Politics Gives Way to Business 

As a rule, all misunderstanding and friction between business partners starts with financial issues and almost always such differences are preceded by revenues that turn out smaller than expected under the original plan. Regardless of disbursement ensuing from a given project - and the bigger the project the greater the sums thus expended - its originators are forced to carry on while adjusting their ideas to reality. Actually, this phase makes it clear whether the partners are capable of staying in business together. In other words, this phase makes it clear whether they can agree upon goals between themselves, whether they are prepared to make mutual concessions, and whether they are "cultured" enough to come to an agreement under the circumstances.

Regrettably, AvtoZAZ-Daewoo's one year in business in Ukraine proved a case study in a business dispute. Without going into details of the joint venture's financial fiasco (we have previously covered the dramatic events in adequate detail), let us look closer at one characteristic making the whole thing clearly distinct from a regular joint venture partners' collision. The thing is that from the outset the project was not commercial for the Ukrainian side. Thus, all business plans, along with cost-and-profit reports and estimates (about whose inadequacy the Korean side feels so anxious now) had an altogether different meaning for Ukraine. What was and remains the Ukrainian partner's biggest concern? First, jobs; second, payments to the budget; and third, the personal interest of the bureaucrats concerned. The latter is just an assumption, based on interviews with individual businessmen. And the Korean partner? Profits. First, second, and third.

And so all efforts of the Korean side to maximize profits and minimize losses, based on the domestic and foreign market situation, could not but contradict the Ukrainian partner's strategic interests - and the Ukrainian side was primarily concerned about carrying out its own political tasks. In fact, the Koreans wanted to secure their money (after the Asian crisis they could no longer spend as liberally as they did when the Ukrainian business plan was being composed), hence their determination to supervise cash flow. And sales are actually the only source of income for the parent company and politically heavily engaged Ukrainian management. For the revenues "tomorrow" could not be compared to the amount invested "today." The reader can perhaps guess why.

Any government working out an economic growth strategy must not allow any conflict between economic efficiency and political expediency - any government except Ukraine's. Until the very last moment the Ukrainian authorities prevented the AvtoZAZ director's retirement, because he, in his own words, protected the interests of the national motor industry. And you know what those interests are all about? Oleksandr Sotnykov (the director) considers that, first and foremost, the Korean side must honor its investment commitments assumed when setting up AvtoZAZ-Daewoo a year ago" (see Biznes, 1998, No. 8).

Obviously the lion's share of the Korean disillusionment is explained by underestimating the Ukrainian authorities' stand, and not by financial miscalculations as the press maintains.