING & FINANCIAL SERVICES COMMITTEE MEETING WITH IHOR BEREZA, DIRECTOR OF THE NBU FINANCIAL MONITORING DEPARTMENT AmCham Ukraine Banking & Financial Services Committee mem- Money Laundering/Combating the Financing of Terrorism (AML/ bers met with Igor Bereza and his colleagues from the National CFT) Draft Law as a necessary step towards the compliance with Bank of Ukraine. Participants discussed preparation of the Anti- international obligations. BRAND NEW RIDE: PRESENTATION OF NEW CONCEPT OF THE TAXI MARKET REGULATION Safety and quality of transportation, transparent taxi market, guarantees for passengers, payment of taxes and fees â&#x20AC;&#x201C; key objectives of state regulation according to the New Concept of the Taxi Market Regulation presented by Vladyslav Prytomanov, Head of Infrastructure Sector at Better Regulation Delivery Office Ukraine to the members of the American Chamber of Commerce in Ukraine, European Business Association and Union of Ukrainian Entrepreneurs. During the meeting Responsible Transporters Association, Bolt, Uber, Uklon, Transflot and BRDO Ukraine signed the Memorandum of Understanding and Cooperation in the field of development of the market of passenger transportation by taxi and passenger cars.

MEETING WITH SEVGIL MUSAIEVA, EDITOR-IN-CHIEF OF UKRAYINSKA PRAVDA AmCham Ukraine members met Sevgil Musaieva to discuss future media trends and receive useful insights. AMCHAM UKRAINE SIGNED MEMORANDUM OF COOPERATION WITH KYIV REGIONAL STATE ADMINISTRATION The American Chamber of Commerce in Ukraine and European Business Association signed the Memorandum of Cooperation with Mykhailo Bno-Airiian, Head of Kyiv Regional State Administration, to boost investment into Kyiv region and continue creating favorable conditions for doing business in Ukraine.

AmCham Member Tour: Grammarly â&#x20AC;&#x201C; Climbing the Start-Up Mountain

During the Member Tour AmCham Ukraine Proud Member Company Grammarly shared its ten-year success story of growing from start-up to successful global service with three offices in Kyiv, New York and San-Francisco, and over 20 million users daily.

Participants got insights on how Grammarly is building its digital communication assistant that scales across multiple platforms and devices and helps people write in English more clearly and effectively every day.

WELDI BUSINESS BREAKFAST “SECRETS OF LONGEVITY: GENETICS VS LIFESTYLE” The mankind has always strived to understand the nature of longevity and eternal youth. Medieval alchemists spent hours searching for the philosopher’s stone, while doctors mixed different herbs and medicines in the hope of obtaining the desired elixir of youth. Although modern health & beauty industry offers us a lot of options to slow down the ageing, it is difficult to identify what is effective and what is not. WELDI participants had an opportunity to learn about the role of genes in ageing processes, physiological age markers, MIND-diet and whether detox and anti-age programs matter with Oleksandr Koliada, geneticist, one of the top 30 successful young scientists of Ukraine. PREMIUM SPONSOR

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opinion

Personal data protection in Ukraine A smart approach to smart technology begins with the creation of the right legislative framework

About the author: Andriy Dovbenko is a businessman and venture investor In today’s world, it can often seem as if our faith in digital solutions has become synonymous with our perceptions of the future in general. Talk of the digital future conjures up images of reduced bureaucracy, greater transparency and the automation of routine procedures. Like most people, I am an enthusiastic adherent of new technologies and regularly discuss the benefits of innovation. However, we must not lose sight of the fact that these benefits will only come via the correct overall approach. Identifying the correct path is not always straightforward, given that the rules of this new digital world are taking shape around us on a day-to-day basis. This is why it is so important to maintain a public discussion on the implementation of any electronic solutions, especially at the governmental level. Not so long ago, Ukrainian President Volodymyr Zelenskyy issued a decree on the development of a single portal of electronic services. This is a welcome initiative, of course. Nevertheless, it is vital to understand the legal framework for this portal. It is no surprise that immediately after news of President Zelenskyy’s decree, some experts recalled that Ukrainian personal data protection legislation has been in place for a long time but actually has relatively little in common with contemporary realities. The current situation is reminiscent of an advertising banner obscuring a dilapidated façade. It looks OK from a distance, but it does not stand up to closer inspection. 42

Getting the legislative framework right is crucial. Laws are the basis on which all digital government programs and smart initiatives operate. In Germany, for example, legislation in the field of personal data protection first appeared in the 1970s before undergoing strict revision in the 1990s. The country’s legislative framework continues to develop and evolve to this day. Thanks to this ongoing process, owners of private property can have houses removed from online panoramas, while video surveillance cameras as prohibited. To be more precise, they are not subject to complete prohibition, but the images they capture are not admissible as evidence in court, which means that filming often makes no sense. Naturally, these peculiarities can create certain difficulties. Companies must always collect consent when engaged in data processing, with even tourists forced to comply with legislation. The result is an excess of bureaucracy that also guarantees the observance of rights. This suggests that not every bureaucracy is bad as it can also often protect the rights of ordinary citizens. Another example is France, where the tradition of protecting personal data has evolved in line with public protests and citizen activism. Initially, the French state tried to create a single database, but this initiative faced resistance from civil society. Another recent example is the case of Facebook and Cambridge Analytica, which seriously damaged the reputation of the social network and even led to the announcement by Mark Zuckerberg of a strategic shift in emphasis towards more private communication. In the wake of this scandal, the EU General Data Protection Regulation (GDPR) got the green light. This allows residents of all European Union countries to feel safe, not only while active on social networks, but also in real life, where they face heightened security and privacy concerns due to the increasing spread of sound and image recording devices. In the United States, the legislative framework is more varied. There is no single federal law. Instead, individual states have their own nuances. In 2018, the most technologically advanced state in the country, California, passed the Consumer Data Privacy Act (CCPA), which will enter into force in 2020. This two-year gap aims to allow companies to prepare for the coming stricter requirements. Interestingly, major market players including Apple and Microsoft supported the adoption of the law. What are the prospects in Ukraine? When it comes to modernizing, we traditionally rush to achieve results by skipping over previous stages in the process. This tendency can lead to the emergence of less than ideal hybrids. Instead of resulting in structural changes, the outcome is often the rejection of technologies as a whole. There is no doubt that it is necessary to approach the adoption of new technologies with a sense of urgency, but also meaningfully and thoughtfully. We urgently need electronic systems and digital solutions to improve monitoring and access to information. All this is fundamentally important for the future of the country. However, the process should move in tandem with the development of the necessary legislation, so that we do not eventually end up regretting premature attempts to jump into the future. www.bunews.com.ua

opinion

Cleaning up Ukraine’s dirty courts Ukraine’s transformation hinges on rule of law – can Zelenskyy achieve reform breakthrough?

Ukraine’s courts may soon get a much-needed facelift. The president recently submitted a bill that would relaunch the most vital parts of judicial reform. In particular, the High Qualification Commission of Judges (HQCJ) that failed to clean up Ukraine’s dirty courts is set for a reload. This is a national priority. The country’s judicial system remains one of the least trusted public institutions and a major obstacle to foreign direct investment. For years, civil society harshly criticized the HQCJ and the High Council of Judges (HCJ) for greenlighting untrustworthy judges to the highest judicial positions and impeding the reform process. If these authorities are properly restarted, Ukraine has a chance of finally fixing its judiciary and creating a competitive environment for business. But the process must be done right this time. After the Revolution of Dignity, efforts to reform these bodies failed. They resulted in a flawed selection process that made these bodies more dependent on the president and his administration. The good news is Ukraine has demonstrated it can choose good judges. The selection of judges to the specialized Anticorruption Court was a big success, especially compared to the alternatives. Meanwhile, the “renewed” Supreme Court contains at least 44 untrustworthy justices. What made the anticorruption court selection process so different? Independent, international experts had a right to veto bad candidates. Now is the time to scale this model to the rest of the judicial system. However, we cannot make six international experts stay in Ukraine for several more years to vet thousands of Ukrainian judges. What we can do is include the international community in the selection of the HCJ and the HQCJ the same way we did with the Anticorruption Court. If we manage to select members of these judicial governance bodies that are at least as good as our new anticorruption judges, there will be no more need for direct international involvement. Eighteen prominent Ukrainian NGOs agree: our number one priority is to relaunch the HCJ and HQCJ with the participation of independent, international experts. Half the members of these selection bodies should be professional lawyers, journalists, and human rights experts

recommended by civil society. Both President Zelenskyy and his Servant of the People party have expressed support for involving international experts in the process. We must ensure that they do what they say, and we need the West to help us hold them accountable. The road ahead will be hard, and we see at least three challenges. First, parliament needs to pass the right legislation. There has been little public discussion of the bill, and every tiny detail matters. The slightest inconsistency regarding the selection process of the two judicial bodies may result in them being captured by untrustworthy politicians again, and another reform opportunity wasted. There is another worrying sign: The composition of the commission responsible for the development of the reform is controversial. It is highly doubtful that the incumbent judges and HCJ members on the commission will bring much change. Second, the president’s silence over a recent scandal involving notorious courts and judges is alarming. Weeks have passed since the National Anticorruption Bureau (NABU) revealed tapes in which judges of the District Administrative Court of Kyiv allegedly plot corruption schemes and put pressure on members of parliament, the ombudsperson, the Constitutional Court, and other authorities in order to get the desired decisions, including the appointment of pliant members to the same HQCJ. However, both the president, who rarely hesitates to comment on the misdeeds of public officials, and his administration have remained silent. However, the biggest controversy is the apparent lack of will to change the composition of the High Council of Justice, a constitutional body that has the final say in selecting, disciplining, and dismissing judges. The president’s bill does not provide for the effective renewal of the body (half of the commission tasked with the dismissal of its untrustworthy members consists of the HCJ members themselves). Moreover, the ongoing contest to the High Council of Justice to fill the president’s two seats is not going smoothly either. The commission under the president recently shortlisted ten of 49 candidates. Some of the ten are judges and lawyers known for their independence and strong support for judicial reform. However, the most famous whistleblower judge, Larysa Holnyk, surprisingly did not make the final cut. No explanation was offered. These could be signs that at least some parts of the president’s office will resist cleaning up the courts as society demands. If President Zelenskyy and his team want to attract foreign investors and achieve 40 percent economic growth as the new Ukrainian Prime Minister Oleksiy Honcharuk vows, there can be no half measures. The HQCJ and HCJ need a fresh start with participation of the international community, and civil society has to have at least half of the seats on these bodies. The District Administrative Court of Kyiv should be liquidated, and effective reassessment of judges should finally result in the dismissal of hundreds of untrustworthy judges. Finally, the West has to unite behind these ideas and demand real change. There has been too much praise for ineffective “judicial reform” over the last five years. Now is the time to change Ukraine’s courts. We can make it happen so long as our Western friends speak out loudly and forcefully at the right moments. This article originally appeared on the Atlantic Council’s UkraineAlert service

About the author: Mykhailo Zhernakov is the head of the board of the DEJURE Foundation, a coordinator of the Public Integrity Council, and a former judge in the Vinnytsia District Administrative Court (2012-2015)

real estate

The Kyiv property market and the Zelenskyy effect Ukraine’s recent presidential and parliamentary elections have produced a radical generational shift in the country’s politics – is this good news for international real estate investors considering the Ukrainian market? Despite Ukraine’s strengthening economic recovery, many international real estate investors opted to delay their investments pending the outcome of the country’s 2019 presidential and parliamentary elections. This electoral cycle has now come and passed, leaving a potentially exciting business climate in its wake. In April, political neophyte and former TV comedian Volodymyr Zelenskyy won a landslide victory in the presidential election thanks to an www.bunews.com.ua

innovative multimedia campaign focusing on broad anti-corruption and pro-reform messages. In July, President Zelenskyy’s Servant of the People party went even further, winning an absolute majority in Ukraine’s parliament to compete an improbable ballot box revolution. Global financial markets and Western political commentators have both responded favorably to what most observers see as a clear mandate for change. Meanwhile, Ukraine’s economic growth has accelerated so far in 2019, defying

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: the pessimistic forecasts of many economists who predicted slowing GDP

growth in a challenging election year for the country. In short, the reasons for waiting on the sidelines pending election outcomes have disappeared and been replaced by several promising factors fueling a new wave of investor optimism towards Ukraine. This article will discuss several recent positive macroeconomic and political trends in the aftermath of Ukraine’s 2019 elections and explore their implications for investment in Kyiv’s property market.

Economic Good News

The sheer volume of good news relating to Ukraine’s economy so far in 2019 is difficult to ignore. In the second quarter of 2019, GDP growth surged to 4.6%. In July 2019, the Consumer Confidence Index reached its highest level since August 2013, some months before the financial crisis that followed the country’s early 2014 Euromaidan Revolution. During the first seven months of 2019, Ukraine’s national currency, the hryvnia, gained over 9% against the US dollar, making it the world’s best-performing currency over this period. In August 2019, the hryvnia exchange rate to the dollar averaged UAH 25.15, which is almost 15% stronger than the UAH 29.4 exchange rate used to calculate Ukraine’s 2019 federal budget. Since Ukraine’s presidential and parliamentary elections, foreign bond markets have also reacted favorably. Ukraine’s longer-term borrowing costs have fallen by 200 basis points (2%) as foreign buyers significantly increase their holdings of Ukrainian bonds. To control inflation, the National Bank of Ukraine (NBU) has maintained a tight monetary policy, but it is now gradually reducing interest rates and forecasting that rates will drop to 15% by the end of 2019 and to 9% by the end of 2020.

Platform for Reforms

Given Ukraine’s 2019 economic indicators, it is clear that President Zelenskyy and his party have inherited an enviable situation to begin their terms in office. Now the difficult work begins. Ukraine’s economy remains commodity-based and a global recession could hurt its hard currency earnings from exports of agricultural products and metals. However, in order to increase Ukrainian production of value-added exports, President Zelenskyy’s government will first need to curb the flow of Ukrainians migrating to the EU in search of higher salaries and better living standards. For Ukraine, deep structural reforms are critical if the country is to attract the international investment needed in order to increase exports, integrate into global supply chains, and ultimately raise living standards enough to keep Ukrainians from leaving the country. In an encouraging sign, President Zelenskyy has promised to win parliamentary approval for a land market this year, and to begin farmland sales in 2020. Successful agricultural reforms and implementation of land sales would be a huge signal to financial markets and institutional investors that Ukraine is serious about tackling its most difficult and delayed structural reforms. We will see how successful Ukraine’s president and his party will be in battling entrenched interests, but so far the market is reacting favorably to Zelenskyy’s announced reform program. There are no secrets or shortcuts here. To build a foundation for broad and sustainable longterm economic growth, Ukraine will need to follow the path of reform trodden by neighbors such as Poland, which had a GDP per capita in 2018 about five times that of Ukraine (USD 15,424 for Poland versus USD 3,095 for Ukraine). 48

Kyiv Property Market Outlook For all of the recent positive news about Ukraine’s economy in 2019, Ukraine’s property market remains stuck at the bottom of the price cycle and has still not fully recovered from the 2008 global financial crisis and Ukraine’s subsequent 2014 post-Euromaidan Revolution crisis. For example, prices for property on the secondary market in prime Kyiv locations are at levels last seen in the early 2000s. Today, the best bet for investors looking to earn the highest returns in Kyiv’s residential real estate market is to execute a niche strategy of buying and renovating apartments in the city’s historical downtown before renting them to expats tenants. There is still an acute deficit of expat-quality housing in Kyiv’s Diplomatic Quarter near to the Golden Gate in the heart of the Ukrainian capital, a neighborhood favored by foreign tenants who pay hard currency-denominated rents and who typically sign multi-year contracts and usually relocate in predictable ways, thus minimizing already-low vacancy rates for owners of such premium rental properties. It is true that purchase prices for such properties have been creeping up in the past six months amidst growing buyer interest. Nevertheless, potential gross annual yields for larger, multibedroom apartments remain high and can be between 10% and 14%. It is getting increasingly difficult to achieve such yields for smaller, one-bedroom apartments, which usually rent to tenants with fixed budgets. This is not a particularly optimistic picture. However, if Ukraine’s current pace of economic growth continues or strengthens, and if a significant percentage of President Zelenskyy’s announced reforms are implemented successfully, we could realistically see a boom across Kyiv’s broader housing market. This would create far greater opportunities for property investors outside the city center. For example, as part of the “government in a smartphone” initiative, Zelenskyy’s team is working on an online “office” for developers that will allow them to obtain construction permissions in a transparent way without the involvement of officials from the Governmental Architectural and Construction Commission. This is primarily part of efforts to curb corruption, but it could also help streamline the sector and attract investors. It is still far too early to predict whether such reforms will prove effective, let alone whether they could pave the way for the market entry of more foreign developers into Kyiv’s market. A small group of local developers currently dominates the Kyiv residential real estate construction market, offering largely undifferentiated and uninspiring products to homebuyers. It is also unclear whether Zelenskyy and his team will be able to follow through on promises to reform Ukraine’s corrupt judiciary. Any progress could be good news for real estate investors. Numerous derelict buildings in Kyiv’s historical downtown districts remain caught up in protracted legal wrangles. Renovating them and converting them into luxury condominiums would help alleviate the shortage of premium downtown housing. These sites could also become attractive redevelopment projects for foreign real estate funds, which generally prefer to invest in large-scale projects. However, many of these older buildings are subject to legal disputes. Effective judicial reform could help to resolve these problems and pave the way for a new wave of ambitious real estate development projects that would dramatically improve the appearance of historic central Kyiv, as well as a host of other Ukrainian cities with similar problems.

Will Ukraine Follow Poland’s Example?

When the Soviet Union broke up and Eastern Bloc countries gained their independence in the early 1990s, Poland and Ukraine were broadly in the same place, economically speaking. The two countries were roughly equal in terms of GDP per capita. At that time, many analysts argued that Ukraine was more likely than

Poland to reap the benefits of the wholesale economic reforms anticipated in both countries. What happened? Poland and its people went through the so-called shock therapy of structural economic reform, and then later benefited from EU integration and EU infrastructure loans. In contrast to Poland, Ukraine muddled through, with a series of half-hearted reforms that helped to foster systemic corruption and a non-competitive oligarch-dominated economy. Since the 2014 Euromaidan Revolution, Ukraine has made notable progress towards reforming its economy, but much work remains ahead if the country is to begin closing the huge gap that now separates it from Poland. The good news is that President Zelenskyy and his party have a clear mandate for change and appear determined to seize the moment. Western financial markets are already reacting favorably to the government’s reform agenda, while Ukraine’s nascent economic growth has begun to accelerate. Will Ukraine at last realize its potential, follow the example of Poland, and become another Eastern European economic tiger? If so, Kyiv property investors will not want to be late to this party.

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Perhaps the key ingredient for the revitalization of Kyiv’s property market would be the return of mortgages at affordable rates. Following the 2014 market crash in Ukraine, the banking sector witnessed historic reforms and about half of the country’s banks closed. Thanks to these reforms, the sector has returned to good economic health and begun posting profits. Banking sector profits are now growing due to expanding consumer lending. In the first half of 2019, profit margins across the sector increased 30% yearon-year. If this promising trend continues, we could see the return of affordable mortgages as early as the second half of 2020. This would open Kyiv’s housing market to millions of Ukrainians who are unable to pay 100% of an apartment’s cost at the time of purchase. It would also stimulate the construction sector, which would help to alleviate the city’s massive structural housing deficit (current per capita living space in Kyiv is about half the EU average).

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

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

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Ukrainian IT industry overview Ukraine’s IT sector is expanding rapidly and will play a growing role in the country’s economy whose relatively high salaries, international mindset and enthusiastic embrace of gadgetry have made their mark on the business culture of towns and cities across the country. This overview aims to provide readers with insights into the current dynamics of an industry that will play a leading role in the future direction of the Ukrainian economy as a whole.

IT: Career of Choice for Young Ukrainians

A comprehensive new report into the Ukrainian IT industry produced by tech service provider N-iX has predicted a rise in annual industry revenues to a new high of USD 5 billion during the current year, representing almost double the total reached four years ago in 2015. The report, which draws on data from a range of domestic and international sources including the IT Ukraine Association, the World Bank, Bloomberg and PwC, anticipates the number of Ukrainian IT professionals reaching 200,000 by the end of the current year, with approximately 4,000 IT companies operating in the country. Based on the report’s findings, the IT industry currently accounts for 20% of Ukraine’s overall service sector exports. This timely report underlines the status of Ukraine’s IT industry as one of the engines of the national economy. Over the past decade, successive years of rapid growth have made the Ukrainian IT sector one of the country’s primary service exporters. At the same time, this growth has created an entirely new class of IT professionals

There is no mystery surrounding the appeal of careers in the Ukrainian IT sector. While the national average monthly wage is currently approximately USD 400, the figure for the IT industry is over five times higher. This huge gap is more than enough to attract both young university graduates and professionals with years of experience in unrelated spheres. An additional attraction is the lack of instability due to a reliance on foreign customers. The vast majority of IT companies operating in Ukraine work almost exclusively with international clients, most of whom are located in Europe and North America. This makes the IT industry relatively immune to the frequent fluctuations of the Ukrainian business environment. Added to this is the promise of foreign currency earnings, which removes the anxieties of a salary fixed in the Ukrainian hryvnia currency. While the sharp devaluations of 2014 and 2015 impoverished tens of millions of Ukrainians, those working in the IT sector found themselves insulated against the drama of the drop. While location, cost, and cultural proximity are all factors, Ukraine owes its status as one of the world’s fastest-growing IT industries primarily to the country’s human resources talent. A large percentage of Ukraine’s institutes of higher education have engineering faculties and offer advanced STEM programs, while many of the biggest Ukrainian IT companies work with universities to develop new programs tailored to produce exactly the kind of future IT graduate the industry requires. Additionally, numerous specific IT training schools have sprung up across the country over the past decade in order to meet demand among those who wish to requalify and switch careers.

Three cities stand out on the Ukrainian IT industry map. Kyiv, Kharkiv and Lviv are collectively home to around two-thirds or 67% of the country’s IT professionals

The Ukrainian Economy’s IT Engine

The Ukrainian IT sector’s stats clearly reflect its rapid expansion and growing importance. IT companies currently account for 20% of all Ukrainian service exports. The sector is growing an annual rate of 26%, with approximately 4000 IT companies active in the country. Today’s Ukraine is currently home to over 100 international research and development centers and counting, while there are an estimated 2000 startup companies. Nevertheless, IT outsourcing providers constitute the largest share of the Ukrainian IT service market, employing around 60% of Ukraine’s entire IT engineer workforce. These outsourcing companies overwhelmingly focus on

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European and North American clients. The list of individual companies outsourcing their software development needs to Ukraine ranges from startups to global corporations including the likes of Cisco and IBM. Ukrainian software developers specialize in a wide range of programming languages, technologies and tools. According to HackerRank, Ukraine occupies eleventh place among the world’s top fifty countries for software developers, while TopCoder ranks Ukraine sixth in terms of programmers.

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Meanwhile, Ukrainian Prime Minister Oleksiy Honcharuk has recently unveiled plans to launch a national IT Creative Fund in order to help the country keep pace with its rapidly expanding innovation economy. The Ukrainian IT industry is currently growing at a rate of approximately 30,000 specialist workplaces per year, whereas the country’s universities and institutes of higher education are only producing around 16,000 graduates with the necessary skills to fill these vacancies. The envisaged Fund will address this shortfall by creating new campuses and courses for IT specialists while also financing scholarships and providing grants for young scientists. Funding will come via a special duty levied on IT companies that will rise from 1% in 2020 to 5% in 2024. This conveyer belt of IT talent is helping Ukraine’s tech sector maintain its robust expansion despite the challenges of robust year-onyear growth over an extended period. It is also earning the country a global reputation for excellence along with a string of international awards. Ukraine features in the top 20 of the latest annual Global Services Location Index, and was GSA’s Offshore Destination of the Year. More and more Ukrainian IT companies appear in the Global Outsourcing 100 by IAOP and the Software 500. This rising international profile is also visible in the increasingly regular feature articles and industry profiles appearing in the business media.

Ukraine’s IT Capitals: Kyiv, Kharkiv and Lviv

Three cities stand out on the Ukrainian IT industry map. Kyiv, Kharkiv and Lviv are collectively home to around two-thirds, or 67%, of the country’s IT professionals. This is hardly surprising. Kyiv’s approximately 68,000 IT sector workers represent around 37% of the country total and reflect the Ukrainian capital’s dominant position within the national economy. All of Ukraine’s largest IT companies maintain development centers in Kyiv, while the city hosts more than 50 international R&D offices for the likes of Samsung, Huawei, and Ericsson. Ukrainian startup success stories such as Grammarly and Petcube also have flagship offices in Kyiv. Kharkiv is in second place with just over 23,000 IT professionals. This makes sense, especially given the city’s size, its reputation as a center of learning, and its historic associations with technical disciplines. Likewise, third-placed Lviv also has a long tradition as a student city, while its location close to the EU border and cozy tourist atmosphere are added advantages for European clients. Perhaps the biggest surprise is the total for Odesa of just under 10,000 IT professionals, representing less than half the figure for Lviv. Given Odesa’s reputation for economic innovation, many would expect the city to rank even higher among Ukraine’s IT hubs. It may the case that Odesa’s tech sector is simply more focused on the entrepreneurial environment of startups than on the more staid world of outsourcing contracts.

The Ukrainian tech sector pioneer behind online train tickets and biometric passports Kyiv-based company UNIT has been at the forefront of Ukrainian IT innovation for over a decade

About the interviewee: Valerii Mazurenko is the Technical Director of UNIT If you have ever booked a Ukrainian train ticket online or used a biometric Ukrainian passport, then you have come into direct contact with the work of pioneering IT company UNIT. These are just two of the landmark projects in the diverse portfolio of the company, which has been at the cutting edge of Ukrainian IT innovation since its foundation in 2004. Today, UNIT employs more than 100 staff at its central Kyiv offices and relies on its own in-house research and development division to remain at the forefront of what is the most rapidly expanding sector of the Ukrainian economy. UNIT Technical Director Valerii Mazurenko spoke to Business Ukraine magazine about the company’s 15-year journey and shared his views on what the future holds in the dynamic Ukrainian IT industry. Founded in 2004, UNIT is one of the pioneers of the Ukrainian IT industry. How has the industry evolved over the past 12 years and what are your expectations for the coming decade? 52

This October will mark the fifteen anniversary of the founding of our company. During this time, we have managed to become the best Ukrainian IT company you never heard of. This is because we have always focused on developing useful products for people rather than promoting ourselves. We believe in letting our products speak for themselves. Over our 15 years of work, we have created numerous innovative products that help make life easier for institutions and ordinary people alike. We were the first Ukrainian tech company to develop and implement the concept of an “electronic government meeting”. This system, introduced in 2008, featured personalized voting cards for government ministers. In 2009, we developed an HR system for the Ministry of Social Protection. One of our flagship projects was the online purchase system for Ukrainian train tickets. When we started, the only way to get train tickets in Kyiv was to wait in line at the central railway station and hope they would have what you needed once you reached the front of the queue. Ahead of the Euro 2012 football championship, we pioneered an online purchase system for Ukrzaliznitsya (Ukraine’s railway operator) giving users the chance to buy tickets, select seating, browse schedules, secure refunds, and access a host of other features. This system has since become an everyday part of train travel in Ukraine. Ukraine now sells more than 36 million tickets online annually, accounting for over 60% of all purchases. Perhaps the best indication of the success achieved by UNIT’s ticketing system has been the appearance of numerous imitators. However, none can offer the security, technology or reliability of our system. Another major UNIT milestone was our work on the launch of Ukrainian biometric passports. UNIT was instrumental in the development of these digital identity documents, which currently allow Ukrainian citizens to travel to the 26 European countries of the Schengen zone and 135 nations around the world in total. Since Ukraine gained the right to visafree Schengen travel in June 2017, more than 15 million Ukrainians have received biometric passports. This number continues to grow. Biometric passports are the most secure identity document in the world, and their introduction in Ukraine played a critical role in the EU decision to award the country with the right to visa-free travel. Meanwhile, more than 1.5 million Kyiv residents have made use of the Kyiv City Card, which is quite literally an entire city in a smartphone. This seven-year investment by UNIT allows Kyiv residents to use public transport, pay their utility bills, attend cultural events, contact their city representatives and receive discounts, along with a host of other benefits. This free card empowers Kyiv residents to manage almost every aspect of their daily lives. More importantly, the model it uses applies equally to cities throughout the country. Other companies are now trying to mimic the innovative Kyiv City Card technology pioneered by UNIT. While imitation is the highest form of flattery, nobody can compete with UNIT in terms of our experience in developing and managing the city card concept. When war came to Ukraine in 2014, we wanted to do our part to help the country defend itself. This patriotic impulse led to the development of a stabilization and fire control system for armored vehicles. This unique system, which consists of both software and hardware elements, has un-

You have developed partnerships with many of the largest tech-related brands in the world. What has this experience meant for the growth of your business? Unlike 99% of Ukrainian IT companies, we do not sell the software solutions of other brands. Instead, we invest, create and develop our own projects. It is because of this approach that we have been successful, and it is because of this that we now have partnerships with global companies including Oracle, Visa, Mastercard, NXP, Infineon, T-Systems, Microsoft, Dermalog and many others. Millions of Ukrainians have firsthand experience of UNIT’s work through your involvement in the operating system used for the country’s biometric passports. How challenging was it to develop a system that met the necessary international standards? When we first began in 2004, our original concept was to create identity documents. Because we had already invested in developing and testing this technology over a ten-year period, we found ourselves uniquely placed when the Ukrainian government made the decision to introduce biometric passports. Whereas most countries typically pay licensing fees to foreign suppliers for the relevant operating systems, UNIT’s operating system for biometric passports is a uniquely Ukrainian development.

UNIT has developed universal software and hardware for a number of weapons systems. How do you see these systems contributing to Ukraine’s defense capabilities? Our hardware for armored vehicles will help the new Ukrainian army defend the country more effectively. No one wants war or conflict, which is why at UNIT we believe we need to do our part to ensure that our nation’s soldiers have precise and efficient weaponry in order to ensure peace. President Zelenskyy has spoken extensively of his desire to create “a

country in a smartphone” and to transfer as many government services as possible to the digital sphere. Based on your experience of projects such as the Kyiv City Card, what advice would you offer President Zelenskyy? With the Kyiv City Card, we have the necessary experience to implement President Zelenskyy’s vision nationwide, using our turnkey solutions. This means making our technology available to every Ukrainian, and not just the residents of Kyiv itself.

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dergone successful testing. Since then, state defense companies have expressed a written interest in incorporating it into their armored vehicles. This is typical of the UNIT approach. We create turnkey solutions to meet the needs of everyone, from pensioners and soldiers to students and international travelers.

UNIT has a long record of innovation in Ukraine. Which sectors of the country’s IT ecosystem currently offer the best opportunities to transform Ukrainian society further and improve quality of life? E-government is the future for Ukraine. We believe digital identity cards have a huge role to play, and will come to serve as the only official ID documents for all government services. In addition to unique products like our e-ticket purchasing system, the Kyiv City Card, the operating system for biometric passports, and military technologies developed by UNIT, we already have the technology in place for the next wave of services. For example, President Zelenskyy recently spoke about introducing electronic voting in future Ukrainian elections. We already have the technology to implement this system in a secure, safe, and reliable manner. With more than 20 million Ukrainians living outside the country, electronic voting is a good way to reconnect Ukrainians with their homeland while enabling them to participate in the democratic process at the same time. Another UNIT technology ready for implementation is the electronic excise tax stamp. These stamps, which are used for medicines, alcohol and tobacco (among other items), will give every citizen the ability to operate as a tax collector for the state. Stamps can undergo simple checks to confirm the legitimacy of goods. This innovation could easily result in a significant increase to the state budget each year. Based on current estimates, this could amount to USD 2.7 billion USD, which is six percent of Ukraine’s state budget and two percent of the country’s GDP. Technologies like these, with the potential to simplify and improve life, are the main source of corporate pride at UNIT and the reason why we believe our team can continue to make a real difference. We may still be the best company you never heard of, but given a little more time, UNIT could yet become a household name.

“Whereas most countries typically pay licensing fees to foreign suppliers for the relevant operating systems, UNIT’s operating system for biometric passports is a uniquely Ukrainian development” www.bunews.com.ua

Ukraine’s Turkey Business Community Welcomes VIP Guest Ukraine’s rapidly expanding Turkish business community welcomed the President of the Union of Chambers and Commodity Exchanges of Turkey (TOBB) Rifat Hisarciklioglu to a Kyiv dinner in September hosted by the Turkish-Ukrainian Business Association (TUID). The dinner marked an official visit by Mr. Hisarciklioglu that reflected the growing importance of bilateral business ties between the two Black Sea neighbors. TOBB ranks among the three largest business associations in the world, with approximately 1.5 million member companies. There was much to celebrate in Kyiv. In his role as Deputy Chairman of Euro-

chambers, Mr. Hisarciklioglu recently backed the election of Ukrainian Chamber of Commerce and Industry President Gennadiy Chizhikov to the Eurochambers Board. Turkey has emerged during the past decade as one of Ukraine’s key economic partners and principle investors. Bilateral trade between the two countries reached USD 4 billion in 2018. During a recent visit to Turkey, Ukrainian President Volodymyr Zelenskyy expressed optimism that a long anticipated Turkish-Ukrainian free trade agreement would finally come into force in the coming months, allowing trade volumes to expand beyond USD 10 billion annually.

networking events

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Norwegian Business Forum in Kyiv as Direct Flights Resume The return of direct flights between Kyiv and Oslo in October 2019 will open up a new era of opportunities for cooperation between Ukraine and Norway. This was one of the key messages at an early autumn Networking Forum in Kyiv hosted by the Norwegian-Ukrainian Chamber of Commerce (NUCC) in cooperation with the Federation of Employers of Ukraine and the Norwegian Embassy, and staged under the symbolic name â&#x20AC;&#x153;Into the Sky - Connecting Norway and Ukraineâ&#x20AC;?. Even before the return of a direct flight connection, passenger traffic between Ukraine and Norway has already demonstrated almost 30% growth during the last two years, reflecting strengthening economic ties between the two countries. Norwegian investments announced this year in the renewable energy sector alone total almost USD 1.5 billion. Other attractive areas for potential cooperation include tourism and manufacturing. In August 2019, the NUCC welcomed a delegation of nine Norwegian travel companies who came to explore what Kyiv, Odesa and Lviv have to offer for Scandinavian tourists. In early autumn, NUCC officials hosted ten fashion industry companies who came from Norway to learn more about cooperation opportunities with Ukrainian clothing, textile and shoe producers. 56

networking events

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Swiss Night in Summertime Kyiv

One of the highlights of the summer 2019 diplomatic season in Kyiv was the annual Swiss Night event. This yearly gathering hosted by the Swiss Embassy took place at the cavernous Art Arsenal

venue in the heart of the Ukrainian capital, with Ambassador of Switzerland Guillaume Scheurer on hand to welcome guests and award prizes for contributions to Swiss-Ukrainian bilateral ties.

networking events

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Catholic University Fundraiser on the Dnipro

In summer 2019, Ukraineâ&#x20AC;&#x2122;s Catholic University held its first Summer Charitable Evening in Kyiv. The event is based on a tradition started in Paris which is now mirrored in 35 countries. Dressed in white, friends of the university gathered together on the threedeck boat-restaurant Rosa Victoria to enjoy a delicious meal on the Dnipro and join in the building of the university. The goal of the event was to support the academic programs of UCUâ&#x20AC;&#x2122;s Humanities Faculty with a focus on the unique Artes Liberales bachelorâ&#x20AC;&#x2122;s program, which not only combines three traditional areas in the humanities (history, philology and cultural studies) but also allows students to create their own trajectory of study. Thanks to the generosity of guests throughout the evening, more than UAH 1.5 million was collected in support of the faculty.

International Artists

Explore Ukrainian Identity Summer cultural highlights in the Ukrainian capital included the opening of a novel joint exhibition at Kyiv’s Gallery 83 by international artists Ola Rondiak and Monique Rollins entitled “Items of Identity in the New Ukraine”. The exhibition explored different approaches to issues of contemporary Ukrainian national identity and sought to reflect the complexities of the country’s ongoing post-Soviet voyage of self-discovery.

Kyiv’s Latest Rooftop Terrace Hosts Summertime International Networking Kyiv’s new EDEN Bar & Rooftop venue was one of the biggest hits of the summer 2019 social season. This spacious terrace is located on the roof of the iconic TSUM Department Store in the heart of the Ukrainian capital, and comes complete with stunning views of Khreschatyk Street and the surrounding city center. EDEN hosted a series of events during summer 2019 organised by social community The Big Meet, with crowds of international business professionals drawn by the promise of refreshing cocktails, good company and outstanding Kyiv panoramas. If you want to visit any upcoming party at EDEN, simply quote “The Big Meet” upon arrival in order to enjoy free admission.

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Russian Retreat or

Russian Revenge The threat of a Kremlin revival hung over Ukraineâ&#x20AC;&#x2122;s 2019 election cycle but ultimately failed to materialize. After five years of Putinâ&#x20AC;&#x2122;s war, has Russia disenfranchised itself from Ukrainian democracy?

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“The good news for Ukraine is that Russia will have less and less direct influence on the country through votes and elections. The bad news is that they will seek to exert their influence through other methods” The specter of Russian revenge was in the air throughout Ukraine’s 2019 presidential and parliamentary election campaigns. For the first six months of the year, presidential candidates, political parties and analysts all repeatedly raised the alarm over the allegedly looming threat posed by Moscow. According to these doom-laden forecasts, Ukraine was about to be reconquered by the Kremlin via the ballot box, with a combination of war-weariness and disillusionment undoing the historic progress achieved during five years of blood, sweat, toil and tears. These predictions of a decisive electoral swing in favor of Moscow ultimately proved well wide of the mark. Instead, Ukrainian voters handed political newcomer Volodymyr Zelenskyy and his Servant of the People party an unprecedented mandate for change. Zelenskyy’s commitment to continuing Euro-Atlantic integration did not prevent him from taking first place throughout much of Russia’s former electoral heartlands in southern and eastern Ukraine. Meanwhile, Ukraine’s remaining pro-Kremlin parties never looked like competing at the national level as they once did. Despite the promise of peace in the east and cheap gas for all, Moscow-aligned parties and presidential candidates struggled to reach double figures. In both elections, they ended up with results that were little better than the outcomes of Ukraine’s previous presidential and parliamentary polls, which took place at the height of the war in 2014. Does this mean Russia is finished as an electoral force in Ukrainian politics? Business Ukraine magazine spoke to University of Calfornia Professor Paul D’Anieri about the results of the recent election cycle and asked him whether the idea of a future Russian revival in Ukraine is still plausible. Openly pro-Russian candidates and parties collectively garnered just 15-20% of votes in this year’s Ukrainian presidential and parliamentary elections. This is well short of the national majorities pro-Russian political forces were able to secure in Ukraine as recently as 2010 and 2012, but still indicates significant levels of support among Ukrainian voters. From the Kremlin’s point of view, is the cup half-full or half-empty at this point? For the Kremlin, these elections confirm the bad news from 2014: namely that there is no longer the electoral basis for a pro-Russian candidate to win the Ukrainian presidency or for a pro-Russian par66

ty to control the Ukrainian parliament. Many of the voters who voted for pro-Russian parties and candidates prior to 2014 were located in Crimea and parts of the Donbas that are now under occupation, and those people could not vote in the recent election cycle. This year’s twin votes have underlined how the ongoing occupation of Crimea and the Donbas has dramatically undermined the electoral position of pro-Russian forces in Ukraine. To cite just one figure, there was no voting in, and will be no representatives from, 26 districts in occupied Donbas and Crimea. That alone represents about six percent of the overall Ukrainian parliament. Almost all of those seats would have gone to pro-Russian candidates. Instead, the pro-Kremlin Opposition Platform-For Life (OP-FL) won only six single mandate seats, as opposed to the 113 won by the Party of Regions in 2012. This means that the cup is at least half-empty for Russia. The consolation prize is that because Zelenskyy was so dominant and other parties also collapsed, OP-FL claimed second place overall in the July parliamentary vote. This is perhaps a moral victory. Substantively, being the main opposition party will entitle this group to some leadership positions and additional authority in parliament. And the fact that this group is now run by Viktor Medvedchuk, who is not only close to Putin but one of Ukraine’s enduring political forces, is an additional source of consolation. The key question is whether Medvedchuk and others will be able to use various methods (bribery being the most obvious) to peel votes away from the majority. For Putin personally, this year’s elections represent a particular risk. Whatever else Zelenskyy turns out to be, his youth, energy, anti-corruption stance and wide popularity provide Russian voters with an example of the kind of leader that can emerge in free elections. This must be a cause for concern for Putin, who is always worried that Ukraine will provide a bad example for Russians. Volodymyr Zelenskyy’s geopolitical stance differs little in substance from that of his predecessor, Petro Poroshenko. Like Poroshenko, he advocates continued Euro-Atlantic integration while unambiguously identifying Russia as an aggressor. Nevertheless, Zelenskyy has achieved an historic breakthrough among traditionally pro-Russian voters in southern and eastern Ukraine. What does Zelenskyy’s success tell us about the mood in these regions?

Polling data suggests that the pro-Kremlin Opposition PlatformFor Life party is heavily dependent on pension-age voters. While it is common to associate the decline in support for Ukraine’s proRussian parties with the ongoing undeclared war between the two countries, is the Kremlin’s Ukrainian electorate also in danger of losing further ground due to natural generational shifts in voter sympathies? The short answer is yes. The average age of the new members of parliament is 41. Such an individual would have been born in 1978 and thus have been 13 when the Soviet Union collapsed. For an increasing share of Ukrainians, the time when Ukraine and Russia were part of the same state is history, and not necessarily good history. People who identify with the Soviet Union rather than with Russia or Ukraine are naturally going to decrease in numbers. Unless something dramatic changes, the constituency for closer ties with Russia will naturally shrink, and the war in the east is probably accelerating that process.

As you have already noted, the occupation of Crimea and parts of the Donbas region has de facto disenfranchised millions of traditionally pro-Kremlin Ukrainian voters. While the return of Crimea to Ukrainian control does not appear likely in the shortto medium-term, the reintegration of Donetsk and Luhansk looks far more realistic. What could the return of this Donbas electorate mean for the Kremlin’s ability to influence Ukrainian politics? Paradoxically, the price Russia paid for occupying Crimea and Donbas has been to shrink the number of pro-Russian voters in Ukraine dramatically. In terms of pro-Russian votes, the loss of the Donbas from the Ukrainian electoral map has had a much bigger impact than Crimea, simply because of its much larger population. Over 2.5 million votes were cast in 2010 in parts of the Donbas that are now occupied, compared to less than a million in Crimea. Therefore, one might estimate that reintegrating the occupied Donbas (without Crimea) would add roughly 10-12 percent to the vote for pro-Russian forces. In such a scenario, pro-Russian parties could again be key to forming a coalition in parliament, and a pro-Russian candidate might still be able to challenge for the presidency. The 2019 election campaigns of Ukraine’s pro-Kremlin parties focused on pragmatic issues such as promises of peace and cheaper www.bunews.com.ua

gas, while at the same time steering clear of loftier appeals to Slavonic brotherhood. Is the old talk of Ukraine and Russia as “fraternal nations” gone for good? We still hear a great deal of talk about Russo-Ukrainian fraternity from prominent Russians. I believe that this talk was toned down during Ukraine’s recent election campaigns because it was not seen as an effective vote-winner. While the rhetoric of fraternity is divisive even in eastern and southern Ukraine, populist promises tend to go down well with most voters. Polling showed that corruption, economics, and the war were voters’ biggest concerns, so that is what the pro-Russian parties focused on.

geopolitics

Voting behavior in southern and eastern Ukraine is shifting, and we do not fully understand yet where it is heading. While regional differences remain visible in voting patterns, Zelenskyy has bridged them better than any previous candidate in Ukrainian history. Whether that turns out to be an anomaly or a trend remains to be seen. Clearly, voters in southern and eastern Ukraine share the same broad desire for change and hunger for new faces as demonstrated by voters elsewhere in the country. Similarly, Zelenskyy’s skill as a campaigner has been as effective there as it was elsewhere. It is also clear that Russia’s war in the east has undermined the position of overtly pro-Russian parties. The permissive condition for Zelenskyy’s success in the east and south is the collapse of the Party of Regions, which once had a tight grip on voting in these regions. An important question for the future is whether some party or oligarchic group can forge the kind of dominant political machine in the east that the Party of Regions once represented. For now, it does not look likely.

What do the diminishing electoral prospects of pro-Russian Ukrainian political parties mean for the Kremlin’s geopolitical ambitions in Ukraine? The good news for Ukraine is that Russia will have less and less direct influence on the country through votes and elections. The bad news is that they will seek to exert their influence through other methods. The current Russian strategy seems to be to give Ukraine a choice between re-integrating the occupied territories on terms that favor Russian influence or enduring a long-term conflict that drains Ukrainian resources. Either way, Ukraine loses. If Russia has further territorial ambitions in Ukraine, meddling in Ukrainian politics is no longer a viable strategy. Instead, outright invasion now seems to be the only viable option. That is either good news or very bad news.

About the interviewee: Paul D’Anieri is Professor of Political Science and Public Policy at the University of California, Riverside. His book “Ukraine and Russia: From Civilized Divorce to Uncivil War, analyzing the long-term sources of the Russian war in Ukraine” will be published by Cambridge in early 2020

Ukraine’s Evolving Business Etiquette Exploring how the norms of Ukrainian business culture have developed as the country has come of age

Ukraine’s business environment has undergone a series of dramatic upheavals over the past quarter of a century that mirror the wider turbulence in the parallel political and geopolitical arenas. The culture of doing business in Ukraine has evolved significantly along the way, with global trends and local nuances combining to create new norms that set the tone for business meetings and office aesthetics across the country. These top five recent changes in Ukrainian business etiquette reflect a professional climate that is absorbing international fashions while becoming more distinctly Ukrainian in its own right.

1. Digital distractions are no longer acceptable

There was a time at the dawn of the mobile communications age when telephones were a ubiquitous feature of any Ukrainian business meeting. Often placed on the table, these phones were the center of attention and many people would think nothing of breaking off a conversation mid-sentence in order to answer a call. The image of wealthy Ukrainians shouting into their mobile phones is one of the most enduring snapshots of the early 2000s, but it is now almost as dated as fax machines and photo albums. This is in some senses paradoxical. After all, the rise of smartphones has made everyone more dependent than ever on the connectivity provided by their mobile devices. Nevertheless, in contemporary Ukraine it is no longer acceptable to answer phone calls during business meetings, while many professionals routinely turn their devices off in order to avoid distractions. Indeed, business gatherings are now among the relatively few areas of modern Ukrainian life where smartphones do not enjoy 100% penetration, making them an oasis against the near-total domination of these handheld distractions.

on the wane for some time, especially with the growing importance of Ukraine’s decidedly informal IT sector. The recent rise of the Zelennial generation has now dealt it a deathblow. Ukrainian President Volodymyr Zelenskyy is famously informal in his costume choices, often appearing at official events in a smart but simple shirt and trouser combo. He will occasionally don a jacket, but rarely opts for a tie. President Zelenskyy’s twenty- and thirty-something colleagues in the new government share this preference for a casual smart dress code, and this trend has served to legitimize more understated approaches to business fashions throughout the country. There are limits, of course. Turning up for an important meeting in jeans and a T-shirt would still raise some eyebrows, for example. However, in most industries, anyone arriving in full suit-and-tie pomp will also likely find themselves the exception rather than the rule.

2. Informal attire is the new black

Ukrainian business fashion used to reflect Henry Ford’s memorable quote: “You can have any color you choose, so long as it’s black.” Given the choice, business professionals overwhelmingly preferred black suits, black jackets and overcoats, black cars, and black anything else. There was also a strong accent on formality, with ladies expected to dress in heels regardless of their suitability to the given terrain, and men accustomed to wearing suits and ties as a matter of routine. Anything less ran the risk of appearing as an affront that could negatively influence sensitive negotiations or create tensions in an otherwise cordial business relationship. This somewhat stuffy approach to business dress has been 68

3. Socially acceptable smoking for the IQOS generation Ukraine has long been a nation of tobacco enthusiasts. Indeed, it is rare to find any period art of Ukrainian Cossacks that does not feature at least one fellow puffing away on his pipe. This has remained the case, with Ukrainians entering the twenty-first century with some of the highest smoking rates in Europe. However, the introduction of a smoking ban in Ukrainian bars and restaurants in the late 2000s succeeded in changing the culture around

4. English increasingly becoming the lingua franca For years, the great linguistic debates within Ukrainian society have revolved around the use of the Ukrainian and Russian languages. While this has never been a particularly contentious issue within the traditionally pragmatic business community, it is now increasingly common to encounter business meetings and business correspondence conducted primarily in English. The rise of English reflects a number of parallel trends within the Ukrainian business community and Ukrainian society as a whole. One factor is the generational shift as more post-Soviet Ukrainians come of age and enter the workforce. Many members of this independence generation have significant English-language skills rooted in their school education and honed via extensive travel, daily internet usage and round-the-clock exposure to Western popular culture. This makes them infinitely more comfortable with spoken English than the previous generation raised in isolation behind the Iron Curtain. This alone would not have led to greater Englishlanguage communication within the Ukrainian business community. However, the post-Soviet generation is emerging at a time when Ukrainian businesses are broadening their horizons in an historic expansion of the country’s geographical reach. The onset of hostilities with Russia in 2014 led to the loss of access to many of Ukraine’s traditional partner markets and forced Ukrainian businesses to look beyond the post-Soviet comfort zone. Over the intervening years, Ukraine’s balance of trade has swung decisivewww.bunews.com.ua

ly away from the former Soviet republics, with the EU emerging as the country’s largest trading partner. India and China are now Ukraine’s biggest agricultural export markets, with a host of African and Middle Eastern countries not far behind. Meanwhile, the fast-expanding Ukrainian IT industry relies heavily on European and North American clients. Even in government circles, officials are far more likely to find themselves interacting with Western colleagues than with Russian-speakers from the ex-USSR. This geopolitical pivot towards a more Western-leaning, globalized Ukraine has fuelled the rise of the English-language within the Ukrainian business community, making it an everyday feature of meetings, digital dialogue and technical negotiations alike.

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cigarettes and served to make it less socially acceptable to smoke during group gatherings and business meetings. The rapidly rising popularity of IQOS and other heat-not-burn smoking products has done much to reverse this trend and reintroduce smoking to the business environment. While restrictions remain in place in public venues, the relatively smokeless experience offered by IQOS has made it an increasingly commonplace feature of business meetings taking place in outdoor environments and summer terraces. Whereas many business people might think twice about the unspoken negative connotations of sparking up a traditional cigarette while conducting serious negotiations, this concern does not translate to gadgets like IQOS.

5. Smartphone taxi services and the decline of the driver

Ten years ago, it was normal to encounter small crowds of personal drivers huddling together outside Ukrainian business centers, restaurants and hotels. At the time, most businesspeople regarded drivers as a daily essential, and large companies often employed small fleets in order to keep middle management on the move. The cult of the driver was a familiar theme throughout the Ukrainian business world, with the drivers themselves often serving as sources of gossip and banter between different departments. This is still true to a degree, but the advent of efficient courier companies and the rise of digital taxi services have led to a significant decline in the prevalence of company chauffeurs. Many senior executives still insist on personal drivers, but the far larger pool of middle management professionals now tend to take the more practical approach of ordering a new taxi digitally after each separate meeting. As a result, the once ubiquitous personal driver has become something of an endangered species in today’s Ukraine. Unsurprisingly, many have switched jobs and become taxi drivers themselves.

A new lifeline for Ukraine’s

army of traumatized veterans

Helpline will offer soldier-to-soldier counselling to overcome Ukraine’s mental health taboo Autumn 2019 will see the official launch of Lifeline Ukraine, the country’s first fully professional suicide prevention and mental health support hotline. Recruitment of counsellors has focused on Ukraine’s pool of approximately 400,000 combat veterans from the country’s undeclared but ongoing war with Russia. After completing training with international specialists in veteran mental health issues, they will begin working around the clock at the Lifeline Ukraine offices in Kyiv’s riverside Podil district. The launch of Lifeline Ukraine cannot come too soon. Mental health problems among former military personnel are a major social issue in today’s Ukraine, and one that the country remains uniquely ill equipped to address. Prior to the Russian invasion of 2014, postSoviet Ukraine had no experience of dealing with the trauma of military conflict, or of providing support for those left damaged by war. This was just one of the many ways in which Ukraine was completely unprepared for the onset of Russian aggression. Understandably, the country initially focused attention on defending itself against the immediate military threat, but the accompanying mental health challenges created by the conflict have since made themselves abundantly apparent. There are no exact figures available for the number of suicides among serving Ukrainian military personnel and veterans, but experts believe at least 900 have taken their own lives since the start of hostilities five-and-a-half years ago. Some speculate that the real number may be far higher, pointing to incomplete monitoring of veterans and question marks over the recording of frontline deaths. The war has also taken a huge toll in terms of broken marriages and families destroyed by a vicious cycle of domestic violence, depression and substance abuse. With hundreds of thousands of Ukrainian veterans hailing from every corner of the nation, this is a genuinely nationwide problem touching every city, town and village in the country. Lifeline Ukraine receives funding from the British Embassy in Kyiv

and is part of the wider All4One veteran support initiative led by the East Europe Foundation. The idea for a nationwide hotline first emerged in the Ministry of Health in 2016 during the early days Dr. Ulana Suprun’s tenure as Acting Health Minister. It is in many ways fitting that the initiative began with Suprun. The American-born former minister, who left her post in late summer 2019 following the appoint of a new government, first rose to prominence in Ukraine for her work improving medical support for battlefield casualties in eastern Ukraine during the height of the fighting in summer 2014. Firsthand knowledge of frontline conditions came hand-in-hand with an awareness of the mounting mental health crisis facing the country as large numbers of Ukrainians sought to return to civilian life while struggling to cope with the horrors they had encountered. Suprun and her team began developing the concept of a nationwide suicide prevention hotline based on best international practices, before inviting Kyiv-based Irish businessman, writer and political commentator Paul Niland to become the founder of what would eventually evolve into Lifeline Ukraine. For Niland, setting up the hotline was a way of giving something back to the men and women who had sacrificed so much for his adopted homeland. Having lived for the past sixteen years in the Ukrainian capital, he describes it as an honor to support the country’s veteran community. “They have literally put their lives on the line to protect us,” he says. Niland stresses that suicide among military veterans is not a problem exclusive to Ukraine. On the contrary, it is a major issue any nation engaged in armed conflict must face. Indeed, many Western countries are currently struggling to cope with long-term mental health challenges related to their own veteran communities. The Lifeline Ukraine team has sought to tap into this experience as they have developed the concept to fit the specifics of the Ukrainian environment, working closely with experts from a number of countries ranging from Australia to Canada.

“Prior to the Russian invasion of 2014, post-Soviet Ukraine had no experience of dealing with the trauma of military conflict, or of providing support for those left damaged by war”

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One of the biggest challenges the project faces is persuading veterans to ask for help. Mental health issues remain largely taboo in Ukrainian society, where the prevalence of traditional machismo culture has long fueled a “boys don’t cry” mentality that leaves many feeling they must suffer in silence. This has created additional psychological barriers for veterans struggling to come to terms with their experiences, while also making it difficult for relatives and family members to seek out the support their loved ones so clearly need. Niland hopes the policy of recruiting and training fellow veterans to work as counsellors will enable Lifeline Ukraine to overcome this considerable obstacle. “People will not be calling up to speak to a psychiatrist. They will be talking to a comrade, to a brother in arms. There is no stigma in that.” The people behind Lifeline Ukraine hope that it can serve as a flagship for raising mental health awareness in the country. While the project currently concentrates on providing support for veterans, the www.bunews.com.ua

structure of Lifeline Ukraine will enable it to eventually expand and become a nationwide mental health and suicide prevention service for the entire country. Such a service is long overdue. According to World Health Organization figures for 2018, Ukraine currently ranks in eighth position internationally in terms of suicide rates among the population. It is one of a staggering six post-Soviet countries to feature in the global top ten (Lithuania is in first position followed by Russia in second place, Belarus in fifth, Kazakhstan in seventh, and Latvia in ninth). This hints at a vast mental health crisis across the whole of the former USSR, making initiatives like Lifeline Ukraine even more urgent. If the project proves successful, it may go on to provide important lessons for Ukraine’s fellow former Soviet republics. For the time being, however, Niland remains focused on doing whatever possible to help Ukraine’s veterans. “This is the section of Ukrainian society most deserving of our support right now,” he comments. “If we can say that we have saved a single life, everything will have been worth it.” 71

Ukrainian Teams in Europe

UEFA Campaign Preview

Shakhtar seek Champions League glory while Dynamo and Oleksandriya launch Europa League bids

Shakhtar Donetsk’s Brazil-born Ukrainian international midfielder Marlos will be one of the key players as the Ukrainian Premier League Champions compete against England’s Manchester City, Croatia’s Dinamo Zagreb and Italian club Atalanta in the Champions League The group stages of 2019-20 European football season, which kick off in September and run through until the final weeks of the year, are a particularly important for Ukrainian clubs. After last year’s largely disappointing UEFA Champions League and Europa League campaigns, Ukrainian sides will need to perform better in order to preserve the country’s automatic group stage berths for the coming seasons. Shakhtar Donetsk, Dynamo Kyiv, and Oleksandriya are the only Ukrainian clubs to qualify for the group stages of UEFA competitions this autumn, leaving them with the burden of defending Ukraine’s overall position in the European football rankings.

Shakhtar Donetsk Preview: Manchester City Once Again

Ukrainian champions Shakhtar Donetsk started the season with a managerial change as Paulo Fonseca departed for AS Roma. Shakhtar replaced him with another Portuguese head coach, Luis Castro. The new trainer has enjoyed a positive start to the domestic league season, with a win over Dynamo already giving his side an edge in the title race. Unfortunately for Castro, Shakhtar fans now take domestic dominance for granted. The club’s Champions League campaign is what really matters. Shakhtar’s group stage opposition has led to mixed expectations. Most notably, the Miners face English champions Manchester City for the third season in a row. The Ukrainian club lost 9-0 on aggregate last year, so their prospects in those fixtures speak for themselves. Elsewhere, Croatia’s Dinamo Zagreb should be beatable both home and away, whilst Champions 72

League debutants Atalanta could cause some surprises after finishing fourth in Italy’s Serie A last season. Interestingly, the group also sees Ukrainian players Oleksandr Zinchenko (Manchester City) and Ruslan Malinovskyi (Atalanta) return to their homeland to face former club Shakhtar. On the eve of this year’s Champions League campaign, Shakhtar received a boost with the signing of Ukrainian national team regular Yevhen Konoplyanka, who joined the club from Germany’s Schalke. The 29-year-old flying winger is widely regarded as one of the most exciting Ukrainian players of his generation. He will bring added thrust to Shakhtar’s UCL campaign, as well as considerable European experience. Much will depend on the form of Marlos, who pulls all the strings for this Shakhtar side. The Brazil-born attacking midfielder, who received Ukrainian citizenship in 2017, functions as the intermediary between Shakhtar’s defensive midfield base and their lone forward. As such, he not only has to contribute through his passing and assists, but often takes it upon himself to share the goal-scoring burden with mazy dribbles into the box and tidy finishes from anywhere inside the 18-yard line. Hindered by a number of injuries last season, he has started the season exceptionally in the Ukrainian Premier League and will be hoping to transfer this form into European competition. It will be interesting to see how new coach Luis Castro takes to his own debut in Europe’s top club competition. League performance is not an accurate measure of how well the side will do in the UCL. However, if the line-ups from his first few fixtures signal anything, Shakhtar will put on some technical displays

Dynamo Kyiv Preview: High Expectations Despite Poor Form

Dynamo’s season has already been a rollercoaster of emotions, and it is only two months old! The Kyiv club’s domestic season has seen a number of defeats, putting them on the back foot in their title challenge against Shakhtar Donetsk. Further compounding Dynamo’s misery was their exit from the UEFA Champions League qualifiers, meaning the side has now failed to reach the group stages of the competition for the third season in a row, their worst run this century. Fortunately, this turn of events meant that club president Ihor Surkis finally sacked unpopular manager Aleksandr Khatskevich. Unfortunately, his replacement is yet another in-house graduate from the club’s increasingly threadbare “School of Lobanovskiy”. Former Dynamo Kyiv player and manager Oleksiy Mykhaylychenko now finds himself in his second stint at the helm, having left the job in 2004 following a highly forgettable two-year reign. Despite the considerable frustration among the club’s fans over the failure to recruit a top calibre manager with a proven record, expectations for the coming European campaign remain high. With Dynamo progressing from the Europa League group stages in all three of the Khatskevich seasons, supporters will want nothing less from the new manager. Dynamo have been gifted a more than manoeuvrable group. Danish side Copenhagen are not what they used to be, Sweden’s Malmo are also a shadow of their twentieth century selves, whilst Swiss outfit Lugano are relative novices on the European stage. Dynamo hopes will rest on the shoulders of star player Viktor Tsyhankov, who has stepped up in recent seasons to fill the boots of former Dynamo talisman Andriy Yarmolenko. The tricky winger can play equally effectively on either the left or the right. Tsyhankov has pace, vision, pinpoint delivery, and an eye for long-range goals. Whilst he has demonstrated that he can cut it in the Ukrainian Premier League, he must now prove himself in UEFA competition. Tsyhankov has shown flashes of brilliance during previous UEFA campaigns during the past few seasons, scoring against the likes of Astana and Rennes. However, he often goes missing in the bigger games. If he shines, Dynamo should emerge as comfortable group winners. The minimal expectation of fans and media is to improve on last season’s European campaign and make the quarterfinals of the Europa League in spring 2020.

Oleksandriya Preview: Debutants Looking to Impress in Lviv

Oleksandriya were last season’s surprise package in the Ukrainian Premier League, finishing third ahead of the likes of Zorya Luhansk and even challenging the mighty Dynamo Kyiv for second place before the winter break. This earned Volodymyr Sharan’s men an automatic group stage spot in the

UEFA Europa League. They will wage this first Europa League group stage campaign far from home. Due to UEFA regulations, the Kirovohrad Oblast side will not be playing their fixtures at their regular stadium, the NSK Nika. Poor transport links, a limited number of hotels, and stadium size all played a part in this decision. Instead, Oleksandriya have opted to play their home games at the Lviv Arena, anticipating the city’s locals to be the most supportive of the side’s European ambitions. On current form, the Kirovohrad side do not look like potential European giant killers. Having overachieved last season, Oleksandriya have had a mixed start to the current domestic season in the Ukrainian Premier League. They have registered a couple of wins but have also lost a few. It is unlikely that the club will reach the heights of last year, but they remain a difficult and well-organised outfit. Due to their novice European coefficient status, Oleksandriya were in Pot 4 for the Europa League draw. As such, they will face some big-name clubs from Western Europe in this autumn’s group stage ties. Germany’s

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of vibrant attacking football. While Manchester City are runaway favorites to top their group, Shakhtar are a good bet for second place and have every opportunity to qualify for the Round of 16. They simply have more experience than both Dinamo and Atalanta, and have a versatile squad with both the firepower and defensive poise to cause their opponents problems. Junior Moraes’ goals will be key in their progression, whilst the latest batch of Brazilian youngsters could enjoy breakthrough European campaigns. However, second place may turn out to be a mixed blessing. In the grand scheme of things, many of the club’s fans believe it might be better for Shakhtar to finish third and aim to have a good run in the Europa League, rather than scrape through in the Champions League only to face a knockout tie against Barcelona that sees them exit Europe before March.

Wolfsburg are no strangers to European competition, whilst French club St Etienne have a European pedigree stretching back decades and often perform strongly in Ligue 1. The most anticipated tie of the group stage will be against Ukrainianized Belgian club Ghent, who boast three players from Ukraine in the first team squad. This match will see Ihor Plastun, Roman Bezus and former Oleksandriya man Roman Yaremchuk all return to Ukraine. Much will depend on the form of Yuri Pankiv, Oleksandriya’s veteran goalkeeper and the recipient of the club’s 2018/19 Player of the Season award. His shot stopping ability was often the decisive factor in Oleksandriya’s low-scoring matches last year. Pankiv’s many clean sheets paved the way for numerous narrow 1-0 victories. He is also something of a penalty specialist. With Oleksandriya likely to be run ragged by Wolfsburg, St Etienne and Ghent, Pankiv can anticipate a busy autumn as the club’s overworked last line of defence. It is going to be a challenging campaign for the goalkeeper, but one that may help bolster his reputation further as he enters the twilight years of his professional career. Manager Volodymyr Sharan follows a rather pragmatic approach to tactics. When playing against superior opposition such as Dynamo and Shakhtar, he generally sets his side up to absorb pressure before using his pacey wingers and full backs to counter down the flanks. Oleksandriya’s line-ups in the Europa League will be similarly defensive-minded, while aiming to steal the odd goal on the break through pace and penetration. Despite this shrewd approach, few are expecting miracles. Oleksandriya will surely put on a brave show in their debut Europa League group campaign, but the gulf in experience, class and finances between the Ukrainian newcomers and their more seasoned opponents will likely be apparent for all to see. The team’s opening fixture in Germany against Wolfsburg will be the litmus test as to whether they can hold their own at this level. Some success is possible. Indeed, this team proved last year that they have the potential to secure hard-fought draws or perhaps even the odd shock win in Lviv. However, anything more would be seen as a bonus. The players, manager and supporters should savour this moment, as it is unlikely such an occasion will come around again for Oleksandriya.

About the author: Andrew Todos is a London-based Ukrainian football expert and blogger. He runs Zorya Londonsk, an Englishlanguage online platform dedicated to Ukrainian football www.bunews.com.ua

expat interview

Nigerian Catholic priest makes history

as first African ordained in Ukraine The Reverend Father Michael Okika Uyammadu made history in 2019 by becoming the first African to be ordained as a Catholic priest in Ukraine. Uyammadu, who originally hails from southern Nigeria, first came to Ukraine during the early years of Ukrainian independence to study economics. He graduated from Donetsk State University before embarking on a career in business in post-Soviet Ukraine. Following a long personal journey of spiritual discovery, the future priest enrolled at the Catholic Church’s Superior Institute of Religious Sciences of St. Thomas Aquinas in Kyiv. He was ordained in May 2019 at Myhailivskiy Roman Catholic Church in Kamianets-Podilskiy. Cosmos Ojukwu spoke to Father Michael about his pioneering religious role in Ukraine. Is it true to say that you are the first African priest in Ukraine? Not quite. I am not the first African priest to serve in Ukraine, but I believe I am the first African to be ordained as a priest in Ukraine. When did you come to Ukraine and why? I first came to Ukraine in 1996. In those days, I was a private student looking to further my education. Why did you decide to enter the priesthood? For me it is quite straightforward. I see it as an act of God. I feel that God has called on me to serve Him. Which languages do you use in church? I use both the Ukrainian and Polish languages in my work, where and when necessary.

Have you encountered any challenges in Ukraine due to your ethnicity or your Roman Catholic denomination? Not at all. I have not faced any problems of that nature in Ukraine.

Ukraine has historically been a religious borderland where different confessions have come into contact. How do you intend to contribute to religious tolerance and interfaith dialogue in today’s Ukraine? As a priest, I will continue praying for the spread of peace and understanding throughout today’s Ukrainian society. By God’s grace, toler-

ance, love and interfaith dialogue will continue to exist among different denominations and between all people, regardless of their personal religious beliefs.

In summer 2019, you read your first English-language sermon at St. Alexander’s Cathedral in Kyiv. What else can English-speaking Catholics in Ukraine expect from you? Let them expect prayers from me. I will pray for them all. I will pray for growth, for love, and for unity amongst the community.

About the author: Cosmos Ojukwu is a Kyiv-based Nigerian journalist who has been covering Ukrainian affairs since the early 2000s

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