Business Ukraine 04/2017 by Business Ukraine magazine

WINNER BRINGS BENTLEY TO UKRAINE

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ISSUE 04/2017

ANNIVERSARY ISSUE ACC Anniversary Issue Partners:

BUSINESS UKRAINE ISSUE 04/2017: This month we are celebrating the twenty-fifth anniversary of the American Chamber of Commerce in Ukraine (ACC). For the past quarter of a century, the ACC has been at the heart of Ukraine’s international business community, working with successive Ukrainian governments to build a better business environment. (With special thanks to our official ACC Anniversary Issue Partners: McDonald’s, Bunge, and Nobel)

The Ukrainianization of Ukraine Ukraine gained independence in 1991, but there is a strong case for arguing that it did not become a fully-fledged nation until 2014. As is often the case with major historic shifts, this change was not immediately apparent. Even now, three years on, it may come as news to the millions of Ukrainians struggling to make ends meet while dealing with a vast and largely unreformed state bureaucracy. Nevertheless, with the passage of time it is increasingly apparent that the traumatic and triumphant events of 2014 represented a national coming of age. We are now witnessing the Ukrainianization of Ukraine, and it is long overdue. Evidence of this national evolution is all around us. It is visible in the multitude of Ukrainian flags on display everywhere you go, and in the popularity of anything carrying the “Made in Ukraine” label. You can see it in the enthusiasm for holidays like Vyshyvanka Day and the plethora of amateur videos on social media highlighting the beauty of the country. It has even permeated people’s sense of self. An April 2017 survey found that 92% of citizens now consider themselves ethnic Ukrainians – up from 78% at the time of the last census in 2001. Most of all, this growing national consciousness is epitomized by the countless thousands of volunteers throughout the country who have given their time, their energy, their money, and, in many cases, their lives for the sake of a better Ukraine. Ukraine was not always like this. In the 1990s, national pride was a rare commodity regarded by many as the exclusive preserve of fools and fanatics. Large swathes of the population were indifferent to ideas of Ukrainian identity, preferring to think in terms of the Soviet collective while dismissing independent Ukraine as an accident of history. Despite enjoying nominal sovereignty, many Ukrainians remained very much stuck in routines established during the Communist era. They got their news from Russian TV and took their lead from Moscow on everything from fashion trends to business practices. Things were so bad that at the turn to the millennium, Ukrainian President Leonid Kuchma actually published a book entitled: “Ukraine Is Not Russia.” In retrospect, there were signs of a growing national awakening long before 2014. The 2004 Orange Revolution stands out as a watershed moment in Ukraine’s journey towards genuine nationhood. The revolution ended in political failure but it inspired Ukrainians to see their country in an entirely new and independent light. The passage of time has also played an important role. Since the mid-2000s, a new generation of Ukrainians with no personal experience of the shared Soviet past has reached adulthood. To them, there is nothing manufactured or artificial about Ukrainian statehood. Indeed, it is all they have ever known.

The shock of Russia’s 2014 attack radically accelerated Ukraine’s post-Soviet nation-building process, uniting the population in ways that might otherwise have taken decades to achieve. Putin’s hybrid war posed a direct threat to the survival of the Ukrainian state and forced every Ukrainian to choose sides. To the surprise and chagrin of the Kremlin, the vast majority chose Ukraine. This was not about politics or even geopolitics – it was an affirmation of Ukraine’s fundamental right to exist. By trying to extinguish Ukrainian statehood, Vladimir Putin became the accidental architect of the modern Ukrainian nation. Since 2014, the Ukrainianization of Ukraine has continued to gain ground despite a toxic cocktail of war weariness, economic gloom, and political corruption. Crucially, the country has made huge strides towards reclaiming control over its own information space following decades of Kremlin domination. Russian TV channels can no longer broadcast freely in Ukraine, while Ukrainian channels are restricted in their ability to rebroadcast Russian content. Meanwhile, new language quotas obliging Ukrainian TV channels to dedicate 75% of airtime to Ukrainian-language content will spur the growth of the domestic entertainment industry and further limit the practice of screening whatever Russia has to offer. The recent ban on Kremlin-controlled social media is potentially even more important for Ukraine’s information independence. As well as weakening Russia’s ability to wage information war, it forces Ukrainians to move beyond the post-Soviet comfort zone. The millions of Ukrainians who used Russian social media did not do so for political reasons. They acted out of habit, just as they used to routinely watch Russian TV and read Moscow newspapers. These habits kept post-Soviet Ukrainians psychologically anchored inside the Russian World and paved the way for the tragedies of Putin’s hybrid war. Without information ascendency, Russia’s subsequent military intervention would have been unthinkable. The Ukrainianization of Ukraine is not a panacea. It will not cure the country’s ills or make the population magically content to receive meager salaries and substandard state services while politicians steal billions. However, it is a prerequisite if Ukraine is to succeed as a modern European nation. A shared sense of identity is essential for the cohesion of any national community, and this was long lacking in post-Soviet Ukraine. At least the country now has a fighting chance. 5

Passionate about business passionate about Ukraine ACC President Andy Hunder believes business can play crucial role in Ukraine’s transformation Perched high above the hustle and bustle of downtown Kyiv, the offices of the American Chamber of Commerce in Ukraine (ACC) are all about transparency. Full-length glass partitions separate the various individual meeting rooms and conference areas, creating a sense of accessibility and openness that cuts to the core of an organization attempting to

aid Ukraine’s embrace of contemporary international business values. This impressive open-plan office space occupies an entire floor in one of Ukraine’s most modern business centers – a status befitting the ACC’s prominence in the country and its historic role as the voice of the international business community in Ukraine for the past quarter of a century. :

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With Petro Poroshenko, President of Ukraine

With Marie Yovanovitch, U.S. Ambassador to Ukraine

With Geoffrey R. Pyatt, U.S. Ambassador to Ukraine (2013-2016)

With Volodymyr Groysman, Prime Minister of Ukraine

25 Years in Ukraine Throughout the month of May, the ACC team was even busier than usual, with staff occupied by plans for a gala party to mark 25 years in Ukraine. The complexity of these twenty-fifth anniversary preparations reflected the sheer scale of the organization’s reach in Ukraine. With well over a thousand VIP guests drawn from the country’s political, diplomatic and business elites expected to attend the anniversary evening at Kyiv’s prestigious and suitably cavernous Mystetskiy Arsenal venue, the event involved dozens of corporate sponsors and partners. The man charged with overseeing these party preparations was American Chamber of Commerce in Ukraine President Andy Hunder, who recently marked his own personal anniversary of two years at the ACC helm. It has been a rollercoaster past twenty-four months for Mr. Hunder. He took over at the Ukrainian branch of the ACC in spring 2015, at a time when Ukraine was facing some of the greatest existential challenges in the country’s long and troubled history. Crimea was firmly under Kremlin occupation and Russia’s hybrid war continued to smolder in the east of the country, resulting a steady flow of daily casualties. Meanwhile, the Ukrainian national currency had just experienced a record devaluation and the economy was in apparent freefall. It was not a particularly advantageous moment to be taking on the presidency of Ukraine’s longest-running international chamber of commerce. Mr. Hunder says he was undaunted by the situation he encountered in early 2015. For him, it was all about the opportunity to make a meaningful contribution at what he sees as a decisive period in the coun-

try’s post-Soviet transition. “When the job first came up in late 2014, I felt that the time was right,” he says. “Given the historic changes taking place in the country and within government circles, I saw that the Chamber had the opportunity to help lay the foundations for the entire economy and dramatically improve the business climate.” He believes these developments could have a profound effect on Ukrainian society as a whole, especially by paving the way for desperately needed investment inflows. “The future is there for the taking,” says Mr. Hunder. “Foreign direct investment is the key to driving Ukraine’s transformation forward. FDI is the only thing that can dramatically increase the country’s GDP. If we can boost FDI through our efforts, then it will have a snowball effect throughout Ukraine on infrastructure, services, and every area of the economy. The coming few years could end up being a decisive period for Ukraine’s development.”

Culture of Communication

All this is a far cry from the kind of networking activities that traditionally serve as the everyday focus for most international chambers of commerce elsewhere in the region. The expanded presence of the ACC in Ukraine reflects both the prominent role played by the international business community in Ukraine’s post-Soviet journey, and the efforts of Mr. Hunder’s predecessor as Ukraine’s ACC President, Jorge Zukoski. Prior to stepping down in New Year 2014, Mr. Zukoski spent almost 15 years in charge of the American Chamber of Commerce in Ukraine, building the organization up from modest beginnings to its : www.bunews.com.ua

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“If we can create the right environment for business here in Ukraine, the consequences for the entire country will be massive” : present size, while also successfully establishing it as a stakeholder in

the country’s economic evolution. He was a ubiquitous figure on the Ukrainian business circuit and a bridge-builder who proved able to establish working ties with successive Ukrainian governments during a period of considerable political turbulence. “I inherited a fantastic team from Jorge,” says Mr. Hunder. “I’m personally very grateful to him, as is the business community in Ukraine.” Mr. Zukoski’s legacy is an organization with an exceptionally large team and more than 600 member companies, including many of the largest international corporations present on the Ukrainian market. He also bequeathed a culture of mutually beneficial cooperation between business and government that Mr. Hunder has embraced enthusiastically. “We remain very much focused on relationships,” he says. “Our lobbying is all about having a dialogue with the government. As an organization, we seek to build the right relationships with our members, with stakeholders, and with government.” Changes in Ukrainian government culture since the 2014 Euromaidan Revolution have helped to facilitate this dialogue. Mr. Hunder says the

old practices of selling influence are giving way to greater accessibility and interaction. “There used to be middlemen offering to set up meetings with government ministers, but times have changed. Today, I can send a message to virtually any senior minister figure via social media and can expect to receive a response within a few hours. There is no guarantee that it’ll be a positive response, but the dialogue is there.” The post-Euromaidan arrival in government of experienced corporate players has also helped to improve communication, with many of those signing up for state service having previously had direct experience of the ACC during their private sector careers. “This has helped us to build up and maintain a sense of trust in our dealings with the government,” the ACC Ukraine President comments. The credibility of the ACC in Ukraine also rests on the professional reputations of the people who make up the membership. The Chamber operates via a seasoned board of directors alongside a series of specialized committees featuring many of the country’s top professionals in their respective fields. International ties bring added weight. Mr. Hunder was recently elected Treasurer of the AmChams in Europe, an umbrella :

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: organization for American Chambers of Commerce from 42 countries throughout Europe, bringing the ACC in Ukraine on to the AmChams in Europe Executive Committee. The organization also enjoys a special link with the US Chamber of Commerce, which Mr. Hunder describes as ‘probably the most powerful lobbying organization in the world’.

Committed to Ukraine

Mr. Hunder is particularly well qualified to reflect on the changes taking place in contemporary Ukrainian society. The son of Ukrainian immigrants who arrived in London following WWII, he grew up with a passion for all things Ukrainian, spending his teenage years studying at a Ukrainian seminary in Rome before beginning his expat career as a TV presenter in 1990s Kyiv. Mr. Hunder speaks of those early independence years with unmistakable fondness, recalling the embryonic international business community of the time and the early steps of the newly independent state. His first big break came in 1997 when he was invited to establish the communications department of Ukraine’s first major mobile phone operator, UMC. Mr. Hunder left Ukraine in the mid-2000s when his Ukrainian wife took up a posting at the Ukrainian Embassy in his native London. While back in the UK, he continued to maintain both professional and cultural ties with Ukraine, setting up London representative offices for some of Ukraine’s leading law firms while overseeing operations at the Ukrainian Institute on a voluntary basis. It was in this role at the Ukrainian Institute that Mr. Hunder first rose to public prominence as an unofficial spokesperson for Ukraine. There is a good chance that if you saw any international English-language TV news coverage of Ukraine’s 2013-14 Euromaidan Revolution, you will have seen Mr. Hunder providing expert commentary. As one of the very few English-speaking Ukraine experts based in London at the time, he quickly became the go-to man for media commentary about the crisis. By the time President Yanukovych fled from office in late February 2014, Mr. Hunder had given over 100 live TV interviews and had become a familiar face to Ukraine watchers all over the world. The experience helped to establish his credentials as a media-savvy personality with the requisite gravitas to represent the country on the international stage. He says it also highlighted the deficit of English-language information about the country, a problem that left Ukraine uniquely vulnerable to the Russian information attacks that began during Euromaidan

and escalated as the Kremlin hybrid war unfolded in Crimea and across eastern Ukraine. Now back in Kyiv, Mr. Hunder says the ACC can help to counter this information deficit by providing the kind of balanced and credible insights into today’s Ukraine that the international community currently lacks. In an information environment overflowing with bad news and negative perceptions, he believes the ACC’s corporate success stories and policy wins can help to provide a valuable counterweight and provide a more rounded picture of the realities on the ground. “People typically come to us because they want to hear the voice of the business community. That’s what we try to provide,” he says. “At present, negativity tends to overshadow everything and this is a real issue. We try to avoid anything resembling spin and just stick to the facts, but we have plenty of good examples of companies operating very successfully here.”

Building a Better Business Environment

As he prepared to mark the twenty-fifth anniversary of the American Chamber of Commerce in Ukraine, Mr. Hunder told Business Ukraine magazine that in an ideal world, he would like to see the ACC role moving closer to that of other ACC organizations in more developed European markets. “I’m probably in danger of talking myself out of job, but it would be great to have a more stable business environment where there was no longer any need for the chamber to take on such a prominent role in policy recommendations.” Nevertheless, he identifies the ACC’s contribution to building a better business environment as the Chamber’s most important contribution. “We are currently on a journey and the green shoots are beginning to appear above the soil. This is a pivotal moment for Ukraine and the ACC has a role to play.” This process has particular meaning for Mr. Hunder, given his lifelong investment in Ukraine. The wall behind his desk bears the Steve Jobs quote: “The only way to do great work is to love what you’re doing.” It is a sentiment that he has carried over into his work as President of the American Chamber of Commerce in Ukraine. “I’ve loved Ukraine since childhood, and I’m passionate about business, so it’s the best of both worlds,” he reflects. “This role has become part of my life. The business community and investors are the ones who can take the country forward. If we can create the right environment for business here in Ukraine, the consequences for the entire country will be massive.”

“Foreign direct investment is the key to driving Ukraine’s transformation forward. FDI is the only thing that can dramatically increase the country’s GDP”

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American Chamber Benefits from Diversity Dividend

ACC Board of Directors Chairman Grzegorz Chmielarski sees international makeup as an asset

About the interviewee: Grzegorz Chmielarski is Managing Director of McDonald’s Ukraine and ACC Board of Directors Chairman What motivates the mega-busy country manager of a global brand to dedicate precious spare time to a demanding voluntary role at the helm of Ukraine’s most high-profile business association? For ACC Ukraine Board Chairman Grzegorz Chmielarski, it is all about making a meaningful contribution towards Ukraine’s post-Soviet 20

transition while also interacting with some of the country’s top business brains.

Executive Interaction

Mr. Chmielarski took over as ACC Ukraine Board Chairman at the : www.bunews.com.ua

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: American Chamber of Commerce in Ukraine (ACC) in early 2017 following three years as a member of the board. He has been involved with the work of the Chamber ever since arriving in Ukraine in December 2013 as Managing Director of McDonald’s Ukraine. Despite facing the huge challenges of overseeing a nationwide network of restaurants during a time of unprecedented national crisis and turbulence, he has remained engaged with the ACC throughout. He tells Business Ukraine magazine that part of the appeal lies in the opportunity to engage with fellow senior international executives. “Personally, I find serving on the Board of the Chamber to be a unique professional experience. It is a rare thing in the business world to have the opportunity to co-work with other corporate leaders. In our respective organizations, we are generally in the top position and communication tends to be along vertical lines. With the ACC, you have the chance to cooperate and interact directly with your peers. It is a valuable and productive process.”

Common Interests

Polish-born Mr. Chmielarski is no stranger to dramatic economic transformations. He joined McDonald’s in 1991 and was involved in the flagship US brand’s expansion during Poland’s emergence as the largest economy in the former Eastern Bloc of post-Communist nations. He believes today’s generation of post-Euromaidan Ukrainians can take inspiration from Poland’s progress, and sees a significant role for the ACC in the historic changes currently underway throughout Ukraine. “It is absolutely crucial right now for the Ukrainian government to have a sounding board like the Chamber which can assist them in the implementation of different laws and regulations,” he says. “Ukraine has decided to take the first steps of what will be many more to come along the road towards integration with the European Union. In a wider context, the country is also now moving towards a more Western-style economy. We are logical partners in this process. The ACC membership is interested in Ukraine’s success because we depend on it for the success of our individual companies. The better Ukraine does as an economy, the better it will be for our members and for the Chamber as an organization. There is a clear common goal here. It is not a zero sum game. On the contrary, we can work together to move the country forward.”

Multinational Organization

Mr. Chmielarski sees the diversity of the American Chamber of Commerce in Ukraine as one of the organization’s greatest assets. While he readily acknowledges the importance of close ties to the US Embassy, the international AmCham network, and various government bodies in Washington DC itself, he says that the international mix within the Ukrainian branch of the Chamber helps provide a wealth of perspectives and brings the obvious advantages of pooled experience. “We are a very multinational organization representing companies from 50 different nations,” he says. “This is also something you will also see in the composition of the ACC Board of Directors, where I have served alongside colleagues from France, Turkey, Germany, Canada and numerous other countries. This diversity allows us to identify the global best practices in any given field. We are able to see what works best and then apply the lessons of other markets to Ukraine, while adjusting and adapting

to local conditions as required.” This diversity also extends to the individual CVs of ACC member company executives. Mr. Chmielarski points out that many are veteran expatriate professionals with considerable experience in a range of emerging markets around the world. This adds value to the insights the ACC can provide as it seeks to support the government in efforts to build a better business environment.

Exports as an Economic Engine

Many analysts cite Poland as a model for Ukraine’s current economic reform agenda and point to the Polish success story of the past twenty-five years as an indication of what Ukraine can achieve given the right policy mix. As a participant in Poland’s post-Communist economic renaissance, Mr. Chmielarski argues that in some senses, Ukraine is actually in a better position today than Poland was in the early 1990s. “We had an economy in the grip of skyrocketing inflation,” he recalls. “There was no international investment and virtually no export market to speak of.” He sees increasing exports as one of the few short- to medium-term factors capable of driving Ukraine’s own economic miracle, given the relatively low purchasing power of domestic consumers and the attractive labor costs the country boasts. To help make this happen, he says the Chamber needs to focus on working with the government to create a more competitive domestic business climate capable of attracting international investors looking to use the country as a base for exports. “There is a lot to be optimistic about for Ukrainian businesses, especially with the easier access to EU markets that the country now enjoys,” he says. “Now is the right time to start exporting more. Ukraine currently exports very little compared to the size of the country. Exports are a way to restart the economic engine and fuel growth, just as they have traditionally been for countries like South Korea and China.” In order to achieve this, Ukraine must do a better job of selling itself. The international struggle for limited amounts of available FDI is fiercer than ever, and Mr. Chmielarski believes Ukraine could be doing much more to attract investor attention. “Ukraine needs far more FDI than many of the nations it is competing against. It desperately needs to build up a competitive edge and must work much harder to attract international investment,” he says. “The Chamber can help Ukraine do a better job of this. At present, the country is losing out too often, despite enjoying a lot of theoretical advantages.”

Brain Drain Dangers

Despite these shortcomings, Mr. Chmielarski remains bullish about the country’s economic development. Much of this confidence is rooted in the strong fundamentals in place, including close geographical location to EU markets, resource wealth, a large domestic market, and enviable human resources. “This country has so much to offer but in my opinion the single strongest asset is the people, who are inventive, creative, hardworking and professional,” he says. “Ever since my arrival at McDonald’s in Ukraine, I have been amazed by the quality of the personnel we have working at every level of the company. The biggest threat facing Ukraine today is the risk of losing these people by failing to meet their expectations for change and a better life. We must make sure this doesn’t happen.”

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Investing in Ukraine’s agricultural infrastructure

Ukraine’s breadbasket attracts interest but international investors seek greater state assurances

About the author: Olga Kopiika is Deputy Legal Director at Bunge Ukraine and an Expert of the Agricultural Committee at the American Chamber of Commerce in Ukraine Ukraine has one of the most attractive and impressive agricultural sectors on the planet. It possesses one-third of the world’s black soil and over 41 million hectares of arable land. There is huge potential for the development of agribusiness in Ukraine and massive scope for further international investment into the Ukrainian agriculture industry and a range of agriculture-related infrastructure. When it comes to analyzing the economic importance of Ukraine’s agriculture industry, the country’s current grain production surplus is particularly significant. Out of the 60 million tons of grain produced by Ukraine in the 2015/2016 growing season, the country exported over 38 million tons. Meanwhile, in 2016 Ukraine ranked as the world’s number one exporter of sunflower oil. This is in addition to its role as a leading grain supplier to key global markets. Ukraine’s strong agricultural export performance is strategically important for the country as it generates crucial foreign currency revenues at a time when other mainstays of Ukraine’s export economy are suffering from falling global commodities prices and domestic instability.

Investing in the Breadbasket

Ukraine is currently in the middle of a major reform period while also navigating its way through a difficult political and economic environment. Despite these historic challenges, it is possible to identity broad positive trends in the country’s development over the past few years. This is good news for agricultural companies who are considering investment in Ukraine, and equally encouraging for those that have already demonstrated a long-term commitment to the market. Global agribusiness and food giant Bunge first entered the Ukrainian market in 2002. In Ukraine, Bunge currently exports grains, meal, soybeans and rapeseed, and produces sunflower oil for domestic and export markets. The company continues to expand its presence in the grain and oil trading sectors. In 2011, Bunge Ukraine invested USD 100 million into the construction of a modern transshipment terminal at the Mykolaiv Sea Port with an annual throughput capacity of 3 million tons, making it one of the most efficient grain terminals in Ukraine. This asset footprint aligned with Bunge’s global strategy, enabling the company to connect Ukrainian farmers to the global marketplace. In June 2016, Bunge unveiled a USD 180 million state-of-the-art multispeed crushing plant at Mykolaiv Sea Port. At present, it is one of the biggest in Ukraine and creates the necessary preconditions for an annual increase in the export potential of the country by one million tons of oil and meal. The 24

presence of Ukrainian President Petro Poroshenko at the official opening ceremony of the facility served to underline the national significance of the investment. President Poroshenko claimed that Bunge’s investment was a “vote of confidence” and an example of investor faith in Ukraine’s future economic development. This most recent port project changes the structure of Ukraine’s agricultural exports. It allows the country to shift from the export of basic agricultural commodities to the export of value-added agricultural products. It took Bunge Ukraine 11 years to strengthen its financial and agro market positions sufficiently to be able to launch an investment project on this scale in Ukraine and to operate a state-of-the-art facility.

Infrastructure Opportunities

We believe that, in spite of the challenges Ukraine faces, the government of the country is committed to creating the best economic environment and establishing long-term cooperation with foreign investors by forming transparent and sustainable terms of public-private partnership. As a global company, we are ready to advise and assist in the development of better regulation and public-private partnership mechanisms, bringing our best practices to the table. We would like the government of Ukraine to focus on preparing for the privatization of state-owned enterprises in agriculture and infrastructure (i.e. state stevedoring companies). This would bring positive structural change to the Ukrainian economy and create additional investment opportunities, while eliminating corruption and other abuses that we currently observe in the ports. We fully support the infrastructural reforms of the Ministry of Infrastructure and expect them to be well thought-out, balanced, and planned in advance. This should boost the competitiveness of the Ukrainian grain market. With further investment in infrastructure, the resulting lower logistics costs for export from field to vessel will improve the margins that help to determine the attractiveness of the industry. In order to retain Ukraine’s leading positions in the world markets of grain commodities and agricultural products, Ukraine needs to improve its logistics significantly. This means updating railway infrastructure (improvement of operations along with the construction of new locomotives and railway trucks) and inland waterways (adoption of the appropriate laws and the introduction of economically justified river charges). These measures will help to boost Ukraine’s export capabilities. The other major impediment is the ineffective and excessive level of current port fees. This significantly undermines the competitiveness of Ukrainian ports compared to other Black Sea cargo destinations. We have high hopes that in the coming year, Ukraine will see new rates of port dues established on the basis of economic feasibility and transparency. This will create the long-term competitive foundation for Ukrainian ports. As companies like Bunge look to plan our further investment into Ukraine’s infrastructure, we need to be sure that we have a mutual understanding and commitment from the government of Ukraine over long-awaited public-private partnership (PPP) regulation. We realize that the success of our company encourages other investors to consider investment opportunities in Ukraine. At the same time, we would like the government of Ukraine to hear the voice of investors who have already demonstrated their commitment and invested in the Ukrainian economy during challenging times.

KYIV INTERNATIONAL SCHOOL

Kyiv International School congratulates the American Chamber of Commerce on it's 25th anniversary. We have been proud to be associated with Ukraine and with the American Chamber of Commerce during this exciting time. QSI Kyiv International School is a private, non-profit institution that opened in September of 1992. It offers a high-quality education in the English language for elementary and secondary students. The warm and welcoming school community makes it an ideal place to receive a quality education from QSI.

Ukraine’s modernization mission presents numerous opportunities for infrastructure investment Infrastructure is one most promising sectors of the Ukrainian economy in the short- to medium-term. In particular, the country’s seaports, road network and energy infrastructure all require significant modernization, creating room for potential international investment initiatives.

Seaports Attract Foreign Investors

According to the latest data provided by Ukrainian Sea Ports Authority, Ukraine currently has 13 operational seaports with a total turnover of 131 million tons in 2016. At the same time, more than 70% of the county’s port equipment and infrastructure is in a worn out condition, forcing authorities to pursue modernization plans. Unsurprisingly, the Ukrainian Sea Ports Authority is now actively working towards attracting greater investment into the country’s seaport infrastructure. In 2017, the volume of capital investment into Ukraine’s seaports should total UAH 3,507 million. Approximately UAH 929.8 million will be used to finance construction and reconstruction works of quayside facilities at the country’s Odesa, Mariupol and Chornomorsk seaports. Meanwhile, UAH 1,737.7 million will be spent dredging the Chornomorsk and Yuzhny seaports. In April 2017, two auctions took place for the planned dredging work at Yuzhny seaport. As a result, foreign companies from Belgium and China (DEME Group’s Novadeal LTD and the China Harbour Engineering Company Ltd) secured the rights to manage these dredging projects, highlighting the existing international interest in the sector. With Ukraine looking to play a role in new Asia-Europe trade routes currently under development, and with EU trade ties gaining in strength thanks to the Association Agreement between Brussels and Kyiv, Ukraine’s seaports are likely to become more attractive over the next few years.

Reviving Ukraine’s Roads

Ukraine’s vast and potholed road network presents a far more challenging but potentially exciting proposition for would-be infrastructure investors. At present, the country’s roads are in a state of considerable disrepair. According to the latest figures from Ukraine’s Ministry of Infrastructure, 97% of Ukrainian roads are in a poor condition. Around 40% of the country’s roadways are virtually ruined. These technically ruined stretches require major repair works that are the equivalent of starting from scratch. In a country the size of Ukraine, this is a task of biblical proportions. What is to blame for Ukraine’s notoriously poor roads? The sector has long suffered from extremely high levels of corruption, leading to regular underfunding of construction and repair works. This is widely believed to be the key factor behind the sorry state of Ukraine’s highways. The scale of Ukraine’s road repair challenge should not be underestimated. Experts calculate that resolving the problem will require funding totaling billions of US dollars per year for at least the next decade. Given the extremely large volumes of financing required to carry out substantial repair works on the country’s roads and to construct new highways, Ukraine currently relies heavily on funding from international financial institutions such as the European Investment Bank and the European Bank for Reconstruction and Development. Prominent examples of reconstruction projects include the M07 highway linking Kyiv to Yagoyn and the M05 Kyiv-Odesa highway.

Engaging the Private Sector The experience of developed economies shows that the most effective way to attract private investment for major transport infrastructure projects is via concessions that allow investors to finance or directly carry out construction and development works. In return, they secure long-term rights to possess and exploit the infrastructure object in question. This format allows the investor to make good on their investment, covering original expenditures and subsequent maintenance costs while turning a profit on their original outlay. Meanwhile, the country benefits from a well-maintained and productive addition to national infrastructure. At the end of the agreed concession period, the infrastructure returns to state control. The mechanisms for this kind of cooperation already theoretically exist in Ukraine and are set out in a concession law, while there is a separate law specifically addressing road construction concessions. Despite the considerable vintage of this legislation, there are virtually zero successful examples of cooperation between the state authorities and private investors within the framework of existing concession law. This failure to capitalize on the opportunities presented by concession agreements reflects a lack of trust within the international investment community towards the Ukrainian authorities due to previous failures to strike a mutually agreeable balance between state and investor interests – especially with regard to the division of expenditures during project financing. Clearly new mechanisms are desirable. The EBRD has provided financing for the development of a new concession law that seeks to create an improved legal framework. This is a very welcome development and may lead to greater infrastructure project financing from the private sector, paving the way for better infrastructure across Ukraine.

About the author: Oleksiy Feliv is Managing Partner at INTEGRITES and Co-Chair of the Infrastructure Committee at the American Chamber of Commerce in Ukraine

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Investing in Ukrainian infrastructure

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Ukrainian energy market opens up for investment Reform process offers signs of encouragement but significant legislative challenges remain for this to happen, further legislative changes will be necessary. Assessments of the progress made so far are broadly positive. Based on a report by the Energy Community made in April 2017, Ukraine has fulfilled most of its major gas sector reform commitments. Two crucial issues remain - unbundling Naftogaz and ending the current subsidy policy. This policy endangers the functioning of district heating providers while prolonging the non-fulfilment of the PSO scheme – the public social obligation to supply gas to household consumers. The Energy Community expects all of the country’s scheduled gas sector reforms to be complete by the end of 2017.

Domestic Production and Energy Independence

About the author: Iuliia Borzhemska is Manager of Regulatory Policy of DTEK Oil and Gas and Co-Chair of the Energy Committee at the American Chamber of Commerce in Ukraine For many years following independence, the Ukrainian oil and gas industry remained notoriously hard to access. State-owned companies enjoyed strong monopolies over exploration, production, export and import operations. Meanwhile, the price of gas supplied to household consumers was strictly regulated by the government and virtually unhindered by market forces. Auctions for new oil and gas sites were rare. When they did take place, there was not sufficient transparency. State-owned oil and gas companies benefitted from privileged rights to obtain new licenses without any auctions. In 2015, this opaque and unsatisfactory picture began to change dramatically as the winds of reform swept through the Ukrainian energy sector. The Ukrainian government began implementation of the EU’s Third Energy Package, with the aim of establishing a genuinely competitive environment in line with EU standards and offering equal access to the domestic gas market for all players. Over the past two years, Ukraine has adopted a number of important laws regulating the operations of the gas market and assigned to the National Energy Regulation Commission the role of independent energy market regulator. Codes have been set in place for the country’s gas transportation, storage and distribution systems. Transparency is also improving. Ukraine has signed up to the Extractive Industries Transparency Initiative (EITI), an independent standard designed to provide energy sector clarity. So far, two reports have appeared based on EITI standards and covering the periods 2013 and 2014-2015. These reports included information about key Ukrainian oil and gas fields, license holders and their beneficiaries, production volumes, and payments made by companies to the state budget. In line with its commitments under the Third Energy Package, the Ukrainian authorities have begun the process of unbundling the state-owned Naftogaz group of companies to divide the functions of oil and gas transportation and sales. A new model for the Ukrainian market has begun to take shape. This domestic market is integrating into the broader European gas market, making it considerably more attractive to both international and local gas traders. This is particularly important for efforts to establish Ukraine as a regional gas hub. The country possesses the largest storage facilities in Europe. It could function as a customs warehouse, but 28

Over the past few years, the royalty rates for hydrocarbon production have undergone substantial revision. Following these changes, the royalty on oil and gas produced at a depth of up to 5,000 meters is now 29%, while the rate for oil and gas produced at a depth below 5000 meters is 14%. A disparity remains in the royalty rates for condensate, which currently stand at 45% and 21% depending on the depth of production. The government has committed to reducing royalty rates to 12% by 2018. Prime Minister of Ukraine Volodymyr Groysman has identified this as part of the strategic goal of increasing domestic gas production to 27 bcm by 2020. In 2016, Ukraine’s domestic gas production stood at 20.1 bcm, with consumption at 33.3 bcm per year. These government targets are ambitious but most analysts believe they are achievable. With the largest gas reserves in Europe, Ukraine has every chance of becoming energy independent. The country may even become a gas exporter. Incentives are also emerging as a tool to boost domestic production. Starting in 2018, 5% of all royalties for hydrocarbon production will go to regional budgets in order to encourage local authorities to approve new licenses. At present, local authorities are prone to blocking auctions for new sites. Additionally, royalty rates within Product Sharing Agreements (PSAs) have been negotiable since the beginning of 2017, making the PSA model more attractive.

Promoting Investment

Chamber experts remain focused on promoting the reforms required to improve the investment climate in Ukraine’s energy sector. Three years ago, the Chamber produced a White Paper on reforms that included a number of concrete recommendations for legislative amendments to create a more attractive investment climate. This White Paper is updated annually. Alongside the planned decreases is royalty rates, the most important energy sector reforms include deregulation of the oil and gas sectors. There are still too many requirements for permits and other documents, with long delays and a lack of transparency in the associated procedures. The biggest single problem remains land allotment for oil and gas sites, which can sometimes take more than two years. Significant parts of the sector’s legislation are also out of date, including the Subsoil Code, Rules of Oil and Gas Fields Development, and the general approach to geological data use. These issues all lie ahead as the sector continues to reform. The changes underway in the Ukrainian energy industry are not taking place as quickly as we may wish, but the government has demonstrated a commitment to turning the industry around. We remain confident that operational conditions will improve further as long as the government maintains the positive momentum of the past few years.

RELENTLESS PERFORMANCE Miratech is a global IT services and consulting organization that enables large and midsize multinational organizations to achieve their strategic business goals by providing high performance technology teams to plan, manage, develop and support information technology infrastructure, operational and client facing solutions. Founded in 1989, Miratech is headquartered in Stockholm and Washington, DC, and has operations in Israel, Norway, Poland, Philippines, Slovakia, Spain, Switzerland, UK, Ukraine and the US. Miratech serves its customers internationally, covering 560 locations. What makes Miratech unique is a culture of relentless performance which over the decades has enabled almost 100% of Miratech’s projects to succeed by meeting the project scope, time-

lines and budgets. In fact, in many cases Miratech exceeds these contractual benchmarks. This passion for success continues to accelerate the growth of the organization, its capabilities and accolades. Today, Miratech is Software CMM Level 3, ISO 9001:2008, ISO 27001:2005, and ISO 22301 certified. Recognitions include the Global Services 100; the Software 500®; the NOA’s Outsourcing Professional Award; the EOA’s Award, The Global Outsourcing 100® and Best Five Companies in Eastern Europe, by IAOP®. CIO Review Magazine special edition on Banking Technology recognized Miratech among 20 Most Promising Banking Technology Solution providers. Miratech has created unique servicing level to ensure clients get exactly

the resources most appropriate for their projects. From team extensions to managed engagements to complete turn-key departments, Miratech provides high performing solutions, with each solution tied to performance benchmarks that ensure success. Whether it is a time and materials contract, a fixed service level agreement, or a success fee tied to the financial performance of the organization, each and every engagement is focused on success delivered with flexibility and achieved through a unique culture of relentless performance.

ACC in Ukraine: 25 Years in Photos The American Chamber of Commerce has been at the center of Ukraine’s business life for the past quarter of a century. ACC officials have cooperated with a succession of Ukrainian political leaders, supported the market entry of numerous international corporations Chamber President Jorge Zukoski at the World Economic Forum in Dalian (2006)

and foreign investors, and always been in hand to welcome visiting dignitaries. To mark the twenty-fifth anniversary of the American Chamber in Commerce in Ukraine, we offer this photographic journey through the organization’s role in Ukrainian public life.

ACC Young Professionals network with Svyatoslav Vakarchuk (2002)

Chamber COI event at Kyiv’s Lobanovskiy Stadium (2005)

Chamber President Jorge Zukoski with the President of Ukraine Viktor Yushchenko and President and CEO of the U.S. Chamber of Commerce Tom Donohue in Washington, DC (2005)

Chamber President Jorge Zukoski at the event in McDonald’s (2006)

James Hitch, Chairman of the Chamber Board of Directors, Baker McKenzie, during the Chamber 15th Anniversary (2007)

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Chamber President Jorge Zukoski with the Minister of Foreign Affairs of Ukraine Petro Poroshenko (2010)

Guests of the Chamber 20th Anniversary (2012)

During the meeting with Carlos Gutierrez, U.S. Secretary of Commerce (2008)

Chamber members meeting with Vice President of the United States Joe Biden (2009)

Chamber meeting with Chicago Mayor Richard M. Daley in Kyiv (2005)

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U.S. Ambassador to Ukraine Carlos Pascual (2000-2003) delivering the speech at the Chamber 10th Anniversary (2002)

Chamber members meeting with Vice President of the United States Joe Biden (2009)

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Chamber President Andy Hunder at the opening of a new McDonald’s restaurant in Kyiv (2016)

Members of the Chamber Board of Directors (2003) Chamber President Andy Hunder participates in the National Reforms Council (2016)

Chamber Charity Ball (2002)

Chamber Board of Directors elections (2002)

Chamber Vice President of Policy Taras Kachka during the conference “Healthcare Reform in Ukraine” (2014)

Chamber President Andy Hunder with Prime Minister of Ukraine Volodymyr Groysman (2016)

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Chamber President Andy Hunder with Kyiv Mayor Vitaliy Klitschko (2016)

Chamber President Andy Hunder with Prime Minister of Ukraine Volodymyr Groysman and U.S. Ambassador to Ukraine Marie Yovanovitch (2017)

Chamber President Andy Hunder with Geoffrey R. Pyatt, U.S. Ambassador to Ukraine (2013-2016) in Lviv (2016)

Chamber President Andy Hunder with Aivaras Abromavicius and Natalie Jaresko at the U.S. Chamber of Commerce in Washington, DC (2015)

From left to right: James Lindley, Senior Commercial Officer, U.S. Commercial Service; Chamber President Andy Hunder; Marie Yovanovitch, U.S. Ambassador to Ukraine; Chip Laitinen, Counselor for Economic Affairs, U.S. Embassy in Ukraine (2016)

From left to right: Geoffrey R. Pyatt, U.S. Ambassador to Ukraine (2013-2016); Ambassador Jan TombiĹ&#x201E;ski, Head of EU Delegation to Ukraine; Dmytro Shymkiv, Deputy Head of the Administration of the President of Ukraine; Chamber President Andy Hunder; Steven Fisher, CEO and Chairman of the Board PJSC Citibank Ukraine

Chamber President Andy Hunder in the Situation Room with President of Ukraine Petro Poroshenko and Prime Minister of Ukraine Volodymyr Groysman at the launch of the new electronic register of automatic VAT refund (2017)

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25 Years of Doing Business in Ukraine For the past quarter of a century, the American Chamber of Commerce has been at the forefront of efforts to improve the Ukrainian business climate and attract international investment to the country. These efforts have taken place amid the turbulence of Ukraine’s post-Soviet historical journey, with nu-

OLGA USTYNOVA CEO Vodafone Ukraine

A quarter of a century is just a moment in history, but it is also an entire epoch in human life. During these 25 years, we have witnessed great developments in the history of Ukraine: the formation of our state, its economy, business and civil society. Fantastic changes have taken place in the world of technology, especially in mobile industry. Global changes in business philosophy are continuing. The strength of a country is no longer measurable purely in terms of huge enterprises. Instead, information technologies are the new power. The world is ruled by information and by those who know how to use it. Vodafone has always been a driver for the introduction of advanced global technologies in Ukraine. This is what makes our mission similar to the aim of American Chamber of Commerce in Ukraine. In close cooperation, we do our best to help the country change faster. 36

merous high points and setbacks along the way. To mark the twenty-fifth anniversary of the Chamber in Ukraine, Business Ukraine magazine invited ACC members to offer their thoughts on the changes that have taken place in the country’s business culture over the past 25 years.

OLEKSANDR MARTYNENKO Director of Interfax-Ukraine The twenty-five years of the American Chamber of Commerce’s presence in Ukraine has been a period of struggle for the formation and perfection of a favorable investment climate in the country. Since the first years of Ukraine’s independence, the Chamber and its members have created institutional conditions for foreign businesses. Since then, the Chamber has been working hard to attract investment to the country and to ensure normal business conditions for investors. These years have been a time of challenges and achievements. These achievements have made it possible to create tens of thousands of jobs in Ukraine, to adopt laws that stimulate business, and to prevent the adoption of legislation that could infringe on business. The American Chamber of Commerce and the Interfax-Ukraine News Agency both celebrate their 25th anniversaries this year. This coincidence is not accidental. We have been, are, and will be a reliable platform for lobbying the healthy interests of the American Chamber of Commerce and its members.

In 1991, Ukraine began its journey as an independent country, embracing democracy, promoting freedom, economic prosperity, and striving to establish the rule of law. Ukraine has been trying to improve its record on ease of doing business with a range of substantial reforms in order to stimulate the necessary investments for this economic growth. It has made quite a progress in this regard but there is still some distance to go. Its rich potential in human capital with its highly qualified and educated population, its fertile land and natural

SERHIY CHORNY Managing Partner of Kyiv office of Baker McKenzie, Legal Advisor of the Board of Directors of the American Chamber of Commerce in Ukraine

PETRO RONDIAK Head of the Management Board, Winner Group Ukraine I congratulate the American Chamber of Commerce in Ukraine on its landmark 25th anniversary. It is my sincere honor and privilege to work with the ACC since its inception. Ukraine has changed dramatically since John Hynansky, our founder, owner and CEO struck a historic deal with Ford Motor Company while a guest of Ford executives at Wimbledon in 1992, and together with Bohdan Kulchyckyj started Winner’s first office at Hotel Nationalny. By the time I joined in 1995, Winner had already established itself as an open and transparent business in a sea of mafia, crime, and bribery. Together with other ACC members, we navigated the vagaries of government legislation, criminal intrusions, Ukrainian banking, and a soft currency called the “Kupon” while saying no to bribes and fending off corrupt civil servants. I moved to Ukraine in 1995 and immediately grew attached to the country of my ancestral origin. Life in Kyiv in 1995 was almost diametrically opposed to the idyllic image of Ukraine I was raised with in the Ukrainian American diaspora. In terms of business and consumer behavior, expectations were very primitive. We were able to differentiate ourselves by simply having an inventory of vehicles and parts on the ground in Ukraine. Today, the Ukrainian automotive customer is European, worldly, and no less demanding than their West European or American counterparts. Winner now has full Corporate Identity (CI) Complaint Brand concept centers throughout Ukraine with sophisticated sales processes, service processes, and state of the art equipment. Our initiatives like www.bunews.com.ua

resources and its crucial logistical position are among its most important assets. Ukraine is open for business. It is a challenging, yet very rewarding market. I am pleased to see Ukraine on the right trajectory to attain sustainable and substantial growth and prosperity. Ukraine became a country of operation for the European Bank for Reconstruction and Development in April, 1992. Since then EBRD continues to provide a comprehensive support package for Ukraine to assist its stabilization and the anchoring of its reforms with high-level policy dialogue, and helps businesses to flourish through financial investments. I am delighted that American Chamber of Commerce in Ukraine is making significant contribution to supporting business for the country’s development. I congratulate the Chamber on its 25th Anniversary and am pleased to see it continue its role as a reliable partner for the business community for the present and the future.

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SEVKI ACUNER Country Director for Ukraine, European Bank for Reconstruction and Development and Vice Chairman of the Board of Directors of the American Chamber of Commerce in Ukraine

The Chamber has played a significant role in my country’s economic and – in fact – political landscape for the last 25 years. The Chamber’s influence was more subtle during certain periods and more vocal in others, like today. However, its influence has always been there and we have achieved many good things (although admittedly not as many as we would wish) as a result of the Chamber’s input. The Chamber unites the best businesses in Ukraine to make our country better, and should be praised both for its achievements and its ability to generate ideas and push its cause forward, despite working in a difficult environment. “Winner College”, a Corporate University providing training and development for 2,000 employees annually, were just a distant dream when we were starting 25 years ago. Today they are a reality. We have been representing Ford for 25 years now, Volvo for 18 years, Jaguar, Land Rover, and Porsche for 13 years, and Bentley for less than one year. To date, we have officially imported over 120,000 vehicles and paid over USD 1 billion in taxes. Supported by the ACC and fellow members, we continue building our business based on the fundamental values of honesty, transparency and professionalism in everything we do. Ukraine continues its evolution through financial crises, the Orange Revolution, the Revolution of Dignity and the current challenges of implementing true reforms. We are grateful for the opportunities we have in this market, for those heroes in all branches of government that are choosing to reform Ukrainian policy and legislation at great personal sacrifice, and most importantly, for the incredibly resilient Ukrainian citizenry. On a daily basis I am awed by the intelligence, enthusiasm, energy, and positivity of our team members. Ukraine has a very bright future ahead! In automotive business terms, Ukraine is still a very underpenetrated market with a clear window of opportunity. Winner is significantly investing in the improvement and expansion of our 51-dealer network in 2017-2022. We are also investing heavily in customer experience teams and processes to dramatically increase our value proposition to the Ukrainian consumer. I can’t thank the American Chamber of Commerce enough for being a beacon of clarity of purpose, for creating a supportive network of likeminded companies, and for tirelessly pushing for reforms and positive economic changes to life in Ukraine. On behalf of all of us at Winner, I wish Andy Hunter and his team great success in all their initiatives and a strong will to continue fighting the good fight for a free and prosperous Ukraine! Slava Ukrayini!

Ukraine Investment Guide

Where to invest: Ukraine’s top five most competitive economic sectors at a glance As one of Europe’s largest and potentially lucrative markets, Ukraine is widely seen as an exciting investment opportunity. The country’s post-2014 reform efforts and European pivot have generated considerable international interest, with investors seeking to identify the most attractive segments of the Ukrainian economy. Ukraine’s Association Agreement with the European Union and close geographical proximity to the EU make it an interesting option for manufacturing and other export-driven businesses, while the country’s famed agricultural excellence remains as important today as it did in centuries past

when it earned Ukraine the reputation of “the breadbasket of Europe”. Today’s Ukrainians are among the world’s most educated people, making IT and other brain-intensive endeavors particularly profitable, while Ukraine’s commitment to gaining greater energy independence and modernizing wasteful energy consumption practices inherited from the Soviet era make the energy sector another industry with obvious investment appeal. This is our introductory overview to five of the most competitive industries for international investors.

AGRICULTURE - 42.5% of total country exports - World No. 1 sunflower oil exporter - World No. 2 grain exporter - Home to around one-third

of the world’s Black Earth soils

MANUFACTURING - Auto manufacturing output is approximately 200,000 vehicles per year

ENERGY

- World’s third largest reserves of shale gas - Government goal: to increase gas production to 27 bln cubic meters per year by 2020 - As of 1 January 2016, recoverable natural gas reserves in Ukraine totaled approximately 924.1 bln cubic meters - Commitment to pursue energy independence

IT - No. 1 software engineering industry in Central and Eastern Europe

- Number of IT specialists has

increased from 42.4K to 91.7K in past few years - IT service export revenues increased by 10.8% in 2016 - Ukraine’s fastest-growing industry

- Ukraine is among the 10 largest shipbuilding countries in Europe

- Manufacturing production increased by 2.4% in 2016 - Land borders with four EU member states provide immediate access

- Highly skilled workforce and competitively low production costs

INFRASTRUCTURE - 13 continental seaports - 16 river ports and terminals - 21 airports - 21,000 km of railways - Strategic position on many of Europe’s most

important transport routes - Gateway connecting Europe to Eurasia and the Middle East

Bringing American Holiday Traditions to Ukraine The ACC team has introduced Ukrainian audiences to American Independence Day and Thanksgiving fun The American Chamber of Commerce in Ukraine is not just about building business bridges. Over the past 25 years, the Chamber has also been a forum for networking fun and seasonal festivities. The social highlights on the annual Chamber calendar are undoubtedly the American Independence Day Picnic and the Thanksgiving Day Gala Dinner. Thanks to the efforts of the ACC team, these two traditional American holidays have become popular and hotly anticipated events in Ukraine.

Perfect Picnic Party

Ever since its foundation in the early 1990s, the American Chamber of Commerce has been hosting the annual American Independence Day Picnic each year on or around 4 July. The ACC Picnic is one of the most popular events in Kyiv each summer, drawing thousands of Ukrainian visitors and guests from the international community. It is a place where old friends meet and catch up amid a carnival atmosphere featuring everything from live music and culinary delights to an impressive kids’ zone. Many picnickers bring rugs and set up shop for a long afternoon in the open air, while others play Frisbee or toss a football about. Traditional highlights include the Grand Raffle with cool prizes from Chamber member companies. The American Independence Day Picnic has migrated between venues over the years but has always main-

tained the same sunny midsummer ambience that keeps the crowds coming back for more. The numbers involved are always impressive. For example, guests at the 2016 ACC Picnic drank 1,500 bottles of Coca-Cola while posing for more than 4,000 selfies in the photo zone.

Black Tie Thanksgiving

Two years ago, the American Chamber of Commerce introduced another American traditional holiday to the Kyiv calendar. Thanksgiving celebrations in the Ukrainian capital take the form of a gala black tie dinner. The event has proved an instant hit with the international business and diplomatic communities. Originally conceived by American Chamber of Commerce in Ukraine President Andy Hunder as a way of thanking Chamber member companies and partners for their contributions to Ukraine’s reform process, the evening allows the Chamber to identify and honor some of the most progressive projects taking place in the business environment. This holiday is particularly in step with the underlying ethos driving the American Chamber of Commerce in Ukraine as an organization. The ACC has always been all about catering to its membership, and the Thanksgiving evening has proven the ideal opportunity to say a big “thank you” to members for their support and positive contributions, both to the Chamber itself and to the development of Ukraine.

President of the American Chamber of Commerce in Ukraine Andy Hunder and Christi Anne Hofland, Director of America House in Kyiv, at the Thanksgiving Day Black Tie Dinner in 2016

Andy Hunder and Christi Anne Hofland together with Steven Fisher, CEO and Chairman of the Board at Citibank Ukraine, and Algirdas Šemeta, Business Ombudsman of Ukraine

The 2007 ACC Picnic advert featured an image of a rabbit with an umbrella caught in a gale. This proved to be curiously prophetic, as the Picnic itself was memorable for unseasonably high winds!

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The 2012 ACC Picnic advert to mark the twentieth anniversary of the event featured a large crowd of people. Sure enough, the holiday itself drew even more guests than usual, as if to prove the poster right!

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Fun Picnic Poster Facts

Jorge Zukoski, President of the American Chamber of Commerce in Ukraine (1998 â&#x20AC;&#x201C; 2015) with his wife Courtney Zukoski at the Picnic in 2013

AmChams in Europe

The Voice of U.S. and International Business in Europe Established in 1963, the European Council of American Chambers of Commerce (AmChams in Europe) serves as the umbrella organization for 46 AmChams throughout Europe and Eurasia. AmChams in Europe’s collective membership represents more than 17,000 American and European companies employing 15 million workers – accounting for more than USD 1.1 trillion in investment on both sides of the Atlantic. As a bilateral voice of American and European companies, AmChams in Europe works to communicate the importance of the transatlantic economy in both Europe and the United States.

AmChams in Europe Transatlantic Conference in Brussels, February 2017

The Transatlantic Relationship The U.S. and Europe are each other’s largest trading partners and the world’s largest and wealthiest market • USD 5.5 trillion Annual Commercial Sales • 1/3 Global GDP • 15 million Jobs on both sides of the Atlantic

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AmChams in Europe Annual Conference 2017 in Washington, DC

Team of AmCham Ukraine with Patrick Mikkelsen, Chairman of AmChams in Europe and CEO AmCham Netherlands

AmCham executives in Slovenia during the Annual Conference

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Leverage our network of 46 AmChams to develop your business in Europe

Albania

Armenia

Austria

Lorenc Gjoni Executive Director

Diana Gaziyan Executive Director

Daniela H Executive

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Andrea Doko Jelu_i_ Executive Director

Lia Riris Executive Secretary

Weston Stacey Executive Director

Stephen Brugger Executive Director

Daria Sivo Executive

Georgia

Germany

Gibraltar

Greece

Hunga

George Welton Executive Director

Eveline Y. Metzen General Manager

James Lasry President

Elias J. Spirtounias Executive Director

Irisz Lippa CEO

Kosovo

Latvia

Lithuania

Luxembourg

Maced

Arian Zeka Executive Director

Liga SmildzinaBertulsone Executive Director

Živilė Sabaliauskaitė Executive Director

Paul-Michael Schonenberg Chairman and CEO

Michelle O Executive

Norway

Poland

Portugal

Romania

Russia

Jason Turflinger Managing Director

Dorothy Dabrowski Executive Director

Graca Didier Executive Director

Anca Harasim Executive Director

Alexis Rod President

Spain

Sweden

Switserland

The Netherlands

Turkey

Aida Casamitjana Executive Director

Peter R. Dahlen Managing Director

Martin Naville Chief Executive Officer

Patrick Mikkelsen Executive Director

Hale Alta Executive

Austria

Azerbaijan

Belgium

Bulgaria

Daniela Homan Executive Director

Natavan Mammadova Executive Director

Marcel Claes Chief Executive

Alex Nestor Executive Director (Interim)

Estonia

European Union

Finland

France

Daria Sivovol Executive Director

Susan Danger CEO

Kristiina Helenius CEO

Caroline Ryan Managing Director

Hungary

Ireland

Israel

Italy

Irisz Lippai-Nagy CEO

Mark Redmond Chief Executive

Oded Rose CEO

Simone Crolla Managing Director

Macedonia

Malta

Moldova

Montenegro

Michelle Osmanli Executive Director

Tanya Sciberras Camilleri President

Mila Malairau Executive Director

Marko MiroÄ?eviÄ&#x2021; Executive Director

Russia

Serbia

Slovak Republic

Slovenia

Alexis Rodzianko President

Vera Nikolic Dimic Executive Director

Jake C. Slegers Executive Director

Ajsa Vodnik Executive Director

Turkey (ABFT)

Turkey (TABA)

Ukraine

United Kingdom

Hale Altan Executive Director

Irem Ones Executive Director

Andy Hunder President

Jeffries Briginshaw CEO

it investment

How to sell Ukraine’s startup scene

Ukrainian IT entrepreneurs need to focus on marketing themselves to international investors

About the author: Olga Afanasyeva is the Executive Director of the Ukrainian Venture Capital and Private Equity Association (UVCA) The Ukrainian IT sector has been one of the country’s biggest economic success stories of the past few years, with bullish growth figures at a time of general recession helping to attract optimistic headlines and considerable investor attention. Nevertheless, there is still huge room for expansion as the industry diversifies and Ukrainian IT professionals become more sophisticated in their efforts to harness the country’s obvious IT strengths. Current priorities include better marketing of Ukrainian IT innovation and greater appreciation of what individual international investors are looking for. This will help to fuel the further evolution of the startup sector and transform great ideas into big business. At present, Ukraine remains primarily known as an IT outsourcing country. There are numerous companies excelling in this field, many featuring foreign investment. According to research carried out by PWC, the Ukrainian outsourcing market is already worth USD 3 billion annually. This is expected to grow to USD 5-7 billion in the coming few years. Thirteen Ukrainian outsourcing companies featured in the 2017 version of IAOP’s annual Global Outsourcing 100. Ukraine’s flagship outsourcing companies include Lviv– based SoftServe and Kyiv-based Ciklum - the first Ukrainian IT company to attract investment from American billionaire investor George Soros. This focus on outsourcing has become something of a market stereotype, but there is much more to the Ukrainian IT industry than competitively priced programming factories. At present, there are around 3000 Ukrainian startup companies active in the country at different stages of development. Given the catalyst effect of investors financing Ukrainian product developers, this figure is extremely promising. Many Ukrainian startups have proven able to attract both local and international investor funding. The Investors Book project recently presented by the Ukrainian Venture Capital and Private Equity Association (UVCA) identified 34 investment funds currently active in Ukraine. This list includes 17 venture capital funds, six private equity funds, one corporate fund (HP Tech Ventures) and others. Alongside these market players, Ukraine also has its own investment angels – many of whom operate below the media radar and engage in strategic one-off investments. Is the current figure of 34 active investment funds sufficient for a fast-growing startup market that already boasts 3000 projects? According to startup specialists Techstars, Kyiv currently has more IT investors than relatively 46

seasoned global venture capital cities including Warsaw, Vienna, Oslo and Copenhagen. Clearly, Ukraine’s status as one of the IT world’s most exciting lands of opportunity is no longer a secret. One of the biggest attractions of the Ukrainian market remains the low financial entry bar for investors. For the time being at least, Ukraine is a place where you can gain market positions and acquire startup stakes for a fraction of the price you would expect to pay elsewhere in the region. Recent research by UVCA found that investment funds in Ukraine tend to hold an average of 20 companies in their portfolios. Around one-third of these individual investments are priced within the USD 100,000 to USD 1 million bracket. In practice, it is possible to build a successful startup in Ukraine and bring it to global markets for less than a quarter of the cost an investor would incur in countries with similarly sophisticated IT sectors. Understandably, the majority of investment funds prefer to engage with Ukrainian startups at the initial seed stage, with interest declining throughout the development cycle as margins begin to narrow. Given the comparatively recent emergence of startup culture in Ukraine, education remains a major issue for everyone active in the startup sector. It is still common to see Ukrainian entrepreneurs focusing all their attention on the technological side of their startup, only to then have difficulty attracting the necessary investments. This reflects the uneven distribution of skillsets within the sector. Ukrainian developers have always had world-beating engineering and technological skills, but the art of smart marketing remains significantly underdeveloped in today’s Ukraine. As a result, potentially exciting projects are often misdirected or otherwise unable to generate the necessary investor interest. Many of the funding problems facing the Ukrainian startup scene stem from an incomplete appreciation of the target audience’s needs. The goal for any startup should always be presenting your product to an investor who specializes in your field and has a record of working with projects at your present stage of development. All too often, Ukrainian startups trend to rely on ineffective marketing tools such as newsletter-style presentations sent out en masse to large audiences without filtering investors based on their suitability or tailoring the approach to match the target. It is quite possible that startups will find numerous potentially suitable investment partners. There is a persistent myth among industry outsiders and newcomers that startup investment funds compete with each other for exclusive access to the most promising projects. In reality, this is not always the case. Syndicated deals involving numerous parties have been gaining in popularity over the past few years. These agreements are attractive for a number of reasons. They offer startups a bigger investment pot to play with, while the investors themselves are able to carry out more qualitative due diligence on the project in question. Research carried out by UVCA found that 48% of all startup investments in today’s Ukraine involved the joint participation of foreign partners, illustrating the high levels of readiness to engage in coinvestment initiatives. Ukraine’s startup entrepreneurs must now develop their knowledge of the investment environment and tailor their approaches in order to secure the most advantageous platforms for future growth. Ukraine’s IT boom has attracted the world’s attention, but the industry remains a long way from reaching its full global potential.

Eurovision Boosts Brand Ukraine

Kyiv’s successful hosting of the 2017 song contest makes positive impact on perceptions of Ukraine May 2017 looks set to go down in history as a landmark month in Ukraine’s epic journey from post-Soviet wilderness to European integration. In the space of a few short weeks, Ukrainians celebrated long-awaited confirmation of visa-free EU access while also hosting one of the most spectacular and acclaimed Eurovision Song Contests in living memory. As festivities gripped the Ukrainian capital, it was easy to imagine we 48

were witnessing a major breakthrough. While Kyiv partied, the international press offered up article after article in praise of the city. Did the positive PR generated by Eurovision succeed in changing outside perceptions of Ukraine? In reality, addressing Ukraine’s international image problems is a Herculean task that will require many years of hard work. However, a major opinion poll conducted among

tourism

foreign Eurovision visitors suggests Kyiv’s efforts to stage a memorable song contest were not in vain.

Ukraine Wins Eurovision Victory at the 2017 Eurovision Song Contest deservedly went to Portugal’s Salvador Sobral for his hauntingly beautiful ballad, “Amar Pelos Dois”. However, once the music stopped and the dust settled, there was widespread recognition that the real winner of Eurovision 2017 was Ukraine itself. Ukrainians managed to introduce their country to thousands of international guests and hundreds of millions of TV viewers across the globe, creating an array of positive impressions that directly chalwww.bunews.com.ua

lenged prevailing negative stereotypes of war-torn and povertystricken Ukraine. There were inevitably hiccups along the way. The contest’s “Celebrating Diversity” slogan seemed somewhat at odds with the choice of three white male TV hosts, while the failure to complete the Arch of Diversity rainbow in downtown Kyiv following thuggish far-right objections also led many to portray the unfinished arch as a metaphor for Ukraine’s incomplete embrace of European values. Nevertheless, Ukraine’s overall handling of the country’s Eurovision 2017 host duties was engaging and impressive in equal measure. There is considerable evidence that these efforts have paid off handsomely. Ever since the start of May, the international

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tourism

Just over 47% of Eurovision guests said Kyiv had surpassed their expectations, while a massive 92% voiced their readiness to return to Ukraine : media has seen a steady flow of positive tourism articles hailing

Kyiv as an undiscovered gem. UK journalist Heidi Stephens captured this general enthusiasm for the Ukrainian capital city in her popular Eurovision live blog for The Guardian newspaper. The British reporter commented: “If you’ve never been to Kiev, you really should. It’s a beautiful and friendly city, the food is magnificent and everything is ridiculously cheap. I’ve had a ball here for the last few days, the organisation has been brilliant. Going to Eurovision is an experience in itself, but doing it in a city I’ve never been to before makes it really special - I highly recommend.”

Eurovision Visitor Survey

In order to gauge what Eurovision visitors thought of their time in Ukraine, Kyiv’s Institute of World Policy commissioned pollster company GfK Ukraine to conduct a survey among more than 1,000 Eurovision guests. The findings of this poll suggest that Ukraine’s capital city is more than capable of pleasantly surprising tourists, while also highlighting the image problems created by the ongoing hybrid war with Russia and the negative media coverage of the country’s stuttering efforts to overcome chronic corruption. Of the 1060 survey participants, 28% admitted to having security concerns about visiting Ukraine. Meanwhile, 24% said that prior to their arrival in Kyiv, they had primarily associated the country with war. The experience of actually spending time in the Ukrainian capital clearly altered these perceptions. After a few days in Kyiv, respondents no longer cited armed conflict among their impressions of Ukraine, with the most popular association (34%) being Ukraine’s friendly and positive population. Ukraine’s poor international image has traditionally created low expectations among visitors to the country, and this trend was very much evident among Eurovision guests. Just over 47% of survey respondents said Kyiv had surpassed their expectations, while a massive 92% voiced their readiness to return to Ukraine. Just 10 visitors, or less than one percent of those surveyed, expressed disappointment at their experiences in Kyiv. When asked to identity the things that had impressed them the most, the top responses were the Ukrainian people (73%) and Ukrainian culture (45%). The biggest negatives were poor public transport infrastructure (26%) and a perceived lack of English-language skills (18%). As Ukraine seeks to engage with the international community, these results are worth dwelling on. Expensive media PR campaigns can certainly help to boost Ukraine’s international 50

profile, but enticing people to visit Ukraine may actually be one of the most cost effective ways of improving outside perceptions of the country.

European Credentials

The Eurovision Song Contest was widely seen as an opportunity for Ukraine to underline the country’s European credentials, and survey results indicate that the event lived up to its billing. International opinion polls of European Union citizens generally identity little if any enthusiasm for future Ukrainian EU membership, but Eurovision visitors were positively bullish on the subject. A massive 54% of respondents saw Ukraine joining the EU within five years, while 19% opted for the slightly more realistic timeframe of a decade. Just 1% said they did not see any EU future for Ukraine, making this the most Euro-optimistic survey in Ukrainian history. While these results doubtless owed much to the intoxicatingly festive mood generated by Eurovision, they do serve as a reminder that visitors to Kyiv are generally surprised and impressed by how quintessentially European the city is. Indeed, 57% of respondents explained their belief in Ukraine’s future EU membership by pointing to the country’s European credentials, while 64% said their time in Kyiv had made them more enthusiastic about Ukraine’s EU membership ambitions.

Oligarchs and Corruption

The survey also revealed the continuing cost of negative international media coverage on perceptions of Ukraine. When asked to cite the key obstacles to Ukraine’s EU integration, the most popular answer was corruption (45%). Somewhat fewer respondents (37%) identified the ongoing war with Russia, while more than a quarter (27%) pointed to Ukraine’s oligarchs as a major barrier to closer ties with the European Union. It is highly unlikely that Eurovision visitors encountered any first-hand evidence of government corruption or nefarious oligarch influence during their short period in the country. Instead, these responses serve as a reminder of the influence exerted by endless coverage of Ukraine’s corrupt elite. This is the harsh reality facing all those working to improve Ukraine’s international standing. Kyiv managed to dazzle and delight its Eurovision visitors, but until the country’s political classes stop attracting damaging headlines, Ukraine will continue to fall short in its bid to create a positive image and establish itself as an exciting new addition to the European ensemble. www.bunews.com.ua

Ulf Schneider Founder and Managing Partner

We provide our international clients with the back office services they need to expand their business into or within Ukraine, Russia, Kazakhstan, Belarus, Poland and Germany. Our services include market entry support, accounting outsourcing, tax consulting, import, ERP systems and support in legal matters with a focus on migration, labor and corporate law. Contact us to receive your individual offer.

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Contact person | Kateryna Kotenko +380 / 44 / 490 55 28 | kyiv@schneider-group.com

legal sector

Legal Tech in Ukraine

Technology is increasingly taking over our lives but can your laptop really replace your lawyer?

About the author: Dmytro Shemelin (dmytro. shemelin@asterslaw.com) is a counsel at Asters law firm. He specializes in international dispute resolution, arbitration and litigation. Legal tech is the new buzzword in the Ukrainian legal community. While Ukrainian startups in this field have so far enjoyed somewhat limited success, most industry analysts expect serious progress in the near future based on developments elsewhere. The legal tech sector is already booming in the US and the EU where it has gone into disruption mode, with new technological solutions attempting to replace “normal” lawyers, or at least significantly reducing the need for traditional legal services. There are three main legal tech segments. The first is “do-it-yourself” legal, including various apps allowing individuals and small businesses access to more or less personalized legal documents or legal advice at low cost. This is the home of RocketLawyer, one of the most successful legal tech startups in the US today. They provide document drafts based on online interviews. In 2016, we have also seen the rapid expansion of chat bots. These are specialized apps offering legal advice through simulated dialogue with the user via a messaging platform. The most famous is probably the DoNotPay bot, which allows users to challenge parking tickets on preset grounds. The second area is legal marketplaces as a means to connect consumers and providers of legal services at a low cost. Online marketplaces such as Amazon and Alibaba are among the highest capitalized companies in the world, and the legal sphere is catching up fast. Avvo, 52

Hire an Esquire, and LegalZoom are among the market leaders. The most interesting legal tech area is probably legal artificial intelligence, or AI. While text analysis and e-discovery platforms have been around for a while, the rapid development of AI initiatives in the last year indicates that we are probably on the verge of a significant breakthrough. In 2016, LexisNexis acquired Lex Machina, an AI platform that discovers meaningful patterns in data about prior litigation in the US courts. Using open data on federal litigations in the US, the platform provides detailed information on things like the likelihood of success of certain motions before a specific judge, the experience of counsels in particular cases, and the likely length of trials. Lex Machina initially specialized on IP disputes. Under new governance, it quickly expanded to securities and antitrust. The closest rivals of Lex Machina are Premonition, which claims to operate the largest database of court decisions in the world, and Litigation Analytics, a Bloomberg product. This is a particularly fashionable sphere and judge analytics is the new black of the legal AI segment.

Can it work in Ukraine?

The size of the Ukrainian legal market does not create the same level of incentives for wannabe legal tech startups. Nevertheless, analysts expect the Ukrainian legal tech segment to expand. The first Ukrainian DIY startups have already emerged. Currently they focus on providing standardized legal advice in the chat-bot format, as well as drafting legal documents following a guided interview. The largest difficulty in the DIY area is probably the monetization of the service. While the public might be willing to use free legal advice, especially with the fun-factor of a chat-bot, it is not yet clear whether they are prepared to pay for it. The key consideration will be the effectiveness of the advice they receive in real-world circumstances. In the contemporary Ukrainian reality, technical knowledge of the letter of the law is often not sufficient to protect one’s rights. In reality, the false selfconfidence of “I know my rights” attitudes may tempt the client to adopt unjustifiably aggres-

sive behavior in uncertain circumstances. For this and similar reasons, the applicability of DIY solutions to the contemporary Ukrainian legal environment remains questionable. Legal marketplace solutions have significant potential in Ukraine. The Ukrainian public has enormous demand for relatively low cost legal advice, especially in the litigation sphere. At the same time, there is a huge oversupply of lawyers, many of whom often cannot make their way to the limited world of the country’s top law firms, which in any case often only cover Kyiv and a handful of major Ukrainian cities. A well-developed platform bringing legal professionals into contact is long overdue. This could feature all the tools of a social network, including ratings and so forth. One of the interesting subspecies of the legal the segment is litigation crowdfunding, allowing laypeople to invest into litigation costs and claim a share of remuneration from the outcomes of successful cases. Such online platforms already exist in the US. LexShares offers dozens of cases for potential investment ranging from below USD 1 million to USD 50 million and above. In Ukraine, however, litigation crowdfunding may be a tricky business given uncertainties over the ultimate recovery of remuneration even if the case is successful, together with the virtually non-existent protection of clients on crowdfunding platforms. The legal AI segment in Ukraine is currently dominated by Liga and various spinoffs such as Verdictum. Unfortunately, no other significant projects have appeared on the horizon yet. Recently, in an unwelcome move, the State Registry of Court Decisions introduced captchas on its website, making the database of Ukrainian court decisions inaccessible to automated searches and data collection. This development will undoubtedly undermine further AI projects in the Ukrainian legal sphere. Although AI is already able to help Ukrainians in some routine legal operations, it still cannot fully replace the human mind in complicated matters and deals. This means that at least for the time being, there will be enough space under the sun for both human and AI lawyers in Ukraine.

Demolish or Renovate? How should Ukraine approach the challenge of the country’s low-quality Soviet-era housing? Rapid construction of new housing has resumed in Kyiv as the country’s economic recovery continues. Despite the large number of new residential buildings appearing in the Ukrainian capital, a sizable portion of the city’s population continues to live in thousands of Soviet-era “Khrushchevky” apartment blocks that are now many years beyond their planned useful lifespans. Typically, these are five-story identikit buildings constructed as a short-term solution to the Soviet housing shortage during the reign of Nikita Khrushchev over half a century ago. For more than a decade, Ukrainian politicians have been discussing possible solutions to this situation. So far, little concrete action has been taken. Most discussions have included various plans for relocating residents to new high rises, demolishing entire blocks of old apartments, and replacing them with high rise apartment buildings funded by private 54

investment from property development companies. Opponents of this approach point to its obvious flaws and exclaim, “Why can’t we just renovate our Khrushchevky as was done in Germany?” This article discusses the pros and cons of each approach from the point of view of financing, energy efficiency, livability/urban density, and other factors. Whichever solution will be chosen will have an immense impact on the complexion of the Kyiv real estate market and the makeup of Kyiv neighborhoods for years to come.

A Soviet Classic “Khrushchevky” is the nickname given to Soviet-era apartments built in the 1950s and 1960s when Nikita Khrushchev was in power. Constructed using concrete panels or bricks, these low-rise, low-cost buildings were

real estate

originally intended as “temporary” housing and were meant to address acute shortages. Standard Khrushchevky have 60 apartments with three entrances and are five floors high, hence the other nickname for them, “pytietashky” (“five-floor” houses). The maximum useful life of these buildings is generally estimated at 50 years. Today there are more than 3,000 outdated Soviet-era 5-floor buildings in Kyiv, most of which are located in Perchersk, Podil, Shevchenko and Solomianka districts, as well as on the Left Bank. The vast majority of these buildings are in dire need of capital repair.

Relocation and Demolition From time to time, Kyiv’s city government has announced plans to launch pilot projects to relocate the residents of Khrushchevky into new housing and then demolish their old apartment buildings and replace them with high rise buildings. However, many unresolved roadblocks stand in the way of such projects moving forward. The government has not defined what quality and size of housing Khrushchevky residents should receive. Kyiv’s municipal authorities would like to attract private property developers to these projects, but building new high rises to relocate Khrushchevky residents before demolishing the old buildings would www.bunews.com.ua

involve significant cash outlays and the city government does not have the funds to help already-stretched developers with financing. There are also technical considerations. It is not so easy to demolish one Khrushchevka without disturbing neighboring buildings, so instead, entire blocks of these old apartments would need to be razed. Thus far, Ukraine’s legislation has required the approval of all Khrushchevka residents before a building can be demolished. Changing this law to something in the region of a 70% approval requirement would allow the authorities to force opponents of demolition to relocate, but this approach could spark massive protests. For evidence of the risks involved, we can look at the growing opposition to the recent Moscow decision to demolish Soviet-era buildings. Many protesters in Moscow claim the entire program is a land grab to enrich greedy developers. They say it will force relocated residents to move from relatively quiet neighborhoods and into in high rises. Not everyone wants to live in a high rise building. Even if all these initial and significant roadblocks prove resolvable, the process of demolishing Khrushchevky and replacing them with high rises as is currently contemplated would also bring huge additional financial and social costs that could generate further opposition. In place of 60 apartments, you could have 150-200 families living in the same : 55

real estate

: space where a Khrushchevka once stood. Kyiv simply does not have the money to properly upgrade and expand the capacity of roads, schools, hospitals and other public services to serve neighborhoods with a potential urban density up to 2-3 times higher than present levels. If implemented poorly, the demolition option could result in a concrete jungle effect. It could create unattractive neighborhoods with poor livability, which residents would eventually flee. This would lead to rapidly depreciating property values.

German Experience

The former East Germany had a population of 17 million people, many of whom lived in buildings similar to Kyiv’s Khrushchevky. Following the reunification of Germany, hundreds of German companies performed renovations on thousands of Soviet-era apartment buildings with lots of coordination between public and private stakeholders. In many cases, East German residents were tenants instead of apartment owners and the apartment blocks belonged to the state, which made it simpler to organize renovations. In cases where there was private ownership, owners were generally able to reach a consensus that it was necessary to approve and implement the proposed renovations. It is important to note that residents were not forced to relocate. Instead, most renovation work took place while they continued living in their buildings. A thorough planning process involving four to five layers of analysis played a key part of this reconstruction approach. Every building is different and has its own “history” which includes the original construction quality (or lack thereof) which can vary greatly, as well as any maintenance, weather damage, wear and tear, and a range of other factors that should all be taken into account. These German renovations provided major infrastructure upgrades that not only extended the useful life of these buildings, but also drastically improved their energy efficiency and physical appearance. Changes included the replacement of roofs, insulation of the technical floor, addition of insulating facades with decorative improvements to the building’s exterior, replacement of windows, rehabilitation of basement floors, balconies, and entrance areas, replacement of pipes and electrical systems, installation of new radiators with thermostats, replacement of vertical with horizontal heating systems, and rehabilitation of the territory surrounding the building. In some cases, the amount of floors was reduced and architects created highly innovative and aesthetically pleasing buildings. In other cases, basic renovations were performed very quickly. These five-day “blitz” renovations involved a high degree of pre-planning and project management while relying on the installation and connection of prefabricated modules with infrastructure and communications.

German-Style Renovation in Ukraine

In Germany, these renovations were often financed by city administrations, which in turn demanded higher rents. This made sense as the buildings in question were usually state-owned and most residents were tenants who benefitted by paying lower utility bills due to increased energy efficiency after the renovation. When applied to Ukraine, where most apartment residents own their property, a key part of the renovation pre-planning phase would be a structural inspection of a building’s foundation to determine if it could support the addition of a 6th or 7th floor - a necessary prerequisite for attracting private investors to finance the renovation of a Ukrainian Khrushchevka.

Because German companies have performed thousands of renovations, they potentially have lots of expertise that would be helpful for reconstructing Khrushchevky in Kyiv. For example, the deep construction planning process could be done by one of several design institutes based in Weimar. However, this would be paid work. In Ukraine, it can be especially hard to find private sector investors who are willing to invest in the project development/feasibility phase. One possible solution might obtaining an EU-type grant or other multilateral lender financing. This could potentially be done under the auspices of an energy efficiency program. If this initial funding could be obtained, then German institutes could also assist with due diligence and oversee construction by partnering with local design institutes in Ukraine. How could a German-style renovation of Kyiv’s Khrushchevky be financed? One potential idea would be to create a multi-party consortium with financing from Kyiv city authorities, individual apartment owners, private investors (for buildings with additional floors), and private Energy Service Companies (ESCOs). ESCOs could provide energy audits of the buildings to be renovated and then implement energy-saving solutions such as insulating walls, replacing windows and doors, and other solutions. Payment would be in the form of energy savings over a period of years to recoup their capital outlay with a profit margin. The legal framework for aspects of this approach is already in place. In 2015-2016, laws were passed to pave the way for implementing ESCO projects in Ukraine’s public sector (schools, hospitals) as well as for multiapartment buildings. Potential energy savings of up to 70-80% could make these renovation projects feasible. By some estimates, heating costs per square meter in Ukraine’s Soviet-era apartments are currently three times higher than in Poland. In addition to the obvious economic benefits, successfully implementing energy efficiency projects in Ukraine would have the added benefit of lowering the country’s strategically undesirable energy dependence on imports. Another funding option is taxation. While it would not be a popular move, Kyiv’s government might use this opportunity to implement an effective property tax. Sooner or later, such a tax will be needed to bring order to the city’s real estate market and to shore up public finances for services. This could be a good occasion to begin.

What Will Kyiv Do?

Will Kyiv look West to Europe and follow the German example, or will it look East and take Moscow’s lead? Doing nothing has been the default choice so far, but this option may not be available for much longer as land plots for new housing developments are rapidly disappearing. While both options contain many strong arguments, the German option is more economical and socially progressive. However, it is also more complicated to get right and has far less potential for graft. It is therefore likely to be far less interesting to today’s Ukrainian politicians. Despite the roadblocks to the demolition option, the close ties of Kyiv’s city government to developers, coupled with the potential for personal enrichment, make this an attractive option for politicians and the more likely outcome. How will Kyiv’s local government and the city’s residents respond to this immense civic challenge? We can expect the Soviet housing issue to remain a hot topic on the municipal agenda for the next few years. Special thanks to Ukraine and Russia market entry consultant Dr. Markus Liemich for his contributions to this article.

About the author: Tim Louzonis (tim@aimrealtykiev.com) is a co-founder of AIM Realty Kiev, a real estate agency that specializes in real estate for foreign 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

The Seven Wonders of Kyiv

Eurovision has put Kyiv in the international spotlight and focused attention on its touristic charms

1. COLOSSUS OF KYIV Ukraine is currently attempting to remove the remaining relics of the Soviet era, but this mammoth Soviet monument remains the most iconic lady in Kyiv and will likely be around for many years to come. Built at the start of the 1980s, Kyiv’s Motherland Monument commemorates the Soviet liberation of the Ukrainian capital from Nazi occupation during WWII. Allegedly commissioned by Soviet leader Leonid Brezhnev as he cruised along the nearby river while admiring the picturesque Kyiv hillside panorama, the

3. VOLODYMYR THE GREAT BAPTISM MONUMENT Ukraine and Russia are not only engaged in a contemporary conflict. They are also at war over the past. Both nations trace their ancestry back to the early medieval Kyiv Rus state, and both lay claim to Volodymyr the Great (known as Vladimir the Great in Russia). Volodymyr was a tenth century ruler who converted the people of the Rus to Christianity, thus becoming the founding father of both the Ukrainian and Russian Orthodox Churches. The Kremlin recently moved to assert its historical claim by erecting a huge monument to Volodymyr in central

monument is one of the tallest freestanding statues in the world. The giant hammer and sickle on the monument’s shield is the largest remaining Soviet crest still on public display in Ukraine. This has helped make the Kyiv colossus controversial among many Ukrainians who see it as an outdated and anachronistic symbol of Soviet power. Fans of the Motherland Monument like to point out that she stands facing towards the east in direct defiance of Russia. This positioning was presumably a Soviet oversight, but it has now become all too appropriate.

2. MAIDAN NEZOLEZHNOSTI

The history of Maidan is the history of modern Ukraine. Today, Maidan Nezolezhnosti (literally “Independence Square”) is world famous as a symbol of Ukrainian identity. However, there was a time during the 1990s when the square was synonymous with Ukraine’s somewhat halfhearted separation from the Soviet past. A huge Communist hammer and sickle symbol used to loom over Maidan, while the inappropriately named Moscow Hotel dominated the skyline. These perceptions changed dramatically during the 2004 Orange Revolution, when the square hosted multimillion-

Moscow. However, Ukraine has the trump card in this particular memory war, because Volodymyr was the Grand Prince of Kyiv. He lived in the current Ukrainian capital and reigned for three decades from the year 980, centuries before the foundation of Moscow. The iconic monument to Volodymyr in Kyiv is nestled in the leafy hills overlooking the Dnipro River and dates from the mid-nineteenth century Tsarist era. The location of the monument reflects the legends surrounding the conversion to Christianity, which speak of Volodymyr calling on the citizens of Kyiv to gather in the river below for mass baptism.

4. DNIPRO BEACHES

Who needs the Riviera? Thanks to its position at a particularly wide and meandering section of the Dnipro River, Kyiv boasts more sandy beaches than most seaside resorts. Instead of relying on a single seafront strip of coastline, the Ukrainian capital has a dizzying array of beach options dotted across the city. Naturally, the bulk of these beaches lie in the geographical center of Kyiv around the Dnipro River itself, 58

strong protests over a rigged presidential election. Ten years later, another people power revolution would underline Maidan’s prominent role in modern Ukrainian history when the square served as the epicenter of the pro-democracy 2013-14 Euromaidan Revolution. The massacre of protesters that marked the tragic climax of the crisis served to imbue Maidan with sacred status. It has remained at the center of the national narrative ever since as Ukraine has defended itself against Russia’s hybrid war. Memorial services for fallen soldiers regularly take place here, while it has become an obligatory destination for all visiting dignitaries.

which is crammed with little islands and cozy inlets. Truhaniv Island is the physically closest beach zone to the downtown area. It reachable from European Square via pedestrian bridge. Visitors looking for the full beach resort experience complete with blaring pop music, sizzling fast food, watersports, poseurs, sun lounger rentals and so forth, should head to Hydropark metro station – the gateway to Kyiv’s somewhat kitsch and cute summertime resort district.

Ukraine’s capital has always been an elegant and artistic city, but it is only in the last few years that it has transformed itself into a giant canvas. The street art craze began in the immediate aftermath of the Euromaidan Revolution as one of the many ways in which Kyivites chose to express feelings of national awakening and patriotism. It has since be-

7. NATIONAL BOTANICAL GARDEN Kyiv is among Europe’s greenest capitals, a status befitting a country famed for its legendary fertility and general agricultural excellence. Shaded parks and lush islands dot the city landscape, while blossoming chestnut trees line the Kyiv streets and provide the city with its iconic chestnut leaf symbol. Kyiv’s most elegant green area is the city’s National Botanical Garden in the Pechersk district overlooking the Dnipro River. Founded in 1936 and covering a total of 120 hectares, the National Botanical

come more of an organized endeavor, with numerous initiatives by arts collectives receiving backing from the municipal authorities. Many of the world’s most famous street artists have come to Kyiv since 2014 to add their artworks to the city ensemble, while guided tours and special smartphone apps have been launched to help visitors and locals alike keep track of the street-level arts explosion.

tourism

5. STREET ART

6. OLYMPIC STADIUM

Europe with a capacity of just over 70,000 and state-of-the-art facilities. Originally dating back to the early years of the twentieth century, the entire stadium complex underwent a complete renovation for the Euro 2012 European Championships and staged five games including the final itself. It is scheduled to host the 2018 Champions League Final.

How can a city that has never hosted an Olympic Games have an Olympic Stadium? Kyiv’s secret is simple enough – the city’s showpiece stadium played host to a series of group stage football matches during the 1980 Moscow Olympics, thus winning the right to use the Olympic label. This stunning stadium is one of the largest in

Garden features a range of geographical zones including the Ukrainian Carpathians, Ukrainian Steppe, Caucasus, Siberia and the Far East. The garden has all manner of special features include rose gardens and celebrated orchid collection. It houses two functioning monasteries that lend a spiritual edge to the ambience and are particularly popular on religious holidays. However, the Garden is most commonly associated with the annual lilac blossom, creating iconic views of the blooming plants decorating the rolling hills leading down to the Dnipro River.

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Time for Ukrainians to discover Ukraine

New survey finds that most Ukrainians have never explored different regions of their own country

One of the biggest victories scored by the Ukrainian government this year was the approval of comprehensive visa liberalization with the European Union. Thanks to this measure, Ukrainians have entered into a new phase in their relationship with the EU and will be able to travel throughout Europe without visas for the first time in the country’s history. This a huge milestone in Ukraine’s post-Soviet progress. For the past quarter of a century, a combination of the visa barrier and low incomes had helped to create a de facto iron curtain that prevented most Ukrainians from moving freely throughout the rest of Europe. Although technically possible, international travel remained tantalizingly out of reach for large numbers of Ukrainians. A recent nationwide survey carried out by the International Republican Institute (IRI) and Global Affairs Canada (GAC) highlighted the astonishingly low numbers of Ukrainians who have actually visited the EU. The poll revealed that very few Ukrainians have traveled to neighboring European countries over the past five years. In 11 of Ukraine’s largest cities, more than 89% of respondents have not traveled to Europe since 2012. Only seven Ukrainian cities boasted more than a quarter of residents who had visited Europe at least once in the past five years. This reflects the difficulties mot Ukrainians have had in experiencing the EU firsthand, and illustrates the importance of the recent visa-free agreement. The removal of the visa barrier will broaden horizons and help Ukraine to build bridges with the rest of the continent.

Ukraine’s Isolated Cities

Travel is one of life’s most powerful experiences. There is little doubt that visa-free EU travel will change Ukrainian perceptions about Europe and 60

make an impact on the way they see themselves. Ukrainians could also benefit in a number of ways from greater domestic travel. The recent IRI/GAC survey found that surprisingly few Ukrainians had traveled within their own country. This lack of interaction between different regions fosters a sense of isolation and feeds stereotypes that encourage distrust and political divisions. As Ukrainians rush to get their biometric passports and book tickets to EU destinations, it worth considering the importance of fostering greater interconnectivity within Ukraine itself. Predictably, Ukraine’s most seasoned EU travelers are located in the western region of the country, which is the area geographically closest to the rest of Europe. The survey found that residents of Uzhgorod in Ukraine’s physically isolated westernmost region of Zakarpattia rarely visit any other region of Ukraine except Kyiv. This is largely due to the physical barrier posed by the Carpathian mountain range on the city’s eastern side, and the limited travel infrastructure connecting the region to the rest of Ukraine. Residents of Uzhgorod are more likely to travel to European destinations than other cities in Ukraine. Just over 35% of city respondents reported traveling to the European Union at some point during the past five years. This is perhaps unsurprising considering the fact that Uzhgorod city residents can literally walk into the EU via the shared border with neighboring Slovakia. Some of the more interesting findings regarding Ukraine’s regional disconnects came from respondents in the center of the country. Chernihiv and Sumy are the capitals of neighboring oblasts (regions), but residents of these two cities seem to ignore each other completely while moving in opposite directions. Chernihiv residents travel primarily to Kyiv, while Sumy residents tend to go east to visit and conduct business in Kharkiv.

www.ratingpro.org

Have traveled over the last 5 years outside the city to... 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5%

(Egypt, Turkey, Bulgaria, etc.)

Chernihiv

Lutsk

17%

Sumy

Rivne

16%

Zhytomyr

Kyiv Ternopil

Uzhgorod

Kharkiv

Poltava

Khmelnytskyy

Lviv

Kyiv Ternopil

Kropyvnytskyi

Uzhgorod

Vinnytsia Dnipro Kropyvnytskyi

Chernivtsi

Zaporizhia

Mariupol

Mykolaiv

Kherson

Odesa

Kherson

other regions of Ukraine

CIS countries

Chernihiv

Lutsk

Chernihiv

Sumy

Rivne

Sumy

Rivne

Zhytomyr Zhytomyr

Kyiv

Kharkiv

Poltava

Khmelnytskyy Ternopil

Uzhgorod

Severodonetsk

Cherkasy

IvanoFrankivsk

Zaporizhia Mykolaiv

Lviv

Kharkiv

Poltava

Khmelnytskyy

Lviv

Dnipro

Odesa

Sumy

Rivne Zhytomyr

Severodonetsk

Cherkasy

Chernivtsi

Lutsk

Chernihiv

Lutsk

Vinnytsia

IvanoFrankivsk

resorts abroad

countries of Europe average % for all the cities

society

Experience of travels outside own city

Ternopil

Vinnytsia

IvanoFrankivsk

Dnipro

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Uzhgorod

Kharkiv

Poltava

Khmelnytskyy

Lviv Severodonetsk

Cherkasy

Dnipro Kropyvnytskyi

Kropyvnytskyi

Chernivtsi

Zaporizhia

Odesa

Mariupol

Mykolaiv

Mariupol

Mykolaiv

Kherson

63%

Kherson

20%

IRI

Survey of Sociological Group «Rating», Mar. 2015 (17,600 resp.), Feb. 2016 (19,200 resp.), and Feb. 2017 (19,200 resp.) Conducted on order of the International Republican Institute (IRI) with support of the Government of Canada.

The International Republican Institute www.IRI.org | @IRI_Polls

Government of Canada

Experience of travels to other oblast centers of Ukraine

citizens of the West of Ukraine

75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Chernihiv

Lutsk

www.ratingpro.org

Have visited other cities over the last 5 years 0% Chernihiv

Lutsk

Sumy

Rivne

Zhytomyr

Kyiv

Poltava

Khmelnytskyy

Lviv Ternopil

Uzhgorod

Kyiv

Kharkiv Ternopil

Dnipro

Uzhgorod

Kropyvnytskyi

from Lutsk

Odesa

Rivne

Kyiv

Poltava

Khmelnytskyy

Uzhgorod

Severodonetsk

Dnipro Kropyvnytskyi Zaporizhia

Odesa

Zhytomyr

Poltava

Khmelnytskyy

Lviv Ternopil

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Mariupol

Mykolaiv

Kharkiv

Kyiv

from Ternopil

Ternopil

Uzhgorod

Kharkiv Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Dnipro Kropyvnytskyi

Chernivtsi

Zaporizhia

Mariupol

Mykolaiv Kherson

from Lviv

Lutsk

Chernihiv

from Khmelnytskyy

Sumy

Rivne

Odesa

Kherson

Zhytomyr

Kyiv Ternopil

Uzhgorod Chernihiv

Dnipro Kropyvnytskyi

Kyiv

Poltava

Khmelnytskyy

IvanoFrankivsk

Odesa

Kharkiv Severodonetsk

Cherksay Vinnytsia Dnipro

Kherson

from Uzhgorod

Kyiv

Uzhgorod

IvanoFrankivsk

Odesa

Kropyvnytskyi

from Chernivtsi

Kherson

Severodonetsk

Dnipro

Chernivtsi

Mariupol

IRI

Kharkiv

Cherkasy Vinnytsia

Zaporizhia

Zaporizhia Mykolaiv

Poltava

Khmelnytskyy Ternopil

from Iv.-Frankivsk

Sumy

Zhytomyr

Lviv

Kropyvnytskyi Chernivtsi

Chernihiv Rivne

Mariupol

Mykolaiv

Ternopil

Lutsk Zaporizhia

Zhytomyr

Lviv

Severodonetsk

Cherkasy Vinnytsia

Chernivtsi

Sumy

Rivne

IvanoFrankivsk

Kharkiv

Poltava

Khmelnytskyy

Lviv

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Poltava

Khmelnytskyy

Lviv

Zaporizhia Mykolaiv

Uzhgorod

Sumy

Rivne Zhytomyr

Dnipro

Odesa

Chernihiv

Lutsk

Kherson

Kropyvnytskyi Chernivtsi

Kherson

Vinnytsia

IvanoFrankivsk

Sumy

Kyiv

Kharkiv

Cherkasy

Chernivtsi

Rivne

Odesa

from Rivne

Sumy

Zhytomyr

Chernihiv

Mariupol

Mykolaiv Chernihiv

Lutsk

Ternopil

Lutsk

Zaporizhia

Mariupol

Kherson

Lviv

Uzhgorod

Dnipro Kropyvnytskyi

Zaporizhia Mykolaiv

Lutsk

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk Chernivtsi

Chernivtsi

Kharkiv

Poltava

Khmelnytskyy

Lviv Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Sumy

Rivne

Zhytomyr

The International Republican Institute www.IRI.org | @IRI_Polls

Mariupol

Mykolaiv Odesa

Kherson

Government of Canada

Travelling from Mariupol to Lviv currently requires switching trains in Kyiv halfway with a total travel time of almost 30 hours Clearly, this corner of Ukraine has more diverse and divergent views than its geography would lead one to believe. The survey indicates that Ukraine’s southern and eastern regions participate in even less travel to other parts of the country, but they do tend to interact more with each other. Whereas Sumy and Chernihiv go their separate ways, residents of neighboring Mykolaiv and Kherson in southern Ukraine travel between the two cities far more. For southern Ukraine in general, Kyiv and Odesa remain the most visited cities. Meanwhile, those from the south who had travelled to western Ukraine were most likely to visit Lviv.

All Roads Lead to Kyiv

There are numerous reasons why the travel pattern picture in Ukraine varies so much from region to region. In terms of European travel, the obstacles have long been obvious. The strict visa regime for the Schengen zone, prohibitive costs, and a lack of decent rail connections have all played major roles in preventing large numbers of Ukrainians from exploring the EU. As for travel within Ukraine, it is often difficult for Western audiences to appreciate the difficulties involved in traveling within the country. One cannot assume that travel between cities in Ukraine is akin to driving from Munich to Frankfurt or catching a flight between Chicago and New York. In Ukraine, all roads quite literally lead to Kyiv, as do all virtually rail and air routes. Travelling from Mariupol to Lviv, for example, requires switching trains in Kyiv halfway with a total travel time of almost 30 hours. Flying from Uzhgorod, located on the doorstep to the EU, over the Carpathian Mountains to Kyiv means catching a small Sovietera prop plane that departs once a day.

Infrastructure Obstacles

With the passage of visa liberalization for Ukraine, the future of European travel is immediately much brighter. However, considerably more work needs to be done to improve domestic infrastructure if travel within Ukraine is to improve. InterCity express trains are currently doing a brisk business servicing large cities like Kharkiv, Dnipro and even the Donbas, with a line to passing through Slovyansk and Kramatorsk. This service could expand to link up Ukraine’s regional capitals to each other. Driving from region to region in Ukraine is an unappealing proposition due to the country’s notoriously bad roads. While the poor condition of the Ukrainian road network remains a disaster for much of the country, there is reason to hope that Ukraine’s ongoing fiscal decentralization will incentivize road improvements at the local level. This would

make a huge difference to the country’s interconnectivity while also boosting regional economies. Air travel is another area where greater intercity connections could prove a big hit. New discount airlines will make their presence felt this summer and autumn as Ukraine’s air travel sector continues to open up for new and existing carriers. For example, WizzAir is slowly expanding its Ukraine services. With RyanAir on its way into Boryspil International Airport, more options are steadily arriving to take advantage of Ukraine’s new openness with the rest of Europe. Developing regional airports will be the next big challenge. This represents a huge opportunity for investment, as cities like Mykolaiv, Khmelnytskiy and even Zhytomyr actively look at plans to modernize their Soviet-era municipal airports. Better airport infrastructure will attract more budget airlines offering access to the EU. It could also encourage the development of city-to-city domestic flight services at low rates. Finally, a new commercial ferry service on the Dnipro has begun to build better connections between the cities of Chernihiv, Kyiv, and Dnipro. The southern port city Kherson will soon join this list. Ukraine’s mighty rivers are a great way to bring the country together. Much more could be done to utilize the potential they offer.

Overcoming Domestic Divisions

The future development of Ukraine lies not just in improving links with Europe but also in creating the conditions where Ukrainians interact with other parts of their own country. There is no better counter-propaganda tool in the EU’s arsenal than physically showing Ukrainians best practices throughout their own country as well as across Europe. Travel within Ukraine can help forge vital new connections across a variety of industries and sectors, while also dispelling negative stereotypes and strengthening social ties. To that end, it is critical for Ukraine’s political and cultural development that its residents see and learn from best practices in neighboring cities. If something is achievable in Ternopil, then it can be replicated in Sumy or Severodonetsk, as all municipalities operate under the same broad governing legal framework. The current state of isolation between cities and regions has caused different areas to develop at varying speeds. Creating more transportation hubs with additional regional spokes within the country is a good start to addressing this problem. Promoting study tours, exchanges, and domestic tourism is another. The opening up of travel to the EU provides a timely reminder of the opportunities to improve linkages within Ukraine itself. This development could play an important role in Ukraine’s own internal reforms and help to foster greater national consolidation.

About the author: Michael Druckman is the Resident Country Director for Ukraine at the International Republican Institute

citizens of the Center of Ukraine

www.ratingpro.org

Have visited other cities over the last 5 years 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5%

0% Chernihiv

Lutsk Chernihiv

Lutsk

Zhytomyr

Kyiv

Kyiv Ternopil

Ternopil

Vinnytsia

Uzhgorod

Dnipro

Kropyvnytskyi Chernivtsi

Chernihiv

Lutsk

Sumy

Rivne

Kherson

Zhytomyr

Ternopil

Chernihiv

Dnipro Kropyvnytskyi

Kyiv

Kharkiv

Poltava

Khmelnytskyy

Severodonetsk

Cherkasy Vinnytsia

from Kyiv

Odesa

Sumy

Rivne

Zaporizhia

Zhytomyr

Mariupol

Mykolaiv

Ternopil

Chernihiv

Lutsk

Chernivtsi

Zhytomyr

IvanoFrankivsk

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Sumy

Rivne

Kharkiv

Poltava

Khmelnytskyy

Lviv

Uzhgorod

Mariupol

Odesa

from Sumy

Kherson

Uzhgorod

Lviv

Zaporizhia Mykolaiv

Mariupol

Kyiv

Lutsk

Dnipro

Zaporizhia Mykolaiv

from Chernihiv

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Kropyvnytskyi Chernivtsi

Odesa

Kharkiv

Poltava

Khmelnytskyy

Lviv Severodonetsk

Cherkasy

IvanoFrankivsk

Uzhgorod

Kharkiv

Poltava

Khmelnytskyy

Lviv

Sumy

Rivne

Sumy

Rivne

society

Experience of travels to other oblast centers of Ukraine

Kyiv Kherson

Ternopil

Uzhgorod

Dnipro

Kharkiv

Poltava

Khmelnytskyy

Lviv

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Dnipro Kropyvnytskyi

Kropyvnytskyi

Chernivtsi

Zaporizhia

Zaporizhia Mariupol

Mykolaiv Odesa

Mariupol

Mykolaiv Odesa

from Poltava

Kherson

from Zhytomyr

Chernihiv

Lutsk

Kherson

Sumy

Rivne Zhytomyr

Kyiv Ternopil Chernihiv

Lutsk

Sumy

Rivne

Uzhgorod

Zhytomyr

Dnipro Kropyvnytskyi

Chernivtsi

Chernihiv

Lutsk

Dnipro

Zhytomyr

Kyiv

Zaporizhia Mariupol

from Cherkasy

Khmelnytskyy

Lviv

Kherson Uzhgorod

Kharkiv

Poltava

Ternopil

Odesa

Sumy

Rivne

Kropyvnytskyi

Mykolaiv Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Kharkiv

Poltava

Khmelnytskyy Ternopil

Uzhgorod

Severodonetsk

Cherkasy Vinnytsia

Chernivtsi

Kyiv Lviv

Kharkiv

Poltava

Khmelnytskyy

Lviv

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Dnipro Kropyvnytskyi

Chernivtsi

Zaporizhia

Odesa

from Vinnytsia

Mariupol

Mykolaiv

Mariupol

Mykolaiv

Odesa

from Kropyvnytskyi

Kherson

IRI

Kherson

The International Republican Institute www.IRI.org | @IRI_Polls

Government of Canada

Experience of travels to other oblast centers of Ukraine

citizens of the South and East of Ukraine

75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Chernihiv

Lutsk

www.ratingpro.org

Have visited other cities over the last 5 years 0% Chernihiv

Lutsk

Sumy

Rivne

Zhytomyr

Kyiv

Poltava

Khmelnytskyy

Lviv Ternopil

Kyiv

Kharkiv Ternopil

Vinnytsia Dnipro

Uzhgorod

Kropyvnytskyi

Dnipro Kropyvnytskyi Zaporizhia

Mariupol

Odesa

from Kharkiv

Chernihiv

Lutsk

Sumy

Rivne Zhytomyr

Ternopil

Severodonetsk

Cherkasy Vinnytsia

IvanoFrankivsk

Dnipro Kropyvnytskyi

Chernivtsi

Chernihiv

Kyiv

Poltava

Ternopil

Kharkiv Severodonetsk

Cherkasy

Zhytomyr

Kyiv

Kherson

from Mariupol

Poltava

Khmelnytskyy

Lviv Ternopil

Uzhgorod

Vinnytsia

IvanoFrankivsk

Sumy

Rivne

Mariupol

Odesa

Khmelnytskyy

Lviv

Chernihiv

Lutsk

Zaporizhia Mykolaiv

Sumy

Zhytomyr

Kherson

Kharkiv

Poltava

Khmelnytskyy

Lviv

Uzhgorod

Odesa

from Odesa

Kherson

Rivne

Mariupol

Mykolaiv

Kyiv

Uzhgorod

IvanoFrankivsk

Zaporizhia Mykolaiv

Lutsk

Severodonetsk

Cherkasy Vinnytsia

Chernivtsi

Severodonetsk

Dnipro Kropyvnytskyi

Chernivtsi

Dnipro

Zaporizhia

Mykolaiv

from Dnipro

Odesa

Mariupol

Mykolaiv

Zaporizhia Odesa

Mariupol

Kherson

from Mykolaiv

Kherson

Lutsk

Chernihiv

Kharkiv

Cherkasy Vinnytsia

IvanoFrankivsk

Kropyvnytskyi Chernivtsi

Kharkiv

Poltava

Khmelnytskyy

Lviv Severodonetsk

Cherkasy

IvanoFrankivsk

Uzhgorod

Sumy

Rivne

Zhytomyr

Sumy

Rivne Zhytomyr

Kyiv Ternopil

Lutsk

Chernihiv

Uzhgorod

Sumy

Rivne

Kyiv

Uzhgorod

Poltava

Khmelnytskyy Ternopil IvanoFrankivsk

Dnipro Kropyvnytskyi

Chernivtsi

from Severodonetsk

Odesa

Sumy

Zhytomyr

Kyiv

Mariupol Khmelnytskyy

Lviv Ternopil

Kherson Uzhgorod

Poltava

IvanoFrankivsk

Odesa

Severodonetsk

Dnipro Kropyvnytskyi

Chernivtsi

Zaporizhia

Mariupol

Mykolaiv

Mariupol

from Kherson

Kherson

IRI

Kharkiv

Cherkasy Vinnytsia

Zaporizhia Mykolaiv

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Chernihiv Rivne

Zaporizhia Mykolaiv

Severodonetsk

Cherkasy

Lutsk

Dnipro Kropyvnytskyi

Kharkiv

Vinnytsia

from Zaporizhia

Severodonetsk

Cherkasy Vinnytsia

Chernivtsi

Zhytomyr

Lviv

IvanoFrankivsk

Kharkiv

Poltava

Khmelnytskyy

Lviv

The International Republican Institute www.IRI.org | @IRI_Polls

Odesa

Kherson

Government of Canada

Ukraine’s top legal industry professionals gathered at Kyiv’s InterContinental Hotel in May for the country’s ninth annual Legal Awards ceremony. The event, organized by Ukraine’s leading legal industry publishing house Yuridicheskaya Practika, saw Sayenko Kharenko named as Law Firm of the Year for 2017. Meanwhile, Baker McKenzie marked the company’s 25th anniversary in Ukraine by picking up the award for International Law Firm of the Year. The top individual award went to Sergey Boyarchukov of Alekseev, Boyarchukov & Partners, who was named Partner of the Year, while Asters law firm Managing Partner Oleksiy Didkovskiy received a special award for Outstanding Professional Achievement.

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networking events

Ukrainian Legal Industry Awards

Bentley Joins Winner Group Ukraine Ukrainian automotive industry leader Winner Group Ukraine recently celebrated the addition of the Bentley brand to its current portfolio, where it now joins Ford, Volvo, Jaguar, Land Rover, and Porsche. To celebrate the opening of its newly renovated showroom and service reception, Bentley Kyiv welcomed more than 200 customers and guests to an official opening ceremony at Equides Horse Club Kyiv on 18 May. Dr. Andreas Offermann, Member of the Board for Sales, Marketing and Aftersales, Bentley Motors, commented at the opening: “This is a significant day for Bentley in Ukraine. Establishing our 68

Bentley brand in this country is a very important step in our growth strategy for Europe.” John Hynansky, Owner and CEO of Winner Group Ukraine, added: “It is truly an honor and a privilege to represent such an esteemed brand as Bentley in Ukraine. We believe that entering into this partnership is perfectly aligned with Winner’s core vision of providing best in class automotive products and services for our customers.” The new dealership, located within Winner Automotive at 24D Stepana Bandery Avenue in Kyiv, consists of a showroom, a stateof-the-art workshop, and aftersales center.

networking events

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Promoting Brand Ukraine in the Middle East The Ukrainian Middle East Business Forum took place in Kuwait on 25-26 April. The event was organised by the Ukrainian Middle East Concord Company and DLF attorneys-at-law under the patronage of the Ministry of Commerce and Industry of the State of Kuwait and the Embassy of Ukraine in Kuwait. The forum aimed to strengthen business connections between the Gulf countries and Ukraine by facilitating investments and developing export markets. The event attracted the participation of over 200 business representatives from Gulf countries, highlighting the growing regional interest in Ukrainian investment and partnership opportunities as post-Euromaidan Ukraine continues to broaden its economic horizons. To provide additional insight into the Ukrainian market, a special Arabic-language issue of the publication â&#x20AC;&#x153;Ukraine: Investment Guideâ&#x20AC;? was launched at the forum. 70

International community Fryday Kyiv joined forces with the Swedish Foreign Ministry in May to stage an evening of international business networking in the Ukrainian capital celebrating the relationship between Sweden and Ukraine. The guest of honour was Martin Hagström, Swedish Ambassador to Ukraine, who gave a TEDx-style talk focusing on the development and promotion of bilateral trade ties. It was a full house at Kyiv’s Hyatt Regency Hotel as leading members of Ukraine’s international business community turned out for the event. Sweden is one of Ukraine’s top trading partners and has long been a strong supporter of post-Soviet Ukraine’s EU integration and European transition. Ties between the two nations actually stretch back many centuries – the Viking adventurers who helped to establish Ukraine’s Kyiv Rus predecessor state in the early medieval period hailed from Sweden. Meanwhile, the two nations engaged in an ill-fated alliance at the turn of the eighteenth century that ended in disaster following the Tsarist Russian victory in the 1709 Battle of Poltava. More recently, tens of thousands of Swedish football fans came to Kyiv during the Euro 2012 football championship, winning hearts with their jovial antics and adding to the sense of friendship between Sweden and Ukraine.

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networking events

Ukraine and Sweden

Annual Survey Highlights Ukraine’s Decentralization Gains This year’s annual Democratic Governance Conference brought together more than 200 representatives of Ukraine’s 24 largest cities including mayors, civil society representatives, governance experts and political party members to assess the impact of decentralization processes across the country. Organized by the International Republican Institute (IRI) with support from Global Affairs Canada, the group convened at Kyiv’s Hilton Hotel in late spring. The annual event highlighted IRI’s third national municipal survey of Ukraine, which polled more than 19,000 residents in all Ukrainian oblast centers, including Mariupol and Severodonetsk in the conflict-hit east of the country. The survey examines citizen perceptions of service delivery and satisfaction with governance across Ukraine. Survey findings for 2017 point to the effectiveness of ongoing decentralization in the country and indicate rising ap72

proval of local governance in the majority of cities surveyed. Decentralization has been one of the most fundamental reforms of the Ukrainian state to be implemented since the 2014 Euromaidan Revolution. The process has given greater authority to regional administrations while making sure more funding remains available at the local level. During the course of the conference, expert panels discussed the impact of local governance reforms on areas including private housing associations, waste management, economic development, and shared best practices from across Ukrainian cities. IRI has worked with Ukrainian political parties and local governments since 1994 with the support of the United States Agency for International Development (USAID). The Institute has received support from the Government of Canada since 2014 for a multi-year democratic governance program.

networking events

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Ukrainian Diaspora Business Forum

Members of the global Ukrainian diaspora and representatives of the Ukrainian business community came together in Kyiv on 18-19 May for an innovative networking event aiming to capitalize on the international opportunities presented by Ukraine’s large and diverse diaspora community. Hosted by the Ukrainian Chamber of Commerce and Industry in partnership with the Ukrainian Worldwide Coordination Council, the inaugural Ukrainian Diaspora Business Forum attracted participation from Ukrainian diaspora members representing 15 countries. “Thanks to multiple waves of migration, millions of Ukrainians now live in countries around the world. This community remains a Ukrainian national treasure and an asset. The global Ukrainian diaspora has much to offer including extensive professional experience, but we have yet to harness this asset for the benefit of the country,” commented Ukrainian Chamber of Commerce and Industry President Gennadiy Chyzhykov. “This potential needs to be tapped in order to help develop international trade and expand Ukraine’s economic horizons. Members of the Ukrainian diaspora enjoy numerous competitive advantages over other foreign nationals doing business in Ukraine. They know the language, culture, and traditions of the country, while also benefitting from valuable insights into the contemporary realities of Ukraine.” Following the success of this inaugural event, the Ukrainian Diaspora Business Forum will now take place on an annual basis, with plans to expand the forum to include Ukraine’s regional capitals.

networking events

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and finally...

Ukraine’s best advert is Ukraine itself

The positive vibes among international visitors to the 2017 Eurovision Song Contest in Kyiv confirmed once again that people who actually come to Ukraine tend to be very pleasantly surprised. This favorable reaction is partly due to the low expectations most first-time visitors to Ukraine bring with them. They generally expect to find a drab and dreary nation wallowing in poverty and, for the past few years at least, ravaged by war. These unwelcome recent associations with armed conflict have joined a long list of negative stereotypes that serve to undermine Ukraine’s international image, including everything from the Chornobyl disaster to sex tourism. As Eurovision amply demonstrated, the best way to beat these clichés is to let people see for themselves. The song contest sparked a flurry of enthusiastic international press reports about Kyiv, with gushing tourism articles appearing everywhere from CNN and British tabloid newspapers to the hipster press. Taken together, this media blitz represented the most intensive blast of positive Kyiv coverage in living memory. Ukraine should now seek to build on the success of Eurovision by hosting further attention-grabbing international events that will bring foreign visitors and the international media to the country in large numbers. Ideally, Ukraine should aim high and bid for the right to stage top tier events like Formula 1, the football World Cup and the Olympic Games. This may sound somewhat fantastical, but doubters would do well to remember that Ukraine successfully co-hosted the UEFA European Championships just five years ago. Kyiv certainly has many of the natural attributes for a spectacular Summer Olympics, with water sports events on the Dnipro River serving as a particularly attractive option. Meanwhile, a Winter Olympics in the Ukrainian Car-

pathian Mountains would do wonders for the region’s profile as a winter holiday destination while also improving infrastructure. A Ukrainian World Cup is certainly an enticing prospect but it would have to wait until the final settlement of the ongoing hybrid war with Russia. Donetsk would be an obvious host city, much as it was during Euro 2012, while Dnipro, Odesa, Lviv, Kyiv, and Kharkiv would all be strong candidates to stage World Cup ties. Luckily, Kyiv will be able to test itself out as a leading football destination in spring 2018 when the city plays host to the UEFA Champions League Final. This prestige game will attract tens of thousands of visitors including a glittering array of VIPs and the global sporting media, making it the perfect opportunity to highlight Kyiv’s credentials as a top football destination. Hosting international events is an expensive undertaking, but it is arguably a better investment than equally costly advertising campaigns and other PR initiatives designed to improve unfavorable international perceptions of Ukraine. Investing in the country’s branding is a long overdue and crucial element in the struggle to attract international investment. Ukraine largely neglected the image issue for the past twenty-five years and is now living with the results of this neglect. The country’s low international profile left Ukraine uniquely vulnerable to Russian information attacks and unable to establish effective counternarratives of its own. Even now, after three years of unprecedented international media coverage of Ukraine, the amount of factually inaccurate and outright false information published about the country remains staggering. The event host route to better international perceptions of Ukraine also fits well with the country’s love of public holidays and suits the general readiness to engage in frenzied preparations that Ukrainians inherited from the Soviet past. Most of the major renovation and construction projects of the past twenty-five years have featured schedules designed to coincide with a particular anniversary or public holiday such Independence Day. This has proven a particularly effective approach, providing the clarity of clear guidelines and nonnegotiable deadlines. The legacy of hosting major international events would go far beyond the boost they can provide to Ukraine’s image. The infrastructure benefits of Euro 2012 are still very much evident, particularly in terms of new regional airports in Kharkiv and Lviv. However, the main reason why event hosting is such an attractive proposition for Ukraine remains the opportunity it provides to debunk the many myths about the country. Ukraine does not need clever slogans or slick advertising campaigns. All it needs is increased exposure. The more people come to Ukraine, the better the country’s international image will become.

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