Finding an investor is easy. One only has to know how to make his business profitable

SPONSORSHIP HINDERS EFFECTIVE MANAGEMENT
The mass media are dominated by the widespread opinion that investors are sponsors or philanthropists. It should be added that so-called investors have themselves encouraged such a view.

Multimillion dollar loans granted two or three years ago by foreign companies under government guarantees were given to enterprises which did not have the slightest idea of what they should do with the funds.

The creditors, both foreign and Ukrainian, are convinced that it is not safe to lend money to an average Ukrainian manager. According to Bohdan Hubsky, the Slavutych Concern Chairman of the Board, who is both an investor and object of investment, the projects proposed by Ukrainian enterprises are mostly aimed at the technological refurbishing of existing facilities, while in normal economies, amortization funds are usually used for that purpose. That is, it is the flawed strategy of enterprises to carry out redecoration rather than radical retooling, and it can be identified early when the enterprise applies for investment.

However, while the adoption of a well-thought investment policy at the nationwide level (i.e., at which effective legislation can be passed) is not likely to occur in the near future, Ukrainian enterprises are building themselves vertical and horizontal structures capable of absorbing investments and implementing profitable investment projects. According to Mr. Hubsky, "From the point of view of practice established in Ukraine, the sustainability of a project depends 50% on the capability of the managers to organize company operations and 50% on external economic factors. Management has to do its job in the time allotted." Obviously, Ukrainian businessmen cannot help worrying about the external factors accounting for 50%, which in this country tend to transform themselves into various political risks. They are no more satisfied with existing investment techniques and are trying to adapt the available structures to the requirements of the "good business."

SECRETS OF GOOD BUSINESS
Some time ago, when the topic of transition of the agricultural sector to market relations was popular among government officials, the Ministry of Agriculture and a number of major financial and industrial entities established, in a joint effort, the Ukrainian Agricultural Exchange. But for various reasons the Exchange was never able to do its job, which, however, did not prevent its founders from modifying the exchange system to restore settlement relations in the agricultural industry.

The Ukrainian Agricultural Exchange (UAE) had several dozen founders, mostly representatives of major companies and financial institutions operating in the energy sector and agro-industrial complex, which fact predetermined the field of cooperation. Moreover, the ability to coordinate projects implemented by the founders under conditions of the total degradation of the agricultural sector generated its own type of know-how.

According to Mr. Hubsky, who had also to become Chairman of the UAE Committee, the essence of such coordination is determined by the technical specificity of the agricultural business. A long seasonal cycle to obtain agricultural produce requires that the process be observed at all intermediate stages of the production: very often the failure to supply just one type of raw materials can endanger the whole investment project. Growing crops involves plowing, planting, pesticides, etc. Thus if only one link in the technological chain is missing, the desired result may not happen at all.

In fact, the Exchange not only assures the availability of all components needed for the production cycle, but also provides for interregional coordination of supplies. Typically, a number of UAE founder companies and other business entities are engaged in centralized programs. It means that if the Slavutych Concern is procuring equipment, oil products, and seeds for Odesa oblast, Ukrahrobiznes (Ukrainian Agro-Business, another cofounder) will deliver it pesticides. Or, for instance, when Slavutych invested Hr 60 million in the sugar refinery industry of Cherkasy oblast to purchase oil products, plant protective agents, and cover labor costs, Ukrahrobiznes, Interagro, and other companies also delivered fertilizers, petroleum products, and seed worth millions of

dollars. In other words, already at this stage UAE coordination enables companies to design specific production projects on a regional level and to minimize numerous investment risks. And foreign partners appreciate this.

Last year, projects worth of hundreds million dollars and involving millions of people were implemented under the aegis of the UAE. In order to insure their business relationship with the agrarians against state interference, UAE partner companies have signed agreements on cooperation with oblast administrations.

However, there are still difficulties in agriculture. Businesses, despite all the agreements on cooperation, cannot rely on regional executive bodies. The latter are now too weak, and, more importantly, irresponsible. At the same time, local administrations are in position to make decisions directly damaging both agricultural producers and the suppliers of petrochemicals and fertilizers.

Of course, the Ukrainian Agricultural Exchange cannot foresee all the problems businessmen investing in agriculture must face. Nonetheless, its three years of experience of joint work in the market shows that by joining their efforts, even in the most unfavorable economic climate, businesses of the new generation can not only keep afloat the potentially profitable agro-industrial complex, but create a new investment structure which is attitudinally and institutionally prepared to invest in the agriculture business.

Photo by Valery Myloserdov, The Day:
The President of the Coca Cola Ukraine accepts his Prometheus statuette in the category, Investor of the Year, in the nationwide Person of the Year annual awards ceremony