Business Ukraine 03/2019

Issue 03/2019

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BUSINESS UKRAINE 03/2019: Lithuania is a post-Soviet success story that offers considerable inspiration for Ukraine and represents a potential business bridge for Ukrainian companies looking to expand their horizons to the EU and beyond. This month we focus on Lithuanian-Ukrainian ties and offer a city guide to Vilnius, Kyiv’s closest EU capital.

President Zelenskiy’s Priorities: Rule of Law, Rule of Law, Rule of Law Ukrainians have considerable experience of the hope that comes with new beginnings and the disillusionment that often follows. The country has lived through repeated false dawns over the past three decades, only for the same old bad habits to come creeping back out of the shadows and reassert their debilitating grip on the nation. The arrival of independence in 1991 was the first watershed moment, but this apparently historic break with the past was actually a deeply flawed compromise that made virtually no attempt to dislodge the vast state apparatus inherited from the Soviet era. Unsurprisingly, the rebranding of career communists as Ukrainian democrats did little to improve living standards or move the country in the right direction.

Frustration with this state of affairs eventually led to the 2004 Orange Revolution, but once again, initial euphoria soon gave way to cynicism as it become clear the country’s underlying culture of institutional corruption remained firmly in place. Ten years later, the trauma of the Euromaidan Revolution marked another fresh start. While President Poroshenko made a considerable contribution to Ukraine’s nation-building progress, he ultimately failed to alter the fundamentals of Ukrainian corruption, leading to his landslide defeat in last month’s presidential election.

Ukrainians now find themselves once again in what is an all-too-familiar position, braced for the dawn of a new Ukraine and awaiting an untainted leader who promises to transform a country that has proven itself uniquely resistant to reform. Will Volodymyr Zelenskiy fare any better than those who failed before him? His outsider status certainly gives cause for optimism, albeit of the heavily guarded variety. Indeed, it says much about the scale of public contempt for the Ukrainian political classes that Zelenskiy’s complete lack of experience is also his strongest recommendation. Nevertheless, the former comic’s novice status raises obvious concerns over his ability to dismantle the deeply entrenched and carefully calibrated dys-

function that lies at the heart of modern Ukraine’s malaise.

As he contemplates the herculean task before him, what should the new president’s priorities be? While there are no quick fixes to problems on the scale of Ukraine’s, wholesale reform of the Ukrainian judiciary would allow Zelenskiy to address one of the central pillars supporting the entire corrupt edifice. At present, Ukraine’s law courts are among the only institutions to command lower levels of public trust than the country’s politicians. This is no accident. Ukrainian judges routinely deliver verdicts that appear designed to mock the very notion of justice, while entire courts stand accused of serving the personal interests of powerful individuals. Until Ukraine addresses this problem, all other attempts at reform are essentially futile. After all, what is the use of a reformed police force or shiny new anti-corruption agencies if their investigations never actually lead to convictions? Why should international investors consider Ukraine when the country’s courts continue to defend a culture of impunity?

Zelenskiy’s election win was a powerful demonstration of Ukraine’s democratic credentials, but the values defining a modern democracy go far beyond the ability to stage a free and fair vote. None of these values is as elementary as the rule of law, which provides the accountability underpinning all other rights and responsibilities. This is Ukraine’s most urgent need. A chronic lack of justice has kept the country trapped in a fruitless post-Soviet cycle of Maidan uprisings, empty promises and false starts. If Zelenskiy wants to avoid becoming the latest in a long line of underwhelming Ukrainian messiahs, he must seek to build his presidency on the firm foundations of genuine judicial reform.

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

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lithuania in ukraine

LITHUANIA IN UKRAINE

Deep historical ties and geographical closeness make Lithuania and Ukraine natural partners, says Lithuanian Ambassador to Ukraine Marius Janukonis

About the interviewee: Marius Janukonis is the Lithuanian Ambassador to Ukraine Lithuania recently celebrated fifteen years as an EU member state. What can Ukraine learn from Lithuania’s EU integration experience, both prior to ascension in 2004 and since?

The past fifteen years of EU membership have significantly changed Lithuania.

Along with economic stability, growing foreign and domestic investment, and the development of Lithuania’s national infrastructure, EU membership has also strengthened the self-confidence of Lithuanians. I think we can be quite sure in saying that it has led to the irreversible embrace of European values 10

and embedded Lithuania within a wider integrated Europe. Today, Lithuanians rank among the biggest euro-optimists within the European Union. Overall support for EU membership in Lithuania is currently at 68 percent, while 88 percent of the Lithuanian population believes EU membership has been beneficial for the country. There are several lessons from Lithuania’s experience that could potentially be useful for Ukraine. Perhaps the most important factor underpinning Lithuania’s integration was the stable and unanimous political consensus since the 1990s regarding future EU membership among all of the : www.bunews.com.ua

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: country’s major parliamentary political parties. Lithuania’s experience may

also provide Ukraine with a clearer understanding that EU standards, legislation and reforms are beneficial for the development of the country itself, rather than merely being something required by Brussels. Another important lesson we learned both before and after EU accession is that negotiating with EU institutions on almost every issue is possible in order to defend national interests.

I would advise our Ukrainian partners to be as active as possible in the corridors of Brussels in order to better understand how the EU works, while also networking and negotiating to find out what solutions might suit Ukraine best.

Since 2014, Lithuania has been one of the most vocal supporters of Ukraine in its struggle against Russian aggression. How challenging is it to maintain EU unity on this issue among fellow EU member states that are not on the frontlines and have no historical experience of Russian imperialism?

Ukraine is an extremely important country for the European Union. It is the EU’s eastern neighbor, and at the same time, it is geographically and historically a long-term partner of Lithuania. The uniqueness of this partnership lies in the fact that we share a common history stretching back to the fourteenth century, and yet have never had any bilateral issues that could overshadow our relations. There is a deep understanding in my country that the security and stability of Ukraine is vital for Lithuania and for Europe as a whole. Based on this understanding, Lithuania has been among the most vocal supporters of Ukrainian sovereignty and territorial integrity since the start of Russian aggression in 2014. Alongside political support, there is also a strong sense of solidarity towards Ukraine throughout Lithuanian society.

The EU is a unique bloc of 28 countries with a range of different interests and different views on international issues. Finding consensus on these issues can sometimes be a challenge. However, over the years, the EU has elaborated a decision-making mechanism on foreign policy issues that takes into account all positions, especially when it comes to fundamental values and human rights.

Russia’s brutal violation of international law and use of military force to illegally annex Crimea and start the ongoing conflict in eastern Ukraine have produced

a united response, with all EU countries condemning these unlawful acts and introducing sanctions against Russia, which are prolonged every 6 months.

We should acknowledge that some of the member states and their representatives express various points of view regarding the future of these sanctions, but the EU as a whole has been able to maintain its firm position so far. This stance demonstrates the strength of the European Union and its commitment to the fundamental values and principles of international law.

Both geographically and culturally, Lithuania is in many ways the closest EU member state to Ukraine. What business opportunities does this create for Ukrainian companies and investors?

Lithuanian businesses have always shown considerable interest in the potential of the Ukrainian market, including both trade and investment opportunities. The last decade has also seen growing interest from Ukrainian companies looking to enter the Lithuanian market. More and more Ukrainians are discovering Lithuania as a stable country with a business-friendly environment and well-developed infrastructure that is an integral part of the 500 million EU market. This increasingly attracts Ukrainians who looking to export to the EU or to set up production facilities within the EU. Current and planned investments from Ukraine include food processing, chemical and pharmaceutical production facilities in various regions of Lithuania. A number of Ukrainian companies are also interested in Lithuania’s Free Economic Zones. Those in Kaunas and Klaipeda has recently seen an inflow of foreign green field investment from German and US companies. It is worth noting that Lithuania is among the fastgrowing regional leaders for international startups and fintech companies. We are extremely happy to see an increase in the number of Ukrainian startups among them. I believe this is the future of our business relationship.

Along with Ukraine and many other countries in the region, Lithuania currently faces demographic challenges due to high levels of labor migration.

How is Lithuania approaching this issue?

Thanks to membership of the EU, Lithuanian citizens enjoy free movement in- :

Lithuanian Ambassador to Ukraine Marius Janukonis (far right) and colleagues meet with Ukraine’s President-elect Volodymyr Zelenskiy in Kyiv

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Modus Energy knows how to bring green energy to Europe In recent years, the renewable energy sector in Central and Easter Europe has experienced rapid growth. Thanks to policy shifts and green strategy implementation, countries such as Poland, Ukraine and Belarus saw their renewable energy capabilities rise significantly. But policy is not enough – competence, expertise and experience are needed to make things work. That is where Modus Energy – the region’s leading renewable energy enterprise – comes in to the picture.

Over the last 10 years, Modus Energy has grown into one of the most advanced renewable energy companies in Central and Eastern Europe with a wide profile of biogas and solar projects. Originally based in Lithuania, Modus Energy has since expanded internationally. Today, the company’s operational green portfolio covers over 112 MW of power and 15 MW of heat capacity. Modus Energy has invested more than 100 million euros into biogas and solar plants all over the CEE region. And it does not intend to stop.

Recently, Modus Energy has announced the investment of 30 million euros in a new solar power park in Ukraine. This new 35 MW solar power facility is set to generate 45,000 MWh of energy and is expected to be completed in the second half of 2019. In a separate Ukraine project, Modus Energy will install an additional 14 MW of solar plant capacity by the end of 2019.

“Our focus right now is developing the markets of Ukraine and Poland, as well as expanding our capabilities in Belarus, the Baltics and Southern Europe. Ukraine is especially favorable for renewable energy projects as it is a very vast country with plenty of room for large-scale projects.

Government efforts to diversify the country’s energy mix and to push towards more sustainable solutions are also huge advantage for us, as is the new transparent system of public auctions for acquiring projects,” says Ruslanas Sklepovičius, chairman of Modus Energy.

The dynamic agricultural sector in Ukraine also provides good opportunities for Biogas energy development. Modus Energy has already demonstrated its abilities in this area in other markets – Belarus and Lithuania. In these countries, biogas plants installed by Modus Energy not only help to produce clean energy but also reduce biodegradable waste.

Modus Energy currently manages 14 agricultural biogas plants with an overall capacity of 15 MW over 2 countries.

In Lithuania, the company recently build a new state-of-theart processing line for hazardous biodegradable materials, providing countrywide ecological benefits. By 2020, Modus Energy is planning to have eight additional biogas energy facilities in Belarus with overall capacity of 10 MW. Four of these biogas plants are already in operation. These projects are in cooperation with the European Bank for Reconstruction and Development (EBRD).

“Our experience and expertise give us a lot of opportunities for development of new renewable energy projects as well as purchase of ready-to-build projects. In addition to this, we may be considering the acquisition and refurbishment of existing biogas plants bringing new perspective to these projects in Ukraine,” says Sklepovičius.

It is not surprising that with such experience, Modus Energy is planning to apply this renewable energy model in other markets of the CEE region including Poland. The company has already made an impact on this country’s energy sector with its solar power projects. Solar plants installed by Modus Energy in Poland account for more than 50MW of the country’s overall solar power capabilities.

As transition to renewable energy becomes more urgent, the competencies and experience of companies like Modus Energy will be vital to save the planet and to enter a new and more sustainable era. Meanwhile there remains plenty of work to be done.

lithuania in ukraine

: cluding freedom of employment within the European Union on equal terms

with other EU citizens. Due to this single market, and for a range of economic factors, a significant number of Lithuanian citizens have opted to study and work in other EU member countries. We estimate that there are more than 200,000 Lithuanians currently living elsewhere in the EU. After more than a decade of net outflows, this year saw a positive migration balance for the first time since Lithuania joined the EU in 2004. Sustainable economic growth since 2010 and new job creation are now attracting an increasing number of our citizens back home, while also stimulating labour immigration, mostly from neighboring countries such as Ukraine and Belarus. Ukrainians are currently the largest group of foreign nationals temporarily working in Lithuania, accounting for over 60 percent of foreigners in the Lithuanian labour market.

Their skills and contribution to the Lithuanian economy are positively valued.

Since 1991, national identity issues and the politics of memory have often been sources of contention and conflict within Ukrainian society. What is the Lithuanian approach to the country’s Soviet inheritance, and what role does this play in shaping contemporary Lithuanian national identity?

After regaining independence in 1990, Lithuania has devoted significant efforts to revealing the historical truth of the country’s past and objectively

evaluating historic events. During the 20th century, Europe, including Lithuania, survived two totalitarian regimes, the Nazis and Soviet Communism.

Evaluating their crimes and establishing objective facts about the legacy of these totalitarian regimes became one of the priorities of Lithuanian national historical memory. To this end, we established an international commission and invited renowned scholars from the US, the UK, Israel, and Russia to join their Lithuanian colleagues and begin the process of evaluating the crimes of the past at the international level. Lithuania suffered enormous losses during the Soviet occupation. Almost 200,000 Lithuanians were deported to Siberia, Kazakhstan and other parts of the then-USSR. Thousands of resistance fighters, who remained active after 1945, suffered torture and death. We cannot ignore this important part of our modern history, and our efforts to address the past enjoy the support of an overwhelming majority of Lithuanian society. The Soviet occupation period has become an integral part of our education system and the subject of a nationwide public discussion, with the participation of national and international experts. In my opinion, there remains room for such a discussion in Ukraine. Dealing with the past requires courage from politicians to accept the truth, regardless how unpleasant it might be.

This is a long but essential learning process, which Lithuania was able to start from the very beginning.

“There is a deep understanding in my country that the security and stability of Ukraine is vital for Lithuania and for Europe as a whole”

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Lithuania sees role as gateway For Ukraine’s global expansion EU market access and favorable investment climate make Lithuania an ideal business bridge In September 2018, Lviv-based Ukrainian pet food market leader Kormotech announced the construction of a new production facility at the Kedainiai Free Economic Zone in Lithuania. The Ukrainian company’s new Lithuanian plant, which is set to begin operations later this year, will create 70 workplaces and involves an estimated EUR 6 million investment. Kormotech already exports to 16 countries and plans to use this Lithuanian expansion as seen as a stepping stone towards further global export growth.

Kormotech’s decision to expand in Lithuania is a sign of the times reflecting the growing Ukrainian export emphasis on EU markets. With more and more Ukrainian companies seeking to broaden their horizons and establish a presence within the European Union, Business Ukraine magazine spoke to Mantas Katinas of Invest Lithuania about the Baltic nation’s competitive advantages as a potential partner for Ukrainian business.

Which sectors of the Lithuanian economy are currently attracting the most international attention?

The Global Business Services sector is one of Lithuania’s most pronounced success stories.

From 2010 to 2017 alone, the sector increased three-fold, with the number of dedicated centres now nearing 80. There are plenty of big names involved. Vilnius is home to Western Union’s most significant operation outside of their headquarters, Booking.com recently opened a sizeable operation, and early 2019 saw the arrival of Moody’s. In the manufacturing sector, 2017 was definitely a tipping point for us, with the arrival of large production facilities for automotive suppliers Continental and Hella, both of whom have set up in the Kaunas Free Economic Zone.

Meanwhile, Fintech remains

the calling card of Lithuania. For the last five years, the Bank of Lithuania has been in the driving seat when it comes to building a world-class Fintech ecosystem. A future-oriented strategy has allowed it to become one of the most proFintech regulators in Europe. With the fastest licensing in the EU, direct access to the SEPA Market, and e-licensing which allows companies to register from anywhere in the world, Lithuania is an ideal destination for Fintech companies.

What’s more, with a deep and growing talent pool (currently over 31,000 IT professionals in Lithuania), and an ICT infrastructure for business that ranks fourth in the world, there is plenty of room for Fintech companies to grow and scale their operations. That’s why there are now over 170 Fintech companies based in Lithuania, and the number continues to grow.

What do you regard as Lithuania’s key advantages compared to other EU member states as a bridge for Ukrainian businesses to the wider world?

Located within the EU, Lithuania is a convenient bridge between East and West and an ideal gateway nation. It can offer companies direct access to clients in the CEE, CIS and Western Europe. Moreover, with average flight times of two to three hours to most European destinations from international airports in both Kaunas and Vilnius, access is excellent.

The country also ranks first in the CEE for its roads, and offers direct rail links to Russia, Belarus, Latvia, Poland, Germany, Ukraine and Asia including China. This rail connectivity, meanwhile, is set to expand following the opening of the Rail Baltica service, which will run from Berlin to Helsinki via Kaunas. Then there is the ice-free Sea Port of Klaipeda, which is the largest port in the Baltic states, handling up to 65 million tons of cargo each year. However, the connectivity the country offers is not limited to rail, road, air, and sea. As a global leader in internet speed and 4G coverage, the country can provide comprehensive digital reach that is fast, reliable and affordable.

What can Lithuania offer to individual Ukrainian investors?

Lithuania‘s advantages are not limited to providing foreign countries a strategic bridge to wider European markets. Lithuania itself is a globally ranked player. For example, the country is currently 14th out of 190 countries in the World Bank’s annual Ease of Doing Business survey, 38th out of 180 countries in the global corruption perception index, and 18th out of 190 countries in the paying taxes ranking. There are numerous other indexes where Lithuania ranks highly. Furthermore, Lithuania offers a well-qualified pool of talent. Over 58% of the population have higher education (first in the EU), 85% of young professionals are proficient in English, and 63% of Lithuanians speak Russian.

Not only does Lithuania have the talent and the infrastructure needed, it also has a cost-competitive edge. If you are looking at setting up an R&D team, Lithuania offers one of the best quality-to-cost ratios in Europe. And when it comes to lab space and office premises, you will have no problem finding what you require for a competitive price.

What does the example of Kormotech tell us about the opportunities for Ukrainian businesses in Lithuania?

Kormotech’s decision to establish a new production facility in Lithuania is an excellent example of the opportunities the country can offer to Ukrainian companies. First of all, this means Lithuania’s strategic location. Being in the European Union, it provides easy access to more than 500 customers and millions of SMEs. Furthermore, Lithuania hosts seven Free Economic Zones which provide attractive business conditions such as tax breaks for the first 10 years of operation and a 50% corporate tax reduction for the following six years. Another important aspect of this appeal is the relative ease of receiving construction permits. Lithuania is ranked seventh globally when it comes to dealing with construction permits, according research conducted by the World Bank. The ability to start operations as soon as possible makes Lithuania a particularly attractive location for manufacturers like Ukraine’s Kormotech.

About the interviewee: Mantas Katinas is Managing Director of Invest Lithuania

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

Vilnius real estate executive sees opportunities in Kyiv DeVision Group CEO Genady Zhukov has been working in the Ukrainian capital for more than a decade

About the interviewee: Genady Zhukov is the CEO of DeVision Group Lithuanian Genady Zhukov is CEO at DeVision Group, a large holding company for more than forty different entities that represents one of the largest Lithuanian investments into the Ukrainian economy. DeVision Group is active throughout the Kyiv real estate industry in the commercial, retail, residential and hospitality sectors. High-profile investments include the Ramada Encore Kyiv hotel and the nearby Atmosphera and Domosphera retail and entertainment complexes, along with the Seven residential complex in the Ukrainian capital.

Mr. Zhukov first arrived in Ukraine in 2008 during the wake of the global credit crunch crisis at the invitation of DeVsion Group owner Dmitriy Buriak. Charged with overseeing the Group’s response to the aftershocks of the global economic meltdown, Mr. Zhukov says he initially saw the appointment as a relatively short-term engagement. However, like many members of Ukraine’s international business community, he found himself increasingly drawn to the 18

country’s dynamic business environment and vast untapped potential. “I originally came to Ukraine as a crisis manager with plans to stay for a couple of years and stabilize the situation, but the market was so interesting that I eventually decided to stay,” he recalls.

The DeVision Group story in Ukraine began with the USD 900 million acquisition of First Ukrainian Development in 2007, which included a large land portfolio for future development in Kyiv and the surrounding Kyiv Oblast region.

The Group has since invested an additional USD 350 million, with a similar amount already earmarked for further investments in the coming years. Present focuses include a number of green field projects in and around the Ukrainian capital, with Mr. Zhukov himself stating that he currently anticipates continuing his role in Ukraine for the next five to ten years.

The period of prolonged economic, political and geopolitical turbulence in Ukraine since 2014 has been a particularly challenging time

for the Group. This has included the temporary shelving of ambitious plans for a major new Kyiv arena capable of hosting international-level sports events and music concerts, with expectations that the project will be reactivated in the coming few years subject to improvements in market conditions. Mr. Zhukov speaks about five years of lost development and notes increasing difficulties resulting from bureaucratic obstacles in the construction sphere and reduced spending power in the retail sector. He predicts that 2019 will not see any dramatic transformations, but expresses optimism that the business climate will improve once the current political cycle is over following October’s parliamentary election. “Many people are waiting until the start of 2020 when the outcome of this year’s elections will be clear. The overall forecast for Ukraine remains very positive, but as with any individual business, we need to be sure the right people are managing the country.”

With his hometown of Vilnius just a one-hour flight away from his business base in Kyiv, Mr. Zhukov has engaged in a weekly commute throughout the past decade. Each weekend he travels north to the Lithuanian capital, before returning to spend the working week in Ukraine. This places him among the ranks of the country’s most frequent fliers and makes him a familiar face to Ukraine’s airport officials. It also means he often runs into fellow Lithuanians who are also living and working in the Ukrainian capital. “The Lithuanian business community in Ukraine is a bit like a big family,” he shares. “I see many of the same people flying to and from Vilnius week after week, and especially during the various annual holiday seasons.”

What do family, friends and colleagues back in Vilnius make of his extended Ukrainian residency? Mr. Zhukov says coverage of the ongoing conflict in eastern Ukraine has given many an exaggerated impression of the security implications for life in Kyiv itself, but argues that the attractions are also apparent. “Compared to Lithuania, this is a much larger and more challenging market,” he reflects. “Yes, corruption is an issue, but corruption is a factor to some extent virtually everywhere in the world.

Here in Ukraine, this must be balanced by the fact that the opportunities are also greater.”

lithuania in ukraine

DeVision Group’s Ramada Encore Kyiv hotel www.bunews.com.ua

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promotion

Skycop helps Ukrainian travelers claim compensation for flight disruption

Skycop is a Lithuania-based international travel service that offers airline passengers the chance to claim compensation against delayed, cancelled or overbooked flights. Launched in 2017 with an eye on the booming global air travel market, Skycop has seen its European claim pool increase from EUR 3 million to EUR 26 million within the past two years. The company has already assisted more than 150,000 passengers from 193 countries to claim EUR 60 million in compensation, and has recently entered the Ukrainian market.

What services will Skycop be offering in Ukraine?

We are happy to confirm that Skycop services are already available in Ukraine. We will help Ukrainian passengers to receive compensation of up to EUR 600 for flight disruption in line with the terms of the Air Code of Ukraine (19 May 2011, No 3393VI). We are looking forward to seeing what kind of response we receive from Ukrainian travelers and are prepared to commit as many resources as necessary to meet the demand we encounter in the expanding Ukrainian market.

Who can apply to Skycop and how do they do it?

Anyone whose flight was delayed, subject to cancellation less than 14 days prior to their scheduled departure date, or who was denied boarding due to overbooking within the last three years can reach out to Skycop by filling in a simple claim form on our online platform.

Passengers simply need to fill in all the details and check if the flight in question is eligible for compensation. Once submitted, the form goes to our team who then begin working on it.

What attracted you to the Ukrainian aviation market?

After researching a number of different markets, we noticed that the Ukrainian market has high levels of demand for the services we pro-

vide coupled with very low supply. We identified a clear need for our services and took upon ourselves to educate Ukrainian passengers about their rights while helping them to navigate the claims process.

Based on your experience in other aviation markets, what are your expectations for the development of the fast-expanding Ukrainian aviation market?

We see great potential in the Ukrainian aviation market, and are currently basing our plans on the expectation of continued rapid growth. Our goal is to establish ourselves as the number one choice among Ukrainian passengers in the air travel compensation claims market.

With more people than ever all over the world flying and budget airlines making it simpler to fly, what are the key global trends regarding airline reliability?

The number of people flying grows every year. Around 4.3 billion passengers flew on scheduled flights worldwide in 2018, and this number is set to grow to 4.5 billion during the current year. With such high numbers of people flying, it is only natural that flight disruptions occur. According to global estimates, around 1 percent of all flights are currently subject to delay or cancellation. Airlines are experiencing pilot shortages, while industrial action also has an impact on disruptions. This creates challenges for the aviation industry, but at the same time, demand for flights is booming. The need for companies like Skycop is also growing in parallel to the rising number of passengers who experience disruptions. Now is a great time for tourism as expanding air travel opportunities have shrunk the world, but at the same time, travelers must be ready for potential disruption and should know their rights as passengers.

Skycop CEO Lukas Rasciauskas

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lithuania in ukraine

Lithuanian support for Ukrainian security

Lithuania has been among most active supporters of Ukraine its struggle against Russian aggression Security issues have been at the heart of the relationship between Lithuania and Ukraine for centuries. Once both part of the powerful medieval Grand Duchy of Lithuania, the two nations returned to the international stage in the early twentieth century as they fought parallel struggles for the right to independent statehood amid the wreckage of the Russian Empire. In recent years, Lithuania has emerged as a prominent supporter of Ukraine as the country has once again found itself fighting for survival following the onset of Russian military aggression in 2014.

Security cooperation between Lithuania and Ukraine in the modern era dates back to 1994.

Both countries joined NATO’s Partnership for Peace (PfP) program in the same year, with Lithuania going on to secure full NATO membership while Ukraine acquired partner status with the military alliance. Security ties between the two countries remained strong over the subsequent decades, bolstered by expert exchanges and joint participation in military exercises. The most important example of this cooperation was the participation of Ukrainian troops within the Lithuanian-led Ghor Provincial Reconstruction Team in the NATO-led operation in Afghanistan.

The regional security situation dramatically deteriorated at the beginning of 2014 when the Russian Federation violated Ukraine’s sovereignty and territorial integrity through the illegal and illegitimate “annexation” of Crimea, which was then followed by the Russian military intervention and occupation of Ukraine’s eastern border regions. Lithuania was among the first countries to respond to Ukraine’s calls for help and assistance. Food and medical supplies arrived in Ukraine from Lithuania in late summer 2014. At around the same time, Lithuania welcomed the first wounded Ukrainian soldiers for treatment and rehabilitation. To date, over 250 Ukrainians have received treatment in Lithuania.

Lithuanian support for Ukraine gained pace in 2015. The Baltic nation was the first country to send lethal defensive armaments to Ukraine

Baltic solidarity: a cargo of humanitarian aid from Lithuania is unloaded in Kyiv in 2014 and has now delivered military aid worth more than EUR 5.5 million. Cooperation in the development of Ukraine’s Special Operations Forces also began with two resident advisors from Lithuania focusing on training, mentoring, and capability building. In the same year, Lithuanian instructors joined the US-led Joint Multinational Training Group-Ukraine and the Baltic state became a member of the Multinational Joint Commission on Defense Reform and Security Cooperation with Ukraine along with the US, the UK and Canada. Lithuania has engaged actively in Ukraine’s defence reform efforts with two resident advisers on sergeant corps development and strategic communication, as well as a retired two-star Lithuanian general serving on the country’s Defence Reform Advisory Board at the strategic level.

Meanwhile, the Lithuanian parliament granted a mandate to send a military training mission to Ukraine featuring up to 60 instructors. This broad-based mission, undertaken at Ukraine’s request, is demand-driven and covers everything from sniper training to military police training. An additional resident adviser focusing on Professional Military Education (PME) arrived in Ukraine in early 2019. Overall, Lithuanian support for Ukraine’s defence sector reform is guided by the principle of strengthening systemic changes that will bring the Ukrainian

military closer to Euro-Atlantic standards.

Lithuania’s diplomatic activity in the defence sphere has also significantly expanded since 2014, with the Kyiv Embassy now featuring three deputies to the Defence Attaché and a civilian defence adviser. For four consecutive years (2015-2018), the Lithuanian Embassy performed the function of NATO Contact Point Embassy for Ukraine. This involved a range of activities including communications outreach to improve public understanding of NATO among Ukrainian audiences.

Perhaps the most striking example of Lithuanian-Ukrainian defence cooperation is the joint Lithuanian-Polish-Ukrainian Brigade (LITPOLUKRBRIG), which came into being in September 2014 and became operational in 2015 from its headquarters in Lublin, Poland, where officers of the three countries serve together.

A military unit with affiliated battalions from each country, LITPOLUKRBRIG has a mandate for international peacekeeping operations and serves as a practical tool allowing Ukrainian military personnel to gain experience of working on a day-to-day basis according to NATO procedures. Symbolically, the brigade is named after Kostiantyn Ostrogski, Grand Hetman of the Grand Duchy of Lithuania, who is most famous for his victory over Muscovy at the Battle of Orsha in 1514.

About the author: Andrius Vaivada is a Defence Advisor at the Lithuanian Embassy in Ukraine

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vilnius city guide

VILNIUS

CITY GUIDE

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Kyiv’s closest EU capital

The Lithuanian capital offers an intriguing mix of timeless European charm and smart city swagger Vilnius is a veritable metropolis by Baltic standards, yet it has managed to retain the charm of a fairytale hamlet. The central districts of the Lithuanian capital are a maze of cozy cobbled lanes and enticing alleys lined with cafes, restaurants and boutiques, lending the city an air of intimacy quite at odds with its reputation as the economic engine of the entire region. Behind this quaint exterior is a far more streetwise Vilnius that is both growing in size and getting younger by the year as twenty-something Lithuanians (and many others) are drawn in by one of the most dynamic innovation economies in Europe and a social scene awash with painfully hip Nordic minimalism. This curious combination of gentrified past and dazzling future makes Vilnius a fascinating city break destination.

Vilnius is certainly conveniently located for Kyiv travelers. Unlike fellow Baltic capitals Riga and Tallinn, Lithuania’s largest city stands hundreds of kilometers away from the Baltic Sea coastline and within a relative stone’s throw of the border with Belarus. Although there is no shared border connecting Ukraine and Lithuania, Vilnius is actually the closest EU capital to Kyiv, lying just 590km to the northwest. Flights to Vilnius from Kyiv take around one hour, or less time than some residents of the Ukrainian capital spend commuting each day.

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There are plenty of places to stay in the Lithuanian capital, with a host of international brands including the five-star Kempinski Grand Hotel on offer.

The most original accommodation is surely the aristocratic Hotel PACAI in the heart of the old town. This former mansion was once the most magnificent in the Grand Duchy of Lithuania and underwent five years of painstaking renovations prior to opening its doors to the discerning public in May 2018. It offers uniquely decorated rooms, many of which feature original frescoes and other reminders of its stately past. Previous guests include a certain Napoleon Bonaparte, who addressed the citizens of early nineteenth century Vilnius from the balcony of what is today the hotel’s presidential suite.

The historic center of Vilnius is easy to explore on foot. It is relatively compact without any inconvenient inclines, making it an ideal strolling city. A small number of broad boulevards stand as testament to the ultimately futile efforts of Soviet town planners to remodel the city, but the overriding impression is of a mazy layout that evolved organically over many centuries. Small archways lead into secluded courtyards and some streets are so narrow that they struggle to cope with even mild pedestrian congestion. The overall architectural vibe is eclectic with a strong baroque flavor, and visitors from Ukraine will likely find it reminiscent of Lviv. Much like the pearl of western Ukraine, the streets of Vilnius are dotted with engaging little flourishes ranging from funky street art to ornate balconies and ancient figurines.

A wealth of churches adorn the city, reflecting the relatively vibrant religious life of what remains a staunchly Catholic nation. Lithuania was famously one of the last places in Europe to abandon paganism and convert to Christianity. Driven by dynastic interests, the country’s rulers subsequently adopted the Catholic faith of neighboring Poland. Religion continues to play a far more prominent role in everyday Lithuanian life than elsewhere in the Baltic region, and tourists should take note that many of the churches they wish to explore are also active houses of worship.

Must-see Vilnius landmarks include the iconic Three Crosses Monument, which dates back to 1989. Erected on a hill offering stunning views of the old town, this monument replaced earlier crosses removed by the Soviet authorities in the 1950s that dated back to the seventeenth century. Vilnius Cathedral is easily the most commanding landmark in the city, dominating Cathedral Square and flanked by the 52-meter high Catherine Bell Tower. The red brick Gediminas Castle Tower looms up behind the square and often serves as a symbol of the city. This physically unassuming tower has a big history. It plays a central role in the foundation myth of Vilnius, featured on the Lithuanian currency before the country made the switch to the euro, and appears in numerous patriotic poems and folk songs. It was here that the Lithuanian flag was first hoisted back in 1988 as the country’s independence struggle against the Soviet Union began to gain ground during the Perestroika years.

Foodies should head to the elegant and glass-roofed Hales Market, which is well worth a visit if you would like to pick up some local delicacies and get a flavor of everyday Vilnius life. Half Soviet-style bazaar and half hipster street food hangout, this open plan market dates back to the early twentieth century and offers an interesting window on the modern transformation of the city as Lithuania has gained in swagger since the fall of the Iron Curtain and the advent of EU integration. Meanwhile, Vilnius’s modern art focus is undoubtedly the architecturally striking MO Museum, a private initiative that houses over 5000 :

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: mostly Lithuanian artworks from the twentieth century and features an engag-

ing design by the people behind the acclaimed Berlin Jewish Museum.

In common with Ukraine and the rest of Central Europe’s bloodlands, today’s Vilnius is haunted by the ghosts of the totalitarian epoch. The city suffered occupation by both Nazis and Soviets before playing a pioneering role in the wave of independence movements that ultimately brought the USSR crashing down, and the scars from this traumatic period are often lurking just below the surface. Known for centuries as the Jerusalem of the North, Vilnius is still struggling to come to terms with the destruction of its Jewish heritage during WWII. Some street names in the former Jewish districts of Vilnius old town bear the Star of David, while a handful of monuments recall prominent members of the once thriving Jewish community, but the calamity continues to weigh heavily on the city.

Nevertheless, the politics of memory plays a significantly less prominent role in Vilnius daily life than it does in Ukraine. While there is little sense of nostalgia for the Soviet past and considerable hostility towards the Kremlin’s current imperial ambitions, Russian is a common and politically inoffensive feature of street-level interaction in the city. Indeed, most Lithuanians appear far more concerned about pressing present-day issues such as the waves of migration to the EU that have seen the country’s population decline alarmingly since joining the European Union in 2004.

According to the Vilnius authorities, just over 50,000 Ukrainian tourists visited the city in 2018, representing around 5% of all foreign visitors. This figure is likely to rise during 2019 as more and more Ukrainians get into the habit of visa-free weekend city breaks to EU destinations. There is certainly much to recommend the Lithuanian capital, whether you are looking for a stylish bar scene or want to lose yourself in the laidback allure of its winding Mitteleuropa streets.

Vilnius is in many ways an inspirational place for visitors from Ukraine. A www.bunews.com.ua

vilnius city guide

“Central Vilnius is a maze of cozy cobbled lanes and enticing alleys, lending the city an air of intimacy quite at odds with its reputation as the economic engine of the entire region”

former Soviet city that has embraced its European identity in a manner many Ukrainians would love to see emulated at home, the Lithuanian capital offers a sense of the possible. Although just one hour away, it represents a leap of the imagination for Ukrainians contemplating the future direction of their own country.

EATING OUT IN VILNIUS

Bistro 18 Restaurant (18 Stikliu Street) Understated wine cellar-style eatery with hearty fare and scrumptious desserts that attracts a lively international crowd.

Grey Restaurant (1 Pilies Street)

Conveniently located close to the iconic Gediminas Castle Tower. Make sure you try the mango-passion fruit cream dessert, which comes in a miniature plant pot.

Leiciai Tavern (4 Stikliu Street)

If you are looking for pub grub and a cozy atmosphere this is the place to be. As well as a wide range of traditional Lithuanian dishes, this old-school venue also has a selection of inhouse beer brews to sample.

Ertlio Namas Restaurant (7 Sv. Jono Street) Take a voyage back in time and experience aristocratic Lithuanian cuisine through the ages at this hybrid joint offering traditional dishes with a modern twist. Service staff present each course with a detailed and entertaining backstory.

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Post-Soviet separatism with a smile

Uzupis district in Vilnius is home to the least threatening independence movement in the former USSR In today’s Ukraine, talk of separatism inevitably conjures up images of Kremlin-sponsored carnage and “little green men” from Russia taking entire regions hostage. Thankfully, the Vilnius brand of separatism has absolutely nothing in common with these nightmare visions. Indeed, the Lithuanian capital is home to what is surely one of the most tongue-in-cheek independence movements in the world. The distinctly bohemian Vilnius district of Uzupis first declared independence in the late 1990s and continues to maintain the charade of statehood, but it takes its inspiration from Montmartre rather than Moscow.

The story of Uzupis’s road to ironic independence begins in the Soviet era, when it first gained notoriety as the roughest and most rundown neighborhood in Vilnius. Cut off from the city’s old town by the Vilnia River and hemmed in by steep hills and a sprawling Soviet industrial zone, Uzupis was an isolated place of derelict buildings and abandoned apartments that served as a magnet for criminal elements, young artists and social dropouts. This unsavory reputation led to the further decline of the area, with more and more properties falling into a state of disrepair and basic utilities largely absent.

The arrival of Lithuanian independence initially did little to improve the fortunes of the neighborhood, but as the 1990s progressed, the presence of a trendy artist community and the availability of cheap housing in close proximity to the city center combined to spark renewed interest in Uzupis.

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The gradual gentrification of the area did much to soften its harder edges while allowing Uzupis to retain the renegade air of an artistic haven. This paved the way for a somewhat theatrical declaration of independence in 1997 masterminded by Lithuanian poet, musician and film director Romas Lileikis, who modestly took on the mantle of self-styled president of the fledgling state.

Today, the Republic of Uzupis has an estimated population of around 7,000, of whom 1,000 are artists. It continues to lay claim to its own flag, currency, government and anthem, but the focus of the enclave remains chaotic creativity. It is home to dozens of galleries and boasts a rich array of street art ranging from murals to installations. Notable landmarks include a series of mounted metal plates displaying the Uzupis Constitution in more than twenty languages (the Constitution’s 38 articles include “Everyone has the right to make mistakes”, “Everyone has the right to be misunderstood”, and “Everyone has the right to die, but this is not an obligation”). Perhaps the neighborhood’s most striking landmark is the Uzupis Mermaid, which nestles provocatively in the embankment on the opposite side of the Vilnia River. Created by Lithuanian sculptor Romas Vilciauskas, this enchanting mermaid serves as an iconic emblem for Uzupis. According to local lore, anyone who falls prey to the statue’s alluring charms is destined to remain forever in the neighborhood.

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Grand Dukes and Games of Thrones

Trakai Island Castle is a monument to an age when Lithuania ruled from the Baltic to the Black Sea

Located just under 20km outside Vilnius, Trakai Island Castle offers an atmospheric window into an epoch when the Grand Dukes of Lithuania held sway over vast tracts of land stretching from the Baltic Sea to the Black Sea. The only island castle in all of Eastern Europe, today’s Trakai Castle is an impressive reconstruction of the mighty fortress first completed by Lithuanian national hero Vytautas the Great in the early fifteen century as the Grand Duchy of Lithuania reached the zenith of its power.

At its height, the Grand Duchy encompassed much of present-day Lithuania and Ukraine as well as Belarus and parts of both Poland and 32

Russia, making it one of Europe’s largest and most powerful nations. The splendor of this era is tangible at Trakai Island Castle, which now serves as an engaging history museum and one of Lithuania’s most popular tourist attractions. Small boats dot the shores of the lake touting for business, with brief pleasure cruises around the castle and on into neighboring waterways costing just EUR 5 per person. The castle is easily reachable by a footbridge across the lake. Once inside, you will find rooms of exhibits spread out across multiple floors recounting the fortress’s heyday and chronicling twentieth century reconstruction efforts.

During the peak years of the Grand Duchy’s power in the late fourteenth and early fifteenth centuries, Trakai Island Castle was often at the very center of Eastern European history. It was the scene of dramatic dynastic infighting and found itself at the heart of numerous struggles against the Teutonic Knights, with an exotic cast of supporting characters and rival rulers fit for an episode of TV’s Game of Thrones. Vytautas the Great used the castle as a base for his many campaigns against the mighty Golden Horde, and would eventually die within its walls in 1430 as he awaited the arrival of a new crown along with the title King of Lithuania. Before his demise, Vytautas managed to

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vilnius city guide

change the demographic makeup of the area around Trakai. While campaigning in Crimea, he took large numbers of Crimean Tatars and Crimean Karaites hostage, bringing them back to Trakai to populate the surrounding town and serve as an elite personal security force. The descendants of this Karaite community are still a visible presence in modern-day Trakai, where their unique culture and hearty cuisine add considerably to the small town’s touristic charm.

The castle’s location in the middle of Lake Galve made it virtually impregnable to attack, but it would eventually fall victim to the changing tides of history, losing its importance as the threat of the Teutonic Order receded and power shifted towards Poland.

The rise of Muscovy to the east eventually sealed the fate of Trakai Island Castle. It suffered damage during a series of seventeenth century conflicts with the expanding Moscow state and eventually fell into disrepair, never to return to its former glory.

The many legends connected to the fortress and the beauty of the surrounding area led to numerous reconstruction initiatives dating back to the nineteenth century. The Russian imperial authorities were the first to embark on a serious rebuilding effort in 1905, but progress on the project fell victim to the outbreak of WWI. Large-scale renovation work did not begin until after WWII. Perhaps understandably given the circumstances, the Soviet authorities were initially reluctant to sanction the reconstruction of something that could serve as a source of Lithuanian national pride. However, according to local lore, the Soviets were eventually convinced that the resurrected fortress would stand as a monument to the fight against Teutonic encroachment from the west. With memories of WWII and the Nazi invasion still fresh in the mind, this line of argument proved particularly persuasive.

Reconstruction efforts continued following the Soviet collapse and the arrival of Lithuanian independence. The castle’s current appearance does not necessarily tally exactly with the fifteenth century original. In the absence of architectural blueprints or photographic evidence, the designs for different elements of the rebuild castle complex relied on a combination of the available archeological evidence and educated guesswork drawing from similar fortifications dating from the same era. The castle may not be 100% authentic, but it remains a fascinating and highly photogenic destination.

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The Lithuanian leader has been Ukraine’s most vocal backer and the loudest critic of Kremlin aggression Lithuanian President Dalia Grybauskaite is probably the most popular foreign politician in Ukraine, where she has won legions of admirers thanks to her straightforward and immensely quotable condemnation of Russian aggression. Back in early 2014, President Grybauskaite was among the first to raise the alarm over the threat to European security posed by Putin’s imperial ambitions in Ukraine. At a time when many of her fellow European leaders limited themselves to diplomatic euphemisms and toothless expressions of concern, she consistently condemned the Kremlin while championing Ukraine’s struggle to defend itself.

“We are facing the largest

security threat since the Second World War.” March 2014

President Grybauskaite has remained a steadfast and vocal supporter of Ukraine, visiting Kyiv on numerous occasions and providing military support while others hesitated. She is now stepping down from office, having completed her second and final term as Lithuanian leader. With the curtain falling on her domestic political career, Grybauskaite is widely tipped for a future role within the European Union, a move that many in Ukraine would certainly cheer.

As she bows out of the Lithuanian presidency, Business Ukraine magazine looks back on some of the most memorable quotes from the politician known to many as “The Iron Lady of the Baltic”.

“In the middle of Europe the UN Charter has been breached with no consequences. Last year, Russia annexed Crimea. The Kremlin seeks to rewrite history and redraw the borders of post-war Europe.”

lithuania in ukraine

Dalia Grybauskaite: Ukraine’s most outspoken ally

“We know that today Ukraine is fighting for peace in Europe, for all of us.”

November 2014

September 2015

“Putin uses nationality as a pretext to conquer territory via military means. That is exactly what Stalin and Hitler did. Such comparisons are spot on.”

June 2014

“If a terrorist state engaged in open aggression against its neighbor is not stopped, then that aggression might spread further into Europe.”

November 2014

“Ukraine is attacked because of its European choice. It is not only defending its territory, but also Europe and its values.”

“Russia is a threat not only to Lithuania but to the whole region and to all of Europe.”

March 2017

August 2014

“It is a fact that Russia is in a state of war against Ukraine, a country which would like to be closely integrated with the EU. Effectively, Russia is in a state of war against Europe.”

August 2014 www.bunews.com.ua

“Our goal is to support Ukraine and get them out of corruption and free from dependence on Russia, to help them be more European. They have a war on their territory, and we have to be patient.”

March 2017

“For the Kremlin, silence signifies consent. We cannot be complicit or create a climate of impunity that encourages dangerous behavior. That is why speaking the truth is our obligation.”

March 2016

“Many Western states are still naïve about Russia and will only wake up once they have been attacked.”

June 2018 35

What is the Business Ombudsman Council?

The Business Ombudsman Council is an independent advocate for businesses operating in Ukraine The BOC investigates complaints from businesses concerning improper

BOC’s services for businesses operating in Ukraine are free of charge

connected with tax inspections or procedural abuse on the part of law enforcers, it can turn to the BOC for help in resolving the situation.

What does the Council NOT do?

The Council is funded by 13 countries through a multi-donor account set up

interests. The Business Ombudsman also does not accept complaints about cases

practices at government agencies. For example, when a business faces problems

at the European Bank for Reconstruction and Development.

What does the Council do?

and all complainants received by the Council remain strictly confidential.

Importantly, the Business Ombudsman Council does not lobby businesses

that are currently going through the courts. Complaints against other private businesses are also not part of the BOC’s remit.

The BOC investigates cases brought to it by businesses, usually problems related

Who can seek help from the Business Ombudsman and when?

owned companies. The decision to support the complainants’ position or not

The Business Ombudsman can be contacted by any company or private

The Business Ombudsman Council is not an executive authority, since its

and local agencies, or state-owned and state-controlled companies.

to illegal actions or inaction on the part of government agencies and statewill be taken once an investigation has been conducted.

recommendations cannot be binding on government agencies. However, the BOC

entrepreneur operating in Ukraine and experiencing problems with state

can and does use the power of its reputation, professionalism and credibility: that’s

how the Council achieved 94% implementation rate for its recommendations by the

What has the BOC done for businesses so far?

end of 2018.

Although the Council also does not assess the quality of individual laws and

Since May 2015, the Business Ombudsman Council has received over

regulations, it does systematize problems and offer government agencies

5,000 complaints and helped Ukrainian businesses recover more than

UAH 13 billion. Since the start of operations, the BOC team has prepared

a package of recommendations for specific sectors of the economy. So far, the Business Ombudsman Council has published 13 sets of systemic recommendations for improving legislation.

more than 2,000 recommendations for government agencies. When surveyed, 97% of businesses said they were happy with the results of working with the BOC.

Contact us:

Follow us:

+38 044 237 74 01

@Business OmbudsmanUkraine

info@boi.org.ua

www.boi.org.ua

Statement on Ukraine’s Presidential Elections which make significant contributions to the state budget and create jobs.

Business wants predictability. The business community wants to see Ukraine secure, democratic and prosperous. Ukraine must not step back and must continue to advance its reform process at an even more rapid pace continuing Euro-Atlantic integration.

Andy Hunder, President of the American Chamber of Commerce in Ukraine, Treasurer of AmChams in Europe On behalf of the Board of Directors of the American Chamber of Commerce in Ukraine we congratulate President-elect Volodymyr Zelensky on his election victory. We look forward to working together to further improve the business and investment environment in Ukraine and support reforms aimed at achieving continued macroeconomic stability, long-term sustainable growth and increased Foreign Direct Investment (FDI). We would like to thank President Petro Poroshenko for serving through very challenging years in Ukraine, for providing business with a voice at the table through the National Reform Council and National Investment Council, for the continuous open dialogue with the business community and ensuring fair and free elections and committing to a smooth transition of power. Many reforms were introduced during the past five years that have stabilized Ukraine’s economy and restarted growth. Business expects the President-elect and his team to build on the foundation that has already been achieved, including strong cooperation with the International Monetary Fund (IMF) and Ukraine’s bilateral partners, an independent central bank and macroeconomic stability, while focusing on high-priority reforms that require action, including guaranteed rule of law for all, fair competition, level playing field and eradication of corruption.

The single most powerful tool each one of us has is our voice and our vote.

Since 1992, the American Chamber of Commerce has been delivering the voice of business in Ukraine at the highest level, pushing forward a progrowth agenda. The Chamber has been representing and supporting member companies – the largest investors, taxpayers and reliable employers,

The key priorities for the members of the American Chamber of Commerce in Ukraine are the following: 1. Guarantee real and effective judicial reform, rule of law, fair justice, transparent operations and selection of judges of all levels, including launching a fully-operational High Anti-Corruption Court in the nearest term.

2. Ensure macroeconomic stability, an independent central bank and continued cooperation with the IMF to speed up Ukraine’s economic growth.

3. Guarantee a fair, equal, predictable and transparent tax policy, establish level playing fields and fair competition by decreasing the shadow economy.

4. Secure investment and property rights, including proper IPR enforcement and launching land reform.

5. Ensure export promotion and improve trade facilitation, including implementation of Authorized Economic Operators Institute and further improvement of Single Window for import-export operations.

6. Develop vital infrastructure through the involvement of the private sector to foster European integration, to attract investments and promote growth.

7. Reform state-owned enterprises’ sector and state-owned banks and launch transparent privatization.

8. Reduce outflow of human capital abroad via policies that encourage citizens to live, work and invest in Ukraine.

9. Increase governmental spending on value-based healthcare significantly (targeting the EU level), and enhancing food safety to ensure general public health.

10. Drive Ukraine’s energy independence with a fully liberalized energy market, implementation of a subsoil use code employing best international practices.

When implemented, each of these policy milestones may become a bold move towards ease of doing business in Ukraine and will serve as a powerful tool to promote Ukraine as an investment destination.

The American Chamber of Commerce in Ukraine will continue to help businesses to operate and invest in Ukraine, and support the Ukrainian Government to implement reforms. Members of the American Chamber of Commerce believe in Ukraine, continue to create, invest and innovate, boosting Ukraine’s economy and pushing for much-needed reforms.

The American Chamber of Commerce in Ukraine will continue the ongoing dialogue with Volodymyr Zelensky and his team and is ready to get actively engaged with them in order to shape key policy priorities together, boosting Ukraine’s economy and FDI. 35

Expert view Access to Innovative Healthcare: If Not Now, When?

During the recent decades in the United States of America and EU healthcare became one of the most expensive areas of public spending, and its costs are constantly rising. This growing demand for healthcare funding is pushing countries to search the new ways to ensure their citizens’ access to necessary treatment.

The growing burden of health-related issues led to the changes in countries’ policies for spending only on the most cost-effective and efficient health technologies.

Current transformation of the Ukrainian healthcare system is moving in the same direction. Introduction of reimbursement system showed the exact need of the population in the treatment of cardiovascular diseases, diabetes type II and bronchial asthma; national procurement conducted via international organizations brought more transparency, decreased prices and ability to procure more effective medical products yet unregistered in Ukraine.

Taking into account last year’s internationally conducted procurement, Ministry of Health is actively building its Central Procurement Agency’s (SoE “Medical Procurement of Ukraine”) capacity to take over the national procurement in a year.

Overall, it is the right time for Ukrainian healthcare system not only to catch up on missed decades, but also to introduce the latest tools used in developed countries to maintain uncertainties associated with novel medical products, which usually lead to higher public expenditure.

Undoubtfully, every medical product that is planned to be reimbursed/procured by the state budget has to prove its clinical effectiveness, safety and cost-effectiveness, passing through the health technology assessment (HTA). However, innovative medical product brings the number of uncertainties regarding the actual clinical benefit comparing with the conducted clinical trials and cost-effectiveness concerns. At the same time, due to the huge R&D spending for inventing the breakthrough medical product, manufacturer sets an ac-

cordant price. On the other hand, the payer is willing to address the unmet need in the novel medical product in terms of budget limits.

At this point Managed Entry Agreements (MEAs) have become a fundamental step toward a greater population access to the innovative medical products at prices affordable for the budget. MEAs are the formal arrangements between payers and manufacturers with the aim to allow market access of medical product by sharing the cost of uncertainty between the payer and the producer.

Different types of MEAs are used in the world, and the global tendencies show radical drift towards financial agreements. Outcomesbased MEAs are more difficult to execute, require developed infrastructure and have high transaction costs. Financial agreements are easier to implement at the population level or at the patient level.

At the population level, there are used simple discounts or the percentage payback; pricevolume agreements, when the volume defines the price for each unit, using one or several thresholds for the price reduction. Among the options there are budget caps: when there is no refund until a predefined level of turnover is reached. At the patient’s level, utilization or cost capping schemes are used – the manufacturer may pay partially or provide free/ discounted doses or the treatment cycles for patient.

For successful implementation, the country should build up the legislative background for MEAs, enabling the negotiations for a discount, volume cap or free of charge goods between the payer and manufacturer related to any kind of medical product (patented or not patented, old or newly reimbursed) after HTA evaluation and international price referencing.

The confidentiality nature of MEAs helps manufacturers to lower the price even in the environment with external reference pricing, that’s why the confidentiality of the financial details is the cornerstone of the MEAs

Inna Markus Chamber Policy Officer (Healthcare Issues) imarkus@chamber.ua implementation. In some countries, the full content of MEAs is strictly confidential. In others – some information may be disclosed to predefined bodies, but the details of the discount or payback may remain commercial-inconfidence. Not only the net price of the medical product is confidential, but also any other details, which can be used for the net price calculation.

We strongly believe, that implementation of MEAs will help to improve the access to innovative medical products, and to ensure more effective spending of the budget funds.

For these purposes, the Chamber Healthcare Committee holds the educational events with international speakers, practitioners transforming healthcare system in different countries, to let the industry and payers gain the knowledge about the ways of transparent cooperation and find the mutual balance in providing the most effective treatment for Ukrainian patients.

B2G Dialogue MEETING WITH ROMAN ISAYENKO, HEAD OF THE STATE SERVICE ON MEDICINES AND DRUGS CONTROL Chamber Members met with Roman Isayenko to discuss main achievements of the State Service on Medicines and Drugs Control in 2018, issues of Good Manufacturing Practice (GMP) as well as the Pharmaceutical Inspection Co-operation Scheme (PIC/S), and current aspects of the state market supervision over compliance with the requirements of technical regulations on medical devices.

MEETING WITH VSEVOLOD KOVALCHUK, ACTING CEO OF UKRENERGO Results of Ukrenergo transformation, upcoming launch of the new electricity market, current terms and future novelties for renewable energy production – Chamber Members met with Vsevolod Kovalchuk, Acting CEO of Ukrenergo.

MEETING WITH REPRESENTATIVES OF THE MINISTRY OF ECONOMIC DEVELOPMENT AND TRADE AND STATE ORGANIZATION “NATIONAL OFFICE OF INTELLECTUAL PROPERTY” The meeting’s participants discussed Draft Law regarding improvement of public administration in the sphere of intellectual property, published at the Ministry of Economic Development and Trade’s website, and Chamber proposals regarding development of National Strategy on Intellectual Property.

MEETING WITH REPRESENTATIVES OF THE MINISTRY OF FINANCE AND THE STATE FISCAL SERVICE The Chamber Energy Committee Members discussed specific aspects of natural gas storage in Ukraine under the customs warehouse regime: transfer of ownership rights between residents and non-residents, VAT application, tax and customs regulation of gas prices, documenting of export and re-export operations.

B2G Dialogue PANEL DISCUSSION “BUSINESS LEADERS STAND WITH SUSTAINABLE DEVELOPMENT” The discussion became a great opportunity to find out more about business initiatives implementing the Global Sustainable Development Goals. The Members of AmCham Ukraine and UN Global Compact Network Ukraine met to share their success stories in reaching global sustainability goals. Topics in focus: ecology, gender balance and communities’ engagement.

PANEL DISCUSSION “MEDIA MARKET OVERVIEW 2019” The Chamber Working Group on Media & Communication held the Media Market Overview 2019. In focus – key trends of Ukraine’s media market. Representatives of the Ministry of Information Policy and Verkhovna Rada Committee on Freedom of Speech and Information Policy took part in the panel discussion to share their knowledge and expertise.

MEETING “WHAT IS WASHINGTON’S VIEW ON UKRAINE IN THE MIDST OF ELECTIONS?” Forecasts on two candidates in the runoff, their policies, economic agenda, key advisors and next steps, if elected - AmCham Ukraine Members had an opportunity to meet and greet Anders Aslund, Swedish Economist, Senior Fellow at the Atlantic Council and hear his insights.

AGRICULTURAL COMMITTEE MEETING WITH MARC ZRIBI, HEAD OF UNIT GRAIN AND SUGAR, FRANCEAGRIMER Grain storage and accounting – topical issues to discuss due to the recent cases of storage fraud. The Chamber Agricultural Committee Members discussed them with Mark Zribi from FranceAgriMer and Nicolas Perrin from the Embassy of the French Republic in Ukraine.

ACC meets Volodymyr Zelensky AmCham Ukraine President Andy Hunder and Vice President Tetyana Prokopchuk, and Directors of the Chamber Board Kira Rudik and Andriy Tsymbal, together with colleagues from the European Business Association and the Union of Ukrainian Entrepreneurs, met with Presidential Candidate Volodymyr Zelensky on March 18, 2019, to discuss his economic agenda. Aivaras Abromavičius, Former Minister of Economic Development and Trade, Oleksandr

Danyliuk, Former Minister of Finance, Sergii Leshchenko, Member of the Parliament, Ruslan Ryaboshapko, ex member of The National Agency on Corruption Prevention, participated from Zelensky’s team. During a 2-hour meeting Andy Hunder and Board of Directors highlighted the highest priorities for business – IMF cooperation, rule of law, support of investors on the ground in Ukraine and FDI attraction.

ACC thanks Petro Poroshenko The business community, united by the American Chamber of Commerce in Ukraine, European Business Association, and Union of Ukrainian Entrepreneurs, met with President Petro Poroshenko on April 15, 2019, and Prime Minister Volodymyr Groysman. AmCham Ukraine President Andy Hunder voiced TOP strategic priorities for business that the American Chamber of Commerce in Ukraine is standing up for – macroeconomic stability, rule of law, fight against corruption, security of investments and property, level playing field. “We would like to thank President Petro Poroshenko for serving through very challenging years in Ukraine, for providing business with a voice at the table through the National Reform Council and National Investment Council, for the continuous open dialogue with the business community and ensuring fair and free elections and committing to a smooth transition of power. Many reforms were introduced during the past five years that have stabilized Ukraine’s economy and restarted growth”, said AmCham Ukraine President Andy Hunder.

B2U - Business to Ukraine “TOURISM AT A GLANCE: LVIV SUCCESS STORIES” REGIONAL OUTREACH TRIP AmCham Ukraine continues developing the Regional Outreach Trips platform. Participants explored Lviv as a business tourism destination full of opportunities tailored to their business needs. The participants visited best sites of Lviv, including Lviv IT Cluster and library of Ukrainian Catholic University as well as met with Oleh Syniutka, Head of Lviv Regional State Administration.

They also had a great opportunity to take part in the Conference “Tourism at a Glance: Lviv Success Stories” together with leading Ukrainian companies in tourism and hospitality sphere.

REGIONAL OUTREACH TRIP TO DNIPRO Chamber Regional Outreach Trip to Dnipro started with a meeting with representatives of Dnipropetrovsk Regional State Administration to discuss the investment potential of the region and Dnipro city. After the meeting the participants had a tour to the Chamber Member Companies Bunge Ukraine and Noosphere Association.

Election Night Live Presidential elections are very important for every democratic country. AmCham Ukraine has been closely monitoring the election process in Ukraine. On the eve of first and second round of Presidential elections, the American Chamber of Commerce in Ukraine gathered friends, Members, key experts, representatives of international media and candidates’ teams to watch live broadcast of the exit polls, hear comment, forecast and analysis, and discuss what to expect from Ukraine’s next President.

PARTNER OF THE FREE RIDE HOME

Chamber Football Tournament Football Tournament by the American Chamber of Commerce in Ukraine has already become the traditional event for Member Companies. This is a great tool for building healthy relationship not only between team members but also between participating companies.

RESULTS OF THE TOURNAMENT 1st place – AVIS 2nd place – Lactalis 3rd place – lifecell 4th place – Carlsberg Ukraine Best player – Oleksandr Glushenko (Procter & Gamble) Best goalkeeper – Oleksandr Sergeev (Lactalis) Best full-back – Oleksandr Lysyuk (lifecell) Best forward – Oleg Pozynych (Carlsberg Ukraine) MEDICAL SUPPORT

SOFT DRINKS AND GIFTS PARTNER

SOFT DRINKS PARTNER

TECHNICAL PARTNER

LOGISTIC PARTNER

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WELDI BUSINESS BREAKFAST “GRL PWR: SUCCESS COMES TO THOSE WHO STRIVE” Success comes to those women who strive to accept new challenges, do not afraid of screw-ups, ready to grow and empower their teams. Women leaders united by AmCham Ukraine WELDI platform gathered at the business breakfast to discuss how Ukrainian women can fulfill their potential, overcome the fear of responsibility, and find inspiration to drive their organizations. Speakers of the event – Yevgeniya Piddubna, Senior Corporate Affairs Director at Carlsberg Ukraine; Christi Anne Hofland, Director of America House Kyiv; Yuliya Zavalishyna, Director, Government Relations, CIS and South-Eastern Europe at Visa; Alyona Nevmerzhytska, Commercial Director and Deputy CEO of Kyiv Post. Moderator of the event – Tetyana Prokopchuk, Vice President of AmCham Ukraine.

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About the interviewee: Nataliia Zabolotna is the CEO and founder of the Ukrainian ID international economic and humanitarian forum

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coming soon

Ukrainian Davos seeks

a revolution of values Ukraine’s annual international economic and humanitarian forum in Kaniv prepares for its second year with big ambitions to take on decades of humanitarian and cultural neglect Ukrainian society has witnessed its fair share of revolutions in recent years, but Nataliia Zabolotna is looking to initiate one more.

This year’s edition of her Ukrainian ID Forum, which takes place on 7-8 June in Kaniv, will focus on the idea that Ukraine needs a fullscale revolution of values. For Zabolotna, this means an entirely new approach to core ideas such as gender equality, national identity and social inclusion. It also means investing in the next generation of Ukrainians and reversing the neglect of humanitarian and cultural issues that she sees as responsible for many of the deeply entrenched

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problems facing Ukrainian society today. Zabolotna says Ukrainians have spent decades distracted by political turmoil while their country has fallen further and further behind its European neighbors.

The time has now come, she argues, for a Maidan of the mind.

This will be the second Ukrainian ID International Economic and Humanitarian Forum. It is set to attract an eclectic collection of diplomats, politicians, journalists, businesspeople and thinkers, who will gather for two days in the picturesque town of Kaniv, overlooking the Dnipro River in Cherkasy Oblast 120km south of Kyiv. Launched in

:

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: summer 2018 amid considerable fanfare, the event’s unabashed am-

bition and international pretentions soon attracted flattering comparisons, with many in Kyiv referring to it as “The Ukrainian Davos”.

Such lofty talk may seem somewhat premature for what remains a fledgling forum, but it also speaks volumes about Natalia Zabolotna’s past record as an innovative influence in Ukraine’s cultural life.

Cultural Innovator

Zabolotna first appeared on the Ukrainian cultural radar at the turn of the millennium when she took charge of Kyiv’s iconic Ukraine House, which at the time was still more commonly associated with its former Soviet-era role as the Ukrainian capital’s Lenin Museum.

By utilizing the considerable but largely untapped kudos of Ukraine’s emerging contemporary art scene, Zabolotna was able to reshape the venue’s public profile and align it with the changes taking place elsewhere in Ukrainian society as the country lurched towards the national awakening of the 2004 Orange Revolution.

Zabolotna’s profile continued to rise in the afterglow of the revolution. She received an invitation to manage the development of the Art Arsenal complex, a flagship project personally championed by newly elected Ukrainian President and Orange Revolution hero VikHistoric Kaniv is the last resting place of Ukrainian bard Taras Shevchenko and offers spectacular views of the Dnipro River that are closely entwined with traditional notions of Ukrainian national identity. For many Ukrainians, the town is quite simply the spiritual heart of the nation

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tor Yushchenko as part of his bid to redefine the way Ukrainians saw themselves. Zabolotna’s task was to reinvent the sprawling former military factory and turn it into a symbol of Ukraine’s national cultural revival. She was to prove so successful in this undertaking that in 2011 Ukrainian newspaper “The Day” named Zabolotna “Person of the Year”, an unheard-of achievement for somebody active in the largely neglected cultural sphere of Ukrainian public life. Such was Zabolotna’s status that when she finally lost her position at Art Arsenal in 2016 in politically charged circumstances, her removal sparked a lively national debate.

Spiritual Heart of Ukraine

The choice of Kaniv for Zabolotna’s latest venture is no accident of geography. This small Ukrainian town occupies a central place in Ukrainian folklore as the last resting place of national bard Taras Shevchenko, making it a symbolically potent location for meditations on the country’s future direction. Kaniv is also home to an impressive river port terminal, a vast but incomplete conference center, and the country’s largest helicopter airport, all relics of a Yanukovych era bid to transform the town into a model of regional rejuvenation. Zabolotna claims that fugitive ex-president Viktor

Tourism Potential

The largely unused infrastructure assets inherited from the Yanukovych era now serve a practical purpose in making today’s Kaniv an ideal candidate for the kind of regional reinvention Zabolotna hopes to inspire throughout rural Ukraine. Problems of economic

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decline, labor migration and depopulation plague the Ukrainian countryside, with towns like Kaniv typically suffering from a host of associated social ills. However, the availability of modern transport connections, combined with the town’s Shevchenko associations, offer Kaniv a lifeline and make it a potentially appealing tourism destination. For Zabolotna, promoting tourism is one of the main aims of the forum and the best bet for the transformation of the local economy. “There is a 20 million-strong Ukrainian diaspora to appeal to, but we need to provide them with the kind of services that will make them visit Kaniv again and again,” she says, adding that the town has already experienced a small spike in tourist numbers following the media coverage generated by last year’s inaugural forum. If Kaniv can build on its tourism advantages, Zabolotna argues, it could serve as a model for other regional towns to follow.

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Yanukovych actually commissioned these white elephants with something very specific in mind. He allegedly planned to welcome Vladimir Putin and other assorted post-Soviet presidents to Kaniv for the ceremonial signing of Ukraine’s ascension to the Kremlinled Eurasian Union. According to Zabolotna, the idea was to host the event on 9 March 2014, the two hundredth anniversary of Taras Shevchenko’s birthday. This fateful event never took place. Instead, Ukraine’s Revolution of Dignity intervened, with Yanukovych fleeing to Russia mere weeks before the ceremonials were supposedly scheduled. We will never know if this entertaining tale is true, but as Zabolotna herself points out, the fact that Yanukovych invested so much in Kaniv infrastructure projects is testament to the town’s spiritual potency as a symbol of the Ukrainian nation. “Even someone like Yanukovych recognized Kaniv’s power to provide him with a veneer of legitimacy,” she notes.

Creating a New Cultural Climate

The primary focus of the forum remains the future trajectory of Ukraine. Once again, we return to Zabolotna’s idea of a revolution of values. She argues passionately and at length that Ukraine is now paying the price for having ignored the country’s humanitarian and cultural development consistently throughout the past quarter of a :

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Guests pictured during the inaugural Ukrainian ID Forum in Kaniv in summer 2018. Some arrived via helicopter, landing at Kaniv’s impressive but largely unused helicopter airport

: century. This has fueled a climate of social alienation, she says, stunting the nation’s growth and ultimately making it possible for Russia to engineer the current military conflict in the east of the country.

“The war teaches us a painful lesson that if we as a nation ignore our own cultural development, somebody else will exploit the void this creates,” she says. “Separatism breeds when people feel no attachment to the country they live in and have no sense of belonging to a wider society. This makes them particularly vulnerable to outside influences.”

The agenda of the forum will be almost as diverse as the list of participants. Issues up for discussion include everything from the role of women in Ukrainian society to the need to invest in the country’s architectural heritage. Zabolotna is aghast at the marginalization of women in Ukrainian politics and business, arguing that until there is radical change on this front, the country will continue to lag behind its European neighbors. Similarly, she sees the crumbling condition of Ukraine’s castles and palaces as a vivid metaphor for the country’s wider neglect of its cultural inheritance. “Ukraine must be one of the

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only countries in Europe where people still think investing in culture is not profitable. We need to change this mindset entirely. Investing in culture can create a thriving and very lucrative tourism industry.

More importantly, it is can also be a significant factor in fostering greater social cohesion.”

Hungry for Change

Zabolotna readily recognizes that her anticipated revolution of values is a wildly ambitious notion. However, she believes the recent landslide election victory of establishment outsider and political novice Volodymyr Zelenskiy in the country’s presidential vote reflects a hunger for drastic change that is very much in line with her own talk of revolutionary shifts. “In essence, Zelenskiy’s win was a massive protest vote,” she says. “Ukrainian society was rejecting the entire status quo of the past twenty-five years and sending a message that they want to try a completely different approach.

The challenge we face now is identifying what this new approach should look like.” www.bunews.com.ua

How Zelenskiy can win Ukraine’s memory wars Eightieth anniversary of Nazi-Soviet Pact offers Zelenskiy a chance to make sense of Ukraine’s history Ukraine’s President-elect Volodymyr Zelenskiy waded into the bloodstained waters of the country’s memory wars during WWII memorial events in early May, posting a picture of himself alongside a Soviet veteran and a former member of Ukraine’s Insurgent Army alongside the message: “The key to peace today is unity among all Ukrainians.” This was something of a departure for Zelenskiy, who largely steered clear of sensitive historical issues during his presidential campaign while promising to move beyond the conflicting interpretations of the past that have plagued Ukrainian society since the Soviet collapse. Zelenskiy’s recent WWII photo-op indicates that as the new head of state, he recognizes he will no longer be able to afford himself the luxury of remaining above the fray. Instead, he must now take a lead in Ukraine’s memory wars while choosing his battles carefully, mindful of the fact that any potential missteps in the minefield of Ukrainian history could reopen old wounds and distract from his calls for national unity.

Finding historical issues that a majority of Ukrainians can agree on is no easy matter. Today’s Ukraine is a country short on statehood and long on history, creating inevitable conflicts between those who embrace a post-colonial sense of national identity and the many millions who reject exclusively negative characterizations of the Soviet era. Nevertheless, there are areas were a broad national consensus may be achievable. For example, while the WWII sacrifices and heroism of the Red Army remain focal points of Soviet nostalgia in today’s Ukraine, there has been no concurrent drive to whitewash the entire Stalin era. On the contrary, modern Ukrainian society now largely accepts that Stalin’s manmade 1930s famine was a crime against humanity, and has embraced a culture of frankness towards Communist oppression that is strikingly at odds with the climate in many other parts of the former USSR. This suggests that while many Ukrainians bristle at attempts to denigrate ordinary Soviet folk, far fewer are prepared to defend the authoritarian leadership or the policies they pursued.

With this in mind, President Zelenskiy will soon have an outstanding opportunity to elaborate his own stance on Ukraine’s memory politics, while at the same time underlining his country’s commitment to democratic values and its historic role as the epicenter of twentieth century totalitarianism. On 23 August 2019, the world will mark the eightieth anniversary of the Molotov-Ribbentrop Pact. This agreement between the Nazi and Soviet regimes led directly to the outbreak of WWII and serves as the ultimate symbol of the totalitarian terror that devastated Europe during the first

half of the last century. The anniversary of the Nazi-Soviet Pact is already an internationally recognized memorial day. In 2009, the European Parliament voted to designate 23 August as the European Day of Remembrance for Victims of Stalinism and Nazism.

Some countries refer to it as Black Ribbon Day. However, the date has yet to be marked in a manner befitting the scale of the catastrophe it commemorates. With the eightieth anniversary fast approaching, Ukraine could now take a lead on this issue by proposing to host an international memorial event of suitable stature.

Ukraine would certainly be a logical venue for such a commemoration. Ukraine was the epicenter of Europe’s totalitarian epoch, suffering genocidal assaults from both Nazis and Soviets and serving as the principle battlefield of WWII. From 1917 until the early 1950s, there was probably no deadlier place on the entire planet. We know that the total death toll was somewhere between ten and twenty million, but mere statistics cannot hope to reflect the true extent of the apocalypse or capture its enduring legacy.

Indeed, the prides and prejudices of modern Ukrainian society only begin to make sense when viewed through the prism of the country’s totalitarian trauma.

Serving as host nation for a global event commemorating the victims of twentieth century totalitarianism would have potentially profound meaning for many Ukrainians, allowing them to reflect on the horrors of the era without the need to demonize their own kith and kin. No longer invited to choose sides in an endless rerun of WWII, Ukrainian society would instead have the chance to move beyond the polarization of the post-Soviet period and begin the healing process.

A Nazi-Soviet Pact anniversary event could also help to overcome international ignorance about the country. Despite over five years as a major geopolitical hotspot, Ukraine remains one of the most poorly understood nations in the world and is frequently misrepresented on the international stage by Russophile academics and Moscow-based correspondents. This lack of accurate outside information hampers policymakers and opinion shapers, depriving them of crucial context and leaving them vulnerable to Kremlin disinformation. Greater awareness of Ukraine’s centrality to the totalitarian story would place the country’s ongoing conflict with Russia in a new light, while also underlining Ukraine’s importance in European history.

For Zelenskiy himself, the anniversary of the Nazi-Soviet Pact represents a chance to burnish his credentials as a symbol of post-Soviet democracy. On the evening of his presidential election victory, the comedian-turned-politician issued a provoca-

About the author: Peter Dickinson is the publisher of Business Ukraine magazine and a nonresident fellow at the Atlantic Council 58

opinion

To mark the country’s WWII Memorial Day on 8 May, Ukraine’s President-elect Volodymyr Zelenskiy posted this picture of his meeting with former Soviet naval captain Ivan Zaluzhniy and Ukrainian Insurgent Army veteran Paraskeva Zelenchuk-Potiak along with the message: “The key to peace today is unity among all Ukrainians.” Previous Ukrainian leaders including presidents Yushchenko and Poroshenko have also previously promoted similar ideas of national reconciliation, but for many Ukrainians, WWII remains an emotionally charged issue that reflects broader polarization over the country’s relationship with Russia and the Soviet past. tive battle cry to cowed electorates across the entire post-Soviet space. “Look at us! Anything is possible,” was his simple message. By hosting memorials for the eightieth anniversary of the Molotov-Ribbentrop Pact, he could further position himself as a defender of human rights, champion of national sovereignty, and opponent of authoritarianism. He would also be putting himself in direct confrontation with the Putin regime, which has placed the Soviet WWII victory at the heart of modern Russian national identity and outlawed all reference to the Nazi-Soviet partnership of 1939-41. Under Putin, the cult of the Great Patriotic War has reached heights of absurdity beyond anything seen during the Soviet era itself. The annual Victory Day holiday is now the biggest event on the Russian calendar and has become an excuse for jingoistic excesses. At the same time, criticism of the Soviet war effort is subject to criminal penalties and people have received jail sentences for public references to the Molotov-Ribbentrop Pact.

This would make things extremely awkward for the Kremlin if www.bunews.com.ua

Zelenskiy did decide to mark the eightieth anniversary in Ukraine and invited world leaders to join him.

The timing of this year’s jubilee anniversary is certainly fortuitous.

After decades of advances, global democracy is now in retreat.

Meanwhile, Russia’s attack on Ukraine has shattered the sanctity of national sovereignty, and recent events in Venezuela have led to renewed debate over Great Power spheres of influence. In this increasingly claustrophobic geopolitical atmosphere, it has never been more necessary to remind the world about the dangers of aggressive authoritarianism. No country has more right to do so than Ukraine. By leading international memorials to the victims of the Nazism and Communism, President Zelenskiy could stake his country’s claim to a place among the world’s democratic nations, while also changing the optics surrounding Ukraine’s own memory wars. For a land that lost so much in the totalitarian maelstrom of the last century, this would represent a modicum of long overdue historical justice.

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opinion

Zelenskiy’s election win was a vote for fundamental change Ukraine’s new president takes office with an unprecedented mandate to transform the country Ukraine’s highly competitive recent presidential election illustrated that Ukrainians can create the necessary conditions for a free and fair vote. This resulted in a “moment of truth” for the country’s entire political class, and the verdict delivered by voters was resoundingly negative. Establishment outsider Volodymyr Zelenskiy’s landslide victory was an expression of the continuing hope for transformational change shared by millions of Ukrainians across the country. They are clearly tired of the country’s unfulfilled potential and hungry for a new reality, both in the spheres of politics and economic activity.

Ukraine now finds itself at the crossroads once again and looking to translate the political progress of free and fair elections into more broad-based societal gains. The economic benefits generated within free societies come to fruition when individual political freedom is respected and guaranteed. Unless the rule of law guarantees individual political freedoms, there cannot be any authentic economic freedom. Now that there has been an explicit articulation of political freedom in Ukraine, the challenge is to work towards the establishment of a fair and free market buttressed by the fair application and efficacy of the rule of law.

Even after five years of post-Maidan reform efforts, corruption remains the most critical and unresolved domestic issue. The ongoing problem of corruption prevents economic growth. As one World Bank representative suggested recently, failure to cure the malady of corruption costs Ukraine at least 2% in annual GDP growth, if not more. The majority of Ukrainian voters clearly understand this. While many would confirm that change has

About the author: Yuri Polakiwsky is a writer and political commentator who resides in Kyiv.

He is the author of the book “Ukraine - a Lament of a Promise” and a member of the Association of Ukrainian Writers and Poets

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indeed taken place since the 2014 Revolution of Dignity, there is a sense of not nearly enough done to improve the everyday lives of ordinary Ukrainians. The presidential election result reflects this desire for a more fundamental shift in the way the Ukrainian state functions.

This is particularly relevant with regards to small and medium-sized businesses (SMEs). Transformations at the level of national government can lead to greater integrity in the overall business sector. This has the potential to transform the culture of daily business practices, especially for SMEs, traditionally the fastest job and wealth creators in emerging economies. Furthermore, a demonstrable commitment to the rule of law would create greater confidence in Ukraine among foreign investors. It would establish a foundation for economic opportunity and provide the basis for greater dignity in daily life. Perhaps it would even prevent the outflow of Ukrainians leaving the country to seek their livelihood abroad in jurisdictions that offer an economically stable and predictable lifestyle based on the rule of law.

The desire for change is evident all over the country. During a forthright discussion on the eve of the country’s recent presidential vote, the Mayor of Nikipol in southern Ukraine spoke candidly about the inability to protect investments in the current business and political climate. As mayor of a relatively small provincial city, he is experiencing significant economic migration. Asked to outline the challenges he faces in creating an attractive and competitive business climate, he cited potential “raider” attacks on new and growing businesses alongside attempts to extract “rents” from new investment projects. He also spoke of the inability of

government officials to guarantee a fair and effective legal framework capable of protecting investor interests. A former entrepreneur himself, he is all too aware of the important role such guarantees play in fostering business confidence.

Similarly bleak assessments are commonplace among the Ukrainian business community and fundamental questions abound. Why is it so complicated to take legal action over defamation in the media? How can businesses be sure of the integrity of evaluations they receive related to property and equipment? Why do Ukrainian businesses have to seek dispute resolution in foreign courts outside the jurisdiction in which they operate?

These are just some of the many issues the new president must address if he is to live up to the expectations of the electorate. These expectations reflect an appreciation that free societies develop and ultimately thrive because they rest upon an agreed to and mutually accepted set of core values.

These principles include social justice, trust, transparency, and the expectation of a fair return on investment. This also means the assumption of an effective legal system that has the integrity to settle disputes justly. While the specifics may differ from person to person, the rule of law is central to virtually every vision for a new Ukraine.

Volodymyr Zelenskiy won the presidency by a wider margin than any previous Ukrainian head of state, giving him an unprecedented mandate for change as he takes office. The Ukrainian electorate has made clear its desire for a fresh start and a new direction. Zelenskiy must now build on the momentum of his overwhelming victory to initiate the transformation that the country is waiting for.

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WEST UKRAINE’S LIFESTYLE GUIDE №122/April 2019

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opinion

Ukraine must create a climate for innovation

Ukraine’s startup talent will continue to look elsewhere unless country creates better conditions

About the author: Andriy Dovbenko is a businessman and venture investor On a national scale, Ukraine’s approach to supporting the development of startups is disappointing. This is a cause for concern because only those who think globally will succeed in today’s innovationdriven economy. The very nature of competition in the innovation economy often transcends national borders, but it remains strategically important for individual countries to foster the most dynamic startup climate possible if they wish to remain competitive internationally. The Ukrainian authorities need to consider adopting a more hands-on approach instead of idly watching as ideas and specialists leave the country for more attractive startup environments.

As the modern world becomes increasingly decentralised, the venture economy occupies a key and often proactive role in this process, creating change rather than merely reacting to a changing environment. This makes it essential for every government to foster the right conditions for a thriving venture economy. Ukraine has yet to do so, and there are numerous indications that this is placing the country’s future development at risk.

Not so long ago, many Ukrainian media outlets carried reports that the Polish government had developed a program bringing together Ukrainian startups with Polish venture capitalists. Obviously, this is the correct step for Poland to be taking. Embracing a rapidly growing but drastically underfunded neighbouring market is a great way to increase Polish budget revenues and position the Polish economy for further future progress. Moreover, thanks to the growing trend among young Ukrainians to seek higher education in Poland (almost 38,000 Ukrainians were enrolled at Polish universities in 2018, representing more than half of the country’s entire international undergraduates), many potential Ukrainian tech entrepreneurs are already in a position to begin cooperation with their western neighbour.

What could this mean for Ukraine? The first and most obvious answer is that the country will witness the steady outflow of technical experts and entrepreneurial innovators. Even if Ukrainian specialists do not leave the country, a framework now exists that will allow them to register their businesses in Poland, meaning that taxes will flow to the Polish budget instead of staying in Ukraine. It is important to stress 62

that Poland is not to blame here for creating these conditions. The Polish authorities are merely protecting their interests in the same way that many if not most other nations are seeking to do. This means creating tax incentives and other enticements for innovative projects in a bid to attract startups from beyond the country’s borders.

This is an issue for individual cities as well as entire countries. At the end of last year, one of the main ideologists of the creative economy, Richard Florida, along with co-author Ian Hatvei, published a piece on the changes currently underway in the geography of startups. According to these eminent researchers, it is becoming clear that the global startup atlas has undergone drastic changes in recent years.

Unsurprisingly, the US is still in the lead overall. However, among the world’s top ten startup cities, we now see Shanghai right behind San Francisco. Nor is this the only Chinese city among the leaders. In terms of investment, the US share has also dropped sharply (especially since 2017). Against a background of overall growth in indicators, this decline in the US share of innovation investment demonstrates the mounting pace of recent international diversification.

While all successful startups necessarily think globally, they also have to consider their base location. This increasingly means choosing between different cities, not only between different countries.

Perhaps the strongest evidence of this trend is the fact that startup ratings generally rank cities rather than countries in terms of attractiveness. Ukraine as a whole and Ukrainian cities in particular are still far from becoming magnets for innovators. The issue has emerged on the country’s political radar and is now often on the agenda as municipal authorities look to boost their investment climates, but progress is still alarmingly slow. For example, positive initiatives like the creation of an Innovation Development Fund have not yet reached full implementation.

The Ukrainian authorities at both municipal and national level are taking enormous risks by delaying progress in this sphere. They are also preventing the country from realizing its abundant innovation potential. Despite the lack of a more favourable startup climate, the number of registered IT specialists grew by 23% over the past year.

This striking rise illustrates the opportunities Ukraine currently has to become a more prominent focus for the global innovation economy. To reach this objective, Ukraine needs a national strategy and an effective startup support system. This includes up-to-date guidance and training for tech entrepreneurs within Ukraine’s extensive higher education environment, along with the creation of more research centres. There is no need for Ukraine to reinvent the wheel. All over the world, the best startups tend to emerge from universities.

Poland’s interest in Ukrainian startups is entirely logical. Indeed, it is probable that other neighbours will soon become more active too in their efforts to entice Ukraine’s startup talent. People who embrace startup culture are naturally also on the lookout for the best possible environment to implement their ideas. Ukraine must now take steps to create this environment at home. Failure to do so will only hurt the country’s long-term national interests. It will also prevent Ukraine from reaching its obvious potential as a major innovation economy. www.bunews.com.ua

French airline Aigle Azur launches Kyiv-Paris flights France’s second-largest airline Aigle Azur has launched a new direct service between Paris and Kyiv. The inaugural flight from Paris Orly Airport to Kyiv’s Boryspil International Airport took place in late April. The route will now feature three flights per week on Tuesdays, Thursdays and Saturdays.

Aigle Azur CEO Frantz Yvelin commented on the launch: “We are delighted to be flying our Airbus A320s to Ukraine and adding Kyiv to our European network. We are continuing to write the company’s story by consolidating our historical routes and activating new growth levers in Europe.

The inauguration of this brand new service fits in perfectly with our objective of consolidating our medium-haul network and we are particularly proud to be the first French airline to offer a direct link between Orly airport and Kyiv. In doing this, we are enabling our passengers to discover the capital of a country eager to interact more and more with Europe.”

legal

Outstaffing and self-employment options in Ukraine Non-standard employment is increasingly common in today’s Ukraine but legal issues abound

About the author: Inesa Letych (inesa.letych@asterslaw.com) is a counsel of the labour and employment practice at Asters law firm Innovative approaches to traditional staffing issues are becoming a daily reality in today’s Ukraine, but increased attention from regulators means companies must make sure their HR policies are in line with existing legislation. While Ukraine’s labor laws continue to borrow heavily from Soviet-era legislation, emerging HR trends reflect significant practical changes taking place in the country’s employment sector. As flexible and non-standard forms of employment gain in popularity, this is attracting the interest of legal experts, regulators and law enforcement agencies alike.

Current Trends

Regular employment remains the standard model for relations between Ukrainian businesses and employees, with every aspect of this relationship subject to heavy regulation under local labor laws. However, the existing legislative parameters have become too rigid to deal effectively with the evolving HR demands of modern Ukrainian businesses. This has led to the growth in popularity of numerous alternatives to standard employment.

While it is now increasingly common to hear Ukrainian analysts speak of “nonstandard employment” as an umbrella term for the growing list of alternatives to traditional employer-employee relations, two specific options have emerged as the market favorites in today’s Ukrainian employment environment. The first is agency work or leased labor, where a staffing agency provides a workforce to a user company. Within the framework of this model, employees work for a user company but conclude employment agreements with the staffing agency. Many in Ukraine refer to this practice as “outstaffing”. The second popular approach is to engage self-employed individuals who are not company employees. They work for themselves rather than for a particular employer.

Outstaffing Advantages and Obstacles

Outstaffing depends on a triangular model of relations between an employee, a staffing agency and a user company. The employee enters into employment relations with the staffing agency, which is fully responsible for all the relevant employment-related rights and benefits of the employee. The employee’s entitlements and taxes, as well as issues related to the termination of employment or potential employee claims, are the responsibility of the staffing agency.

The user company concludes a service contract with the staffing agency and receives the necessary personnel in return for payment of a fee.

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This model is especially popular among foreign businesses that operate in Ukraine, particularly in cases where the business has internal limitations governing the number of local staff or payroll expenses. Many businesses also opt for outstaffing as a flexible HR solution because it shifts numerous risks relating to employee claims, dismissals and so forth onto the staffing agency.

Ukrainian laws governing outstaffing are far from perfect but the existing legislative framework does generally allow for the legal use of this model. Nevertheless, the issue of outstaffing is coming under increasing scrutiny and attracted growing attention from regulators and law enforcement agencies during 2018.

This including several criminal cases with businesses accused of a variety of offenses ranging from gross violation of labor rights to tax evasion. This was the result of staffing agencies and client businesses grossly neglecting to observe key legislative rules.

What are the main points to consider? Firstly, a company cannot opt for outstaffed personnel to handle the core functions of its business. Legislation specifies that only staff engaged via traditional employment can perform key functions, while outstaffed personnel are restricted to supplementary or support functions. Secondly, businesses cannot use agency personnel for heavy or dangerous work. Furthermore, engaging workforce for low-paid or overtime work may be not possible within the framework of outstaffing due to salary and worktime constraints.

A further potential pitfall is the very unclear legal distinction between outstaffing, where a company borrows a workforce, and outsourcing, where a company pays a third party for a particular service. Lack of attention to this issue, along with the misuse of outsourcing instead of outstaffing, could qualify as a serious violation. Last but not the least is the reliability of the agency itself. It is crucial to verify whether a potential outstaffing partner agency is a true staffing agency rather than a multifunctional services company. Businesses must do their research and clarify whether the agency observes all the major labor rights of hired personnel and pays their taxes.

Self-Employment

The number of self-employed individuals is constantly on the increase in today’s Ukraine. Both businesses and workers benefit from the independence and flexibility this offers beyond the boundaries of traditional employment relations.

However, businesses and individuals are not free to choose between self-employment and traditional regular employment, with classification depending on the nature of their role rather than their preferred label.

Current legislation is only clear on black-and-white situations where there is either an employment agreement in place or a civil law contract with a selfemployed individual. Any more ambiguous situations automatically create difficulties, as there are no adequate guidelines on how to distinguish between these two forms of employee engagement. This means that any negligent approach may lead to the reclassification by a labor inspector of a contract with a self-employed individual into an employment agreement. Businesses may also encounter other potential legal problems when utilizing self-employment options. Starting in 2017, labor inspectors have enjoyed very wide powers and can impose significant fines on businesses that abuse contracts with self-employed individuals. Consequently, as of early 2019, the number of court cases where businesses appeal against the decisions of labor inspectors continues to increase. www.bunews.com.ua

trade

Poland replaces Russia as Ukraine’s top export market Egypt, China and Turkey make up the top five as Putin’s war forces Ukraine to go global

From breadbasket of Europe to global agribusiness superpower: Ukraine’s agricultural wealth is helping fuel economic growth as Ukrainian exporters expand their international presence in Europe and Asia Poland was the number one export market for Ukrainian goods during the first quarter of 2019, displacing Russia from the top spot for the first time since Ukraine gained independence in 1991 as Ukrainian exporters continued to go global. Poland imported goods from Ukraine worth USD 818 million, almost 10% more than the USD 759 million in exports to traditional trading partner Russia. In a reflection of Ukraine’s increasingly global trading horizons, the country’s remaining top five export markets in the January-March 2019 period were Egypt (USD 652 million), China (USD 640 million), and Turkey (USD 638 million). Overall, Ukraine saw exports rise by 7% year-onyear in Q1 2019 to USD 12.3 billion.

Ukraine’s trade with Russia has plummeted since 2014 and the onset of Vladimir Putin’s hybrid war, which includes military, cyber, informational and economic dimensions.

The Kremlin has liberally deployed trade embargos throughout the past five years, with the latest round of bans on Ukrainian imports put in place in December 2018. Prior to the outbreak of hostilities, Russia had long been unassailable as Ukraine’s dominant trading partner, accounting for approximately 24% of Ukrainian exports and 30% of Ukrainian imports in 2013. These close 66

economic ties afforded Moscow considerable influence in Ukraine, but the ongoing trade restrictions within the broader undeclared war between the two nations have served to erode this position.

Faced with the loss of access to Russian markets (and mounting difficulties exporting to other former Soviet nations due to a Kremlin-imposed ban on cargo transit via Russia), Ukraine has made significant strides since 2014 towards entering new global markets. The country signed a landmark Association Agreement with the European Union in summer 2014, which includes a free trade component. In the past three years, Ukraine has also concluded free trade agreements with Canada and Israel, with a similar Turkish FTA expected in the coming months.

Last year alone, Ukrainian agricultural exporters entered 85 new global markets, highlighting the economic importance of the agribusiness sector for a nation once famed as the breadbasket of Europe and now aiming to play a central role in global food security.

The agriculture sector has been a key driver in the process of broadening Ukraine’s international trade horizons. In 2018, Ukraine ranked in fourth place among agricultural exporters to the EU with total annual volumes

of USD 6.3 billion. Meanwhile, overall agricultural exports reached a record high of USD 18.8 billion, with India the country’s largest single agricultural export market accounting for USD 1.8 billion. Ukrainian agricultural exports remain on a steep upwards trajectory, growing by 24.4% in the first two months of 2019 to reach USD 3.5 billion.

With no end in sight to Putin’s hybrid war and a fresh round of Kremlin trade bans set to enter into force in early summer 2019, the dramatic decline in Ukraine-Russia economic ties looks set to gain further momentum even as Ukrainian exports to global markets continue to grow. This shift in the geography of Ukraine’s export economy will further reduce Moscow’s ability to leverage its influence in Kyiv, hampering Russian attempts to derail Ukraine’s Euro-Atlantic integration ambitions.

Ukrainian Export Markets: January-March 2019

1

Poland

USD 818 million

3

Egypt

USD 652 million

2 4 5

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Russia China

Turkey

USD 759 million USD 640 million USD 638 million

investment

Kyiv and Lviv enter global top 10 in Financial Times investment ranking Ukrainian cities score well for cost-effectiveness in survey for Financial Times division fDi Intelligence

Ukraine’s gateway to the EU: Lviv has long been famed for its dreamy spires and stunning architectural ensemble. The city, which sits a stone’s throw from the EU border, is now also gaining a growing reputation as a competitive international investment destination Ukrainian cities Kyiv and Lviv have made it into the inaugural Smart Locations of the Future ranking produced by Financial Times division fDi Intelligence. Both Ukrainian destinations featured in the global top ten for cost-effectiveness, with the Ukrainian capital city occupying fifth place while Lviv was in eighth position.

The cost-effectiveness category of the ranking assessed 115 investment destinations worldwide on such indicators as rental fees for office and industrial space, corporate and total tax rates, average salaries for skilled workers, and the costs of registering property and establishing a business.

Central and Eastern European cities dominated the category, highlighting the relative competitiveness of the region and underlining the competition Ukraine faces as it seeks to attract greater international investment to the country. Alongside Ukraine’s pair of entrants, Poland and Lithuania both had two ranking cities, while Romania’s Iasi and Bulgarian capital Sofia 68

also entered the global top ten.

Kyiv and Lviv are not the first Ukrainian cities to gain recognition from Financial Times division fDi Intellence. A 2018 survey by the fDi service ranked eastern Ukraine’s Kharkiv as Europe’s most cost-effective large city. Of the 40 large European cities studied, Kharkiv was found to have the lowest average annual salaries for skilled and semi-skilled workers, lowest cost of establishing a business, and most competitive rental rates for grade A office space. It also had the second lowest costs for electricity and corporation tax.

This latest ranking is a further indication of Ukraine’s rising international investment profile as the country experiences a period of sustained economic growth. Ukraine’s GDP has risen for three consecutive years and is set to remain on an upward trajectory in 2019-2020. Ukraine has also made steady if unspectacular progress during recent years in the World Bank’s annual Ease of Doing

Business ranking, climbing consistently from a low point of one hundred and fortieth position in the 2013 report to occupy the seventyfirst place in the 2019 edition.

Financial Times fDi Smart Locations of the Future 2019-20

TOP 10 FOR COST-EFFECTIVENESS 1

Skopje Macedonia

3

Kaunas Lithuania

2 4 5 6 7 8 9

10

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Sofia Bulgaria

Gdansk Poland Kyiv Ukraine

Wroclaw Poland Iasi Romania Lviv Ukraine

Vilnius Lithuania Hanoi Vietnam

Ukrainian Banking Industry Awards Members of Ukraine’s banking and financial services sectors gathered

in Kyiv in late April for the latest edition of the annual Financial Club

Awards, which recognizes the contributions of industry leaders. This year’s winners included Credit Agricole’s Larysa Bondarieva, who was

named Corporate Banker of the Year for 2019. The event also saw the presentation of the latest Top 50 Leading Ukrainian Banks ranking,

with state-owned Oschadbank taking first place for the fourth year in a row following its post-Maidan transformation into a leading exponent

on innovation in the Ukrainian banking sector. The spring ceremony in the Ukrainian capital featured special recognition for the National

Bank of Ukraine’s First Deputy Chair Katerina Rozhkova, who received an award for her contribution to the development of Ukraine’s financial market.

FINANCIAL CLUB 2019 AWARDS Leading Ukrainian Bank

Oschadbank

Corporate Banker

Larysa Bondarieva, Credit Agricole Bank

Leading Manager

Retail Banker

Financial Director

Chief Operating Officer Classic Deposits Saving Deposits Cash Loans Card Loans

Automobile Credits Mortgage Loans

Premium Banking

Branch Services for Accountholders Internet Banking Mobile Banking Salary Services Overdrafts

SME Loans

Services for Legal Entities Cash collection Services

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Volodymyr Lavrenchuk, Raiffeisen Bank Aval Sebastian Rubaj, FUIB

Dmitry Serezhin, Alfa-Bank Tamara Savoshchenko, Ukrgasbank Alfa-Bank

TAScombank Idea Bank

Oschadbank

Credit Agricole Bank Globus

Alfa-Bank FUIB

PrivatBank PrivatBank

Oschadbank Kredobank

Raiffeisen Bank Aval Ukrgasbank

Oschadbank

networking events

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Burns Night Celebrations in Ukraine Ukraine celebrated Scottish national holiday Burns Night in April with a gala din-

calendar. Kyiv Lions Club president Natalia Koval welcomed guests together with

become one of the annual highlights on the international community’s cultural

with this year’s recipients including the Children’s Cardiac Centre.

ner hosted by Kyiv Lions Club at the Hilton Hotel in downtown Kyiv. This was the twenty-first Burns Night extravaganza in the Ukrainian capital, where it has

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traditional Burns Night chieftain Stuart McKenzie and host for the evening DJ Pa-

sha. As always, the event focused on raising money for worthy Ukrainian causes,

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and finally

Ukrainian salaries return to pre-war levels

Average salaries in Ukraine have returned to pre-war levels in US dollar terms as of March 2019, according to the latest figures released by the State Statistics Service in early May. The new average monthly pay of USD 385 is now only marginally lower than the figure of USD 394 reported in March 2013, representing a remarkable recovery following the precipitous drops of 2014-15 during the height of the economic crisis caused by the Revolution of Dignity and subsequent Russian invasion of Crimea and eastern Ukraine.

This new average salary figure still leaves Ukraine trailing some distance behind other Central European nations in terms of monthly incomes, but the country’s recent salary growth rate is nonetheless impressive. Ukrainian salaries are now up by 21% yearon-year, and stand at comfortably more than double the low point reached in March 2015, when average wages dropped to just USD 172 per month.

A number of factors are driving this recovery. The realities of largescale labor migration since 2014 among skilled Ukrainian workers have forced many of the country’s largest employers to increase monthly rates dramatically or risk severe staffing shortages. Meanwhile, the slow but steady growth of the Ukrainian economy is also pushing wages up. Ukrainian GDP has increased annually for three

consecutive years and looks set to remain on this upwards trajectory for the coming few years.

Some suspect that Ukraine’s official figures for monthly wages may not offer a complete picture of the country’s economic recovery.

Many analysts believe real average income levels in today’s Ukraine are actually significantly higher than the USD 385 figure currently touted. Between 30% and 40% of the Ukrainian economy is still in the shadows, meaning that a large percentage of Ukrainians continue to receive salaries unofficially. In practical terms, this often means direct and untaxed cash payments. Meanwhile, state statistics also fail to take into account the myriad illicit income streams and casual corruption schemes that remain common features in many sectors of the Ukrainian economy.

A further factor that could potentially alter Ukraine’s average salary indicators is the growing wealth within the country’s booming IT sector. Ukraine’s hundreds of thousands of IT professionals are often employed as individual entrepreneurs and do not necessarily feature in official state salary statistics. However, with average wages in the sector currently more than four times higher than the national figure of USD 385 per month, the inclusion of IT workers would likely boost the national average significantly.

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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