Business Ukraine June 2015

June 2015

‘Turkey in Ukraine’ issue sponsor

TURKEY IN UKRAINE Special focus on Turkish-Ukrainian relations: from investments in airlines, retail, banking and telecoms to experience sharing on reforms and development

Also inside: Monthly American Chamber of Commerce in Ukraine Newsletter

JUNE 2015 This month Business Ukraine focuses on Turkish-Ukrainian ties.

Ukraine’s Central European neighbours are often held up as ideal reformist models for Kyiv, but fellow Black Sea nation Turkey may be an even better fit for EU-ambitious Ukraine.

June 2015

‘Turkey in Ukraine’ issue sponsor

TURKEY IN UKRAINE Special focus on Turkish-Ukrainian relations: from investments in airlines, retail, banking and telecoms to experience sharing on reforms and development

Also inside: Monthly American Chamber of Commerce in Ukraine Newsletter

From the editor

Maidan metamorphosis reflects Ukraine’s coming of age

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hen I first arrived in Ukraine in the late 1990s, Kyiv’s Independence Square (Maidan Nezalezhnosti) was still dominated on one side by a gigantic communist hammer and sickle facade, while the imposing Moskva Hotel loomed over the entire square, monopolizing the skyline. These twin reminders of the Kremlin’s overbearing influence on Ukraine seemed to serve as symbols of a pseudo-independence which many ordinary Ukrainians struggled to take seriously, and some openly mocked. Eventually, the hammer and sickle were removed and the hotel was renamed, but the sense that Ukraine remained in some kind of geopolitical limbo lingered.

Meanwhile, Independence Square was given a makeover, becoming a shopping mall featuring an eclectic array of architectural elements which reflected the lack of consensus over the nature of Ukraine’s post-Soviet national identity. The new-look Independence Square finally gained gravitas as a national landmark when it served as the epicenter of the 2004 Orange Revolution, but this status proved surprisingly fragile and was largely eroded by the subsequent failure of the Orange revolutionaries to live up to the initial optimism of the uprising. Instead, Independence Square reverted to its previous existence as a largely apolitical arena, popular for live concerts June 2015

and favored by ice cream-munching day trippers. Maidan, as it is universally known to Ukrainians, still served as a venue for occasional political rallies, but in the jaded and cynical post-Orange Revolution environment, these attempts to ape the people power protests of 2004 were widely distrusted and seen as manufactured counterfeits.

All this changed during the Euromaidan protests of winter 2013-14.

Against all expectations, millions of ordinary Ukrainians once more flocked to Maidan to demand social justice. The square played such a central role in proceedings that it actually lent its name to the entire protest movement. For the second time in a decade, Maidan became the focal point of a popular uprising in support of European values and democratic freedoms. This status as the country’s main national stage was consecrated with the blood of the Heavenly Hundred, whose deaths on and around Maidan in early 2014 marked the terrible climax of the protest movement. Along the way, the very word ‘Maidan’ entered the international lexicon as a term for popular protests against authoritarian regimes.

Today, Maidan is no longer a venue for pop concerts and garish public holidays. Festivities are now generally held on Kyiv’s other central squares. Maidan has become a sacred place where people come to pay their respects to the victims who died there in early 2014, and to those who have since given their lives in the defence of Ukrainian independence. It is no coincidence that Maidan regularly hosts memorial ceremonies for fallen soldiers, or that it now serves as the essential destination for all visiting dignitaries. What was once a square of mixed meaning, which seemed to reflect Ukraine’s incomplete independence, has instead become a spiritual lodestar for the entire nation and a powerful symbol of the new Ukraine. The events of the past eighteen months will likely come to be seen as the period in history when the Ukrainian nation finally came of age, and nowhere is this emerging sense of national self-awareness more visible than on Maidan.

Peter Dickinson Chief Editor 3

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ince the independence of Ukraine, Turkey has been trying to develop a mutually rewarding relationship with this important Black Sea neighbour. Geography, as well as a mature view of history between the two countries, have facilitated the emergence of the political will and the business logic needed to build a closer bilateral relationship. As a result, we established a strategic partnership between the two countries in 2011, and we now have regular high-level meetings to explore ways of advancing relations in a wide spectrum of areas, ranging from commercial ties to defense cooperation.

The problems which Ukraine faces today constitute a challenge to Turkey’s objective of helping to build zones of regional cooperation, peace and prosperity in its region. That is why, in addition to what friendship requires, Turkey’s own national interest directs us to support Ukraine in its efforts to fulfill the aspirations of its people, build a strong democracy, establish peace and rule of law through inclusive political and economic reforms, and carry out a successful integration process with Europe - a path that Turkey has also chosen for itself. Ukraine’s independence, sovereignty and territorial integrity, including Crimea, is an asset for the region. This asset, if well-understood and its potential well-harnessed, will serve the whole region along the east-west and northsouth axes. That is why it needs to be protected.

And that is why the editor’s choice for the cover of this issue of Business Ukraine magazine, the traditional Turkish blue bead meant to protect one from misfortune, is so fitting.

Turkey’s current vision for Ukraine, in additional to political support, puts an emphasis on economic cooperation and experience sharing to aid the process of transformation. High-level bilateral contacts are held mainly within the context of High Level Strategic Cooperation Council Meetings (HLSC) under the co-chairmanship of the Presidents of Turkey and Ukraine, and Joint Strategic Planning Group (JSPG) meetings under the co-chairmanship of Turkish and Ukrainian Ministers of Foreign Affairs – which also serve as preparation to the annual HLSC meetings – the most recent having taken place in Kyiv in March.

We also have working groups operating under the guidance of relevant Ministers from both countries. In the process, Turkey has pledged soft loans as well as humanitarian aid which has begun to arrive incrementally.

June 2015

About the author: Yonet C. Tezel is the Turkish Ambassador to Ukraine While tourism and especially mixed Turkish-Ukrainian families provide the basis of human contacts, a substantial medium for interaction has been the economic and commercial contacts driven mainly by the private sector. In 2014, bilateral trade volume stood, unfortunately, at USD 6 billion. This low figure does not reflect the true potential between our countries. That is why the Presidents agreed to work towards attaining a trade volume of USD 20 billion by 2023. One important requirement for the attainment of this goal will be the speedy conclusion of the ongoing negotiations of the bilateral Free Trade Agreement between Turkey and Ukraine. Businesses from both sides will benefit from this arrangement.

There are more than 500 Turkish and TurkishUkrainian companies of different sizes in Ukraine.

Against all odds but in line with our general advice, most of them continue their operations, or at least keep a presence, in so far as business logic allows. They share with our Embassy a common belief in the future of Ukraine. But, like other international business partners, they have important expectations for a well-governed, well-reformed Ukraine where business is a matter of market economy and fair competition. Realistically, most of them are all too aware of the difficulties and irregularities that need to be overcome.

There are two major Turkish-Ukrainian business associations working in Ukraine, the TurkishUkrainian Businessmen Association (TUID) and the Turkish-Ukrainian Industrialists and Entrepreneurs Union (TUSIB). Both offer valuable

guidance to members and other Turkish businesspeople contemplating investment in Ukraine.

They have important ideas about where some critical problems lie and how they can be overcome. They expect no privileges, only fair competition and rule of law. As reforms pick up, Turkish businesses will increasingly deliver what they are best at; providing quality products and services at reasonable prices. We already have some positive stories of successful new Turkish investments in Ukraine. The well-known standing of Turkish Airlines, which is poised to grow with additional flights and destinations in Ukraine, and recent initiatives by Turkish firms like life:), with its success in the 3G tender, and nascent operations of AtlasJet, also signal new investments. But these need to become the norm, not remain the exception as they now are. We are determined to help Ukraine make this positive change.

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Turkish-Ukrainian relations: furthering transformation through cooperation

One way to help Ukraine is to enhance existing cooperation via mutual investments and experience sharing. We already have complementary economies. Ukraine has a lot to offer for Turkish industries and SMEs. In return, thanks to a business environment integrated with that of the EU and international standards in general, Turkey has a lot to offer for large Ukrainian companies seeking to expand and diversify their investments. At a time when Ukraine needs foreign direct investments and service sector restructuring with an internationally more competitive mindset, and at a time when Turkey has a lot of experience to share in these areas, it takes only a brief glimpse into bilateral relations to understand what more could be achieved.

In the following pages, readers will be able to find information and views about Turkish endeavors in Ukraine and what additional support Turkey can bring. There will be a special emphasis on Turkey’s public private partnership (PPP) experience, which has produced some very good results after the 1980s and especially in the last 10 years in important areas such as health care, transportation and housing. There are best practices as well as lessons learned from the Turkish case that might be useful for Ukraine. In response to requests, we expect to increase Turkey’s advisory contribution to Ukraine’s transformative efforts.

In addition to the PPP experience of Turkey, you will also find in the following pages the views of Turkish businessmen in Ukraine who share our hopes for Ukraine’s success.

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Economic and trade relations between Turkey and Ukraine Ties remain strong despite current climate with hopes for further growth tied to free trade deal

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kraine is one of the most important countries in the region due to its size, human resources, economic potential and strategic position, including in the energy sphere. As two countries both on their way towards greater integration with Europe, their shared location on the Black Sea coast adds special meaning and dimension to bilateral relations between Turkey and Ukraine.

The economic cooperation process with Ukraine was formalized immediately after Ukrainian independence when a Trade and Economic Cooperation Agreement was signed on 4 May, 1992. The Commission on Trade and Economic Cooperation is a useful platform on which all trade and economic issues within the scope of bilateral agreements concerning trade, economy and industry are addressed comprehensively at the highest level. The ninth and latest session of this Commission took place in June 2013, and was co-chaired by each country’s respective deputy prime ministers.

Turkey’s relations with Ukraine have intensified due to the momentum provided by high-level contacts in recent years. The High-Level Strategic Council (HLSC), which was established during the Turkish Prime Minister’s official visit to Ukraine in the beginning of 2011, elevated our relations with Ukraine to the level of strategic partnership.

Free trade talks continue

In order to further strengthen economic and commercial relations between the two countries, negotiations on a Free Trade Agreement (FTA) between Turkey and Ukraine began at the end of 2011 following a series of exploratory meetings. Since then, mutual understanding on a great deal of issues concerning the proposed FTA has been reached, but during the last one and a half years, progress has been delayed because delegations could not meet due to the severe conditions in Ukraine. Once negotiations are complete, it is anticipated that this 8

Agreement will contribute to an increase in the trade volume between the two countries, serving to eliminate trade imbalances and allow for greater product diversification.

Turkey is currently one of Ukraine’s most prominent foreign trade partners. For the last 14 years, Turkey has been one of the top three destinations for Ukrainian exports. In fact, in 2014 Turkey was the number two destination for Ukrainian exports, preceded only by the Russian Federation, and the ninth ranked country for Ukrainian imports.

(Source: State Statistics Service of Ukraine)

Growing bilateral trade

Since 1992, the trade volume between Turkey and Ukraine has increased from USD 125 million to USD 6 billion; a 50-fold increase. The adverse conditions and macroeconomic challenges faced by Ukraine in 2014 have inevitably had a negative impact on bilateral trade. Compared to the previous year, Turkey’s exports to Ukraine declined by 21% to a value of USD 1.7 billion, while imports from Ukraine decreased by 6%, falling to USD 4.2 billion. However, these figures do not reflect the full potential for trade between the two countries. Turkey believes in Ukraine’s future and supports its efforts to overcome the challenges facing the country. Despite the difficulties of the day, Turkey will continue to aim at more intensified relations with Ukraine. (Source: Turkish Statistical Institute) During the fourth session of the HLSC held on 20 March, 2015, in Kyiv, the Presidents of Turkey and Ukraine agreed on common targets in terms of increasing bilateral trade. Goals were set at USD 10 billion by 2017 and USD 20 billion by 2023. In order to reach this trade volume, the Free Trade Agreement needs to be signed as soon as possible.

Therefore, it is necessary to intensify and accelerate the negotiations of the FTA, which is an impor-

tant tool in the development of foreign trade, while also providing a more convenient environment for increasing investment.

Turkey’s experience with other countries clearly demonstrates that FTAs raise awareness in partner countries about each other’s economic and commercial potential, while also serving to improve mutual understanding among business people, thereby contributing to the strengthening of friendly ties between partner nations.

The Turkish and Ukrainian economies are mutually complementary. The major items of export from Turkey to Ukraine are vegetables and fruits - especially citrus fruits. Other important products include motor vehicles, iron and steel products, plastics, electrical equipment and appliances, knitted or crocheted textile fabrics and their accessories, mineral fuels and mineral oils, carpets and other textile floor coverings, and jewelry products.

The main import items to Turkey from Ukraine are iron and steel, raw vegetable oils, sunflower seeds, fertilizers, soya beans, rape or colza seeds, cereals, coal and briquettes from coal, wood and timber, iron ore and their concentrates.

Turkish companies investing in Ukraine

According to State Statistics Service of Ukraine, at the end of 2014, the volume of direct investments

by Turkey into Ukraine stood at about USD 200 million. However, according to other estimates, the total assets of Turkish businesses in Ukraine, including capital investments directly from Turkey and indirectly through other countries, and economic assets of Turkish citizens residing in Ukraine, actually reached the level of about USD 1.1 billion by the end of 2014. These investments were mainly concentrated in sectors such as information and communication technologies, food and beverage production, building and construction, and www.bunews.com.ua

Increasing investment despite current challenges

Despite the current challenging circumstances, we have encouraged Turkish companies and investors to remain engaged in Ukraine, and to maintain faith in the country’s potential. Many Turkish companies have chosen to stay in Ukraine even during these difficult times. Not only small and medium-sized enterprises, but also leading companies in some key areas like telecommunications and aviation, have decided to invest more in Ukraine despite the challenges they are facing.

The joint venture of Turkish company Turkcell,

June 2015

operating in Ukraine under the life:) brand, paid the highest amount to acquire the first 3G license in a tender carried out in February 2015, in what was a clear demonstration of the company’s resolve to increase its investments in the country.

Turkish Airlines, which has been operating here since the early years of Ukrainian independence, began regular flights to Kherson at the end of March 2015, and intends to expand services further. Atlasjet Ukraine is still doing its utmost to start its operations in Ukraine, and to bring a fresh wave of competitiveness to the Ukrainian civil aviation sector.

Turkey’s development assistance to Ukraine started in 1997. Since that time, in parallel with the enhancement of relations between two countries, development assistance activities continue to increase. In this context, the total value of projects realized by the Ukraine Coordinating Office of the Turkish Cooperation and Coordination Agency (TİKA) has amounted to USD 29 million.

As Ukraine moves forward with its much needed reform process, Turkish-Ukrainian economic and commercial relations will grow significantly. We expect entrepreneurs from both sides to develop win-win projects, benefitting from the comparative advantages that each partner can bring to the relationship.

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metallurgy manufacturing. In this respect, Turkish investors have provided employment opportunities to over ten thousand people in Ukraine.

Moreover, according to estimates, Turkish construction companies have undertaken nearly 160 projects throughout Ukraine worth about USD 5 billion. These include prestige projects such as Kyiv’s Boryspil International Airport Terminal D, Shakhtar Donetsk’s Donbas Arena stadium, several five-star hotels around Ukraine, and the ongoing Sky Towers Project in Kyiv, as well as bridges, trade centers, tourist facilities, residential houses and the maintenance of roads - especially in western Ukraine.

About the author: Belkis Gursel Gulec (kiev@ekonomi.gov.tr, Tel.:+38-044-3777677) is the Commercial Counsellor at the Turkish Embassy in Ukraine

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Connecting Ukraine to the world via Istanbul Turkish Airlines sees huge potential for further growth in Ukrainian air travel sector

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urkish Airlines international flights via Istanbul have become a popular hub option for Ukrainian travelers. Which global destinations have proved the most popular among Ukrainian passengers transiting via Istanbul?

Turkish Airlines has the world’s fourth largest flight network, reaching 274 destinations in 110 countries. Our network gives us the power to connect Ukraine to the world. In Ukraine, Turkish Airlines is represented in 5 cities: Kyiv, Odesa, Kherson, Dnipropetrosk and Lviv. Favourite Turkish Airlines destinations for Ukrainians include Singapore, Maldives, Kuala Lumpur, Hong Kong, Bangkok, Cairo, Ashgabad and other Middle East and Far East destinations.

Are the majority of your passengers from Ukraine generally business travelers or tourists?

The percentage of travelers who fly for business and leisure purposes is almost equal. We have student passengers and seamen. To attract more business travelers we offer Ukrainian companies the Turkish Corporate Club programme, which allows companies to reduce travel expenses while enjoying other benefits.

How have the security situation in Ukraine and the devaluation of the Ukrainian currency impacted on your business over the past year?

It is evident that the security situation in Ukraine and the devaluation of the Ukrainian currency have influenced the aviation industry in Ukraine, as well as other countries in the region. Last year we had to stop services from Donetsk and Simferopil, but we have also added a new destination, Kherson, which is proving quite successful. We are currently the only global airline serving Kherson. We plan to continue our growth in Ukraine by increasing flight frequencies to current destinations and opening new routes.

The Ukrainian air travel sector is regarded as one of the most promising in the region. Which segments of the market do you think have the greatest potential for further growth?

I agree that the Ukrainian air travel sector has big potential. The present level of flights on offer does not meet existing levels of demand. The market needs more airlines and more competition in order to provide passengers with the most appropriate prices, connections and high quality services. Growth in the number of carriers on the Ukrainian market could also see tourist passengers switching from charter to regular flights.

Ukraine’s regional airports have attracted significant investment in recent years. Does Turkish Airlines have any plans to expand its regional services in Ukraine?

Thanks to Euro 2012, some regional Ukrainian airports were reconstructed and even rebuilt. But a large number of regional airports still don’t have sufficient facilities to receive international flights.

Some don’t have CIP lounges for business class passengers, so in order to provide better service to our business

class passengers, corporate customers and frequent travelers in Odesa, Turkish Airlines launched its own CIP lounge. Turkish Airlines plans to expand its newtwork within Ukraine - in the near future we plan to open flights between Zaporizhia and Istanbul, assuming we receive the necessary permission.

How important is the Ukrainian market for Turkish Airlines in terms of the airline’s regional market share?

The Ukrainian market is one of the most important markets for Turkish Airlines.

As well as passenger flights, we also operate two freighter flights per week.

Turkish Airlines is the biggest foreign carrier in Ukraine in terms of destinations within the country, so I can say that our market share in Ukraine is quite high.

A number of international airlines have been critical of recent changes to Ukrainian aviation legislation which have created challenges to international participation in the Ukrainian market. Would you like to see the Ukrainian authorities do more to ensure equal access to Ukrainian aviation markets for all international carriers?

Turkish Airlines has one of the biggest networks in the world. Every year, this network expands via increased flight frequencies and the addition of new destinations, which gives the airline great potential to serve as a bridge between countries. In this context, we are looking to expand our network in Ukraine and serve as a bridge between Ukraine and the whole world. However, we are facing numerous obstacles to increasing our flight frequencies and to opening new destinations in Ukraine, mainly due to limited flight quotas and issues of reciprocity. Therefore, Turkish Airlines is focusing on rapidly increasing its flight frequencies and opening new destinations in other countries where flight quotas and reciprocity are not such significant issues.

About the author: M. Hakan Yilmaz is the Turkish Airlines General Manager in Kyiv

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www.bunews.com.ua

Ukrainian mobile communications

and the 3G revolution

life:) CEO Erdal Yayla says new mobile technologies can help transform Ukrainian society

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rdal Yayla has served as acting CEO at mobile operator life:) since February 2014, ten years after first joining the company following a career which had earlier seen him in executive roles at PwC and Turkcell.

Marmara University graduate in Business Administration Mr. Yayla now finds himself at the helm of one of Ukraine’s major mobile operators as the launch of 3G technology in the country revolutionizes the Ukrainian communications sector. He spoke to Business Ukraine magazine about the opportunities created by the arrival of 3G, and shared his perspective on the likely impact this breakthrough will have on everything from the way Ukrainians do business, to significant lifestyle changes due to access to high-speed internet everywhere and all the time.

What does the introduction of 3G licenses mean for the Ukrainian telecoms market?

Ukraine’s mobile communications sector is crucial to the development of the broader economy. A look at recent global statistics illustrates that the world is becoming more and more mobile on a daily basis. Mobile broadband subscriptions grew globally by around 30% in 2014 year on year, while mobile data traffic rose more than 50% in Q1 2015 compared to 2014 (this trend closely mirrors the experience of life:) which saw data traffic growth in 2014 of 51%). In general, people are increasingly using smartphones as part of their everyday lives, and are increasingly communicating with their smartphones via social media. The introduction of 3G technology has been shown to boost economic growth in countries where it is launched. As well as supporting the growth of the wider economy, the introduction of 3G in Ukraine will also create thousands of new jobs.

Ukrainian consumers have been waiting for 3G technology for some time. Our aim to provide it as soon as possible and to as many consumers as possible. We were the first mobile operator on the Ukrainian market to introduce 3G technology in the country, launching 3G in Lviv on 19 May, and in Kyiv on 4 June. In the meanwhile, we have included 30 cities in our test program and plan to provide commercial usage in cities where 3G is currently working in test mode.

We have reason to be optimistic about the 3G services life:) is introducing: we have the youngest network, which means less preparation work is required, and we have secured the most attractive frequencies.

Moreover, our network has the highest level of smartphone penetration (36%), while penetration of 3G-compatable devices is even higher at 40%, which is more than in some countries with developed 3G services.

We are also witnessing a strong growth trend in Ukrainian mobile data traffic consumption, which is evidence that Ukrainian subscribers are ready for 3G services.

The launch of 3G technology in Ukraine will enable operators to provide a wide variety of services and to expand the range of tariff plans on offer. In order to facilitate the healthy development of the telecommunications market, subscribers should also have the opportunity to choose freely between operators. This implies the elimination 12

of existing market barriers and non-competitive practices, including things like the ‘club effect’ caused by the practice of dumping on-net calls and overcharging for off-net calls. The issue of unequal radio frequency spectrum distribution among operators also needs addressing.

What are the next technical priorities for the Ukrainian telecoms market?

It is probably still too early to comment on the next steps in Ukraine’s technological progress. Today, the focus needs to remain on full 3G implementation. Additional technological progress will depend on a number of factors. 4G requires handsets that will support it, which are presently not widely in use in Ukraine, so there are question marks over how soon the leap to 4G could come. Then there is the issue of the limited number of frequencies and the question of their fair and equal re-allocation in order to provide as many subscribers as possible with access to innovative new techwww.bunews.com.ua

Which segments of the Ukrainian telecoms market offer the most exciting growth opportunities?

The launch of 3G opens up a range of new areas for growth, including mobile finance, e-commerce, e-governance, mobile health and much more. E-commerce could benefit considerably from the greater technological opportunities of 3G. According to research company “TNS Ukraine”, the number of e-shoppers in Ukraine is growing despite the challenging current economic environment in the country. In September 2014, 3.5 million Ukrainians made internet purchases, while in April 2015, the figure had risen to over 3.9 million. The launch of 3G and expansion of internet sales services will only add to this robust growth trend.

More Ukrainians are online than ever before – 62% of Ukrainians had internet access in April 2015, compared to 59% one year earlier. According to research conducted by the Google Consumer Barometer in 2014, only 5% of internet users in Ukraine did their shopping via smartphones, while a further 2% used their tablets for purchases. An additional 30% of users researched products via their mobile devices. As a mobile operator, we believe that this area represents huge potential for growth once 3G launches across the whole country. Experience elsewhere demonstrates that the percentage of ‘mobile shoppers’ is highest in countries with functioning 3G and 4G networks. This illustrates the fact that there is a direct correlation between e-services and new technologies.

How has the growing domination of smart phones with mobile internet access impacted on life:)’s business model?

We have designed specific smartphone strategies to reflect the fact that our network tends to attract modern and technologically advanced mobile users. The goal of these strategies is to make the life of smartphone users as comfortable as possible. We have designed special tariffs taking into consideration the interests and requirements of these users, w hile providing them with a range of mobile internet options.

This approach has already produced results. In 2014, we saw data traffic growth among users of 50.8%. The penetration of 3G-ready smartphones in our network has reached 40%, which means four million subscribers. We anticipate that they will become 3G subscribers as soon as our network launches in their cities.

Mobile phones are evolving from telephone handsets into multi-purpose corporate tools. How can mobile operators meet the growing demand for more executive apps and diverse professional functions?

With each passing year it is getting harder and harder to pigeonhole modern mobile devices into traditional categories like telecommunications, computer hardware, and consumer electronics. This is because the mobile subscribers can use their phones to do everything from taking pictures and resolving working issues via emails, to surfing the internet, downloading and watching videos, and transmitting their geographic location.

The increasingly high functionality of modern mobile devices brings with it a number of demands and opportunities for operators. The most important of these is to create synergy between different services such as voice, data, and SMS services, as well as managing convergence with other industries to make sure phones enjoy maximum functionality. For example, this can mean convergence in terms of GSM and finance services, GSM and smart-home services, e-commerce and e-governance.

Mobile medicine opportunities also have a wide scope for technological applications. Our shareholder, Turkcell, has made huge progress in this sphere, having introduced mobile devices in Turkey capable of measuring blood pressure and sugar levels at a distance. This provides patients with the opportunity to be monitored by doctors, regardless of their current location. They could be spending at their mountain holiday home, or situated in a faraway suburban area, but they can still receive the same level of medical services as urban residents located in cities with the best clinics. This is a good example of how GSM and medicine can work together in order to bring benefits to society as a whole.

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nologies. Nevertheless, we are sure Ukraine is now moving in the right direction technologically and will continue along this path at a faster and faster pace.

What can Ukraine learn from the experience of rapidly expending telecoms markets like Turkey?

There are a number of lessons from the Turkish experience that are worth studying and learning from. The first area relates to technological growth, while Turkey’s experience with market regulation also offers potentially useful insights.

In terms of new technologies, we would like to use the experience of Turkey and Turkcell as we look to introduce a number of services to the Ukrainian market such as mobile finance and mobile medicine. Both have the potential to significantly improve the quality of life in Ukraine.

Turkey has also been involved in the implementation of a telecoms regulatory process that has succeeded in creating a level playing field for players. The result has been improved competition, consumer benefits and greater investment. Price control mechanisms have been introduced to prevent non-competitive practices among dominant operators, while retail price measures have sought to reduce the network (club) effect. Also, Turkey introduced consumer-friendly mobile number portability to the market and to create a framework for fair and competitive spectrum management. All these instruments of regulation are required on the Ukrainian market, and can help make competition fairer and more predictable for all market players.

“The launch of 3G opens up a range of new areas for growth, including mobile finance, e-commerce, e-governance, mobile health and much more” June 2015

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Turkish lessons can benefit Ukraine TUID’s Burak Pehlivan says Turkey offers Ukraine practical roadmap for effective reform

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can still clearly remember receiving a phone call in the last days of 2014 from the Ukrainian Foreign Ministry, inviting me to make a speech regarding cooperation between public and private sectors at a meeting hosted by the American Chamber of Commerce in Ukraine and supported by USAID. The meeting was part of USAID research into possible precedents for economic and structural reforms in Ukraine. Turkey featured prominently in this research, leading to a high-level delegation trip to Turkey involving the participation of Ukrainian politicians, ministry officials and business community representatives. The delegation visited the techno-city at METU (Middle East Technical University) and a range of other industrial zones and similar institutions. The goal of our subsequent meeting in Kyiv was to share their findings from this trip and to evaluate how these findings might apply to Ukraine. I accepted the invitation to participate, and can say without any hesitation that I experienced one of the most beautiful and inspirational days of my entire life.

Ms. Tetiana Korotka, who at the time served as Director of the Public and Private Sector Cooperation Department at the American Chamber of Commerce and project manager of USAID, led the delegation that visited Turkey. Ms. Korotka’s positive analysis of Turkey’s economic development, and her portrayal of Turkey as a developed rather than developing country, were enough to fill me with a huge sense of pride. The evaluations of other delegation participants were similarly enthusiastic. The general impression created by the conference was that it would be useful to foster greater economic and trade ties with Turkey and to seek to learn as much as possible from Turkey’s development model. This recognition of the importance of the Turkish model mirrors current attitudes within the Ukrainian business community, which has made no secret of its interest in the Turkish experience. This is a healthy and logical process. While it has become something of a tradition to compare Ukraine to fellow east European nations like Poland, the similarities between Turkey and Ukraine are impossible to ignore.

Ukraine does not enjoy EU advantages of 1990s

The reform experience of the newer EU member states, especially the Visegrad group of nations (Poland, Hungary, Slovakia and the Czech Republic) are undoubtedly very important for Ukraine. However, it is also crucial to keep in mind the fact that the circumstances facing Ukraine today are very different from the situation in the 1990s. In the early post-Cold War years, public opinion formed in the Visagrad nations against a backdrop of the reunification of Germany and widespread expectations of everlasting peace and prosperity in the EU zone. Meanwhile, high growth rates facilitated substantial funding in support of reform efforts. In the 1990s, foreign development support to Poland reached 27% of the country’s 1990 GDP, and since then the West has continued to generously support and reward Poland’s European choice.

Expansion fatigue continues to plague EU The situation within the EU is very different today. Clear majorities in a number of key EU member states are opposed to further EU enlargement, while many member state populations within the EU are preoccupied with their own economic recoveries. As it looks to pursue EU integration, Ukraine is confronted by many of the same obstacles that have served to dilute enthusiasm for Turkish integration. Both countries are often perceived as having less developed economies, relatively low average incomes, and large populations. Even if the Russian factor is left to one side, Ukraine most overcome considerable problems if it is to succeed in integrating into the EU. The relationship between Ukraine and the EU therefore shares more similarities with the ties between Turkey and the European Union than it does with the relationship between Brussels and the former Warsaw Pact nations of the 1990s.

EU integration process a marathon not a sprint

In terms of Ukraine’s potential future EU and NATO membership, both France and Germany – the two nations dubbed the twin engines of the EU – have expressed reservations. Indeed, there has been very little support for granting Ukraine the status of EU candidate country. Turkey is already a NATO member and EU candidate, but German and French attitudes towards Turkey in recent years can hardly be characterized as constructive. Nevertheless, Turkey has not given up, and Ukraine must remain similarly determined and resolute.

Turkey’s road towards EU integration has been a long one. In 1963, a partnership agreement was signed, and in 1987 Turkey officially applied for membership. A Customs Union deal was then inked in 1996, but Turkey only gained candidate country status in 2004. Although negotiations have taken a long time, the process continues and Turkey continues to benefit in terms of social, economic and political advantages. Ukraine will also benefit from the integration process. It is important to remain patient and appreciate that this is a marathon, not a sprint.

Ukraine could benefit from EU and IMF anchors

The process towards EU membership, together with the IMF programme introduced in Turkey in 2001, have served as important anchors and catalysts for Turkey’s economic, social and political reform processes. It is possible that we will see something similar in Ukraine in the coming years. Turkey’s experience with both the EU and the IMF offers important examples that Ukraine can benefit from. Cooperation in the public and private sectors must now improve in this context.

It is my pleasure to see a second conference focusing on Turkey’s public private partnership experience taking place in Kyiv on 22 June, and I am happy to be participating once more. Ultimately, the challenges of creating a democratic and economically prosperous Ukraine governed by the rule of law cannot be met by anyone but the Ukrainian people themselves. However, the reform experiences of friendly nations such as Turkey will undoubtedly prove useful for Ukraine.

About the author: Burak Pehlivan is Deputy Chairman of the International Turkey-Ukraine Business Association (TUID)

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Ukraine and Turkey: Black Sea partners Large-scale projects could help to cement strategic partnership between Turkey and Ukraine

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kraine and Turkey have a long history of cooperation and started intense bilateral contacts in all spheres immediately after Ukraine gained its independence in 1991. This bilateral cooperation developed quickly, and was eventually crowned by the proclamation of a strategic partnership and the creation of a High-Level Strategic Council in 2011.

Friendly political ties pave way for closer cooperation

As of 2015, Ukrainian-Turkish bilateral relations rest upon solid foundations including a number of specific pillars. Firstly, for more than 20 years, ties between the two states have developed against the backdrop of a positive political background. With no major political problems or obstacles to upset ties, the key characteristics underpinning Ukraine-Turkey relations throughout the past two-and-a-half decades have been friendliness, mutual understanding and respect.

Secondly, there is a diverse network of intergovernmental and sectoral interaction between Turkey and Ukraine, including commissions, working groups, and a range of bilateral councils. Taken together, this diverse range of official bodies covers nearly all areas of bilateral cooperation, from trade, transportation and energy, to issues related to humanitarian and cultural spheres. This allows for a continuous dialogue on the pressing issues shaping the bilateral agenda.

Black Sea nations with much in common

Thirdly, the geographical proximity of the Ukrainian and Turkish markets, coupled with their mutual attractiveness and the prevailing favorable political conditions between the two countries, have led to considerable volumes of bilateral trade and investment.

Trade and investment are among the main strategic links between the two countries. Turkey currently ranks second among the destinations for Ukrainian exports. Meanwhile, the Turkish business community significantly contributes to the Ukrainian economy in a range of sectors such as construction, telecommunications and finance.

Presidents agree on PPP initiative

Nevertheless, bilateral relations could still be further strengthened by large-scale projects, in order for Ukraine and Turkey to be considered truly strategic partners. Shrinking bilateral trade and investments volumes over the last year, due to circumstances beyond the control of Ukraine and Turkey, pose a challenge for both governments and businesses, forcing them to find new ways to develop cooperation and to search for mutually beneficial projects.

For this purpose, the Ukrainian-Turkish Working Group on Public-Private Partnership was created as an outcome of the Strategic Council meeting chaired by the Presidents of the two countries in March 2015. This decision aims to stir bilateral cooperation and create favorable conditions for further investments.

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About the author: Olga Chubrykova is Deputy Director General for Europe 2 in the Ministry of Foreign Affairs of Ukraine. She has served twice in the Embassy of Ukraine in Ankara. Chubrykova holds a PhD in oriental studies. She has published a number of articles on modern Turkish foreign policy and authored the book ‘The Turkey That We Don’t Know’.

Ukraine can benefit from Turkish experience The mechanism of the PPP Working Group, while allowing the Ukrainian side to benefit from extensive Turkish experience in implementing PPP projects, will also generate additional opportunities for Turkish investors in Ukraine. It should also have an important social dimension when applied in the areas where it is most needed - for instance, in the sphere of healthcare or the renewal of ruined infrastructure in the east of Ukraine. In this regard, intense joint interaction between governments and businesses is of the utmost importance. UkraineTurkey PPP cooperation creates grounds for exactly the kind of new ideas which are now needed. Therefore, there is reason to be confident that this initiative could become another success story in the narrative of Ukraine-Turkey relations. www.bunews.com.ua

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Public-Private Partnerships and the Turkish experience Turkey’s PPP success story could provide Ukraine with practical model to emulate

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urkey is one of the most prolific users of private sector partnerships in Eastern Europe and Central Asia to improve infrastructure. According to newly-released data from the World Bank’s Private Investment in Infrastructure database (PPI), Turkey came in second place globally for public-private investment in infrastructure in 2014, with USD 12.5 billion in investment in 17 new projects in the energy and transportation sectors.

Turkey’s experience can serve as a useful model to stimulate broader use of public-private partnerships (PPPs) in Ukraine, which faces major challenges in rebuilding its infrastructure and economy. To accelerate this process, the USAID Public-Private Partnership Development Program is joining the American Chamber of Commerce in organizing a conference on PPPs in Turkey and Ukraine on June 22, 2015. The event in Kyiv follows a successful study tour to Istanbul and Ankara in 2014, also organized by P3DP, which gave Ukrainian national, regional and municipal officials the opportunity to learn from their Turkish counterparts while having a first-hand look at PPPs in action.

The conference will showcase a number of successful cases of PPPs in Turkey in sectors of great interest to Ukrainian officials and private investors, including projects in healthcare, transportation, marinas and industrial park development. Government officials from Turkey and Ukraine, as well as the United States, will be joined by international PPP experts and leaders of business to learn how significant barriers were overcome in Turkey to achieve amazing results and, most importantly, how these approaches can potentially be adapted 18

and applied in Ukraine to address the rapidly growing need to rehabilitate existing or build new infrastructure.

With strong growth expected in the region, the Turkish government is improving infrastructure to accommodate increasing demand that is both a requirement for and a result of a thriving economy. With its strategic location on the Bosphorus Straits linking European and Asian trade routes, Turkey stands to gain solid returns from investment into sectors also of great import to Ukraine.

Turkish PPP experience: road transport

The Eurasia Tunnel Project is one of the most ambitious PPPs underway in Turkey today. A 14.6KM tunnel will connect Asia and Europe under the Bosphorus Straits. This greenfield Build-Operate-Transfer (BOT) project will reduce travel time from 100 to 15 minutes. A consortium of Turkish and South Korean firms won the tender in 2008 for a period of 29 years and ten months.

The tunnel will be transferred to the government after the operating period.

Total investment cost is estimated at USD 1.245 billion.

The Gebze–İzmir Highway Project is the biggest PPP in Turkey to date. Tendered in 2010, the project aims to construct a 433KM motorway from Gebze, a town on the Sea of Mamara 65 kilometers from Istanbul, to İzmir, a major port city on the Aegean Sea. The USD 7.3 billion project will shorten the existing route by over 140 kilometers, cutting travel time between Istanbul to İzmir by more than half. The PPP is structured as a 22-year, four-month BOT con- : www.bunews.com.ua

Domosphera Mall (3rd floor) 101 Stolichne Shosse, Kyiv +38 (044) 252-73-80 www.harem-kylymy.com.ua

The International Turkish-Ukrainian Business Association (TUID) with more than 200 member companies is proud to invest in the future of Ukraine Cem Murat Aytaรง TUID Chairman of the Board

Our membership includes:

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: tract with annual income guaranteed by the General Directorate of Highways,

a state-owned enterprise. Nine banks, including Deutche Bank and leading Turkish banks, provided USD 5 billion loans in June 2015. The project is being implemented by a consortium of four Turkish companies, and is expected to be completed in 2018.

The Third Bosphorus Bridge PPP Project in Istanbul, consists of construction of a 1.4KM suspension bridge and 115KM of the Northern Marmara Motorway.

The total project cost is USD 2.5 billion.

Airports and ports

Turkey has had success introducing the PPP model in the airport and port sectors. For example, Turkey’s major airports – including two in Istanbul, one in Ankara and one in Izmir – have been developed and operated under the PPP model. The Third Istanbul Airport Project is the most recent airport PPP initiative. Expected to cost over USD 9 billion, the new airport will have an annual capacity of 150 million passengers.

Another major PPP is a new greenfield container terminal at Asyaport on the Marmara Sea, approximately 70KM from Istanbul. It will serve as a transshipment hub with an annual capacity of 1.9 million twenty-foot equivalent units (TEUs). The terminal is expected to begin operations at the end of June 2015.

Total project cost is estimated at USD 415 million. The project will help Turkey develop its water transport infrastructure, which will increase shipping capacity and lower cost with a smaller environmental impact than road shipping.

Power sector PPPs

Turkey is expected to double its energy infrastructure in the coming decade. In 2014, it launched 13 new projects with private sector investment in the sector.

Much of this was driven by three large-scale privatizations of thermal power plants. Government incentives have also stimulated investments in the wind sector, which increased as a total of energy output from 0.8% in 2010 to two percent in 2012. Turkey aims to have 20,000 megawatt of installed wind-power capacity by 2023, and seeks to build 600 megawatts of solar power plans to quadruple investment in geothermal energy.

Solid waste management

Mamak Landfill Waste Management Project in Ankara uses a variety of solid waste management practices to minimize the volume of waste being dumped in the landfill, including recycling, capturing landfill gas to generate 26 megawatts of electricity, and using waste heat for greenhouses. Operations are managed by a private operator selected through a tender, who benefits from income derived from managing the site. Up to 85% of waste at the landfill is recycled.

Industrial and technology parks

Industrial and technology parks have also been successfully developed in Turkey using the PPP model. These include the ODTÜ Teknokent Science and Technology Park, founded in 1991 as the result of collaboration between the Middle East Technical University, the Ankara Chamber of Industry and Commerce, and several private companies. Also of interest is the OSTIM Industrial Zone, a large industrial park in Ankara serving 5,000 small and medium enterprises in 17 sectors. A green technological and research hub is also being planned in Ostim.

Turkish healthcare PPPs

The Turkish government recently turned to PPPs to raise the standards in healthcare facilities by increasing diversity of services provided in light of technological developments and new medical trends. The Ministry of Health June 2015

currently aims to develop 18 integrated healthcare facilities located throughout Turkey using the PPP model. One example is the Bilkent Integrated Health

Campus Project, which envisions the design, construction and operation of a 3,804-bed hospital in a 25-year PPP. Total investment cost is USD 850 million.

PPP success factors in Turkey

PPPs have not been a success in Turkey by accident. This success is the result of a deliberate policy to increase private sector participation in infrastructure and public services. The Turkish authorities have understood the potential and have acted accordingly by establishing the legal framework to make it possible.

One key factor has been government commitment. Turkish policymakers recognize that partnering with the private sector can significantly boost the government’s ability to provide infrastructure and public services.

A strong legislative framework for PPPs has also helped. Turkey was an early implementer of PPPs in the region and has developed a solid framework for PPPs. In 1984, it passed a law allowing private sector participation in the power sector. Turkey passed further legislation to allow Build-Operate-Transfer (BOT) PPPs for other sectors, including transportation and power. By 2001, Turkey had already built 30 power plants under PPPs, providing 8,500 megawatts of power. The PPP model is also allowable for privatization. Over time, Turkish legislation has steadily improved to make PPPs easier to develop and implement in a fair, transparent way. PPP contract violations can be addressed through the judicial system or international arbitration. There is still room for further improvements in the legal framework - some international lenders were unable to obtain full guarantees, for example - but overall, the Turkish PPP environment is positive.

Strong demand has also been important in driving Turkey’s PPP success story.

A strong economy that depends greatly on transportation infrastructure has helped ensure that demand for infrastructure services will attract interest among potential investors. The Turkish authorities have also sought to use PPPs to meet public needs. PPPs in Turkey serve the public interest in visible ways, for example, by reducing traffic congestion, contributing to job growth, and providing critical services such as healthcare.

Turkish lessons can help Ukraine

Ukraine has much to gain by learning from Turkey’s PPP experience. Since 2010, interest in PPPs among Ukrainian officials has grown, a development reflected in development strategies, policies, and legislative amendments.

Ukraine, like Turkey, lies on important trade routes, which will fuel demand for improved infrastructure. Ukrainian citizens also stand to benefit from improved healthcare and education systems that take advantage of private sector investment, technology and resources.

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Developing through partnership: PPPs in Ukraine Partnering with private sector could help Ukraine modernize despite budget shortfalls

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kraine lags behind many of its neighbors, particularly Turkey, in attracting private sector investment in the infrastructure and public services sectors. Ukraine’s infrastructure, healthcare and education infrastructure have been steadily deteriorating for two decades and will require enormous sums to rebuild and maintain. Compounding the problem, Ukraine’s legal and institutional framework make it difficult to attract private investments. Corruption is systemic and public procurement practices are far from transparent. Additionally, Ukraine faces the turbulence of reform, a simmering conflict with Russia, and a seemingly endless economic crisis. The already inadequate state budget continues to shrink while the funding required to address public service needs continues to grow. The new reform-oriented government knows that the private sector has important role to play in rebuilding infrastructure. Not surprisingly, interest in public-private partnerships, or PPPs, has been steadily growing as the government looks for new resources to address these challenges.

Ukraine looks to PPPs

PPPs are not a quick fix. They are long-term contracts between the public sector and private businesses that leverage resources and allocate risks to those best positioned to manage them. The media and civil society also play an important role in ensuring that any given PPP transaction is in the best interest of the public and that the selected private sector partner delivers. Until recently, awareness of PPPs in Ukraine was low. But since 2010, the USAID-funded Public-Private Partnership Development Program (P3DP), implemented by FHI360, has been working with government to change the situation: it aims to broaden the use of PPPs in Ukraine and expand the role of private sector finance, expertise, and technology to improve infrastructure, the quality of public services, and the environment. The program provides assistance to national, regional and municipal authorities to improve the legal and institutional framework, build individual and organizational capacity to structure PPP transactions, and supports pilot PPP project implementation.

In addition to working with the Ministry of Economic Development and Trade (MOEDT) at the national level to improve laws and establish national PPP policies, P3DP has been working with oblast and municipal leaders. The program supports efforts to introduce PPPs to renovate hospitals and introduce new services, rehabilitate city parks and 22

sports facilities, improve solid waste management practices, and introduce renewable energy that can help Ukraine achieve its goal of energy independence.

One successful P3DP pilot has helped Malyn, a city in Zhytomyr oblast, substitute locally-produced wood and agricultural waste for imported Russian gas to heat three schools. P3DP worked with city officials to conduct a feasibility study, develop a financial model, conduct a legal analysis and environmental assessment, and communicate with the public and stakeholders. P3DP also prepared tender and contract documentation and brokered discussions between the city, potential bidders, and technical experts.

The winning bidder invested in two new boilers and arranged for the supply of fuel from local producers in time for the winter heating season. The revamped boiler house provided heating throughout winter for 1,700 students, reduced municipal heating costs, supported local small businesses, while contributing to Ukraine’s energy independence. Unlike natural gas, which is subject to unpredictable price and supply risks, locally-produced biofuel is plentiful, reliable, and cheap. The partner has been able to make a profit while saving the city up to 40% in heating expenses.

Such PPPs have the potential to help other cities in Ukraine fulfill their heating obligations with limited public resources. Several have approached P3DP for help with similar projects. P3DP is also working on pilot PPPs to improve and maintain recreation areas, generate electricity from landfill gas, build public parking facilities, and expand quality healthcare services.

Building PPP institutions

Long-term use of PPPs requires both capacity in government and the development of institutions that can drive PPP development. In addition to training officials through study tours, P3DP partnered with the American Chamber of Commerce in Ukraine to launch the PPP and In-

frastructure Expert Center (PIEC) with support from the Ministry of Economic Development and Trade and the Ministry of Regional Development, Construction, Housing and Communal Services.

PIEC serves as a platform for stakeholders to advocate for reforms that improve the environment for PPPs. It also promotes opportunities and offers advice on specific PPP agreements. Since its establishment in May 2014, PIEC has hosted public discussions of proposed PPP-related regulations, presented studies on proposed infrastructure projects, disseminated information about successful PPP projects, and worked with regions such as Dnipropetrovsk and Ternopil to publicize investment opportunities.

The future of PPPs in Ukraine

Although PPPs offer governments a mechanism for expanding services and infrastructure, PPPs are complex and can create problems for both the public and the private sectors if not properly administered. Additionally, corruption can undermine public trust in any PPP if the contracting process is not transparent. Lack of sufficient competition can turn PPPs into private monopolies that operate no more efficiently than state-owned enterprises.

Experience shows that if PPPs are to succeed, Ukraine must enact adequate legal reforms to allow the private sector to operate efficiently and effectively. Most importantly, government must redefine its role from providing services directly to facilitating and monitoring them, while letting the private sector deliver them.

Leaders also must learn to ensure that citizens understand the purpose and benefits of the project, taking into account any concerns raised. Because PPP projects often take a long time, strong public sector leadership and political commitment are essential to their success. Ultimately, the success of PPPs depends not only on developing mutual trust between government and private sector, but on building and maintaining public confidence.

Neighboring governments, most notably Turkey, have overcome similar challenges. Global experience suggests, however, that no single approach to public-private sector cooperation is suitable for all countries. PPPs are not panaceas for all of the ills confronting Ukraine. But for Ukraine to meet its developmental objectives, it will have to partner with the private sector, and PPPs are a proven tool for doing that. www.bunews.com.ua

INTERNATIONAL CONFERENCE

Investment in Ukraine: Public Private Partnership and the Turkish Experience The conference will cover investment and industrial development policy in both Ukraine and Turkey, Turkish accomplishments in PPPs, and explore how PPPs can contribute to infrastructure rehabilitation across Ukraine. International experts will stimulate discussion and exchange suggestions regarding specific steps to harness private sector funding and expertise for infrastructure and investment.

Conference Date: 22 June, 2015 Venue: Hyatt Regency Kyiv (5 Alla Tarasova Street, Kyiv, Ukraine) For further details please contact: The American Chamber of Commerce in Ukraine Email: chamber@chamber.ua Tel. (+380-44) 490-5800

USAID Public Private Partnership Development Program (P3DP) Email: ochala@fhi360.org Tel. (+380-44) 234-3525

Ukraine reform path mirrors prior Turkish challenges

Turkish success story could be repeated in Ukraine if important reform lessons are implemented The Turkish-Ukrainian Entrepreneurs and Businessman Association (TUSIB)

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very developing economy has no choice but to go through periods of economic crisis from time to time, and there is also widespread agreement every crisis has its own unique dynamics. Nevertheless, many Turkish observers have argued that the current challenges facing the Ukrainian economy share many similarities with the situation faced by Turkey in the 1990s leading up to the turmoil of 2001. In fact, the situation at the turn of the millennium in Turkey has often been likened to an economic perfect storm. Economic growth had been slowing for some time between 1990 and 2002. The country’s economic structure was unstable due to low public finances, while the economy was suffering from high inflation of up to 68.5% annually. The currency depreciated during this period to such an extent that banknotes where replaced on an almost monthly basis, while the banking system experienced a liquidity crisis. External factors such the 1999 earthquake, which caused 60,000 casualties, added to the economic challenges.

However, thanks to fundamental reforms carried out after 2001, Turkey managed to remain relatively strong despite the global economic crisis. Turkey was the only country in the Organization for Economic Cooperation and Development (OECD) that did not provide public sector support to the banking sector before or after the 2008 global financial crisis. Therefore, we believe that there is a lot for Ukraine to learn from Turkish experiences.

Turkey emerges as economic powerhouse

After the financial crisis in 2001, the Turkish economy has shown remarkable performance, posting steady growth over the last decade. A sound macroeconomic strategy, in combination with prudent fiscal policies and major structural reforms in effect since 2002, have helped integrate the Turkish economy into the globalized world, while transforming the country into one of the major recipients of FDI in its region, attracting USD 144 billion in FDI over the past decade. These significant improvements, achieved over such a short period of time, have seen Turkey recognized as an exceptional emerging economy, the 16th largest economy in the world, and the 6th largest economy when compared with the EU countries, according to GDP figures (at PPP) in 2013 (Source: www.invest.gov.tr). Ukraine has very close political and economic ties with Turkey thanks to close geographical position and history. Therefore, the continuing economic crisis in Ukraine also effects the Turkish economy.

To overcome current financial challenges, the Ukrainian government should do its utmost to attract foreign investment. It is the responsibility of the government and the NGOs to encourage more foreign direct investment between Turkey and Ukraine. NGOs in particular need to play an important role leading, assisting, and encouraging investors. In order to attract local and foreign direct investments we believe the Ukrainian government should work on an Investment Incentives Scheme and start to implement it as soon as possible.

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Ukraine must attract international investment It is also a fact that in order to launch any initiatives there is a need for financial support which will not be easy to find in the current conditions. The Ukrainian state budget is unable to meet significant additional demands, which means that the only reasonable solution would be to invite private investors.

If investors are to be attracted, a comfortable investment climate needs to be fostered by adopting a number of measures. One key step could be establishing an investment-friendly economy reflecting the hospitality that Ukraine is famous for. In terms of tax policy, this could mean following Estonia’s example and adopting a zero tax rate for re-invested profit, which would ensure sizeable external investments. It would be also useful to conclude bilateral agreements with European, American and Asian countries to avoid double taxation. The provision of tax holidays would also create more favourable investment conditions. More attention should also be paid to the control of contraband goods, which would attract investors will also providing benefits for local producers.

Steps could be taken to protect manufacturers via government grants, with size depending on the sphere of activity and location. Companies in less favourable locations could be offered more support and certain discounts.

Another area where the government can have an impact is through the creation of organized industrial zones in the country. This strategy can attract massive investment in manufacturing as well as in research and development activity. In order to succeed, these industrial areas need to be secure against corruption and bureaucratic pressures. A particular focus should be placed on areas where the country currently relies on imports. The most imported goods in 2014 were mineral products, energy-related materials, chemical goods, cars, and clothing.

If the necessary steps are taken, and are accompanied by the requisite political will, these steps will likely accelerate the growth of the Ukrainian economy, provide citizens with more employment opportunities, and boost industrialization. The state budget would also receive a boost as a result. It could also become possible to save the country from the existing burden of debt.

The Turkish Ukrainian Entrepreneurs and Businessman Association (TUSIB) is one of the business associations in Ukraine helping and assisting investors across Ukraine and Turkey. Our membership includes many Turkish and Ukrainian companies and professionals serving in Ukraine. The main mission of TUSIB is to assist and help Turkish and Ukrainian investors to become a true bridge for Turkish investors looking to do business in Ukraine.

TUSIB believes that collaboration finds its true meaning during difficult times.

We trust in the Ukrainian economy, because Ukraine has enough resources to become a wealthy nation with a fair distribution of income. Last but not least, we aim to spread the message: “Come wherever you are, whatever you are, come and invest in Ukraine. Come to this land of opportunities.” www.bunews.com.ua

As part of efforts by the Embassy of the Republic of Turkey to promote cultural relations between Turkey and Ukraine, Dr. Emre Aracı, a Turkish musicologist and conductor based in the UK, introduced and conducted a concert entitled ‘European Music at the Ottoman Court’ on 16 June at the Tchaikovsky National Music Academy in Kyiv. Dr. Aracı has made original contributions to the scholarship of Turco-European historical music through his pioneering research into European musical practice in the Ottoman court in the 19th century. Following the event, Turkish Ambassador Yonet C. Tezel hosted a reception.

June 2015

turkey in ukraine

European Music from the Ottoman Court in Kyiv

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Official newsletter of the American Chamber of Commerce in Ukraine June 2015

The Tortoise and the Government Andy Hunder, President of the American Chamber of Commerce in Ukraine

techniques could help Ukraine’s government in accelerating much needed reforms.

In the corporate world of result-oriented deliverables, one company which I have come across recently motivates its sales force in the following way: the slowest performing sales team of the month is given a live tortoise to feed and look after and in the office. The whole office can see that they are the slowcoaches, holding back the entire company from speedy growth. The shamed team is then inspired to put in more effort over the next month in order to avoid having to take care of the shelled creature for another 30 days.

I sometimes wonder if such motivational

June 2015

Last month I was invited to speak at the Kyiv Security Forum, joining a highly distinguished panel of speakers including Finance Minister Natalie Jaresko and internationally renowned economist Anders Aslund (both of whom I have great admiration for). The panel was proudly dubbed: “While cannons sound – Ukrainian reforms are on the march.” I expressed the view that the business community would like to see the reforms Ukraine so desperately needs as more of a sprint, but we understand that the process will in fact be more of a marathon.

Sadly, what we are seeing so far in terms of reforms is more of a leisurely stroll than a determined advance.

Giving credit where credit is due, I fully acknowledge that good things are taking place, like, for example, the launch of 3G mobile communications services: the tender process conducted by Ukraine’s government has been generally accepted as the most transparent in Ukrainian history.

This is an example of a true ‘win-win’ for

both government and business: the State coffers have been filled with billions of hryvnia; the mobile operators are happy to offer new services to increase investment and revenues; Ukrainians can now read their Facebook pages during their daily commute; but most importantly, as shown across the globe, the introduction of new 3G services can be a shot in the arm for the country’s GDP. The current government in Ukraine is seen by many international investors as being the most competent that the country has seen over the past two decades.

We at the American Chamber of Commerce are always looking for ways of further assisting this government. We hold vital and constructive talks with high-level officials.

We are focusing on ways to transform this into tangible results. Under the current conditions, where 7% of the nation’s territory is under conflict, now is the time to make a decision on how the remaining 93% of the country should progress. Our view is that the country can further proceed in retaining and expanding new investment.

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Tax Reform: Vision of the Members of the American Chamber of Commerce in Ukraine On June 16, during the meeting with Roman Nasirov, Head of the State Fiscal Service of Ukraine, Members of the American Chamber of Commerce in Ukraine presented their vision regarding the necessary steps for improving tax administration as well as issues requiring attention of fiscal authorities leadership.

Andy Hunder, President of the American Chamber of Commerce in Ukraine emphasized the key “must-haves� of the effective taxation system: clarity, transparency and predictability.

The business community, represented by the American Chamber of Commerce in Ukraine, expressed its readiness for a constructive dialogue on the development and implementation of tax reform in Ukraine.

Transparent and predictable taxation will help both the development of business activities in Ukraine, and the stability of tax revenues to the state budget.

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Our goal is to re-invent the doctor visit through affordable annual health plans, innovative technology and equipment, direct insurance billing, and your personal physician choice. Over the next few months and years we want to show you how we’re different and why good care truly matters.

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Deputy Minister for Information Policy Tetyana Popova seeks to make Ukrainian army media-savvy

interview

Ukraine’s Infowar Amazon O

ver the past year, the defence of Ukraine has relied heavily on volunteers. This has been true of the soldiers fighting in east Ukraine, and it is equally true of the information war, where a vast volunteer force of citizen bloggers, amateur reporters and online sleuths has stepped up to counter the Kremlin’s initially overwhelming information offensive.

The most prominent of these infowar volunteers is Ukraine’s current Deputy Minister of Information Policy Tetyana Popova, who has taken on a number of increasingly high-profile roles in the infowar after first volunteering for service last summer as an advisor to Ukraine’s National Security and Defence Council. A media professional with over two decades of experience in the communications industry, Ms. Popova also currently serves as an advisor to the Ukrainian Ministry of Defence, where she cuts a somewhat glamorous figure alongside the staid suits and military top brass of the country’s defence establishment.

Ukraine has a long history of prominent females in military roles, having served as the homeland of the legendary Amazon warriors who so fascinated ancient Greek historian Herodotus. Media-savvy Ms. Popova is now following in this Ukrainian tradition, bringing with her a knowledge of modern communications strategies that makes her a formidable opponent for the Kremlin, while also sometimes placing her on a direct collision course with some of the more traditional elements within Ukraine’s military hierarchy.

Letting international journalists see for themselves

Business Ukraine magazine sat down with Ms. Popova in mid-June as she was in the process of presenting the new programme to embed foreign journalists with the Ukrainian army. Securing official approval for the programme proved to be the kind of Herculean challenge that she regularly faces as she attempts to transform Ukrainian military attitudes towards the media. “You cannot imagine how many papers I had to sign! At first I was told that counter-intelligence would never allow it,” she recalls. Nevertheless, the first batches of international journalists have now been successfully embedded with Ukrainian forces, allowing them to see the realities of the frontline firsthand. “We need to invite journalists to come and see for themselves rather than hearing it from us,” she reasons.

June 2015

Old habits die hard, but Ms. Popova says despite encountering significant resistance to her initiatives at the middle-management level, she enjoys the full support of the Ministers of Defence and Information Policy. She recounts numerous incidents where she has found herself confronted by uncooperative members of the military establishment, including one particularly entertaining tale where some defence officials allegedly sought to secure her cooperation by bribing her with a bar of chocolate. Each tale ends with confirmation that the people involved have since been replaced. “We are seeing big changes in personnel. Compared to the situation one year ago, we’ve made big progress,” she says.

One of the key issues in the information war remains the presence of regular Russian army troops in east Ukraine. Despite a mountain of evidence pointing to direct Russian military involvement, the Kremlin continues to issue blanket denials while seeking to refute Ukrainian and international media claims. Ms. Popova was one of the driving forces behind the decision to provide media access to the two Russian Special Forces troops recently taken prisoner near Luhansk, and is encouraged by the level of international coverage their capture generated. Nevertheless, she also admits that information interests are not always given top priority, and claims that Ukrainian forces have actually captured over 100 Russian fighters, only to exchange most of them for Ukrainian prisoners. “The people we are dealing with over prisoner exchanges are very insistent that we should not show captured Russians in the media and claim that if we do so, they will no longer be interested in exchanging them,” she explains, adding, “I believe we should

show them, and am pushing my colleagues to do so. If the Russians don’t want to exchange them afterwards, that’s their problem.”

Countering the Kremlin’s ‘fake news’ tactics

The late 2014 decision to create a Ukrainian Ministry of Information Policy was widely criticized by the country’s media industry, leading to claims of an Orwellian agenda and accusations of Kremlin-style censorship. Opposing sides in any conflict are often prone to adopting each other’s tactics, but Ms. Popova is adamant that Ukraine’s info warriors will not be borrowing from Russia’s information policy playbook anytime soon. “The best counter-propaganda is the truth, not the fantasies created by the Russian media. We will not be repeating the Russian practice of broadcasting fake news like the story of the boy crucified by Ukrainian troops, or using Iraq War footage and claiming it is Ukraine.”

Instead, Ms. Popova wants to concentrate on getting Ukraine’s message out – both inside Ukraine and to international audiences. “I think we need to focus on strengthening our narrative, especially in the Russian language and in the occupied regions of east Ukraine,” she says. More battles lie ahead for Ms. Popova as she seeks to win support for her media initiatives among military professionals more accustomed to operating in secrecy, but she is confident that things are finally moving in the right direction. “They need to change and they are changing,” she says of the army institutions she works with. “Such attitudes might have been acceptable in the Soviet army, but not in a modern country looking to reform itself.”

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Russians ‘want to believe’ Kremlin disinformation Spiegel Online Moscow correspondent Benjamin Bidder reflects on the infowar raging over Ukraine

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ver the past eighteen months, German journalist Benjamin Bidder has found himself thrust into the maelstrom of the information war being waged over Ukraine. Since 2009, he has served as a freelance Moscow correspondent for Germany’s largest internet news site, Spiegel Online, and also regularly contributes to the print version, Der Spiegel. Mr. Bidder’s fascination with the former Soviet empire stretches back to a 2001 stint as a volunteer at a St. Petersburg orphanage for disabled children run by the charity ‘Perspektivy’, for whom he retains a deep sense of admiration. In different circumstances, the German journalist might well have been described as a Russophile, but the polarization which has taken place as a result of the Ukraine conflict has instead led to accusations of Russophobia and seen him become a target for online abuse from Russian extremist groups. Mr. Bidder spoke to Business Ukraine magazine about the unique challenges of covering a conflict which is being fought in the information sphere as fiercely as it is on the battlefield.

Russia is accused of orchestrating an unprecedented multi-media disinformation campaign over Ukraine. How has this impacted on your journalistic work while covering the Ukraine crisis?

Every morning I drown in information. As a journalist, I try to identify interesting reports, but it is a process plagued by doubts. It is physically impossible to check every story personally. A journalist’s best friend is skepticism, and it needs to be applied to all sides of the conflict. It is true that Russia systematically uses disinformation.

But you need to be cautious with other sources as well. Remember the stories claiming that Russian separatist fighter Babai was a Russian government agent? It was not true.

It is accepted international journalistic practice to present rival narratives in an objective manner - has the information war over Ukraine exposed or validated this practice?

To be honest, you won’t find too many of those ‘one side says A, the other side says B’ type of reports anymore. Why not? First of all, because it’s awfully boring for readers. Secondly, it’s often misleading. Remember what happened in Crimea. There we saw soldiers without official insignia but equipped as Russian Special Forces.

They operated like Russian Special Forces, and in 36

one place I even talked to a commander who was holding a Russian Ministry of Defence briefcase. In such circumstances, do you really have to repeat the official Russian narrative that these troops are merely local self-defense militias? I doubt it.

Russian commentators have often claimed that there is no such thing as objectivity in news coverage. Where do you think the dividing line lies between spin and deliberate disinformation?

Information can be biased. However, there is a difference between coverage which is biased due to mistakes or a lack of knowledge about Russia and Ukraine – as sometimes happens in Germany – and bias which is the result of a systematic campaign, as is the case with Russian television. Truth exists, but it is often complex and has many dimensions.

You have reported on the so-called Kremlin troll factories and interviewed alleged whistleblowers. Do you think such tactics have had any impact in shaping public opinions towards the Ukraine crisis, both inside Russia itself and among international audiences?

I recently did an interview with Ludmilla Savchuk, an activist who claims she went undercover at a St. Petersburg troll factory. However, I don’t often report on the issue of Russian trolls.

In my opinion, paid trolls have a very limited impact in Germany. Many of Putin’s supporters in Germany are clearly not paid - they believe what they say. Moreover, Elder statesmen like Helmut Schmidt who call for more understanding of Putin are far more influential than any online troll armies.

Germany is regarded as one of the key battle-

grounds in the infowar over Ukraine. How has coverage of the Ukraine crisis in the German media evolved over the past eighteen months?

It’s very difficult for me to say. I don’t watch German television a lot because I just don’t have the time. But in Germany we have seen some vocal criticism by activists and watchdogs over TV coverage of Ukraine. Some of the criticism was well-founded, some not. Sometimes I have the impression that as a consequence of this, some German channels have become very cautious in their coverage of the Ukraine conflict. I would even say they have become too cautious.

Which aspects of the Ukraine crisis have attracted the most German media attention, and which aspects have been neglected?

In the early days of the Euromaidan protests, every single German magazine, newspaper, and TV station was full of reports about ‘the boxerturned-politician’ Vitali Klitschko. I have great respect for Vitali and have met him several times, but this coverage was naive and highly misleading. It took some time for most of our leading news institutions to mobilise more manpower for their Ukraine coverage. They reactivated former Eastern Europe correspondents, and this improved the quality significantly. Coverage focusing on the ‘nationalist factor’ during Euromaidan, and of the subsequent volunteer battalions, has been low-key – which has led to some criticism. I think Spiegel’s handling of this issue has been OK. We cover it more or less regularly, but I don’t see nationalist forces playing a decisive role today.

The EU is planning to counter Russian information policies with its own Russian-language initiatives. Based on your experience of existing Russian-language media and audiences, do you think such a strategy will prove effective?

We already have so many Russian-language services, from the BBC to Deutsche Welle. I don’t think that you will solve the conflict simply by providing the ‘right information’ in Russian.

Most Russians have the technical possibility to access Western media. We need to be honest and confront the reality of the situation. Why is Russian disinformation so successful? Because it supplies what its audiences want to hear. If you really want to fight for the minds of modern Russians, you must understand that the battle will be a long one. www.bunews.com.ua

Ukraine progresses towards full EU Association implementation PwC Ukraine’s Denis Shendryk explores the challenges ahead as Ukraine moves towards EU

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s full implementation of the Ukraine-EU Association Agreement (EUAA) draws closer, businesses across Ukraine are monitoring the situation and seeking clarity on what the EUAA will mean for them and for the nation’s economy in general. The EUAA involves a vast amount of information across a wide range of spheres, making detailed analysis particularly challenging. As full implementation draws closer, the key for many businesses will be to keep track of the progress of implementation measures and their practical implications for Ukrainian companies.

Countdown towards full implementation continues

With just over six months until the scheduled date for full implementation, the Association Agreement has been signed and ratified by the Ukrainian government and by a majority of EU member states. The EUAA has not yet been ratified by all EU members, but the ratification process is expected to be completed by the end of the year. Even though this process is still underway, various aspects of the EUAA have already been introduced in line with a pre-ratification agreement struck between Brussels and Kyiv. Since 1 November, 2014, Ukraine and the EU have already begun cooperating the practical implementation of the EUAA. A number of initiatives from the EU have already come into force under the terms of the EUAA. These have included the introduction of unilateral customs preferences, which allow for the duty-free import of some Ukrainian goods into the EU (or import under reduced customs duty rates). The EU has also provided significant sums to help stabilise Ukraine and to support the country’s democratic development – including funds to help consolidate Ukraine’s civil society sector. There has also been an additional informational element designed to promote greater awareness inside Ukraine of the terms and conditions which will be created by the EUAA.

Ukraine increasingly adopting EU standards

While the EU continues to offer support for Ukraine’s transition process, the focus within Ukraine itself has been on adopting the necessary legislation to meet the requirements stipulated in the EUAA. With half a year still to go before the anticipated full implementation of the agreement, the changes which have been introduced to Ukrainian legislation are already substantial. A useful summary of the steps taken by the Ukrainian authorities can be found in the ‘Report on Implementation of the Association Agreement between the EU and Ukraine: September 2014 – April 2015’, published by the Ukrainian government.

The changes already implemented by the Ukrainian authorities will have significant implications for businesses in a number of spheres. In terms of the fight against corruption and justice reform, a number of anti-corruption laws have so far been adopted, along with laws regulating the work of prosecutors and the country’s court system. Perhaps most important of these is the creation of an Anti-Corruption Bureau and Na-

tional Corruption Prevention Agency.

In the trade and business spheres, many have attached particular importance to the adoption of laws dealing with deregulation and the creation of an online system of public procurement. An electronic VAT administration system has been introduced, along with changes to certification rules which have seen a reduction in the number of certificates, permits and licences required.

From adoption to implementation

The main question now is whether these changes will be effectively implemented into practice, and whether they will comply with the Association Agreement’s requirements. This process of implementation will be assessed by a number of parallel bodies including the Association Council and the Association Committee (with the respective subcommittees), the Government Office on European Integration, and a civil society platform.

All these institutions have already been created, including the civil society platform, which can be effectively used by the business community as an independent instrument for evaluating the implementation progress and addressing concerns.

Ratification process trundles on

The next step from the EU side is the completion of the formal ratification of the Association Agreement, which needs to be done by every EU member country separately. A number of countries have yet to do so, and it remains possible that complete ratification will not be achieved by the end of the calendar year. Countries such as Austria, Greece and Cyprus have yet to make progress on the ratification procedure, while the ratification law was vetoed by one of the Houses of the Czech Parliament. The EU has already planned for a possible failure to secure complete ratification by January 2016. If this scenario comes to pass, the EU and Ukraine have agreed that the most practical part of the EUAA, the trade section, will temporarily come into effect, independent of ratification of the entire agreement by all EU member states. As a result, the current implementation process is being planned on the assumption that the majority of the terms of the EUAA will be effective starting 1 January, 2016, regardless of possible parliamentary delays in individual EU member countries.

The Ukrainian authorities have a range of tasks ahead over the coming six months which must be accomplished if they are to prepare the ground for full implementation in early 2016. Planned changes which have already been announced include Ukraine signing up for the Open Skies treaty and tax reform. The Ukrainian Customs Code must be brought into line with the EU Customs Code, while strategies will be developed to bring Ukrainian practice into harmony with EU practice in the spheres of sanitary controls, public procurement, telecommunications, the financial sector, and much more. Additional articles in the coming issues of Business Ukraine magazine over the next six months will monitor the progress being made in all these sectors as Ukraine seeks to move closer to the rest of Europe.

About the author: Denis Shendryk is a customs practice expert at PwC Ukraine. He has more than 13 years of experience in the customs sphere and previously worked for the Ukrainian customs authorities. Denis is also the Co-Chair of the Customs Committee at the European Business Association in Ukraine.

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Ukraine must sell itself as hospitality hub Ramada Encore’s Irantha Duwage says local hotel sector can learn from likes of Istanbul and Budapest

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Ukrainian regions do you regard as the most exciting for future hotel industry expansion?

Lviv in west Ukraine is a wonderful city with so much potential for further development of the hospitality sector. Dnipropetrovsk and Kharkiv also have great urban infrastructure, making them attractive for further growth.

amada Encore Kiev General Manager Irantha Duwage has two decades of experience in the international hotel sector. In a career that has so far spanned three continents, the hospitality industry expert has worked at some of the world’s leading hotels, including the legendary Raffles in Singapore. Mr. Duwage first arrived in Ukraine in early 2012 to oversee the development of the Ramada Encore Kiev project, and explains that he was attracted by the chance to manage what remains the country’s largest international hotel complex, with Ukraine’s largest hotel conference facilities.

The Ukrainian hotel industry has been particularly adversely affected by the instability in the country over the past eighteen months.

What steps have you taken to respond to these challenges?

We’ve focused our response on a number of areas including increased service quality and value for money for our customers. We’ve also developed long-term partnership options and boosted our cooperation with the local community.

Internally, we have sought to empower our team and develop a clear staff awareness programme to make sure employees do not experience the stresses of uncertainty.

The past decade has witnessed a steady increase in the number of international hotel brands entering the Ukrainian market.

Which segments of the Ukrainian hotel sector do you think offer the most attractive growth prospects?

The luxury full-service sector in Kyiv is already over-supplied, so I think you have to look towards the budget sector for the next wave of growth. As a result, Ukrainian hotel owners currently have a great opportunity to convert their hotels into international brands in the mid-scale to budget segments. This could help them gain better brand awareness and other marketing advantages.

Ukraine’s geographical location between European and Asian markets makes it a natural choice for international forums and conferences. How can Ukraine promote itself as a venue for such events?

If we accept that Kyiv is the main destination for

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both tourism and business visitors, then we can conclude that the Ukrainian government and the Kyiv city authorities hold the key to promoting Ukraine. At present, they have not positioned themselves well as an international conference and business forum (MICE) destination. Major efforts are required to transform Ukraine’s fortunes in this segment, but the outcome would have a huge impact on the country’s development. The best way forward is for the Ukrainian hospitality sector and the Kyiv city authorities to work together on a common agenda in order to promote Kyiv as a great MICE destination. International hotel chains, airlines and tour operators need to be involved in this process.

Another key issue is minimizing red tape regarding visa issues. The Ukrainian authorities need to appreciate that in today’s global market, China and India equal Europe in terms of numbers of travellers and money spent. Ukraine is currently way behind the international curve regarding visa processes and border control issues, creating barriers to Ukraine’s development as a MICE destination. Small modifications and innovations to visa policy would likely encourage investors and decision-makers in Europe and Asia to consider Kyiv as a potential destination for conferences.

Most major hotel industry expansion in Ukraine has so far focused on Kyiv. Which other

The Ramada Encore Kiev was recently awarded the ‘Property of the Year’ award by the Wyndham Hotel Group. How important is international recognition of this nature for the Ukrainian hotel industry?

I think this kind of recognition is very important.

First and foremost, it puts Ukraine in the international spotlight. Secondly, it highlights the increasingly competitive standard of the Ukrainian hospitality sector. A Kyiv hotel won this award ahead of other regional hotels in top destinations like London, Dubai and Istanbul. This will help to debunk outdated stereotypes and myths about old-fashioned service standards and mediocre service delivery in Ukraine.

Based on your knowledge of the international hotel industry, what lessons can Ukrainian hoteliers learn from the experiences of other emerging markets?

There is a lot to learn and there are plenty of useful examples that Ukrainian hoteliers can learn from in the regional neighbourhood. Just ten years ago, few would have believed that Istanbul would be a top conference destination, or that Budapest would be among the leaders in many city break destination rankings. Over the past decade, Istanbul has managed to emerge as the top European MICE destination, claiming market share from other key regional cities in this market. The local hospitality sector and city authorities have worked very hard to brand themselves as an attractive MICE destination, and as a result Istanbul now enjoys strong brand recognition in the business conference segment. Ukraine has huge potential to develop in this direction, but an honest appraisal of the situation and a clear strategy are required. I believe the role of the local authorities will be crucial in this process. Young Ukrainian hoteliers, meanwhile, can also look to other regional markets in order to learn the importance of a deep understanding of the hospitality business, a willingness to gain experience in entry-level positions, and of taking a creative lead rather than seeking to replicate others. www.bunews.com.ua

Iranian-American Astronaut Entrepreneur in Kyiv World’s first female space tourist Anousheh Ansari tells Ukrainians to follow their dreams

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yiv professionals were offered some out-of-this-world inspiration in early June when the Kyivstar Business Hub welcomed IranianAmerican astronaut and entrepreneur Anousheh Ansari to the Ukrainian capital. Ms. Ansari gained worldwide fame in 2006 when she became the world’s first female space tourist and the first Muslim woman in space, spending nine days in orbit at the international space station. She is also a successful entrepreneur in her own right, having made her fortune in telecommunications before becoming a pioneering voice in the emerging private sector of the international space exploration industry.

Ms. Ansari’s motivational speech at the Kyivstar Business Hub was open to the public via online registration, attracting hundreds of young Englishspeaking Kyiv professionals. The key message she offered was the power of the human imagination and the importance of believing that dreams can come true. Ms. Ansari’s personal story certainly provides convincing evidence that even the most outlandish of ambitions are reachable if you have the right blend of faith and determination. Born in the 1960s in the Iran of the Shahs, the young Anousheh dreamt of space exploration from the age of five, and refused to give up her dreams despite the advent of the Islamic Revolution and the outbreak of the Iran-Iraq war. After emigrating to America with her family as a teenager, she was able to build a business empire, before finally realizing her dream of experiencing space

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flight. “Imagination is one of the most important gifts we have as human beings,” she commented in Kyiv.

Ms. Ansari was visiting Ukraine for the first time, and had some encouraging words for the country’s own space programme. A vocal advocate of the growing space exploration industry, she has first-hand experience of post-Soviet space technology thanks to her trip to the international space station on board a Russian rocket, and sees huge potential for private sector initiatives within the framework of Ukraine’s existing space exploration industry. “Ukraine has a large talent pool of intellectual capital and a long history of involvement in the space industry. It’s now a matter of people who have a shared interest coming together and doing it. If nothing else, you’ll have a lot of fun,” she told the Kyiv audience.

Ms. Ansari remains an active entrepreneur and says her experience of space travel has informed her attitudes towards business in general. Most of all, it has instilled a global perspective into everything she does. She is confident that the growth of private sector space exploration will eventually make space travel affordable to ‘all who want it’, and believes that leaving Planet Earth is a great way to put the terrestrial challenges and political conflicts of the modern world into perspective. “If we could send our world leaders into orbit and get them to hold international summits in space, they would reach very different decisions,” she concluded in Kyiv. www.bunews.com.ua

business perspectives

Yelena Kapustan

Ihor Shaforost

Dmytro Gorkun

Journalist “This was a totally fresh perspective for me on the topic of space travel. We’re used to thinking in terms of Yuri Gagarin but this was completely different.”

Internet Marketing Expert “It was an amazing experience to hear Anousheh tell her story in her own words. Now I’m not afraid of chasing my own dreams.”

Entrepreneur “Anousheh’s presentation made me realize how small-scale many of my own current goals are. From now on, I’ll be thinking big.”

Ivan Gaidutskiy Anastasia Bording Public Relations Professional “After Anousheh’s speech I feel inspired to pursue my own dreams. I realize that there are no borders or boundaries - we should all work together to build a better world.”

June 2015

Alternative Energy Entrepreneur “This presentation showed that space travel is already within touching distance.

But we also need to be aware of the dangers that space travel might create. We have been here before - a century ago, few people initially appreciated the dangers that would come with the emergence of the automobile industry.”

Yulia Barabash International Business Consultant “It was really inspirational and showed me that there are no limits to what we can achieve. I particularly liked the message of working to unite people globally and being motivated by more than just money.”

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Former Kyiv expat turned full-time writer Alex Shaw finds success by using Ukraine as literary backdrop

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ritish author Alex Shaw is making a name for himself via a series of thrillers set in and around Ukraine. One of the few contemporary English-language writers to feature Ukrainian themes and locations in his fiction, former Kyiv expat Shaw has successfully made the transition from self-publishing to securing a contract with a commercial publishing house, and is currently writing for Endeavour Press. His novels revolve around the exploits of former SAS member and current British intelligence asset Aidan Snow, typically aided and abetted by veteran Deputy Director of the SBU (Ukrainian Security Service) Gennady Dudka. He predicts that Ukrainian themes are set to enjoy greater exposure in the literary world, and says that rising interest in Ukraine will boost awareness of the country internationally while debunking many of the myths and stereotypes that remain in circulation.

Many of your novels involve Ukrainian settings and themes. Does this make your books more or less marketable?

Six years ago when I tried to publish my first novel, no one wanted to market a thriller set in Kyiv, so I sold it on the SAS angle. Now, however, Ukraine is more marketable. Euro 2012 raised Ukraine’s profile, and, obviously, the Euromaidan movement showed the world the real heart of the Ukrainian people. Russia’s theft of Crimea and invasion of the Donbas, or ‘Russian aggression’, to be politically correct, has also served to highlight Ukraine further. Literature, however, is always looking for something new. Currently the buzzwords are ‘Nordic Noir’ and ‘Scandi-Brit’ - crime thrillers written and set in Scotland and the Nordic countries. I want to make ‘Ukrainian Noir’ the next big thing. Ukraine is the biggest country in Europe yet hardly anything has been written about it in popular international fiction. I want to change that with my novels and help others to do the same.

Which Ukrainian themes have generated the most buzz among your readership?

As I write crime thrillers, my readers are naturally interested in the corruption angle. In my novels Gennady Dudka is the Director of the SBU’s Anti-Corruption & Organised Crime Directorate and he battles powers without June 2015

lifestyle

British author taps into Ukraine chic and the legacy of the Soviet Union. Fiction can do this without preaching.

and within the government, usually aiding Aidan Snow in the process. The themes of language and nationality are also popular - I try to make the point that ‘one nation’ and not ‘one language’ is what most Ukrainians want, as I have never seen any real hostility against Russian speakers in Ukraine. I try to show the beauty within the Ukrainian nation, but I don’t ignore reality.

Relatively few English-language authors choose Ukrainian settings for their novels.

How conscious are you of the fact that your audiences may be encountering Ukraine for the first time through your literature?

I’m conscious that many readers bring with them expectations that may rely upon stereotypes of beautiful women, mafia groups and cheap vodka. I mention the fact that Ukrainian women are beautiful (I married the most beautiful one), that criminal gangs exist, and the price of vodka, but I do try to show Ukraine for what it is - a proud European country rich in culture. I hope that at least my books challenge the stereotypes.

Ukraine remains relatively unexplored territory in terms of world literature. Which periods in Ukrainian history offer the greatest potential as settings for literary fiction?

There is a wealth of source material for literary fiction in the nineteenth and twentieth centuries. Personally, I see the most potential in the recent past and the present day. Ukraine needs to escape Russia’s propaganda shadow

Has the current conflict in east Ukraine had any impact on demand for literature about this part of the world?

Yes, but I don’t think the full impact is visible yet. With the exception of e-books, the world of literature tends to run quite slowly. There will be, I imagine, more books mentioning Ukraine appearing within the next year from the ‘Big Five’ publishing houses. Stephen Leather’s next novel ‘Black Ops’ includes a relative of an MH17 victim in the UK attempting to assassinate Putin, and Steve Konkoly’s new book ‘The Loyal Nine’ has some scenes set in Mariupol. Authors, publishers and readers are always interested when I explain what I write about, and are eager to learn more about the current conflict.

Do you plan to include aspects of the current conflict such as Russia’s information war and ‘little green men’ tactics in future novels?

Very much so. They are actually integral to my latest novel ‘Cold East’, which was published in April. I’m also setting a novella in the Donbas for Amazon’s ‘Kindle Worlds’.

Can you tell us a little about your latest book, Cold East?

Cold East is the third Aidan Snow thriller. A terrorist cell has found a missing Soviet ‘suitcase nuke’ and MI6 operative Aidan Snow is sent, with the help of the CIA and the SBU, to stop them from detonating it. The action moves from London to Kyiv, from Moscow to Crimea, and many places in between. I wanted to find a way of taking a classic thriller construct, i.e. a Jihadi terrorist cell, and intertwine this with events in Ukraine, whilst acknowledging the legacy of the Chechen and Georgian conflicts. I didn’t want to be didactic or detract from the salient point of the book, which, after all, is to entertain. What I hoped to achieve was to explain my take on real world events, while shedding light on some lesser-known facts. If at least one reader, after enjoying the book, understands the Ukrainian crisis a little more and questions ‘the Kremlin line’, then I’ll be happy.

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Networking events

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Representatives of the Swedish business community came together in June for the fourth ‘Sweden-Ukraine Business Forum’ in Kyiv. Guests enjoyed a welcome cocktail at Kyiv’s Monaco restaurant, where they were greeted by Swedish Ambassador to Ukraine Andreas von Beckerath, who offered an introductory address along with Ukrainian Finance Minister Natalie Jaresko and Sigma Software founder and Chairman Dan Olofsson. This year’s forum was attended by 26 companies and was supported by Ericsson, Scania, Oriflame, SEB, Shelton Petroleum, Sigma Software, SKF, and Volvo Construction Equipment.

June 2015

networking events

Swedish Business Forum in Kyiv

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Fryday Hosts Bohdan Nahaylo at Hilton Kyiv Hotel

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Ukrainian networking group Fryday welcomed veteran Ukraine expert Bohdan Nahaylo as guest speaker in late May to a Fryday W evening at the Hilton Kyiv Hotel.

British Ukraine specialist Nahaylo has previously worked for the United Nations, Radio Liberty and Amnesty International. He spoke at the Hilton about the challenges facing today’s Ukraine as the country seeks to integrate with the Euro-Atlantic community and reform while facing a Russian-backed military conflict in the Donbas.

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networking events

Bereznitsky Aesthetics Welcomes Kyiv Art Lovers Ukraine’s modern art elite flocked to Berenitsky Aesthetics in Podil in early summer to enjoy the iconic pop art of rising Kyiv contemporary scene star Yuriy Sivirin. The exhibition, which was curated by Yevheniy Bereznitskiy, drew many of the most famous faces from the Ukrainian modern art world, including artists themselves and prominent patrons from the business and finance sectors. The Sivirin show will run at Bereznitsky Aesthetics (43, Vozdvyzhenka Street) until 22 July.

June 2015

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last word

Governor Saakashvili and the many myths of Odesa

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n many ways, it is only appropriate that a city named after the Greek mythological hero Odysseus, should be awash in modern-day myths. The surprise appointment of former Georgian President Mikhail Saakashvili as Odesa Governor has only fueled more myth making. However, given the geopolitical risks at stake today in Ukraine – and specifically Odesa - some key myths should be debunked.

Odesa Myth No. 1: Odesa is a Russian city and the region supports Russia Fact: Odesa is a European city and the region supports Ukraine. Demographically, the census shows that Ukrainians make up 63% of the population, compared to 21% who identify as Russian. Bulgarians and Moldovans make up six and five percent of the population respectively and Gagauz, Belarusians, Armenians and Roma total a further five percent. In addition, Odesa has the largest Jewish population in Ukraine outside of Kyiv. There is significant foreign investment in Odesa and expatriate communities large enough to justify sixteen consulates including Bulgaria, Greece, Turkey, Romania, Georgia, Israel, Italy, Kazakhstan, South Africa, Latvia, Russia, Germany, Moldova, Pakistan and China. While the Russian population in the city of Odesa is slightly higher (29%) than the region itself, public opinion surveys have consistently shown only token support for joining Russia. For example, following last September’s Minsk Agreement, a poll by the International Republican Institute (IRI) showed 89% of residents of Odesa and other southern regions opposing Russia sending troops to protect the rights of the Russian minority. Odesa residents are pragmatic and generally apolitical. If there is anything they support it’s the maxim: “do not mess up the tourist season” as the region is dependent upon the summer providing needed revenues for business.

Odesa Myth No. 2: Saakashvili’s appointment as Governor makes conflict in the region more likely Fact: If conflict happens in Odesa, it will be part of a larger military invasion of Ukraine and not an indigenous development. The Kremlin has been trying unsuccessfully for thirteen months to stir up separatist sentiment in Odesa. However, they lack strong public support, and the economic crisis due to recent Russian neglect in the neighboring Moldovan region of Transnistria, is hardly a model that Odesa residents want to duplicate. Saakashvili’s appointment may yet be the scapegoat for the Kremlin to justify an

invasion, but the reality is that the Governor has no authority over the Ukrainian armed forces in the region. The armed forces serve under the command of the President of Ukraine and the recent move by Parliament to ban transit of Russian military through Ukraine to Transnistria complicates possible military maneuvers from the region into Odesa. If anything, Saakashvili’s tenure as Odesa Governor will reduce the chance of conflict if he is successful in fighting corruption and creating economic opportunities for Odesa residents.

Odesa Myth No. 3: Odesa will not accept a foreigner as Governor Fact: Odesa is an international city full of different ethnic groups and with a history of governance by foreigners. Founded in 1794, the city grew dramatically under the leadership of two Frenchman, Duke Richelieu and his successor Count Andrault de Langeron, who served by appointment of the Russian Tsar. This combined twenty year reign by French nobility led to the city becoming the third largest in the Russian empire and being designated a ‘free port’ for trade. Former Georgian President Saakashvili is only the latest foreigner to serve as Odesa Governor. In recent decades, Odesa has been one of the most corrupt regions of Ukraine, rife with mafia and government graft.

If reforms can succeed there, then they can succeed anywhere in the country.

If Saakashvili can reduce corruption in Odesa like he did in Georgia during his two terms in office, then his place in Odesa’s history will be no less honored than Richelieu’s and Langeron’s. Thus, the only thing Odesa residents will no longer accept, is failing to reform the region.

About the author: Brian Mefford is a business and political consultant working in Ukraine since 1999. Mefford has previously worked for the International Republican Institute and former Ukrainian President Viktor Yushchenko. Mefford opened the IRI office in Odesa in 2008 and he is currently a Senior Non-Resident Fellow at the Atlantic Council’s Dinu Patriciu Eurasia Center.

Business Ukraine is distributed every month at a wide range of leading business centres, hotels and restaurants in Kyiv and throughout Ukraine as well as on incoming flights to the Ukrainian capital.

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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