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Issue 08/2019

BUILDING THE NEW UKRAINE


BUSINESS UKRAINE 08/2019: This month’s issue features a special focus on the Ukrainian real estate industry including a look at how the country’s residential market is growing increasingly sophisticated to meet rising client expectations regarding everything from amenities to energy efficiency. (Cover image: Kyiv’s Malahit Residential Complex)

Trump Impeachment Probe is Brand Ukraine’s Breakthrough Moment At first glance, the entire Trump impeachment probe looks like being terrible news for Ukraine. With Russian forces still firmly entrenched in the Donbas and Vladimir Putin eager to exploit the inexperience of the country’s new president Volodymyr Zelenskyy, the last thing Ukraine needs right now is a crisis in relations with its most important ally. While the potential security implications of impeachment are ominous enough in their own right, the optics of the scandal are arguably even worse. As US coverage has intensified, Ukraine has become a byword for graft and political sleaze, with President Trump’s defenders frequently dismissing the nation as “one of the most corrupt countries in the world.” This is not a winning brand message, by any stretch of the imagination. Nevertheless, the fact remains that in the space of a few short months, the impeachment story has garnered Ukraine far more international attention than the country has enjoyed in the previous 28 years of its independent existence. The question Ukrainians should now be asking themselves is whether there really is no such thing as bad publicity. The true significance of the current global spotlight only becomes apparent when viewed in the context of Ukraine’s historic problems with international anonymity. This low profile is no accident. It is the product of longstanding and remarkably successful Russian efforts to suppress Ukrainian identity and prevent the emergence of a separate Ukrainian polity. Russia’s motives are not hard to grasp. After all, Ukraine’s perceived closeness to Russia involves issues of security, geography, ethnicity and religion stretching all the way back to a common foundation myth that sees both modern nations trace their roots to the early medieval Kyiv Rus state. This makes continued control over Ukraine, along with Kyiv as the “mother of all Russian cities”, central to Russia’s own sense of self. Indeed, when viewed through the Russian prism, the only separatists in today’s Ukraine are the Ukrainians themselves. Since the seventeenth century, such thinking has led to everything from language bans and rigorous russification policies to mass deportations, population transfers and forced famines. The drive to absorb Ukraine reached a tragic crescendo in the 1930s, when the Soviet authorities deliberately starved millions of Ukrainians to death while systematically executing the moral and intellectual leadership of the Ukrainian nation. Incredibly, Ukraine survived. However, evidence of this grim inheritance remains all too easy to identify. It is apparent in the complex political divisions of the

diverse Ukrainian state that emerged from the ruins of the Soviet Union, and lies behind the continued dominance of traditional Russian historical narratives among outside audiences trying to make sense of today’s country. The press frenzy surrounding the Trump impeachment probe now presents Ukraine with an unparalleled international stage upon which to tell its side of the story. This is not a job for the country’s political leaders, who already have their work cut out trying to avoid becoming any more embroiled in the unfolding drama than they already are. Instead, this is an opportunity for Ukraine as a whole to flex its soft power muscles and demonstrate that there is much more to the country than corruption and war. The influx of international correspondents currently flooding the Ukrainian capital in search of impeachment gold represents a good place to start. With CNN reporters already snooping round Kyiv restaurants and the New York Times publishing articles on the correct way to pronounce “Kyiv”, additional story suggestions are likely to prove popular. Outside of Ukraine, now is the ideal time to promote the creative talent of the country’s vibrant fashion, music and tech scenes. President Zelenskyy has spoken on numerous occasions of the need to improve Ukraine’s international image. With national brand recognition currently at all-time highs, he has the perfect platform to do so. Even if Ukraine fails to capitalize on the present bout of impeachment mania, the exposure the country is receiving could still prove to be a turning point. In the short period since the scandal first erupted, leading international media outlets including the BBC, Washington Post, Wall Street Journal and Financial Times have all officially adopted the Ukrainian-language “Kyiv” spelling when referring to the nation’s capital. This small but symbolically significant gesture offers a hint of the broader shifts in outside perceptions that are already taking place. Eventually, the 24-hour news cycle will move on to the next big scandal and the details of Ukraine’s involvement in the whole impeachment affair will begin to fade from the collective memory. However, the boost to Ukraine’s brand recognition will linger on. Countries regularly invest billions of dollars in PR campaigns in the hope of securing a fraction of the attention Ukraine is currently enjoying. For a nation that has spent centuries struggling to emerge from the shadows of Russian imperialism, such international exposure is quite literally priceless.

About the author: Peter Dickinson is the publisher of Business Ukraine magazine and a nonresident fellow at the Atlantic Council

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legal

Ukraine prepares for

new privatization push New privatization regulations aim to remove restrictions while offering investors greater protection It has been over a year since Ukraine’s new rules for the privatization of state and municipal property first came into effect. Originally, the aim of this upgraded legal framework was to speed up the overall process of the sale of state and municipal property. It has certainly reached that goal to the extent that it relates to the sale of small privatization assets via Ukraine’s online e-auction system. By August 2019, annual revenues from the sale of small privatization assets had reached close to UAH 400 million. Unfortunately, there has not been a single sale of any large privatization assets (LPA) so far in 2019. Nevertheless, privatization remains on the agenda. Most recently, the new Ukrainian parliament passed legislation allowing for the privatization of many SOEs that were previously subject to a longstanding privatization moratorium. Following these changes, over 1000 Ukrainian SOEs that had been on a privatization blacklist for more than 25 years are now available for sale. The updated list of large privatization assets includes some highly recognizable companies like Kyiv’s Dnipro Hotel, Ukraina Hotel, and President Hotel. It also features major industrial assets such as Centrenergos (power generation), six regional power distribution companies including KharkivOblenergo and MykolaivOblenergo, UMCC (mining of non-ferrous metals), Electrotyazhmash (manufacturing of power generators), Odesa Portside Plant (production of fertilizers), Indar (a pharma manufacturer), Ukragroleasing (leasing of agricultural machinery), TPPs (e.g., Odesa TPP, Kherson TPP, Dnipro TPP), and many other companies.

Investment Advisors and Price Appraisals

The new law requires that any LPAs must undergo preparation for privatization by investment advisors selected by the State Property Fund (SPF) prior to sale. The selection process outlined for investment advisors by the SPF is via tender, with selection based on respective skills, experience, deals list, proposed sale strategy, and timeline. At present, the SPF has selected a number of investment advisors such as EY, KPMG, BDO, Pericles and Concord Capital. SPF advisors, inter alia, shall determine the starting price of any LPA before the privatization tender. Prior to these recent changes, a local appraiser had been responsible for determining the starting price. In practice, this price was often far above what most saw as a fair market valuation. It is important to mention that the new law allows for privatization agreements governed by the laws of England and Wales at the buyer’s request. However, within the present legislative framework, this option is only set to be available until 2021, unless the Ukrainian parliament chooses to extend it

further. At the same time, there are no time limitations when it comes to referring potential disputes between the investor and the SPF to a foreign dispute resolution forum. In order to gain admittance to an LPA auction, bidders must pay a security deposit amounting to five percent of the starting price (a significant decrease from the 20% stipulated under the terms of the previous law), or provide the respective bank guarantee. Bidders must also disclose information about their ultimate beneficial owner (UBO) and provide their most recent annual/quarterly report.

Protecting Investor Rights

The key point of the new legislation is the protection of investor rights that it implies. The provisions governing the content of a privatization agreement, even if governed by Ukrainian law, may include a set of warranties of the seller as to information relating to the LPA, along with the respective liability for breaching them. Furthermore, after the signing of a privatization agreement, the target company shall not conclude any agreements that are beyond its ordinary course of business without first securing the buyer’s prior consent. This includes issues such as asset pledges and set-offs. Given that many of Ukraine’s state-owned or municipal enterprises have a significant amount of (often moot) indebtedness, the country’s new privatization law prescribes an important protection mechanism. For a period of one year following the completion of a privatization deal, no bankruptcy proceedings can be brought against a privatized company based on grounds that relate to the period prior to the deal’s completion. In addition to this restriction, once a privatization agreement has been signed, no changes to the custody account relating to arrest or placement of other encumbrances shall be made until the title to the LPA passes to the buyer. These protection measures would allow buyers to directly control any cash-out from the target company after signing the sale and purchase agreement, as well as increase the overall attractiveness of the asset. However, the law does not exempt a privatization acquisition from merger clearance requirements, which means that any potential investor must still obtain approval from the Anti-Monopoly Committee of Ukraine before the privatization deal is closed.

Creating the Right Climate

These changes to privatization legislation are part of a broader move to create a more conducive climate for a fresh privatization push in the country. In parallel to these new regulations, the Ukrainian government has just appointed new top management to the SPF. With the newly appointed SPF leadership in place and new privatization regulations confirmed, Ukraine now has a very good chance to relaunch the privatization process and to transfer the country’s large quantity of SOEs from state ownership to more efficient private owners.

About the author: Serhiy Piontkovsky is the Managing Partner at Baker McKenzie in Ukraine

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economy

Autumn of upgrades for Ukrainian economy Annual GDP growth forecasts revised upwards as Ukrainian economy outperforms expectations

The National Bank of Ukraine (NBU) is one of a number of institutions to upgrade its economic forecasts for Ukraine during autumn 2019. NBU officials recently improved Ukrainian GDP growth expectations for 2019 from 3% to 3.5%, while also boosting the 2020 and 2021 figures to 3.5% and 4% respectively. The Ukrainian economy has continued to outperform expectations during autumn 2019, with strong stats and an optimistic outlook persuading domestic and international institutions to upgrade the country’s GDP growth forecasts and improve Ukraine’s credit rating. New figures released in mid-November confirmed that Ukraine’s economy had expanded faster than expected during the third quarter of 2019, with the State Statistics Service reporting yearon-year growth of 4.2%. This follows a 4.6% increase in Q2 2019, with rising domestic consumer demand, strong agricultural exports and favorable global commodities prices among the factors combining to produce a better than anticipated economic performance. These growth rates are significantly higher than previous expert estimates, leading to a series of institutional upgrades. Earlier estimates anticipated Ukrainian economic expansion of around 2.5% to 2.7% in 2019, with many institutions factoring in the turbulence of presidential and parliamentary election cycles during the course of the year. However, as economic data has become increasingly available, these figures have undergone upwards revision. The World Bank was one of the first to respond, significantly improving its 2019 Ukrainian GDP growth forecast in midOctober from 2.7% to 3.4%. The European Bank of Reconstruction and Development (EBRD) followed suit in early November, revising its growth figure from 2.5% to 3.3%. The IMF and Morgan Stanley have also recently made similar moves. On the domestic front, the National Bank of Ukraine (NBU) moved in late October to upgrade its expectations for Ukrainian GDP growth during the current year from 3% to 3.5%, while also improv10

ing its 2020 forecast from 3.2% to 3.5% and 2021 outlook to 4%. A similar autumn 2019 trend has been evident among international credit rating agencies. In late September, S&P Global Ratings raised its long-term foreign and local currency sovereign ratings on Ukraine to ‘B’ from ‘B-’, noting, “Ukraine’s economy continues to recover. The National Bank of Ukraine has augmented its FX reserves and restrained inflation to below 10%. Quasi-fiscal deficits at the state-owned utility, Naftogaz, have been eliminated, and general government debt-to-GDP continues to decline. Ukraine’s new administration appears committed to preserving these gains. Moreover, we view positively the new government’s intention to improve the business environment and lift the moratorium on the sale of agricultural land. In our opinion, these measures could pave the way for higher foreign investment inflows into Ukraine, boding well for the economy’s growth and external leverage.” S&P’s fellow “Big Three” credit rating agency Fitch also gave Ukraine a similar international credit rating upgrade in the first weeks of the autumn season. Ukraine’s autumn of upgrades is certainly encouraging news, but most observers note that the country’s economy requires significantly higher rates of growth if it is to begin catching up with its neighbors in Central Europe. While average GDP growth forecasts for 2019 and the following few years are now approximately 3.5% to 4%, a figure of 5% to 7% over a prolonged period is often touted as necessary in order to drag the Ukrainian economy out of the doldrums. With this in mind, Ukraine’s new Prime Minister Oleksiy Honcharuk has set the target of 40% GDP growth over the next five years, while stressing that this remains a goal rather than a forecast.


interview

Ukrainians are innovation-friendly consumers PepsiCo Ukraine’s Marek Tomalak says Ukraine is among the region’s most dynamic markets Canadian-born Marek Tomalak took up his post as PepsiCo Ukraine General Manager in June 2019. As he approached the half-year mark in his new position, the former Senior Marketing Director for PepsiCo in Eastern Europe spoke to Business Ukraine magazine about the specifics of the Ukrainian consumer market and his key priorities for the years ahead.

In your previous role, you oversaw PepsiCo’s marketing activities throughout the Eastern Europe region. What characteristics does the Ukrainian market share with other regional markets, and how does it stand out? Ukraine mirrors the broader trends towards greater emphasis on health and wellness, but the Ukrainian market also stands out for a number of reasons. The macroeconomic and geopolitical changes we have seen here in the past couple of years have been unprecedented. As a result, businesses and consumers both behave differently. Growth dynamism has been impressive. Many of the categories where we are present have been experiencing double-digit growth. This is fueling changes in the structure of our business, with segments such as “away from home” consumption growing more rapidly than in other regional markets. In terms of consumers, my perception is that Ukrainians are particularly receptive to innovation. In many cases, Ukrainian consumers are jumping ahead of regional trends and embracing product lines that are developing at a slower pace in many other countries. This applies to brands and innovations brought into Ukraine from outside the country, and to locally driven innovations. We see this in the enthusiasm for products like flavored Pepsi beverages and oven-baked Lays potato chips. This places Ukraine ahead of the curve and demonstrates that Ukrainians have a taste for new experiences. They seem to take genuine pleasure from shopping and actually look for innovations on the shelf. You have been in your current post as General Manager of PepsiCo Ukraine since June 2019. How do you find living and working in Kyiv? I have been a frequent visitor to Ukraine for a number of years, so there was no sense of culture shock in moving here to live. However, I must say that Ukraine has changed massively, even in the time that I have known the country. One of the main observations I have relates to the resilience of Ukrainians. They seem to approach the challenges they face with a smile

and with a sense of optimism. This has helped us to feel welcome and at home here. The city itself is very vibrant and has a lot to offer for all the family. I can say that my wife and children enjoy Kyiv just as much as I do.

Looking ahead, what are your priorities as General Manager of PepsiCo Ukraine? My top priority is to make sure the company is in a position to thrive in what is a dynamically changing market. The economic recovery in recent years has been strong and consumer habits are evolving rapidly. It is my job to many sure that we are able to take full advantage of these factors. The second big priority is building on the talent we have here in Ukraine. This means investing in recruiting, training, developing and retaining the right talents. I try to invest my time in this process by engaging across the organization. I am also focusing on making sure we live up to our high standards as responsible corporate citizens. PepsiCo has a very strong sustainable business agenda and this applies to products as well as production processes. We have a partnership with several other companies here in Ukraine to help make packaging more sustainable, and we invest constantly in our infrastructure to make sure we minimize our ecological footprint. As part of our development, we are expanding policies of localization and working with Ukrainian farmers to produce more of the ingredients we need here in Ukraine. This applies to the products themselves and the associated infrastructure for processing and storage. When we invest in farming partnerships, we have the long-term perspective very much in mind. General retail sales figures have been rising slowly but steadily in Ukraine for a number of years now. Are you observing this trend at PepsiCo? We have been witnessing strong recovery since 2014. In the categories where we operate, we continue seeing very optimistic figures, thanks to a combination of economic growth and consumers increasingly choosing our products. So looking ahead, our forecasts are very positive. Some categories are newer and demonstrate robust growth, while others are slower, but the diverse PepsiCo portfolio in Ukraine provides for a good balance of growth engines overall.

How does the PepsiCo brand portfolio in Ukraine compare to other regional countries, and are you currently considering any additions to this portfolio? We have five categories in Ukraine: beverages, snacks, juices, dairy products, and baby food products. Ukraine is one of the few countries globally where we have such a complete portfolio. This gives us good credibility as a leading food and beverage company. It also places a responsibility on us to help establish certain standards in the broader business climate. In terms of additions, there is also a lot of growth potential in all of the categories where we are present, with new products and flavors among the innovations we are pursuing.

About the interviewee: Marek Tomalak is the General Manager of PepsiCo Ukraine

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infrastructure

Boryspil sets new passenger record Ukraine’s busiest airport surpasses previous annual passenger high with two months to spare

Boryspil International Airport continues to lead the way in Ukraine’s aviation industry boom, setting a new annual passenger record with two months still left to go on the 2019 calendar. Boryspil boosted passenger numbers by 22.4% year-on-year during the January-October 2019 period. The 13.07 million travelers the airport serviced during this ten-month period comfortably surpassed 2018’s record figure of 12.6 million. Meanwhile, monthly growth in October 2019 was 22.3%, or almost exactly in line with the annual increase recorded so far this year. Boryspil is Ukraine’s busiest airport, accounting for more than half of the country’s overall airline passenger numbers. It has witnessed strong annual growth in passenger traffic for the last five consecutive years in a sequence stretching back to 2014, when the airport serviced 6.89 million travelers. In each of the past three years, Boryspil has set a new record for annual passenger volumes. The airport has a number of operational terminals, with Terminal D hosting the majority of both domestic and international flights. The mothballed Terminal F building recently reentered service to cope with an influx of budget airlines arriving on the Ukrainian aviation market. Ukraine’s air travel industry is currently experiencing a period of 14

unprecedented expansion, with airports across the country posting double-digit growth in passenger numbers for the past four years. This expansion is due to the arrival of new airlines drawn by Ukraine’s growing economy and the advent of visa-free travel to the European Union, which Ukrainian citizens secured in June 2017 within the framework of the country’s Association Agreement with the EU. Boryspil has sought to keep pace with growing passenger flows by improving aspects of infrastructure connected to the airport. A long-awaited shuttle rail service connecting the airport to downtown Kyiv finally entered service in November 2018 and has since undergone expansion, while spring 2019 saw the unveiling of a multistory car park alongside Terminal D, bringing to an end a construction saga dating back around ten years. Also in spring 2019, Ukrainian government officials released plans for an ambitious upgrade that would see Boryspil’s capacity more than trebled over the coming 25 years at an estimated cost of over EUR 3 billion. These plans include the construction of a second runway and expansion of Terminal D facilities in order to accommodate in excess of 50 million passengers per year by 2045. www.bunews.com.ua


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BUILDING THE NEW UKRAINE

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real estate

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real estate

Ukrainian real estate

industry overview The pace of growth has declined during 2019 as developers adapt to post-election environment 2019 has been a relatively good year for the Ukrainian economy, with GDP growth on track to surpass expectations and reach more than 3%, while the national currency has performed surprisingly well against the US dollar, leading to a number of notable upgrades from international credit rating agencies such as Fitch and S&P. However, the situation within the country’s real estate sector has been challenging due to a series of factors. The biggest issue has been political uncertainty relating to presidential and parliamentary elections followed by widespread changes in local and regional administrations. With future prospects in the real estate sector unclear, many major players chose to restrict their activities in 2019 and preferred to monitor developments instead. Meanwhile, legislative changes to construction rules have also had an impact on activity in the real estate sector, particularly in the residential real estate segment. Cushman & Wakefield Ukraine highlighted this relative lull in its summary covering the first six months of 2019. This authoritative industry overview noted low development activity combined with relatively strong occupier demand, creating upward pressure on rents. According to Cushman & Wakefield research, prime base office rent remained at around USD 30 per square meter per month during the second quarter of the current year. During the same period, vacancy rates in the Kyiv office property sector decreased to 6.2%. With Ukraine’s retail sector experiencing prolonged growth, new shopping center space has continued to appear on the market in 2019. During the first half of the year, new additions totaling 67,000 square meters included Kyiv’s Smart Plaza Obolon and Oasis shopping centers, together with the Spartak City complex in Lviv and an extension to Odesa’s Gagarin Plaza. A further 720,000 square meters of retail real estate space are in the pipeline over the com-

Mall map: new arrivals on the expanding Kyiv retail real estate market in 2019 and beyond ing two years in Kyiv alone, creating significant opportunities for new retailers to penetrate the growing Ukrainian market. Meanwhile, Ukraine continues to exhibit signs of undersupply in the warehousing and logistics sector, with a lack of new space helping to drive vacancy rates down to just 1.9% by the end of June 2019. As in most sectors of the Ukrainian economy, Kyiv remains the dominant player throughout the real estate industry. The capital city attracts the most investment and delivers the largest volumes of new property space, both in the residential and commercial segments. Despite the uncertainties of the current year, the majority of market participants continue to choose Kyiv over all other regions of the country. The growth in major real estate investment deals that Ukraine has witnessed in recent years slowed noticeably during 2019. The most prominent real estate sector investor over the past few years has been Dragon Capital. Since 2015, the group has made a number of acquisitions in the commercial real estate sector with a focus on high-quality operating properties, with 300,000 square meters of warehouse space and a similar volume of retail and office space currently under Dragon Capital manage-

About the author: the Ukrainian Real Estate Club (URE Club) 18

ment. This flurry of acquisitions did not continue at the same pace during the current year, with only a single retail sector deal for Aladdin Shopping Center in Kyiv, but even this transaction initially dated back to 2018. February 2019 saw the sale of a non-performing loan for the 139,000 square meter Respublika shopping and entertainment complex by the National Bank of Ukraine and the Deposit Insurance Fund of Ukraine via the ProZorro public procurement system. This sale came following several rounds of bidding stretching back to July 2017, with earlier failures resulting in a significantly decreased asking price. In the first half of the current year, Ukraine’s office property market continued to be the most attractive in terms of secondary investments, with around 51% of overall totals allocated to the sector. Major secondary investment transactions in the Kyiv office property sector included the acquisition of the Sigma and Inkom business centers by the Ukrainian development company Merx. Another high-profile acquisition was the purchase of the Arena City office and retail complex in the heart of Kyiv by companies affiliated with Serhiy Tigipko.

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real estate

Residential real estate upgrades continue

Ukrainians demanding higher quality properties with energy efficiency and additional amenities

Odesa’s La Mer residential complex project overlooking the Black Sea reflects a new generation of Ukrainian business-class properties with a wider range of additional amenities The Ukrainian residential real estate market continued to expand in 2019 despite concerns over political instability due to an intensive election cycle in the first half of the year. Regions such as Lviv, Odesa and Ivano-Frankivsk made significant gains on Kyiv over the course of the year in terms of new apartment space, but the Ukrainian capital remained the dominant residential real estate market in the country. New projects reflected the trend of increasingly high expectations among Ukrainian buyers, with demand growing for residential complexes offering better quality construction together with an expanding range of amenities and energy efficiency advantages. Ukraine’s spring 2019 presidential election campaign served as a significant drag on the country’s residential market, with almost all developer companies acknowledging a slowdown in apartment sales. At the same time, construction volumes in the residential real estate sector remained stable. More than 53,000 new apartments entered the Ukrainian market in the first half of the current year, representing a 50% increase on the same period in 2018. This new residential housing stock totaled around three million square meters. Unsurprisingly, Kyiv region led the way with 684,300 square meters of new residential space, but the capital’s lead over other major Ukrainian

regions was significantly smaller than in previous years. In second place was Lviv region (632,900 sqm), followed by Odesa region (474,800 sqm), and the up-and-coming Ivano-Frankivsk region (431,600 sqm). Despite this strong performance by Ukraine’s regions, Kyiv city and the surrounding oblast continued to constitute by far the largest residential market in the country, with 120 development companies currently active. Over the past year, the Kyiv region has seen prices creeping up, with average growth of around 5%. There has also been a marked increase in the number of business-class projects in the Kyiv region, reflecting the generally improving economic fortunes of the country and a readiness among buyers to spend more on higher quality properties featuring better architecture and additional amenities within easy reach. With Ukraine currently integrating into the wider European community and Ukrainians spending more time travelling internationally, expectations are evidently rising among homeowners over the quality of the properties they are purchasing. With the cost of communal services such as gas and electricity rising sharply in today’s Ukraine, many developers are now also increasingly turning their attention towards issues of energy efficiency. These gas and electricity hikes are helping to

About the author: the Ukrainian Real Estate Club (URE Club) 20

stimulate demand for new properties, with buyers looking to upgrade to new developments with the expectation of benefiting from significantly lower long-term costs. As Kyiv’s residential real estate industry continues to grow, individual projects by the largest developers in the capital are also getting bigger. The top ten Kyiv developers in terms of portfolio size now account for more than 50% of the Ukrainian capital’s residential construction projects. These projects are increasingly ambitious in scale, often now incorporating entire residential zones complete with attractive features such as landscaped areas, supermarkets, sports facilities, healthcare providers and schools. Residential real estate has long been a favored investment vehicle among Ukrainians, with many looking to apartments as the most reliable form of asset to hold in a market where the banking system still suffers from significant levels of public distrust. This has remained the case in 2019, but a handful of residential real estate scandals have served as reminders that the sector is not entirely without risk. In spring 2019, the Kyiv city authorities withdrew construction documents from Bank Arcada Developer, which was engaged in the construction of two largescale complexes in Left Bank Kyiv’s Osokorky district and an additional complex in Goloseyevo district. The situation remains complex and unresolved, with construction work frozen on all company projects. Many Ukrainian real estate market observers were surprised this year when one of Kyiv’s largest developers also found itself facing legal issues. Ukrbud, which has a portfolio including 66 delivered buildings and a further 46 projects under construction, became entangled in public accusations of fraud levelled at the developer’s owners and senior management. These issues are bad news for the entire residential real estate market. They generate negative headlines that undermine public confidence in new housing projects and deter potential buyers from investing. This has the effect of increasing calls for greater legal protections, with new members of parliament speeding up legislation intended to protect buyers from falling victim to issues relating to the developers behind their property.

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Putting Ukrainian real estate

on the global investment map Ukrainian companies can act as informal ambassadors to counter country’s international obscurity

About the author: Anna Nestulia (anna@investinprojects.pro) is the founding partner of Ukraine at MIPIM (www.ukraineatmipim.com) and a B2B marketing communications expert In autumn 2019, I had the opportunity to attend EXPO REAL, one of the largest real estate investment exhibitions in the world that takes place annually in Munich right after the city’s legendary Oktoberfest. This year, the event attracted a record number of 2,190 exhibitors from 45 countries. Over 46,000 people from 76 countries attended the event. Among this huge crowd, Ukraine’s representation was limited to just fifteen real estate companies, all of whom participated at their own initiative. At the same time, various Central and Eastern European countries such as Bulgaria, Poland, the Czech Republic, Romania, and Russia all boasted beautiful and impressive national stands. These flagship positions were typically part of joint promotional efforts combining business and government resources in a bid to attract international partners and investors. It is interesting to note that these major real estate industry events now offer a focus that goes beyond the specifics of the property market, with attention also paid to trendy topics such as the role of smart technologies, environmentally friendly approaches to urban development, and social impact issues. This year’s EXPO REAL saw the launch of an Innovation Hall, while the annual MIPIM event on the French Riviera next spring will fea22

ture a large-scale Innovation Forum and start-up competition. During the days I spent at this year’s EXPO REAL, my partner and I had about 20 meetings with companies from Austria, Germany, the Netherlands, Turkey, Singapore, and Great Britain. During these conversations, I was able to gauge significant interest in Ukrainian real estate investment opportunities, but the overriding impression was of Ukraine’s continuing low profile. In other words, the outside world still knows remarkably little about Europe’s largest country. This is partly due to long-term historical factors, but it is also the result of Ukraine’s relative absence from the international arena at events like EXPO REAL. This lack of awareness about the realities of modern Ukraine is so severe that some of the people we met were surprised to learn Ukraine actually has its own currency. There always seems to be a good excuse for Ukrainian real estate businesses and the country’s official representatives to pass up on the chance to participate in major international industry events. We appear to exist in a never-ending cycle of constant turbulence marked by pre- and postelection periods interrupted by the occasional revolution. All the while, the country waits for the next hero leader to end injustice and transform


with very basic information. “Kyiv is the capital of Ukraine and Ukraine is the biggest country in Europe” may not sound particularly inspiring to Ukrainians, but it is important to overcome the basic obstacles of the country’s anonymity before moving forward to the meatier specifics. Ukrainians attending international trade events need to recognize that they are unofficial ambassadors for their country. In order to promote their own specific businesses, it is in their interests to debunk the many myths surrounding Ukraine and provide key facts about the country as a whole. This is vital if investors are to learn that Ukraine is an attractive option where they can do business both safely and successfully. The optimum length for introductory meetings at international exhibitions is between 15 and 30 minutes. Anything shorter than this timeframe risks appearing dismissive, while longer meetings should be reserved for detailed negotiations. It is important to be specific and clear with your messaging. Visual materials are a welcome addition to such introductory meetings, as long as they are relevant and in line with the subject matter at hand. However, you should not be surprised (or offended) if people do not keep your promotional materials. People attending international trade events are often overwhelmed with such materials and tend to discard them routinely. If you choose to present your project via a separate stand, you can consider a range of additional visual channels. These range from print materials to video footage and augmented reality options. A separate stand also allows for more direct dialogue and informal networking opportunities. At the end of the day, attending trade events is an important part of the international marketing process, but it is in many ways just the beginning. Once you return home, you should begin the next stage of your marketing campaign. This means building up communications channels with new contacts and establishing a relationship as a trustworthy and credible potential partner. This can take the form of tailored personal emails and phone calls. Perhaps the most powerful option is organizing a discovery tour. This is particularly true in Ukraine’s case, as the country is still relatively unknown but tends to impress those who arrive for the first time, typically with low expectations. Bringing people to Ukraine is certainly an effective way of promoting specific real estate investment projects and the country as a whole. However, there is no secret ingredient. Ukrainian companies looking to raise their international profile should consider adopting a long-term approach that takes limited outside awareness of the country into account. Today’s Ukraine has a lot to offer international investor audiences, but it has yet to learn how to market itself effectively.

real estate

everything for the better. Engrossed in this dramatic narrative of endless historic upheaval, we tend to forget that the outside world does not care about our excuses and will not wait for us. The result is missed opportunities for Ukrainian businesses and international investors alike. There are no quick solutions to this problem. Organizing a major Ukrainian stand at the next big trade fair will not alter international perceptions overnight. Instead, Ukrainian businesses in the real estate sector (and other sectors of the economy, for that matter), need to adopt a longer-term perspective and recognize the value in projecting their brands beyond the domestic market. State support can certainly play a significant role in this process, but governments tend to work with different types of institutional investor at the strategic level. They will not negotiate the kind of individual commercial projects that Ukrainian real estate companies can offer to international investors. Nor is it practical to wait for bureaucratically burdened state agencies to commit to such endeavors. Whether the task is promoting a country, city, individual project, or specific company, various simple steps can help promote the Ukrainian real estate sector internationally. Much like an iceberg, the bulk of your promotional efforts will remain below the surface and will not be visible. This submerged iceberg includes detailed analysis of your desired goals and outcomes, as well as a clear understanding of your preferred target audience. The more specific and focused you are in terms of creating a suitable presentation, the more likely you will be to attract the right interest and generate plenty of meetings. This is only the first hurdle. As any marketing professional will tell you, personal communication and preparation for individual meetings are crucial for any successful B2B marketing strategy. Another important component of effective international marketing is direct messaging. This can take the form of personalized emails, newsletters, or participation in specialized trade publications. While print materials are capable of conveying considerable prestige, it is vital not to overlook both the digital component and the targeting opportunities this brings. Digital strategies are a vital tool for getting the right message to the right audience, and allow you to tailor your messages accordingly. Your digital checklist should include an easily navigable and informative webpage, along with a full range of social media profiles in English. These platforms will help those who you reach out to learn more about who you are and what kind of cooperation options you offer, while also adding credibility to your brand. The second stage of your homework is developing an engaging presentation and preparing the story you will tell at the event during face-to-face communication. As a rule, Ukrainian companies should start their story

“Ukrainians attending international trade events need to recognize that they are unofficial ambassadors for their country”

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real estate

The Ukrainian real estate market can be internationally attractive International investors increasingly recognizing potential of underpriced Ukrainian properties

The Ukrainian real estate market continues to develop quite steadily, with year-on-year growth in demand and number of transactions. In most cases, real estate remains the best available investment in the country, both for Ukrainians and non-residents. Indeed, as political and economic stability return to Ukraine, foreign citizens are increasingly demonstrating a readiness to invest in the country’s real estate opportunities. The three most attractive Ukrainian real estate investment destinations are currently the capital city Kyiv along with regional capitals Lviv and Odesa. All three cities are home to growing tourism industries and serve as major business hubs. They have expanding populations fueling strong demand for quality real estate in all market segments. While these cities are attracting more attention than other parts of Ukraine, the entire country is emerging on the international radar thanks to the attractive returns on investment that Ukrainian real estate can offer. In many mature international real estate markets, investors can expect a return of around 1.5% to 2% per an24

num on their investment. In Ukraine, the figure can be as high as 12% to 15%. This is possible by purchasing and then renting out property, thus securing a stable monthly income. Investors who buy Ukrainian apartments at the initial stages of the construction process and sell once the property is almost complete stand to make even bigger profit margins of between 20% and 25%. Many foreign investors are attracted to the Ukrainian real estate market because they see it as underpriced. Prices tend to be significantly lower than elsewhere in Europe or in similar markets such as Israel and North America. For example, it is virtually impossible to purchase an apartment in Israel for USD 30,000, but in Ukraine, this sum could secure a good one-room apartment with a rental value of hundreds of dollars per month. Forward-looking international investors seem to understand this, and we are now seeing a trend towards foreign citizens buying out entire sections and whole floors of new residential projects direct from Ukrainian developers. Also notable is the trend among foreigners to explore the possibility of investing in their own

construction projects in Ukraine. So far, this remains largely confined to expressions of interest, but it is a clear indication of the potential for larger scale international partnership in the Ukrainian real estate sector. Ukraine clearly has the necessary money and technologies in place, while the country has plenty of areas suitable for development and offers every prospect of continued market growth.

About the author: Anna Laevskaya is the commercial director at Intergal-bud

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We are the government’s investment promotion office created to attract and support investment in Ukraine.

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The Cabinet of Ministers of Ukraine 12/2 Hrushevskoho street, office 148 Kyiv, 01008, Ukraine

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Hospitality sector optimistic as

Ukraine emerges on tourist map The Ukrainian hotel industry is benefiting from airline arrivals and growing tourist numbers Ukrainian President Volodymyr Zelenskyy’s plans to relaunch the gambling business and allocate additional funds to promote Ukraine internationally have generated a lively debate and added to the mounting sense of optimism in the country’s hotel industry. Despite a dip in visitor numbers at the beginning of 2019, industry insiders hope to end the year on a positive note and have increasingly high expectations looking ahead. Early 2019 was a somewhat anticlimactic time for many Ukrainian hoteliers, with occupancy rates dropping slightly after a period of sustained

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growth. The reasons for this drop were not hard to identify. Many wouldbe visitors to the country had second thoughts following the declaration of temporary martial law by the Ukrainian government in the final weeks of 2018, while presidential elections scheduled for spring 2019 meant that business travel also declined as potential investors chose to wait and see what the vote would bring. With business travel one of the core drivers of the hotel sector in the Ukrainian capital, this pushed average Kyiv occupancy rates down by around 1% to 54.1% for the first eight months of 2019,

:


real estate Kyiv’s Radisson Blu Hotel was the first international brand hotel to open in the Ukrainian capital back in 2005. It recently underwent a complete renovation www.bunews.com.ua

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real estate

“With low-cost airlines making Ukraine an economically attractive tourist destination, budget tourism is now on the investment agenda” : according to research by CBRE Ukraine.

This mild seasonal decline cannot obscure the overall positive picture in the Ukrainian hospitality sector. Alexey Yevchenko, Managing Partner of ArtBuild Hotel Group, notes that despite temporary swings towards lower occupancy rates in some cities, the market as a whole is demonstrating good financial results and is poised for further growth. “President Zelenskyy’s statements on legalization of the gambling business and the construction of new resort towns are in line with growing investor interest in new hotel projects,” he says. “If funds are forthcoming to promote Ukraine as an international tourist destination, we will see even greater investment expectations in the hotel segment.” There is plenty of dynamism on display in Ukraine’s regional hospitality industry, with new hotels and innovative formats popping up to serve a rising tide of visitors drawn from both international and domestic tourism flows. The most popular Ukrainian cities among tourists currently include Uzhgorod, Chernivtsi and Odesa, with Lviv leading the way among regional capitals. “The Carpathian and Black Sea-Azov Sea regions are currently developing actively but would benefit from greater international expertize,” observes Yevchenko. Industry experts identify foreign tourists as a key growth engine for the Ukrainian hospitality sector, both during 2019 and in the years ahead. They point to a number of factors that are combining to drive up visitor numbers, but also note the lack of a coherent and centrally coordinated promotional campaign at the state level. Yevchenko says the Ukrainian authorities need to focus more resources on selling the country as a tourist destination, while also offering specific support for the development of various specific hospitality industry segments. For example, he argues that Ukraine is unable to host more international congresses and forums due to the country’s relatively poor transport infrastructure. Marina Leo, a partner at DEOL Partners and CEO of 11 Mirrors Design Hotel and the Senator Hotels and Apartments chain, believes some government measures risk undermining the competitiveness of the Ukrainian hospitality sector. She says recent tax code amendments introducing a new tourist tax mechanism create an added economic burden for the industry as a whole. “The entire hotel sector will feel these changes. After all, the rate is set according to the minimum wage, which increases annually. This will have a negative impact, especially for the low-budget segment of the market.” She is also critical of the failure to reduce the tax rate for tourism sector services. A reduction would help to attract investment to the sector, Leo says, which would create jobs, fuel the expansion of the Ukrainian tourism industry, and provide the economy as a whole with a welcome boost. “The more tourists the country receives, the higher its income.” About the author: Viktoria Beraschak of Property Times

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Researchers at CBRE Ukraine say the latest Ukraine study by the World Tourism Council supports this argument. According to this research, the direct contribution of the tourism industry to Ukraine’s GDP was 1.5% in 2017. Based on current forecasts, this figure will increase marginally over the coming decade to reach 1.7% of GDP in 2028. This is far lower than the comparative figure for countries like France, Spain, Turkey and Greece that have long since embraced tourism as a central pillar of the national economy. Despite these relatively underwhelming forecasts, many in the Ukrainian hospitality sector remain optimistic regarding the accelerated expansion of the industry. Ukraine’s steady economic revival since the low point of 2014-15 is a key source of this optimism, with further GDP growth of above 3% predicted for the coming years and senior government officials talking of far more ambitious figures. The rapid expansion of Ukraine’s international aviation connections is also giving rise to positive expectations. For the past three years, new airlines have been entering the Ukrainian market on an almost weekly basis, attracted by the country’s growing economy and newfound international mobility thanks to the advent of visa-free access to the EU in June 2017. With visa restrictions no longer in place and budget carriers offering flights to European Union destinations at bargain rates, Ukraine’s airports are experiencing a period of unprecedented passenger growth. This increasing flight portfolio is also bringing more visitors to Ukraine. According to figures released by the State Aviation Service, the number of international visitors flying into Ukraine increased by 20.7% during the first eight months of the current year, continuing a trend that stretches back to 2016. With the growth of low-cost airlines making Ukraine an economically attractive tourist destination, the domestic market for budget tourism is increasingly on the investment agenda. “Hostel development is now one of the hottest trends in the Ukrainian hospitality sector,” says Marina Leo. “It is attracting investor attention. A number of hostels have recently opened in Kyiv as a result.” The new openings include the Ukrainian capital’s first capsule hotel and a hostel made from former metro train wagons. These stylish and photogenic additions to the budget end of the Kyiv hotel sector reflect a growing awareness of the need to appeal to millennial travelers and the Instagram generation. Meanwhile, mid-market and higher end hotels are looking to expand the range of services they offer. This includes introducing co-working spaces for guests. This co-working focus aims to appeal to the increasing number of hotel guests who continue to work from distance while traveling as the margins between business and leisure become increasingly blurred.

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Ukraine’s monthly English-language current affairs publication since 2007


Mariupol forum puts eastern Ukraine on investors’ maps

Andy Hunder, President of the American Chamber of Commerce in Ukraine, Treasurer of AmChams in Europe My first trip to Donetsk was in 1998. Viktor Yanukovych was the regional governor. His ally and supporter Rinat Akhmetov, who is today Ukraine’s richest man, was just starting to expand his business empire. Akhmetov had become the owner of the Shakhtar Donetsk football club following a stadium bomb assassination that killed the club’s previous owner during a football match. Donetsk in those days was Ukraine’s wild east. I was working for what was then the country’s biggest cellular operator, Ukrainian Mobile Communications, which now operates under the Vodafone brand. We had just launched a new digital cellular communications network in Kyiv and a handful of big Ukrainian cites. At the time, mobile phones were considered an attribute of affluent businessmen, or gangsters. Twenty years later, things could not be different. Mobile phones are omnipresent and widely affordable. Donetsk region is also changing and embarking on a new journey to lure in foreign direct investment. I was back in Donetsk region on October 29 together with 400 business representatives and state officials at the Mariupol Investment conference, President Zelenskyy’s first investment forum, aimed at showcasing Mariupol and eastern Ukraine to international audiences. This was my first time back to the region since Russia invaded parts of Donetsk and Luhansk in 2014, where the war continues today. Mariupol on the north coast of the Sea of Azov is 20 kilometers from the front line. On the grey autumn morning of the investment forum, Mariupol looked warm and welcoming. The city has seen a makeover with new public transport on its streets. Vadim Boychenko, the INSEAD Business School educated mayor of Mariupol, has been recognized for driving changes in the city. International guests arrived to the Mariupol forum by flying into Zaporizhia, the closest city with an operating international airport. They then traveled by road to Mariupol. Ukraine’s new government had set an

ambitious goal to construct a new highway in time for the forum. And it succeeded. The brand-new Zaporizhia to Mariupol 225-kilometer-long road is the smoothest stretch of pothole-free tarmac that I have seen in Ukraine. It’s a benchmark standard for future construction of new highways in Ukraine. At the forum, Zelenskyy and Prime Minister Oleksiy Honcharuk urged investors to focus on eastern Ukraine. “You have definitely heard of businessmen who did not believe in Google or missed the opportunity to buy WhatsApp for a song. Ukraine is a country of opportunities. And today they are knocking at your door. But opportunity never knocks twice,” Zelenskyy told the Mariupol forum audience. During the forum, twelve memoranda were inked. Four mobile communications operators signed an agreement to ensure fourth generation broadband cellular network coverage providing fast-speed mobile web access across 90 percent of Ukraine’s vast territory. The European Bank for Reconstruction and Development signed a memorandum with the government kicking off the initial public offering process of Ukrainian Railways that will allow UkrZaliznytsia to raise capital from public investors. Together with the president and prime minister, Ukraine’s young newly appointed government ministers presented how their ministries will boost Ukraine’s economy by forty percent over the next five years, focusing primarily on land reform and privatization, and fighting the shadow economy. The world’s leading media also came to Mariupol. But Ukraine is finding it tough to get its investment messages across as the media is focused on one topic when it comes to Ukraine: the Trump inquiry. CNN award-winning journalist Clarissa Ward was in Mariupol seen actively pursuing Ambassador William Taylor, the top US diplomat in Ukraine, who had just returned from Washington to a rock star reception after testifying on Capitol Hill in the impeachment inquiry. A day before the Mariupol conference, the American Chamber of Commerce together with Citi Ukraine presented the Business Climate Survey. The results are cautiously optimistic: 82 percent of companies surveyed plan to expand their business in Ukraine, 88 percent are forecasting an increase of their revenues in 2019, and 64 percent are reporting an improvement of the investment climate. Zelenskyy and his team delivered a clear and concise message in Mariupol: they are committed to their people in eastern Ukraine. The government showed that it will support and showcase the opportunities for business to invest in eastern Ukraine, to boost the economy, and create jobs. The president spoke passionately about ending the war and bringing peace to the region. The next months will be vital to prove whether the road to ending the war will be as smooth and as quickly constructed as the new road to Mariupol was. This will be a key factor to bring in investment to eastern Ukraine. Source: Atlantic Council

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RE: THINK. Invest in Ukraine Forum in Mariupol On October 29, the first investment forum under the President of Ukraine Volodymyr Zelensky took place in Mariupol, Donetsk region. The event was aimed at showcasing Mariupol and eastern Ukraine to international audiences. 700 participants, including 400 business representatives and state officials, attended this flagship event. The forum included 6 key panel discussions, more than 10 special events and occasions, pitch-sessions, presentations and workshops, IT-startups demo zone, and exhibition of the investment projects. Chair of AmCham Ukraine Board of Directors, CEO and Founding Partner of Horizon Capital Lenna Koszarny moderated the Hard Talk “Updated rules. What is Ukraine really worth?” with the Prime Minister of Ukraine Oleksiy Honcharuk. The President of the American Chamber of Commerce in Ukraine Andy Hunder moderated the high-profile discussion “Points for growth. Investment menu” with the Deputy Head of the Office of the President of Ukraine Yuliya Kovaliv, Minister of Infrastructure of Ukraine Vladyslav Krykliy, Minister for Development of Economy, Trade and Agriculture of Ukraine Tymofiy Mylovanov, Minister of Energy and Environmental Protection of Ukraine Oleksiy Orzhel and Chairman of the State Property Fund of Ukraine Dmytro Sennychenko.


THANKSGIVING BLACK TIE DINNER AND AWARD CEREMONY 2019 For the fifth year in a row, the American Chamber of Commerce recognizes organizations, projects and individuals who have made an outstanding contribution to the development of a favorable business and social environment in Ukraine or promoted Ukraine internationally. Representatives of the Chamber member companies named those who they would like to thank. The American Chamber of Commerce in Ukraine presented the 2019 Thanksgiving Choice of the Business Community Award to the National Bank of Ukraine. The award was given for pursuing a credible monetary policy, continuing the cleaning-up of the banking sector, defending NBU independence and contributing to macroeconomic stability. The business community also acknowledged Mr. Brian Bonner for

delivering Ukraine’s news in English to global audiences through his dedicated service as Chief Editor of the Kyiv Post. “On behalf of the business community, I would like to congratulate the National Bank of Ukraine and Chief Editor of the Kyiv Post Brian Bonner with these well-deserved awards. A strong and independent central bank, as well as free and independent media, play a key role in Ukraine’s macroeconomic stability as they are a powerful signal of trust for foreign investors. Also, I express my sincere gratitude to members, Board of Directors, U.S. Embassy in Ukraine, Ukrainian state authorities and international partners for everything they do for business and Ukraine, making a difference and changing people’s life for better”, commented Andy Hunder, President of the American Chamber of Commerce in Ukraine.


AmChams in Europe Annual Board Meeting and Best Practices Conference 2019 in Belgrade

45 AmChams in Europe gathered for the annual AmChams in Europe Best Practices Conference in Belgrade, Serbia, on October 16-19, 2019. The purpose of the conference was to meet with the community, to exchange best practices, and to discuss relevant issues impacting AmChams and their members. AmCham Ukraine President and Treasurer of AmCham in Europe Andy Hunder was flying the flag for the American Chamber of Commerce in Ukraine at the conference and ACE Board meeting together with Finland, EU, Sweden, Netherlands, and Estonia.


AmCham Ukraine Board of Directors met with Prime Minister Oleksiy Honcharuk

AmCham Ukraine Leadership and Board of Directors’ members met with Prime Minister Oleksiy Honcharuk. The participants discussed the reform process, ways to attract Foreign Direct Investment and what needs to be done to make Ukraine a better place for doing business.


Annual FLIFI Anti-Money Laundering Best Practices Conference Forum for Leading International Financial Institutions (FLIFI), jointly with the National Bank of Ukraine, held AML Best Practices Conference – the new progressive format of the banking community communication for the proper implementation of legislative requirements in the area of financial monitoring. Intensification of the fight against money laundering and combating the financing of terrorism (AML/CFT) are the leading trends in the financial sector. The event gathered more than 230 attendees – high-scale financial experts from international financial institutions, state authorities, international banks, and FinTech companies.


B2G Dialogue UKRAINE-U.S. TRADE AND INVESTMENT COUNCIL On November 1, the 9th Ukraine-U.S. Trade and Investment Council took place in Kyiv. The annual event was aimed at discussing steps to strengthen U.S.-Ukraine bilateral trade and investment. During welcoming remarks, AmCham Ukraine President Andy Hunder highlighted the importance of boosting Foreign Direct Investment, strengthening U.S.-Ukraine business ties, and accelerating bilateral trade.

MEETINGS WITH LEADERSHIP AND TEAM OF OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE On the eve of the 9th Ukraine-U.S. Trade and Investment Council, AmCham Ukraine members met with the leadership and team of Office of the United States Trade Representative – Dan Mullaney, Assistant USTR for Europe and the Middle East; Betsy Hafner, Deputy Assistant USTR for Russia and Eurasia; Erland Herfindahl, Deputy Assistant USTR for GSP – to discuss trade facilitation, Ukraine’s investment climate improvement and trade barriers’ elimination. After that, all interested members also joined the meeting on recent restoration of Generalized System of Preferences (GSP) benefits for Ukraine.

MEETING WITH TARAS KACHKA, DEPUTY MINISTER FOR DEVELOPMENT OF ECONOMY, TRADE AND AGRICULTURE – TRADE REPRESENTATIVE OF UKRAINE AmCham Ukraine members met with Taras Kachka to discuss trade facilitation and Ukraine’s investment climate improvement, including technical regulations, conformity assessment, ways of elimination of trade barriers, and related tax issues.


B2G Dialogue AMCHAM UKRAINE LEADERSHIP MET WITH DENYS MALIUSKA, MINISTER OF JUSTICE AmCham Ukraine leadership met with Denys Maliuska to discuss the introduction of safeguards against raiding attacks and fraud, development of e-services in the sphere of justice, execution of judgments’ system improvement, and alternative dispute resolution as well as possible ways for further cooperation.

MEETING WITH INNA METELEVA, DEPUTY MINISTER FOR DEVELOPMENT OF ECONOMY, TRADE AND AGRICULTURE AmCham members met with Inna Meteleva to discuss acute issues in agriculture, food and beverage, and seeds spheres, in particular international cooperation and technical assistance, rural development, agricultural cooperation, farming and organics.

MEETING WITH HALYNA YANCHENKO, DEPUTY HEAD OF THE PARLIAMENTARY COMMITTEE ON ANTI-CORRUPTION POLICY AmCham Ukraine in partnership with Overseas Security Advisory Council (OSAC) Ukraine met with Halyna Yanchenko to discuss the future of Ukraine’s anti-corruption system and fighting against corruption. MEETING WITH DMYTRO NATALUKHA, HEAD OF THE PARLIAMENTARY COMMITTEE ON ECONOMIC DEVELOPMENT AmCham Ukraine members met with Dmytro Natalukha and Liudmyla Buimister, Head of the Subcommittee on Competition and Equal Business Opportunities, to discuss key aspects of reforms in antimonopoly, healthcare, infrastructure, and IPR sectors. Business representatives shared their vision on further development within these sectors and actions expected to be taken in this regard.


B2G Dialogue MEMORANDUM ON GRAIN EXPORT SIGNED AmCham Ukraine and other main grain market participants signed the Memorandum of Understanding for the new marketing year 2019/2020 with the Ministry for Development of Economy, Trade and Agriculture of Ukraine. The document is designed to contribute to the stabilization of Ukraine’s grain market with securing the grain export for 2019/2020 marketing season. PANEL DISCUSSION “MEDICAL DEVICES REGULATION IN UKRAINE” AmCham Ukraine Healthcare Committee members discussed conformity assessment, technical regulations and implementation of the National Classifier of Medical Devices as well as medical devices’ place in the transformation of Ukraine’s healthcare system during the high-profile panel discussion. MEETING WITH YULIYA SOKOLOVSKA, MINISTER OF SOCIAL POLICY The meeting was devoted to the discussion of strategic plans and the most actual issues in the social sphere, the importance of inclusivity, major goals, and planned improvements in the social sphere as well as Ministry’s goals in the Government’s Action Program.

MEETING WITH OLEKSANDR TKACHENKO, HEAD OF THE PARLIAMENTARY COMMITTEE ON HUMANITARIAN AND INFORMATION POLICY AmCham Ukraine members met with Oleksandr Tkachenko to discuss the most acute aspects of reforms in tourism and media spheres as well as possible ways of cooperation.


“FROM SUCCESS TO SIGNIFICANCE: HOW TO RUN A SUCCESSFUL BUSINESS AND WIN WITH PURPOSE” Women’s Executive Leadership Development Initiative gathered over 50 powerful leaders for the business breakfast with Marek Tomalak, Member of the Board of Directors of the American Chamber of Commerce in Ukraine, General Manager of PepsiCo Ukraine. During the frank talk, Marek Tomalak shared his view on what really matters for the success of a business, how to make business not only profitable but also impactful and how to empower teams to do and achieve more. PREMIUM SPONSOR

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AmCham Ukraine community celebrated Halloween in different ways – by choosing the scariest costume and supporting life-saving initiative. Over 100 members in exclusive spooky looks came to have fun at Halloween Business Networking Cocktail, and 120 volunteers donated 40 liters of blood at AmCham Ukraine traditional Halloween Blood Donation.

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Meet the American energy sector executive pioneering private sector growth in Ukraine Dale W. Perry hopes to contribute to the continued liberalization of Ukraine’s energy industry

About the interviewee: Dale W. Perry is Managing Partner at Energy Resources of Ukraine (ERU) American Dale W. Perry is a 35-year veteran of the international energy industry who is contributing to the long overdue transformation of Ukraine’s energy sector. As Managing Partner of Energy Resources of Ukraine (ERU), Perry is a private sector pioneer at the helm of what is the only US energy company currently active in the Ukraine market. After a profitable first five years of operations in Ukraine, he hopes to play an enhanced role in the modernization of the Ukrainian energy sector and believes further liberalization will be the key to success. Perry established ERU in 2014. He says the initial decision to enter the Ukrainian market owed much to the opportunities opening up in the country following the Euromaidan Revolution. With an extensive professional background in the region and a wealth of experience in the energy sectors of emerging economies, postMaidan Ukraine seemed tailor-made for the American. Nor was Ukraine itself an unknown quantity. Speaking from his office in Kyiv’s riverside Podil district, Perry reflects on the fact that his relationship with the Ukrainian capital actually stretches back more 46

than three-and-a-half decades to 1982, when he first arrived in Kyiv as a Russian-language undergraduate student. The American’s career then took a military turn, with years of service as a nuclear engineer on a submarine in the US Navy. Following the collapse of the Soviet Union, Perry entered the civilian world and began building a career in the international energy sector. Starting in 1997, he spent an extended period in Kazakhstan, where he witnessed and directly contributed to fundamental changes in the country’s power infrastructure. “For more than two decades, I have been able to watch the transformation and development of the post-Soviet energy sector and to participate in this process. It’s been a fabulous experience,” he says. With his family now settled just outside Seattle in the northwest of the United States, Perry has spent much of the past five-and-ahalf years in Kyiv, where he is focused on pioneering private sector engagement in the Ukrainian energy industry. This has meant splitting his time between Ukraine and the US, while undertaking a monthly intercontinental commute of some seventeen hours.


including plans to participate in the ambitious multi-billion dollar upgrade of the country’s entire energy infrastructure. “This is where my 25 years of experience in developing markets becomes important. You have to find the right format for Ukraine and not just offer the latest technologies from the US or UK, because in many cases they would be too expensive for this market. It is crucial to find the right balance between affordability and technical necessity.” Perry speaks at length about the challenges created by Ukraine’s recent pivot towards renewable energy, with guaranteed high feed-in tariffs and fluctuating volumes placing strains on suppliers and operators who must balance what are often intermittent inputs while maintaining energy flows to end users. To achieve this goal, ERU hopes to expand into the management of energy assets on a gradual basis. “How do you eat an elephant? You do it one bite at a time,” says Perry. “We are going to start by offering up individual bites of solutions. Instead of a billion dollar project, we envisage beginning with a sixty million dollar project to solve the specific issue of integrating a particular wind farm into a regional power grid.” Perry believes the continued liberalization of the energy sector, along with greater private sector involvement, will determine the success of the current modernization drive, with its promise of lower costs and greater efficiencies. He hopes to contribute to this process, both through the work of his company ERU, and by engaging in the ongoing dialogue between the state and the business community. Perry is standing as a candidate for the American Chamber of Commerce in Ukraine (ACC) 2020 Board of Directors, and believes his previous experience in similar roles could prove valuable as the ACC seeks to support the emergence of a more business-friendly energy sector. During his time in Kazakhstan, Perry was the founding chair of the Kazakhstan Electricity Association, before helping to set up the US-Kazakhstan Business Association. “Thanks to these experiences, I have seen first-hand the benefits of collaborative professional organizations such as these councils,” he says. “I believe we could be more proactive in Ukraine when it comes to promoting what we think of as good models for the energy sector. I could bring this expertize to the ACC Board of Directors. This is an area that could benefit the entire ACC membership, because the cost of utilities has an impact on the bottom line of every member company.”

energy

“You have to be here on the ground in order to understand market conditions and get to know all the players. If you want to work in Ukraine, you have to be in Ukraine,” he quips. After what by any standards has been a long and successful career, what motivates this American executive to enter the notoriously turbulent and often opaque Ukrainian energy sector? Perry acknowledges that many of his fellow energy industry professionals remain unconvinced by the complexities of Ukraine, but argues that in his opinion, the advantages far outweigh the obstacles. “We have found that the gas and electricity regulations introduced since 2014 are actually very effective. On paper at least, these laws work. The risks arise when other issues from outside the market come into play. So in order to enter the Ukrainian market, you have to be a risk-taker. I am here because I think it is worthwhile. There are exceptionally smart people here and I believe this is a great country. In other words, it is worth the risk.” This readiness to accept the inevitable risk factor of an emerging market like Ukraine appears to be paying off. Since its establishment in 2014, Perry’s company ERU has consistently posted annual turnover growth of between 20% and 25%, with this year’s figure expected to surpass the 2018 total of around USD 500 million. ERU activities are currently concentrated on the trading side of the energy industry, “because that’s where the opportunities are right now,” offers Perry. This focus has allowed ERU to emerge as the largest private gas trader and importer in Ukraine for the past four years, before branching out into the newly reformed electricity market during summer 2019. ERU’s electricity trading experience has so far proved encouraging. “It appears to be working. Prices are coming down and competition is growing,” Perry says. “We were one of the first movers to enter the reformed market this summer and we prepared well in advance with all the requisite paperwork and permits in place, allowing us to be there from very beginning. As a result, we had a good initial month. Then competition arrived and prices came down, which is what the free market is all about at the end of the day. Obviously, we were able to make more money when we were one of only a few participants, but we believe that by demonstrating the new market can work, we have helped to attract others and reduce prices.” In addition to this growing trading portfolio, the company also has a long list of other development goals it would like to pursue,

“In order to enter the Ukrainian market, you have to be a risk-taker. I am here because I think the risks are worthwhile”

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New Business Ombudsman is longtime supporter of Ukraine Ukraine has been at the heart of Polish politician Marcin Swiecicki’s career for almost three decades When Marcin Swiecicki took up his post as Ukraine’s new Business Ombudsman in October, his arrival in Kyiv was more homecoming than departure. The veteran Polish politician boasts an impressive CV of senior posts in his native country including Minister for Foreign Economic Relations, Deputy Economy Minister and Mayor of Warsaw, but for much of the past three decades, neighboring Ukraine has been prominent thread running through his career. Swiecicki first came to Kyiv a quarter of a century ago in the early 1990s to take up a role with an international think tank. At the time, the goal was to support the initial stages of Ukraine’s post-Soviet economic transition. “Many of the recommendations we made then are still valid today,” he quips. This was to be one of two extended periods in the Ukrainian capital, with a second think tank posting lasting from 2007 until 2011. More recently, as a two-term member of the Polish parliament, he has spent the past eight years serving as deputy chair of the country’s parliamentary committee on Ukraine. “I was also the first Polish politician to speak on Maidan. I gave a speech the day before the Vilnius EU summit in November 2013,” he recalls, adding for good measure that he was a regular attendee of Euromaidan solidarity events in Warsaw throughout the tumultuous winter of 2013-14. Following the Revolution of Dignity, he also advised the Ukrainian government on local self-government reform. This strong Ukraine background made Swiecicki a formidable candidate for the position of Business Ombudsman following the departure of Lithuanian Algirdas Semeta in mid-2019, with the Pole beating off competition from over 100 candidates during an international recruitment process in order to land the role. Semeta had been Ukraine’s first Business Ombudsman and Swiecicki is quick to praise his Baltic predecessor, noting the “very high standards” he set in everything from internal recruitment to building productive relationships with the various state bodies the Business Ombudsman Council aims to engage and influence. Launched in spring 2015, the Business Ombudsman Council is a post-Maidan creation designed to serve as a bridge between the business community and the state. It is widely regarded as among Ukraine’s most effective innovations of the past six years, enjoying a reputation for constructive contributions that address private sector complaints while encouraging improvements to the business climate. Backed by a number of international donors and Ukraine’s largest business associations, the Business Ombudsman Council does not hold any official state authority and must instead rely on what Swiecicki refers to as soft power tools. “Advice, opinions and recommendations - this is our ammunition,” he says. The results certainly speak for themselves. From May 2015 until the end of October 2019, the Business Ombudsman Council received over 6,000 complaints and helped Ukrainian businesses recover more than UAH 17 billion, while at the same time preparing in excess 48

of 320 systemic recommendations for government agencies, over one-third of which have subsequently been implemented. The Council has genuine nationwide reach, with more than half of all complaints coming from beyond the Kyiv region, and is regularly namechecked as a positive addition to the country’s business community. Unsurprisingly, Swiecicki sees maintaining this impressive performance as one his chief tasks. He is hopeful that agreement will prove possible in the coming months on a long-awaited Ombudsman Law that promises to codify the status of the Business Ombudsman Council and pave the way for possible co-financing from the Ukrainian state budget. “This law would help solidify our position as an institution. It would send a signal that the Business Ombudsman Council is now an important and stable element of the country’s business architecture.” Among the challenges he faces, Swiecicki identifies so-called raider attacks on businesses as being particularly problematic. “Rule of law, protection of property rights and the predictability of public officials are all very important for businesses,” he reflects. “Raiding, even if it only directly affects a relatively small number of individual companies, has the potential to negatively impact the entire business climate.” He advocates a two-pronged approach to the issue, with greater transparency in state registers serving to improve property rights, alongside the adoption of a tougher stance towards those implicated in raider schemes. “Even when these attacks are prevented and businesses are returned to their rightful owners, the perpetrators currently tend to go unpunished and are free to seek fresh targets. This absence of an effective deterrent cannot continue.” With a two-to-four-year term ahead of him and an acquired taste for the broad historical sweep of events in today’s Ukraine, Swiecicki is setting his sights high. The Pole says that alongside the everyday work of improving the country’s business architecture and pushing back against corrupt practices, he hopes to make a meaningful contribution to Ukraine’s European integration aspirations. “I would like to convince the Ukrainian business and political communities that full implementation of the Association Agreement with the EU will be beneficial for the entire Ukrainian economy. It will facilitate trade, introduce EU standards, and attract international investors.” For a man who has spent much of his career dividing his attentions between Poland’s own national transition and Ukraine’s significantly less straightforward post-Soviet journey, such sentiments are to be expected. “I find Ukraine’s struggle for a European future very moving,” he shares. “I like Ukrainians personally and I wish them the best. I think they deserve better and I believe it is possible. If Poland can be successful, why not Ukraine too?” About the interviewee: Marcin Swiecicki is Ukraine’s Business Ombudsman


interview

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Correcting the gender imbalance

in Ukraine’s booming IT sector Ambitious WTECH initiative aims to enable greater female engagement in the Ukrainian tech sector

About the interviewees (left to right): Viktoriya Tigipko is the founder and managing partner of TA Ventures, founder of WTECH, founder of iClub, initiator of Code Club UA, President of the Odesa International Film Festival, and Chair of the Supervisory Board of the Ukrainian Film Academy. Veroslava Novosilnaya is the CEO and founder of Slova Tech PR, and CEO and co-founder WTECH. Valerie Kuzmenko is the founder and managing partner of Management Consulting Agency SalesTech and Ambassador of Sales in IT and Tech for WTECH. Ukraine’s IT industry has grown at such a remarkable rate over the past decade that there are now very real concerns over the country’s ability to provide enough professionals in order to meet the apparently insatiable international appetite for Ukrainian IT services. With annual industry expansion running at around 20%, many fear that sooner rather than later there will simply not be enough qualified candidates to fill all the new positions created by soaring demand. For many, the solution to this problem is more training. But while Ukrainian educational institutions and tech companies alike are busy launching new teaching programs and training initiatives, a more obvious solution might be to get greater numbers of women involved in the industry. IT is one of the most male-dominated professions in today’s Ukraine, with between 80% and 90% of all the country’s IT professionals currently men. This reflects global tech industry trends, but it also presents a roadmap towards long-term sustainability in a sector that is increasingly fuelling Ukraine’s wider economic growth. Encouraging more women to enter the tech industry could help Ukraine overcome its mounting IT employee supply issues and provide the human resources necessary to continue the sector’s stellar growth. Experience elsewhere also strongly indicates that companies tend to perform better once they confront and address issues of gender imbalance. More women in management 50

positions often leads to better performance and higher profits. This lesson is relevant across the Ukrainian business landscape, but few sectors could benefit as much as the IT industry from attempts to attract more female entrepreneurs and employees. Awareness of the need to bridge the gender imbalance in the Ukrainian IT sector appears to be growing. One pioneering initiative in this direction is the WTECH community, which brings together Ukrainian women working throughout the IT and tech sectors to share their professional experience, seek mentoring support, and gain access to the best business practices. WTECH is the brainchild of co-founders Viktoriya Tigipko and Veroslava Novosilnaya. They hope the community can help raise the profile of women within the Ukrainian IT industry while leading by example and encouraging more ladies to explore career opportunities in a segment of the economy that remains shrouded in stereotypes of male domination. “I think that the WTECH community appeared in Ukraine right on time,” offers Viktoriya Tigipko. “It is a unique community with a range of very specific goals including networking, career development, communication with potential investors, and business growth. At the end of the day, it is no secret that good advice is worth more than money.” Tigipko believes the WTECH community is more valuable than the sum of its parts. She argues that a strong sense of solidarity


factor in career development. It seems that certain gender biases remain deeply engrained in Ukrainian society regarding traditional female roles as wives and mothers. This encourages many women to suppress the urge to build a successful IT career.” For those who do opt for a career in IT, the relative lack of highprofile and successful Ukrainian women in the industry can also be an obstacle. “The women currently occupying leadership roles in the Ukrainian IT sector are genuine pioneers,” says Novosilnaya. “A majority of them have had no role models to look to for inspiration throughout their careers, which can lead to a sense of isolation. We hope WTECH can now provide the next generation of female IT professionals with the role models their predecessors lacked.” This need for mentoring and guidance extends beyond abstract inspiration to the practicalities of getting ahead in the fast-evolving business environment of the Ukrainian tech sector. WTECH Ambassador of Sales in IT and Tech Valerie Kuzmenko says the community aims to help members by providing access to the expertise they require in order to advance their careers and make the most of the opportunities around them. “The majority of company founders in the IT sector are young people who have brilliant ideas and have created winning technologies,” she says. “In order to deliver their product to the right end customers, they require specialized business knowledge and the skills to grow on the market. This makes it particularly important for WTECH to attract experts who can help women at an early stage in their tech careers to choose the right kind of scalable business model, identify business opportunities, and establish themselves professionally. By bringing together women who have made a success of their businesses in a sphere that is still seen by many as a “man’s world”, we hope WTECH can serve as a bridge to a future where more women pursue careers in IT and the gender imbalance in the tech sector is a thing of the past.”

tech sector

between members can help create important support networks. “Our community offers genuine help when it comes to building up businesses in the Ukrainian tech sector, whether the task is finding the right employee or entering new international markets. We have advisors who are ready to invest their time on specific challenges, whether this involves taking a call or meeting for a coffee. Ultimately, we want WTECH to be a place where members can engage with leading entrepreneurs and opinion shapers in the Ukrainian tech sector while sharing ideas with their peers.” Fellow founder Veroslava Novosilnaya believes WTECH can help counter stereotypes about women working in the IT industry. She acknowledges that such thinking is not limited to men only, and hopes that by bringing together many of the most successful women currently working in the sector, the initiative can help to dispel the nagging doubts that prevent some females from pursuing a career in the tech world. “I am often asked whether there are still any signs of overt gender discrimination among tech sector business partners, or stereotypical thinking about women in IT,” she says. “Obviously, nobody would openly question women’s tech abilities to their face anymore, but a certain bias on the part of many men still exists. However, the upsetting reality is that we women also tend to underestimate ourselves. We are susceptible to self-doubt and the fear being too pushy or persistent. It may seem surprising, but the biggest barriers to a greater role for women in the tech sector may actually be internal issues we have yet to deal with ourselves.” Novosilnaya explains that these internal issues can sometimes extend to what she terms as “imposter syndrome” or a feeling among some women that they somehow do not fully belong in the tech sector. “When we conducted research, we found that 70% of surveyed women experienced such feelings,” she says. “This is often due to a lack of self-confidence stemming from the absence of family support, which more than 80% of respondents considered a crucial

“Women occupying leadership roles in today’s Ukrainian IT industry are genuine pioneers who had no role models to look to for inspiration. We hope WTECH can now provide the next generation with the role models they need.” www.bunews.com.ua

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Sheva’s boys unbeaten as they qualify for Euro 2020 Ukraine finish above holders Portugal to reach next summer’s European Championship in style The Ukrainian national football team rounded off their Euro 2020 qualification campaign on 17 November with a 2-2 draw in Serbia that confirmed first place in a group also containing current European champions Portugal. The draw against Serbia meant Ukraine finished the year unbeaten, winning seven games and drawing three. Highlights from a

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memorable 2019 include a famous 2-1 triumph over Portugal at Kyiv’s Olympic Stadium and a swaggering 5-0 demolition of highly rated Serbia in summertime Lviv. Euro 2020 is only the third major tournament Ukraine has qualified for since the country first began to compete internationally in the mid-


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lished an unwanted reputation as one of world football’s perennial bridesmaids, losing World Cup and European Championship qualification play-offs on five separate occasions. The manner in which his team qualified for Euro 2020 will have been particularly pleasing for Ukrainian coach Andriy Shevchenko. Many questioned the wisdom of his appointment in 2016, pointing to his complete lack of managerial experience and underwhelming softspoken manner. However, the former Dynamo, Milan and Chelsea star has now proven the doubters wrong and will be looking to burnish his reputation further next summer.

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1990s. Ukraine made it to the 2006 World Cup in Germany and went on to reach the quarterfinals of the competition, and have also appeared twice in the final stages of the European Championship, but country’s participation at Euro 2012 came courtesy of Ukraine’s status as the tournament’s co-hosts alongside Poland. This is particularly disappointing given the dominant role of Ukraine in the celebrated Soviet sides of the 1980s. Ukrainian clubs led by Dynamo Kyiv provided the backbone of the USSR team that reached the final of Euro 1988, leading many to predict similar success once Ukraine gained independence. Instead, over the past 25 years the country has estab-

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tourism

Record-breaking Chornobyl tourism Site of world’s worst atomic energy disaster sees 75% spike in visitors following hit HBO series

The number of tourists visiting the Chornobyl Exclusive Zone jumped by almost 75% year-on-year in the first ten months of 2019, according to figures released in November by the state agency responsible for managing the site of the world’s worst atomic energy disaster. During the January-October period, 107,600 people visited the zone, representing a 74.9% increase on the comparative figure for one year earlier. Uniquely among Ukraine’s tourist attractions, the majority of Chornobyl visitors have always come from EU countries and North America. This has remained the case during the current year. Britain is in first place so far in 2019 with 15,738 tourists, followed by Poland (9378 tourists), Germany (7826 tourists) the US (5580 tourists), and the Czech Republic (4063 tourists). This surge in visitors is partly attributable to rising international interest thanks to HBO’s Emmy-winning 2019 TV miniseries “Chernobyl”. Since the acclaimed series first aired in late spring, monthly visitor numbers have grown from 6100 in May to 17,030 in October. With more and more international tourists now looking to visit the site, efforts are underway to improve tourism infrastructure and 54

streamline access procedures by upgrading checkpoints and removing bureaucratic barriers. In a move that will improve connectivity and allow visitors to remain online throughout their tours, Ukrainian mobile communications operator Kyivstar recently connected the Chornobyl zone to its 4G high-speed internet network. Meanwhile, the Ukrainian authorities have given the green light to tourism on a number of river routes passing through the exclusion zone, subject to a range of safety precautions. The biggest changes have come at the atomic energy plant itself, where tourists are now be able to visit the control room after the lifting of longstanding restrictions on access. These developments are part of efforts to transform the Chornobyl site in line with Ukrainian President Volodymyr Zelenskyy’s July 2019 decision to declare it an official national tourist attraction. Zelenskyy spoke of wanting to turn the site into a convenient modern tourist attraction that would demonstrate how far Ukraine has progressed since the Soviet era. “Chornobyl has long been a negative part of Ukraine’s international brand,” he commented. “The time has come to change this.” www.bunews.com.ua


sport

Lviv enters race to host 2030 Winter Olympics Olympic bid will benefit from Lviv’s thriving tourism sector and Euro 2012 infrastructure upgrade

Lviv Mayor Andriy Sadoviy confirmed in mid-autumn that the western Ukrainian city plans to enter a bid for the 2030 Winter Olympics. The official contest to select a host city is set to get underway next year, but the final decision is not likely to come until 2023, leaving Lviv with plenty of time to put the polish on the city’s bid. Lviv’s candidacy will benefit from the major infrastructure upgrade the city received around a decade ago as it prepared to serve as one of four Ukrainian host cities during the Euro 2012 European football championship. Preparations for Euro 2012 included the construction of a completely new international airport terminal building and significant improvements to the city’s transport infrastructure. With a booming tourism industry and rapidly improving connections to the nearby EU, Lviv has a number of obvious advantages as a location for a major international sporting event such as the Winter Olympics. In addition to upgraded airport facilities, Lviv has a growing number of international rail connections that could help European guests reach the city during a future Olympic Games. The local hotel sector continues to expand at a steady if unspectacular pace, while the city boasts a thriving café and restaurant scene geared towards meeting the expectations of international visitors. If selected to host the 2030 Winter Olympics, Lviv would likely split sports events between venues in the city itself and resorts in the nearby Carpathian Mountains. 56

Lviv’s anticipated 2030 Winter Olympics bid will not be the first time the city has put itself forward as a potential Olympic venue. Back in 2010, Ukraine announced plans to campaign for the right to host the 2022 Winter Olympics in the western Ukrainian city. Preparations gained momentum for a number of years, with an official bid submitted in early November 2013. However, within a matter of weeks, Ukraine was plunged into political chaos by the outbreak of protests in Kyiv that would eventually escalate into the Revolution of Dignity and lead to the Russian invasion of Crimea and eastern Ukraine. With parts of the country under Russian occupation and the national economy in critical condition, Ukrainian officials quietly shelved this initial Lviv Winter Olympics bid in summer 2014. Lviv’s dreams of hosting the 2030 Winter Olympics will face stiff competition. Although rival bids have yet to be confirmed, America’s Salt Lake City and Norway’s Lillehammer are both reportedly considering campaigns to host the Games. At present, Ukraine’s only experience as an Olympic host nation came when it served as a secondary venue during the Soviet-era 1980 Moscow Olympics, but the country does have a strong recent record of staging showcase international events. In addition to Euro 2012, Ukrainian capital Kyiv earned considerable kudos for successfully hosting the 2017 Eurovision Song Contest and the 2018 UEFA Champions League Final. www.bunews.com.ua


27th IWCK Charity Bazaar November 30th, 2019, NSC Olimpiyskiy 55, Velyka Vasylkivs’ka St, Kyiv

The 27th IWCK Charity Bazaar is the great chance to take an unforgettable journey, experiencing the cultures and cuisines from around the world. For 27 years now, IWCK continues to organize on behalf of the International community in Kyiv one of the biggest fundraising events in Ukraine. It brings together embassies and many local volunteers to create an amazing spectacular event and collect enough money to fund the IWCK grant competition. IWCK grants funds collected during the Bazaar to local organisations which help women, children, elderly and people with disabilities in need in Ukraine. The traditional setup of the Charity Bazaar: - More than 40 embassies are participating; - The event is accompanied by the Cultural program; - We collect donations throughout the year: coordinator@iwck.org; - Boutique and White Elephant booth as a possibility to buy second-hand items in a good condition; - The Children’s Corner gives youngsters the chance to explore various craft master classes and traditional games; - At the Busy Bees booth it is always possible to find delicious pastries and cakes; - The Handicraft booth for those who appreciate creativity and original goods; - Visitors can try their luck at Grand Raffle/Tombola. • 90 UAH - Adults ticket at exclusive online presale price (Nov 1 - Nov 29). • 20 UAH - Pensioners, students, children 12 -18 years old. • FREE of charge - Children under 12 years, ATO veterans and people with disabilities. (A document confirming your right to a discount is required.) • 120 UAH - The adult ticket price if purchased on the day of the Bazaar November, 30th. Please buy tickets only from official vendors: online sale www.studydive.com or by the cash table at the entrance of the event. 100% of 27th Charity Bazaar proceeds goes to charity. Location: National Sport Complex Olympiysky Velyka Vasylkivs’ka,55 Kyiv, Ukraine


UKRAINIAN POP MUSIC RENAISSANCE Over the past three years, the introduction of language quotas throughout the Ukrainian media has sparked a lively and often bitter debate over the role of language in national identity. With linguistic issues at the heart of the ongoing hybrid war against Vladimir Putin’s Russia, this controversy is unsurprising. However, Euromaidan Press journalist Bohdan Ben argues that quotas have actually helped spark a renaissance in the Ukrainianlanguage music industry.

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culture

Onuka has helped pioneer Ukrainian electro-folk (Photo: courtesy)

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ince 2016, the introduction of language quotas for Ukrainian radio stations mean that 35% of songs and 60% of all broadcasting must now be in the Ukrainian language. Similar quotas also apply to the country’s TV channels. Over the past three years, these quotas have had a significant impact, dramatically boosting the presence of the Ukrainian language on the country’s radio and TV outlets. Thanks to frequent broadcasting, Ukrainianlanguage music has enjoyed a resurgence, reversing a decline that stretched back years or even decades.

Politics and Practicalities

In essence, today’s quota approach to Ukrainian broadcasting aims to protect the Ukrainian language. The reasoning behind this move is simple. The estimated audience for Russianlanguage music amounts to more than 200 million people worldwide, while the Ukrainianlanguage audience is some 30 million at most. This creates clear and obvious incentives for any Ukrainian musician to produce songs in Russian. Such decisions are generally down to practicalities rather than politics. Although the majority of Ukrainians claim the Ukrainian language as their mother tongue, most are also fluent in Russian, making the Ukrainian pop music industry’s traditional preference for the Russian language easy to understand. By singing in Russian, performers have a far better chance of easy sales and public popularity in countries with large Russian-speaking populations like Belarus, the Baltic States or other former Soviet republics, not to mention Russia itself. With a purchasing audience that is notionally seven times larger than the market for Ukrainianlanguage music, it is no wonder that so many Ukrainian performers have traditionally taken this linguistic route. Why does the Ukrainian language need protecting? According to recent research by the Kyiv International Institute of Sociology (KMIS), 46% of Ukrainian citizens use Ukrainian in their everyday communication with friends and family, while about 25% use both Ukrainian and Russian equally. Meanwhile, 28% use Russian only. Although these figures indicate that the majority of Ukrainians use Ukrainian as their primary spoken language, the country’s most popular radio stations and TV channels have traditionally featured relatively few Ukrainianlanguage pop performers. This translated into low levels of demand for Ukrainian-language content, restricting the earning power of Ukrainian-language music and creating a vicious 60

circle of ever-decreasing motivation to perform in Ukrainian. Predictably, musicians producing high-quality Ukrainian-language music have suffered financially. At the same time, an emphasis on Russianlanguage music also created additional international competition within the Ukrainian music industry, with songs from across the Russianspeaking world often filling up radio playlists and preventing new Ukrainian talent from enjoying the exposure necessary to evolve as artists.

Troubled History

Inevitably, the political dimension of this language debate is never far from the surface. Whether by circumstance or design, the reality of the market conditions in the Ukrainian music industry has made language a powerful weapon in the Russian hybrid war against Ukraine. Nor is this a new trend. Russia has long been adept at using language policy as a tool of imperial influence. In the 19th century, the tsarist regime claimed that Ukrainian was merely a dialect and sought to crush it altogether throughout the Russian empire. In total, Ukrainian-language publications were subjected to at least 60 official prohibitions during the 337 years in which much of today’s Ukraine was ruled by the Russian Empire and then by the Soviet Union. Even today, Russian President Vladimir Putin declares “the need to protect Russian speakers” throughout the world, claiming that any territories where the Russian language is prominent to be ethnically Russian. Considering this legacy of long-term language repression, Ukraine’s decision to introduce quotas for Ukrainian music looks reasonable, both for the sake of protecting the country’s national language and as a practical measure to support the development of the Ukrainian music industry. Nevertheless, many predicted that any such moves would spell doom for Ukrainian artists. Three years on, these concerns appear to have been misplaced. Despite fears that quotas would destroy the Ukrainian entertainment business, the exact opposite has occurred. The number of Ukrainian pop videos has increased six-fold since 2016, with Ukrainian artists enjoying a string of international successes and growing global recognition. A pop renaissance is well underway.

Business Boost

Ukraine’s language quota regulations oblige radio stations to comply with several norms: 35% of songs needs to be in Ukrainian and 60% of all broadcasting should be in Ukrainian. There are

some exceptions and exclusions. For example, radio stations that broadcast more than 60% of their songs in EU languages can air only 25% in Ukrainian. Quotas apply throughout the day, including peak periods in mornings and evenings from 07:00 to 14:00 and 15:00 to 22:00. Despite initial concerns over an anticipated lack of available Ukrainian-language music of suitably professional quality, these requirements do not appear to have posed a particular burden on broadcasters. Initially, they necessitated a change in industry trends, but by late 2019, many radio stations in all regions of the country were actually broadcasting more Ukrainianlanguage songs than officially required. Indeed, the percentage of Ukrainian-language songs on radio playlists continues to increase year-to-year beyond the official quotas established in 2016. This “over-quota” trend not only debunks the fear that there are too few Ukrainian performers to fill airtime, but also reflects the growing quality of Ukraine’s pop music industry. The switch towards Ukrainian-language music certainly appears to enjoy majority public backing. According to research by the National Council of Television and Radio Broadcasting (NCTRB), 60% of Ukrainians support policies to achieve a larger share of Ukrainianlanguage content on the country’s TV channels and radio stations. The impact of these quotas is evident within the Ukrainian music industry. Roman Mukha, a producer at Ukrainian pop music TV channel M2, says the introduction of quotas has attracted some 100,000 people to work in the Ukrainian music industry, including everyone from musicians and arrangers to lighting technicians and sound studio specialists. He believes that the quota policies introduced in 2016 have led to advances in the country’s music market and, just as significantly, have changed the structure of music-related employment.

Pop Music Revolution

The current rise of Ukrainian-language pop music is not taking place inside a vacuum. Instead, it is very much part of broader trends rooted in the transformational events of 2014. According to Atlas Weekend festival founder Dmytro Sydorenko, quotas are far from the only factor driving today’s increasing popularity and marketability of Ukrainian-language music. He points to a significant change in listener preferences dating back to the 2014 Revolution of Dignity that favors domestically produced content and Ukrainian-language lyrics. This makes sense. The historic developments of :


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culture

Ukraine’s Dakh Daughters have won international acclaim for their eclectic “freak cabaret” performances that borrow heavily from Ukrainian folklore while offering a very contemporary musical flavor (Photo: courtesy/Igor Gaidai)

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Ukrainian group Kazka scored a massive international hit in 2018 with their track “Plakala”, clocking up over 280 million YouTube views (Photo: courtesy)

: 2014 served as a turning point for the whole coun-

try, including the show business industry. Since then, changes have come at a tremendous pace. Prior to the Revolution of Dignity and subsequent Russian invasion of Crimea and eastern Ukraine, Russian artists had occupied 60% to 70% of the Ukrainian pop music market. Six years on, the majority of Russian performers no longer come to Ukraine. Meanwhile, Ukrainian artists who once struggled to emerge from the shadows have managed to break through into the mainstream. Previously starved of earning power due to the overwhelming competition they faced from the far larger and wealthier Russian music industry, many Ukrainian artists now have the financial resources to invest in higher production values and increasingly sophisticated videos. Ukrainian groups like SINOPTIK, Stoned Jesus and Jinjer have begun touring across the European Union. Others, such as Ukrainian electro-folk group Kazka, have scored massive online success with YouTube hits attracting hundreds of millions of views.

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All Roads Lead to Kyiv Although it is not easy to summarize the current Ukrainian pop music renaissance in a single sentence, some distinctive trends are identifiable. Analysis by the Radio Aristocrats team and texty.org.ua of over 400 albums released in 2018 by Ukraine’s most popular groups and solo artists provides a window on the current situation in the Ukrainian music industry. Last year, most artists sang in Ukrainian. Overall, 74 albums featured songs in Ukrainian, while 52 were in English. Thirty-nine albums included a combination of English, French, Russian and Ukrainian songs, while 31 were exclusively in Russian. A further contingent of 46 performers produced music without any vocals. In a further indication of the sector’s accelerated evolution, around 40% of all albums released in 2018 were debut releases by newcomers to the Ukrainian music industry. Geographically speaking, the Ukrainian capital remained dominant. The most creative cities in

terms of 2018 album releases were Kyiv (118 albums), Lviv (26), Kharkiv (12), Dnipro (9) and Odesa (9). Meanwhile, the gender mix was decidedly male-heavy, with 73% of albums produced by all-male bands and just 9% coming from all-female groups, while 18% were mixed.

Creative Diversity

Respected online media platform Ukrainska Pravda recent launched another effort to take the pulse of the Ukrainian music scene. The “How Ukraine Sounds” initiative, led by Oleksandra Hayvoronska and Sasha Koltsova, resulted in an exhaustive list of the 700 most popular Ukrainian bands and musicians across all genres and throughout history. This list reveals the growing dominance of Ukrainian-language music in recent years, while also highlighting the enduring popularity of Ukrainian-language songs. Approximately 450 of the 700 featured groups and solo artists had Ukrainian songs in their repertoire, while 269 had Russian-language tracks and 245 included


culture

English-language lyrics. Only 90 featured artists sang exclusively in Russian. It seems that linguistic diversity is also on the rise. Today’s Ukrainian artists are creating music in an ever-wider array of languages including French, Spanish, Polish and Bulgarian. Perhaps the most extraordinary contemporary Ukrainian band in this respect is Atmasfera, with a repertoire including some meditative songs performed in Sanskrit. The Ukrainska Pravda list features many of Ukraine’s most internationally recognized groups including DakhaBrakha, whose innovative blend of traditional and modern styles has won acclaim for its so-called “ethno-chaos”. The DakhaBrakha folk phenomenon has also spawned its own musical offspring in the shape of the Dakh Daughters, an all-female troupe offering a unique brand of “freak cabaret”. Another Ukrainian band with a highly original style is Odyn v Kanoe (One in a Canoe). Using only acoustic guitar, acoustic drums and vocals, and without any recognizable PR efforts or even properly recorded and marketed www.bunews.com.ua

albums, the band has become popular in Ukraine while frequently performing abroad. At the more conventional end of the pop star spectrum, Onuka is a Ukrainian electro-folk band credited pioneers of the contemporary Ukrainian-language music trend in today’s Ukraine. The Ukrainian word “Onuka” translates as “granddaughter,” a tribute to lead singer Nataliia Zhyzhchenko’s grandfather Oleksandr Shlionchyk, who was a renowned folk instrument artisan. Ranking alongside “granddaughter” Onuka in terms of importance is pop personality Dzidzio, whose name means “Grandpa” in Ukrainian Carpathian dialect. A singer and actor who includes heavy doses of comedy in his work, Dzidzio is actually a classically trained musician who studied at Lviv’s acclaimed Musical High School before graduating from the National University of Culture and Arts in Kyiv. His stirring renditions of the Ukrainian national anthem before matches of the Ukrainian national football team highlight the artistic range of this more typically jovial figure.

These are just a handful of the musicians fuelling Ukraine’s current pop renaissance. With greater professional opportunities and growing public appetite for Ukrainian-language songs, the country’s music industry looks poised to expand further in the years ahead.

About the author: Bohdan Ben is a journalist at Euromaidan Press and co-manager of the “In the Land of Hope” project facilitating practices of sustainable development in Ukraine. He is currently studying for an MA in Philosophy and MA in Public Policy

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Jack Ma Stars at Kyiv International Economic Forum Chinese tech icon and Alibaba Group founder Jack Ma was the headliner at this year’s Kyiv International Economic Forum (KIEF), which took place in November at the Parkovy by DBI business and convention center in the Ukrainian capital. During his keynote address, the Chinese billionaire identified Ukraine’s new generation of young political leaders as a source of optimism. Looking ahead, he advised the country to focus on improving logistics, internet access, and electronic payment technologies, while also fostering a broader climate of entrepreneurial innovation. Ma was one of over 100 speakers at this year’s KIEF, which ran for two days and featured 22 panel discussions focusing on Ukraine’s economic development in a rapidly changing global business climate. KIEF is the initiative of Ukrainian entrepreneur and UFuture founder Vasyl Khmelnytsky. In recent years, it has emerged as one of the highlights on Ukraine’s increasingly crowded annual forum calendar.

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networking events

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Celebrating 25 Years of the Western NIS Enterprise Fund Friends, partners and colleagues of the Western NIS Enterprise Fund (WNISEF) gathered at Kyiv’s Hilton Hotel in November to join the celebrations at the Fund’s 25th Anniversary Reception. Since its establishment in 1994, WNISEF has made a significant impact to the economic development of both Ukraine and Moldova. This has included a wide range of equity and debt investments that have unlocked USD 1.85 billion of capital. 66

Another key WNISEF achievement has been the creation of Horizon Capital, which manages three private funds as well as a WNISEF investment portfolio with USD 850 million in assets, and has invested nearly USD 700 million in about 150 companies that employ over 56,000 people. WNISEF has also been responsible for establishing the Legacy Program, which has undertaken 161 unique social projects since 2015 and transformed the lives of millions of people in Ukraine and Moldova.


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Ukraine’s Growing Turkish Community Marks Republic Day in Kyiv Turkish Ambassador to Ukraine Yagmur Ahmet Guldere and spouse Seda Guldere welcomed guests to Kyiv’s Hilton Hotel at the end of October for a reception to mark the 96th anniversary of the foundation of the Republic of Turkey. Hundreds of Turkish and foreign guests including Ukrainian officials, diplomats, members of the international business community, media representatives, and leaders of the Crimean Tatar, Gagauz and Meskhetian communities attended the annual Republic Day event. 68

Black Sea neighbor Turkey is one of Ukraine’s key economic partners, with trade between the two countries reaching USD 4 billion in 2018. Talks on the establishment of a bilateral free trade agreement are now in their final stages, with the next round of negotiations set to take place in January 2020. Turkish and Ukrainian leaders have expressed optimism that a free trade deal could help drive trade volumes to beyond USD 10 billion per year.


networking events

Polish Cinema Days in Ukraine Kino connoisseurs and fans of Polish culture flocked to Zhovten Cinema in Kyiv’s riverside Podil district in October 2019 for the official opening of this year’s Polish Cinema Days. Currently in its 14th year, this film festival traditionally features a selection of the most interesting and acclaimed works of Polish cinema from two previous years. This year’s festival began with a screening of WWII drama “The Messenger”. The movie’s male lead Phillipe Tlokinski provided celebrity sparkle at the grand opening in Kyiv, with the Polish movie star greeting guests alongside Polish Ambassador Bartosz Cichocki and Polish Institute Kyiv Director Bartosz Musialowicz. This year’s festival program featured five awardwinning Polish films and included a series of screenings in five different Ukrainian cities (Kyiv, Odesa, Vinnytsia, Kharkiv, and Lutsk).

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Asters Art Exhibition Highlights Ukraine’s Statehood Struggle Asters law firm hosted a reception together with the U.S.-Ukraine Business Council (USUBC) in November to mark the opening of the latest and perhaps most ambitious exhibition in the long-running ArtAsters project, which is currently in its tenth year. Entitled “Ukraine’s fight for freedom, independence and culture through the eyes of Ukrainian artists,” the exhibition featured over 100 original artworks by more than 40 Ukrainian artists. This eclectic collection was united by a shared desire to reflect Ukraine’s experience at the epicenter of twentieth century totalitarianism and capture the es70

sence of the country’s long struggle for statehood. In his welcoming address, USUBC President Morgan Williams noted the historical significance of the exhibition at a time when issues of Ukrainian national identity are once again in the spotlight. “Many of these artworks have been hidden in personal art studios for years and are now being shown publicly for the first time,” he commented. “These artworks feature a variety of very strong, dramatic and emotional images that show the terror, persecution and repression suffered by Ukrainians in their fight for freedom, independence, and identity.”


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International Networking at Kyiv’s Canadian Club An international crowd gathered for big fun at the big bar as social community The Big Meet held its latest networking evening at the recently renovated Canadian Club in downtown Kyiv in November. This spacious venue, located on the Ukrainian Capital’s 72

Lesya Ukrainka Boulevard, proved a big hit among guests including more than one hundred expats and business professionals. The next event will take place on 6 December at Kyiv’s GOL’DAbar (12 Shota Rustaveli Street).


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and finally

Explore Ukraine at Kyiv Central Railway Station

How much do you really know about Ukraine? A new and highly original exhibition is currently running at Kyiv’s Central Railway Station that promises to take visitors on a journey through Ukraine past and present. The Ukraine WOW initiative is a multimedia exhibition featuring a range of innovative and interactive displays covering everything from the first silver hryvnias of the Kyiv Rus era to the groundbreaking avant-garde art of Kyiv-born Kazimir Malevich. Instagram-friendly highlights include a giant replica of the head from Kyiv’s iconic Motherland monument. The venue hosting the Ukraine WOW show

is a recently renovated exhibition space occupying a former luggage storage facility close to platform 14 at the Ukrainian capital’s main rail hub, alongside the departure point for the Boryspil Express train service. The venue has been unused for the past decade, but has undergone a transformation to become a 3000 square meter space suitable for exhibitions, conferences and other largescale gatherings. The exhibition is part of ongoing efforts to promote brand Ukraine. Since the 2014 Revolution of Dignity, the Ukrainian authorities and various non-government groups have engaged in projects aiming to foster a stron-

ger sense of national identity while telling Ukraine’s story to domestic and international audiences alike. At a time when Ukraine finds itself in the global headlines as a reluctant pawn in the ongoing Trump impeachment saga, this is a timely attempt to remind the world that there is much more to Europe’s biggest country than the fight against corruption and the struggle with Putin’s Russia.

Ukraine WOW exhibition Kyiv Central Railway Station Daily from 11:00 to 20:00 Runs until 29 December

Letters to the editor: editor@bunews.com.ua Advertising inquiries: +38-067-4032762 Business Ukraine magazine is distributed every month free of charge at a wide range of leading business centres, embassies, international organizations, hotels and restaurants throughout Kyiv. Registration: KV 15006-3978PR Published by: Open Borders Media Director: Susanna Dickinson

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No reproduction, use or adaptation of contents, logos, titles or designs is permitted in any manner without the prior written consent of the publisher. The opinions expressed by individual authors and contributors each month in Business Ukraine magazine do not necessarily reflect the position of the publishers. The publishers of Business Ukraine do not accept legal responsibility for the goods and services advertised within the publication.

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Business Ukraine 08/2019  

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