Business Ukraine July / August 2016

July/August 2016

Also inside:

Ukraine at 25

CANADA IN UKRAINE Ukraine and Canada look forward to strengthening bilateral business ties following signing of free trade agreement during PM Trudeau visit

Inside: Monthly American Chamber of Commerce in Ukraine Newsletter

BUSINESS UKRAINE ISSUE: JULY/AUGUST 2016 Canada is home to one of the world’s largest Ukrainian diaspora communities and has long ranked among Ukraine’s most important international allies.

The signing of a free trade agreement between the two countries during the visit to Ukraine of Canadian Prime Minister Justin Trudeau in July now promises to usher in a new era of bilateral commercial cooperation and strategic partnership.

July/August 2016

Also inside:

Ukraine at 25

CANADA IN UKRAINE Ukraine and Canada look forward to strengthening bilateral business ties following signing of free trade agreement during PM Trudeau visit

Inside: Monthly American Chamber of Commerce in Ukraine Newsletter

The rejection of Russia and the dangerous myth of Western encirclement Twenty five years since the collapse of the USSR, the ‘Great Rejection of Russia’ continues. Ukrainians are merely the latest to seek a better future beyond the Moscow orbit, joining a long line that stretches back to the fall of the Berlin Wall and the mass defection of the Kremlin’s Warsaw Pact vassals. Nor is there any end in sight. Today, the former Soviet republics of Central Asia are increasingly looking to China. Even historical ally Serbia has rejected Russia in favour of the EU, despite having more reason than most to harbor animosity towards the West.

The continuity of this process makes claims of a plot to encircle Russia particularly difficult to justify. One of the most damaging and misleading assumptions colouring international media coverage of Ukraine has been the idea that Western expansionism caused the crisis. In reality, Ukrainians needed no outside encouragement to choose a European future - it was the proverbial no-brainer, just as it had been for Poland, the Baltic States, Hungary and all the rest. The same is true of NATO enlargement. The Kremlin loves to demonize NATO as an aggressive empire bent on the destruction of Russia. In reality, the post-Soviet growth in NATO membership has been driven by the new members themselves. Their main motivation has been a desire to have their rejection of Russia backed up by security guarantees.

Russian displeasure at this process is understandable, but it is disingenuous in the extreme to blame it on nefarious Western scheming. At worst, the West is guilty of opening the door. The real cause behind this rejection is the relative unattractiveness of the Russian model.

In civilizational terms, it is not difficult to see why modern Russia is such a hard sell. Despite vast material wealth and political power, Russia simply lacks the aspirational appeal that won the Cold War argument for the Western world in the first place. Russia’s soft power weakness was particularly prominent in the run up to Ukraine’s Euromaidan Revolution, when the entire Kremlin argument for rejecting the EU revolved around absurd hoJuly-August 2016

mophobia. This ‘Gayropa’ gambit was a more or less open admission that Moscow had given up even trying to make its case.

Instead, Russia has responded to the post-Soviet wave of rejections by becoming a spoiler superpower. Rather than trying to compete in the realm of ideas, Kremlin policy now focuses on support for Far-Right and Far-Left political parties, separatist movements, frozen conflicts and anything else capable of undermining the allure of the liberal democratic consensus.

Both at home and abroad, the key Russian media message is, ‘You think we’re bad? The West is no better.’

Given this lack of a constructive counter-argument, it is no wonder Russia resorts so readily to the use of military force. Some have interpreted Putin’s hybrid war in Ukraine as a sign of renewed Russian strength, but when viewed within the context of the Kremlin’s receding sphere of influence, it looks more like an act of sheer desperation. Waging war on Ukraine has been a geopolitical disaster for the Kremlin. It has turned Russia’s closest natural ally into an implacable enemy while highlighting just how unattractive Russia has become. This is not the kind of strategy usually embraced by upwardly mobile nations.

There is little chance of Russia changing tactics unless it becomes capable of winning friends and attracting allies without the threat of force. Until that happens, the international community should stop trying to appease the Kremlin and should instead brace itself for more military interventions and hybrid wars. Ultimately, the historical rejection of Russia will continue until Russia itself changes, and compromising with the Kremlin will only make the process even more painful.

Peter Dickinson, Business Ukraine magazine 5

A new chapter in

Canada-Ukraine ties

Canadian Ambassador Roman Waschuk on free trade, military training and police reform Summer 2016 will surely go down as one of the busiest periods in the history of the Canadian diplomatic mission to Ukraine. May and June were occupied by preparations for a landmark Canada-Ukraine Business Forum in Toronto, while early July saw the signing of a free trade agreement between the two countries during Canadian Prime Minister Justin Trudeau’s headline-grabbing visit to Kyiv and Lviv.

This recent flurry of activity marks the opening of a new chapter in what has long been a close bilateral relationship. Ties between the two nations are rooted in Canada’s millionplus Ukrainian diaspora and date back to December 1991, when Canada became the first Western country to recognise Ukrainian independence.

FTA gateway to EU and NAFTA markets

Business Ukraine magazine caught up with Canadian Ambassador to Ukraine Roman Waschuk in mid-July as the dust was still settling on the Trudeau visit.

Ambassador Waschuk was understandably encouraged by the success of the visit and the signing of the bilateral free trade agreement (FTA), but he was also keen to emphasize the work that now lies ahead in order to build on this momentum. Trade between the two countries is currently hovering at extremely modest levels – Ukrainian exports to Canada in 2015 totalled just USD 60 million – but Ambassador Waschuk sees the FTA as a potentially transformational trade platform with broad implications for both countries’ bottom lines. “This is about much more than widgets going from country A to country B”, he says. Instead, Waschuk hopes the FTA will invigorate triangular trade, with cooperation between Ukrainian and Canadian companies serving as a gateway to market access throughout North America and the European Union.

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About the interviewee: Roman Waschuk is the Canadian Ambassador to Ukraine. He took up his post in Kyiv in October 2014 Direct bilateral trade is also expected to grow from present lows. There was an unmistakable feel-good factor surrounding the Trudeau visit that cannot be solely attributed

to the rock star appeal of the charismatic Canadian PM. The first cooperation agreements of the new free trade era have already been signed, with a memorandum of understandwww.bunews.com.ua

Canadian Ambassador’s Ukrainian diaspora roots

Ambassador Waschuk is a member of Canada’s large and well-established Ukrainian diaspora community. Born in Toronto in 1962, he is the child of Ukrainian parents who emigrated to Canada in the wake of World War II. He has always been conscious of his Ukrainian roots and was a member of the Ukrainian scouting organisation ‘Plast’ in his youth. This close association with Ukraine has equipped Waschuk with the kind of local knowledge that makes him the envy of many ambassadorial colleagues within the Kyiv diplomatic community, but it also poses ethical challenges. Does he ever feel that he is becoming too emotionally involved? “Very few diplomats have not been emotionally engaged by the events in Ukraine over the past two years,” Waschuk says, before recounting the tale of one seasoned EU member state July - August 2016

ambassador who recently told him that Kyiv had been the most memorable posting of a veteran diplomatic career. “I try to remain conscious of the fact that the cultural baggage I bring to the table can be both an advantage and a liability. I always seek to maintain a certain distance and remain critical.”

In addition to his Ukrainian heritage, Waschuk enjoys additional insight into regional current affairs thanks to his educational background. He studied East European history at the University of Toronto, providing him with the context necessary to make sense of the massive changes across the region since the fall of the Iron Curtain. He believes this historical perspective informs his work in today’s Ukraine and helps shape Canadian support for Ukraine’s ambitious post-Maidan transition agenda. “From the historical point of view, there is a sense of ‘you snooze, you lose.’ You can’t just wait for eternity to do its work.”

the divides in Ukrainian society will inevitably be a key theme over the next decade, but for the time being at least, Ukraine’s top priority remains the strengthening of the country’s defensive capabilities. Since the conflict began in 2014, Canada has been among the leading providers of trainers for the Ukrainian military. The current Canadian military training mission is scheduled to run until March 2017 and is part of what Waschuk terms as ‘an evolving defence relationship’.

He places this support within the broader context of Canada’s national defence priorities and points to the recently confirmed deployment of Canadian troops to Eastern Europe as part of the NATO response to Russian aggression in Ukraine. “Our role in Ukraine

Waschuk’s current role in Kyiv is not his first diplomatic posting to the Ukrainian capital. In the mid-1990s he served as Political Counsellor at the Canadian Embassy in Kyiv. As a regional specialist, he had also been posted to Canada’s Moscow Embassy in the twilight years of the Soviet Union. His current post in Ukraine is his second ambassadorial role. Prior to his October 2014 appointment as Canadian Ambassador to Kyiv, Waschuk had been based in Belgrade as Canadian Ambassador to Serbia, Montenegro and the Republic of Macedonia. This Balkan posting provided Waschuk with an interesting vantage point to view the unfolding events in Ukraine in 2013-14 as the Euromaidan protests gave way to the occupation of Crimea and the Kremlin’s hybrid war in east Ukraine. He recalls how many Serbian commentators echoed Russian narratives and says colleagues in Belgrade commented on the striking similarities between Kremlin media coverage of events in Ukraine and the tone of the early 1990s Serbian media under Slobodan Milosevic at the time of the Balkan Wars.

In addition to boosting bilateral trade and bolstering Ukraine’s military defenses, the Canadian Embassy is also involved in a range of reform-oriented initiatives designed to add meat to the bones of the grassroots changes taking place in the country.

Waschuk singles out the banking sector reforms carried out by the National Bank of Ukraine for particular praise, and also enthusiastically recounts the positive impact of numerous ongoing projects backed by Canada in the agriculture and regional SME sectors. However, pride of place is reserved for the reform of the Ukrainian police service. Canada has been instrumental in this process, working alongside Japanese and US partners to help Ukraine carry out an ambitious and high-visibility overhaul of its law enforcement infrastructure.

Waschuk struggles to contain his amazement at the pace of the process, quipping that the hardest challenge has been keeping up with the sheer speed at which new Patrol Police services have been unveiled across the country. Crucially, he regards the positive public response to Ukraine’s police reforms as evidence of continuing support for the transformation agenda championed by the Euromaidan protests of 2013-14. “Ukrainian society wants tangible change,” he says.

“There is lots of understandable skepticism in today’s Ukrainian society, but when people see change, they embrace it.”

Moscow, Belgrade, Kyiv

An evolving defence relationship

Waschuk says his time in Belgrade gave him valuable insight into the kind of post-conflict processes that could serve as important lessons for Ukraine in the coming years. Healing

canada in ukraine

ing between Ukrainian Railways and Canada’s global rail technology leader Bombardier Transportation on upgrading Ukraine’s locamotive fleet among the most eye-catching.

When asked which other specific sectors are poised to benefit most from the FTA, Waschuk points to Ukrainian processed food exports, value-added metal products and sporting goods like the hockey sticks Ukraine already exports to Canada. He also speaks of the associated ‘halo effect’ – the tendency for free trade deals to raise awareness of opportunities and generate a growth in bilateral trade that goes far beyond the removal of tariff barriers alone. “In our experience, trade tends to rise by 50% to 100% in the years following the signing of a free trade agreement.”

This halo effect may well make itself felt beyond the confines of Canada-Ukraine bilateral trade. There are already mounting indications of growing international investor interest in post-Maidan Ukraine as the hybrid war worst-case scenarios of recent years are downgraded and opportunities finally begin to outweigh risks. Waschuk says the Canadian Embassy has encountered a marked growth in economic inquiries in recent months, and points to the November 2015 Ukrainian market entry of heavyweight Canadian business group Fairfax Financial Holdings as a reflection of the country’s renewed investor appeal. “The post-revolutionary situation has stabilised and there is a realisation that you can now reenter the water profitably,” he says.

should be viewed as an element of the broader Canadian government vision for Euro-Atlantic security. We’re not getting sentimental about any single country.”

Ukrainians still hungry for change

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Toronto-Kyiv Complex: Flagship of Canada-Ukraine cooperation Yuriy Kryvosheya upbeat about growing free trade opportunities for Canada-Ukraine business Kyiv executive Yuriy Kryvosheya is a prominent personality in Ukraine-Canada commercial cooperation and has been involved in many of the most high profile initiatives designed to bring the business communities of both countries closer together. As Managing Partner and President of the Private Joint Stock Company ‘Toronto-Kyiv’, which owns and operates the Toronto-Kyiv Complex, Kryvosheya oversees what is arguably the flagship project of bilateral business ties between Canada and Ukraine.

Strategically located in the heart of Kyiv’s historical & business districts, and directly across the road from the landmark St. Nicholas Catholic Cathedral, the Toronto-Kyiv Complex boasts Class A office premises, retail space, restaurant areas, and Ukraine’s first five-floor underground parking facility. The Complex is the only commercial real estate property in Ukraine that has premises with LEED GOLD Certificate status, and also houses the Holiday Inn Kyiv hotel, managed by InterContinental Hotels Group.

The Toronto-Kyiv Complex business center is home to a range of international corporations and prominent business brands including Mars, Wrigley, Royal Canin, MacPaw and Glencore – all attracted by the Complex’s high-end office premises professionally managed and built according to true International Class A standards. The Complex also offers incredible views of the nearby cathedral and a spectacular courtyard that regularly hosts headliner corporate events like the 2015 Elle Style Awards and Canada Day celebrations.

Prior to going into private business, Kryvosheya studied in America at Boston College’s Carroll School of Management, before returning to Ukraine to take up a position with the International Finance Corporation (IFC) in Kyiv. He credits this IFC role with offering him a ‘tremendous opportunity’ to gain hands-on experience in a range of different sectors of the economy.

In addition to his current role at the Toronto-Kyiv Complex, Kryvosheya is Co-Founding Shareholder and Partner at Yakaboo (www.yakaboo.ua) - one of the largest e-commerce companies in Ukraine. In parallel to his business & entrepreneurial activity, Kryvosheya also serves as a member of the Board of Directors of the Canada Ukraine Chamber of Commerce (CUCC). Business Ukraine magazine sat down with Kryvosheya to discuss the future of Canada-Ukraine business ties, explore the opportunities presented by the recently inked free trade agreement between the two countries, and to ask what it was like meeting Canadian Prime Minister Justin Trudeau.

You played a key role in organizing the recent visit of Canadian Prime Minister Justin Trudeau to Ukraine. What was your experience of interacting with the Canadian delegation?

It was a genuine honor for us to help organize the reception for Canadian Prime Minister Justin Trudeau during the Canadian delegation’s July visit to Ukraine. I have long believed that the importance of Canada’s support for Ukraine cannot be overstated.

Thanks to the success of the June 2016 Canada Ukraine Business Forum in Toronto, and the subsequent concrete progress made during the governmental visit to Ukraine, the relationship between Canada and Ukraine is now moving to another level that will create even greater opportunities.

In addition to signing of the Canada Ukraine Free Trade Agreement during the visit, guests at our reception event also witnessed the signing of a number of additional business projects that pave the way for closer direct partnerships between the Canadian and Ukrainian business communities. None of this would have been possible without strong teamwork, and I am particularly grateful for the opportunity to have worked with the Canadian delegation and everyone else who contributed to the success of the visit. Throughout the preparation period and during the trip itself, we worked as one team and were able to find creative solutions whenever new challenges arose – as they often did! Any successful event depends on strong leadership and the Canadian leader succeeded in impressing everyone in this respect. I had the opportunity to meet Prime Minister Justin Trudeau personally during the welcome reception organized by the Canadian Embassy on 10 July, when I was one of literally hundreds to be introduced to him. When we met again during the St. Sophia reception on the following evening, PM Trudeau greeted me with a friendly, “Nice to see you again.” This demonstrated his attention to detail – an important skill for any leader. This highly professional approach and mastery of detail were also confirmed by numerous other team members who had the opportunity to discuss various aspects of Canada-Ukraine ties with PM Trudeau during his time in Kyiv and Lviv.

The Trudeau visit to Ukraine and the signing of the Canada Ukraine Free Trade Agreement has generated considerable buzz. How can this momentum be maintained?

In addition to the signing to the free trade agreement, the visit of Prime Minister Justin Trudeau also saw the signing of a number of business deals. This helped to build on the success of the Canada Ukraine Business Forum in Toronto, which took place on the eve of the visit to Ukraine. There are also a number of exciting initiatives currently at various stages of implementation, such as the Canada Ukraine Trade Investment Support project (CUTIS). These projects are all integral to the long-term vision of strengthening ties shared by both countries. In order to maintain momentum, it is important for further business cooperation to develop from these solid foundations. As in any business relationship, it takes :

About the interviewee: Yuriy Kryvosheya is President and Managing Partner of PJSC Toronto-Kyiv

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canada in ukraine

July - August 2016

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now do their homework in order to appreciate the opportunities presented by free trade, the CUTIS project, and other associated initiatives. There is much to learn from existing success stories and positive examples already present on the market, like the bilateral cooperation at Bombardier and PJSC Toronto-Kyiv. The Toronto-Kyiv Complex has already hosted a range of business networking events and initiatives designed to help maintain the momentum of bilateral ties and enhance business bridges between our two countries. Ultimately, it is up to the business community to seize the opportunities presented by recent developments and recognize the potential for initiating new cooperation or building on existing collaboration. By doing so, they can contribute to a positive trend that will gain a momentum of its own.

Where do you see the biggest opportunities for the Ukrainian economy from the Canada-Ukraine free trade deal?

I have always believed that Ukraine has huge growth potential in all areas of the country’s economy. The CUFTA now provides a range of additional tools and options to realize this potential.

It is natural to look to sectors that are currently performing particularly strongly such as IT and agriculture, but I think it is a little lazy and shortsighted to focus exclusively on these segments alone. As well as the CUFTA itself, tools such as CUTIS offer the opportunity to both capitalize on existing potential and create new opportunities. This is realistic if businesses are prepared to do their homework.

I am also optimistic that the advent of free trade with Canada will help Ukrainian businesses to grow internally and become more responsible in the way they do business, thus creating more longterm value. For example, the terms of the CUFTA include a chapter on environmentally friendly policy and energy efficiency – a theme that Ukrainian companies desperately need to pay more attention to, and that offers the promise of competitive advantages. This is something I can confirm from my own personal experience. The Toronto-Kyiv Complex is still the only commercial real estate property in Ukraine that has premises with a LEED certificate, while the Holiday Inn Kyiv is part of the Green Engage program initiated by the InterContinental Hotel Group (IHG).

We have experienced increased demand from potential tenants, guests and partners for environmentally friendly and energy efficient solutions. This helps our business to grow in a responsible and reputable manner.

What were the main themes raised by Canadian business community representatives at the Canada Ukraine Business Forum in Toronto in June?

The Canadian business community, just like any other reputable business community, is looking for a stable environment with transparent rules and a level playing field. Although Ukraine is still at the stage of confronting existing challenges and creating an attractive investment climate, my key message is simple: we must act now and not spend our time analyzing and waiting for improvements. There are already numerous positive examples of successful diversified investments in Ukraine from a range of countries. In terms of the Canadian business presence in Ukraine, I would advise anyone to watch the short but informative vidJuly - August 2016

eo produced for the Canada Ukraine Business Forum entitled, ‘Ukraine. Open for Canada.’ This brief video will immediately give you an impression of the scale of investment that has already been possible in the current business climate. Can you imagine the possibilities that will present themselves following the full implementation of free trade and other initiatives?

The interest is certainly there on the Canadian side. During meetings held in Toronto following the Forum, the head of a large financial institution told me that he had recently noticed increased interest in Central and Eastern Europe – including Ukraine - from Canadian and US pension funds. This interest represents a great opportunity for Ukrainian businesses.

canada in ukraine

: two to tango. Businesses and investors from both countries must

What is your advice to Ukrainian companies looking to develop a presence in Canada?

As I have mentioned previously, I strongly suggest companies do their homework, which ranges from learning about all the instruments and programs available, to market analysis and the identification of particularly attractive niches. Canada enjoys a reputation among the leading nations in virtually every credible international business ranking, so it is natural to expect Canadian businesses to seek partnerships with similarly reputable market players. They want partners with a long-term vision and the will to implement transparency and the highest standards of doing business. Anyone looking to build business relationships with Canada should also remember the support offered by the Canada Ukraine Chamber of Commerce and the Trade Mission of the Canadian Embassy in Kyiv.

International investors have a huge range of countries competing for their attention - why should they choose Ukraine?

It is true that today’s international investment market offers a wide range of opportunities across the entire globe. However, despite what we might hear about this or that particular investment opportunity, there is no such thing as an easy deal. Absolutely every investment requires serious work in order to find the right balance and to establish fruitful partnerships. Ukraine currently has all the ingredients for successful international investment.

These ingredients include the current phase of market development, attractive valuations, growing entrepreneurial activity, highly educated and talented population, and advantageous geographical location. These factors make investments potentially attractive, especially if done with the right partners. Ukraine has numerous examples of high-quality business infrastructure already in place and ready to host newcomers to the market.

At the Toronto-Kyiv Complex, we have already introduced a range of firsts for the Ukrainian market including five floors of underground parking and a series of architectural and engineering solutions. The Complex also features the first Holiday Inn hotel to open following the rebranding of the Holiday Inn brand incorporating the latest IHG brand standards. As a result, the Complex serves as an HQ for numerous international companies and venue for all manner of corporate events and fashionable happenings.

If you take all the positive examples and favorable conditions into consideration, I am convinced Ukraine represents a great opportunity for investors to benefit from first mover advantages by entering the market today.

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canada in ukraine

Promoting the new Ukraine among old Canadian friends Ukrainian Ambassador Andriy Shevchenko on diaspora ties, free trade, and shared security concerns “One of my key messages to Canadians is that today’s Ukraine is the eastern frontier of the free world. This creates considerable risks and fantastic opportunities,” explains Ukraine’s Ambassador to Canada Andriy Shevchenko during one of a series of recent telephone interviews with Business Ukraine magazine. ‘Eastern frontier of the free world’ is exactly the kind of attention-grabbing sound bite that comes naturally to Shevchenko, reflecting an earlier career in journalism that was arguably even more successful than his subsequent foray into the rough and tumble of Ukrainian politics.

Still only forty years of age, Shevchenko was already a household name in Ukraine by his mid-twenties thanks to his role as Chief Editor of pioneering independent TV channel 5 Kanal during Ukraine’s Orange Revolution.

Initially best known to the Ukrainian public for sharing the same name as the country’s most celebrated footballer, Shevchenko became a celebrity in his own right when he led the 5 Kanal newsroom as it almost singlehandedly pushed back against the tide of Kremlin-style state censorship during the winter 2004 popular uprising.

In the wake of the Orange Revolution, Shevchenko became one of a number of public figures and media stars to enter the Ukrainian parliament.

He went on to serve three terms as an MP in Yulia Tymoshenko’s party, earning himself considerable kudos as the advocate of human rights and greater government transparency. In the October 2014 parliamentary election, Shevchenko fell victim to Yulia Tymoshenko’s temporary slump in popularity, finding himself too far down the Tymoshenko party list to enter the country’s first post-Maidan parliament. Instead, he was offered his first diplomatic role as Ukrainian Ambassador to Canada, arriving in his post in December 2015.

Shevchenko was an interesting choice for this strategically crucial position. His lack of experience in the diplomatic service is undeniable, but he brings extensive media and political knowhow to the post, along with excellent English-language skills and the kind of unsullied reformist credentials that allow him to serve as a credible representative of the new Ukraine. He claims his time in Ukraine’s parliament is particularly valuable when dealing with Canadian MPs. “I’ve been in their shoes and so I can see things from their perspective.”

Showcasing the unsung achievements of the new Ukraine

Shevchenko says communicating the changes taking place in post-Maidan Ukraine is one of the Embassy’s top priorities – especially when it comes to tackling rampant corruption and creating the kind of business environment capable of enticing greater Canadian investment into Ukraine. Like many Ukrainian reformers, he argues that the country’s reform agenda achievements do not currently receive the attention they deserve. “There are obvious issues with corruption,

but there is also obvious progress,” he says, pointing to the success of the ProZorro electronic public procurement system as an example of what can be accomplished via a combination of political will, civil society participation and international support. Shevchenko believes the recently inked free trade deal between the two countries can play an important role in boosting bilateral trade while also bolstering reform efforts in Ukraine via the adoption of international norms on issues including intellectual property rights. “The challenge now is to build on the existing emotional and historic bonds between Canada and Ukraine to develop a pragmatic and mutually beneficial partnership.”

These historic bonds are rooted in Canada’s large and well-established Ukrainian diaspora, which will begin celebrations in the coming months to mark its 125th anniversary. Shevchenko is full of praise for the role of the diaspora in Canada, but says Canadian support for Ukraine goes far beyond the boundaries of these ancestral ties. “Canada is a society of values with a strong commitment to human dignity. This is why Canada has been so outspoken in its support of Ukraine’s right to define its own destiny.”

Shared interest in countering Russian security threat

Canada and Ukraine also have a common interest in defending international law and the post-WWII security system. Since the outbreak of Russia’s hybrid war in Crimea and eastern Ukraine in 2014, Canadian trainers have played a prominent role in efforts to improve Ukraine’s military capabilities. Meanwhile, Canadian troops will be among those deployed to NATO member states in Eastern Europe in response to the heightened threat posed by Russian aggression in Ukraine. Shevchenko describes Canadian attitudes on defence cooperation as ‘very clear’ and says the two countries share a commitment to countering Russia. “We have a common security interest. We have the same neighbour that does not respect the rules and resorts to the use of force instead. The key security issue for both Ukraine and Canada is the need to make Russia respect the rules.”

As well as bilateral security cooperation at the governmental level, Ukrainian society has also received considerable support from the Canadian diaspora. Shevchenko is full of admiration for the widespread spirit of Ukrainian-Canadian volunteerism he has encountered, and highlights the evolving nature of this support since the Euromaidan Revolution. “As the situation has changed in Ukraine, needs have also changed. In 2014, there was a need for basics like military uniforms and first aid supplies. Today, Ukraine requires help providing psychological care for soldiers coming home from the front. The Canadian diaspora has adjusted to these needs.”

Despite these efforts, Shevchenko says many Ukrainians do not fully appreciate the depth of the Canadian diaspora’s emotional bonds with Ukraine, and admits that some in Ukraine continue to regard the diaspora as a wealthy but distant community. He hopes to be able to combat such misconceptions. “I don’t think many people in Ukraine really understand the scale of the Ukrainian presence in Canada,” he comments. “I have discovered a whole new continent of Ukrainian life.”

About the interviewee: Andriy Shevchenko is the Ukrainian Ambassador to Ukraine

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125 years of the Ukrainian diaspora in Canada Ukrainian Canadians celebrate landmark anniversary while maintaining strong ties to Ukraine The Ukrainian diaspora in Canada is one of the largest and most well established Ukrainian communities in the world, numbering around 1.3 million. This year the Ukrainian Canadian diaspora is celebrating the 125th anniversary of Ukrainian emigration to Canada. The National President of the Ukrainian Canadian Congress, Paul Grod, spoke to Business Ukraine about the upcoming anniversary and reflected on the historical contributions of Ukrainians to the Canadian success story.

How will you celebrate the 125th anniversary of Ukrainian emigration to Canada?

Ukrainian Canadians across Canada will be celebrating this anniversary throughout the year. A very long list of events, exhibits and dedications is available at www.ucc.ca. Our community has been working with our federal, provincial and municipal governments to organise these landmark celebrations. For example, Saskatchewan has designated 2016 the Year of Saskatchewan Ukrainians, while Manitoba has designated 2016 the Year of Manitoba’s Ukrainian-Canadian Cultural Heritage. Alberta declared 2016-2017 the Alberta’s Year of the Ukrainian Canadian. The celebration of the 125th anniversary of Ukrainian immigration to Canada will culminate at the 25th Triennial Congress of Ukrainian Canadians in Regina on 29 September October 2 this year, with a Gala Showcase.

Who do you regard as the most important figure in the Ukrainian Canadian story?

It is impossible to identify any one individual because Ukrainians have had such an important impact on Canadian life and society. A Ukrainian Canadian, Ramon (Ray) Hnatyshyn, served as Head of State. Senator Paul Yuzyk is widely acknowledged as the father of Canada’s multiculturalism policy – which has defined the Canadian cultural landscape for over four decades and is a fundamental part of contemporary Canadian identity.

The current Commander of the Canadian Army, Lt. Gen. Paul Wynnyk, and the Governor of the Bank of Canada Steve Poloz are

(Raynell Andreychuk, David Tkachuk, and Denise Batters), and at least 12 MPs. Other Ukrainian Canadians to have served in government include former Premiers Ed Stelmach (Alberta) and Roy Romanow (Saskatchewan), and countless provincial ministers and mayors. Naturally, we are also very proud of Canada’s Ambassador to Ukraine, Roman Waschuk.

both proud Ukrainian Canadians. The late Justice John Sopinka served on the Supreme Court of Canada, prior to which he represented the Ukrainian Canadian Congress before the Royal Commission on War Criminals. Astronaut Roberta Bondar is a Ukrainian Canadian.

Ukrainian Canadians have made and continue to make immense contributions to all fields and sectors of Canadian life. James Temerty, C.M., Chairman of Northland Power, is one of Canada’s bestknown philanthropists and recognized Canadian business icons. He is also chair of UCC’s Advisory Council and Founder and Chairman of the Ukrainian Jewish Encounter. Artists such as William Kurelek contributed immeasurably to the development of Canadian art.

There are currently two Ukrainian Canadian Cabinet Ministers – Chrystia Freeland and MaryAnn Mihychuk. They are joined by three Senators

How have the historic challenges facing Ukraine over the past two and a half years of revolution and war affected the mood within the Canadian diaspora?

As I travel through Canada, I am continually inspired by the unity and determination in our community to assist the people of Ukraine as they defend their country against Russia’s invasion. The Ukrainian Canadian community has answered the call to help Ukraine, rolled up their sleeves and gotten to work. From the first days of Euromaidan, through Russia’s ongoing war against Ukraine, the Ukrainian Canadian community has been incredibly active in helping our brothers and sisters in Ukraine, both is providing direct humanitarian assistance and advocating to all levels of government that they do the same.

Organisations throughout Canada and individual members of the community are assisting Ukraine in so many ways – organizing humanitarian assistance, help for wounded soldiers, participating in the reform process in Ukraine, advocating to both the Canadian government and to provincial and local governments, to increase their support to Ukraine – to name just a few examples. The UCC is coordinating much of the humanitarian, medical and logistical assistance through the UCC Ukraine Appeal chaired by John Holuk, and the Canada Ukraine Foundation chaired by Victor Hetmanczuk.

As Russia’s war against Ukraine enters its third year, the unity that the Ukrainian Canadian community continues to show is truly inspirational and moving. That resolve was on display during the recent visit to Ukraine of Prime Minister Justin Trudeau, who echoed the strong sentiment of all Canadians that we will stand shoulder to shoulder with the people of Ukraine against Russia’s aggression. For me it has been a true personal honour to serve our community.

About the interviewee: Paul Grod is National President of the Ukrainian Canadian Congress and Vice-President of the Ukrainian World Congress

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Business gateway between

Canada and Ukraine Canada-Ukraine Chamber of Commerce (CUCC) prepares to mark twenty-fifth anniversary The recent Canada Ukraine Business Forum in Toronto was a landmark event in the developing commercial relationship between Ukraine and Canada. The forum was attended by more than 150 Ukrainian companies and 230 Canadian companies along with a host of senior government officials from both sides, making it one of the largest international forums of its kind in Ukrainian history.

Connecting Canada and Ukraine

The forum was organized by Global Affairs of Canada, the Ministry of Economic Development and Trade of Ukraine, the Conference Board of Canada, and the Canada-Ukraine Chamber of Commerce (CUCC). The role of the CUCC was in keeping with its longstanding activities as a gateway for greater Canadian-Ukrainian commercial ties. The CUCC story dates back to the early years of Ukrainian independence, and can even be traced to the twilight years of the Soviet Union. In the late 1980s, Soviet leader Mikhail Gorbachev invited a Canadian delegation to visit what was then Soviet Ukraine as part of his Perestroika initiative to open up the Soviet Union to the outside world. Toronto businessman and community activist Bohdan Onyshchuk, who would go on to become the first President of the CUCC, was part of the Canadian delegation during this ground-breaking 1989 visit. He was accompanied by Canadian government officials and 70 business representatives from a variety of sectors.

As a Soviet republic, Ukraine was not able to independently enter into any bilateral agreements with a foreign state, but the visit concluded with the signing of a cooperation agreement between Soviet Ukraine and the Canadian province of Ontario. This Soviet era agreement was to become the first step towards modern bilateral commercial ties.

Within two years, the Soviet Union had collapsed. Perhaps predictably, Canada was the

first country to recognize Ukrainian independence. Within months, a group of prominent Canadian businessmen with Ukrainian roots had come together to establish an umbrella business organization to help support bilateral ties. In 1992, the CUCC was formally incorporated in Toronto.

The initial membership of the CUCC was around 40 Canadian companies. The chamber’s membership has since expanded to include over 200 companies based in both Canada and Ukraine. However, this growth has been coupled with problematic periods that reflect the challenging and turbulent business climate in post-Soviet Ukraine. By the turn of the millennium, the initial enthusiasm of the early 1990s had become overshadowed by disillusionment over chronic corruption and the lack of a functioning judiciary, with numerous Canadian-owned companies falling victim to so-called raider takeovers. Many chose to exit the market.

A long-term relationship

The 2004 Orange Revolution served to reenergize the Canadian interest in Ukraine,

leading to the return of the CUCC in 2005 under the leadership of new Chamber President Zenon Potoczny. “Our twenty-fifth anniversary is a testament to the lasting relationship between our two nations and the ability to overcome various obstacles. CUCC is the largest trade association for Canadian and Ukrainian business relations and will continute to engage and connect businesses throughout Canada and Ukraine,” says CUCC President Potoczny. “For over 20 years, CUCC has been a vigorous advocate of the business community ensuring that private sector positions and needs are considered during the development of policies that will impact future Canadian business and Canadian-Ukrainian relations. The recently signed Canada Ukraine Free Trade Agreement will create additional jobs for citizens in both countries and lay new foundations for trade, growth, and investment. It also sends a very powerful message to the rest of the world that Ukraine is open for business, and Canada again lends a supportive hand to Ukraine.”

The CUCC Ukrainian office was opened in Kyiv in 2009 by CUCC VP for Ukraine Ro-

About the authors: Zenon Potoczny is the President of the CUCC. Yuriy Kryvosheya is a member of the CUCC Board. Emma Turos is CUCC Managing Director for Ukraine. They can be contacted via: ukraine@cucc.ca or +38-044-4954551 18

www.bunews.com.ua

New era in bilateral trade ties

The activities of the CUCC received a fresh impetus following the Euromaidan Revolution in Ukraine. The CUCC office was actually located close to the epicenter of the protests in downtown Kyiv, providing the CUCC team with an often nerve-wracking close-up view of the violent clashes that rocked the Ukrainian capital during the early weeks of 2014. As the post-Maidan era dawned, the CUCC was involved in developing a new Canadian government-led initiative to boost bilateral trade.

The Canada-Ukraine Trade and Investment

Support Project (CUTIS) is a five-year development assistance project funded by the Government of Canada through Global Affairs Canada, and implemented by the Conference Board of Canada and the CUCC in partnership with the Ministry of Economic Development and Trade of Ukraine. It is scheduled to run until 2021 and will be a key focus for efforts to build on the recent Canada Ukraine Business Forum in Toronto and the subsequent signing of a bilateral free trade agreement during the early July visit to Ukraine of Canadian Prime Minister Justin Trudeau.

The CUTIS project aims to reduce poverty and increase sustainable economic growth in Ukraine through the expansion of Ukrainian exports to Canada and the encouragement of Canadian investment in Ukraine.

In order to maximize the poverty reduction impact of increased trade and investment between Canada and Ukraine, the project will focus on supporting Ukrainian small and medium-sized enterprises (SMEs), including SMEs owned or operated by women.

By the end of 2016, the Conference Board of Canada and project partners will complete analysis of the Canadian market for Ukrainian exporters and define five priority indus-

tries. The next steps will involve engaging Ukrainian producers and offering a range of support including training, certification, partner identification and participation in industry events.

The CUCC sees initiatives like CUTIS as important steps in the process of capitalizing on the strong emotional ties binding Canada and Ukraine in order to develop a pragmatic and mutually beneficial bilateral business relationship. “It is now time to act and to move the relationship forward. Within the framework of the already well-established relationship between Canada and Ukraine, entrepreneurs already have a variety of tools available that eliminate the need ‘to break the ice’ and allow them to jumpstart cross-border business collaboration,” says CUCC Board Member Yuriy Kryvosheya. “By adopting a proactive approach, members of business communities in both countries have the chance to build not merely their own competitive advantage, but to become a source of much needed development impact.

Eventually, successfully realized cross-border projects will create additional jobs, facilitate know-how exchange and plant seeds for further fundamental growth. “

Пропонуємо розмістити інформацію про підприємство, Ваші потреби, пропозиції на інформаційній платформі (виставкових центрах) в Канаді і Україні. Ви отримаєте можливість, не виїжджаючи за межі країни, заявити про свої можливості, асортимент продукції, що виробляється та представити зразки продукції. Товаровиробники Канади і України зможуть представляти свої товари, послуги і здійснити пошук партнерів, а інвестори, в свою чергу, зможуть розмістити на цій платформі свої пропозиції і умови співпраці. Особливо актуальним для Канадських підприємств, при веденні бізнесу в Україні, а для Українських при веденні бізнесу в Канаді, буде супровід і лобіювання інтересів іноземного підприємства, в державних і муніципальних дозвільних службах; при тендерних закупівлях; природні монополії (ел.енергія, газ і т.і.) тощо.

We are glad to offer you to place the information about your company and its needs on the informational space (exhibition centers) in Canada and Ukraine. Without leaving the country, you will be able to show your capabilities, the range of your products or services, and to exhibit samples of your product.

Producers in both Canada and Ukraine will be able to present their products or services and to search for partners; investors, in their turn, will be able to state their proposals and terms of cooperation.

What is particularly relevant for Canadian companies when doing business in Ukraine, and for Ukrainian companies when doing business in Canada, is provided support and lobbying of the interests of foreign enterprises within the state and municipal licensing services, at tender procurements; in sectors of natural monopolies (electric power, gas, etc.), etc.

Офіс в Канаді: 204 MAIN STREET E. NORTH BAY, ONTA­RIO CANADA P1B1B1 Tel. 306-501-8450 Email: pavelko@sstcc.ca http://sstcc.ca

Office in Canada: 204 MAIN STREET E. NORTH BAY, ONTA­RIO CANADA P1B1B1 Tel. 306-501-8450 Email: pavelko@sstcc.ca http://sstcc.ca

July - August 2016

Офіс в Україні: Tel. +38 (066) 288-32-30 Email: los@sstcc.ca http://sstcc.com.ua

canada in ukraine

man Sawycky and CUCC Managing Director for Ukraine Emma Turos. “During the Yanukovych era, interest from the Ukrainian side in closer commercial ties with Canada was modest – especially from state officials.

However, the efforts of individual members of the Canadian and Ukrainian business communities allowed us to develop momentum with a series of events including a successful 2010 event in Edmonton and a 2012 forum in Toronto to mark the CUCC twentieth anniversary,” says Turos.

Office in Ukraine: Tel. +38 (066) 288-32-30 Email: los@sstcc.ca http://sstcc.com.ua

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Free trade conversation is just beginning

Canada Ukraine Free Trade Agreement opens doors but it will not transform trade overnight The recently signed Canada Ukraine Free Trade Agreement (CUFTA) is not a recipe for immediate prosperity, but it does represent a good opportunity to spark mutual interest in building beneficial trade ties between the Ukrainian and Canadian business communities. It will encourage members of both communities to explore opportunities in more detail, creating possibilities and starting new conversations on cooperation.

The Ukrainian League of Industrialists and Entrepreneurs (ULIE) is the largest umbrella business association in Ukraine, uniting a range of business organizations and economic entities across all sectors of the Ukrainian economy since 1992. Our association has always focused on supporting strategic solutions to strengthen Ukraine’s position in an increasingly globalized world. ULIE’s current priorities include support for Euro-integration and legislative reform to bring Ukraine into line with contemporary international business practices. Naturally, we view the CUFTA breakthrough as a significant milestone that opens up new prospects for Ukraine’s economic development.

players in both countries. The key task facing Ukrainian producers today is adapting their products to the requirements and standards of the Canadian market. Once they have a product that meets the regulatory requirements of the Canadian market and is capable of generating Canadian consumer interest, negotiations can begin with potential partners.

We do not have to build the relationship from scratch. Some Ukrainian goods have already established a presence in Canada. ULIE members including Chumak, Rosava and Zlatomed already have a history of exporting to the Canadian market. Ukrainian sunflower oil is also a popular item in Walmart supermarkets in both Canada and the US. These successful relationships demonstrate the possibilities for Ukrainian producers able to meet the quality and legislative standards required to enter the Canadian market. Nevertheless, there is huge room for growth. Ukrainian exports to Canada in 2015 stood at minimal levels. Diligence and professionalism are required to improve this situation and increase volumes.

Ukrainian producers need to appreciate that CUFTA is not a magic pill with immediate effects. We are not about to witness sudden sharp increases in exports. Current low levels of bilateral trade are not only the result of previously existing regulatory hurdles. The present modest trade turnover reflects a business environment where neither country previously viewed the other as a strategically important market. Despite the strong ancestral bond connecting Ukraine and Canada, there had been little effort to prioritize greater trade. In this context, the advent of the CUFTA is a prominent signal of the newfound political will to build business bridges. It has the potential to focus attention on bilateral trade and encourage Canadian companies to consider investing in Ukraine.

The most direct advantage of the free trade deal is obviously the removal of import tariffs. Approximately 98% of regulatory obstacles and existing tariffs will be cancelled as the terms of CUFTA are implemented, enabling producers to become far more competitive while creating attractive opportunities for

As we look at the potential advantages of CUFTA, it is important not to underestimate the significant role it can play in fostering increased collaboration between Ukrainian and Canadian industrial associations. ULIE has already signed a cooperation agreement with Canadian Manufacturers and Exporters (CME) – Canada’s largest trade and industry association. We held our first joint event in Toronto on 21 July, featuring the participation of member companies from both associations. This kind of cooperation helps to build direct contacts between members of the two business communities and reflects the new momentum in Canada-Ukraine business ties as a direct result of the free trade agreement.

CUFTA will also help Ukraine’s small and medium-sized enterprises (SMEs) to meet Canadian standards and increase their access to both Canadian and global markets. By creating trade and investment opportunities for more Ukrainian SMEs, CUFTA contributes to increasing their growth and viability, which in turn generates sustainable economic growth for the entire Ukrainian economy. In order to support this process, ULIE has established relations with the Canadian Independent Business Association. This is another example of how CUFTA is succeeding in starting conversations within the business community and opening doors for greater bilateral cooperation.

As person-to-person and association-to-association links continue to grow, new synergies will arise and partnerships will inevitably develop. Given the favourable climate created by the terms of the free trade agreement, one area of particular interest is the development of industrial parks in Ukraine bringing together the respective cost efficiency, geographical and technological advantages that both countries bring to the table. Ukraine’s location makes it the ideal candidate to become a logistical hub on the frontiers of the European Union, the Middle East and Asia. Canadian companies, with their global reach, strong reputation and cutting-edge business practices, would be ideal partners in a venture of this nature. It is up to Ukraine to demonstrate that it can be a reliable and transparent partner in such a long-term undertaking.

The conversation has begun – we must make sure it does not fizzle out.

Building on sound but modest foundations

Mutually beneficial commercial cooperation

There is much more to CUFTA than simply the removal of trade barriers and tariffs. The agreement contains clauses that will contribute to greater industrial cooperation in areas such metallurgy, chemical production, oil and gas processing, and aircraft engineering. This is a particularly promising avenue for potential cooperation, opening the door for the mutually beneficial marriage of high-tech Canadian expertize and the cost-efficient production capacity of Ukrainian enterprises. By pooling the technological and production advantages offered by both countries, it should prove possible to produce competitive commodities for sale on global markets.

Bringing business communities together

About the author: Denys Krasnikov is the Vice President of the Ukrainian League of Industrialists and Entrepreneurs (ULIE) and serves as Coordinator of ULIE’s Export Promotion Centre

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Miratech brings innovative Managed Competence Center model to Canadian IT market Managed IT services provider Miratech showcased its Managed Competence Center TM (MCC) model at the recent Canada Ukraine Business Forum in Toronto, as the company continues its expansion into North American markets. In his “Disrupting Quadrant 4” presentation, Miratech Director Stewart Christ explained to audiences in Toronto how the company is disrupting conventional approaches to IT outsourcing by offering highly strategic, complex services resulting in a range of advantages including the development of IT transformation roadmaps, enhanced intellectual property valuation, and comprehensive product lifecycle management.

Canadian healthcare software provider Nightingale has already adopted Miratech’s MCC model. In early 2015, Toronto-based Nightingale faced serious challenges involving a $15 million, threeyear investment that had fallen behind

schedule. Miratech was able to identify the origin of the problem and proposed a pioneering, long-term solution to help get the project back on schedule.

The Miratech technology team initially took on all engineering, maintenance, and support functions. In June 2015, Miratech also took over management of Nightingale’s entire engineering organization - including oversight of all product development - using the MCC framework. This allowed Miratech to work directly with Nightingale’s product organization to set up a suitable governance model. Based on this success Nightingale took the unprecedented step of handing over responsibility for the management of its core R&D operations. “It was a really unprecedented initiative,” said Miratech CEO Valeriy Kutsyy. “Not many companies are revolutionary enough to terminate their engineering management and operations. It’s not the typical practice

for a software engineering company.”

Cooperation with Miratech introduced greater predictability to the Nightingale product development schedule, while improving software quality and performance.

Building on the success of its Nightingale transformation, Miratech is now providing similar strategic, complex, high-value services to other clients.

Kutsyy believes this is an indication of where the broader outsourcing market is heading. “It’s a new trend to outsource both high-complexity and high strategically important processes,” the Miratech CEO commented. “We will continue to push this frontier.”

Canadian pharmaceutical company in Ukraine since 1991 Pharmascience was among the first international companies to arrive in independent Ukraine Founded in 1983, Pharmascience Inc. is a fullservice privately owned pharmaceutical company with strong roots in Canada and a growing global reach with product distribution in over 60 countries including Ukraine. Ranked forty-seventh among Canada’s top 100 R&D investors with USD 50 million invested annually, Pharmascience Inc. is the third largest Canadian generic pharmaceutical company.

Pharmascience Inc. is a leading manufacturer and marketer of prescription products including generic, over-the-counter, and behind-thecounter products as well as FDA approved Canadian-made injectables.

Pharmascience established its first presence in Ukraine in 1991 as part of its strategic international expansion. Business Ukraine magazine spoke to Dr. Paul Melekhov, Pharmascience Vice President, Eastern Europe, about the company’s experience of working in the challenging and rapidly developing Ukrainian pharmaceuticals market over the past quarter of a century.

You have been active in the Ukrainian pharmaceutical market since 1991. What were the most striking developments in the sector over the past quarter century?

After Ukraine obtained its independence in 1991, the country moved from a planned economy to a market economy and with this transition came growth in the pharmaceutical market. Year after year, Ukrainians gained increased access to high-quality medicines as well as modern equipment and supplies. It was a turning point for the local pharmaceutical industry, which began to attract a number of pharmaceutical companies from around the globe. Recognising this opportunity, we are proud that Pharmascience was the first Canadian pharmaceutical company to do business in Ukraine and among the first worldwide.

Pharmascience was one of the first International companies to enter the Ukrainian market following independence. How did you arrive at the decision to begin operations in Ukraine?

The parents of our company founder, Morris Goodman, immigrated to Canada from Ukraine at the beginning of the last century. Not surprisingly, it was Mr. Goodman’s personal initiative that our company’s first international expan22

About the interviewee: Dr. Paul Melekhov is Vice President for Eastern Europe at Pharmascience sion should occur in Ukraine. Looking back at pre-independence history, we know that Ukraine was widely viewed as a “breadbasket” for pharmaceutical products within the former USSR. The raw materials for these products

were generally manufactured in the other parts of the USSR, mostly in Russia, while Ukraine was the place where most of the finished products were produced. As a consequence of the dissolution of the USSR, the Ukrainian pharmawww.bunews.com.ua

You currently import pharmaceutical products produced in Canada and do secondary packaging in Lithuania. What factors could persuade you to consider switching to local Ukrainian production?

Our decision to perform secondary packaging of some of our products in Lithuania and then to export into Ukraine and elsewhere in Eastern Europe was something we did not take lightly.

Our decision was heavily based on the business environment in Ukraine at that time. Returning production, including the full production cycle, to Ukraine will depend on the successful implementation of long-awaited promises of reform. We are encouraged to see that some of these reforms have already started and we fully support this process. We are hopeful that additional reforms will soon follow and create the right business environment for us to consider resuming local production.

Which of your products enjoy the highest demand on the Ukrainian market, and how has

demand for your products evolved over the past 25 years?

With each passing year, Pharmascience products become increasingly popular among both doctors and patients in Ukraine. The most commonly used products are Pharmacitron (cold and flu remedy), probiotic yogurt capsules, Dentol (teething pain gel), Ugresol (anti-acne lotion), motion sickness tablets, as well as the Happy-Baby pediatric line. In addition, Pharmascience supplies cancer treatment medications, as well as medicines for psychiatric, neurologic, gastroenterologic and many other disorders.

What impact has the devaluation of the hryvnia had on your business?

The devaluation of the hryvnia has had a strong impact on exports to Ukraine. Due to the current political and economic situation, it has become increasingly difficult for the general population of Ukraine to afford the high-quality medications and treatments they require. We have seen similar situations of economic crisis over the past 25 years of our activities in Ukraine, but we anticipate an improvement in the coming two to three years.

Many of your staff has been with Pharmascience for over 20 years. How important is this employee loyalty for your business model?

Our team in Ukraine consists of approximately 100 industry professionals including pharmacists, medical doctors, nurses, economists and people with a diverse range of educational backgrounds. They are active in their roles in Kyiv and in all the major cities and provinces of Ukraine. Many of them have been part of the Pharmascience family for 10-15 years a few of them have been with the company for more than 20 years. Pharmascience is an important chapter of their lives and we are very proud of our employees’ loyalty to our organisation. Our employees are inspired by our creativity, innovation and by our flexibility and dedication to our customers. They are proud of the quality of our products and see how highly regarded we are among patients and health care practitioners.

Until the market instability of the past two years, Pharmascience had experienced consistent growth in Ukraine for two decades.

How do you see the pharmaceutical market developing over the next few years?

In my opinion, the situation may begin to improve within the next 10-12 months. We are already seeing initial signs of stabilisation. I anticipate that in two to three years from now, if certain conditions materialise, the pharmaceutical market may bounce back to its previous state. For Pharmascience, Ukraine plays an important role in our diversified international strategy. Our CEO, Dr. David Goodman, is very involved with our activities in Ukraine and visits the country almost every year, further advancing the development of our business. A strong domestic Ukrainian market will allow us to invest more into our presence here and our export activites to neighbouring countries.

The health industry is often cited as one of the most corrupt in Ukraine. Do you see any progress in efforts to reform the industry and reduce corruption?

As per Transparency International, Ukraine continues to face challenges from corruption.

We fully support the government’s efforts to implement the necessary reforms that will ultimately benefit the Ukrainian population and provide them with better access to medication.

canada in ukraine

ceutical industry was cut off from its traditional supplies of raw materials. Seizing on this opportunity, Pharmascience expanded in Ukraine with the goal of locally producing much-needed medication using high-quality Canadian standard raw materials. This marked the first successful project of Pharmascience in Eastern Europe. Our products were in high demand not only in Ukraine, but in the neighboring countries as well. We began exporting our products to Russia, Belarus and Moldova. By the end of 1995, we were manufacturing almost 10 different pharmaceutical products in Ukraine of high Canadian quality and at very competitive prices. Thanks to growing and profitable operations, Pharmascience’s first Eastern European office was established in Kyiv in 1994, thus creating Pharmascience Ukraine Inc. As the business environment in Ukraine evolved, we gradually switched from manufacturing in Ukraine to exporting products manufactured at our Montreal plant direct to Eastern Europe.

Your imports to Ukraine already represent a significant portion of Canada’s total trade with the country. Do you anticipate any significant developments as a result of the recently signed free trade agreement?

The Free Trade Agreement between Canada and Ukraine is an opportunity to bolster both our economies. While we do not currently anticipate that this agreement will significantly impact the pharmaceutical industry, we will wait to see how things unfold.

“After Ukraine obtained its independence in 1991, the country moved

from a planned economy to a market economy and with this transition came growth in the pharmaceutical market. We are proud that Pharmascience was the first Canadian pharmaceutical company to do business in Ukraine and among the first worldwide.”

July - August 2016

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Canadian giant backs

Ukrainian insurance group 2015 Fairfax acquisition of Colonnade represents vote of confidence in Ukraine market The November 2015 acquisition of Ukrainian insurance industry veteran Colonnade by Canada’s Fairfax Financial Holdings Limited was widely interpreted as a signal to the wider international investment community that Ukraine was open for business once more after a rocky few years.

Colonnade was the first international player on the Ukrainian insurance market, having previously operated since 1998 under the QBE brand. The 100% acquisition by Fairfax has allowed one of Canada’s largest business groups to consolidate its insurance market position in the Eastern Europe region, while also encouraging other strategic investors to explore market entry opportunities in post-Maidan Ukraine.

Ukraine’s corporate insurance pioneer

Colonnade Ukraine General Manager Svyatoslav Yaroshevych told Business Ukraine magazine that the 2015 acquisition would allow his team to continue building on the foundations first laid in the late 1990s. “When we arrived on the market, it was the first time a genuine international corporate business model had been incorporated into the young Ukrainian insurance market,” he recalls. The result was a sustained period of year-on-year profitability stretching from 1998 right up until the chronic market volatility of the past two years.

Colonnade Ukraine currently employs 31 staff – many of whom have over a decade of experience in the Ukrainian insurance market. As representatives of the country’s first international insurance provider, they have been intimately involved in the Ukrainian insurance industry’s evolution throughout the past 20 years of booms, busts, recessions and revolutions.

“The Ukrainian insurance market developed in a similar way to other markets in the post-Soviet space, with a former state monopoly facing increasing competition from private sector companies,” explains Yaroshevych.

The mid 2000s saw the biggest expansion of the Ukrainian insurance market, with a number of multinational corporations launching local subsidiaries as the Ukrainian banking sector experienced dramatic growth.

Inevitably, this close relationship with the banking sector left many of these new market entrants dangerously exposed at the time of the 2008 Credit Crunch, but Yaroshevych says the turbulence of 2008 actually served to vindicate his company’s more conservative approach. “We had historically always been a commercial niche insurer. This allowed us to avoid complications. Our conservative investment policy actually strengthened our financial position.”

Adjusting to new challenges

In more recent times, the Russian hybrid war in east Ukraine and the occupation of Crimea have served to undermine the attractiveness of the Ukrainian economy as a whole and the domestic insurance market in particular. This has meant the further revision of business models in order to take the new realities into account. “By adjusting to specific territorial restrictions and sanctions policies, we’ve been able to make sure the same high-quality insurance and reinsurance products are again available on 24

About the interviewee: Svyatoslav Yaroshevych is General Manager of Colonnade Ukraine the Ukrainian market,” says Yaroshevych. “Our succesful example demonstrates that life goes on and doing profitable business in Ukraine is still very much possible.”

This confidence in the long-term attractiveness of the Ukrainian market is clearly shared by Canada’s multi-billion dollar Fairfax holding company, which opted to add Colonnade to its regional insurance industry presence at a time when many other major international investment groups continued to adopt a ‘wait and see’ approach to the Ukrainian market. The acquisition of Colonnade was finalised in November 2015, but negotiations over the deal actually date back to the early months of the year – a time when hostilities in the east Ukrainian conflict zone were close to peak levels.

Yaroshevych describes Canada as ‘probably Ukraine’s dearest friend on the international stage’ and singles out the Canadian Embassy in Kyiv for its support in helping to facilitate the Fairfax acquisition. “We really appreciate the work of the Canadian Embassy in helping to create a favourable climate for international investment, and particularly the roles played by Ambassador Roman Waschuk and Trade Commissioner Clint Martin.” www.bunews.com.ua

canada in ukraine

Transforming Ukraine’s brain drain into brain gain Returning IT entrepreneurs can help Ukraine to upgrade from breadbasket to brainbasket In February 1992 my former employer, Digital Equipment of Canada, moved me to Kyiv to develop its IT business from scratch. At the time, DEC was the No. 2 global IT company. Prior to my arrival, the transfer of sophisticated technology was prohibited due to strict Cold War export restrictions. Regulations were relaxed after the Soviet Union collapsed. Even then, in 1991, everyone talked about Ukraine’s IT potential. Twenty-five years have passed and Ukraine’s economy continues to struggle along, taking several steps forward then several steps back.

Despite this, Canada has remained a fervent supporter of Ukraine’s economic, social, and political transformation. Support is partially based on Canada’s strong Ukrainian diaspora, but also because Canada can serve as a good example. With both countries strong in agriculture and technology while bordering a big, influential neighbour, Canada and Ukraine have shared attributes of multiculturalism, diversity, and technology innovation.

As a show of this support, the Canada Ukraine Business Forum took place in June in Toronto. The objective was to increase trade and investment between Canada and Ukraine. Three weeks after the forum, Canadian Prime Minister Justin Trudeau arrived in Kyiv. While in Ukraine, he and Canadian Minister of Trade and Development Chrystia Freeland signed the Canada Ukraine Free Trade Agreement (CUFTA), eliminating about 98% of all duties. Promising sectors for trade include aerospace, transportation, energy, agro-tech, defence and security, and information technology. All have the potential to create win-win opportunities for both countries.

As a good example, one of Canada’s largest retailers has contracted more than 700 Ukrainian software engineers to help them develop leading edge IT solutions to maintain an advantage against global technology giants such as Amazon and Ebay. CUFTA will make more opportunities like this possible.

Ukraine’s bountiful brainbasket

One of the most successful panels at the Toronto business forum was ‘The New Ukraine - an Emerging Technology Nation’, where the chasm between Canada and Ukraine’s high-tech ecosystems was evident. The key to Ukraine’s growth in ICT is investment. The problem is not a lack of private capital availability. According to the 2016 Preqin Global Private Equity & Venture Capital Report, global uncalled capital commitments, known as dry powder, stands at a record USD 4.2 trillion.

According to the Ukrainian Ministry of Economic Development and Trade, Ukraine is ranked the fourth most educated nation in the world, with over 99.7% literacy. Ukraine produces more than 130,000 engineers and about 16,000 IT graduates each year, making it the No. 1 engineering force in CEE. Ukraine is in the top three by number of certified IT professionals globally.

Indeed, Ukraine is no longer just the breadbasket of Europe, it is evolving into a brainbasket for global IT.

Ukrainian IT sector can learn from Canada Despite its strengths, Ukraine lags significantly in attracting venture capital investment. By way of comparison, Canada attracted USD 2.3 billion in venture capital in 2015, while Ukraine attracted just USD 132 million. Nevertheless, IT outsourcing in Ukraine has grown twenty-fold over the last decade, reaching USD 2.5 billion in 2015. The industry is expected to grow to USD 21 billion by 2021.

A recent article in Tech Crunch states that Toronto can become one of the biggest hubs for technology start-ups in North America over the next fiveten years. Both the Canadian federal and Ontario’s provincial governments offer strong support. Federal tax incentives to conduct R&D and economic development agencies such as FedDev Ontario help create, retain and grow businesses while cultivating partnerships. Furthermore, International Science and Tech Partnerships are supported so small companies with R&D programmes can receive financial support to partner with foreign researchers. Ukraine happens to have a good supply.

If we want the brainbasket to grow by harvesting its technology potential, similar programmes should be implemented by the Ukrainian government. Best practices from Canada and other innovation centres such as Israel and Silicon Valley should be adapted to the Ukrainian reality.

There is no way to recreate a Silicon Valley in Ukraine and that temptation should be resisted. Building a technopark (i.e. Skolkovo, Bionic Hills etc.) as a real estate project is not the way to go. The government should help create the conditions for entrepreneurship and innovation to thrive, or at least get out of the way.

Ukraine needs return of émigré entrepreneurs

Since independence, Ukraine has suffered from a shrinking population and brain drain. Thousands of young people have left the country - many from the tech sector. They have built careers in technology centres such as Silicon Valley, Tel Aviv and Toronto. They have gained valuable education and skills that are very much needed in Ukraine. A colleague, Stas Khirman, himself born in Kyiv, is managing partner at TEC Ventures and Co-Chair of the influential Silicon Valley Open Door Conference. He has researched that a minimum of 5% of Palo Alto residents, the heart of Silicon Valley, are Russianspeaking - mainly immigrants from the former Soviet Union. Accomplished entrepreneurs like Jan Koum and Max Levchin, both born in Ukraine, have achieved their success outside Ukraine. They would make wonderful mentors. The tipping point will come when those who left return to Ukraine to build their careers and companies, as many entrepreneurs from India and China have done after achieving success abroad.

Despite challenges, the Ukrainian tech sector has shown that it will continue to grow and prosper. If coupled with a well-defined strategy and best practices from global innovation hubs, and combined with stubborn Ukrainian creativity, the tech sector can play a more important role in Ukraine’s transformation than many realize. Ukraine has the ingredients to be the world’s breadbasket and brainbasket. It just needs the right recipe. Every Canadian knows this.

About the author: Bohdan Kupych (bohdan.kupych@kmcore.com) is Vice President of KM Core and Managing Partner of Borsch Ventures, a technology holding company based in Kyiv with a portfolio of operating and early stage technology companies

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ROSTYSLAV KISIL: HOW TO BUILD A BRIDGE TO UKRAINE People all over the world face multiple challenges in their lives. I have my personal challenges: space and time.

When I talk about space, I am not referring to physical or geographical distances: humans have learned to overcome the obstacles of distance with ships, cars, aircraft and even spacecraft.

The space I am referring to is the environment we are born in. Once you are born, you have no time to grasp its nature and transcend it in search of new achievements. Those who do and achieve success are recognized as geniuses or leaders in their field.

At first glance, it would seem that time, at least as a philosophical concept, cannot be mastered by people. However, time can be used to our advantage to overcome both present and future challenges. As head of MEEST GROUP, space and time have become my partners. They have taught me to transform obstacles into opportunities for growth. I would like to share my experience.

The roots of MEEST GROUP lie in 1988 - the year when a Soviet-era engineer from western Ukraine went to visit his uncle in Canada. This visit turned my world upside down: I saw incredible opportunities and became obsessed by the idea of seizing them. I successfully launched a reliable system for sending packages overseas and a system for money transfers. At that time, the Ukrainian diaspora in Canada and the US was striving to help their fellow countrymen in Ukraine. Motivated by the natural human desire to get closer to one another and take care of family, we overcame the obstacles of distance by building bridges between continents.

Our 28-year experience helps us overcome the relentlessness of time, as every penny earned has been invested in Ukraine. Following the foundation of JV ROSAN in 1992, we began to expand in Ukraine. The list of our current businesses is amazing: ROSAN International Postal Services, Trade House Meest Express National Postal/Logistics, Meest-Tour Tourism Travel Agency, ROSAN-IT Unique Software Developer.

Today, MEEST GROUP has offices all over the world. Meest Express alone processes up to half a million deliveries every month and has more than 3,500 employees and 1,500 trucks to deliver packages to more than 30,000 clients in Ukraine. We are the top player in the “door-to-door” delivery market in Ukraine, including delivery of packages from overseas.

MEEST GROUP is also a school for training professionals. We have trained a generation of top managers, providing them with growth opportunities. It is enough to look at the geographic range in which they operate, covering Ukraine and Canada, USA, Australia, Germany, Poland, Italy, Spain, Greece and Portugal. Our employees are experts in a variety of fields, ranging from export/import and postal operations, to logistics support for cross-border online sales. Market players like Rozetka, ModnaKasta, LaModa, Stylepit, OTTO, BonPrix, and METRO count on us to deliver to their clients.

We monitor customer opinion continuously. Customers are the initial links in the chain of our success. The criticism and advice given by students, seniors, computer programmers, and housewives is priceless. Unlike billionaires, they don’t tell you what other people need. They tell you what they want and what they are willing to pay for.

They are the real co-creators of MEEST GROUP. All people have needs. Ukrainians are no exception. We view any given economic situation as an opportunity for maneuvering and new opportunities.

Even a downturn or flat growth in one industry can be offset by a breakthrough in another. Ukrainians will overcome the current challenges and return to stable growth. Simply being active in such markets is a dream for foreign investors, online marketplace managers, or product manufacturers, who are looking for a country of educated people who know how to work.

We continuously develop our network of pick-up and delivery points jointly with Ukrainian financial institutions. Our mini branch offices are opening in the most convenient locations for consumers. Sending or receiving packages from relatives is becoming routine for Ukrainians. They can reliably track their packages online and make payments to couriers with banking cards.

MEEST GROUP believes in corporate responsibility and supports those who may stumble when climbing their ladder of life. The corporation is involved in The Bridge of Hope Charity Foundation, and it cooperates with the Sisters Servants to benefit orphans and the poor. Meest Express delivers packages for orphan children free of charge.

MEEST works with the Ukrainian diaspora maintaining the continuity of their cultural ties with Ukraine. The corporation supports Ukrainian sports teams, including the ‘Halychanka’ ladies’ handball club, ’Karpaty’ soccer team, Ukrainian Olympic champions, and individual athletes.

In this way, a diverse group of people has been able to overcome the obstacles of time and space to help others via a bridge named MEEST GROUP. As you take your first steps on this bridge to Ukraine, you will soon realize that it is a reliable gateway to success.

canada in ukraine

Ukrainian exporters can build on free trade foundations New bilateral trade deal opens up one of world’s most sophisticated markets for Ukrainian exports Despite being separated by 7000km of land and sea, the historical and social ties between Ukraine and Canada should not be underestimated. The recent signing of the Canada Ukraine Free Trade Agreement (CUFTA) marks the beginning of a new chapter in these traditionally warm bilateral relations. Is the optimism generated by the free trade deal justified? The jury is still out on the potential impact of the CUFTA on the Ukrainian economy, but there is reason to believe it represents an important opportunity for Ukrainian exporters if fully exploited.

Fair terms for free trade?

In contrast to the general mood of self-congratulatory backslapping in the diplomatic arena, some economic analysts have accused Ukraine of overstating the importance of the CUFTA. It is certainly true that the two signatory countries are something of a mismatch. Even at the current low levels of bilateral trade, the difference in volumes flowing in each direction is striking. Last year, Canada exported just over USD 200 million in goods and services to Ukraine – mostly chemical production, processed minerals and both heavy and light machinery. Ukrainian exports over the same period hovered at around USD 30 million, predominantly commodities and metal products. Within the context of Canada’s estimated annual USD 420 billion spend on foreign imports, this is barely a drop in the proverbial ocean. However, it does leave considerable room for growth. In other words, the only way is up – and the CUFTA creates a platform for potentially rapid expansion in trade.

The CUFTA sets out a number of clear and precise terms designed to improve the current imbalance in bilateral trade, but certain barriers will remain.

Ukrainian industrial goods will now be subject to zero quotas, but a number of agricultural exports including basics like dairy products and grain crops will continue to be subject to restrictions based on strict intra-Canadian domestic regulations. Canadian exporters will enjoy zero quotas on textiles, steel and iron products, machinery and electrical equipment. There will also be a stepby–step cancellation of duties and quotas on heavy machinery and aerospace goods (three-year transitional period), radio and electric goods (five-year transitional period), and automobiles and agricultural vehicles (seven-year transitional period). Other eye-catching elements of the CUFTA include the simplification of e-commerce – an era where Ukraine has huge growth potential and a strong competitive edge given the country’s highly skilled workforce and low labour costs.

Canada opens up domestic markets

The presence of numerous exemptions in key areas such as agricultural exports has inevitably sparked a debate over which side has secured the more advantageous terms, with some in Kyiv arguing that Ukraine has provided considerable strategic access in return for relatively limited benefits. This nitpicking is understandable but it fails to take

the wider picture into account. As soon as the CUFTA enters into force in early autumn, Canada will immediately open up around 98% of its domestic market to Ukrainian exporters. Coupled with the cancellation of around 99% of import duties by the Canadian side, this is a more than generous offer.

At the same time, the Canadian exemptions are both prudent and consistent.

Numerous key food categories including dairy products, eggs and poultry are fully exempted from the Canadian side of the agreement as they are regulated by domestic Canadian rules and not subject to supranational review. This is not an issue of particular discrimination against Ukrainian producers – the recently concluded free trade agreement between Canada and the European Union also contains the same restrictions.

Complying with NAFTA regulations

Much has been made about the potential for the CUFTA to serve as a platform for Ukrainian exports to enter the wider NAFTA market. This is indeed an attractive proposition, but it is also worth noting that NAFTA regulations regarding labour law and ecological policy involve strict dispute resolution and financial sanctions. It is not clear if Ukrainian producers will be able to meet these standards, raising the issue of whether it might have been wiser to insist on gentler regulations along the lines of the principles underpinning Ukraine’s EU Association Agreement.

It is also worth noticing that on 18 May 2016, Ukraine officially completed the country’s long-term quest to join the WTO’s Agreement on Government Procurement (GPA). As Canada is also a party to the GPA and one of the key principles of the agreement is free access to the markets of fellow participants, Ukrainian enterprises can now freely participate in Canadian public procurements and vice versa. This could prove attractive to both countries – especially given the increased public procurement transparency in Ukraine thanks to the implementation of the ProZorro electronic procurement system.

First fruits of CUFTA

The consequences of these moves to liberalise bilateral trade are already being felt. Canada’s Esterline CMC Electronics has concluded a contract with Ukrainian aerospace giant Antonov to supply avionics. Meanwhile, leading Canadian manufacturers Bombardier Transportation and Pratt & Whitney Canada have signed memorandums on cooperation with Ukrainian Railways (Ukrzaliznytsya) and Antonov respectively. Bombardier will develop plans with Ukrainian partners to produce electric locomotives, while Pratt & Whitney aim to supply engines for Antonov’s An-132 planes.

These steps represent the initial impact of the improved legislative base for bilateral cooperation provided by the CUFTA. They are the first fruits of a new chapter in economic relations – Ukrainian exporters must now examine the opportunities for further growth and Canadian market entry.

About the authors: Anton Molchanov is a senior associate at Arzinger law firm. Currently based at the South Ukraine office of the firm in Odesa, Anton’s main areas of expertise are commercial law and dispute resolution, international trade and infrastructure.

Andriy Selyutin is a partner at Arzinger law firm. Andriy heads the South Ukraine office of the firm in Odesa. He specialises in maritime law, infrastructure and international trade, commercial law and contracts, as well as corporate structuring and tax advisory.

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Canadian military trainers in Ukraine Canadian Armed Forces helps Ukrainian counterparts adapt to NATO standards ence in Afghanistan. This is invaluable and gives them the credibility and the confidence required to take on this mission. The biggest difference remains the fact that many UAF soldiers we have trained are experienced, professional soldiers. They are determined, patriotic, proud, and they are eager to share information and to learn new methods. The contrast is obvious. In Afghanistan the trainees had no experience and our trainers needed to start with the basics. In Ukraine we need consider the current knowledge and experience of the battalion we train and adapt our training accordingly. This difference makes the training interesting because we need to tailor it to suit specific needs. Our instructors can also rely on the experienced Ukrainian soldiers to help them identify areas where our contribution can be the most effective.

About the interviewee: Lieutenant-colonel Tim Arsenault is the Commander of Canada’s Joint Task Force – Ukraine Canada has been at the forefront of international efforts to boost Ukraine’s military capabilities in response to the Russian-led conflict in the east of the country. Since autumn 2015, a team of Canadian military trainers has been active in Ukraine sharing crucial skills and aiding in the process of adapting to NATO standards. Business Ukraine magazine spoke to the Commander of Canada’s Joint Task Force – Ukraine, Lieutenant-colonel Tim Arsenault, about the goals of the training programme and the experience of interacting with Ukrainian troops fresh from the front lines of the Kremlin’s hybrid war.

What are the key focuses of the Canadian military training programme in Ukraine?

Operation UNIFIER is the military contribution to the Canadian government’s overall support to Ukraine. The Canadian military has therefore put together a highly skilled group of soldiers to address specific issues identified by the Ukrainian military. The goal of the trainers is to help develop and enhance the capacities of the Ukrainian Armed Forces (UAF) in various areas such as Small Team Training, Counter-Improvised Explosive Device capabilities, Military Police skills, Medical training (combat first aid and instructor courses) and Logistics systems modernization. The task force is comprised of approximately 200 Canadian Armed Forces personnel and the current rotation is mainly from the 2nd Canadian Division. Most of our group will have spent 7 months in Ukraine.

How does the Ukraine training experience compare to other Canadian military training experiences?

Many Canadian soldiers present on our current rotation benefit from experi30

Canada has one of the world’s largest Ukrainian diasporas. What impact has ancestral links between the two countries had on the training mission?

Coming to Ukraine I was aware that a large portion of Canada was closely watching and supporting this mission. After many months in Ukraine, I note that we share common values with our Ukrainian partners and that we are very similar. This has helped us develop strong friendships with them. As far as the training mission goes, knowing that a significant part of the Canadian population is interested in what we do certainly serves as an extra motivation.

Many of the NATO member country military officials involved in training Ukrainian forces have commented on how much they can learn from Ukraine’s unique experience of Russian hybrid warfare. Have Canadian trainers also benefitted from Ukrainian knowledge of contemporary Russian hybrid war tactics?

Operation UNIFIER’s job is to improve the UAF’s interoperability with NATO military forces, and this is what our training is providing. Although Operation UNIFIER is identified as Canada’s training mission in Ukraine, my soldiers have the utmost respect for the skill and experience the Ukrainian Armed Forces have acquired in the conflict zone as they fight a conventional and well-equipped military force. Our work with the UAF certainly is mutually beneficial.

Based on your close-up experience of the Ukrainian military, how realistic do you think it would it be for Ukraine to adopt NATO standards?

Which areas of this process would pose the greatest challenges?

The UAF can achieve NATO standards, but it will take time. Over 1700 Ukrainians have been trained by Canadian soldiers since the beginning of Operation UNIFIER in the autumn of 2015. We are doing our best to ensure that we are training instructors who will in turn be able to continue training after we leave. But the key to ensuring that the effects of this training will not dissipate over time is the planned institutional reform that the Ukrainian government has set out to achieve in its Strategic Defence Bulletin.

On a personal level, what has surprised you most in your interaction with Ukrainian soldiers?

I was surprised to see how much Canadians have in common with our Ukrainian counter parts. We have developed very strong relationships, and it will be difficult for us to leave! www.bunews.com.ua

Canada’s PLEDDG initiative focuses on helping to build a better regional business environment What is the “good” we are seeking by supporting Ukraine’s decentralization process? A question I often ask as my program and I set out to work with 16 cities from four oblasts. To answer the question let me paraphrase Aristotle: through medicine we seek health, through arts- beauty, through strategy – advantage. What then, through building strong sustainable local government? In one word: prosperity.

Local governments in Ukraine are accountable to the communities they serve while operating within a wider legal and policy framework. However, since independence in 1991, they have had insufficient authority and few resources to implement their mandate and prosper. Previous central governments resisted efforts to advance decentralization, while creating complex local government legislation and starving local authorities of funds.

The priorities of citizens and business were not effectively integrated into largely outdated, non-democratic local decision-making processes. The regulatory burden on business placed Ukraine near the bottom of international “ease of doing business” rankings. These factors impeded the ability of local authorities to adequately respond to their citizens, manage their resources in an efficient and transparent manner, and create an enabling climate for business and local economic development. Now with an ambitious decentralization reform agenda, Ukraine is moving towards integration with the European Union and global markets, while local governments continue to gain responsibilities. The Partnership for Local Economic Development and Democratic Governance (PLEDDG) supports the decentralization agenda by strengthening local governments and the municipal sector in 16 cities in Zaporizhia, Poltava, Vinnytsia, and Ivano-Frankivsk Oblasts.

SMEs as an engine for regional development

Now beginning its second year, PLEDDG is funded by Global Affairs Canada and implemented by the Federation of Canadian Municipalities (FCM). PLEDDG is a six-year technical assistance program supporting the adoption of new local government powers, engaging community and business stakeholders, and helping municipalities facilitate business growth at the local level. Our program operates three main directions of activity: enhancing democratic governance, supporting local economic development, specifically SMEs with a focus on promoting more women in business, as well as promoting intergovernmental cooperation. PLEDDG believes that an effective business climate and business services are cornerstones of SME growth and economic prosperity. Part of our programming facilitates the creation of business support programmes in order to help grow and strengthen SMEs and, ultimately, Ukraine’s middle class.

To better understand the current business climate, we recently conducted express Business Climate Analysis in our 16 partner cities. We asked: What do Ukrainian SMEs need at the local level to prosper? Three common themes emerged: favourable enabling regulatory environment; business infrastructure (including financial infrastructure with services catering to SMEs); and increased opportunities for local stakeholders to engage in partnerships that support business development.

With this analysis as a guide, our team is now working with each of our partner cities to determine specific programming and service needs. Several legislative changes need to occur at the state level in order to improve the overall SME

regulatory environment.

Our support comes in the form of technical assistance engaging Ukrainian, Canadian, and Polish consultants. We will also contribute finances to various projects identified by municipal stakeholders and the business community.

For an example of the types of SME related projects we may fund over the next 4 years, we can look at FCM’s previous efforts in Ukraine.

canada in ukraine

Supporting the growth of Ukraine’s middle classes

Support for Lviv start-ups

From 2010–2015 we worked with 12 cites from Dnipropetrovsk and Lviv oblasts with the Municipal Local Economic Development (MLED) project.

Overall we funded 20 projects that supported local economic development.

Together with municipal staff in Lviv, we established The Lviv Innovation Centre and Start Up Depot, which became the first Ukrainian municipal incubator catering to IT start-ups.

“Cooperation with the PLEDDG team in their previous project was very important not only due to financial support, but because of the practical technical assistance. In Edmonton, Canada, we were introduced to a business incubator model we were able to implement here in Lviv. We analyzed a lot of different models used in Canada, Poland, and Ukraine. Edmonton’s model proved the most attractive and achievable for us,” explains Oleksandr Kobzarev, formerly Director of Lviv City Institute, now Director of the Mayor’s Administration Department, Lviv City Council. Today the Lviv Innovation Centre is an independent self-financing organisation that recently partnered with the Polish Ministry of Foreign Affairs to expand the Incubator to almost twice its current size.

The Lviv Innovation Centre is an ideal model to replicate in Ukrainian cities because it demonstrates how technical assistance, with the right partners, can adapt global best practices to the Ukrainian reality and achieve tangible results. Furthermore, this model provides an opportunity for Ukrainian municipal leaders to exchange their experience and achievements in decentralized local governance and economic reform. Vinnytsia is leading the way in local governance reform and economic development. They recently established a City Development Institute aimed at attracting investment and promoting SME growth. “With PLEDDG we would like to focus on the development of investment and innovations programmes because, in the current economic situation, job creation is the prerequisite of any city’s prosperity,” states Vitaliy Pogosyan, Director of Economics and Investments Department Vinnytsia City Council. PLEDDG began cooperation with Vinnytsia in this direction in July with projects supporting local economic development. Municipalities across Ukraine understand that job creation, economic growth and prosperity arise from the local level.

As the country continues to implement reform, PLEDDG will support our partner’s efforts by providing assistance to SMEs, promoting government transparency and better dialogue between local authorities and business community so we can build strong sustainable local economies.

About the author: Kadie Ward is Senior Governance Advisor at the Partnership for Local Economic Development and Democratic Governance. She is an international economic development expert who has worked with 60 cities from 12 countries July - August 2016

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by Canadian pop culture icons

Pamela Anderson among stars featured in funky Kyiv T-shirt collection dedicated to Canadian cool

Amid the relentless global passion for British and American cult icons, fellow Anglosphere nation Canada is often somewhat overshadowed. The American stars-and-stripes and the British Union Jack flag can be found on everything from towels and T-shirts to snacks and sandals, while TV, pop and film stars from both countries are household names from Botswana to Buenos Aires. Despite often playing second fiddle to its southern neighbour and older brother, Canada is in many ways an ever more attractive proposition, representing the same civilizational ideals and cultural connections without bringing the kind of geopolitical baggage often associated with the US and the UK. In other words, Canada is cool without being controversial. One Ukrainian fashion designer is looking to capitalize on Canada’s relatively untapped pop art appeal with a range of funky and highly original T-shirt designs featuring tributes to the country’s biggest celebrities and variations of the iconic Canadian maple leaf national emblem.

Canada in fashion

Kyiv designer Kateryna Kropyvna launched her ‘Canadians are in the Trend’ series early in summer 2016 and is marketing them at her fashion showroom in Kyiv and via social media. Kropyvna explains that the range was inspired by her personal passion for Canada and says her target customers are fashion-conscious young Europeans looking for eye-catching and original street wear options. The eponymous Kropiva fashion label specializes in contemporary street style clothing with an emphasis on innovative yet casual cool, making the Canada theme an ideal fit. Initially, Kropiva will be offering the ‘Canadians are in the Trend’ range in black and white, with a choice of standard cut T-shirts and ‘boyfriend’ models designed with ladies particularly in mind.

July - August 2016

canada in ukraine

Ukrainian designer inspired

The T-shirts are produced at a Kyiv Oblast textile manufacturing plant owned by the Kropiva brand’s parent company – a factor the designer says guarantees high quality while allowing for rapid production cycles. “It’s no secret that the plant handles everything from military uniform production for the Ukrainian state to the latest fashion collections from some of Ukraine’s biggest designer labels. This production capacity and professional expertize allows to us to produce high-quality T-shirts at short notice. The ‘Canadians are in the Trend’ range was conceived and produced in a very short space of time.”

Social media marketing

Anyone hoping to pick up a Pamela Anderson tribute T-shirt will need to go online. The ‘Canadians are in the Trend’ collection will not be appearing in shopping centres or on Andriyivskiy Uzviz souvenir stalls anytime soon. “I’m a child of the fashion industry and I prefer to market my products in the most fashionable way, which today means social media,” explains Kropyvna. “I enjoy communicating with my customers directly and social media is the perfect platform for this. My brand is not about mass-market appeal. If you would like to order a T-shirt, I encourage you to send me a social media message personally.”

How did Kateryna go about selecting the stars featured in her Canadian cult T-shirts? After all, Canada has produced a dizzying array of A-listers including everyone from Star Trek’s Captain Kirk (William Shatner) to hockey legend Wayne Gretzky. She says it was all just a matter of personal taste. “As far as I am concerned, Jim Carrey, Justin Bieber and Pamela Anderson are a wonderful trio.

I am simply delighted with them – especially by the way they look in my T-shirt designs. I’m sure these personalities will not leave anyone indifferent.”

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Thank You to an “Incredible Ambassador” Andy Hunder, President of the American Chamber of Commerce in Ukraine

“We’ve got an incredible Ambassador. We’re fortunate to have one of the best that we have in the entire foreign policy establishment,” commented US Vice-President Joe Biden when he spoke during the first US-Ukraine Business Forum, hosted by the US Chamber of Commerce in Washington DC across the road from the White House, on July 13, 2015. VP Biden was referring to Geoffrey Pyatt, US Ambassador to Ukraine. This August, Ambassador Pyatt departed from Kyiv after a three year posting to take on a new ambassadorial role in Athens.

Ambassador Pyatt arrived in Kyiv on August 3, 2013 as the 8th United States Ambassador to Ukraine. His 26 year State Department career has ranged from Asia to Europe and Latin America.

From August 2013 until August 2016, the Ambassador found himself in the midst of some of the most turbulent, most dramatic periods in modern Ukrainian history.

Ambassador Pyatt contributed greatly to the development of strategic partnership between Ukraine and the United States of America. He 2016 Chamber Official Service Providers:

July - August 2016

made an immense personal contribution to improving general investment climate in Ukraine, always ready and eager to hear the voice of the business community.

The Ambassador dedicated much time and effort in assisting the reform process in Ukraine, including facilitating financial and technical assistance needed to establish security, restore economic stability, and carry out vital reforms.

Ambassador Pyatt’s input in building a true European democracy in Ukraine has been significant, as he always stressed the need to establish the rule of law throughout the country, create a culture of respect for human dignity, guard freedom of speech. restore economic stability, and carry out vital reforms in Ukraine.

During a meeting last December with AmCham members at the Hilton Kyiv, Ambasador Pyatt said: “Real reform is happening. Progress is being made. In the past year, Ukraine has passed more reform legislation than in all the years prior of this country’s independent history.”

He now heads to Athens, to take on a new role as US ambassador to Greece. Ancient Greece is

generally considered to be the seminal culture which provided the foundation of modern Western culture and is considered a cradle of Western civilization. Most influential were that Greek philosophers. One of the founders of Western philosophy, Socrates, renowned for his contribution to the field of ethics, said “The Secret of Change Is to Focus All of Your Energy, Not on Fighting the Old, But on Building the New.” This is the focus and a massive step that Ukrainians have taken upon themselves to build a new Ukraine, without corruption, based on the principles of rule of law and freedom of speech.

Ukraine’s greatest philosopher, Hryhoriy Skovoroda, whose portrait is found on the largest banknote in circulation in Ukraine, the 500-hryvnia note, wrote in the 18th century: “Everything will be difficult, if there’s no dream.”

Today, the people in Ukraine continue to aspire to the Ukrainian Dream, building a new Ukraine, where each individual can, through hard working and strength of mind, achieve everything, in a country free from corruption.

On behalf of the members of the American Chamber of Commerce in Ukraine and the business community, I would like to sincerely thank Ambassador Pyatt for all his support of the business community, especially in the fight against corruption and establishment of rule of law. We wish the Ambassador and his wife Mary all the very best in Athens, where he will, no doubt, continue to work together with our colleagues at the American Chamber of Commerce in Greece.

We look forward to welcoming newly appointed US Ambassador Marie L. Yovanovitch in Kyiv later this month.

Photo: US Ambassador Geoffrey Pyatt and Andy Hunder at the AmCham Independence Day Picnic in Kyiv, July 2016.

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EITI implementation in Ukraine Olga Adamovska Co-Chair of the Chamber Energy Committee

Starting from 2009 Ukraine is on its way on adoption of the Extractive Industries Transparency Initiative (EITI) standards. The initiative reflects a global transparency mainstream and is currently being implemented by 51 countries. The result of the EITI is usually materialized in a public report released by each participating country that discloses all direct and indirect benefits received by the state from the extractive industries. The effective report is only possible if proper cooperation and information flow between private sector, state authorities and civil society organizations are reached.

2015 was a year of significant progress for Ukraine, as a basic local legislation has been finally adopted, EITI administrative bodies have become functional and, what is the most valuable, the first country report covering 2013 year has been issued. However, the reporting process has exposed a number of institutional problems such as total absence of trust between the authorities and private entities (40% of companies ignored the request to provide data or used legislative gaps to reject it), unagreed actions between state bodies, existence of a significant layer of questionable companies (near 26% of the responders were not found at their registered addresses). EITI presumes that in case weak points are revealed during reporting, an internal improvements need to be done by the relevant country.

A new data collecting campaign is near to be launched and since EITI is an integral part the whole-Ukrainian reform puzzle, the reporting results will reflect the progress that Ukraine made with regards to anti-corruption and transparency policy within the year.

Key to increasing gas production in Ukraine?

New technologies and predictable investment environment Andrew Favorov Expert of the Chamber Energy Committee Energy independence has been an elusive goal for Ukraine. Still there are concrete and tangible steps that will lead to increased production of natural gas and oil in the country.

First of all any long-term strategy should focus on maximizing production at existing wells by deploying technologies long available in the United States and Europe. Letâ&#x20AC;&#x2122;s fix what we have first, and then letâ&#x20AC;&#x2122;s invest into new production. This is a strategy of ERU Gas, which is a licensed representative of GasGun technology in Ukraine, Poland and Romania. GasGun technology is an economic alternative or precursor to hydraulic fracturing for wells at the tail end of its useful life. It has a proven successful 10-year track record of thousands of stimulations in North America and Middle East. Ukrainian geological conditions are well suited for it. Furthermore, ERU Gas is offering production-sharing arrangements for such technology without any financial risks to the owner of the field.

However, the major obstacle in a way of implementing this and other well stimulation technologies in Ukraine is an outdated, burdensome and prohibitive regulatory process for certification and import of this technology into Ukraine. The investor is obligated to go through a 12-18 month long certification procedure in Ukraine in order to utilize technology that has been successfully used over 10,000 times all over the world. Technology just needs to be implemented in a time and cost efficient matter. Reducing the regulatory burden is one of key steps that Ukraine needs to take to achieve its energy independence in 4-5 years.

Investing in the next generation of Ukrainian hotel managers Swiss-based DBI aims at lead a new wave of Ukrainian hospitality sector growth

The Ukrainian hotel industry has come a long way from the dark days of Soviet-style service standards and aesthetically unappealing accommodation, but there is still considerable room for growth and modernisation in the sector. International-quality hotel chains are thin on the ground in much of Ukraine, while the standards guests can expect to encounter outside of the country’s major regional capitals remains something of a lottery.

Swiss-based hotel management company DBI hopes to take advantage of these opportunities by offering a range of franchising, manchising, and management solutions to Ukrainian hotel owners.

Launched in June 2016 in Kyiv, DBI is headquartered in Switzerland but will concentrate primarily on serving the Ukrainian market, with additional focuses in the CIS and Central/Eastern Europe regions.

The DBI management team features a range of hotel industry executives led by DBI Hotels Chief Operating Officer Irantha Duwage, who brings a wealth of Ukraine hospitality sector experience to the table, having served for the past four years as General Manager of the Ramada Encore Kiev hotel. Following the DBI launch, Duwage sat down with Business Ukraine magazine to explain the hotel 44

management company’s strategy. The concept of investing in Ukrainian talent lies at the core of the company’s philosophy and serves as the key to its entire business plan. Duwage stressed the importance of building on the international experience already gained by Ukrainian hospitality industry professionals, while also fostering the next generation of hotel sector professionals.

Tapping into existing hospitality sector talent

DBI is currently in the process of recruiting Ukrainians with international hospitality sector experience to serve in senior executive positions within the company. The ideal recruits are Ukrainians who have worked for the past decade or so at top hotels around the world, gaining hands-on experience of the latest trends and service expectations in the sector. Regular travellers will confirm that there are an entire generation of suitable Ukrainian candidates now occupying management positions throughout the international hospitality sector – the task DBI faces is persuading the strongest candidates to swap their current – often glamorous – international locations for Ukraine. Duwage is unfazed by this challenge. www.bunews.com.ua

Tailor-made for the Ukrainian market

One of the key focuses of the DBI business model in Ukraine will be the promotion of three in-house brands as nationwide hotel franchises. Each brand has been tailored to meet specific needs identified in both Ukraine and the wider post-Soviet region. Prelaunch market research in five separate post-Soviet hospitality markets (including Ukraine) found that all were dominated by individually owned hotels, while management group penetration was low throughout the sector. While international hotel franchising agreements have proved popular with customers across the former USSR, traditional agreements tend to be expensive while offering relatively low returns. Duwage is confident the DBI aproach will prove more attractive to hotel owners and investors. “Compared to existing international franchises, our rates will be 50% lower. We are smaller so our overheads are smaller. And we are also able to offer a more tailored approach to suit the specifics of the market.”

The three DBI brands have been designed to cater to different segments of the hotel market. ‘Moi’ aims to provide a guaranteed good night’s sleep and consistency of service. ‘Sync’ is aimed at millennial travellers with an emphasis on digitally integrated services and social media connectivity. ‘KOKO’ will offer a more bespoke and luxurious approach, with unique interior design solutions and exceptional dining experiences serving as the brand signature. Of the three brands, Moi will be the first to debut on the Ukrainian market – three Moi hotels are expected to be unveiled in September, with a total of at least seven scheduled to open by the end of 2016.

programmes at hotels throughout Europe, while three annual scholarships will be made available to cover the considerable costs of studying at the world’s leading hospitality industry schools.

This is an undeniably eye-catching investment in the Ukrainian hospitality industry’s future development, but it could also leave the company open to exploitation. Many of the international franchises currently operating in Ukraine have previously expressed concern over the tendency of trained staff to leverage their internationalquality skills in order to secure senior positions elsewhere in the sector, leaving big-name employers with the task of beginning the training process once more. While recognising the inherent dangers of investing in staff only to see them move on, Duwage prefers to take a broad view of the issue. “It’s for the good of the country as a whole and for the development of the hotel industry in particular,” he says. “We want the entire hospitality sector to view our staff as the industry standard. In an ideal world, this recognition would be international. Today, staff we have trained could be managing a

industry

On the contrary, he says he has already encountered a significant willingness among potential recruits to return to the fast-developing domestic industry. “They want to be part of the transformation of the country. They want to contribute to the historic processes underway in today’s Ukraine.”

Ukrainian hotel for us, but tomorrow they could take on a senior position in Dubai or Singapore.”

Emphasis on youth

These new hotels will be staffed by teams made up predominantly of young Ukrainians looking to establish careers in the hospitality sector. The DBI recruitment strategy envisages hiring recruits from the 18-to-24 age bracket, meaning many will be university graduates or students. The goal is to train this relatively raw material in the best current practices of the international hospitality industry – a process Duwage hopes will lay the groundwork for the emergence of the next generation of Ukrainian hotel managers.

“Hiring young staff involves an element of risk, but it is a risk we are willing to take,” he says, pointing out that the industry already leans towards youth in terms of personnel – both in Ukraine and internationally. By opting for younger employees, he aims to help shape the future growth of the entire sector. “The impact two years of experience can have on a young recruit is so much greater than the effect it might have on a more experienced industry professional. Within a few years, we will have created an exceptional team.

The Ukrainian hospitality sector is currently in need of a new generation of leaders. By 2020, we expect to see far more hotel chains entering the market – we currently need to develop a generation of Ukrainians with the right skills.”

Setting a new industry standard

Successful DBI recruits will be offered access to exchange July - August 2016

About the interviewee: Irantha Duwage is the Chief Operating Officer of Swiss-based hotel management company DBI

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Legal guide for property investors looking to move hard currency into and out of Ukraine In 2015 potential real estate investors from overseas were largely pre-occupied with the war in eastern Ukraine and the ensuing financial crisis and falling hryvnia currency. In 2016, the chief concerns of foreign investors on Kyiv’s property market often revolve around Ukraine’s hard currency controls and ways to bring money into and out of the country.

Despite the imposition of tough currency controls, foreign investment in Kyiv’s promising residential real estate market is possible with proper planning and structure. In many cases, this will include obtaining qualified legal advice to help you structure your purchase. This article outlines basic strategies to legally bring hard currency into the country to purchase Ukrainian real estate. It also explores ways to expatriate rental income for properties owned by nonresidents as well as expatriating the proceeds from property sales.

The article explores basic approaches for non-residents towards paying taxes on their property in Ukraine, and looks forward to possible near-term changes to Ukraine’s currency control regime and other regulatory changes that would benefit real estate investors. This material is based on a series of discussions with Olexander Olshansky and Andriy Zhupanyn from the Kyiv law firm Sayenko Kharenko. Readers should note that this article is not intended to replace qualified legal advice, but instead to introduce readers to general strategies and structures for solving common legal issues for foreign real estate investors in Ukraine.

July - August 2016

real estate

Cross-border real estate financial transfers Bringing money into Ukraine to buy real estate Currently there are four main strategies to legally bring hard currency into Ukraine in order to buy real estate. A buyer could open a Ukrainian limited liability company (LLC) with charter capital that is of equal value to the target property. Alternatively, you could open an LLC with a minimum charter capital and then subsequently extend a loan to this entity from abroad for the purchase of the target property. It should be kept in mind that loans received by residents from non-residents of Ukraine are subject to registration with the National Bank of Ukraine.

The simplest way for a non-resident buyer to bring the necessary funds into the country is to wire the money to cover the sales price of a property directly from a foreign bank account to the bank account of the seller in Ukraine. A slightly more time-consuming way would be for a foreign buyer to transfer funds sufficient to purchase the property to an investment account at a bank in Ukraine for the subsequent purchase of a property by transferring the necessary amount to the seller’s account at a Ukrainian bank. Alternatively, if the seller of the property has a foreign bank account, then direct transfer payment between the foreign bank accounts of the buyer and the seller is permissible.

However, such cases are beyond the scope of this article.

Each of these methods has pluses and minuses. The benefits of establishing a Ukrainian LLC are numerous. It presents a variety of ways for divestment or :

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: withdrawal of income received in Ukraine (for example, payment of div-

idends, which in some cases can be carried out at low tax rates). It also allows for the possibility of selling the property by selling shares in the company. On the other hand, creating an LLC involves additional costs and takes some time. In addition, in order to manage the company, the non-resident founder must appoint a director who, among other things, will bear criminal liability for the company’s activities. Additionally, some methods for withdrawing income and divestment (for example, payment of dividends) are currently limited.

The advantage of acquiring real estate in Ukraine by a direct transfer of funds from abroad is its simplicity, since only a signed contract of sale is required for this option. Opening an investment account is a somewhat more complex process which, among other things, requires the physical presence of the buyer (account holder) in Ukraine when the account is opened.

Ways for non-resident landlords to expatriate rental income

Rental income on property owned by non-residents may be transferred out of Ukraine in a number of ways. This can be done via interest payments on the loan agreement under which a property was purchased. In this case, you need to take into account existing restrictions imposed by the National Bank of Ukraine on the maximum interest rate on loan agreements with non-residents. The maximum allowable fixed interest rate depends on the term of the loan and varies between 9.8% to 11% per annum.

Rental income could theoretically be expatriated via dividend payments to the founder of the limited liability company which owns the real estate.

However, the National Bank of Ukraine has currently banned the payment of dividends abroad. At the same time, this ban does not apply to dividends to foreign investors that were accrued for payment during the years 20142015, subject to fulfilling a number of National Bank of Ukraine requirements. Although future policy is currently unclear, the National Bank is expected to allow the payment of dividends for 2016 and subsequent years.

Alternatively, a property owner can lease out a property with the assistance of a local agent (an individual private entrepreneur or legal entity in Ukraine). As an intermediary between the owner and the tenant, the agent has the ability to transfer the income received from the leased premises overseas to the foreign account of the property owner. If a property in Ukraine is purchased by a non-resident for subsequent lease, then this owner can only rent it out with the help of an agent. Recruiting an agent inevitably means taking the risk of becoming involved with unscrupulous intermediaries who may abuse their powers at the expense of the owner. Accordingly, special care should be taken to select the right agent.

Expatriating proceeds from property sales in Ukraine

There are several ways for a non-resident to transfer funds received from the sale of a property in Ukraine.

If you used an LLC to buy your property, you could then liquidate the LLC by selling the property, with the subsequent payment to the founder equal to the amount of their original charter capital contribution, and all funds remaining after the entity’s liquidation.

Or, if a loan was extended through an LLC to buy the property, it can be sold to settle the debt under the terms of the initial loan agreement.

Taxes for non-resident landlords

A non-resident individual (as opposed to a legal entity) who owns real estate in Ukraine can only directly lease out his property when he obtains tax resident status in Ukraine. This status can be granted via several avenues such as employment in Ukraine or voluntary application. Without tax resident status in Ukraine, a non-resident individual may only lease out his property through an agent. In practice, when selecting an agent, it is often more profitable to attract individual private entrepreneurs using Ukraine’s simplified taxation regime, as opposed to legal entities. Keeping in mind the above warning (and expected temporary ban on dividend payments), payment of dividends to the founder of a limited liability company that owns a property and leases it out can be attractive when the founder is a legal resident of a country with which Ukraine has agreed to a reduced tax rate on the repatriation of dividends. For example, in accordance with the provisions of a bilateral agreement on the avoidance of double taxation between Ukraine and the Netherlands, Ukrainian companies may be exempt from withholding taxes on payment of dividends in Ukraine to their Dutch founders, provided that a number of requirements were met during their initial investment in Ukraine.

Changes to Ukraine’s currency controls

The good news is that in the near future a decrease is widely expected in the amount of foreign currency that is subject to compulsory conversion into Ukrainian hryvnia upon its transfer to Ukraine. Today, this rule only applies to legal entities and individual entrepreneurs and provides for the mandatory sale of 65% of the incoming hard currency. In addition, simplifications to the rules governing the withdrawal of money from Ukraine through the payment of dividends to non-resident participants in LLCs (i.e., shareholders) are also under consideration.

Moreover, a number of changes to Ukrainian legislation are expected that would simplify the procedure of payments between buyers and sellers of real estate through the use of escrow accounts. This change will greatly reduce counterparty risk for skeptical investors in Ukraine’s real estate market who are not ready to “go first” and transfer funds equal to the value of the property to sellers, who, in turn, are not ready to “go first” and re-register the ownership of the property in the buyer’s name. Using an escrow account, the seller will receive money only after the bank or escrow agent has received confirmation of the transfer of ownership.

As of today, a draft bill that allows for the use of escrow accounts is pending review by the Ukrainian parliament for its second reading. The likelihood of its acceptance is quite high as it has broad business community support - in part since it would legalize the use of derivative financial instruments in Ukraine. The legislation has won support as it was developed with the support of international financial organisations. The draft law calls for the provisions on escrow accounts to enter into force on 1 October 2016.

However, this date should be expected to move further into the autumn season since Ukraine’s parliament will not vote on the draft until late September at the earliest. Nonetheless, favorable regulatory changes for real estate investors in Ukraine do seem to be close at hand, making it easier for foreign investors to transfer money into and out of the country.

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

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ProZorro reform wins international acclaim Innovative open source system brings transparency to notoriously corrupt public procurement sector Ukraine’s public procurement sector has long been a byword for corruption, with an estimated UAH 50 billion (USD 2 billion) lost annually through shady deals and limited competition. This makes the recent success of the ProZorro electronic procurement system all the more remarkable. This transparency tool is one of the fruits of the Euromaidan Revolution and serves as a model for cooperation between government and civil society. At a time of growing frustration among Ukraine’s partners over the slow pace of the country’s stuttering reform efforts, ProZorro also stands out as a cause for optimism. The system has garnered considerable international praise, winning the prestigious World Procurement Award in May 2016. ProZorro insider Yuriy Bugay shares the story behind one of post-Maidan Ukraine’s flagship projects.

Cutting out corruption in public procurement

This unlikely success story begins in March 2014, in the immediate aftermath of the Euromaidan Revolution. Amid the chaos created by the fall of the Yanukovych regime, a group of volunteers came together in Kyiv and decided to overhaul one of the most notoriously corrupt areas of the Ukrainian economy: public procurement. This desire to reform the public procurement system led directly to the creation of ProZorro, developed in close cooperation between the Ukrainian government, the private sector, and civil society.

The ProZorro project itself began life in Kyiv in May 2014, led by a group of anticorruption social activists. The project drew inspiration from public procurement reforms in Georgia, with the experience of two e-procurement experts, Tato Urjumelashvili and David Marghania, guiding the development of an electronic procurement system for all Ukrainian public agencies. With the help of commercial platforms, a pilot ProZorro system launched in February 2015.

In April 2015, the civil servant responsible for supervising Ukraine’s public procurement reform, Deputy Minister of Economic Development and Trade Max Nefyodov, asked ProZorro coordinator Oleksandr Starodubtsev to lead the government’s public procurement department. Other volunteers from the project joined shortly afterwards. In the meantime, a strategy for the eprocurement system’s implementation was developed.

Saving billions for the budget

By March 2016, more than 3,900 governmental organizations from all over Ukraine had joined the pilot project, creating savings totaling more than UAH 1.5 billion (around USD 55 million). The purchases involved were “below-threshold” contracts worth less than UAH 100,000 (or UAH 1 million for stateowned enterprises), which means they were not regulated by Ukrainian procurement laws, so volunteers didn’t have to obtain a government license to carry out the pilot project. Below-threshold tenders account for around half of Ukraine’s entire procurement budget.

As of July 2016, public agencies including defence, police, customs, health, infrastructure and energy, have awarded more than 85,000 tenders through the ProZorro system.

The project has been expanding step-by-step to cover all the country’s procurement needs. Meanwhile, the central platform, which was hosted by Transparency International Ukraine throughout the development and

pilot phases to avoid bureaucratic processes and cut costs, has now been transferred to the state and is available at www.prozorro.gov.ua. On 1 August 2016, it became mandatory for all contracting entities to use e-procurement for all purchases.

Other complementary initiatives have also been successfully implemented or tested. A professional risk-management system with “red flag indicators”, a new official web portal, an online course for contracting authorities, and an e-library of typical specifications have all been possible thanks to open contracting.

Pioneering open data transparency

ProZorro, which means “transparently” in Ukrainian, has some specific attributes that make it a novelty in the procurement world. In short, everything is open. All information related to the tender process, including suppliers’ offers, can be accessed and monitored by anyone. The system is open source, with all data structured in line with the Open Contracting Data Standard, making crosscountry data comparison and analysis possible.

The key actors in the project play their own unique role in what we call the “golden triangle of partnership”. Government actors are responsible for setting general rules and protecting information. Businesses are responsible for providing services to contracting authorities and suppliers. Civil society is responsible for managing business intelligence modules and developing risk-management methodologies. This style of cooperation has significantly improved trust among all key stakeholders.

Innovative reform model

The concept of reforms is generally associated with the passing of new laws.

ProZorro is different. The changes to Ukraine’s procurement system did not start with a new version of the law on public procurement. These changed started with a group of people who had one common dream – to make each step of the public procurement process transparent and open for monitoring by anyone.

The team behind ProZorro shared several common beliefs that guided their approach in an environment where corruption had eroded citizens’ trust in public institutions. They were confident that private business, driven by competition, would be much more efficient in providing services than the government, and that civil society would have a genuine interest in monitoring public procurement compared to public officials who may harbor ulterior motives.

Overcoming inevitable resistance

The project has not been without its setbacks. Two ministers leading the department responsible for procurement resigned during the implementation phase, and while some agencies have welcomed the reform, others have resisted. New legislation now promises to act as a powerful incentive to those who have been stalling on making real changes. Ukraine’s Prime Minister Volodymyr Groysman has even said that the heads of state authorities who fail to transition to the ProZorro system should be dismissed.

The success of ProZorro is a remarkable example of how a small group of individuals from different parts of society have been able to work together to repair a broken system, despite operating in a politically and economically uncertain environment.

About the author: Yuriy Bugay is a coordinator of the ProZorro electronic public procurement system

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Networking events Canadian Prime Minister Justin Trudeau Charms Kyiv A Canadian delegation led by Prime Minister Justin Trudeau visited Kyiv and Lviv in July, reaffirming strong Canada-Ukraine bilateral ties and signing a free trade agreement between the two countries. The social highlight of the visit was a summer cocktail reception held in the elegant grounds of Kyiv’s historic St. Sophia Cathedral Complex. The reception was attended by the visiting Canadian delegation, Ukrainian government officials including Prime Minister Volodmymyr Groysman, members of the international business and diplomatic communities, and representatives of the vibrant Ukrainian-Canadian community. Guest of honour PM Trudeau set the tone for what was an informal evening of international dialogue by posing for numerous ‘selfie’ photo portraits with guests.

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networking events

July-August 2016

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Summer Networking on Kyiv’s Central Street Networking community Fryday Kyiv enjoyed a busy summer 2016 season with events including beach parties and boat cruises on the Dnipro River. Among the highlights was the well-attended event at Tiger Bills venue on Kyiv’s central Khreshchatyk Street. The venue’s summer terrace and spacious interior allowed a cosmopolitan mix of Ukrainian and international guests to network long into the sweltering summer night.

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networking events

Kyiv Connoisseurs Enjoy Five-Star Italian Cuisine at Va Bene

July-August 2016

The Ukrainian Connoisseur Club (TUCC) held their second event of the summer 2016 season at Kyivâ&#x20AC;&#x2122;s Va Bene Bistro, part of the Carte Blanche group of restaurants. The restaurant is located in the heart of the Ukrainian capital right next to the National Opera House, and offers both a stylish interior and excellent service. New Va Bene Head Chef Matteo Boifava prepared an exclusive five-course menu for TUCC members, while sommelier Daniil Zamoyski skillfully selected wines that delicately set off the taste of each dish. For the first starter, connoisseurs enjoyed a very tasty seafood cocktail. For the second starter, Mateo prepared a cappuccino soup of white asparagus & burrata cheese served with Sauvignon Viticoltori Alto Adige. For the main course, guests could chose a prime fillet steak served with Lagrein Viticoltori Alto Adige or a tender sea bass served with white asparagus. For the desert, Connoisseurs were treated to Mango panna-cotta with a strawberry salsa that was extremely delicious, together with Amaro Nonino liquor. The excellent cuisine, efficient service and cozy atmosphere in the restaurant won recognition from the attending connoisseurs. As a result, with a composite score of 4.8, Va Bene achieved the top accolade of five stars from The Ukrainian Connoisseur Club. Restaurant Director Natalia Strogaja and Chef Matteo Boifava personally received the award certificate from TUCC Chairman Terry Pickard. For more information on coming TUCC events please contact Tatiana (trud@pickard.com.ua).

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UKRAINE AT 25 Ukraineâ&#x20AC;&#x2122;s declaration of independence on 24 August 1991 was one of the decisive moments in the collapse of the Soviet Union. Over 92% of Ukrainians backed this decision in a subsequent referendum. The following quarter of a century have seen independent Ukraine struggle to shake off continuing Kremlin influence and establish itself as a European democracy. The country has been rocked by two revolutions and is currently locked in a hybrid war with Russia. Domestically, rampant corruption and overbearing oligarch influence continue to serve as barriers to genuine rule-of-law reforms, while ordinary Ukrainians remain among the most impoverished people in all Europe. Nevertheless, independent Ukraine marks its twenty-fifth anniversary with the country more internally united than ever and increasingly able to command attention on the international stage. Business Ukraine magazine invited a number of experts to assess the past 25 years of Ukrainian history and offer their thoughts on the progress the country has made.

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Nation building in the age of globalization: strengthening Ukrainian identity in the post-Soviet era Ukraine marks the twenty-fifty anniversary of its independence with issues of identity still very much at the forefront of the national debate.

The continuing hybrid war with Russia has served to strengthen the postSoviet consolidation of Ukraine identity, broadening perceptions of what it means to be Ukrainian. Earlier interpretations based primarily on ethnic and linguistic lines are currently giving way to a wider civic definition that embraces all citizens, including native Russian-speakers along with a diverse range of ethnic and religious minorities. This process has been underway since 1991. Ukraine’s evolving sense of self is a crucial element in the country’s nation-building process. It will continue to play an important role in the development of Ukrainian society as Ukraine moves further away from the imperial past and finds its place within the ranks of the international community.

Ukraine among Versailles losers

Any discussion of Ukrainian national identity must necessarily take into account Ukraine’s relatively short history as an independent state. Aspects of Ukrainian identity date back many hundreds of years, but the concept of an independent Ukrainian state first gained geopolitical prominence in the early decades of the twentieth century. Until the formal establishment of the USSR in the early 1920s, Ukraine had rarely been included as a distinct country on international maps or atlases. Efforts to create a viable Ukrainian state in the wake of the Russian Revolution had failed, despite various short-lived attempts at establishing sovereignty.

At the time, recognition of a separate and distinct Ukrainian nation was far less widespread than it would become later in the twentieth century.

Many people have now forgotten, but until World War II, many Poles and Hungarians often denied that Ukrainians existed as a people. Today, such ‘Ukraine denial’ sentiments are restricted to Russian leaders. Russian President Vladimir Putin still prefers to talk of Ukrainians and Russians as ‘odyn narod’ (one people).

The appearance of Ukrainian independence aspirations during the latter stages of World War I was not a very welcome development for the Western powers. This lack of outside enthusiasm for an independent Ukraine would remain evident until the USSR disintegrated in 1991. After WWI, the victorious Western powers agreed to the de facto partition of Ukraine, with the lands of today’s Ukraine divided between four countries (Poland, Czechoslovakia, Romania and the USSR). The Treaty of Versailles dramatically altered the map of Eastern Europe, but there was no room for Ukraine among the many new nations created by the peace settlement. As Myroslav Shkandrij writes in his new study of Ukrainian nationalism, after 1923 Europe “appeared to have washed its hands of the Ukrainian question.”

In the final months of WWII, the Allied powers met in Yalta and agreed to Soviet dictator Joseph Stalin’s annexation of Ukrainian-populated lands in Romania, Hungary (formerly part of Czechoslovakia) and Poland, thus effectively reversing the partition of Ukrainian lands following the previous world war, while keeping a united Ukraine firmly under Kremlin control.

Ukraine’s borderland struggle with Poland

The roots of both World War I and World War II lie in the struggle for control of the vast East European borderlands between Germany and Russia. The entire first half of the twentieth century was a periJuly - August 2016

od of regional violent upheavals throughout much of Eastern Europe, with Ukrainians often deeply involved. From 1918, when the AustroHungarian Empire disintegrated, until 1947 and the ethnic cleansing of Ukrainians from south eastern Poland in Action Vistula, a state of armed struggle existed between Poles and Ukrainians over where their border should be. This Ukrainian-Polish border conflict was ultimately resolved by Stalin. By determining the Polish-Ukrainian border, Stalin accomplished what Ukrainian nationalist leaders Symon Petlura and Stepan Bandera could not. As a consequence, Ukrainians and Poles were able to set in motion a process of reconciliation and healing that has gained momentum steadily since the late 1940s.

Ukraine and Poland are now close allies – albeit allies who are still capable of engaging in memory wars related to the bloody borderland violence of the early twentieth century. All is quiet on the western front, but the eastern borderlands of the country are in flames. According to the overwhelming majority of Ukrainians, their country is at war with Russia. Putin’s territorial goals when he embarked on his hybrid war against Ukraine in early 2014 were the annexation of Crimea and eight southern and eastern Ukrainian oblasts in order to create ‘Novorossia’ (‘New Russia’). Much like the Poles decades earlier, today’s Russians have struggled to understand how a ‘non-people’ could fight so tenaciously to defend a ‘non-existent’ country. The Poles came round to understanding they were wrong about Ukrainians, but the Russians, bombarded by a continuous stream of surreal television propaganda, have yet to figure this important fact out for themselves.

American historian Stephen Kotkin recently wrote in Foreign Affairs magazine that Putin is in some respects worse than Stalin, who at least recognised “the existence of a Ukrainian nation separate from a Russian one.” However, both dictators share the same attitude towards independent states on their borders, “as weapons in the hands of Western powers intent on wielding them against Russia.” Kotkin writes that Russia views its neighbours not as potential friends but as “potential beachheads for enemies.” Two factors suggest that the Ukrainian-Russian border conflict will be with us for a long time to come. First, both the Putin regime and the country’s ‘democratic’ opposition support the annexation of the Crimea. Second, Putin is de facto president for life. As long as he is Russia’s leader, he will seek to destabilize Ukraine. Ukraine must therefore continue to forge a post-Soviet national identity against this backdrop of Russian aggression.

ukraine at 25

Ukraine’s evolving sense of national identity

Post-Soviet progress

Since 1991, Ukrainian national identity has developed with the assistance of the Ukrainian state. The only Ukrainian president not to contribute to the process was Viktor Yanukovych. Of Ukraine’s first three presidents, east Ukrainian native Leonid Kuchma made the greatest contribution to the nation-building process. He promoted the Ukrainian language in education, spread the teaching of Ukrainian history, marginalised Crimean separatists (without a shot fired) and defeated Communist leader Petro Symonenko in the 1999 presidential elections, thereby burying any hope of reviving the USSR. However, Kuchma also played the villain in another important aspect of Ukraine’s post-Soviet national-building process. A second peak in 57

1991: BIRTH OF AN INDEPENDENT UKRAINE Ukrainians voted overwhelmingly for independence in the 1991 referendum which followed the August 24 declaration of independence from the Soviet Union. A national total of 92.3% backed independence, with clear majorities in every single region of the country including Crimea.

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Russian hybrid war backfires

Since the outbreak of the Russian hybrid war in Ukraine, the biggest transformation in terms of national identity has taken place among Russian-speaking Ukrainians – especially those living in eastern and southern Ukraine. Many of these Ukrainian citizens have mixed ethnic backgrounds and had previously harboured ambiguous feelings towards issues of national identity, with large numbers preferring to sit on the fence. Russian aggression in 2014 forced these Russian-speaking Ukrainians - many of them at least partially ethnically Russian - to make a definitive choice. The vast majority decided to embrace Ukrainian identity. This came as a nasty surprise to Putin and other Russian officials, who seemed unable to comprehend the concept of patriotic Russian-speaking Ukrainians. Instead, they appear to have concluded that Russianspeaking Ukrainians would welcome Kremlin intervention. Indeed, six years prior to the 2014 crisis, Putin told a NATO summit there were “seventeen million Russians” living in eastern and southern Ukraine. He meant Russian-speaking Ukrainians. Tellingly, he saw no difference between the two definitions.

These chauvinistic fantasies ran into harsh realities on the ground in 2014 when Russian-speaking Ukrainians showed their patriotism by defending Ukraine’s territorial integrity. Thousands joined volunteer battalions or signed up for the Ukrainian Armed Forces. Millions more pointedly refused to respond to Kremlin calls for a ‘Russian Spring’ throughout the south and east of the country. It would be not far from the truth to say that Ukraine’s Russian-speakers destroyed Putin’s imperialistic ambitions and shattered his dreams of creating ‘Novorossia’.

Slow but steady spread of Ukrainian identity

This strengthening of Ukrainian national identity in the traditionally Russophile regions of southern and eastern Ukraine owes much to the historic questions posed by Putin’s hybrid war, but it is also part of a more organic process underway since 1991. Over the last twenty-five years, Ukrainian national identity has spread from its traditional heartlands in western Ukraine to the central regions of the country and on into the south and east. Voting patterns in presidential elections reflect

changing attitudes to national identity during the post-Soviet era. In the first post-Soviet presidential election in 1991, patriotic candidate Viacheslav Chornovil could only secure a majority in three western Ukrainian oblasts. In 2004, pro-Ukraine candidate Viktor Yushchenko won election with majorities in both western and central Ukraine. In the 2014 presidential election, Petro Poroshenko took first place in every single region of the country – the first ever candidate to do so.

Attitudes towards national identity in eastern and southern Ukraine are still subject to fluctuations and remain volatile, but there has clearly been a major shift among ethnic Russians in the region away from post-Soviet ambiguity towards self-identification as Ukrainians. These changes are largely due to the sense of betrayal engendered by Russia’s hybrid aggression, which is especially strong among those with Russian heritage. In the first two post-Soviet decades, many residents of southern and eastern Ukraine had avoided the issue of national identity altogether by focusing instead on regional identity. Since 2014, this trend has become less prominent as feelings of Ukrainian patriotism have taken root in response to Russian aggression.

Young Russian-speaking Ukrainians who grew up after the Soviet collapse have also found their voice in the public arena, with football fans among the most vocal. For example, the hugely popular (and extremely rude) terrace anthem ‘Putin Khuylo’ is the work of fans from Kharkiv Metalist, despite the fact that the Kremlin regarded east Ukrainian capital Kharkiv as one of the cornerstones of the ‘Novorossia’ project and a bastion of pro-Russian sentiment.

ukraine at 25

the evolution of Ukrainian national identity began with the 2000 Kuchmagate crisis – mass protests over Kuchma’s alleged role in the murder of journalist Georgiy Gongadze that set in motion four years of civil society mobilisation. This was the first popular movement to grip the country since the late 1980s. It culminated in 2004’s non-violent Orange Revolution. This popular uprising represented the coming of age of Ukraine’s post-Soviet generation and was a triumph of the emerging middle classes. It was also far larger than the protests during Serbia’s Bulldozer Revolution and Georgia’s Rose Revolution.

A third peak in the evolution of Ukrainian national identity began with the Euromaidan Revolution and has continued to gain momentum during the ensuing hybrid war with Russia. President Yanukovych was widely perceived to be dragging Ukraine backwards to neo-Soviet policies. In this context, the Euromaidan Revolution resembled a national liberation struggle. Many Euromaidan activists and self-defence volunteers went straight from the Maidan to the frontlines in eastern Ukraine.

Challenges to national unity

Eastern Ukrainians are now far more likely to embrace notions of Ukrainian national identity, but significant challenges remain. While a sense of national identity has grown in the Ukrainian-controlled regions of the Donbas, support for Ukraine remains lower than in any other region in the country. In many towns and cities, polls show levels of patriotism hovering at around the 50% mark. A secondary problem is the political vacuum created by the disintegration of the pro-Russian Party of Regions and the overall weakness of Ukrainian political parties.

A third factor is the continued influence of Russian culture and the Russian Orthodox Church.

Ukraine has demonstrated over the past two years of hybrid Russian aggression that is strong enough to defend its independence. However, the nation-building process will face continued threats and obstacles. A solution to the Donbas conflict must be found, and the millions of Ukrainian citizens currently living in the occupied zones must be reintegrated into Ukrainian society. The conflict must end if Ukraine is to integrate into the EU and NATO. Ukraine has come a long way towards achieving an inclusive and durable sense of national identity, but the country will never be truly secure until it moves decisively beyond the geopolitical no man’s land it has inhabited for much the post-Soviet era. A stronger shared sense of national identity can play an important role in this process.

About the author: Taras Kuzio is a Senior Research Fellow at the Canadian Institute of Ukrainian Studies, University of Alberta. His most recent book ‘Ukraine: Democratization, Corruption and the New Russian Imperialism’ (Praeger, June 2015) surveys modern Ukrainian political history from 1953 to the present July - August 2016

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ukraine at 25

Ukraine finally comes of age

Ukraine at 25: recounting the dramatic journey from post-Soviet orphan to self-confident statehood Over the past quarter of a century, Ukraine has experienced two revolutions, one war, and suffered the violent theft of parts of her homeland. These formative years have been highly eventful, offering the kind of drama and plot twists more commonly found on the pages of a classic novel.

If the independent Ukraine of the early 1990s could take on human form, it would be as a poor orphan girl. In the early years of independence, Ukraine’s abusive brother Russia was her primary guardian. Distant cousins Europe and America offered support but remained far away. Young Ukraine took an immediate liking to Europe and America, but could not fully grasp the concepts they were trying to convey. Instead, brother Russia remained the dominant figure in her life, alternating between drunken proclamations of love and selfish neglect.

Despite these difficulties, Ukraine grew up fast and learned to think for herself.

As is often the case, Ukraine struggled with an identity crisis during her teenage years. On one hand, brother Russia was always near, but often difficult and unpredictable. Europe and America clearly lived a life she wanted for herself, but could she ever meet their high standards? When Ukraine was 13 years old, brother Russia became jealous of Ukraine’s desire to be like her European and American cousins. He tried to force Ukraine to accept his choices, but Ukraine rebelled, sparking the Orange Revolution. This was a pivotal event in Ukraine’s development. She made a clear choice to live her own life rather than following the path Russia had planned for her. Predictably, Russia held a grudge over this decision. Nonetheless, Ukraine matured greatly in the years that followed.

After finishing her education, Ukraine wanted to move to Europe to live a better life. Brother Russia had different plans. In order to keep Ukraine from leaving, Russia introduced Ukraine to his best friend Yanukovych in hopes they would marry. Ukraine tried to please Russia by spending time with Yanukovych, but never forgot her dream of going to Europe. Ukraine also had serious doubts about Yanukovych. She did not like his temperament and feared he had a dark side. Ukraine’s suspicions proved justified when Yanukovych demanded that she give up her European dreams and marry him immediately. This led to the Euromaidan Revolution, in which Ukraine confirmed her European civilizational choice. Brother Russia was furious. He stole Crimea and parts of the Donbas in order to punish Ukraine and force her to agree to his demands. However, Russia had miscalculated. Ukraine had become strong and independent thanks to her difficult childhood. Instead of bowing down, she cut her ties with Russia. Ukraine was determined to achieve her dream of a better life, and cousins America and Europe supported her choice. It would take some years before Ukraine would be ready to join Europe, but she had now made a determined and irrevocable choice.

Dysfunctional but developing democracy

The Ukrainian fairytale has been a consistently gripping drama, and we still do not know if there will be a happy end. Nevertheless, it is clear that Ukraine has made noticeable and important democratic progress since 1991. The path has not been linear. In fact, it has been closer to a roller coaster ride. When one examines Ukraine’s democratic progress, it is critical to analyze trends over 10and 20-year periods, rather than month to month – or even year to year. Too often, pundits focus on the situation immediately at hand and forget achievements made over time. Things in Ukraine are never as good – or as bad – as they seem. A sense of perspective is crucial to understanding where the country is, and which direction it is moving in. For example, in April of this year 60

About the author: Brian Mefford is a business and political consultant working in Ukraine since 1999. Mefford worked for ten years on a democracy and governance program for the International Republican Institute (IRI), and later as an adviser for former Ukrainian President Viktor Yushchenko. He is currently a Senior Non-Resident Fellow at the Atlantic Council’s Dinu Patriciu Eurasia Center many pundits were deeply disappointed with the choice of successful mayor and parliamentary speaker Volodymyr Groysman as the country’s new Prime Minister. They would much rather have seen the undeniably brilliant and accomplished Finance Minister Natalie Jaresko appointed as PM. This frustration was perfectly understandable, but it is worth remembering that just ten years ago, the choice facing Ukraine had been between Orange Revolution villain Viktor Yanukovych returning as Prime Minister, or dismissing parliament and forcing new elections. This is clearly progress.

Ukraine’s revolutions must also be viewed as part of a bigger picture. Retrospectively, it is clear that the Orange Revolution was the moment when Ukraine confirmed its independence from Russia. Euromaidan was about Ukraine making a decisive European civilizational choice. Without the Orange Revolution, there could never have been a Euromaidan Revolution.

Now that Ukraine has come of age, what does the future hold? The path ahead towards greater European integration will be difficult to navigate. Ukraine still faces many major challenges, but the experiences of the past 25 years will prove invaluable. As the Greek philosopher Heraclitus said, “No man ever steps in the same river twice, for it’s not the same river and he’s not the same man”.

Ukraine at 25 is not the same country as it was at 10, 15 or 20 years of age.

Ukraine today is stronger, wiser, and more united than at any time in its postSoviet history. This only becomes evident when you move beyond the everyday hype and look at the country’s progress from a longer-term perspective. I predict that a decade from now, people will look back with pride at the democratic and European country they have built, knowing that the best is yet to come. www.bunews.com.ua

Balancing acts and European ambitions

Ukraine has spent past quarter century trying to reduce Russian dominance while engaging the West For the past 25 years of Ukrainian independence, the country’s most consistent foreign policy priority has been to escape from the Kremlin orbit and return to the European family of nations. This escape bid has repeatedly failed due to a number of factors, primarily the weakness of the Ukrainian position and indecision among the country’s potential Western partners. For extended periods, the Ukrainian authorities have also sought to balance between Russia and the Western powers, seeking advantages from both sides while committing to neither.

As Ukraine marks 25 years of independence, the country is closer than ever to succeeding in its bid to break out of the Russian orbit. The issue is far from settled, but Ukraine has made more progress towards Western integration in the past two years than in the previous 23 years combined. At the same time, Ukraine finds itself having to fight against aggressive Russian opposition to the country’s Western course.

The indecisiveness of the West is also an increasingly important factor in this process. The mood of indecision has only intensified following recent anti-EU referendums in the Netherlands and the United Kingdom, the rise of Donald Trump in the US, and the refugee crisis across the Europe. Ukraine’s bid for European integration could hardly have come at a worse time.

In order to understand where Ukrainian foreign policy is heading, it is worth looking at the paths chosen by each of the country’s five presidents.

1991–1994: Leonid Kravchuk

Ukraine’s first post-Soviet president was also the country’s last communist era leader. This continuity says much about the lack of fundamental change in 1991. Nevertheless, Leonid Kravchuk takes credit for overseeing what was in many ways a remarkably civilized divorce with Russia. He did so in a largely unsympathetic international environment. When Ukraine declared independence, there was no expectation of major support from the West. On the contrary, many remembered the discouraging words of US President George H. W. Bush in his infamous ‘Chicken Kiev’ speech on 1 August 1991, when he came to Kyiv and warned Ukrainians against ‘suicidal nationalism’.

Kravchuk’s first major achievement was the establishment of the Commonwealth of Independent States (CIS), a development that marked the final death of the Soviet Union. Crucially, he resisted efforts for the CIS to include a joint currency and joint armed forces, thereby greatly reducing its stature and protecting Ukraine’s fledgling independence.

One of the thorniest issues Kravchuk faced during the breakup period with Russia was over the status of Crimea in general, and the Soviet Black Sea Fleet in particular. Crimean separatism flared up in the early 1990s and remained a challenge throughout Kravchuk’s presidency. The redistribution of the Black Sea Fleet and the presence of the Russian Navy at Sevastopol would also dog Kravchuk until he left office. Nevertheless, Kravchuk managed to avoid open conflict with Russia and steered Ukraine through the volatile early years of independence intact.

Kravchuk was also one of the driving forces behind Ukraine’s unilateral nuclear disarmament, initiating processes that would culminate in the Budapest Memorandum of 1994. Many regarded this step as advantageous because it helped secure better terms of partnership with the West, but it backfired disastrously in 2014 when Russia unilaterally broke its commitments to respect Ukrainian territorial integrity and attacked the country.

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1994–2004: Leonid Kuchma Kuchma is Ukraine’s only two-term president. During his ten years in office, his foreign policy trajectory took all manner of twists and turns. Kuchma is regarded the father of the so-called multi-vector foreign policy – a strategy of maneuvering between Russia and the West. He won election on the back of pro-Russian rhetoric, which helped him to ease tensions with Russia. Separatism in Crimea fizzled out, while the redistribution of the Black Sea Fleet was completed. A major Treaty of Friendship and Cooperation between Ukraine and Russia was signed in 1997, settling a wide range of contentious issues and seeming placing relations on a sound footing.

Kuchma then won reelection in 1999 on a nominally pro-Western ticket, resoundingly defeating the Communist Party leader. He laid the groundwork for closer cooperation with NATO, and began building ties with the European Union. Kuchma’s pro-Western policy soon faced problems due to a series of scandals including the murder of a prominent opposition journalist in Kyiv and the sale of prohibited air defence systems to Saddam Hussein’s Iraq. As he became increasingly isolated from the West, Kuchma once more sought closer ties with Moscow. He announced his intention to join the Russia-led Common Economic Space (CES) and backed the pro-Russian Viktor Yanukovych as his anointed successor in 2004.

Towards the end of his ten-year reign, he also rejected the policy goals of NATO and EU membership, dismissing them somewhat unconvincingly as irrelevant issues.

2005–2010: Viktor Yushchenko

Yushchenko came to power thanks to the 2004 Orange Revolution. These mass protests erupted over massive vote fraud, but they also reflected deep-seated frustration with Ukraine’s failure to make the transition from Soviet authoritarianism to European democracy. Yushchenko soon restored Ukraine’s proWestern course, making NATO and EU membership official policy objectives.

This was broadly popular – especially with young and middle class Ukrainians – but it also brought him into direct confrontation with Russia.

Yushchenko’s bold foreign policy plans made headlines but they did not bring results. His domestic position significantly weakened following the 2006 parliamentary vote, which allowed Orange Revolution villain Viktor Yanukovych to make an unlikely comeback. Internationally, Ukraine’s EU partners were wary of an increasingly resurgent Russia and cautious of aggravating the dangerous mood of EU enlargement fatigue that gripped much of Western Europe after to the expansion of the European Union in 2004.

At the 2008 NATO summit, Vladimir Putin was able to ally with Germany’s Angela Merkel and France’s Nicolas Sarkozy to block any membership invitation for both Ukraine and Georgia. Within months, Russian tanks were rolling into Georgia. Yushchenko backed Georgia in its confrontation with Moscow, thus cementing his place on the Kremlin Parthenon of anti-heroes.

2010–2014: Viktor Yanukovych

It has become routine to depict Viktor Yanukovych as a Kremlin puppet.

However, in many ways, his initial foreign policy was an attempt to return to the multi-vector strategies of the Kuchma era. He officially abandoned Ukraine’s NATO membership ambitions and embraced non-aligned status, but continued the process towards a European Union Association Agreement initiated during the Yushchenko presidency. www.bunews.com.ua

2014–present: Petro Poroshenko

Poroshenko came to power with the most decisive pro-European mandate of any Ukrainian leader. He won majorities in every single Ukrainian oblast with a campaign that explicitly positioned him as the champion of the proEU Euromaidan Revolution. His first major act was the signing of the EU Association Agreement. He has since managed to craft a series of international alliances, placing Ukraine far closer to the top of the geopolitical agenda than it has ever previously been.

With the West determined to restrain a revanchist Russia, Poroshenko has been able to secure significant financial, diplomatic and technical support for Ukraine while also gaining widespread backing for the country’s EuroAtlantic integration. However, there are limits to this support. Financial aid has not been overwhelming, while subjects such as NATO and EU membership remain off the table. Indeed, even the issue of visa-free EU travel for Ukrainian citizens remains unresolved, despite Ukraine complying with all requirements.

While the West hesitates, Russia continues to employ spoiling tactics. The hybrid war in eastern Ukraine keeps the country destabilized, while the Kremlin also works hard to dissuade the West from supporting Ukrainian integration ambitions. These destructive tactics have failed to derail Ukraine’s westward trajectory, but this will not prevent the Kremlin from continuing. Ukraine is now closer than ever to escaping from the Russian orbit, but this historic process remains under threat. Experience suggests it will fail once again if Ukraine does not receive the support of the entire Western world.

ukraine at 25

Ending Ukraine’s NATO membership flirtation was a big win for Moscow. The Kremlin also gained a 25-year extension on the lease of the naval port at Sevastopol, keeping the Russian Black Sea fleet in Ukrainian waters until 2042.

These concessions to the Kremlin fuelled domestic criticism of Yanukovych – especially as they came in tandem with repressive domestic measures that mirrored similarly anti-democratic policies championed by Putin. Nevertheless, Yanukovych continued to champion the country’s European trajectory and reiterate his intention to conclude the long-awaited EU Association Agreement. Weeks before the document was due to be signed, he reversed his position, citing unfavorable terms and Russian pressure. Brussels was shocked. Ukrainians took to the streets in protest. When he finally ran out of domestic allies, Yanukovych fled to Russia, where he remains to this day.

About the author: International relations specialist Ihor Solovey is head of the international department at online publication Leviy Bereg (LB.ua)

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Five icons of Ukrainian independence

Ukraine has changed dramatically over the past quarter century of independence. The legacies of foreign rule and imperial domination have made the country’s quest for an inclusive identity particularly challenging, but shared national experiences since 1991 have given Ukrainian society a sense of self that became particularly apparent in spring 2014, when it proved crucial in derailing the Kremlin’s ‘novorossia’ partition project. As Ukraine celebrates 25 years as a sovereign state, Business Ukraine magazine offers up five key icons of independence that epitomize Ukraine’s ongoing state-building progress.

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1. Maidan Nezalezhnosti In the early years of Ukrainian statehood, Kyiv’s Independence Square was a symbol of the pseudo-independence Ukraine enjoyed following the Soviet collapse. Dominated by the Moscow Hotel on one side and a huge Soviet hammer and sickle on another, it seemed more like a monument to lingering Kremlin influence than the central square of a free nation. The revolutions of 2004 and 2014 changed all that. Maidan served as the focal point for both the Orange Revolution and the Euromaidan Revolution, placing the square firmly at the centre of the Ukrainian historical narrative and imbuing the word

‘Maidan’ with international recognized political potency. No longer a bad joke, today’s Maidan is the spiritual soul of the independent Ukrainian nation and a source of nightmares in Moscow.

2. Holodomor Memorials

During the Soviet era, the Ukrainian famine of the 1930s had been one of the great taboos. Initially denied completely, it was later attributed to natural causes. Since 1991, recognition of the famine as a deliberate act of genocide against the Ukrainian people has played a major part in the country’s postSoviet healing process. While other aspects www.bunews.com.ua

3. New Police

For the first two decades of Ukrainian independence, the country’s militia stood out as a symbol of continuity with both the Soviet past and the Russian present. The uniforms of Ukraine’s law enforcement officers differed little from those worn by their Russian contemporaries or their Soviet predecessors, while ubiquitous associations with incompetence and corruption strengthened perceptions of a country still firmly rooted in the Kremlin orbit. All that changed with the 2015 launch of the Patrol Police – the first stage in the massively ambitious postMaidan reform of Ukraine’s law enforcement organs. Dressed in modern uniforms reminiscent of the NYPD, the Patrol Police brought a new ethos of public service to Ukrainian policing and have become the unofficial face of the new Ukraine. The public response to this police reform has been emphatic, reflecting the widespread hunger for change in Ukrainian society and continued readiness to embrace the ‘rule of law’ values that drove both the Orange Revolution and the Euromaidan Revolution.

4. Ukrainian Premier League Ukraine’s post-Soviet national evolution has often been a grassroots affair, with few national institutions gaining widespread credibility. The exception is the Ukrainian Premier League, which has become a popular national icon capable of attracting regular international recognition. This success is partly the result of Ukraine’s historic pedigree as a regional hotbed of footballing excellence. It is also partially due to the considerable investments made by regional oligarchs into their local clubs – a kind of informal social tax that was particularly popular during the 2000s. This influx of often ill-gotten oligarchic wealth helped July - August 2016

make Ukrainian football clubs among the richest in Eastern Europe, boosting their ability to hold on to domestic talent while attracting international stars of increasingly high caliber. The Ukrainian Premier League has regularly featured among Europe’s top ten football leagues, with UPL teams consistently competing in the latter stages of UEFA club competitions. High points have included Dynamo Kyiv’s march to the UEFA Champions League semi-finals in 1999, and Shakhtar Donetsk’s 2009 UEFA Cup triumph. However, it is on the domestic scene that the league has had its biggest impact.

Fans of UPL teams have travelled across the country for leagues games for the past 25 years, building up rivalries and friendships between clubs along the way. While the so-called ‘ultras’ associated with each club often engaged in hooligan violence, they all shared a sense of patriotism that was not always mirrored in broader Ukrainian society.

This patriotic mood came to the fore during the Euromaidan Revolution, when fans from UPL clubs across the Yanukovych heartlands of southern and eastern Ukraine came out in support of the protests and offered protection from government thugs.

ukraine at 25

of historical revisionism have proved particularly painful for Ukrainian society to digest, few in Ukraine have opposed efforts to honour the millions who perished in Stalin’s most monstrous crime. The process began in the early years of independence, and gained significant momentum during the presidency of Viktor Yushchenko. Holodomor memorials now dot the country, serving to remind the present generation of the terrible price paid for the survival of the Ukrainian nation.

5. Ukraine’s Volunteer Battalions

When Russia launched a hybrid war against Ukraine in early 2014, few expected the country to survive. There was no Ukrainian Army to speak of, and the government was in post-revolutionary disarray. What happened next was a miracle of truly historical proportions. Thousands of ordinary Ukrainians from all walks of life set off to the front lines in east Ukraine as volunteers. They received support from an even larger grassroots volunteer movement that supplied them with clothing, food, medicines and anything else that could be bought, begged, or borrowed. Ukraine’s volunteer army played a key role in stemming the tide of Putin’s hybrid onslaught, linking up with threadbare state forces to limit the Russian incursion to less than half of Donetsk and Luhansk oblasts. It was an army of Russian and Ukrainian speakers, Orthodox Christians and Greek Catholics, Jews and Muslims, reflecting the cosmopolitan complexity of modern Ukrainian society. This volunteer army also mirrored Ukraine’s 25-year state-building experience, with ordinary Ukrainians making up for the shortcomings of the state via ingenuity, initiative and sheer strength of character.

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in review

A Corner of Canada in Kyiv Perched high on the hills of Kyiv’s Pechersk district is a little piece of Canada where you can sample classic North American culinary treats and party the night away fuelled by maple syrup cocktails. Kyiv’s Canadian Club opened for business in April 2016. Venue management say the Canadian theme is a tribute to the endless expanses, frontier freedoms and multicultural cosmopolitanism associated with the country.

The location is conveniently central, overlooking the hustle and bustle of downtown Kyiv’s Lesya Ukrainka Boulevard but sufficiently distant from the street to avoid the distracting drone of passing traffic. Instead, guests can enjoy excellent second floor views of city life from the comfort of cozy sofas and elegant leather armchairs. It is a suitably large venue with an open-plan design reminiscent of the vast open spaces of Canada itself. Industrial minimalism and bare concrete pillars mix with contemporary mural art to create an understated hipster feel. A number of giant maple leaf decorative elements add to the Canadian ambience.

The menu reflects Canada’s diverse heritage, with a wide selection of Anglo-American items alongside French Canadian favorites. Authentic options include Pate Montreal, Canadian Trout, pancakes with maple syrup, and a selection of hearty Tourtiere pie starters. Meat lovers will enjoy the choice of steaks and other carnivorous treats on offer. Portions are generally large, with a wide range of sauces available to complement your order. Meanwhile, the Ukrainian contribution to the Canadian cultural mosaic makes its presence known in a range of dishes including a special Slavonic selection dubbed ‘Recipes of Wayne Gretzky’s Babushka’.

Foodies with a hunger for knowledge should

visit the Canadian Club on any evening from Tuesday to Saturday, when the venue has its own expert Culinary Commentator providing running commentaries on menu selections.

Families can also take advantage of the Club’s playroom, which is free for customers and comes complete with babysitter supervision daily from 11:00 until 22:00.

In addition to its dining options, the Canada Club is also a popular social spot that comes alive after dark and attracts more than its fair share of Kyiv’s beautiful crowd. The venue hosts some form of evening entertainment on most nights, with live music performances and visiting DJ sets among the most popular attractions. Things usually begin heating up after 21:00. Naturally, the bar menu includes Canadian whiskeys as well as five different maple syrup cocktails.

The Canadian Club is a welcome addition to the Kyiv going out scene, and makes a change from the ensemble of more predictable

themed venues like Irish pubs and Americana burger joints. Canadian citizens will find this venue a particularly welcoming place – all Canadian passport holders are entitled to a 20% discount on the entire menu.

Canadian Club

23b Lesya Ukrainka Blvd.

Tel.: +38-098-2012525 Open: daily from 11:00 until last client

Letters to the editor: editor@bunews.com.ua Advertising inquiries: +38-067-4032762 Business Ukraine is distributed every month at a wide range of leading business centres, hotels and restaurants in Kyiv and throughout Ukraine as well as on incoming flights to the Ukrainian capital.

Registration: KV 15006-3978PR Published by: Open Borders Media Director: Susanna Dickinson

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