The economy needs support from culture

Beata Stelmach, Undersecretary of State for Global Economic Policy, Promotion, and Culture at the Ministry of Foreign Affairs, visited Ukraine the other day and held a series of negotiations with governmental officials as well as meetings with Ukrainian companies represented at the Warsaw Stock Exchange and major Polish investors on the Ukrainian market. In an exclusive interview with The Day, she spoke on the importance of combining economic might with culture in order to achieve success on the international arena.

Considering that your last name is Stelmach, do you have any relatives in Ukraine? We have a famous writer of the same name, and also deputy head of the National Bank.

“I am really proud of that, but unfortunately, no, nothing that I would know. This is the name after my husband, and as far as I know, he also does not have any roots here. But the country is so beautiful, maybe we should look for them, and maybe we would find something.”

I have seen your CV on the website of the Ministry of Foreign Affairs. You have had a lot of experience working for the private companies. Why have you taken this state job? It seems to be not so well-paid.

“It is a great responsibility and opportunity. I think that coming with the business experience is something you can add to the competences of the administration. And this is my role at the Ministry of Foreign Affairs, to support all those relationships between countries that may create or bring business closer together. What I want to say is that if you want to support the country and if you want to support the economy and companies that represent your country, it is very good to have the business experience, because then you understand their needs better. You may have a better understanding of strategies of individual sectors, individual companies considering entering new markets. So, I think it is a great challenge for me, and as I have said, a great responsibility. Very often you have to deal with individual problems. When the companies are coming to you, asking for your support as the representative of the government, they count on you. Firstly, you have to understand their problems, but secondly, you have to know what kind of tools you may use with another administration to convince or to inform. Sometimes it is enough to inform, but sometimes it is important to stress the problems in order to ask them to react.”

Did you experience any problems when you came here with the Head of Warsaw Stock Exchange?

“We came here for a three-day visit. There were different topics on our agenda. One of them was to meet with the representatives of Ukrainian companies that are listed on the Warsaw Stock Exchange. As we look at the foreign companies, listed on the Warsaw Stock Exchange, Ukrainian group is the biggest one in terms of numbers, we have 11 companies listed at the moment. And those companies represent 2.5 billion euros of market cap, but at the same time it is worth mentioning that those 11 companies raised 0.5 billion euros from the capital market in Poland, which means that 20 percent of their capitalization was raised thanks to IPOs in Poland. This is an example of not only good cooperation, but benefits for Ukrainian companies that decided to choose Poland for their strategy and for their development in the future. Not only directed their shares to be listed in Warsaw, but also raised capital from the investors that are present in Poland.

“So, we came to meet these issuers, mainly the Board of the Warsaw Stock Exchange was interested in listening to their observations. But also, what we wanted to pass to those representatives, was the message that today this group is big enough to try to organize in order to talk one voice, to represent their interests in Poland. As a group, they are big enough to be heard. But at the same time, these companies, they are top of the top, because, you know, answering the requirements of the public market means that they have to be transparent, they have to disclose any information which is important to their investors and to the public opinion. So, they are cream of the cream. They also might be good ambassadors to promote Ukrainian market to the foreign/Polish investors, or Polish companies interested in coming to Ukraine. Taking the first step is always the most difficult part, someone has to be the pioneer. But if you have the door open, then the others will come. These all are success stories.”

Could you, please, give example of most successful Ukrainian company listed in Warsaw Stock Exchange?

“Astarta was the first Ukrainian company listed in Warsaw. Since the moment of IPO the market price rose by more than 300 percent; also Kernel Group – since The Day of IPO the price is higher by almost 300 percent. It only shows that these companies, as well as the rest, are the success stories. These examples may attract more companies from Ukraine to come to Poland, but also to attract investments to Ukraine to come from Poland.”

Could you, please, tell how Polish companies feel in Ukraine?

“Indeed we also had a meeting with the Polish investors that are present here in Ukraine, and although they are very satisfied with the market, they also face many problems. Maybe I will show some examples, but before, let me tell you that investment climate is always the most important factor while considering business location. So, if the investment climate is friendly, and favourable for newcomers, then newcomers will come. But if you create the regulatory framework which does not protect investors or it changes too frequently, if you do not take care of those investors, then they will decide to leave. We met with only big investors, companies who hire locally hundreds of Ukrainian employees. And these companies suffer from the stable regulatory framework. Unfortunately, I heard two examples, because of that unfavourable legal treatment, the companies decided not to invest more here, but instead of that shift their factory to the neighbour country. I talked about that during our political meetings. We met First Deputy Prime Minister Valerii Khoroshkovsky, the head of the National Bank of Ukraine Serhii Arbuzov, Deputy Foreign Minister of Ukraine Pavlo Klimkin, and Deputy Minister of Energy and Coal Industry Volodymyr Makukha.

“It may happen that companies who want to stay here, who feel very comfortable here, will leave because of such difficulties. There are problems with returning VAT. This is not the problem of only Polish companies, these are problems of foreign companies being here. These are problems of being not treated very fair by the taxation officers. I am not going to ask for better and extra special treatment for the Polish companies, we would rather like to see Ukrainian economic market as a friendly market to attract foreign investments. Otherwise it would be a great pity, because we are neighbouring countries, you are a great market for Europe. There are 38 million people in Poland and 46 million in Ukraine. If you look at the potential number of consumers, we might have a joint interest to create the opportunities to develop the cooperation. There is another example that I think is worth mentioning. We have heard of investor who had decided to come to Ukraine, opened a factory, and now produces the products using the imported raw materials. These raw materials do not exist in Ukraine. So they have to import, otherwise it is impossible to produce. And they have to pay tariffs, which is not understandable, because you impose tariffs to protect your local market. Such small things from one perspective, make big problems sometimes. Because then business is not profitable because of the higher cost of production. This is our role to show the foreign investors’ perspective, to turn the attention of Ukrainian administration to the problems that may stop, block, or slow down the economy.”

What else can we do to support cooperation between Polish and Ukrainian companies?

“In Poland we have special programs to facilitate the Polish exporters or to facilitate Ukrainian importers who would import from Poland.”

Does it work?

“Not yet.”

Why?

“We talked about it at the Central Bank. The Polish bank, BGK, a state-owned financial institution has prepared a specially dedicated program to support the trade; we agreed that one of the Ukrainian banks upon the agreement with BGK will introduce a pilot program to see how we may facilitate the cooperation.

“But also what I think is worth mentioning, there is also a great program coming from European Union: program within the framework of Eastern Partnership. This is another possibility for Ukrainian companies, especially SMEs, to use funds from European Union for their development. European Investment Bank, which is dedicated from the level of European Union, is the one to cooperate with domestic banks and to support SMEs.

“From our perspective thanks to the support of SME sector our economy was able to boost Polish economy during last 20 years; we also used the European funds. Our countries are too close to each other not to understand that we might benefit on both sides.”

Do you think it would benefit Ukraine to assign a Vice Prime Minister on the European integration who would close a deal on all those problems?

“I am not going to comment on the political solutions. First of all, I would like to orient our discussion on the economy issues. Each government may have its own solutions on how to deal and how to share posts. What I am saying, is that today is the best moment for Ukraine because of the quite favourable environment after all the negotiations towards Association Agreement, after the whole program of Eastern Partnership. You know that Poland is a great supporter of Ukraine to bring Ukraine closer EU. We would love to see Ukraine as the member of European Union, because everybody would benefit. So, what I am saying, is that this is that momentum worth using all these opportunities.”

The official name of your post says that you are the Undersecretary of State at the Ministry of Foreign Affairs for the Global Economic  Policy, Promotion, and Culture. What aspects of culture do you have to deal with?

“What does promotion stand for? It is for building your competitive advantage on the global scene. If you want to be recognized on that global market, if you want to have a big competitive advantage, you should use all the tools possible. You should show your country as a strong one in terms of democracy, economy power, in terms of your heritage and cultural achievements. So, if you ask a person somewhere in the world, what they associate Poland with, they would probably say Chopin, Sklodowska-Curie. What else?”

For us it is your poet Mickiewicz…

“Mickiewicz, Copernicus, John Paul II, Walesa, Szymborska, and many others. So, you see, these are the combinations of different names, coming from different moments of our history, people who are heroes in different situations of our history. And today you have to add your economic power. Culture is not enough. You may, of course, organize beautiful concerts of Chopin, but what you bring today to the global scene is your economic power. Look at Poland: it is the only country in the European Union that has not gone through recession during current crisis. At all times, from 2008 all the way to 2011 we have the economic growth, our GDP is always positive. There was a year, when everybody was red, and Poland was the only green country. Today, when you think about the global market, you have to think globally, you have to build the complex message to the world.”

Thanks to what reasons your country did not face the recession?

“One of the reasons was our strong internal demand. Let’s not forget about big spendings on infrastructure. And also thanks to the fact that we became the member of European Union we were able to use EU funds, a lot of European funds were spent on infrastructure, human power, research and development, etc. And the funny story, this is again something we have in common, Euro-2012 Championship accelerated our investment efforts. We in Poland decided that in order to be better prepared, we have to complete a lot of infrastructure projects by June 2012. Not only stadiums and airports, but hotel network base, roads, highways, and so on. A lot of spendings were dedicated to that. And this is not just investments for the championships itself, because those projects will stay forever, so this is just acceleration of our development.

“Besides, because we did not enter eurozone, we were not victims of eurozone crisis. Sometimes you need to have luck, and I think, we had a lot of luck in the crisis. In our case it was a combination of luck and hard work. A lot of Polish companies benefited from the crisis. The cost of production in Poland is still quite favorable, and the prices of the final products being produced in Poland were very much competitive on the international market. Thanks to that, our export rose. Not only we had internal market quite stable, but we also exported. Those at least two factors made our success possible.”

Recently our prime minister said that Ukrainians should put emphasis on the development of the internal market. Is it right strategy?

“It is always a good strategy to invest in internal market, because if you invest in internal market, you make the society more happy, richer, and if you create more working places, it is good for the economy itself. If you satisfy the internal market, then you may think about export. Going outside and having a good position on the international market is always good. But first of all you have to satisfy the internal market and your own people. And it is even better if you can do it together with foreign investors and foreign investements.”