Business Ukraine September 2015

GAMBLING ON UKRAINE

September 2015

Can return of Ukrainian gaming industry help fuel country’s economic recovery?

ITALY IN UKRAINE Ukraine’s long-standing love affair with all things Italian: from architecture and investment to fast cars, finance, fashion and fitness

Also inside: Monthly American Chamber of Commerce in Ukraine Newsletter

September 2015 This month Business Ukraine magazine offers a special focus on the Italian-Ukrainian bilateral relationship.

Italy is the number one destination in the EU for Ukrainian exports and a key investor into the Ukrainian economy.

Ties between the two countries also encompass a shared love of everything from fine dining and high fashion to opera and football.

From the editor: time to acknowledge Ukraine’s military miracle Eighteen months ago, when Russia launched a hybrid war in east Ukraine, the Kremlin was confident that its proxies would face little or no military resistance. At the time, this seemed like a reasonable assumption. Ukraine had just surrendered Crimea without a fight and could muster just 6,000 troops. The Ukrainian army, in practical terms, had ceased to exist.

The events of the intervening one and a half years represent nothing short of a military miracle. Today, the Ukrainian army boasts hundreds of thousands of soldiers, the majority of them battle-hardened combat veterans. They have succeeded in holding a vast front line against Russian-backed opponents who are more heavily armed than just about any conventional army in today’s Europe. The tide of Russian expansionism, which in spring 2014 threatened to sweep all the way to Kyiv, has been stemmed, leaving the Kremlin with an undersized enclave it does not want and a war it cannot win.

Ukraine’s unlikely military recovery has been a miracle of volunteerism. Thousands of ordinary Ukrainians have volunteered to join the defence of the country, while millions more have contributed to the fundraising and supply efforts that have helped bridge the gap created by the chronic lack of state support for the armed forces. The result has been the creation of a ‘People’s Army’ in the truest sense of the term.

The remarkable tale of Ukraine’s against-all-odds fight back has yet to receive the coverage it warrants. Instead, media attention has focused on fringe political extremism, top brass corruption, draft-dodging, supply woes, and individual military setbacks. While these concerns are all valid, they are mere footnotes when compared to the far bigger story of Ukraine’s military resurrection and its impact on the geopolitical balance in the region. Without the armed resistance Ukraine has mounted in the east of the country, Russian tanks would likely have reached the Dnipro River by mid-2014, and the Kremlin would now be negotiating a new status quo with a trembling Brussels while firmly entrenched on the borders of the EU itself.

It is time to recognize the role Ukraine’s military miracle has played in blunting Putin’s imperial aggression. Sanctions, diplomatic bluster and falling oil prices have all attracted their fair share of international headlines, but the unexpectedly high price that Russian commanders have had to pay for every inch of Ukrainian land has been decisive in persuading the Kremlin to scale down its ambitions. Economic costs were no doubt anticipated when the Kremlin launched its hybrid war campaign, but nobody expected Ukraine to put up such a fight. In contrast to the defiant public stance the Kremlin has adopted towards sanctions, Russia has gone to extreme lengths to conceal the deaths of Russian soldiers in Ukraine. It is reasonable to assume that a fear of far greater numbers of casualties has played in a key role in preventing renewed escalations.

The cost to Ukraine has also been tragically high. Ukrainian society will carry the scars of Putin’s hybrid war for generations, and the scale of the psychological damage has yet to be fully appreciated. Understandably, there is little current appetite for triumphalism. Nevertheless, there is no escaping the huge debt owed to the men and women behind Ukraine’s military miracle. Their valor has laid the foundations for the new Ukraine, while shielding the rest of Europe from the Kremlin’s revisionist doctrine of occupation and annexation. History will eventually be kind to these unsung heroes, but those of us who are lucky enough to live in Ukraine do not have to wait so long. We have the chance to express our gratitude on a daily basis, whenever we see a member of the armed forces or a volunteer.

Such small gestures may seem insignificant given the historic scale of the events gripping Ukraine, but it is the least we can all do.

Peter Dickinson Business Ukraine magazine

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September 2015

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politics

Local vote, international implications

Ukrainian local elections preview: decentralization gives October vote added importance

On 25 October, Ukrainian voters will elect mayors and local councils under a new open party list system. The new open list system means that voters will be able to choose the candidate’s place on the party list rather than have it prearranged by party bosses. In addition, the new election law raises the barrier from three to five percent for representation on councils, while simultaneously reducing the number of seats on councils by 30%. It also establishes ‘recall’ provisions for elected officials, institutes a 30% quota for women on party lists, and institutes mayoral runoffs in cities with over 90,000 populations. The likely passage of decentralization by the Ukrainian parliament later this year will give the newly elected mayors and councils more local autonomy and authority than ever before, a development that gives these local elections significant national and international significance. If increased powers are passed to regional officials, then the winners of the 25 October vote will be the first in a new generation of local Ukrainian politicians to wield significantly more authority.

Will Klitschko remain king of Kyiv?

Vitaly Klitschko is seeking to win re-election as mayor of the Ukrainian capital following his decisive victory last May. Just sixteen months ago, the events of Euromaidan were still fresh in voters’ minds. However, now Klitschko is no longer leading large protest rallies, but focusing on mundane mayoral tasks like street lights and stray dogs. The man who was once leading presidential preference polls is now facing an electorate that is feeling the effects of a nationwide recession. While Klitschko hasn’t made any major mistakes, the electorate is in a foul mood which has opened the door to challenges to his re-election.

Samopomich’s Sergiy Gusovskiy was the first real opponent to enter the race.

Gusovskiy, a city deputy and owner of some of Kyiv’s most popular restaurants, is banking on his party’s strong performance in the capital last year during the parliamentary elections, when they garnered 21% of the vote, to propel him into the runoff. Klitschko, as a continuation of his deal last year with Petro Poroshenko to block Yulia Tymoshenko from the presidency, will run as the can6

didate for the President’s Solidarity Party. That alliance sidelined Tymoshenko politically in 2014, and her party received just 5% of the vote in the Parliamentary election last October. However, Tymoshenko’s populist rhetoric has found support with disappointed voters, and her rating has since doubled. As a result, Tymoshenko was believed to be considering entering the race, but now appears to be aiming at a return to the Premier’s office. Her Motherland Party has performed well in Kyiv historically (winning 31% of the vote in 2012) and any candidate that they field will have a chance to make the runoff against Klitschko.

Rematch in Odesa

Incumbent Mayor Gennadiy Trukhanov faces a rematch with former Mayor Eduard Hurvits in Ukraine’s strategically crucial Black Sea port city. The two squared off last May, and despite a ‘Shuster Live Exit Poll’ showing Hurvits as the clear winner, Trukhanov was declared the victor after a suspicious vote count lasting several days. Meanwhile, the appointment of Mikheil Saakashvili as Odesa Governor in June has added an extra element of intrigue to the political situation in Odesa.

Trukhanov, a former Party of Regions MP, has managed to consolidate the proRussian electorate without being perceived as pro-Kremlin. He also maintains the support of oligarch Igor Kolomoiskiy, which is believed to have played a critical role in his election last year. However, Trukhanov’s friendships with Igor Markov of Russia’s Rodina Party (awaiting extradition in Italy) and local alleged organized crime figures remain liabilities. Trukahnov’s main opponent, 67-year-old Eduard Hurvits, has a long history as a former Odesa city mayor.

Hurvits was first elected in 1994, earning a reputation as an effective city manager. He was re-elected overwhelmingly in 1998 - only to see his election overturned by the courts. Hurvits ran and lost in 2002, but a court ruling in 2005 de-registered his opponent and declared him the rightful winner. Hurvits then won easily in the 2006 vote, but in a particularly fraudulent 2010 election, he : www.bunews.com.ua

Odesa politics is traditionally personality driven, and so it comes as no surprise that both Trukhanov and Hurvits are campaigning without major party labels.

Trukhanov will run under the ‘Belief and Actions’ Party, using the same logo as the recently banned Communist Party. Meanwhile, Hurvits is running as an independent. The race has been complicated by the expected entry of a Saakashvili-backed candidate into the race, who is likely to run under the banner of Poroshenko’s Solidarity party. Though Hurvits is an ally of Vitaly Klitschko, the new chairman of Solidarity, the Saakashvili team is searching for a younger candidate. Local polls show only Trukhanov and Hurvits in double digits, with the President’s party in single digits. Thus, even with Saakashvili’s support and possible administrative resources, the race is likely to be decided in a runoff between Trukhanov and Hurvits.

‘Teflon’ Kernes still the man to beat in Kharkiv

Controversial incumbent Kharkiv Mayor Gennadiy Kernes is in a surprisingly strong position to win re-election. His flirtation with separatism, pending criminal charges for his role in pressuring Euromaidan activists, and his survival of an assassin’s bullet, all seem to have added to his allure. A recent poll put him at 64%, placing him head and shoulders above all opponents. Though Kernes’s election win in 2010 over current Interior Minister Arsen Avakov was narrow and questionable, Kernes has since consolidated his support within the business community and the city’s pro-Russian community. His primary opponent is businessman and former Deputy Governor Yuri Sapronov. Sapronov served under fugitive former Ukrainian President Viktor Yanukovych, but is probably best known for owning Ukraine’s largest golf course. Igor Baluta, the first Kharkiv region governor after Euromaidan, may also enter the race as the candidate for Tymoshenko’s Motherland Party.

With the Opposition Bloc ineligible to compete in the Kharkiv elections due to a registration technicality, Kernes is planning to run as the candidate for the Kolomoiskiy-backed Renaissance Party (Vidrozhennya). A Kernes win would be a key victory for Kolomoiskiy in Ukraine’s second largest city, since the oligarch has been locked in a political battle with President Poroshenko for much of 2015. With Kernes as a clear favorite for re-election, the government’s best chance of replacing him appears to be via the courts rather than the ballot box.

Kernes faces two court cases for alleged crimes against activists during Euromaidan. However, no court rulings are expected until after the New Year.

Lviv Mayor Sadoviy expected to keep his job

Incumbent Lviv Mayor Andriy Sadoviy, who is also Chairman of Samopomich Party, is a hot favorite for re-election. While Sadoviy seeks a third term, his national profile continues to grow, leading some to argue that he is not focused enough on local issues. In addition, the recent refusal of Samopomich to support President Poroshenko’s decentralization plans in Parliament has encouraged Solidarity to field MP Oksana Yurinets as a candidate for mayor. Poroshenko Bloc Parliamentary Deputy Dmytro Dobrodomov is also running, but with the People’s Control Party. Finally, Sadoviy’s long-standing feud with Svoboda Party has led former Deputy Parliamentary Speaker Ruslan Koshulynskiy to enter the race. Koshulynskiy has significant local support, winning considerable respect for volunteering to serve in the Ukrainian military in the Donbas. Despite this array of challengers, Sadoviy still remains the front runner even though the race is likely to go to a runoff.

Two unpopular favourites in Zaporizhia Incumbent Zaporizhia Mayor Oleksandr Sin faces a rematch against local businessman and City Council Deputy Volodymyr Kaltsev in this autumn’s mayoral election. Sin was the candidate from Motherland Party in 2010, when he secured a surprise 37-31% victory over Kaltsev (then the Party of Regions candidate). However, when Sin promptly quit Motherland and joined Regions after the election, he burned bridges with many of his strongest supporters.

The damage done by this move has not yet healed, and many local voters consider Sin to be a ‘sell out’.

Meanwhile Kaltsev has also since left the Party of Regions and is now the candidate for the constructive opposition party Our Land (‘Nasha Krai’). This party is the brainchild of the Poroshenko administration and seeks to offer an alternative to the Opposition Bloc for voters in the east and south of the country.

The unpopularity of both Sin and Kaltsev has paved the way for the emergence of a third candidate, Zaporizhstahl executive Volodymyr Buryak. Campaigning under the banner of the Opposition Bloc and enjoying the financial backing of Rinat Akhmetov, Buryak stands a good chance of making the runoff against one of the two main rivals.

politics

: was finally defeated.

The battle for Dnipropetrovsk

Ukraine’s third largest city is home to oligarch Igor Kolomoiskiy. While Kolomoiskiy’s 2014-15 term as regional governor was generally praised, his ongoing battle with President Poroshenko will make this autumn election additionally interesting. Last October, four-term incumbent Dnipropetrovsk Mayor Ivan Kulichenko was elected to Parliament with the Poroshenko Bloc. Kulichenko, age 60, was first elected in 2000, and then re-elected in 2002, 2006 and 2010 with the Party of Regions. However, as evidence of the old saying that ‘politics makes strange bedfellows’, Kulichenko appears to be working closely with the local Opposition Bloc led by former Yanukovych-era regional governor and current MP Oleksandr Vilkul. If the administrative apparatus of President Poroshenko combines with the financial resources of the Opposition Bloc in the runoff, either Kulichenko or Vilkul will give Kolomoiskiy confidante and MP Borys Filatov a strong challenge. Filatov, a former Deputy Dnipropetrovsk Governor, is currently an independent Member of Parliament aligned with the Ukrop Party. Party affiliations mean little on this occasion, as this race will likely become a major battleground in the ongoing struggle between President Poroshenko and Kolomoiskiy.

Incumbent favoured in Cherkasy

Incumbent Cherkasy Mayor Serhiy Odarych, who represents the small Free Democrats Party, will face a host of challengers as usual, but remains favorite for re-election. The owner of the Cherkasy professional basketball team, he was elected in 2006 and re-elected in 2010. However, an attempt to force oligarch Dmytro Firtash to pay local taxes in 2013 led to criminal charges and his impeachment. Following Firtash’s arrest last spring, Odarych was cleared and returned triumphantly as Mayor in last year’s elections. Tymoshenko’s Motherland Party, Odarych’s long-time key local rivals, will field Anatoliy Bondarenko again. He lost to Odarcyh last year. City Council Secretary Oleksandr Radutskiy is likely to be the Solidarity Party candidate. A runoff here is expected, but Odarych stands to prevail.

About the author: Brian Mefford is a business and political consultant working in Ukraine since 1999. Mefford has previously worked for the International Republican Institute and former Ukrainian President Viktor Yushchenko. Mefford opened the IRI office in Odesa in 2008 and he is currently a Senior Non-Resident Fellow at the Atlantic Council’s Dinu Patriciu Eurasia Center.

September 2015

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agriculture

Promoting Kharkiv agricultural potential Ukraine’s second city hosts international agrarian forum amid Ukrainian agriculture boom On 15-17 October Kharkiv International Airport will play host to the second annual AGROPORT 2015 International Agrarian Forum. The event, which is expected to attract over 10,000 visitors and involve more than participating companies, is part of mounting efforts to promote Ukraine’s status as an global agricultural superpower and build additional bridges with international partners. Focuses of this year’s forum will include dedicated sessions on agricultural cooperation with Germany and Poland – highlighting the growing levels of international interest in the Ukrainian agricultural sector, which continues to register impressive growth despite the broader malaise currently gripping the Ukrainian economy. As Kharkiv prepares to welcome agriculture sector executives from across the region, Business Ukraine magazine spoke to the Director General of the city’s flagship Kharkiv Tractor Plant, Vladislav Gubin, about his vision for the continued growth and modernization of Ukraine’s potentially world-beating agriculture sector. Mr. Gubin argues that the development of Ukraine’s vast Soviet-era agro-industrial inheritance hinges on the appointment of a new generation of professionally qualified managers, and says that the future of Kharkiv Tractor Plant depends on strategic transition away from reliance on traditional CIS clients and towards greater penetration of global markets.

Much of Ukraine’s industrial potential remains hampered by mismanagement and a lack of post-Soviet investment. As the Director General of one of Kharkiv’s flagship industrial plants, what do you see as the priorities for improving the performance of Ukraine’s biggest industrial enterprises?

At present, everyone is engaged in the fight against corruption. My opinion is that the highest priority should be combating nepotism in order to allow for a new generation of professional managers to emerge. The government and private sector both need to introduce regulations and procedures to make sure appointees are qualified to perform in their positions. Inappropriate appointments should be classified as a threat to Ukraine’s national interests, and the government should be prepared to intervene if necessary. If we continue to invite international experts to aid the reform process while having amateurs working in senior positions, the results will be disastrous. Unofficial estimates suggest that up to 80% of senior positions in Ukrainian industry are currently occupied

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would allow us to continue expanding, because growth is only possible via increased exports to new markets. The global potential of our products is extremely high – we have entirely renewed our production line over the past two years and have brought the plant to a new level in terms of quality.

About the interviewee: Vladislav Gubin is Director General of Kharkiv Tractor Plant by unqualified people without the necessary education or professional experience.

You became head of Kharkiv Tractor Plant two years ago at the relatively tender age of 39. How difficult has it been to adapt to a role which has traditionally been held by significantly older professionals?

Young managers of major industrial enterprises are the exception rather than the rule in Ukraine.

In general, I support the idea of the top positions in major companies of this nature being occupied by experienced professionals. I was able to take on a leadership role at a relatively young age due to lots of hard work and thanks to the experience I was able to gain in a range of similar enterprises.

In global terms, people tend to reach their professional peak at around the age of 45, but for some it comes a little earlier. I continue to work with my departmental directors on a daily basis, and try to learn as much as possible from my team.

What are the current strategic objectives for Kharkiv Tractor Plant?

Kharkiv Tractor Plant is undoubtedly a global brand, but for the past two decades, our presence has largely been limited to CIS markets. Our goal is to develop the brand’s popularity throughout the world. Our current priorities are to expand our geographical reach and boost plant output.

The medium-term strategic objective is achieve a majority of sales outside of the CIS by 2020. This

What impact do global market trends have on your planning for the development of Kharkiv Tractor Plant?

Global food security will soon replace energy security as the key issue driving geopolitics. The world population is already around 7.5 billion people, and this figure will rise to 10 billion within a decade or so. At the same time, quality of life is improving and people require higher quality food. Everything indicates that global financial resources will increasingly focus on this sector. As a result, demand for agricultural machinery around the world is set to increase. This means more global expansion opportunities for Kharkiv Tractor Plant.

The conflict in east Ukraine has had a negative impact on the national economy and on major industrial enterprises in particular. How have you managed to adapt to the challenges presented by the ongoing conflict?

Everyone has suffered, but it is my job to minimize the risks our company faces and to make the right decisions in a timely fashion. We have focused on diversification of both suppliers and distributors, while also building a new sales and service network and developing direct sales. Our previous experience of risk management has proved useful in dealing with the current challenges. Working in the CIS region has taught us to explore unorthodox solutions in order to make sure we meet our production and delivery schedules. The risks which have always been inherent in doing business with Russia and the CIS are further evidence that we are moving in the right direction by looking to expand to world markets. Today our priorities are Asia and Africa. There has recently been a drop on demand for agricultural equipment on global markets, but Africa and Asia offer both stability and growth.

AGROPORT 2015 International Agrarian Forum Kharkiv International Airport 15-17 October Tel.: +38-050-4038844 agroport@aviabrand.com.ua

www.bunews.com.ua

Ukraine bets on return of gambling industry

Can legal gaming sector provide struggling Ukrainian economy with timely tax tonic?

The Ukrainian government is currently preparing to reverse the 2009 ban on the country’s gaming industry, paving the way for a new wave of casino and online gambling expansion that could provide a significant boost to the state budget. The return of legal gambling to Ukraine will be welcome news for the thousands who previously ran gamingrelated businesses in the country or worked in the gaming sector. However, it will also inevitably run into opposition from those who regard gambling as a social blight likely to exasperate the problems of poverty and addiction already prominent in today’s Ukraine.

The gambling industry initially flourished in postSoviet Ukraine, with casinos cropping up rapidly throughout the 1990s and serving as one of the cornerstones of the country’s fledgling nightlife scene. This growth suffered from a lack of regulation characterized by the twin presence of glitzy high-end casino clubs alongside a plethora of seedy low-end gambling dens packed with slot machines.

A tragic fire in one of these low-end emporiums in Dniropetrovsk in 2009 led to the introduction of a blanket ban imposed by then-PM Yulia Tymoshenko, forcing the industry to shut down virtually overnight.

Advocates for the return of legal gambling argue that the ban has not succeeded in preventing Ukrainians from actually gambling, merely leading to the creation of a shadow economy of unlicensed casinos operating with impunity while robbing the state of a potentially lucrative income stream. They claim that a properly regulated gaming industry could serve as a considerable asset for Ukraine, 12

generating budget revenues while boosting hospitality sector employment and attracting tourists to the country. These supporters of a legalized gaming industry face opposition from activists who regard the ban on gambling as a significant social policy victory that helped millions of ordinary Ukrainians struggling with the effects of gambling addictions and its associated ills.

Advocates of a renewed Ukrainian gambling industry clearly enjoy the support of many in the current Ukrainian government. Support has come from senior figures such as Prime Minister Arseniy Yatsenyuk and Finance Minister Natalie Jaresko, both of whom will be among the keynote speakers at a major forum on the gambling industry scheduled to take place in Kyiv in mid-October. The forum, entitled ‘Game On! Bringing the gambling industry back to Ukraine’, is the brainchild of British expat Glyn Thomas. Mr. Thomas has been based in Kyiv since 2007 and has over 20 years’ experience in the international gambling industry. He currently serves as Publisher and Chief Editor of Casino Life magazine, a role that he says puts him in touch with gambling organizations worldwide. Business Ukraine magazine spoke to Mr. Thomas about the agenda for the upcoming forum and his vision for the return of legal gambling to Ukraine.

What is your assessment of the current state of gaming in Ukraine?

Let’s be perfectly clear about one thing - gambling is here already. However, it exists either as an illegal industry in hidden-away casinos, or as a grey industry in the form of sports betting, which is taxed

and therefore tolerated. Then there are the unregulated, untaxed online casinos, and the poker clubs that are legal one minute and illegal the next. The whole idea of regulating the industry is one I have advocated for some time. This is partly to bring tax revenue, but also to make sure that the people get what they deserve and are treated fairly. I’m talking about a proper industry offering jobs and entertainment. It will bring investment directly and indirectly through tourism.

Something not mentioned often is the fact that the state of the gaming industry in any given country is often a good barometer of the maturity of that society in general. In France, the casino is part of the community. It is often where you get your first job.

It sponsors the local football team. It hosts art exhibitions, not drug-fuelled car chases in the car park.

What is the goal of the ‘Game On’ event?

We aim to bring international speakers to Kyiv so that the government can hear about good practice.

We also want to enable investors and operators to gauge the Ukrainian business climate. Nobody can realistically expect politicians to make laws for an industry they know nothing about. They cannot be expected to know how gambling works, so this will be a great opportunity to meet people who are practitioners. I have seen the draft legislation that has been prepared, and in its current state, I would describe it as ‘warmed-up soup’. What Ukraine needs is a spicy new Borscht. There is still time to change it.

What are the main options open to Ukraine as www.bunews.com.ua

What kind of impact could the return of the gaming industry have on the Ukrainian economy?

If the government chooses the corrupt model, they will be lucky to generate USD 10 million per year in additional tax revenues. If they opt for a properly regulated industry, budget revenues could be USD 100 million per annum while generating at least 250,000 jobs. If these additional tax revenues are employed to fund schools, hospitals and other socially important initiatives, then the positive impact will more than offset the fears over the negative social impact of problem gambling. However, I must admit that the danger exists of someone killing the golden goose – and eating it.

Which countries can Ukraine learn from when it comes to getting gaming regulations right?

Georgia is not a bad example, with licenses issued quickly and fees and taxes that are all very clear, albeit a little too high in my opinion. Ukraine should seek to adopt a hybrid approach. It is all too easy to dust off old laws restricting casinos to five-star hotels, or to borrow from other countries, but such approaches fail to take into account how much the industry has evolved. The world of gambling has moved on, and Ukraine needs to move forward too.

Gambling became a major social problem in post-Soviet Ukraine. What steps can be taken to make sure any renewed gaming industry avoids

September 2015

creating a new generation of addicts and associated social problems?

I am asked this question all the time. At this very moment, your son could already be gambling illegally in a basement club, or online via an unregulated gambling website based in Russia. If you regulate the industry, it becomes a lot more transparent and controllable. Modern gambling businesses tend to be run as proper companies.

Some are even stock market listed. They don’t want to squeeze every last kopek out of someone.

Hopefully the industry will also be regulated by a Gambling Commission, which will be responsible for education on responsible gambling and for addressing social issues.

Gambling is not a zero sum game. It is not a question of either having James Bond glamour or drugs and misery. There is a happy medium where people are able to gamble for entertainment. The politicians who cry populist slogans about how gambling destroys families are doing so to win votes. I want to give Ukrainian people a choice. Let them grow up and be responsible for their own decisions. Problem gamblers are here already and are already in trouble, but nobody can currently help them. Gambling, after all, is illegal.

How can transnational internet gambling benefit the Ukrainian economy?

Easy. Legalise online gaming and sports betting, but insist on strict license conditions that include the requirement to have a physical presence in Ukraine and to pay tax in Ukraine. All other internet gambling companies from outside Ukraine would be banned.

The Ukrainian gambling industry was closed down without warning in 2009. How can potential investors be convinced that this will not happen again?

Many in the international gaming industry are concerned about this issue. Ultimately, it is a question of good faith and appreciating why the gambling industry is returning to Ukraine, which is to generate tax revenues. The fact that the government is seeking dialogue with the gaming industry is a good indication that the return of the gambling industry is not being viewed as a short-term fix for budget shortfalls. Theoretically, any future government could choose to close the industry down again, but the chances of it happening again as it did in 2009, ‘purely coincidentally’ at the same time as Russia closed down its own gambling industry, are remote.

How could the Ukrainian gaming industry stand out from similar gaming options in other re-

industry

it considers opening up the national economy to the gaming industry?

There are many avenues and a number of taxation options, but in essence, Ukraine has two choices.

The country can follow the well-worn path of corruption and nepotism by dishing out gambling licenses to whoever pays under the table, then allowing the local oligarchs and criminal elements run the businesses and pay off the tax police, fire service, and health authorities. Then they can bring in fake slot machines, pay bad wages, falsify all the records and repeat. For Online gambling, the same principles can be applied, but operators of sites can also be permitted to keep all the revenue as somebody conveniently ‘forgot’ to include a requirement for servers to be based in Ukraine. This is what everyone cynically expects to happen.

The alternative is to do it properly by setting up an arms-length Gambling Commission remote from government. Let businesses pay a fair license fee to finance the Gambling Commission. Tax businesses a reasonable amount. Offer guarantees of no tax increases for 3 years, and then only by amounts linked to inflation. Appoint a Gambling Ombudsman. Enforce laws against illegal operators, regulate the business, and educate the public.

About the interviewee: Glyn Thomas is the Chief Editor of Casino Life magazine and the organizer of the ‘Game On’ gambling forum in Kyiv gional countries?

If the government listens to industry experts then Ukraine could become the best gambling jurisdiction in Eastern Europe. Reasonable taxation and strong enforcement against illegal operations will create an environment where gambling becomes part of the normal landscape and not something dirty. Ukraine has great IT and game developers already. These sectors will flourish in a legalized gambling environment.

What will be on the agenda at the ‘Game On’ forum?

We expect a number of senior government speakers including a business breakfast with Prime Minister Arseniy Yatsenyuk. On the casino side, we have Olympic Group CEO Madis Jaager, and Michael Boettcher of Storm Entertainment. Legally we will have the team at DLA Piper on hand to give pan-European views on legislation and tax. There will also be plenty of networking opportunities. We kick off in style with a delegate reception hosted by Macallan Whisky on the opening night. Our lead sponsor Parimatch will be hosting a VIP reception at a newly built sports betting complex in the heart of Kyiv that is already prepared for instant opening once Ukrainian legislation changes.

Game On! Bringing gambling back to Ukraine 13-14 October Hilton Hotel Kyiv www.ukrainegaming.com info@ace123.com

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Italian Ambassador to Ukraine Fabrizio Romano stresses importance of Ukrainian reform efforts

How has Italian investment in Ukraine under macro financial assistance programs evolved since 1991? drawn up by the EU, the World Bank, the During the 1990s, Italian companies inEuropean Bank for Reconstruction and Devested widely and established presences velopment, and the International Monetary in eastern European countries including Fund. Their support will have a stimulating Ukraine, mainly drawn by low labour costs. effect on investment in strategic sectors such Production was initially destined to be reas agriculture, infrastructure and energy. exported to Western markets, but in time, The latter is especially interesting to Italian this pattern changed. As sizeable personal companies, which are well qualified to confortunes were accumulated and average intribute to achieving Ukraine’s goals in terms comes grew, companies saw an opportunity of energy efficiency, diversification and the to invest with an eye towards the Ukrainian development of renewable sources. domestic market.

According to the State Statistics Service Based on your interaction with Italian of Ukraine, Italy currently holds the 10th investors, what are the key issues they place among 123 investor countries. In raise about the current business climate 2014 alone, Italy invested around USD 1 bilin Ukraine, and how has the investment About the interviewee: Fabrizio Romano is the Italian lion, which roughly corresponds to 2.2% of climate changed since the fall of the Ambassador to Ukraine the total volume of foreign investments in Yanukovych government?

Ukraine.

Italian businesses in Ukraine have had to The total value of Italian investments in Ukraine is actually considerably struggle with certain longstanding issues that have hampered investments higher than portrayed by official statistics, as the most significant invest- over the years, namely corruption, excessive bureaucracy and lack of transparments are often through foreign subsidiaries. This was the case in the acqui- ency or certainty concerning relevant rules and regulations, resulting in cases sition (for several billion dollars) by Unicredit Group of two Ukrainian banks of discrimination and market distortions. (including Ukrsotsbank), which was done through subsidiaries based in Po- The Embassy supports our entrepreneurs, and the Italian business community land (Bank Pekao) and Austria (Bank Austria), an operation which overall in Ukraine as a whole, by constantly raising the authorities’ awareness of such accounts for the second largest foreign investment in Ukraine’s history. In a problems. To that effect, I have had a range of meetings at the highest political similar way, the Danieli Group, which is involved in steel production and the and institutional levels, repeatedly voicing our concerns and those of our comconstruction of a sizeable and highly advanced steel mill in the surroundings panies. In turn, I have received reiterated reassurances that all necessary attenof Dnipropetrovsk for Interpipe Steel Group, operates in Ukraine through its tion will be paid to solving these delicate matters. The highly cooperative spirit Luxembourg subsidiary. Taking into account such cases, Italian investments with which our concerns have been met by the authorities, at both local and since 1991 stand at about USD 4 billion, placing Italy among the leading forstate levels, is perhaps the most obvious and welcome change that we have eign investors in Ukraine. experienced since February 2014.

The main Italian investments in Ukraine are concentrated in the financial/ banking sector, the energy market and the food industry, as well as construction What do you regard as the reform priorities for the Ukrainian government materials, home supplies and textiles. At the sectorial level, Italian companies as it seeks to make the country more attractive to Italian and other interin Ukraine can boast a strong presence in the traditional fields of excellence national investors? of Italian manufacturing such as textiles and clothing, furniture, construction I think that the priorities of the reform process are basically the same ones that materials (cement, tiles, other components), and industrial mechanics. make the business climate a challenging issue. Not coincidentally, the issues I previously mentioned have become some of the key points on the reform agenWhich areas of the Ukrainian economy are currently considered the most da of the Ukrainian authorities, which have shown a steadfast commitment topotentially attractive by Italian investors? wards modernizing the country in all fields while following Western standards Notwithstanding the difficult situation Ukraine is facing, there are several facand experiences as a beacon of political, economic and social development. The tors that still make Ukraine a highly attractive market for foreign investments. economic crisis the country is currently experiencing has given rise to further The country is rich in raw materials and metal ores. It has vast portions of fer- woes. However, Ukraine has shown incredible resilience. As we stand alongtile and arable land alongside an abundance of timber, and an educated and side the Ukrainian people and the country’s institutions, we urge the latter to qualified yet uncostly workforce. continue on the path of deep and comprehensive reforms, which I believe are On a related note, sizeable financial aid is being pumped into the economy paramount to an improved business climate.

September 2015

in focus: italy in ukraine

Italy in Ukraine

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in focus: italy in ukraine

Maintaining Italian-Ukrainian trade ties in challenging times Italian Trade Agency focuses on strengthening relationships but sees cause for reform optimism Ukraine is currently at a turning point in its history, facing a complex process of repositioning itself economically and geopolitically. In the economic and commercial spheres, the last 18 months have seen the country rocked by a severe crisis. However, when viewed from a broader perspective, economic opportunities long considered out of reach are beginning to seem accessible. The reform process still needs to gain momentum and consolidate, but we remain committed, together with Ukraine’s other international partners, to backing the government in its reform efforts.

Support for existing relationships

Italy has long been a stable economic partner of Ukraine, consistently ranking among the top ten investors and top six trade partners.

Trade between Italy and Ukraine is diverse, going far beyond mozzarella cheese and men’s shoes to embrace a wide range of products and sectors including machinery and chemicals, furniture design and agroindustry technologies. Much of this trade has been driven by the activities of thousands of innovative and export-oriented Italian SMEs. The mission of the Italian Trade Agency (ITA) office in Ukraine is to support Italian companies active here and to build commercial bridges between our two countries. The current challenges Ukraine is facing have inevitably affected the work of the ITA and pushed us to diversify our approach. The events of 2014-15 in Ukraine have created levels of uncertainty that have had a knock-on effect on many Italian companies, disrupting long-standing relationships with Ukrainian partners, while in some cases putting their presence in the country at risk.

The immediate risks posed by the conflict in east Ukraine are not the only challenge Italian investors are facing. The fall in the value of the Ukrainian currency, coupled with the possibility of debt default and rising inflation, have all had a negative impact on trade and investments, resulting in sharp contractions. In 2014, Italian exports to Ukraine fell by 35% while Italian FDI dropped by around 10%. In this climate of relatively high risks and uncertainty, many Italian entrepreneurs have adopted a wait-and-see approach to the Ukrainian market.

In order to counter these negative trends, the ITA has focused on maintaining ties between Italian companies and their Ukrainian counterparts. As the current crisis has forced many Ukrainian companies to cut budgets for promotional activities and trips, opportunities for potential partners to meet have become less frequent. In response, we have increased our support for Ukrainian delegations to Italy in order to participate in trade fairs and B2B events, or simply to meet potential partners. In cooperation with Italian national and regional institutions, and individual industrial associations and exhibition organizers, in 2014 we provided direct support for over 60 delegations to visit Italy. Ukraine’s

economic recovery will take time, but we are confident that positive Ukrainian attitudes towards ‘Made in Italy’ products will remain intact. Protecting our partnerships with importers and distributors is therefore a priority.

Developing new ties

The brighter side of the current Ukrainian situation is that long-awaited reforms in the economic sector now appear closer to reality than at any time in the past. This brings the promise of new opportunities for investors that should outweigh the costs of the past two years of instability and conflict. Improving the business climate and integrating into EU markets will eventually allow Ukraine to get the most out of the many national assets previously exploited for the benefit of a very limited number of market participants. It is no secret to say that for the past 24 years, the Ukrainian economy has remained relatively closed to foreign participation, with potential international investment discouraged by a problematic business environment which made many projects very attractive on paper, but unattainable in reality.

A quick comparison of basic FDI indicators across the region shows how far Ukraine has to go in order to bridge the gap. This disparity is especially striking given Ukraine’s size and its vast potential in terms of both human capital and natural resources. The gap between Ukraine and its EU neighbours also provides an indication of the growth possibilities with which the Ukrainian economy now enjoys. We look to the Ukrainian government to focus the reform process on those areas of the economy that offer the greatest potential for positive results.

This includes measures that will promote economic integration into foreign markets in general and the EU in particular. Two sectors that deserve specific mentions are energy and agriculture. These are clear strategic priorities for Ukraine, both offering scope for significant growth and large-scale international investment attraction. The ability of the Ukrainian authorities to unlock the country’s vast economic potential will initially be measured by the ability of the government to reform these sectors.

Ukraine’s transformation will also be dependent on the effectiveness of the support the country receives from its international partners. In order to play an active and productive role in this process, the ITA in Kyiv is working to help identify and define technical assistance projects that will best aid the reform process. The goal is to support assistance projects that can meet the needs of international companies looking to enter the Ukrainian market, while also speeding up the building of capacity among local industry so that it can better connect to global markets.

Despite criticism from some quarters over the slow pace of reform in Ukraine, it is now possible to talk about a growing sense of guarded confidence and positivity among Italian investors. We remain ready to take the necessary steps to raise awareness of Ukrainian business opportunities among Italian companies, and to help business communities in both countries build bridges as the situation improves. We look to the future with a sense of qualified optimism, but at the same time, remain very much aware of the challenges that remain.

About the author: Alessandro Gerbino (kiev@ice.it) is the Director of the Italian Trade Agency in Ukraine

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www.bunews.com.ua

70 YEARS OF INNOVATION Candy Group celebrates anniversary by showcasing Simply-Fi range of Wi-Fi connected appliances

The first revolution in consumer convenience came in 1945, when the first Candy washing machine was produced by the “Officine Meccaniche Eden Fumagalli” in Monza. The latest innovation is Simply-Fi, the first range of appliances connected to Wi-Fi and manageable remotely with a simple App. 70 years of Candy Group history and a glance at the future were the major themes of the company’s recent 70th anniversary celebrations, held at the Villa Reale in Monza. Identity, awareness and consolidation are the keywords for the future of the company’s brands (Candy, Hoover and Rosieres, in particular).

Since its foundation 70 years ago, the company has always been owned by the Fumagalli family, today in its third generation of management. The Candy Group has been able to overcome and benefit from numerous social changes including the postwar period, economic booms, the globalization of markets, the crisis of the new millennium and the technological revolution, always listening to the needs of consumers and constantly developing its

products with innovations to improve standards of living. The Candy Group has transformed this experience into invaluable corporate heritage. Thanks to its “Made in Italy” identity, the Candy Group today enjoys a reputation as a unique and identifiable brand in the world of domestic appliances.

Candy Group employs over 4,500 people across four continents. In 2014 the Group sold more than 6.9 million appliances and significantly improved profitability. The Group’s three key strategic sectors (washing, built-in and small domestic appliances) are all still growing.

Over the past 70 years, Candy Group has managed to maintain the essence of an Italian family business while expanding and developing into a major player on global markets. Today, Candy Group works with a wide range of international .. brands including Hoover, Iberna, Gasfire, Jinling, Hoover-Otsein, Rosieres, Susler, Vyatka, Zerowatt, Hoover-Helkama, Hoover-Grepa, and Baumatic.

For further information, please contact: Candy Hoover Ukraine LLC 0800-501-509 http://www.candy.ua/

in focus: italy in ukraine

Italy is Ukraine’s leading EU export partner

Ukrainian Ambassador to Italy Yevhen Perelygin on building bridges & countering Kremlin infowar

How extensive is Ukrainian economic activity in Italy, and which areas is this economic activity currently focused on?

The statistics clearly show the intensity of economic relations between Ukraine and Italy. This year Italy became the leading partner for Ukrainian exporters to the EU, according to the State Statistics Service of Ukraine. In other words, 15% of Ukrainian exports to the EU go to Italy. To make it clear, I can say that the volume of exports to Italy in financial terms is greater than the total exports to Austria, Great Britain, Portugal, Slovakia and France. Italy is also one of Ukraine’s top ten largest investors.

How do you expect full implementation of the EU-Ukraine Association Agreement to impact on Ukrainian-Italian economic ties?

Today we already feel the impact of unilateral application of the Association Agreement. First of all, it has affected agricultural supplies. Ukrainian grain, oil, and vegetables are very much in demand on the Italian market. However, certain agricultural products are unable to enter the Italian market due to EU quotas. I hope the EU will consider increasing quotas, at least for products with the highest demand such as honey, cereals, flour, and tomatoes. The full application of the agreement will affect the import of Italian products to Ukraine, but a transition period for ‘sensitive’ groups of products will allow Ukrainian enterprises to adapt to increased imports. In addition, the current average duty on imports into Ukraine within the WTO is 5.8% - in other words, tariff protection levels are already quite low. The growth of imports will also be affected by other factors, primarily the state Ukraine’s economy, which has suffered as a result of Russian aggression.

What role does the Ukrainian Embassy currently play in the promotion of Ukrainian business in Italy?

Among other trade-promoting agencies, the Embassy plays a specifically institutional role. We actively promote business between Ukraine and Italy, as well as facilitating the start-up and development of joint business projects. While we do not do such things as market research or building distribution chains for individual Ukrainian enterprises interested in the Italian market, we seek to create bridges for Ukrainian companies to reach Italian business partners.

This includes the organization of business forums, seminars, field visits, B2B and B2G round tables, search for and primary negotiations with potential Italian partners, and initial consultations for Ukrainian businesses looking to start activities in Italy. This institutional work creates many opportunities for cooperation. For instance, this year’s business forum in Rome, which was dedicated to energy efficiency issues, resulted in at least 5 Ukrainian-Italian business projects in the energy sector. We now plan to apply this experience to the agriculture and food processing industries, where Ukrainian producers are particularly strong.

The Embassy also provides information on Ukrainian products. We are currently setting up a new online platform (www.opengateitaly.com) which will allow Ukrainian and Italian businesses to connect.

Italy is seen as one of the most pro-Russian countries within the EU. Do you encounter sympathy for Russia within Italian politics and the Italian media, and how do attitudes towards Russia impact on your work representing Ukraine and Ukrainian perspectives?

The Italian government and parliamentary coalition fully support Ukraine, its 18

About the interviewee: Yevhen Perelygin is Ukrainian Ambassador to Italy territorial integrity and the course of reforms in the country. We are grateful to our Italian partners for this support, despite some calls for enhanced dialogue with the aggressor country. Nevertheless, business is business everywhere, and there is neither sympathy nor antipathy where we offer beneficial cooperation.

Which areas of the Ukrainian economy generate the most interest among representatives of the Italian business community?

Traditionally, the most attractive areas of the Ukrainian economy for Italian businesses are agriculture, energy and finance. While cooperation in the agricultural sector is largely a question of export and import operations, finance and energy generally attract investors and are a key area of institutional cooperation. A number of additional sectors are on the radar of Italian businesses, including machinery, production of ceramic tiles, shoes, textiles, household chemicals and so on. The Ukrainian market is attractive for investment, given the low labour costs and excellent human resources. Addressing security issues will be the starting point for the recovery of investment flows into Ukraine.

How has awareness of contemporary Ukraine among Italians evolved over the past two years of revolution and conflict?

Since the very beginning, Italy had supported the Revolution of Dignity in Ukraine, transmitting signals for the necessity of dialogue between expresident Yanukovych and protesters. Then-Foreign Minister of Italy Federica Mogherini as well as others Italian delegations paid visits to Ukraine calling for a peaceful resolution of the crisis in Ukraine. The Italian government condemned the illegal annexation of Crimea by Russia and supports full implementation of the Minsk agreements. Of course, we cannot say the same for the whole political spectrum in Italy, as, for instance, the 5 Stars movement, Forza Italia and Lega Nord strongly insist on the unconditional resumption of normal relations with Russia, the lifting of EU sanctions against the aggressor, and recognition of Crimea’s annexation. Nevertheless, we note with satisfaction that the current parliamentary coalition is able to move forward in line with Italy’s international commitments. The latest evidence of this is the successful ratification of the Association Agreement between the EU and Ukraine. www.bunews.com.ua

ЧИСТОТА “по-итальянски” Итальянцы известны своим шармом и стилем. Они всегда выглядят элегантно, и с особым трепетом относятся к каждому элементу своего гардероба. Dolce&Gabbana, Versace, Prada, Valentino, Gucci: все это – великие дома моды, основатели которых – итальянцы. Поэтому, абсолютно не удивительно, что именно у итальянца – Дженнаро Бертоли, в 1996-м году возникла идея создания химчистки европейского формата в городе Киеве. Сеть химчисток UNMOMENTO на рынке уже 20 лет и сегодня о секретах успеха нам расскажет генеральный директор компании – Светлана Юлдашева.

Business Ukraine: Сегодня, UNMOMENTO – самая известная в Украине сеть химчисток. С чего всё начиналось и в чем же заключается секрет успеха? Светлана Юлдашева: После распада СССР, тяжелого периода для всего постсоветского пространства, люди, уставшие от серости и однообразия, начали покупать яркие, красивые вещи, требующие особого ухода. Тогда и была создана первая химчистка нового формата с итальянским оборудованием, итальянскими технологиями и препаратами, да еще и созвучным названием UNMOMENTO. Сначала химчистка работала как «предприятие для своих», сегодня же – это национальная сеть с заслуженным званием лидера рынка и репутацией новатора. Секреты нашего успеха – это непрерывная работа над усовершенствованием качества и повышением уровня сервиса. Политика же компании остаётся неизменной более 19 лет: уважение к клиентам, стремление сделать все возможное, чтобы превзойти их ожидания!

Business Ukraine: Что клиенты могут получит у вас, чего нет в других химчистках? Светлана Юлдашева: Мы относимся к клиентам так, как бы нам хотелось, чтобы относились к нам. Команда профессионалов

UNMOMENTO, это непросто технологи и администраторы, это творческие люди, которые влюблены в свою работу. Спектр услуг включает не только чистку и ремонт одежды из текстиля, кожи и меха, но и комплексный уход за обувью, аксессуарами и домом; только в Киеве успешно работают 7 цехов и более 50 пунктов приема. Мы стараемся быть максимально открыты и доступны для каждого клиента.

Business Ukraine: Как вы справляетесь со сложными задачами? Светлана Юлдашева: Дорогая эксклюзивная одежда требует особого бережного ухода и внимания. В этом случае

стандартные виды потоковой чистки имеют высокую степень риска. Именно для решения сложных задач в 2006 году была создана OSCAR Dry Clean Studio – студия, в которой объединяются индивидуальный подход и инновационные технологии. В 2011 OSCAR была отмечена наградой «Лучший бренд класса люкс». Стратегия OSCAR заключается в индивидуальном подходе к каждой вещи и каждому клиенту.

Business Ukraine: Что для UNMOMENTO главное? Светлана Юлдашева: Благодаря дружественным связям, у нас есть исключительный доступ к уникальным разработкам

итальянских коллег, которые являются безусловными экспертами в сфере чистоты. Заключены эксклюзивные договора на поставку препаратов и инновационного оборудования. Основной принцип работы нашей команды – забота о клиентах. Именно поэтому все используемые препараты гипоаллергенны, не содержат фосфатов, и совершенно безвредны. Доверие и лояльность наших клиентов и партнёров - главная ценность для нас, ведь на протяжении 20 лет мы стараемся быть лучше и непрерывно усовершенствуем качество предоставляемых услуг для них.

044 495 2 495 067 626 2 495 unmomento.com.ua

in focus: italy in ukraine

Ukrainian banking reform moving in right direction Roberto Vercelli of Pravex Bank on challenges as Ukrainian banking undergoes deep reform process How do you assess the banking sector reforms of the past year?

A lot has already been done in the Ukrainian banking sector, and much more is on the way. I appreciate the efforts undertaken by the government and the National Bank of Ukraine so far in such directions as the protection of investors’ rights, disclosure of information about financial institutions, and the introduction of a ban on early withdrawals of term deposits. However, I expect the continuation of reforms in these directions, strengthened by an improved legislative base. I look forward to a more transparent banking sector that will attract new investments and guarantee stable development.

What additional steps would you like to see taken by the National Bank of Ukraine to reform the Ukrainian banking sector?

To create a healthy banking environment it is necessary to do more towards implementation of the same rules for real and fair competition for all banks active in Ukraine. We have to find the right solutions to be more flexible in order to attract funds and investments.

How can the Ukrainian banking sector rebuild consumer confidence in the country’s banks?

Given the fact that the Ukrainian banking sector is interconnected with all other aspects of government and the economy, if the authorities carry out legislative transformation and the country pursues reforms, then the banking system will be able to finance all sectors of the economy. If all these components are working in the same direction, it will be possible to rebuild trust in all segments of the economy, including the country’s banking system.

Which segments of the Ukrainian banking sector do you expect to experience the most growth in the coming years?

I would identify corporate lending among the most promising banking sectors, in particular in the agricultural and renewal energy sectors. Facilitating the development of medium- and largescale corporate companies will boost the business environment and create employment, therefore helping to restore the health of the Ukrainian economy. By aligning the Ukrainian banking sector with internal regulations and international rules, we can improve the private banking sector and offer more products focusing on asset management and the insurance business.

How has your business been impacted by the instability of the past two years in Ukraine?

The strong instability in politics, the economy and the social environment, including high rates of inflation and exchange rate fluctuations, have impacted heavily on the bank. The quality of the bank’s loan portfolio suffered the most – overdue payments grew 20

About the interviewee: Roberto Vercelli (roberto.vercelli@pravex.ua) is ISP Resident Senior Executive Officer in Ukraine and Head of the Special Coordination Office of Pravex Bank. while provisions increased. As the result, at present there are a significant number of issues to resolve regarding legal cases and investments. Strong enforcement of juridical leverage is required in this sphere.

How does the parent company of Pravex - ISP Group – support its Ukrainian subsidiary?

Pravex Bank has always received strong support from its parent company. During the current period of instability, ISP has provided for an increase of Pravex Bank’s capital up to EUR 115 million.

How can Italy help Ukraine?

Ukraine can exploit the experience of Italy in the development of the SME segment of the domestic economy. For example, progress can be encouraged via the creation and greater use of associations of smaller companies in order to help small-scale producers to develop a stronger presence on the market, and to become more bankable. Such associations can help companies prepare balance sheets and can provide other financial help. www.bunews.com.ua

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King Cross Group The Italian Company which has developed shopping centres in Central and Eastern Europe since 1996 and in Ukraine – in Lviv since 2010, when King Cross Leopolis SEC was opened

Address: King Cross Leopolis SEC 30 Stryiska Street Sokilnyky village Pustomytivskyi district Lviv region 81130 Ukraine

Contacts: Tel./fax. +38 (032) 242-05-80 www.kingcross.com.ua www.kingcross.com Leasing Department: Tel.: +38 050 431 62 52 E-mail: kclviv@kingcross.com

The Campari Calendar has evolved into an annual arts event in its own right, featuring a high-profile international celebrity in a series of cocktail-related poses. The 2015 calendar (featured) starred Eva Green. This particular image was said to be inspired by the creation of the ‘Americano’ cocktail invented in 1933 to honour Primo Carnera, the first ever Italian world heavyweight boxing champ 22

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Global drinks giant Gruppo Campari represents diverse portfolio of beverages on the Ukrainian market Italy’s Campari drink brand has been present on the Ukrainian market for many years. Since 2009, Gruppo Campari has also had its own business representation in the country, where it manages a range of beverage brands in addition to the celebrated Italian tipple. Business Ukraine magazine spoke to Campari’s Ukraine Country Director Kirill Sokolov about fashionable cocktails, expanding portfolios and the brand’s continued development on the Ukrainian market.

How has the Campari brand evolved over the years?

It goes without saying that the company is primarily associated with the famous bright red drink. These days, however, Campari should be viewed in a much broader context. The company has evolved over the years to become a global market leader. Campari was founded in 1860 - the year Gaspare Campari invented the bright red, bittersweet aperitif in downtown Milan. From 1888 onwards, his son and successor, Davide Campari, initiated efforts to grow the brand globally. This involved an innovative marketing strategy including the creation in 1932 of the first single–serve aperitif, Campari Soda, and patronage of the arts. By the 1960s, Gruppo Campari already distributed to over 80 countries.

In the second half of the 1990s, the international beverage industry witnessed a strong M&A trend, which led to the creation of corporations with global dimensions and diverse product portfolios. In this environment, Campari chose to expand not only via organic growth but also via external growth.

In 1995, Campari transformed from a single brand company into a multinational with a solid and expansive portfolio. Gruppo Campari is currently a major player in the global branded beverage industry, with a portfolio of over 50 premium and super premium brands, marketed and distributed in over 190 markets around the world.

Campari and Aperol remain the group’s flagship brands, along with SKYY vodka, Wild Turkey bourbon and Appleton rum. For the past few years, Ukrainian consumers have been able to enjoy one of the world’s best singlemalt whiskies, Glen Grant, as well as Old Smuggler blended Scotch whisky.

Espolon tequila, which has already conquered Mexico and the United States, is now also available in Ukraine.

What is the corporate philosophy behind Gruppo Campari’s development?

Gruppo Campari’s growth strategy aims to combine organic growth through strong brand building, with shareholder value-enhancing acquisitions.

Spirits are the company’s core business and where it focuses its acquisition efforts. The group’s strategic thinking is driven by the desire to reach or enhance critical mass in key geographic markets. Organic growth drivers include a focus on best-in-class marketing, periodical renewals of key local brands, and reinvestment into strategic brand building. External growth drivers include the acquisition of local brands with strong equity which allow for the building of new distribution networks.

What unites the brands in Campari’s portfolio?

Careful selection. It is easy to talk about the products offered by Gruppo Campari because all of them are top-quality offerings. Campari is always on the lookout for the latest trends. We study consumer preferences and try to stay realistic about the brand’s potential. All of this helps to drive growth.

September 2015

in focus: italy in ukraine

Campari brings taste of Italy to Ukraine

About the interviewee: Kirill Sokolov is the Director of Campari Ukraine Campari first became famous for its ad posters back in the 19th century.

How do you maintain this artistic tradition?

Campari has always paid attention to the art world and this tradition remains very much alive in a number of contemporary projects such as the Campari Art Label and the Campari Calendar. This arts association is also tied to the Cinzano brand. Art has always been a core element of the Cinzano image, with a rich history of innovative, vibrant and socially relevant art partnerships spanning over 250 years.

How fashion-conscious is the world of drinks?

We are talking about a world just as dynamic and susceptible to fashion as other spheres of life – people want to try something new all the time and are always looking for new combinations. Campari is unique because it is mostly meant for use in cocktails. A range of Campari cocktails feature on the International Bartenders Association’s list of the top 20 best cocktails of the past century. Fashion can also be cyclical. We are now seeing the revival of classic cocktails like the Negroni - an old-school cocktail featuring Campari, Cinzano, red vermouth and gin that was invented more than a century ago.

What kind of policy does Gruppo Campari adhere to doing business in the Ukraine?

Our global mission is to remain a profitable and sustainable market leader in the global spirits industry by combining a passion for brand building with entrepreneurial drive and functional excellence. This applies equally to each and every country where the company operates. Gruppo Campari actively promotes a culture of responsible drinking. Our Group strongly condemns excessive, inappropriate or illegal consumption of alcohol. In spite of all the current challenges facing Ukraine, our Group strongly believes in the potential of the Ukrainian market. Tradition and innovation, global strategy and local execution will remain the fundamentals underpinning the Group`s longterm development in Ukraine.

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in focus: italy in ukraine

Promoting Ukrainian fitness with added Italian style TechnoGym expands on Ukrainian market amid fitness club boom and growing consumer demand

Italian fitness equipment giant TechnoGym has been present on the Ukrainian market since establishing a distributor company in the country in 2004. The TechnoGym philosophy of promoting Wellness and healthy lifestyles has found a receptive audience among Ukraine’s famously sporty population, with the company responsible for providing equipment to a growing number of middle class homeowners and throughout the booming fitness center segment.

Founded in 1983 by company president and owner Nerio Alessandri, TechnoGym is based in Italy and operates in over 100 countries worldwide through branches and distributors. Technogym’s Ukrainian presence is currently based in Kyiv, where the company maintains its Ukrainian head office along with a showroom at Domosphere retail center. Business Ukraine magazine spoke to Alan Zacchini, the TechnoGym Area Manager for Northern/Eastern Europe, about the company’s operations in Ukraine and the prospects for further expansion as more and more Ukrainians seek to pursue healthy lifestyles.

How has the Ukrainian market for fitness and training equipment evolved since TechnoGym began operating in the country?

The Ukrainian market has been developing steadily from year to year. We have been operating in a range of segments including fitness clubs, four- and five-star hotels, corporate clients, the health segment and the B2C (business to consumer) segment.

What percentage of TechnoGym sales are to individual clients compared to fitness centres?

Sales have been growing in each segment. The 24

majority of our sales are currently generated in the B2B (business to business) segment, but the B2C segment has also been very important, growing substantially throughout the years. Despite the fact that the fitness club segment is just one part of the total B2B segment, it is actually bigger than the entire B2C segment at present in terms of sales.

On average, sales of TechnoGym equipment in the Ukrainian B2C segment vary from 18%to 30% of our total sales portfolio.

What kinds TechnoGym equipment are the most popular among Ukrainian consumers?

The most popular type of fitness equipment on the Ukrainian consumer market is cardio equipment particularly the Excite and Personal Line products.

We currently expect the newly launched MY RUN TechnoGym treadmill to become the most popular product in the B2C segment.

How does the Ukrainian fitness equipment market compare to other regional markets in Eastern and Central Europe?

Each market is different and has its own nuances.

In general, all the domestic markets in the region are growing, but a significant gap remains compared to the most developed markets in countries like the UK, Germany and Italy. This means that there is still major growth potential in Ukraine, as there is throughout Central and Eastern Europe.

Despite the difference in levels of market development between Ukraine and some West European countries, there are some genuinely world class clubs in today’s Ukraine. For example, Tsarsky in

Kyiv is an elite club equipped by Technogym with state-of-the-art ARTIS line products.

How has the political and economic instability of the past two years affected your business?

Inevitably, the instability of the past few years in Ukraine has affected the fitness equipment market.

However, the negative impact has not been comparable to the extent it has affected other industries such as the automobile industry. For example, in the B2C segment of our industry, there has not been any noticeable decline in sales.

Which sectors of the Ukrainian fitness equipment industry do you think offer the best opportunities for further growth in the coming few years?

In the short term, we expect to see the entire fitness industry to continue growing substantially in Ukraine. In the medium term, we believe that the highest growth rates will occur in the B2C segment and in the fitness club segment.

As an importer of high tech equipment, do you expect to benefit from the introduction of the free trade aspect of the EU-Ukraine Association Agreement in 2016?

In general, all agreements lowering restrictions and costs to the final customer will bring benefits to trade and boost future volumes. However, in terms of the Association Agreement’s free trade component, we shall see how the situations develops in practice and which product groups benefit from the new trade regulations. www.bunews.com.ua

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Italian manufacturing can thrive in Ukraine Gianluca Sardelli says Ukraine enjoys competitive advantages but investors must take personal lead What is the role of the Confederation of Italian Investors in Ukraine?

The Confederation seeks to unite Italian investors active in Ukraine, while also working with Italian business owners whose companies have interests in Ukraine. We aim to represent and protect their investments and their interests in Ukraine.

Which sectors of the Ukrainian economy are Confederation member companies primarily involved in?

As everybody knows, Italy is a country of style and beauty, so naturally many of our companies and investors are involved in the fashion industry and the manufacture of clothing and shoes. A number of our members are active in this sector, having relocated their production operations to Ukraine since 1991, either directly from Italy itself or from other East European countries.

As Italian businesses grew more familiar with the opportunities presented

by Ukraine, a new wave of Italian investors and entrepreneurs arrived in the country. This second wave included many entering the financial, real estate and professional consulting sectors. Today, Italian companies in Ukraine employ many thousands of Ukrainians and have a significant impact on the national economy and on the development of Ukrainian society.

How did the Italian business community first emerge in Ukraine?

Italian entrepreneurs began to enter the Ukrainian market in the early years of independence. These initial pioneers where often drawn by the search for skilled labour at competitive rates and the opportunities presented by relatively cheap production facilities. Some came direct from Italy, while others arrived in Ukraine via intermediate countries such as Romania, Slovakia and Hungary. Once these former Warsaw Pact satellites entered the EU zone, they became less competitive and experienced significant increases in production costs.

Are low costs the single most important factor driving the expansion of Italian investment in Ukraine?

I think the process is more rational and long-term than simple economic colonialism. Italian companies are committed to sustainable growth in Ukraine and many are involved in the technological development of the Ukrainian economy. They have overseen the transfer of technologies and have helped their Ukrainian colleagues to develop their professional skills, while also providing the kind of stable employment that helps foster greater growth. It is also important to note the significant contribution to Ukraine’s development made by Ukrainian employees who have spent time working in Italy before returning to their homeland. These Ukrainian professionals have been able to apply the skills they developed in Italy directly to the Ukrainian environment, often playing key roles in Italian companies operating in Ukraine. The combination of state-of-the-art Italian knowhow and local knowledge has proved a real asset.

As well as your role with the Confederation, what are your business interests in Ukraine?

I have been living in Ukraine and doing business here for 20 years. I currently head a legal practice and an international business consultancy that provides services to Italian investors and helps them to implement their projects in Ukraine. My consulting work draws on a large network of professional con26

About the interviewee: Gianluca Sardelli (info@kii-ukraine.com) is the head of the Confederation of Italian Investors (www.kii-ukraine.com) tacts throughout the country that helps me to offer local expertize across Ukraine.

What are the key challenges facing Italian investors in today’s Ukraine?

I think it is important to recognize the basic obstacles such as the language barrier and the local mentality, which naturally differs in many ways from the typical Italian approach to business. I would also point to the often contradictory an incomprehensible rules and regulations that continue to hamper the Ukrainian business climate. In order to achieve success, it is vital for any investor to build a strong and cohesive team, and to manage the team-building process personally. Other factors that play a role in determining the success of an international investor entering the Ukrainian market include having a thorough technical knowledge of all aspects of the business they are entering, and excellent financial skills. I would stress that in order to be a success, you need to be ready to invest your time and be physically present in Ukraine.

There is no substitute for this personal involvement.

Which sectors of the Ukrainian economy do you regard as the most promising for potential Italian investment?

Frankly speaking, Italian industrial relocation to Ukraine has suffered as a direct result of the ongoing downturn in global consumption. The fact that Ukraine is not part of the European customs zone is also a factor. However, the advent of the European Union-Ukraine Association Agreement, with its extensive free trade provisions, will go a long way to making Ukraine more relevant, bringing a range of significant competitive advantages. I see great potential for relocation of production facilities, particularly in the www.bunews.com.ua

What aspects of the Ukrainian reform process offer the best prospects for increasing Ukraine’s attractiveness as a destination for Italian investment?

There is clearly widespread popular support in the new Ukraine for deep and wide-ranging reforms aimed at eradicating malpractices and addressing the problems of the country’s post-Soviet bureaucracy. I see steps being taken towards better governance and the introduction of European values in the country. This is expressed in the appointment of foreign experts to delicate administrative roles, and in the growing cooperation with international institutions. As the reform process develops, Italian investors will be paying particular attention for signs of greater transparency and efficiency among Ukraine’s financial regulators and in the spheres of interior affairs, justice and the state fiscal service. Much more is also expected from the reform of land rights, especially in relation to the revision or removal of the current moratorium on the sale of agricultural land.

How has awareness of the investment opportunities in Ukraine evolved among the Italian business community since 1991?

Since Ukraine gained independence, the Italian business community has entered the Ukrainian market in dribs and drabs. Initially the key attractions were cheap raw materials and low labour costs. Those who settled here soon discovered good professional skills and a high level of education among the local population, as well as abundant infrastructure opportunities. Italian entrepreneurs who have had the chance to put down roots in Ukraine have often been able to integrate into the broader economic, political, and social communities. This has brought a wide range of interesting business opportunities that might otherwise have been impossible. In practice, many of the best investment opportunities in today’s Ukraine are not sufficiently well advertised or widely known in the public domain. They often only become apparent to those entrepreneurs who have already become well integrated.

in focus: italy in ukraine

engineering industry. In particular, I would identify electrical engineering and the production of electronic components. For some reason, this sector has so far been inexplicably overlooked by Italian entrepreneurs. There is also enormous untapped potential in the food-processing sector at all stages of the supply chain. In broad terms, any technologically advanced production process has good prospects given the abundance of excellent local resources in Ukraine.

What is your personal message to potential Italian investors considering entering the Ukrainian market?

Ukraine is undoubtedly an interesting market but it remains complex in many ways. Based on my professional experience, the key factors for building successful business ventures in Ukraine are patience, consistency, sufficient capitalization and a readiness to invest your time in your Ukrainian business and become part of the local community. All potential Italian investors should assess whether they are in a position to meet these criteria before choosing to enter the market.

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Italian architecture adorns Ukraine Many of Ukraine’s most famous landmarks and celebrated buildings were designed by Italians

As one of the great crossroads nations of continental Europe, Ukraine boasts dizzying array of different architectural styles and genres, reflecting the country’s patchwork history and diverse ancestral influences. Many of the country’s most celebrated buildings are the work of Italian architects, who have left a considerable mark on Ukraine’s architectural ensemble throughout the centuries.

Rastrelli’s Kyiv masterpieces

Perhaps the most famous Italian architect to leave a legacy in Ukraine is the former Russian Imperial court favourite Francesco Bartolomeo Rastrelli. Born in Paris in 1700, Rastrelli spent his enter career in the Russian Empire and was largely responsible for establishing the Late Baroque style associated with eighteenth century Tsarist imperialism. His most celebrated Kyiv creation is the splendid St. Andrew’s Church overlooking Podil. This distinctive wedding cake construction is one of the most popular landmarks in the Ukrainian capital and often features in promotional materials about the city. Construction of the church began in 1744 during the reign of Russian Empress Elizaveta Petrovna, who laid the foundation stones herself. The site, perched above Kyiv’s iconic Andriyivskiy Uzviz Street, is in line with ancient Kyiv Rus tradition, which claimed that the 28

Apostle Andrew visited the spot in the first century AD and foretold the rise of a great city and a Christian civilization.

Rastrelli’s other Kyiv calling card is Mariyinskiy Palace, which sits majestically on the hillside above the Dnipro River. This stylish and somewhat understated palace was designed to serve as a summer residence for Empress Elizabeta Petrovna, but she died before it could be completed. The first Russian ruler to actually stay in the completed palace was Catherine the Great, who visited Kyiv during her procession through Ukraine to visit the newly conquered Crimea. Incidentally, this was also the trip during which the infamous Potemkin Villages are said to have been erected along the banks of the lower Dnipro River in order to impress the passing empress.

Italian design behind iconic Odesa stairs

Much of Odesa’s historic city centre was designed by Italian architects, with Turin-educated Francesco Boffo making the most lasting and celebrated contribution. Boffo’s masterpiece is undoubtedly the Potemin Stairs leading from the downtown area to the city’s Black Sea port. These elegant stairs have gone on to become Odesa’s most famous landmark, winning international fame after featuring prominently in early Bolshevik cinematographer Sergei Eisenstein’s silent movie epic ‘Battleship Potemkin’. In the movie, the www.bunews.com.ua

Lviv’s Italian-inspired renaissance treasures

Lviv is Ukraine’s architectural capital and home to more than half of the country’s UNESCO treasures. Unsurprisingly, it also boasts more than its fair share of Italian architecture. Many of the most prominent structures in the city’s signature Market Square are the work of Italian architects, or were com-

missioned by Italians who lived and worked in the city during the fifteenth and sixteenth centuries. When part of Lviv was destroyed in the Great Fire of 1527, a number of Italian architects were invited to help rebuild the city and they left an unmistakably Italian imprint on Lviv. The stable economic situation in the city at the time made it possible to implement a massive reconstruction programme, resulting in the distinctive renaissance style that characterizes much of the city’s Old Town to this day. These renaissance architectural traditions were brought to Lviv by people from northern Italy and southern Switzerland, particularly from the regions of Como and Lugano. The first known Italian master mentioned in the town record books was Petrus Murator Italus de Luugnon, who is referenced as active in Lviv in 1563. His most important building project in Lviv was the Dormition Church.

Among other works attributed to Petrus Italus were the ornate porches of several private homes.

The 1560s brought further accounts mentioning new Italian masters arriving in Lviv, including Gabryel Quadro Italus magister murator (1561), the brothers Angiolo and Gallacius, Franciscus Roland de Brusimpiano, Peregrinus Bononicus and Christophus Bozzano from Ferrara. Not all these names have any immediate connections to the city’s existing renaissance monuments, but they do give an idea about the origin of these renaissance masters, who came to Lviv from as far afield as Lombardy, Ferrara and Bologna. The most famous example of Italian architecture in Lviv is the city’s Korniakt Palace, which boasts the popular Italian Courtyard, and is widely regarded as a classic example of a renaissanceera palazzo.

in focus: italy in ukraine

stairs are the scene of a massacre by Tsarist troops during the failed 1905 Russian Revolution. The massacre scene, which features a baby’s pram rolling down the stairs in dramatic fashion, has since been widely acknowledged as a cinematic classic. No visit to Odesa is complete without a visit to the Potemkin Stairs.

While Boffo is by far the most renowned of the Italians who shaped the Odesa landscape, he is not alone. Other less famous Italian architects to leave their impression on Odesa include Alessandro Digbi senior, Alessandro Digbi junior, Francesco and Giovanni Frapolli, Ivano Dall’Acqua, Luigi Cambiaggio, Giovanni Scudieri, Giorgio Torricelli, Francesco Morandi, and Alessandro Bernardazzi.

Odesa’s most famous street also has an indirect Italian connection. The centrally-located Deribasivska Street is named after Spanish nobleman Jose de Ribas, who was born and raised in the Kingdom of Naples, serving in the Neapolitan Army for a time before taking on a role in the Russian Empire as a military commander. He was one of the key Tsarist commanders during the Russian expansion to the northern shores of the Black Sea, and is today best known as the man who gave his name to the Odesa street where the city’s beautiful crowd loves to parade and promenade.

About the author: Anna Pastore works at the Italian Cultural Institute in Ukraine (with special thanks to Fabio Marcotto)

September 2015

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in focus: italy in ukraine

Italian culture finds home from home in Ukraine

From opera and operetta to fashion and design, Ukrainians have always embraced all things Italian

Italy and Ukraine have long been united by a common passion for the finer things in life, whether it is high-end designer fashions or passionate opera performances. Evidence of these shared tastes can be traced back for hundreds of years and have helped guarantee high demand for Italian cultural imports into Ukraine ever since independence in 1991.

This cultural exchange has always been a two-way street. In past centuries, Ukrainian singers graced Italy’s finest opera theatres, while Italian architects and sculptors decorated Ukraine’s towns and cities. In more recent times, Ukrainian catwalk models have become a firm feature of seasonal podium shows in Milan, while the latest Italian designer fashions have enjoyed pride of place in the wardrobes of Ukraine’s famously fashion-conscious high society crowd.

The modern Ukrainian passion for all things Italian also reflects the often all-consuming post-Soviet desire for a taste of formerly forbidden luxury.

Almost a quarter of a century since the collapse of the Soviet empire, Italian restaurants are still among the most popular and prestigious in Kyiv.

Meanwhile, the country’s powerbrokers and oligarchs love nothing better than to sail their mega-yachts to Sardinia each summer to pass the season in style.

This Ukrainian love affair with all things Italian is not merely a matter of exclusivity and ostentation. Italian art, music and cinema also boast strong followings throughout the country, with Ukrainian audiences likely to respond to everything from the sculptures of Da Vinci and the compositions of Vivaldi to the the films of Fellini and the comedy of Celentano with equal enthusiasm and connoisseurship.

The cultural wing of Italy’s diplomatic representation in Kyiv, the Istituto Italiano di Cultura di Kiev, is responsible for making sure this Ukrainian demand for a taste of Italy is being sated. The Istituto has long maintained an active presence in Ukraine, organising a clustered annual calendar of cultural events 30

across the country designed to bring aspects of both modern and classical Italian culture to Ukrainian audiences. This autumn will see a busy schedule of Italian cultural events in Ukraine offering something for a range of tastes.

Autumn 2015 season highlights

Beginning in September and running until early November in the Ukrainian capital, the Kyiv Biennale’s ‘School of Kyiv’ will feature strong Italian participation. This year the works of Italian artists Nico Angiuli and Adelita Husni-Bey will be featured as part of the season, including an exhibition dedicated to the highly contemporary theme of refugees and immigration.

Fans of baroque music can look forward to a sumptuous autumn with the Italian Baroque Festival, which runs from late September until 16 October and features performances in Kyiv, Odesa and Lviv as well as neighbouring Minsk.

This joint Ukrainian-Italian initiative debuted in 2014 and won considerable plaudits in its inaugural outing, leading to an even more ambitious programme for this autumn’s festival season. A total of 15 concerts at planned for this year’s festival, with prestige venues including Odesa and Kyiv national opera houses.

These two venerable concert venues will play host to a range of Italian performers including directors Claudio Cavina and Stefano Montanari, and soloist Pino De Vittorio. The Artistic Director of the 2015 Italian Baroque Festival in Ukraine is Nancy Milesis Romano. For further details about the festival and for a full schedule of performances please see the Istituto website.

Istituto Italiano di Cultura di Kiev 32a, Yaroslaviv Val vul.

Kyiv 01901 Tel.: +38-044-2706223 Email: iickiev.esteri.it Website: www.iickiev.esteri.it

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8 Years of Ukrainian History n Politics: Anyone looking to take the pulse of Ukrainian democracy needs to look beyond the bright lights of the capital n n Industry: Outdoor sector leading advertising market upswing n Interview: Walid Arfush on the need to shake up state TV n

n Politics: As President Yanukovych consolidates grip on power is Ukraine’s fledgling democracy strong enough to survive? n n Real Estate: New re-registration process eases developer concerns n Franchising success of Ukraine’s pop art pizza king n

Volume 4, Number 3 March 2010

Volume 4, Number 4 April 2010

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www.bunews.com.ua

VICTORY

wanted:

green shoots

Russia’s regional resurgence receives a fresh boost on the eve of Victory Day celebrations as Ukraine’s new government agrees to 25-year Sevastopol lease extension in return for cheap gas supplies

With a new government in place in Kyiv and international markets finally showing signs of modest growth will spring 2010 bring with it evidence of a Ukrainian economic recovery?

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Official newsletter of the American Chamber of Commerce in Ukraine September 2015

My 10 years in Rome Andy Hunder, President of the American Chamber of Commerce in Ukraine

I lived in Italy for 10 years as a student – possibly, the best years of my life. As this edition of Business Ukraine is dedicated to Italy in Ukraine, the editors have asked me to focus on my links to Italy, especially to my connections to the Church in Rome. I arrived in the Eternal City a thirteen year old boy and left, a decade later, after my University studies. I loved and still do love this amazing country.

My ten years in Italy were student years – with some great memories. I could go on and on about my experiences but would like to briefly focus on the role of Church in Italy and the influence that it had on me, personally. I studied Philosophy and Theology t at a one of the world’s Pontifical universities – the Angelicum, Saint Pope John Paul II studied there just a few decades there before I arrived.

The Church played a massive part in my studies and formation. When in Rome, I belonged to the single largest banned religious community in the world. The Ukrainian GrecoCatholic Church was, until December 1989,

September 2015

the most sizeable officially banned religious organization, persecuted by Soviet authorities for 43 years. The Church, somewhat miraculously, managed to survive “underground”, in the Gulags, in exile outside the USSR, and clandestinely across Western Ukraine. On December 1st 1989, Mikhail Gorbachev, the last leader of the Soviet Union, visited the Vatican and sealed a decision to lift the ban on my Church’s existence.

I was in my second year at University in Rome when, on that sunny and crisp December morning a quarter of a century ago, Gorbachev’s black hand-built armored Soviet Zil limousine pulled up at the Vatican gates and, consequently, the fate of millions was settled. Gorby, as he was called by the Italian media, had arrived to meet Pope John Paul II, just weeks after the fall of the Berlin Wall. Massive changes were taking place across Europe at the time.

We had been preparing for his visit. I was 18 at the time and together with other Ukrainian diaspora-born student friends in Rome we arranged to stage a protest during the Communist head of state’s visit, bringing to light the suffering and persecution of Ukrainian Catholics in the Soviet Union. We managed to draw the attention of the world’s media, including CNN and other TV crews, by distracting from the glitz of “Gorby” coming to town and focusing on the bravery, assertiveness and fight for truth of Ukrainian Catholics back in Ukraine.

Stalin banned the Ukrainian Catholic Church in 1946 and had all of its bishops sent to labor

camps, where most of them perished. Many priests secretly continued to provide religious services. The Church in Ukraine continued to exist underground for decades, but was always under the scrutiny of the pitiless security forces and the subject of vigorous attacks in the state media. Activities that could lead to arrest included holding religious services, educating children as Catholics, conducting baptisms, performing weddings or funerals or copying religious materials, possessing church calendars, possessing religious books or other sacred objects. Conventions were held by the Soviets to discuss how to perfect the methodology in combating Ukrainian Catholicism in Western Ukraine.

A quarter of a century later – since coming out of the catacombs and being officially legalized, the Ukrainian Greco-Catholic Church has established itself as a leading authority in Ukraine, highly respected both locally and across the globe. Its, now retired, octogenarian Archbishop Cardinal Lubomyr Huzar, a frail and blind man today, is considered by many as the moral voice of the nation. In Italy, Huzar was considered a “Papabile” – a frontrunner to be elected as the next pope. His, untraditionally young, 44 year old successor, Patriarch Sviatoslav, seems to also be very much following in the footsteps of his great predecessors driving the Church in Ukraine forward in the 21st century.

So much has changed in just two decades. But Rome remains the Eternal City – the capital of a great country, and, still, a friend of Ukraine.

31

Experts and business reviewed the macroeconomic situation in Ukraine and made a forecast for 2016 The American Chamber of Commerce in Ukraine in strategic partnership with the Forum for Leading International Financial Institutions (FLIFI) held the Quarterly Panel Discussion “Macroeconomic Outlook & Forecast for Ukraine”. Experts and business representatives discussed the key indicators of macroeconomic situation in Ukraine, inflation forecasts and foreign currency exchange indexes dynamics, strategy of the NBU/IMF monetary policy for Ukraine and its impact on the real sector of the economy, investment trends and sentiments in Ukraine.

Experts agreed that the worst economic situation in Ukraine is over, but it is not worth to expect the rapid growth in the near future. “I would describe the state of Ukrainian economy as scratching the bottom upwards.

The worst economic situation was overcome in March-April. Since then our economy has been slightly improving. Our analysis shows that this recovery will continue though it will be pretty marginal. Next year economic growth will reach 3% at most”, - stated Mr. Dmitry Sologub, Deputy Governor of the National Bank of Ukraine (Macroeconomic stability).

Mr. Oleksiy Blinov, Chief Economist of Alfa-Bank Ukraine made a similar forecasts: “Real GDP growth forecast for the next year is 2.5%. The first half of the next year will be definitely just growing over the deepest decline point we had half a year ago. In the second half of 2016, we expect slow growth and hope for a boost only in 2017. I would like to stress that growth by 2-3% forecasted not only by us, but also by the government and IFIs, is virtually no growth versus such a low baseline of 2015. In particular, real disposable household income as well as private consumption are likely to continue their fall in 2016”. According to him, the key factor behind modest real GDP growth in 2016 should be reloading of industrial capacities, which lived through the crisis and war. But the pace and scale of reforms so far does not seem to bring some clear macroeconomic effect in 2016. “Much more efforts required and more time is needed to restore business and investor confidence”, - stated Mr. Blinov.

State budget and inflation were also among the key topics to discuss. According to Mr. Jerome Vacher, International Monetary Fund Resident Representative in Ukraine, “the state budget for 2016 discussion will be difficult due to a loss of temporary revenues and increased expenditures leaving little room within the deficit targets. In parallel, the NBU will need to continue its increased focus on price stability”.

NBU representatives stated, they are determined to change substantially the monetary policy framework in Ukraine, increasing the role of discount rate. As NBU ultimate goal is a completely new monetary policy setup, which will change the focus of central bank from exchange rate to inflation.

The stable moderate inflation will be the main goal of NBU activities. “Since

May we have seen steady deceleration trend, which we attribute to the exchange rate stabilization. The price pressure on the economy has declined.

We believe the inflation will decelerate to 12% by the end of 2016 assuming stable security risks and continuing reforms”, - stated Mr. Sologub.

Business and international organizations representatives agreed that the pace of reforms not in all areas is satisfactory. Among key positive developments Mr. Jerome Vacher focuses on the tentative stabilization on macro level, fiscal stabilization – strengthening that started in the banking sector, stabilization of the level of UAH deposits, and stabilization on the FX market. “But there are areas we would like to see more progress, first of all anticorruption. Overall, the progress in reforms has not been translated yet in apparent gains for the population. The recovery in income and economic conditions will take some time but the population needs to see some changes happening now – not only tackling corruption in day-to-day life, but need to see some systematic progress in the revamp of the prosecution and court system”, - stated Mr. Vacher.

Mr. Nicholas Burge, Head of Trade and Economic Section, Delegation of the European Union to Ukraine, focused on international trade issues. “DCFTA will be coming into force on 1-st January, and it will have positive benefits both for parties involved and neighboring countries as well, this is a basis of trade liberalization in whole of the world.” The expert also stressed the importance of justice reform in Ukraine: “DCFTA reforms will be much less effective unless some fundamental changes is made - top issue is justice – this system is not reformed, it is still not working on a fair, non-corrupted basis.

Likewise the key sectors of public administration need to be reformed, in particular the state fiscal service”.

In context of possible Russian embargo on Ukrainian exports, according to Mr. Burge, it should be noted, that “export from Ukraine to Russia represents now about 11% of all Ukraine’s exports, in agro sector – only 2-3%.

If the embargo is introduced, there will be significant effect on some businesses in certain sectors, but it will be nowhere as great threat as it was a couple years ago. Of course we have been encouraging Russia not to take this action that would be against WTO rules”.

Thus, business should plan its activities based on gradual economic recovery in Ukraine, but a boost economic growth should not be expected. “In terms of macroeconomic stabilization, I should say that the decline in many sectors comes to an end, inflation is slowing down, most dramatic events in banking sector are behind us, and consumer demand is stabilizing. All these developments are happening already and will get more statistical evidence in the next 6 months. But all this is not enough to start a new wave of growth”, - said Mr. Blinov.

Russian TV icon finds freedom in Ukraine TV host Yevgeniy Kiselyov is in exile in Ukraine – but will other Russian journalists join him?

Since the advent of the Putin regime in 2000, the Russian media has increasingly fallen under the direct control of the Kremlin. This process has brought the brief 1990s flirtation with a free press to an end, creating a closely regimented media industry that has become a key weapon in the Kremlin’s infowar over Ukraine and against the Western world in general.

Faced with the choice of following the party line or scraping an existence on the few remaining independent fringes of the Russian media industry, many journalists have chosen to leave the country, with the comparatively free Ukrainian marketplace serving as an obvious destination. But while Ukraine offers numerous apparent advantages for Russianspeaking journalists, there are no guarantees that Ukrainian media managers and audiences will necessarily welcome dissidents from an industry which is widely blamed for enabling the Kremlin’s hybrid war in Crimea and east Ukraine. Business Ukraine magazine sat down with veteran Russian TV journalist Yevgeniy Kiselyov to discuss why he made the switch to Ukraine, and whether he sees Kyiv becoming a haven for Russian journalists seeking the freedom to practice their profession in peace.

Dangerous journalism in Putin’s Russia

Mr. Kiselyov currently hosts a popular weekly political talk show on Ukrainian national TV channel Inter. He is arguably the best known among a number of Russian journalists currently plying their trade in Ukraine, and has been a primetime presence on Ukrainian TV since arriving in the country in 2008. Initially, he viewed his Ukrainian residency in primarily economic terms, but has since come to regard it as an ideological choice. “Back in 2008, I came here for work purposes after I received a very interesting job proposition.

Then bad things started to happen in Russia. I began to dislike Putin’s Russia more and more. Long before the assassination of Boris Nemtsov, I realized that it was no longer safe for me in Russia. So I started out in Ukraine as an economic migrant, and became a voluntary exile.”

Despite being a prominent member of the 38

growing Russian journalistic community in Ukraine, Mr. Kiselyov is skeptical about the chances of the country emerging in the coming years as a haven for Russian journalists and as a serious counterweight to Kremlin propaganda efforts. He claims that attitudes towards Russians journalists in Ukraine are far from universally positive, and points to the conflict in east Ukraine as an aggravat-

ing factor. “Russophobia is not an invention.

It is not a myth or a phantom. It exists in the minds of a segment of the Ukrainian public.

It is not dominant, but it exists,” he says. The end result, he argues, is a professional climate in which managers may be inclined to hesitate before hiring Russian talent. Mr. Kiselyov states that while there are numerous Russian executives occupying senior positions in the www.bunews.com.ua

Free speech as an optional extra

In the 1990s Mr. Kiselyov had been one of the most recognizable faces on Russian TV and a key figure in the emergence of a postSoviet free press. A graduate of the Perestroika school of free speech, he was an innovative current affairs broadcaster in the years following the fall of Communism and one of the co-founders of NTV channel, which was widely praised during the transition from Soviet rule for its independent coverage of the First Chechen War and the social iniquities of the Yeltsin era. Mr. Kiselyov’s subsequent fall from grace in Russia is symptomatic of a process that saw the high journalistic standards of the 1990s replaced by a seductive combination of impressive production values and rigidly controlled content.

The switch towards today’s heavily censored Russian media environment did not happen overnight, and Mr. Kiselyov argues that the process was made possible by a series of high-profile dismissals which sowed fear among journalists and gradually made the new reality crystal clear to all those who wished to continue working in the media industry in Putin-era Russia. Those who felt differently, as well as members of the public who opposed the new regime, found themselves out of step with the realities of this new Russia. “I can vividly remember one of my colleagues saying to me that freedom of the press was no longer part of the basic commodities basket. This was part of the

social contract struck between Putin and the Russian people – they were allowed to enrich themselves as long as they gave the Kremlin a free hand in politics.”

Kremlin offers up bread & soap opera circuses

Mr. Kiselyov chose to leave Russia, but for colleagues who stayed behind and who refused to compromise with the Kremlin-controlled media system, employment opportunities soon became few and far between. “Journalism still exists in Russia, but it has been pushed out into the margins by a huge propaganda machine which is either directly or indirectly controlled by the state,” he says. “I can give you a very long and very sad list of all the once-prominent Russian journalists who are still active in their profession but who must constantly search for small niches where they can work. The other option is to become a loyal propagandist for the Kremlin.

You can count the remaining independent media outlets on your fingers.”

The transformation of the Russian media landscape over the past 15 years has been widely documented, but the question remains of why the Russian public has seemingly accepted the return of such direct state control without a struggle. Mr. Kiselyov argues that the relatively subtle manner of the state takeover has played a key part in preventing widespread public opposition.

“The Russian media still has very strong entertainment content,” he says. “They produce a range of good entertainment programmes. That’s the strange thing about Russian television today. On the one hand, it is pro-government propaganda, but on the other hand, it is very high-quality entertainment programming. This is one reason why so many people continue to watch it. If it was simply nonstop propaganda broadcasts for 24 hours a day, then it would start to irritate people. But when the propaganda is broadcast between a very nice love story designed for young mothers and a police se-

rial watched by their husbands, it influences people on a subconscious level.”

Current infowar comes as no surprise

media

Ukrainian media, they are generally loathe to recruit fellow Russians in order to avoid charges of cultural colonialism. Meanwhile, those already employed in Ukraine risk having their Russian identity used against them.

“Sometimes when a Russian journalist like me starts asking Ukrainian politicians difficult questions the response is, ‘how can you, as a Russian citizen, ask me such things?’ It is very sad, but it is something I have often experienced,” he reflects.

The Russian media has been widely cited as a key component in the Kremlin’s hybrid war against Ukraine, with Russian channels accused of employing everything from one-sided coverage to outright faked news in order to generate support for Putin’s undeclared Ukrainian war. This tactic has sparked a flurry of debate among Western strategists who seem to have been caught completely offguard by the so-called weaponization of the media by the Kremin. Mr. Kiselyov does not share this sense of surprise, arguing that the power of the Russian media was amply demonstrated at the turn of the millennium when it was deployed to pave the way for the rise of Vladimir Putin. “How can 85% of Russian people support the war against Ukraine and believe in all the TV propaganda? In order to understand this phenomenon, we should first remember that it was the same at the end of the 1990s, when Putin was totally unknown to the Russian public. He was portrayed in the state-controlled Russian media as the savior of the nation and as the strong leader that everyone was longing for. As a result, he won a landslide victory.”

Mr. Kiselyov admits he no longer feels physically safe in Putin’s Russia, and regards himself as an exiled journalist who has been given little choice but to leave his homeland.

He sees his former Russian colleagues as a key component in the Kremlin’s hybrid war tactics, and speaks with conviction of the fundamental differences between contemporary Ukrainian and Russian media cultures. “I have the freedom to do my job in Ukraine,” he says. Nevertheless, this icon of Russia’s brief flirtation with a free press is well aware that additional Russian journalists seeking to enter the Ukrainian market will have to contend with a considerable amount of skepticism from their Ukrainian colleagues.

“Journalism still exists in Russia, but it has been pushed out into the margins by a huge propaganda machine which is either directly or indirectly controlled by the state” September 2015

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Moscow-based correspondents not immune to Kremlin infowar Western journalists covering Ukraine from Moscow at risk from Russian information offensive Ukraine has been in the international news a great deal over the last two years. Much of that reporting has come from regional correspondents based in Moscow. Has Ukraine been getting fair representation? Those who cover Ukraine from Moscow should be aware that they live inside a tightly controlled media environment, and there is ample evidence they are not immune to its influence.

Ukraine recently kicked off something of an international scandal when almost 400 individuals and entities, some of whom were journalists, were named on a sanctions list. Some of the names came as a surprise. A trio from the BBC raised eyebrows, while the inclusion on the list of two Spanish journalists who are apparently being held captive by ISIS was more than strange. Some of these bans have since been reversed, but not before the list provoked widespread

objections from people in high places. This outrage was not surprising; freedom of the press is a necessity for any democratic country, while restricting the press is a hallmark of any authoritarian regime. Ukraine’s journalist blacklist has been widely branded as an own goal which succeeded in damaging the country’s international standing and undermining its democratic credentials.

While this affair caused understandable indignation in the journalist and diplomatic communities, it also served as a reminder of the crucial role played by the media in the Ukraine conflict, and of the difficulties governments face if they attempt to respond to perceived information attacks in a heavy-handed manner. Attention inevitably focused on the international journalists included on Ukraine’s blacklist, but the majority of the targets of the sanctions list were actually Russian journalists directly involved in Moscow’s information war against Ukraine.

No escaping the Kremlin media machine

A professional media attempts to offer balance, to give airtime to both points of view in a dispute, and allows audiences to form their own opinions based on balanced facts. The Russian media does not do this. It offers a very restricted worldview and portrays events according to a centrally-planned narrative. In order for this to be effective, the method of delivery is as important as the message. In today’s Russia, they use an approach similar to wielding a series of sledgehammers. Multiple news channels offer one coordinated message. This is then backed up by armies of trolls, who contribute to distorting reality in online comment sections, blog posts, and social media. The result is a flood of similar information coming from a multitude of sources, creating a new ‘reality’ based on a manufactured sense of consensus.

Belief in this Kremlin-engineered reality is so widespread that more than one person has questioned whether there is something in the water in Moscow.

In fact, the success of Russia’s information war is down to a cocktail of disinformation, flawed logic, a selective reinterpreta-

tion of history, a chauvinistic view of Ukraine, and a dangerously adversarial worldview. Many people in Moscow are simply unaware of how their thinking is been manipulated, but the results illustrate just how powerful a weapon information can be. Russian journalists distorting the truth about events in Ukraine have literally created an environment of hatred that has motivated large numbers of men from Russia to come to Ukraine to kill people.

Moscow-based correspondents face daily disinformation and distortions

Russia’s media war may also be influencing the perspectives of Western reporters who call Moscow home. A great deal of the global commentary on events in Ukraine comes from Moscow-based correspondents. Are they affected by the unavoidable barrage of information that surrounds them in the Russian capital? The Moscow correspondents will naturally answer that they are not influenced by Russian infowar narratives. They will argue that they are unbiased and ‘dispassionate – unlike some’, and they will claim to stick to the journalistic tenets of balance and airing both positions in a disputed situation. That is perfectly fair, and I think it is important to stress here that I have no doubt that the people I have had exchanges with from time to time genuinely believe that they are reporting in a fair and balanced way. But are they?

By way of example, one Moscow-based Western journalist I know shared a tweet earlier this year from a Russian source that referred to inflation in Ukraine ‘In April being 60%’. In his covering comment, my acquaintance remarked that this qualifies as hyperinflation. In fact, the word order was (deliberately) misleading and the original tweet went on to state ‘as compared to last year’. This is just one minor instance of how, tweet by tweet and comment by misleading comment, attitudes are changed and misplaced opinions are formed.

A very fruitful and respectful dialogue commenced from there. In this exchange, one quite startling thing came out. My journalistic acquaintance wrote, ‘what shocks me is how EU/US back Ukraine to provoke a fight with Russia and then fail to come up with dollars/ guns when Ukraine clearly needs help.’ I believe this demonstrates how the Russian anti-Ukrainian narrative is affecting people. The very idea that Ukraine is somehow ‘provoking’ Russia, either on its own or at the behest of another player, is absurd. Ukraine has, of course, done nothing to provoke Russia. To be fair to him, as soon as this was pointed out, he agreed that the word ‘provoking’ was wrong. Nevertheless, how is it possible that this can even come to mind? My acquaintance is a smart guy, and words are the tools of his trade.

We have to ask a serious question: are the opinions of Moscowbased international correspondents being clouded by the pervasive, persistent, and unavoidable information offensive they are exposed to in daily life? It is something all international news organisations should consider when they commission Ukraine coverage via Moscow.

About the author: Paul Niland is a long time Kyiv resident. He has written extensively about Ukraine’s recent history. He is also the founder of Statement Email, a charitable crowd funding platform

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Online start-up at forefront of information upheavals reshaping the Ukrainian media landscape The concept of a free press has struggled to take root in the post-Soviet space, but ever since the 2004 Orange Revolution, Ukraine has emerged among its ex-Soviet peers as a regional leader in media pluralism. This trend has gained considerable pace over the past two years of revolution and conflict in Ukraine, with the rise of a new generation of Ukrainian media outlets promoting recognizably international standards of journalism. The flagship brand in this next generation of Ukrainian media start-ups is undoubtedly Hromadske.

Established in spring 2013, Hromadske began broadcasting in November 2013 and quickly gained an online audience via its coverage of the Euromaidan protests in Kyiv. A digital start-up channel with big ambitions, Hromadske currently produces a range of Ukrainian, Russian and English-language content. Business Ukraine magazine spoke to Nataliya Gumenyuk, the Head of Hromadske.tv and Hromadske International, about the multiple challenges posed by the Kremlin

want, but it is especially important during wartime to have outlets that provide the population with objective information, allowing them to make their own judgments.

information war, continued Ukrainian oligarchic influence, and the emotional pressures of remaining objective in a time of national crisis.

ously suffering from significant trauma. It is true to say that it is much harder for Ukrainian journalists to maintain a sense of distance from the war than it would be for US journalists reporting on American troops in Afghanistan or Iraq, for example. Almost every Ukrainian is directly involved. They may have friends or relatives involved in the fighting. They might know people who have had to flee their homes or those living in Crimea or the Donbas. It can be hard to stay sane. Despite these challenges, I think it is important to note that big stories from the conflict are usually first reported by the local media. In this regard, both Ukrainian photographers and reporters are doing a great job – although it is also true that some do not see any problem with including poppatriotism in their coverage.

Hromadske is widely seen as a symbol of the new media that has emerged in Ukraine since the beginning of the Euromaidan protests in 2013. How would you characterize the Hromadske philosophy?

The Hromadske mission is to create an information environment that can support the development of individuals and society as a whole. We aim to build a transparent and sustainable organization guided by the principles of trust, commitment, responsibility and professionalism.

How has the emergence of Hromadske impacted on the editorial content of Ukraine’s more well-established mainstream TV channels?

Hromadske has had a major influence, both in terms of popularizing the concept of live streaming (rarely seen on Ukrainian mainstream TV before 2014), and in promoting the highest editorial standards. The existence of Hromadske also demonstrated the importance of socially responsible media, which in turn helped drive the adoption of Ukraine’s new law on public broadcasting.

Is it accurate to talk about a new era in Ukrainian media since the advent of the Euromaidan Revolution?

I would not call it an entirely new era, as Ukraine had experienced years of ‘random freedom’ prior to the Euromaidan Revolution. Nevertheless, it is true that the media situation has improved significantly. However, Ukraine’s oligarch-owned commercial media outlets still refuse to use the opportunities of today’s greater press freedoms, and instead continue to serve their masters rather than their audience.

Since late 2013, the Ukrainian media has had to contend with a sophisticated and extensive Russian information war. What balance do you attempt to strike between developing your own narratives and countering Kremlin disinformation?

I do not think in terms creating our own narratives and countering disinformation. Our goal is to provide audiences with the best information we can, and to let them decide for themselves what is happening. The Kremlin information war seeks to demonstrate that objective information is a myth and all media outlets follow their own agenda. Confronted by this, the best thing serious journalists can do is to safeguard reality. Government bodies can do whatever they

media

Hromadske TV leading the Ukrainian media revolution

Many analysts argue that the conflict in eastern Ukraine is primarily an information war generated by the Kremlin media. Is it possible for the Ukrainian media to adhere to internationally accepted standards of objectivity in such an environment of weaponized journalism?

I am always a bit puzzled by the use of the rather general term ‘Ukrainian media’. My opinion is that there is quality media and there is bad journalism. In today’s Ukraine we have both, much as they do in the US, the UK and in Russia.

Unfortunately, not all Ukrainian journalists are doing a good job. Any country’s media sector is a reflection of society as a whole, and Ukrainian society is obvi-

What kind of reactions have you had from viewers in the Russian Federation?

Many Russians followed our coverage of the Euromaidan protests. We understood from the beginning that our Russian audience was open to alternative sources of information other than the Kremlin. We do not want to change the minds of those who are ready to believe anything the Kremlin says - we just want to explain what is happening here for people who genuinely want to know more.

Hromadske currently produces a weekly English-language show and maintains online English-language platforms. Do you plan any further English-language initiatives?

Hromadske International is still very young – it will mark its first anniversary at the end of October. Every day we produce at least one report with English subtitles, while our extremely small Englishlanguage newsroom team manages to provide breaking news coverage via Facebook and Twitter. We currently have funding until the end of 2015, but we are sure we will not stop there.

About the interviewee: Nataliya Gumenyuk is the Head of Hromadske.tv and Hromadske International

September 2015

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legal

Nationalization in occupied Crimea

Russian courts avoid judgment on nationalization despite strident claims by occupation authorities The Russian occupation of Ukraine’s Crimean peninsula has created a wide range of complex legal issues, ranging from human rights and international jurisdiction to trade relations and property ownership. Since the Russian annexation process began about eighteen months ago, much international media attention has focused on violations of basic human rights and freedoms – particularly in relation to the peninsula’s indigenous Crimean Tatar population which overwhelmingly opposed the Russian invasion and has hence become the target of abductions, entry bans, freedom of assembly restrictions and a media crackdown.

The efforts of the occupation authorities to nationalize Ukrainian state-owned and private assets in Crimea also created an entirely new area of legal confrontation as owners seek to assert their property rights in a climate of geopolitical confrontation and complete Russian disregard for international law. The Ukrainian state has estimated that it has suffered losses valued at tens of billions of dollars as a direct result of Moscow’s annexation of Crimea. Nonetheless, legal proceedings over compensation are likely to take many years to be resolved. Meanwhile, private individuals face an environment of legal ambiguity and uncertainty as they seek to safeguard their property rights from occupation authorities operating with apparent impunity.

Ukrainian property owners dispossessed

The nationalization initiative was initially justified by the so-called Council of the Republic of Crimea as a measure to return assets ‘illegally acquired’ by the Ukrainian state. Additional arguments to support the nationalization drive have included the alleged need to secure objects regarded as strategically important to the Crimean economy, and a quite obvious desire to prevent owners loyal to the Ukrainian government from using Crimean resources to help finance Ukraine’s national defense efforts in eastern Ukraine.

The list of seized or compulsorily

redeemed objects in Crimea had included those of Privat Bank (associated with former Dnipropetrovsk Oblast Governor and prominent Ukrainian oligarch Ihor Kolomoyskiy), Aivazovskiy Park complex (associated with another Ukrainian oligarch Serhiy Taruta), energy company Krymenergo and the Crimean branch of Ukraine’s national fixed line telephone operator Ukrtelecom (both associated with ‘Ukraine’s richest man’ Rinat Akhmetov).

The Crimean occupation authorities went to some lengths to stress the finality of this controversial nationalization process, in particular with the peninsula’s high-profile Moscow-appointed chief prosecutor Nataliya Polkonskaya calling the nationalization ‘non-challengeable’. However, leaving aside the issue of the legally unrecognized status of the Russian occupation in general, even the Russian courts seem to be undecided about the legality of Crimea’s nationalization drive.

Russian Supreme Court leaves issue unresolved

While complaints for annulment of the nationalization from the Ukrainian authorities and individual Ukrainians have not been lodged due to legislatively established absence of legal authority of Russian-based court authorities in Crimea, there have been a number of legal challenges to the nationalization process from Russian sources.

Well-known Crimean lawyer and activist Jean Zapruta and Russia’s Yabloko political party have both disputed the legality of the nationalization programme by lodging complaints with a local court of appeal at Simferopol. Mr. Zapruta’s com-

plaint was eventually rejected by the Russian Supreme Court in a final ruling that was held up by many in the international media as confirmation of official Russian state backing for the nationalization process in occupied Crimea.

However, closer inspection of the Russian Supreme Court ruling of April 2015 reveals a more restrained picture that remains open to a variety of interpretations. Russia’s top court ruled that Mr. Zapruta had not possessed any legitimate interests or rights regarding the privatization issue, and therefore had not been legally empowered to act on behalf of those affected by the nationalization. As a result, the case was closed without the court passing judgment on its merits. The Russian Supreme Court employed similar arguments - and reached similar conclusions - during a subsequent hearing in May 2015 addressing the complaints lodged by Yabloko political party.

Far from confirming the legality of the process, the Russian Supreme Court neither supported nor opposed the Crimean nationalization drive, leaving the question of Moscow’s official stance open. While those who have lost property as a direct result of the nationalization process theoretically enjoy the right to challenge these acts of nationalization in the Russian courts, the situation remains shrouded in mystery. As long as this uncertainty remains, members of the media and legal professionals should beware of jumping to conclusions or attributing undue importance to rumors – unless they wish to become part of the rumor mill themselves.

About the author: Anton Molchanov (Anton.Molchanov@arzinger.ua) is a senior associate at Arzinger law firm in Kyiv

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Overview of where to live in Ukraine’s capital city and where to invest in property purchases

In our real estate practice we are frequently approached by investors interested in Kyiv’s residential real estate market. These investors are usually seeking aggressive annual rental returns of 10% or more of a property’s purchase price. We advise them that such returns will require finding and renovating a ‘fixer-upper’ or buying and renovating a ‘shell and core’ (unrenovated apartment unit) in a new building. In Kyiv, properties that are already in a suitable condition for tenants and that would support 10%+ annual returns are practically unavailable on the market.

Deals are harder to come by in new buildings in prime locations in Kyiv, primarily because these buildings are in greater demand among local buyers (who tend to be less fixated on investment returns). While as the owner of a renovated apartment in a new building, you could demand a premium over rental prices in older buildings, this premium is usually insufficient to make up for the differential in your purchase price of an apartment plus renovation in a new building versus buying and fixing up a unit in an old building.

Let’s say you’d like to buy a property in one of Kyiv’s new buildings, renovate it and let it out for rental income. You might pay USD 2,500 per square meter for a 160 square meter apartment in one of Kyiv’s suburban luxury apartment complexes, and an additional USD 750 per square meter for a luxury renovation. Your total cost (excluding taxes and agency fees) would be about USD 520,000, meaning you’d need to charge about USD 4,333 per month in rent for a 10% annual return. This is for a property without the advantage of city center location. Let’s suppose that you have found what you believe is a good deal to purchase a residential property in Kyiv and you plan on letting out this apartment for rental income (after a renovation). How should you estimate the future rental income from this property? Here we come to the most basic of all value drivers in real estate: location. After location, the rental level for a given apartSeptember 2015

real estate

Kyiv real estate district-by-district guide

ment size depends on its building and renovation type (usually ‘Euro remont’ or ‘Luxury’). Apartments in older buildings have various levels of construction quality and layout, tend to be clustered in Kyiv’s center, and often have higher ceilings (3.5 to 5 meters) than newer buildings.

The construction quality and layout of new buildings tends to be better, but these buildings usually lack the ‘character’ of older buildings. While rental prices in Kyiv are often quoted in US dollars, these days payment to your landlord is generally paid in Ukraine’s hryvnia (UAH) currency.

Whether you plan to buy Kyiv property for rental income, or you are just looking to rent an apartment in a neighborhood that suits your lifestyle and budget, this article will help get you started with your property search in Kyiv. Here you’ll find a quick overview of Kyiv’s central raions (‘districts’) highlighting livability, infrastructure, and rent levels.

Shevchenko: Kyiv Old Town and the Diplomatic Quarter

Kyiv’s Shevchenko (or Shevchenkivs’kyi ) district is a mix of cultural and historical landmarks, and commerce. The eastern part of Shevchenko was once known as the ‘Upper City’ and is home to St. Andrew’s Church, St. Sophia’s Cathedral, St. Michael’s Monastery, Volodymyrska Hill, and Golden Gate. Kyiv has over 75 embassies, consulates, diplomatic missions and international organizations, and about half of these organizations are located close to Golden Gate (Zoloti Vorota metro station), making this Kyiv’s unofficial diplomatic quarter. Cultural institutions in Shevchenko include the National Opera Theater and the National University, which is bounded by Taras Shevchenko Park and the Fomin Botanical Garden.

The district also includes many modern commercial and residential buildings, nearly all of Kyiv’s five-star hotels, and the greatest quantity of metro stations in the city. Whether you are looking to live downtown in a : 45

: pre-revolutionary building with ‘character’, or in a modern luxurious high

rise near upscale restaurants on relatively quiet streets, you can find it in Shevchenko. However, you should be prepared to pay a premium price to live in Kyiv’s Old Town.

If you are looking for somewhere to live in Shevchenko that is less pricey but close to the city center, there is L’vivs’ka Plosha (Lviv Square). This a popular hangout for the young and hip which is located near to Peizazhna Alley, a park and picnic area. L’vivs’ka Plosha is a potential candidate for urban redevelopment and sits atop the perennially unfinished Lvivska Brama metro station. If the metro station ever finally opens and the area redeveloped, rents and property values will rise accordingly, making this an interesting option for speculative real estate investment.

Pricey Pechersk: Government offices, parks and green space

Pechersk is one of Kyiv’s central districts and is home to Ukraine’s parliament and the beautiful Mariyinskyi Park. The district is bordered by Khreshchatyk Street, Velyka Vasylkivska Street (formerly Chervonoarmiiska), and the Naberezhne (riverside) and Naddnipryans’ke Highways just below the city’s main Botanical Gardens. Pechersk has some of the city’s most prestigious and pricey neighborhoods, including Pecherski Lipki (close to government institutions) and Tsarskoe Selo, an upmarket residential district with old and modern detached homes and several embassies. The southern part of Pechersk has a large new business-class complex called Novopecherski Lipki and other modern complexes, particularly along Zverynetska Street, which offer views of, and proximity to, the Central Botanical Gardens. One of Kyiv’s top private schools, Pechersk School International, is in Pechersk, and the British International School also has a campus in this district. In addition to several luxury boutiques, you’ll find two of Kyiv’s most upscale shopping malls here: Gulliver Trade Center and Mandarin Plaza. Aside from several pricey neighborhoods, other parts of Pechersk tend to be fairly unremarkable and urban, but housing here is not cheap due to demand for apartments close to Kyiv’s city center.

Hip and historical Podil: pedestrian-friendly arts focus

Historical Podil is located close to the Dnipro River. The district includes one of Kyiv’s oldest neighborhoods that was once known as ‘Lower City’. Here you’ll find many beautiful pre-revolutionary buildings, art galleries, trendy cafes and restaurants. On weekends, Andriyivskiy Uzviz (‘Andrew’s Descent’) is teeming with tourists, who come to visit Saint Andrew’s Church, Mikhail Bulgakov’s house, and the souvenir market that lines this winding and picturesque street. Podil is an up-and-coming neighborhood that is popular with a young and hip crowd who are drawn by Podil’s fun atmosphere that emanates outward from Kontraktova Plosha especially along Sagaydachnoho Street. Close by is the recently renovated Poshtova Plosha that overlooks the Dnipro River and the Kyiv River Port, where you can embark on a river-

boat cruise, enjoy a view of Kyiv’s illuminated bridges at night, or take a short walk to the funicular that connects Podil with Shevchenko district.

Between Kontraktova and Poshtova Squares is Kyiv-Mohyla Academy, one of Ukraine’s most prestigious and Western-oriented universities.

Apartments in Podil are close to Kyiv’s city center (about a ten-minute drive during non-rush hour traffic) and are often less expensive than in other central districts. There are many relatively quiet streets here as long as you avoid the noisy tramlines, and in addition to the old buildings, there are some new low-rise and high-rise apartment complexes such as the premium Vozdvizhenka micro-region and mixed-use developments above Kontraktova Plosha.

Holosiiv: Parks, forests, lakes and new apartment complexes

Holosiiv district (‘Goloseev’ in Russian) is a large, mostly green district that stretches from downtown Kyiv where Velyka-Vasylkivska (formerly Chervonoarmiis’ka) meets L’va Tolstoho Street along a narrow urban strip that broadens and extends southwesterly along Prospekt 40-letiya Oktyabrya - a major north-south highway that intersects with Kyiv’s Ring Road (Kil’tseva Doroha). This northwestern urban corridor features several new residential complexes of mid-priced and premium-class housing (such as the Park Avenue complex). Many of these new complexes offer good transportation links to Kyiv’s center and are clustered along the Kyiv Metro blue line (only a 15-minute ride from the heart of downtown Kyiv). Plenty of shopping and entertainment options are nearby including Ocean Plaza, a large modern shopping mall with hundreds of shops, a hypermarket, movie theater, restaurants and the rooftop City Beach Club. Just to the southeast of these new housing developments you will find Holosiivskiy National Nature Park, a large nature reserve and recreation area boasting forest land with lakes and ponds. Indeed, Holosiiv’s huge, old growth forest (4,000 hectares) contains stately oak trees that are said to be 200 to 400 years old. Not far from Holosiivskiy Park is Park Feofania.

Both of these parks are popular spots for walking, biking, picnicking and other outdoor recreation. On average, apartment rental prices in the north of Holosiiv, which is closest to downtown Kyiv, tend to be as high as those in Shevchenko and Perchersk districts. The exceptions are large luxury apartments in new buildings, which are generally in less demand.

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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reform

Rebuilding government communication from the ground up Lack of communication blamed for negative perceptions over reform pace in post-Maidan Ukraine It’s a fact that no Ukrainian government has ever been very good at communication. In the past, most government ministers believed that their PR person was there solely to protect them. Few understood the real importance of communication, or how to use it ethically or effectively. With the advent of the new government in 2014, many expected a new era of enlightenment. In communications terms, this does not appear to have been the case. Today, the government of Prime Minister Yatsenyuk is under attack for apparently failing to carry out reforms.

Is reform process criticism warranted?

Following a recent in-depth audit by the Communications Reform Group of the entire government communications system, it is clear that the communications system has changed little since Soviet times. Of the 50 or so press secretaries in the government system, less than 10 have any real communications training. Their status and salary levels are not much higher than that of a junior secretary and they have little incentive to do any more than follow instructions. The sad truth is that the government does not have anything that could even resemble a modern communications system, thus everything that has been achieved in communications to date has been the result of the dogged determination of a dedicated few.

The function of government the world over is determined by process and systems. The role of communication departments is to convert process into public benefit and social result. Without a functioning communications system, the Ukrainian public are being presented with a diet of process and systems that neither informs nor inspires. This problem is not just restricted to the government itself. The National Reform Council website, which is supposed to be the source of all reform information, is little more than a maze of indecipherable process.

Recognizing the rising wave of public disquiet, the Prime Minister has taken steps to not only reform the entire system of government communication, but also to start a process of public dialogue over the impact of reform on Ukrainian society. The short-term strategy includes a television programme ’10 Minutes with the Prime Minister’ aired on many channels every Sunday evening. Within less than three months, the programme was already attracting a weekly audience of up to 5.8 million viewers, making it the third most watched programme on Ukrainian television. This is an indication of the public desire for greater communication.

Selling reform is a bit like selling thin air, as in most cases there is nothing physical to see. The majority of reform is structural and designed to change the way the nation is governed. Certainly there are visual examples such as the new police, but most reforms are technical despite what the populists might claim. Until recently, Ukrainian reform hasn’t even had an identity or any visual image. The ‘Reform is happening’ logo (pictured) being rolled out across ministerial Facebook pages is a very low-cost start. It will be followed by a series of three reform e-guide books targeting citizens along with the business and international communities. These will only be available on social networks and government portals as there is currently no budget for printing. The e-books are being specifically written from the audiences’ perspective so that readers will be shown actual results as opposed to indecipherable process.

Creating a class of government communications professionals The longer-term strategy is much more complex as it requires the complete modernization of the entire communications system at all levels of national, regional and local government. The British government is funding the Communications Reform Group at the Cabinet of Ministers (CRG), which is made up of some of the top practitioners in the country and supported by international experts, who have begun what is likely to be a two- to three-year process.

The CRG has just completed an extensive audit of the current communications staff and systems to ascertain the current reality. Their findings will form the basis of a new and long-term communications education programme for all levels of government at the National Academy for Public Administration. This will then form the minimum standard for all government communicators. The courses are being developed by a former President of the Chartered Institute of Public Relations in the UK, and are designed to build systemic capacity and enable trainees to advance to recognised international standards. Once operating, the new system will put ministerial communications advisors at a senior level and provide them with the budget to enable the government to both listen to and communicate effectively with the public.

Media must play key communications role

However, training the communicators is only part of the problem. In order to communicate effectively, you also need to have a media industry that works in the national interest. This is clearly not the case in Ukraine, where the media is largely owned by oligarchs who seem more interested in discrediting the government than in helping the public to understand the reform process.

The recent YES conference in Kyiv was a classic example of this problem. Many of the international speakers at YES hailed the achievements of the government, but Ukrainian press reports on the subject were at best muted. What the media oligarchs are doing at present is distinctly Putinesque. They are disguising biased and unjustified criticism as bona-fide journalism, while ensuring that the balance is distinctly anti-government.

European democracy is reliant on the ability of the government to listen as well as speak. The media plays an essential role in this process. The government has already recognised its responsibility and is working to completely reform the entire process of communication. Fixing the media, however, may mean changing the entrenched attitudes of the oligarchs. Reform in this area could well take a lot longer.

About the author: Martin Nunn is communications advisor to the Prime Minister of Ukraine and Chief Executive of Whites Communication, Kyiv 48

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KSE President Dr. George Logush argues for better pay and greater international interaction Ukraine ranks as one of the most educated nations on the planet, but as a new academic year gets underway across the country, the Ukrainian education system is still widely regarded as falling well short of its world-beating potential. Limited resources, outdated curriculums, corruption and a lack of international academic interaction all continue to hamper the further development of what is theoretically one of Ukraine’s greatest assets.

Business Ukraine magazine spoke to Kyiv School of Economics President Dr. George Logush about his vision for a Ukrainian education system capable of serving the country’s needs as it looks to integrate further in the global economy.

Are Ukraine’s institutes of higher education producing the kind of graduates that the country’s economy needs?

Unfortunately, they are not yet doing so, but this is an incredible opportunity for human capital investment, restructuring, and transformational reforms.

Ukrainian universities are vastly underfunded, isolated from the world academic community, and do not appear in international rankings. State universities, saddled with stifling conservatism and overregulation, offer tuition-free education, and thus monopolize education by squeezing out competition from non-state universities.

Ukraine is widely regarded as one of the most educated nations in the world. In which areas does Ukraine enjoy the greatest advantages, and what are the biggest weaknesses of the country’s education system?

Ukrainian education produces very highly literacy and is still quite good for academic disciplines such as mathematics and for the basics in several sciences. However, this edge is in decline as Ukraine has seriously lagged behind scientific developments over the past few decades. The technological and scientific advantages inherited from the Soviet period were primarily in defense-related fields like aerospace, welding and a few other specialized technologies. These advantages should not be exaggerated as the Soviets could not attain parity in the design of items like space shuttles, aircraft carriers, and high performance aircraft, avionics, and civil aviation. As an indicator, there were just a handful of Soviet Nobel Prize winners. This edge has seriously slipped in the past few decades.

Moreover, Ukraine seriously lags in academic fields

with no other choice. However, this does not just relate to conversational English language - a total business education conducted in English and in accordance with international curriculum standards is required in order to provide effective communications with business partners and competitors internationally. Particularly important are MBA programs taught in English with international faculty with PhDs and executive management experience.

About the interviewee: Dr. George Logush is President of the Kyiv School of Economics that were banned, underdeveloped or distorted by censorship and ideological controls during the Soviet era. This applies to social sciences, economics, and management.

How have the past two years of protest, revolution and war impacted on the higher education system in Ukraine?

The Revolution of Dignity exposed the link between authoritarian rule and the subservience of state universities. This has driven a series of initial reforms, heroically led by Minister Kvit, Rector Zhurovskyi, and parliamentary committee chair Hrynevych. As a result, Western PhDs have finally been recognized, opening the way to international faculty exchanges. Universities have been granted more autonomy, and barriers dismantled for education-science-technology interfaces. But this is just the start. Further reform should include state scholarships for students with freedom of choice as to where to study, including non-state universities. Ukraine also needs English-language degree programs and appropriate faculty salaries. These reforms would provide opportunities for the rapid development of the kind of world-class education system which Ukrainians richly deserve.

How important are good English-language skills for Ukrainian students looking to build a successful international business career?

I can answer simply, loudly, and profoundly – they are indispensable! English is the international language of business and science. The Association Agreement with the EU, opportunities with North America (especially with an impending EU-US FTA) and the rest of the world, and the continuously constricting trade with Russia, leave Ukrainians

education

Ukrainian educators need higher salaries and better English skills

In the 1990s, it was common for ambitious young Ukrainians to study law. Today many Ukrainians see IT studies as a pathway to a lucrative career. What will be the most sought-after educational background in ten years’ time?

Ukraine’s biggest problem is the lack of economic growth driven by business expansion, especially internationally. Successful business requires managers and executives with state-of-the-art knowledge. Ukraine needs thousands of high quality MBAs with this training. This is the coming boom in education.

How difficult is it to attract high-caliber international specialists to teach in Ukraine?

This is a severe bottleneck. While PhDs are now finally accepted, recruitment is needed. Salaries and working conditions must be competitive. Students and fellow Ukrainian faculty members must be fluent in English to enable teaching, research and publications. Western faculty will drive the change in Ukraine’s higher education.

Ukraine’s higher education system has long been dogged by corruption, with bribes for grades and ghost-written course papers just a few of the more common problems. How can this culture of corruption be overcome?

Faculty members must be paid proper salaries.

Current salary levels are very low. This creates the temptation, and even the need, to supplement income with ‘supplementary payments’. After salary reforms, universities should root out corruption. We should add that the majority of faculty members are hard-working and honest. But a sizeable minority remain corrupt and devastate the system.

Cosmos Ojukwu is a Kyiv-based Nigerian journalist who has been covering Ukrainian affairs for more than a decade

September 2015

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it sector

The next generation of Ukrainian IT excellence Ukrainian IT sector booming but suffers shortage of professionals to meet burgeoning demand The recent acquisition by online giant Snapchat of Odesa-based Looksery for USD 150 million has highlighted the strength and economic potential of Ukraine’s burgeoning IT industry. The Ukrainian IT sector is one of the few segments of the economy to have performed impressively over the past two years, continuing to expand despite the broader economic malaise gripping the country. Ukrainian IT employees are a growing class of upwardly mobile professionals capable of competing successfully on global markets, with the country recognised as one of the world’s top outsourcing destinations and a prime location for innovative research and programming centres.

The pace of this IT sector growth is now in danger of outstripping supply. Ukraine simply doesn’t have enough qualified professionals to meet the expanding levels of international demand for skilled IT staff. If the Ukrainian IT sector is to reach its potential as one of the engines of the new Ukrainian knowledge economy, a fresh generation of IT experts needs to be nurtured.

The BrainBasket Foundation is leading current efforts to prepare this new generation of Ukrainian IT specialists. Launched in 2015 and supported by a number of leading Ukrainian IT companies including main donor Ciklum, BrainBasket aims to facilitate the training of 100,000 new IT specialists by 2020 via a combination of informational support and educational initiatives. Business Ukraine magazine spoke to BrainBasket team about the vast potential of the Ukrainian IT sector and the challenges of keeping pace with developments in this most dynamic of industries.

Which areas of the Ukrainian IT sector currently suffer from the greatest shortages of qualified employees?

The Ukrainian IT sector is dominated by outsourcing companies developing products for Europe and the US. The industry lacks senior specialists in programming, quality assurance and project management.

According to your research, how many extra work places could the Ukrainian IT sector potentially provide in the short- to medium-term?

The Ukrainian IT industry is developing dynamically and can easily generate around 200,000 work places by 2020. Global research shows that Europe will lack 900,000 IT specialists in a few years, while the global shortage will be around five million. This

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means that more and more companies will need outsourcing options. Ukraine is well-placed to meet this demand.

What are the key advantages of the Ukrainian IT sector compared to other regional IT sectors?

Ukraine boasts excellent higher technical education standards dating back to Soviet times. As a result, the country had a range of highly-qualified mathematicians, cybernetics experts and engineers who joined the IT industry when it started to expand. The Ukrainian IT sector also offers highly competitive salaries compared to costs elsewhere in the region.

How is the Ukrainian education system adapting to meet the demand for qualified IT specialists with the requisite professional skills?

Unfortunately, the dynamics of today’s reality are such that universities can’t keep up with the speed of development within the IT industry. Many existing state study programmes have become quite outdated. To counter this shortcoming, a few years ago we began to see the emergence of a commercial educational sector. Now you can find around 50 educational centres all over Ukraine that offer courses on the most relevant professional skills and allow anyone to master new IT specialities in a matter of months.

Which areas of the Ukrainian IT sector offer the most exciting prospects for further growth and expansion?

The largest and most developed segment of the

Ukrainian IT sector today remains outsourcing.

Companies in this sector can vary in size from a handful of employees to hundreds. Another interesting segment is product development. This takes more time and expertise, but it offers far more potential for future global growth.

How much is the Ukrainian IT sector currently worth and what are your projections for future growth?

For the last 10 years, the industry has consistently grown at around 25%-30% annually. In 2013, it generated an estimated USD 2 billion. We believe that in the event of peace in east Ukraine and a return to economic stability, the Ukrainian IT sector could be generating annual revenues of USD 10 billion by 2020.

What would be your advice to any young Ukrainians looking to improve their chances of securing a career in the IT sector?

A good candidate for any position in IT should have a combination of strong tech and soft skills.

Tech skills include core knowledge of information technology and programming languages. Soft skills include time management, social intelligence, teamwork, negotiation and communication skills.

Another must-have for IT specialists is English language proficiency. Since a lot of communication is with international clients, English is the industry language and fluency is essential. If someone is unsure of what area of the IT industry they wish to work in, they can visit the brainbasket.org website and explore the career advice we provide. www.bunews.com.ua

Viral video promotes the new Ukraine Rebranding Ukraine: Golden domes make way for IT opportunities and knowledge economy

Ukraine desperately needs to attract foreign investment, but the country faces image issues as it seeks to convince international business that it is a good place to invest. In addition to the well-documented problems created by ongoing Russian aggression coupled with decades of corruption, Ukraine must also contend with the harsh realities of a low international profile and overwhelmingly negative outside perceptions. A small but important step towards confronting these issues was taken in summer 2015 with the release of a short but striking promotional video entitled ‘Ukraine.

Open for U’, highlighting the country’s wealth of intellectual assets and promoting the most dynamic elements of Ukraine’s growing knowledge economy.

The video, which premiered at the landmark US-Ukraine Business Forum in July, proved an instant hit, clocking up hundreds of thousands of online views within days. It was widely hailed as the most successful promotional video produced since Ukraine achieved independence in 1991, and is currently being translated into a range of languages in order to take the message to as wide an international audience as possible. Business Ukraine magazine spoke to some of the people responsible for creating the ‘Ukraine. Open for U’ video in order to uncover the story behind this fresh approach to promoting the new, post-Maidan Ukraine.

Bureaucracy-busting government input

The ‘Ukraine. Open for U’ video was a collective creation that was championed by the Ministry of Economic Development with the idea and concept 52

originating from Horizon Capital, financing provided by USAID-funded Western NIS Enterprise Fund and filming and production led by Titanium Presentations. Horizon Capital Founding Partner & CEO and Western NIS Enterprise Fund Executive Vice-President Lenna Koszarny says that the collaboration involved in the creation of the video, together with a promotional brochure and leaftlet ‘Invest Ukraine Open for U’, reflects the ‘cando’ attitude that is increasingly coming to epitomize the new Ukraine. “The video was produced in record time, with just a few weeks between the decision to create a promotional clip and the premiere of the final cut with everyone involved working round-the-clock on the project,” she explains. Ms. Koszarny recalls the initial brainstorming sessions fondly, and points to the super-fast interactions with various participating ministries as an example of how the bureaucratic delays of old have given way to more dynamic decision-making within government circles. “We received detailed and impressive feedback from five different ministries within three days, clearly demonstrating how a commitment to a common goal and business and government working together can lead to impressive results,” she shares.

Ms. Koszarny also attributes the success of the video to a spirit of volunteerism and collaboration between government, civil society and the wider business community. Location shoots at a range of Ukrainian businesses were coordinated at breakneck speed – a process that relied very much on individual goodwill and a collective desire to contribute to the country’s post-Maidan rebranding efforts. Stock footage was kept to a minimum and no actors were used in the making of the video. Instead, Ukrainian employees www.bunews.com.ua

investment

at featured companies participated in filming, giving the video an authentic feel. “People are coming together to help Ukraine with an enormous sense of pride in their country and what Ukraine and its people have to offer the world,” she offers. “We wanted to communicate that sentiment in the video.”

IT excitement replaces golden dome clichés

Viewers familiar with previous efforts to promote Ukraine to outside audiences will be struck by the absence of traditional elements such as agricultural idylls and golden domes. This was a conscious decision and part of a bid to turn international attention towards the dynamic aspects of Ukraine’s economy, with a particular focus on educational and IT excellence, breadbasket potential and infrastructure appeal. “We’ve all seen videos featuring historic churches, bread and salt greetings and embroidered shirts. Those images are great, but we are trying to show a new Ukraine and the new economy driven by the young generation,” says Ms. Koszarny.

“You have to sell the country to international audiences. You can’t wait for people to come to Ukraine.”

In place of well-worn folksy Ukrainian clichés, this post-Maidan promotional video was built around slogans supporting the idea of a new and exciting investment opportunity and backed by a soundtrack by popular Ukrainian artist ONUKA. It opens with the line, ‘Ukraine reborn, driven by the new generation’, and carries on very much in that vein. Only one church – Kyiv’s decidedly untypical Andriyivskiy Church – makes an appearance in the entire twominute clip, and there is not a Carpathian shepherd or Cossack dance troupe in sight. Instead, the focus is on economic achievements such as Ukraine’s strong position on international agricultural markets, and the intellectual potential evident in the country’s education system and thriving IT sector.

Such slick presentations have long been the norm for other emerging central and east European economies, but this is the first time that Ukraine has been portrayed in these terms, making it a watershed moment in the country’s rebranding process.

Introducing audiences to the real Ukraine

The video concept was ironed out in collaboration with the Ministry of Economic Development, with the Deputy Minister of Economy and Trade Representative Nataliya Mykolska and the Ministry’s Project Manager Maryana Kahanyak playing key roles in driving and coordinating government input.

From the very beginning, the stated aim was to create a social media tool that would go viral and reach a maximum number of viewers all over the world. Video production was overseen by Kyiv-based Canadian advertising executive Luc Chenier of Titanium Presentations. He says the commission was one of the biggest and most challenging of his entire career, deadpanning, “it’s not like there was any pressure. I only had 45 million people depending on me.”

As a long-time Kyiv resident, Mr. Chenier says his key objective was to overcome the low expectations often associated with the country, and to introduce outside audiences to the real Ukraine that he himself knows so well.

“How many times have you encountered people who visit Ukraine for the first time and are completely shocked and impressed by what they encounter? The whole goal for me was to demonstrate that Ukraine is so much more than the expectations people tend to have,” he says.

Praise from government leaders

The team behind the video first felt that they had achieved something noteworthy when the initial cut drew praise from a range of senior Ukrainian government officials. Prime Minister Yatsenyuk reportedly responded to a private screening of the video preview with the one-word endorsement September 2015

Members of the team behind the ‘Ukraine. Open for U’ video celebrate the clip’s premiere during the US-Ukraine Business Forum in Washington DC with Ukrainian Prime Minister Arseniy Yatsenyuk ‘cool’ and personally came up with the tagline ‘Open for U’. When the video received its public premiere at the US-Ukraine Business Forum in Washington DC, it received a standing ovation from an audience of business and government leaders, and proved to be one of the talking points of the entire event. Mr. Chenier says the Washington DC premiere was one of the proudest moments of his life, and claims he even received praise on the video’s production values from US Vice President Joe Biden.

Meanwhile, the video proved an online hit, garnering enthusiastic comments from all over the world and generating no small amount of pride among Ukrainian viewers thrilled to see their country finally depicted to international audiences in a positive and fresh light. After decades of largely negative Ukraine coverage in the international media, here was the Ukraine they knew – a land of opportunity capable of inspiring revolutions and generating a powerful sense of patriotism. “When I saw the video being tweeted by world leaders and high-profile investors, and especially when I read through some of the comments from Ukrainians expressing their pride and delight, I knew that what we had created resonated with viewers and truly captured the spirit of this great country,” shares Ms. Koszarny.

Rebranding Ukraine in the Image Age

The ‘Ukraine. Open for U’ video has now become a core component of Ukrainian government promotional efforts. It is shown at Boryspil Airport and on intercity trains throughout Ukraine. It is also featured wherever government officials are trying to raise the profile of ‘Brand Ukraine’, and will play a central role at a number of high-profile upcoming international business forums. Ukraine will seek to repeat the success of the US-Ukraine Business Forum with a German forum in Berlin in late October, and at a similar French event in Paris in November. Meanwhile, plans for a major China-Ukraine forum are currently being finalized. As if to underline its importance, the video has already been translated into Chinese.

One promotional clip will clearly not succeed in fixing Ukraine’s image ills overnight, but the enthusiastic reception for the ‘Ukraine. Open for U’ video has highlighted the readiness of international audiences to move beyond traditional post-Soviet narratives and explore the opportunities presented by the new, post-Maidan Ukraine. Similar efforts along these lines will have a big role to play in the coming months as Ukraine looks to reposition itself and attract investment. In an age where image is everything, Ukraine still has a long way to go, but the county may now finally be moving in the right direction.

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Networking events

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networking events

Fryday Kyiv kicks off autumn networking season International networking franchise Fryday welcomed the business community back to Kyiv following the summer break with a series of events in late August and throughout September. On 28 August, Fryday Afterwork teamed up with Avalon to showcase the venue’s stunning ‘Top Terrace’, overlooking St. Volodymyr’s Cathedral in the centre of the Ukrainian capital. In mid-September, more than 400 Fryday guests attended a fun networking evening at Kyiv’s popular Buddha-Bar. September 2015

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sport

Euro 2016 qualifiers: can Ukraine overcome playoff jinx?

The Ukrainian national football team goes into the find round of Euro 2016 qualification matches in early October lying in third place in their group and in line to enter the playoff stage. There remains an outside chance that Ukraine could qualify automatically, either by sneaking second spot in the group or by virtue of being the strongest third-placed team throughout the qualifying stages. However, with an awkward away tie in Macedonia and a tricky home match against Spain ahead of them, few would fancy Ukraine’s chances of improving on the team’s current qualifying group position.

A third place finish would secure Ukraine a place in the Euro 2016 playoffs and a chance to banish what is one of international football’s most unwelcome records. Despite inheriting what was by far the strongest football tradition in the former Soviet Union, independent Ukraine has only ever qualified for one major international tournament - the 2006 World Cup in Germany, where the team reached the quarterfinal stage of the competition before losing out to eventual winners Italy. This lack of tournament qualification reflects Ukraine’s reputation as the nearly men of international football.

Since entering international competition in the mid-1990s, the Ukrainian national team has fallen at the qualification playoff hurdle of major competitions on a record five occasions. This sequence of playoff woes began in 1997, when Ukraine lost out to fellow international football newcomers Croatia in the race for a place at the 1998 World Cup in France. There was similar heartbreak in 1999 and 2001, with Ukraine defeated at the playoff stage for Euro 2000 and the 2002 World Cup by Slovenia and Germany respectively. In more recent times, Ukraine failed to reach the 2010 World Cup following playoff defeat to Greece, and subsequently missed the 2014 World Cup after

becoming the first team ever to surrender a two-goal first leg playoff advantage in a 2-3 aggregate loss to France. No other national side has fallen at the playoff stage with such dismal consistency.

Ukraine’s playoff woes have made the team something of an international enigma. Despite possessing a wealth of top quality players, a strong domestic league, and a long history of footballing excellence, Ukraine has yet to make its mark on the world scene.

The current crop of players, led by head coach Mykhailo Fomenko, will now be hoping to break their playoff hoodoo and reach Euro 2016 in France. Much will depend on the form of star player Yevhen Konoplyanka, who was recently signed by Spanish giants

Seville after impressing during Dnipro Dnipropetrovsk’s sparkling 2013-14 Europa League campaign. Konoplyanka’s electric wing play has already proved a big hit in the Spanish league, and he is likely to come in for special attention when Ukraine line up against Spain in Kyiv in October. If, as currently looks likely, Ukraine do end up securing a playoff berth, then the decisive ties will take place in mid-November.

Euro 2016 Qualifier Ukraine vs Spain 12 October Olympic Stadium, Kyiv Kick-off: 21:45

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