Misadventures of an American in Ukraine

Mr. Wingate came to Ukraine three years ago as an employee of a US company. The company folded up after endless changes in Ukrainian law, and Stephen faced a dilemma: either go back to the States or still try to work here. He opted for the latter and accepted a proposal to head the Carry Europe company which decided to implement a number of investment projects in Ukraine. The first of these, sort of a trial balloon, was to be the opening of an American restaurant.

"We decided not to take big cities that already had a well-developed infrastructure of foreign companies and international-level restaurants," says Mr. Wingate, "We started to study the provinces and when we rejected, for various reasons, several towns, only Mykolayiv was left."

In November 1997 the company acquired for 21,000 hryvnias the building of a former trolley power station via a local real-estate firm. Located in the very center of the city, at the intersection of Lenin Avenue and Radianska Street, the building had been empty and becoming dilapidated since the streetcar tracks had been removed from the avenue. In 1994 the State Property Fund of Ukraine regional branch authorized transfer of the power station, then belonging to the Mykolayivelektrotrans enterprise, to private ownership. Since then the building has seen several owners come and go. This continued until Carry Europe chose it as the best place to be turned into a restaurant.

Having finalized the relevant documents and received permission from the city architect for reconstruction as well as a go-ahead from the city public health authorities, Mr. Wingate set about renovating the building. Workers changed the interior layout, refinished the walls, and redecorated the facade.

However, three months after starting renovation, in April 1998, problems began. At first, they came from the regional public health office which, in spite of its earlier positive findings, now claimed the building contained a dangerous percentage of mercury vapors. There was no choice: the American carried out all the necessary work, including demercurization and repeated renovation in six months time. After the public health office, other authorities began to raise their claims. "We decided to play your games," says Mr. Wingate. The rules of the games turned out to be not so complicated: "problems" could be solved by means of presents, souvenirs, household conveniences, and office supplies. Getting to know Ukraine, the American discovered the notion of business, Ukrainian style as something special, which is not taught at economics colleges, not written about in The Economist and other "bourgeois" business publications. Business, Ukrainian style proved to be something amorphous, out of the reach of the elementary laws of logic and economics.

Mr. Wingate still cannot understand why special permission is required to occupy the land on which stands the building you want to buy. This is perhaps why the land issue became the main obstacle to opening a restaurant. There was a conflict with the Mykolayiv city council land commission which is in charge of land allotment.

When last September the city council voted to allow opening a restaurant in the former power station by a majority vote (55 vs. 12), the land commission claimed the decision of the local State Property Fund branch to alienate the building had been unlawful. At the same time, the commission demanded the premises be handed over to communal ownership.

"Then I was approached by a man who suggested I meet, with his help, one of the commission heads, Oleh Krysenko, to strike a deal," says Mr. Wingate, "I refused: we had acquired a building standing firmly on the ground and not hanging in thin air; why on earth do we need a permission? Rumor said there were other contenders for this building."

Meanwhile, the American was offered an alternative zero option: he drops all claims to the building and is refunded 21,000 hryvnias. He cannot accept this, either: "We invested $263,000 in the reconstruction, repairs, and equipment - we can prove it with documents."

So far, the opening of the practically finished American restaurant in Mykolayiv has been put off indefinitely. It is proposed to hear the question yet again in the city council session. Mr. Wingate is going to court to defend his rights. He also addressed a letter to the International Monetary Fund and a number of other organizations asking them to suspend financing Ukrainian programs due to an unfavorable investment climate. Carry Europe is waiting for the results of its first investment project in Ukraine and, in case of failure, is ready to abandon future projects. It is not ruled out that other foreign investment companies will follow suit.

INCIDENTALLY

On February 18 US Secretary of State Madeline Albright will report to Congress on the conditions under which US companies work in Ukraine. The Pustovoitenko government has been warned that if the problems of nine US enterprises are not solved, Ukraine will lose half the promised aid, that is, $72 million.

Meanwhile, official Kyiv tries to do everything possible to demonstrate how much it cares for foreign investors. Speaking on Tuesday during the Coca Cola plant opening near Brovary, President Leonid Kuchma said Ukraine would support strategic investors. He noted that Ukraine had received about $960 million in US investment since independence and promised to assist the trailblazers. However, Danylo Kliakhyn's information shows that the words and deeds of our leadership rarely coincide. On the other hand, there are over 250 US companies now functioning in Ukraine, according to Andriy Bihun, US Embassy commercial attachО in Kyiv. And if only 9 of them are facing difficulties, while the overwhelming majority of national enterprises are in crisis, then this could be regarded as relatively good.

By Vitaly KNIAZHANSKY, The Day