Kostiantyn Hryshchenko on new format of collaboration with business

What is the Ministry of Foreign Affairs doing to help Ukrai-nian business abroad? What role does the Ministry’s Council of Exporters play (considering its se-cond meeting during this year)? More on this in the following exclusive interview with Foreign Minister Kostiantyn HRYSHCHENKO.

“The Ministry of Foreign Affairs is taking a series of coordinated measures aimed at stepping up fo-reign trade, a task set before MFA by President Viktor Yanukovych. As you can imagine, this is an ambitious task, considering that MFA hasn’t worked along these lines systematically for a number of years, among other things because the ministry lacked the authority.

“The situation changed after the president signed an edict making it perfectly clear that the development of foreign trade contacts is within the MFA’s jurisdiction; that the mi­nistry must assist Ukrainian business abroad, help find potential investors, promote the business potential of various Ukrainian industries and regions in international media. Now this is another MFA priority, on a par with European integration and work with the Diaspora. The trade economic missions, previously under the dual command of MFA and the Ministry of Economy — that wreaked havoc on their performance — have been reorganized as foreign trade departments at the Ukrainian embassies, being thus subordinated to the Ministry of Foreign Affairs.

“In other words, we have all the tools we need to carry out our tasks. The emphasis in the foreign trade realm has been shifted to new markets, new regions — Latin America, Africa, the Middle East, Asia — that previously weren’t paid due attention.”

The foreign policy economization issue was broached when Zlenko held your post, wasn’t it?

“I hold in esteem the achievements made by our economic diplomacy over the previous years. However, most of them were made on a point target basis. Our ambassadors were never responsible for the commodity turnover of our businesses abroad or the number of partners found for them. Today, there is a different approach. Addressing last year’s conference of ambassadors, the president declared that progress in foreign trade, business, and fo-reign inland investments would be the main criteria in assessing their performance.

“Today’s MFA team has made a detailed analysis of the situation in the foreign trade domain. We have realized that we lack a systemic approach. All last-minute arrangements for [top-level] visits mostly served as proof of this. Most importantly, we have realized that diplomacy in the foreign trade sphere is absolutely ineffective without collaborating with [domestic] businesses. We have realized the need to have a basis upon which to maintain such constant collaboration. We now have this basis: the Council of Exporters under the aegis of the Ministry of Foreign Affairs of Ukraine. I signed an order establishing it on March 15, 2011, and its first meeting took place on May 15.”

What role is assigned to this council?

“First and foremost, it is meant to remove all barriers between businessmen and MFA leadership, including our ambassadors. I chair this Council and all messages from our businesses abroad, requesting assistance on the world market, are placed on my desk within the working day. In my absence, these issues are resolved by my deputy. As a result, each such request, along with our instructions, is forwarded to the ambassador concerned within two days.

“At present, the Council is functioning in keeping with the standards adopted by Western embassies. We have discarded the [previous] method of summoning 50-60 ma-nagers in various lines of business, with their absolutely different problems, focusing instead on specific directions.

“On May 17, the Council held a meeting with the directors general of Ukraine’s largest machine-building businesses, among them Turboatom, Motor-Sich, Zoria-Mashproekt, and AvtoKrAz. Why? Because I’m sure that effective modernization in Ukraine can be achieved by encou­raging hi-tech exports. Ukraine remains in the lead in a number of such technologies, and it can’t be an influential country without preserving and developing its industrial base. We will also support other economic sectors, ones increasingly contribu­ting to Ukraine’s GDP. We plan shortly to hold meetings with major agribusiness corporations and IT companies.”

Any progress along the export lines?

“We have the first results. They are proof that we adopted the right communication format. During five months since the Council of Exporters’ first meeting we have received over 30 messages from various businesses. All of the messages have been processed, resulting in 10 machine-building businesses currently actively negotiating access to the markets of 12 countries, particularly in Latin America (Argentina, Brazil, Venezuela) and in the Persian Gulf (Kuwait, Qatar, UAE).

“The Council’s second meeting took place last Monday. This time we decided to invite the heads of Ukraine’s largest financial-industrial groups (FIGs). As a result, the top managers of 13 companies attended. We signed a memorandum of understanding (our estimates show that these groups unite some 200 companies in various industries).”

Why FIGs this time?

“An analysis done by MFA experts has shown that there are mature, powerful corporations in Ukraine today, which have the financial, cadre, and human resources to access foreign markets and buy new assets. We have grown out of our short pants. National capital is strong enough to compete for attractive industrial and non-industrial assets abroad, and thus help to conso­lidate Ukraine’s positions in the international arena.

“In all developed countries big business closely collaborates with diplomats, strengthening these countries’ influence in the countries where investments are made. Thus forms the platform of patriotic business, something that could consolidate Ukrainian society.

“Most Ukrainian FIGs boast strong management, people capable of doing business using modern Western standards. We’re banking on them; we’re convinced they will be the prime movers of Ukraine’s stronger presence on foreign markets.

“I am further convinced that the meeting [last Monday] gave them enough food for thought. We will wait and see the results. During that meeting a memorandum was signed and the guidelines — bigger exports, combined efforts in working out le-gislative initiatives, attracting tangible investments from capital markets, primarily those in the Persian Gulf and Asia — determined.”

Do you believe that securing Ukrainian companies’ access to sales markets is an achievement?

“Yes, I do. I believe that’s a good result for starters. Let me stress, however, that the MFA isn’t going to negotiate any deals in lieu of any [Ukrainian] company. That’s not our jurisdiction. All such talks, all such initiatives must come from our businesses abroad. Our task is to help them access foreign markets. Business people must play the leading parts in economic diplomacy, with MFA playing a good supporting role — or necessarily acting as a reliable defender.

“Simultaneously, we started paying serious attention to professional diplomatic training in terms of collaboration with business. There is no way a diplomat can help a Ukrainian company unless he understands that company’s problems and concerns, unless he knows what their business is all about. You can’t figure out any of this sitting in your MFA office. Twenty-five MFA officials visited businesses in Sumy and Kharkiv oblasts on October 19-21. They were shown large factories and received first-hand data, taking the first step in understanding the actual problems and capacities of business in Ukraine.”

Sounds good enough to demand an interest on services.

“No way. That’s our responsibility under the law. We’re paid for it by the central budget, which means taxpayer and national company income tax money.”

Could this clearly formulated MFA-FIG collaboration result in your ministry forgetting about the needs of smaller businesses?

“MFA’s Council of Exporters isn’t the sole authority when it comes to foreign inland investments. On my initiative, an ad hoc Working Group was formed at the MFA in May 2011. It was made up of deputy governors responsible for foreign trade and investment. Its first meeting took place on May 17, 2011. It lasted five hours, with the deputy governors taking turns telling me about their foreign trade plans. Guess what was my conclusion after the meeting?”

I don’t know.

“Regrettably, not all of the Ukrainian regions know how to make a European-standard economic pro-ject in the public and private sectors that will interest a foreign investor. What I mean is the lack of professionalism on the part of some of the deputy governors in charge of investments. On my business trips abroad, meeting with potential investors, I have often heard that Ukrainians don’t know how to make their investment proposals attractive to foreign investors; that it is necessary to include Ukraine’s great potential in terms of agribusiness, hydrocarbon output, tourism, you name it.

“MFA, in collaboration with Ernst&Young, Pricewaterhouse Coopers, and EBRD experts, held a free-of-charge training course, explaining how to prepare investment projects and what minimal criteria they should meet. I might as well point out that it was a unique pro-ject, considering that the world’s major rival companies combined efforts in teaching Ukrainian bureaucrats to prepare investment projects.”

Two days to teach something that takes years being taught at universities and companies? Impossible.

“Impossible, of course, but in our case those who attended the course were shown what should be in their projects. Clear-cut standards were demonstrated, so that when such projects are prepared in Ukraine’s regions, those responsible will know what kind of data each such project must contain. Moreover, I’m sure they will remember that, without such data understandable and acceptable to world business, no one will bother to consider their projects.

“We have also initiated events meant to promote the economic potential of Ukraine’s oblasts. The first one was staged in Zhytomyr oblast. It gathered some 300 guests, including officials of about 30 embassies in Kyiv. We will keep developing this format. I visited several exporting businesses in Donetsk oblast recently. I met with the managers of the leading foreign-market-oriented businesses. I had previously made similar trips to Lviv and Odesa, meeting with local business people, discussing support of their international projects. I plan to visit Ukraine’s regions as often as I can. Practice shows that effective economic diplomacy requires the foreign minister to make domestic trips along with trips abroad.”