A “window” for entrepreneurs

The world financial order is changing. A slow recovery of the world’s most powerful economies and the growing debts in some eurozone countries is forcing investors to reorient from traditional markets to more reliable “havens” to keep their money in.

The world’s media are also noting a not-so-simple situation on traditional investment markets. European banks have borrowed an all-time high amount of money (for this year as well as for the whole period since the crisis began), 247 billion euros, from the European Central Bank, BMF quotes The Financial Times as saying. “We are speaking about a credit crunch, not a crisis of liquidity. There is a lot of money, but more and more banks are beginning to believe that it is too risky to lend it to someone else,” the brokers polled by the newspaper are saying. Financial woes in the eurozone are being aggravated by an uncertain debt situation in Italy and Greece.

There seems to be the beginning of the redistribution of foreign markets and the establishment of new world economic growth points. Experts are saying that, in these conditions, Ukraine should create a more attractive investment image and encourage the national producer to export in order to rank first on the economic map of a new financial order. We are standing fair chances, which foreign states also acknowledge.

“Ukraine is one of the world’s top five most promising economies, on a par with such countries as China, India, and Singapore,” US Representative for New York, Michael Grimm, said recently. In his view, the most attractive sectors of the national economy are power generation, farming, tourism, and the infrastructure. The exploitation of the existing large deposits of gas will allow Ukraine to become an important player in the next 10 to 20 years, the Congressman believes.

“While Europe lacks domestic resources, Ukraine has a number of indisputable investment advantages. In particular, it is Europe’s largest country with a population of about 45 million. It is the fifth largest domestic market in Europe. A favorable geographic situation allows it to directly export products in the regions populated by more than a billion people,” says businessman Dmytro Firtash, chairman of the United Movement of Ukrainian Employers, assessing this country’s investment attractiveness.

To bring this investment reserve into play, the Ukrainian authorities ought to learn the basic rules of economic diplomacy.

Firstly, the state and business should set up effective cooperation, especially in capturing foreign markets. Firtash cites Germany and the Netherlands as a model of this kind of effective cooperation. He says export accounts for 46 and 67 percent of the two countries’ annual economic growth, respectively.

Besides, efforts should be made to attract investments to this country. It will be recalled that Ukraine received 5.3-billion-dollar worth direct investments this year (out of the planned 7.5 billion dollars). According to Vladyslav Kaskiv, chair of the State Agency for Investments and National Projects Management (Derzhinvestproekt), the agency expects to see 10 billion dollars in Ukraine in 2012. It is planned to get this money in several ways. The first is national projects. Kaskiv estimates they are supposed to provide for at least a quarter of this amount. He told The Day that negotiations on three national projects had already been finished. What will also help attract investments is the establishment of a foundation to support small-scale investment business and a venture company to fund risk projects.

“If you really want to make progress in improving the investment climate in the country, it is not enough just to carry out reforms. You should do this faster and more effectively than the rival countries, for the worldwide struggle for investments is intensifying,” said Martin Raiser, World Bank Country Director for Ukraine, Belarus, and Moldova, addressing the Ukrainian authorities.

The authorities are ostensibly heeding good advice. For example, officials more and more often announce that Ukraine is striving to remove the barriers that hinder the movement of its goods to the world markets, pursuing the course of national pragmatism, and doing its best to improve business conditions. Do the potential investors believe in the sincerity of these declarations and intentions? What other steps are they expecting the Ukrainian authorities to take? What projects are they prepared to invest their money in? The Day put these questions to Turkish investors during the national project launching ceremony in Istanbul.

“It is very good that Ukraine has begun to popularize itself on the world’s main investment grounds. This broadens the circle of potential investors who can personally see the ready-made projects which the state promises to help implement,” says the Turkish businessman Kadet Ergul, founder of the company Turk Ambalam. In his words, when he heard about the Istanbul launching ceremony, he came over to discuss with Ukrainian officials the conditions of participating in the Clean City project. It will be recalled that the project calls for building garbage-treatment plants in major cities, where there is a very acute problem of garbage accumulation. On the whole, the ever-growing heaps of trash are a national problem. Ukraine annually produces about a billion tons of wastes, while a mere 5 to 8 percent is being recycled. The chief method of dealing with garbage today is storage at landfills (770 of them are registered), transfer to improvised dumps (3,298), and incineration at two plants. The Turkish businessman suggests that, instead of doing so, we should not just store the garbage but cash in on it, making useful things out of the wastes. “We want to invest in garbage-treatment plants. We are interested in big cities, such as Kyiv, Donetsk, Dnipropetrovsk, Lviv, and perhaps Odesa. If we make a deal, we will be prepared to invest funds in the construction of five plants within five years,” he told The Day. It will take almost 10 million dollars to invest in the construction of one plant, he says.

Another potential foreign investor, Seladet Barbarosoglu, head of the company Okman, told The Day he was prepared to invest in the Ukrainian energy sector even today. “I am interested in ‘green energy projects,’ including hydro power plants (the construction of two or three mini-plants),” he says. Asked by The Day about the all-pervading corruption, the businessman said it was not the chief problem. In his view, bureaucracy is the main obstacle to business today. If we cut it down, he says, we will be able to combat corruption.

Meanwhile, the state has decided to take one more step to please business. On December 1 it presented the updated mechanism of a “single investment window” which is part of InvestUkraine, a structural unit of Derzhinvestproekt. This unit is supposed to be an intermediary between the governmental bodies and the businesses that would like to invest in Ukraine. The window is supposed to start working on January 1, 2012.

According to InvestUkraine chief Serhii Yevtushenko, Ukraine has attracted about 50-billion-dollar direct foreign investments in all the years of independence, which means 1,000 dollars per Ukrainian. It is a small figure, he says, against the backdrop of other countries, such as the Czech Republic (12,700 dollars per person), Bulgaria (7,300), Hungary (7,200), Kazakhstan (5,100), Poland (5,000), and Romania (3,200). For this reason, the “window” is supposed to increase the inflow of investments by way of reducing the contacts between business and the bureaucratic machine. Yevtushenko specifies that the “single window” is estimated to cut the time between the launching and the implementation of a project in Ukraine from two-three years to six-nine months. “We expect to bring ten large international companies onto the Ukrainian market next year, attract up to two-billion-euro worth direct foreign investments, and help create at least 3,000 jobs,” he said.

The mechanism is essentially simple. The investor applies to the required branch of Derzhinvestproekt which promises to react to this application within 24 hours. Then they should furnish basic analytical documents for the potential investor within a week and, if necessary, select four or five potential investment grounds and organize a visit to them. If need be, they will help find a common language with the local authorities.

As Sumy Oblast Governor Yurii Chmyr commented to The Day, this mechanism has been functioning in the region for a year. “It accompanies the investor from the project application to The Day products begin to be put out,” he explains. Thanks to this, they managed to carry out four projects worth 120 million dollars in a year’s time. “If the ‘window’ is introduced throughout the country, this will have a tangible effect on business organization,” Chmyr said in conclusion.

However, organization is only the beginning of any business story, Anna Derevianko, executive director of the

European Business Association, says to The Day. The launching brings forth a lot of routine problems. Therefore, the next step in Ukraine’s economic diplomacy should be the creation of an effective mechanism to tackle such vital problems as disputes with the tax and customs services. But, in reality, this is a very good idea, Derevianko says. The main thing is that the government should implement it. Otherwise, society will run the risk of seeing another investment deja-vu after a certain time.