“So far the level of investment is disappointing…”

The British Business Days in Ukraine were held in Kyiv last weekend. For three days the representatives of 27 British companies promoted their products in Kyiv, looked for partners in Ukraine, and met the head of the Ukrainian government.

Meanwhile, on March 21, Deputy Prime Minister Serhii Tihipko was establishing trade and economic ties in London. He spoke at a roundtable “The Prospects for Ukraine’s Economic and Political Development,” held within the framework of the Ukrainian Business Week in London.

Great Britain is the sixth biggest investor in Ukraine. Since 1992, a hundred British companies invested 2.3 billion dollars in the Ukrainian economy. The biggest actors are: Shell, BP (through a joint venture with the Russian company TNK), JKX (oil and gas exploration and production), CBM Oil, etc. They usually import manufactured goods, vehicles, specialized equipment and medicine from Great Britain. In 2010 export to Ukraine grew to over 600 million dollars. And in 2011, according to Great Britain’s ambassador Lee Turner, double-digit growth of British exports to Ukraine is expected. Last year trade between the two countries exceeded one billion dollars. And this figure can grow further.

“So far the level of investments in Ukraine is disappointing,” said Turner in response to The Day’s question. In the ambassador’s opinion, in order to attract investments the Ukrainian government should improve the business climate more actively. “Ukraine has a considerable potential to rapidly develop its economy. For this to happen we should improve the business climate together. This is a specific issue. If Ukraine improves its business climate, there will be much more investments,” he believes.

Asked by The Day about the greatest hurdle to development, British investors unanimously answered that it was corruption. The businessmen also commented on the Tax Code. “The overall impression of the document is that, so far, there are more questions than answers,” said Mohammad Zahoor, founder and head of the ISTIL Group and owner of the Kyiv Post. He also explained that while some taxation items were improved, others became worse.

However, despite all the obstacles, British businessmen stress the substantial economic potential of the country. According to JCB’s regional director in Russia and the CIS countries David Hill, Ukraine produces only one-third of Poland’s GDP. That is why we have very strong prospects for economic growth. In particular, in Hill’s opinion, the agro-industrial complex is one of the most promising sectors.

British investors shared their worries and troubles in conducting business in a meeting with Ukraine’s Prime Minister Mykola Azarov. There the British ambassador expressed hope that the harmonization of legislation with the EU, as well as the signing of the deep and comprehensive free trade area agreement would promote further improvement of Ukraine’s investment climate. “I think this agreement will be signed by the end of 2011,” he stressed during the meeting.

“Ukraine is doing everything it needs to submit the application on joining the EU in some time,” Azarov told investors about the country’s plans on European integration. Speaking about business prospects, he singled out Ukrainian-British cooperation in the energy sphere. “Either we agree with our partners (the Russian Federation – Author) on a normal agreement on gas supplies, or we do everything possible to diversify gas supplies in Ukraine,” said the prime minister, implying prospects of gas cooperation with the British. At this Azarov stressed that the government welcomed the investors’ intentions to start producing shale gas and develop the Ukrainian Black Sea shelf.

Azarov also stressed that, while realizing projects in the agro-industrial complex, one will have to put up with restrictions on the sale of agricultural land. “Restrictions will be conditioned by the protection of our interests. But they shouldn’t constrain initiative and hamper the development of the agro-industrial complex,” the prime minister responded to the businessmen’s questions. But shouldn’t such an answer provoke even more questions? For if there are restrictions, there is someone setting them. In this case, can there be a guarantee that a responsible person or body won’t become yet another cog spreading corruption in the agrarian sector? Thus, while implementing the land reform, the government should think not only about restrictions, but also about reliable guarantees of market equality for all participants.