The FINANCIAL — Perceptions of Ukraine abroad are distorted, with international TV stations only reporting on the war and poverty in Ukraine. The Ukrainian Government has now realized that it is private investment, not donor money, that can jump-start the economy. Therefore, the Government has greatly improved communication on reforms implementation, is meeting potential investors abroad and inviting them to Ukraine. Fighting corruption, accelerating reforms and creating understandable rules remain the main challenges for Ukraine.
“One of the key tasks for Ukraine remains establishing and developing cooperation with new trading partners, and the strengthening of non-traditional markets. These attempts are supported by tangible efforts to simplify the national regulatory base and bring it in line with EU and international standards. Also, the gradual yet constant loss of the sales market of the Russian Federation for Ukrainian producers means there is a need for diversification and restructuring of exports, and exporters are putting more and more focus on meeting the EU standards and requirements,” Andy Hunder, President of the American Chamber of Commerce in Ukraine, told The FINANCIAL.
In his exclusive interview with The FINANCIAL, Hunder expressed his optimism about the Ukrainian economy. As he said, the most recent data published by the State Statistics Service of Ukraine shows a slight growth of foreign direct investment in Ukraine. “This is the first sign of restoring growth of the Ukrainian economy in 2016, which is very important,” he added.
Q. According to recent UN estimates, net FDI into Ukraine amounted to negative USD 300 million in 2014, signalling that more investment money left Ukraine than entered it. The figures are quite understandable, considering the ongoing military conflict in the country. What was the impact of the Ukrainian crisis on U.S. businesses operating in Ukraine?
A. The present situation is both challenging for business, and also has many opportunities to offer. Investors are awaiting vital changes in the country, and actively contributing to accelerating these changes. Last year was demanding for the business community operating in Ukraine. There was a decline in macroeconomic indicators. But most recent data published by the State Statistics Service of Ukraine shows a slight growth of foreign direct investment in Ukraine. This is the first sign of restoring the growth of the Ukrainian economy in 2016, which is very important.
Unfortunately, the perceptions about Ukraine abroad are distorted, with international TV stations only reporting on the war and poverty in Ukraine. This creates a wrong perception on what is happening in the country. Such perceptions need to be addressed.
Q. In July of the current year the first U.S.-Ukraine Business Forum took place in Washington. The two countries agreed to work together to develop a roadmap that aims at improving Ukraine’s investment attractiveness. Please can you share with us your view on improving the investment climate of Ukraine?
A. It was, without doubt, the best presentation put on by a Ukrainian government in a quarter of a century. All speaking fluent English, articulate and showing well-honed presentation skills, Ukraine’s cabinet ministers did a marvellous job in presenting the country to the U.S. business elite that convened at the U.S. Chamber of Commerce building across the road from the White House on 13 July for the first ever U.S.-Ukraine Business Forum. The Hall of Flags was packed with leading business figures, many of whom make the call on where to invest billions of dollars. The Ukrainian government team, led by PM Arseniy Yatseniuk, had been preparing their presentations months before the event. A snazzy and upbeat 2 minute video promoting Ukraine as an attractive business destination was shown first thing at the Forum – the video, Ukraine open for U, became a YouTube hit with over a quarter of a million views in the first two days.
The U.S. Department of Commerce and U.S. Chamber of Commerce had done an excellent job in attracting a high calibre crowd to listen and meet Ukraine’s leadership, the majority of whom were themselves former investment bankers and leading corporate CEOs only a few months ago, having given up lucrative careers in business to serve in Ukraine’s post-Maidan government.
Another very important development is the start of privatization that will bring new investments to Ukraine as well as give an opportunity to grow existing businesses. This is substantiated by the recent announcement by Cargill of its decision to invest USD 130 million in a deep water grain terminal and create 350 new jobs in Odessa. Provisional arrangements have also been reached in Washington and published officially this week.
A hot topic for all Member companies of the American Chamber of Commerce in Ukraine now is the forthcoming reform of tax legislation, which affects improvement of the investment climate in Ukraine. Tax rules should be understandable, transparent, and predictable – this is something we actively advocate for. This spring we have prepared detailed proposals as to models of a new taxation system. The main pillars include significant simplification of tax administration, free automatic VAT refunds, and regulation of the issues of CIT advanced payments.
Q. How active is the Ukrainian Government in attracting foreign investors and improving economic conditions?
A. The Government realizes that not donor money, but private investment, can jump-start the economy. Therefore, the Government has much improved communication on reforms implementation in Ukraine, meets potential investors abroad and invites them to Ukraine to personally feel the environment for doing business in the country. At the same time, we at the American Chamber of Commerce in Ukraine and the businesses we unite, advocate for accelerating reforms in Ukraine, as we are far from satisfaction with that pace.
Q. What is your recipe for recovering the Ukrainian economy?
A. Fight corruption; accelerate reforms; create understandable rules of the game and a level playing field; communicate reforms and promote Ukraine internationally. But, in practice it is much harder to achieve this goal quickly and not lose the quality of such changes.
Q. Situations like the Ukrainian crisis are up to political decisions, meaning representatives of business have no influence on them. How do businesses deal with such cases?
A. Apart from contributing to the state budget, providing jobs for Ukrainians, ensuring economic development of the country in these challenging times, the role of business is also in broadcasting a clear message to the world about the actual work Ukraine has done and continues doing to overcome the crisis, and about the opportunities this country definitely has for growth. Business contributes to development and implementation of economic reforms and the dialogue between the Government and business continues.
Q. Naturally resource-rich Russia has always speculated with its resources, and imposed embargos for political revenge. How important is it to gain import independence from Russia?
A. The situation in the country last year forced the Government to decrease volumes of imports to stabilize the state finances. Therefore, dynamics showed a reduction of import from almost all countries. But one of the key tasks for Ukraine remains establishing and developing cooperation with new trading partners and the strengthening of non-traditional markets. These attempts are supported by tangible efforts to simplify the national regulatory base and bring it in line with EU and international standards. Also, the gradual yet constant loss of the sales market of the Russian Federation for Ukrainian producers means a need of diversification and restructuring of exports, and exporters are putting more and more focus on meeting the EU standards and requirements.
Q. What is the main mission that you would like to achieve while in this post, and how do you plan to accomplish your goals?
A. We at the American Chamber of Commerce have 3 main priorities that we are focusing on. First of all it’s B2G – driving the dialogue between business and Government; B2B – we work on continuously creating opportunities for business to business partnerships; and B2U – promoting Ukraine internationally as an attractive investment destination.
Q. Do you currently see any reasons for optimism regarding the Ukrainian economy?
A. I have come to Ukraine because I believe in the successful and prosperous future of this country. And, as Nelson Mandela once said: “Sometimes it falls on a generation to be great.” Ukrainians today can be that generation.
I am confident that Ukraine should move forward, build a strong economy. Let’s look at Israel for example; the country has been in conflict for long, but business has still been developing there.
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