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ISSUE 05/2017

INVESTING IN MYKOLAIV


BUSINESS UKRAINE ISSUE 05/2017: Many economic analysts believe Ukraine’s next big investment story will lie in the country’s regions. Mykolaiv may be the best bet among Ukraine’s oblast capitals. The southern Ukrainian port city currently acts as the international gateway for the bulk of Ukraine’s agricultural wealth. It boasts a progressive mayor and has attracted hundreds of millions of FDI dollars since 2014. Can Mykolaiv now lead Ukraine’s regional revival?

Memo to President Trump: It’s Not “The Ukraine” Anymore The first meeting between Ukrainian President Petro Poroshenko and US President Donald Trump in mid-June was widely hailed as a small but significant victory for Ukraine, signaling continued American support for the country at a time when many fear Ukraine’s struggle with Russia is in danger of becoming a forgotten war. The only fly in the ointment was President Trump’s reference to “The Ukraine”, which elicited a predictable chorus of moans and groans throughout the Ukrainophile world. Numerous commentators chose to see this gaffe as yet another example of President Trump’s allegedly amateurish and uninformed approach to foreign affairs. However, in fairness to the current incumbent of the White House, he is far from alone in failing to name Ukraine correctly. His predecessor Barack Obama repeatedly referred to “The Ukraine”, while numerous other international leaders have also been guilty of the same offense in recent years. Many people struggle to see why the use of the definite article is such a big deal for Ukrainians. There is a tendency to group it together with that other great English-language pet peeve of the Ukrainian community, the debate over the rival “Kiev” and “Kyiv” spellings of the country’s capital city. This comparison is unfair. While there is a very good argument for stating that English-language city names often differ from their rendering in the native tongue (Moscow, Florence and Munich being obvious examples), continued references to “The Ukraine” cut to the very heart of the nation’s centuries-long struggle to establish itself as an independent state. Admittedly, numerous other countries are quite happy to include “The” in their names. However, this is generally in reference to a collective or grouping of some sort like The United States of America, The Netherlands or The Philippines. Such logic does not apply in Ukraine’s case. Instead, the seemingly innocuous use of this three-letter word instantly relegates the country to the status of geographical region in the manner of the Midwest, the Ardennes, or the Algarve. Ukrainian objections to this are not mere pedantry. They are a matter of national honor and historical justice. There is reason to believe that the origins of this subtle linguistic attack on Ukrainian sovereignty are anything but accidental. The term “The Ukraine” first entered popular usage during the Soviet era at a time when the Kremlin was particularly eager to counter perceptions of Ukraine as a separate and distinct nation. This was the least of the Soviet crimes committed against Ukraine’s national aspirations. The genocidal engineered famine of the early

1930s was a direct attack on the agrarian heart of the Ukrainian nation, while the destruction of the Ukrainian intelligentsia during the Stalinist terror was a deliberate attempt to decapitate the nation. Right up until the end of Soviet rule, the suppression of Ukraine’s independence movement was one of the key internal battles waged by the Kremlin. Sadly, little has changed in the twenty-six years since the collapse of the USSR. Russia may have grudgingly acquiesced to the idea of Ukrainian independence amid the chaos of 1991, but there is little to suggest that either the Kremlin itself or the wider Russian population ever accepted the reality of a genuinely separate Ukrainian state. The current hybrid war in eastern Ukraine has exposed the full extent of Moscow’s post-Soviet imperial pretentions, revealing a modern Russian state that is openly contemptuous of Ukraine’s claims to statehood. Kremlin TV regularly provides platforms for those who believe Ukraine is a manufactured and artificial nation, while Russian President Vladimir Putin recently referred witheringly to “the territories now called Ukraine” during his annual national phone-in. Putin is in many ways the champion of Ukraine denial. In 2008, he told US President George W. Bush Ukraine was “not even a country.” He is also fond of publicly stating his belief that Russians and Ukrainians are “one people”, a claim that explicitly denies Ukraine an independent identity while implying Ukrainian membership of a wider Russian world. When world leaders refer to the country as “The Ukraine”, it is reasonable to assume they are not lending their tacit support to Russia’s ongoing campaign against Ukrainian statehood. They are simply unaware of the blooddrenched baggage that accompanies the phrase. This makes them no different from the vast majority of the international community, who have no idea that Ukraine’s independence struggle has been one of the longest and deadliest in world history. Nevertheless, the time has come to draw a line under awkward references to “The Ukraine” and to start giving the country the respect it deserves. Ukraine stands on the frontline of a global hybrid war against a resurgent Russia that seeks to dismantle the security apparatus of the post-WWII world and reverse the verdict of the Cold War. While US and EU politicians fret over election hacks and fake news, Ukrainians are paying with their lives. The very least the rest of us can do is get the country’s name right.

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

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Investing in Mykolaiv

Grains and Brains

Gateway to Ukraine’s breadbasket wealth hopes to inspire the reinvention of industrial heartlands For the coming decades, much of Ukraine’s economic prosperity will depend on the vast grain shipments flowing out across the Black Sea to feed the growing global population. Europe’s breadbasket has become the world’s breadbasket, and the gateway is Mykolaiv. More grain and agricultural produce leaves Ukraine via Mykolaiv than any other port. This is hardly surprisingly – the city’s excellent riverside facilities and inland location close to Ukraine’s black earth heartlands make it ideal as a point of departure for agricultural exports. These advantages have already attracted considerable international investment to Mykolaiv region. In the past few years alone, some of the world’s largest agricultural groups from America and China have invested hundreds of millions of dollars into Mykolaiv riverside infrastructure, making it the FDI capital of a nation desperately seeking greater flows of international financing. The arrival of such large-scale infrastructure investments has cemented Mykolaiv’s hold on Ukraine’s agricultural export market, serving to guaran-

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tee the city’s importance to the wider Ukrainian economy as the country undergoes the shocks of a belated transition away from the inbuilt inefficiencies of the Soviet inheritance. Alongside the agricultural export sector, Mykolaiv has also attracted a number of major international investors in related sectors including America’s Pepsi and French dairy giant Lactalis. While Mykolaiv blossoms as a key player in Ukraine’s agricultural industry, the city’s historic role as a shipbuilding center has slipped into the shadows. The colossal shipyards that line the riverside are now ghostly quiet, their hulking cranes standing like museum relics of an antediluvian age. Shipbuilding continues in the city, with a new emphasis on luxury yachts. However, these oligarch playthings are mere novelties compared to the days when Mykolaiv produced mammoths like the much-mocked Admiral Kuznetzov, the Soviet Union’s sole aircraft carrier that provoked an outpouring of global mirth in 2016 with its smoke-belching limp towards Syria.


investing in mykolaiv

The decline of the shipbuilding business has hurt Mykolaiv’s pride and its pocket, but the subsidiary sectors of the industry remain very much part of the local economy. The city’s academic sector still focuses heavily on nautical themes, with a number of specialized schools and thousands of graduates offering engineering and design expertize at virtually unbeatable prices. This has helped fuel the growth of an outsourcing market, with international shipbuilding groups looking to tap into the Mykolaiv brain trust and benefit from some of the most highly trained and experienced professionals in the whole of Eastern Europe. Mykolaiv has strong ties to the Russian imperial and Soviet past, having served as the headquarters of the tsarist navy before becoming a closed Soviet city and center of strategic military shipbuilding during the communist era. This heritage, together with a tradition of large industrial enterprises and imperial nostalgia, has led to perceptions of Mykolaiv as a city sympathetic towards the Soviet past and inclined to favor pro-Russian sentiments. This made the autumn 2015 election of thirty-something Western-leaning IT entrepreneur Oleksandr Senkevych as Mykolaiv Mayor particularly surprising. Mayor Senkevych’s victory came following an innovative campaign driven by flash mobs and social media that sought to mobilize the city’s considerable youth vote in favor of change and modernization. Many observers saw it as one of the first manifestations of the progressive Maidan spirit in Ukraine’s more politically conservative Russian-speaking southern cities. Since his election, Mayor Senkevych has faced the challenge of working with local authorities drawn largely from the old guard and often openly hostile to his reformist agenda. This has made an already difficult task considerably more daunting. Nevertheless, the momentum generated by www.bunews.com.ua

his 2015 election triumph has helped Mayor Senkevych mobilize support at both the local activist level and among national and international allies. Many of Ukraine’s international partners currently regard Mykolaiv as the litmus test for the country’s ability to achieve a decisive break from the Soviet past and reinvent itself along European lines. Despite boasting reform-minded local authorities and a range of natural advantages, Mykolaiv faces serious obstacles as it seeks to lead the southern Ukraine region out of the post-Soviet economic malaise. The city stands on numerous major European transport routes, but the dire condition of local roads stops it from taking full advantage of this geographical asset. Likewise, the absence of an international airport and efficient rail links prevents easy access and dampens the enthusiasm of visiting delegations. The usual ailments also abound. Like all Ukrainian cities, Mykolaiv struggles with corruption and inefficient bureaucracy. The most striking difference about this southern Ukrainian port is the apparent willingness to address these problems in a frank and direct manner. The big question now is whether the new brooms brought in by Mayor Senkevych will succeed in sweeping Mykolaiv clean. Can they overcome the opposition of the old guard and prevent a return to the political passivity of the past? Concrete results are urgently required in order to maintain the fading momentum generated by the 2015 mayoral election. Policymakers in Kyiv, Brussels, and Washington DC will be watching developments in Mykolaiv as a bellwether for Ukraine’s broader transformation. There are considerable hopes that the city can serve as a model for regional reforms, but failure will fuel a wider sense of Ukraine fatigue that could undermine enthusiasm for further international support. 9


investing in mykolaiv

Mykolaiv poised to benefit from decentralization dividend Ukrainian port city boasts investment-friendly administration and infrastructure advantages Ukraine is a vast country with diverse regional potential. Investment promotion office UkraineInvest has witnessed a tendency among investors to form clusters in certain key economic sectors, such as automotive parts manufacturing, agribusiness, logistics and metallurgy, and in certain investment-attractive regions. Investors have identified what makes certain regions particularly attractive for foreign investment. These factors include location, relevant natural resources, availability of qualified workers, and infrastructure. The key contributing factors that informs decisions on where to invest in Ukraine seem to be the local business environment and the level of support provided by local authorities. Decentralization reforms implemented by the national government over the past three years have played a vital role in strengthening the regions in Ukraine, increasing their investment competitiveness. Prior to decentralization, economic and administrative control was concentrated in the hands of the central government in Kyiv. This hampered Ukraine’s economic development since local authorities lacked the funds and authority to make decisions about development at the local level. Today, with more tax revenues filling local and municipal budgets, individual cities and regions have far more responsibility for how investment occurs locally. When these new resources and incentives for growth are put in the hands of progressive, investment-oriented mayors, city councils and regional state administrations, opportunities blossom. As the country continues to shake off the legacy of Soviet bureaucracy, certain cities and regions have transformed more quickly than others to compete for foreign investment. Mykolaiv city, and the greater Mykolaiv region, is one of the areas that has risen to the top of the list that foreign investors are considering. Mykolaiv Mayor Oleksandr Senkevych and the Head of the Mykolaiv Regional State Administration, Alexey Savchenko, have made great strides to leverage the clusters in their region and to use all the tools they have available in an impressive effort to make Mykolaiv an increasingly attractive destination. For example, the Mykolaiv Development Agency (MDA) is an important resource for new and existing businesses. This non-profit agency assigns a dedicated team for investment projects entering Mykolaiv to provide information, assistance with legal procedures, and to act as a liaison between the investor and government offices when needed. Feasibility studies, business plans, data analysis, and human resource information are also part of the suite of services offered by the MDA, which are often crucial for new businesses in due diligence or early execution phases. On a recent visit to the Mykolaiv region, I was struck by the number of large international and Ukrainian companies who have invested hundreds of millions of dollars in the area in what amounts to a dynamic agribusiness cluster, including Pepsico (Beverage & Food, United States), Lactalis (Dairy Products, France), Bunge (Grain Storage and Oilseed Crushing, United States), Cofco Agri (Food Processing, China), and ED&F Man (Sugar Refining, United Kingdom). Mykolaiv stands at the edge of Ukraine’s agricultural heartlands – perfect for growing, processing and shipping the bounty of Ukrainian fields.

Ukraine has over 33% percent of the world’s black earth soil, one of the most fertile soils on the planet, known for producing high agricultural yields. Approximately 70% of Ukraine’s grain exports move through Mykolaiv ports, representing an increase of 600% in volume over the last 10 years. As the world requires more food, more of it will pass through the ports of Mykolaiv. Another business cluster has formed around logistics. As a transport hub, Mykolaiv offers commercial and river ports with direct access to the Black Sea, railways and highways with connections to three European transport corridors, and service from the international airport in nearby Kherson. Port capacity continues to be an important area of growth, with large-scale investment going into improved cargo servicing, river dredging and overall port development. Related to the transportation aspect of this cluster is manufacturing. Founded as a shipbuilding and maritime city, Mykolaiv continues this tradition today as the engineering, technological and manual skills needed for this sector are built into the city’s rich industrial heritage. 13 universities and 28 vocational schools provide the human capital needed to support the industry. This has been an important factor in the decision to locate in Mykolaiv for several large international and Ukrainian companies who continue work in the ship building and repair sectors. In addition, Mykolaiv has become home to four premium-class yacht shipyards, proving that the local economy has the capacity, skills and resources to pivot and produce goods that meet the needs and desires of today’s consumers. A robust IT sector has emerged as Mykolaiv leverages its engineering prowess. With over 15,000 students enrolled in IT, engineering, and other technical studies programs in the city, the pool of skilled workers allows for locally based software, outsourcing, and development companies to choose from a broad selection of potential employees, as GlobalLogic (Digital Product Engineering, United States) and Geeks for Less (IT Outsourcing, United States) have discovered. What does the future hold for Mykolaiv? The path for business has already been paved. The host of opportunities in agribusiness as well as IT, shipbuilding, river and seaport transportation speak to the attractiveness of Mykolaiv as a base for companies doing business in Ukraine now and well into the future.

About the author: Daniel Bilak is Director at UkraineInvest (www.ukraineinvest.com) and Chief Investment Advisor to the Prime Minister of Ukraine

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investing in mykolaiv

From Soviet Closed City to Ukraine’s Global Gateway

Former Soviet shipbuilding center seeks to lead industrial Ukraine’s post-Maidan transformation Mykolaiv’s economic history has been a story of major industrial enterprises primarily focusing on the shipbuilding industry. In recent decades, global changes to the shipbuilding industry have led to a shift in emphasis towards broader maritime industries and the agribusiness sector. With a new reform-minded team in place at city hall, and buoyed by a recent flurry of international investment, Mykolaiv is now seeking to position itself as a model for the post-Maidan transformation of Ukraine’s Soviet-era industrial centers.

International Attention

Despite the economic challenges facing Ukraine since the 2014 Revolution of Dignity and subsequent Russian hybrid war, Mykolaiv is very much on the international investment radar. New grain terminals and processing plants involving a total investment of USD 320 million began operating in 2016. Many international investors have moved Mykolaiv higher on their lists of potential destinations following the election of Mayor Oleksandr Senkevych, who previously owned a successful IT company and enjoys a reputation as a progressive and business-friendly official. Recent changes in municipal management have earned the city growing levels of international recognition. Mykolaiv took top place for cost effectiveness among mid-populated cities in the 2016/2017 fDi Intelligence report “European Cities and Regions of the Future” produced by a division of the authoritative Financial Times. Meanwhile, Forbes magazine placed Ukraine in fifth position in a recent rating determining the most attractive cities for business in Ukraine. Due to the generational shift in the global shipbuilding industry towards enterprises located in China and South Korea, Mykolaiv is looking for new development vectors and strategic directions capable of fueling future economic growth. Local human resources offer huge scope for the development of value-added and intellectual outsourcing services as well as processing and manufacturing. Areas that are

already producing attractive profits include maritime equipment production, marina development, and maritime engineering and design. There is also strong growth in the agricultural sector and food product processing.

Perfectly Positioned

Logistically, Mykolaiv is in a prime position. The city boasts an ideal location for maritime equipment producers seeking to serve the Black Sea region and beyond. Mykolaiv’s ports offer uninterrupted year-round access to Black Sea region countries, whilst extensive road and rail networks link the city with the major Ukrainian metropolitan areas of Kyiv, Dnipro, and Odesa. As well as attractive connections to the Black Sea region and Ukraine’s major urban centers, Mykolaiv is also ideally positioned as the gateway to the country’s fabled agricultural heartlands. This makes the city well suited for export-oriented agricultural and food product processing industries. All manner of agricultural produce can be sourced directly in nearby regions before being stored and processed in existing or purpose-built facilities prior to export via the city’s ports. New investors would find themselves joining an existing cluster of international companies including the likes of Bunge, Cofco, and Kernel. There are several municipal and privately owned land plots adjacent to the city’s industrial river docks that are currently available, while the city can also offer a range of greenfield and brownfield locations with infrastructure and port access in place. Marina development is another attractive investment area in Mykolaiv. Despite boasting stunning riverside locations and huge tourism potential, Mykolaiv’s current lack of large-scale recreational facilities is a legacy of its closed city status during the Soviet era. Municipal authorities have already designated several riverfront areas for marina development, paving the way for a genuine tourism industry to emerge.

Academic Excellence The city’s human resources are highly attractive for international companies seeking to benefit from the low costs and advanced skills on offer in today’s Ukraine. Mykolaiv boasts one of the largest maritime engineering talent pools in the entire Eastern Europe region, with an estimated 11,000 technically trained professionals and an average monthly salary requirement currently standing at around EUR 280. Mykolaiv also has strong IT potential and a large pool of qualified IT professionals. The city ranks in Ukraine’s top ten IT outsourcing cities with more than 50 companies operating in the information technology sector. Mykolaiv offers significant cost advantages over Ukrainian rivals such as Odesa, Lviv, Dnipro, and Kyiv. Coupled with the strong local educational establishment and international mindset, this cost competitiveness positions Mykolaiv strongly for further IT outsourcing and information technology growth.

Leading Southern Ukraine’s Transition

Mykolaiv is a city in transition. This journey from Soviet closed city to global gateway reflects Ukraine’s broader transformation from authoritarian command economy to free market European democracy. The municipal authorities are working hard to promote Brand Mykolaiv on the national and international stages, both in terms of raising awareness and by creating attractive conditions for investment. The city enjoys many natural advantages thanks to a location close to the Ukrainian breadbasket, easy Black Sea access, and convenient connections to the wider region. These benefits make Mykolaiv potentially attractive, but it is up to the local authorities to make the most of the region’s investment potential. In recent years, the city has been a focus of international investment into Ukraine. It is crucial that this trend continues.

About the author: Roman Khanzhyn is Project Coordinator at the Mykolaiv Development Agency

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investing in mykolaiv

Mykolaiv as test case for the New Ukraine

Can this former Soviet closed city become a model for durable change in Ukraine’s industrial rust belt? Mykolaiv was once best known for the city’s vast shipyards that churned out warships from the days of the tsars to the fall of the USSR in 1991. Like many industrial centers, Mykolaiv struggled to find its feet in the immediate aftermath of the Soviet collapse, but today it is earning a reputation as a scrappy and forward-looking city trying to turn things around. Mykolaiv’s young new leadership, led by Mayor Senkevych, is searching for a new identity as an economic incubator in Ukraine’s Black Sea region. As the surprise victor in autumn 2015 local elections, Mayor Senkevych has moved beyond initial stumbles to embark on a plan to make the city more transparent and responsive to citizens. In July 2016, the mayor welcomed an assessment by the International Republican Institute (IRI) of the city’s vulnerabilities to corruption, participating in an intensive interview process with policy makers, local officials, and civil society representatives to identify weak spots in the city’s systems and procedures. The city has slowly but steadily risen in IRI’s city services index for the past two years, with both the mayor and city council increasing their favorability ratings. The creation of a Mykolaiv Development Agency (MDA) staffed by young and idealistic Ukrainians with educational and work experience in the United States and Europe is another way Mykolaiv is increasing its attractiveness to investors and building a reputation as an effective partner. The city also continues to recruit motivated public administration volunteers from across Ukraine, from Chernivtsi to Donetsk, including the newly appointed Deputy Mayor for Transportation Mkrtich Mkrtchyan. There is evidence that these initial measures are starting to bear fruit. For the past three years, IRI has released annual national municipal surveys of 24 oblast centers including Mariupol and Severodonetsk, and has noted improvements in citizen perceptions of Mykolaiv in a variety of areas, including perceptions of the interaction between local residents and city authorities. From 2016 to 2017, Mykolaiv increased its rating from twenty-first out of 24 centers to eighth place nationally. Despite these encouraging signs, the challenges facing Mykolaiv’s city authorities remain formidable. In addition to navigating a series of reforms through a fractured and tumultuous city council body, the new leadership faces serious public health challenges. These include a lack of running water in one of the city’s outer districts and a city cemetery reaching overfill capacity. City authorities are now desperately trying to find a suitable space to consecrate as a new cemetery while working with international partners to address the water issue. Numerous infrastructure initiatives are currently underway that could help the city tap into its natural advantages. Mykolaiv’s location at the confluence of Southern Bug and Inhul rivers flowing into the nearby Black Sea, together with its past expertise in shipbuilding, make the city an ideal place to develop niche shipbuilding and yacht maintenance facilities. Both sectors are currently focuses of municipal economic development activities.

The city is looking at the possibility of renovating the nearby Mykolaiv regional airport, which is currently in use by the Ukrainian military to support ongoing operations in the Donbas. However, the airport is located outside the boundary of the city and would need regional-level support to facilitate any development. New bridges over the Southern Bug River are also on the drawing board. Japan seems to be interested in participating in such infrastructure projects, with several Japanese delegations visiting the city during spring 2017. In addition, the city’s executive leadership is looking at ways to increase the transparency of decision-making processes and get a better grasp of the vast amounts of communal property and services that city taxpayers currently support. Mayor Senkevych’s IT business background is particularly useful in this regard, giving him a solid insight into the role that centralizing databases and registries can play in managing city assets and resources more openly and effectively. Many observers believe developments in Mykolaiv will have major implications for the wider reform process across Ukraine. With the city in the midst of an ambitious reform agenda set against the backdrop of a complex and challenging regional political environment, Mykolaiv’s progress is a key test for Ukraine’s ability to achieve a genuine national transformation. As a former bastion of support for the pro-Russian Party of Regions and a traditional Soviet industrial city, Mykolaiv is exactly the kind of place where cynics have long doubted the will of local elites to embrace change. The IRI is currently fielding a new public opinion poll that will look more deeply at the issues, challenges, and opportunities deemed most important by the residents of Mykolaiv. The results of this survey are set for release later this summer, along with analysis of the impact made by ongoing economic and governance reforms initiated in the city in recent years. While the Mykolaiv authorities have succeeded in improving residents’ perceptions of their city via new approaches to more transparent and inclusive government, creating sustainable economic reform remains a top priority going forward. Mayor Senkevych won election in 2015 by mobilizing young voters and appealing to hope for a better future, but reforms must deliver concrete results if this sense of hope is to prove durable.

About the author: Michael Druckman is the Resident Country Director for Ukraine at the International Republican Institute

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investing in mykolaiv

Generation UA driving change in Mykolaiv Southern Ukrainian port city with global horizons seeks to reinvent itself and shake off Soviet shadows

Despite being a major shipbuilding center and former headquarters of Imperial Russia’s Black Sea Fleet, Mykolaiv was a closed city until 1993 and remained largely off the international radar. Today it is the ninth biggest city in Ukraine with a population of approximately 500,000 and boasts a record as one of the most attractive destinations in the country for international investment. Mykolaiv has a number of strategic advantages. Three major international transport corridors pass through the region, making Mykolaiv a key hub for commerce between Europe and Asia. The city has a powerful export-oriented industrial sector with particular potential for further growth in the agro-industrial and energy sectors. The Mykolaiv region is rich in natural resources such as fertile soils, granite deposits, and raw materials for cement production. However, the citizens of Mykolaiv remain the city’s most important resource. While the municipal authorities work to bring further investment to Mykolaiv, local activists are engaged in transformational projects like the Mykolaiv Development Agency (MDA), a multi-purpose institution that serves as a chain between local governance and Mykolaiv citizens. “When we started our cooperation with the Mykolaiv Development Agency, we identified three main goals to be achieved: engagement of citizens, co-financing, and real impact on the lives of ordinary people,” says Jaroslawa Johnson, President and CEO of the Western NIS Enterprise Fund, one of the first donors to support the newly created institution. Mykolaiv Development Agency focuses on addressing municipal issues and empowering local communities to take an active part in initiating change. It is a pilot project with the potential to serve as a role model for other Ukrainian cities. MDA is a young organization in every sense. Thirty-three year old Chernivtsi native Vasyl Goshovskyy leads a locally recruited team of 15 with an average age of just 27. They are creative in their approaches and benefit from a lack of the archaic procedures that can stifle initiative within existing municipal structures. This has led to a “clash of generations” and created many bumps along the road to reform of local government, but advocates believe it is the only way to achieve the necessary transition to modern governance practices at the municipal level.

Engaging for Change

Local engagement is a crucial element of the MDA strat-

egy to promote transformation. With the Mykolaiv population impatient to see the political slogans of the past three post-Maidan years translated into concrete results, quick wins and community interaction are vital. The MDA has focused on two projects designed to involve the public and provide opportunities for tangible change. The first initiative involved the redevelopment of Mykolaiv’s main square and central Soborna Street, which serve as the key shopping and strolling areas for local residents. MDA brought together over 2000 residents and experts to discuss the redevelopment concept and identify priorities. Complaints focused on the proliferation of small kiosks and outdoor advertisements. Many participants grumbled that the chaotic growth of summer terraces was creating obstructions for pedestrians. These issues are now on the municipal agenda. The second initiative is the launch of an NGO resource center that has already consulted around 100 civil society groups and activists in the first four months of its existence. As a result, 15 projects focused on art, ecology, urbanism, and gender issues will receive co-financing from the local budget totaling about UAH 500,000. Fourteen further projects are receiving MDA support. A further injection of fresh ideas came in autumn 2016 with the opening of the Ukrainian Leadership Academy (ULA) Mykolaiv. In addition to their studies, 37 young adults from all regions of Ukraine are now helping to transform Mykolaiv’s Korabelnyy district. In cooperation with the Municipal Transport Department, they have installed QR codes in trolleybuses, giving passengers access to world literature in Ukrainian. A bicycle festival organized by ULA students drew over 700 participants, while they also volunteer at local schools and animal shelters. “The main task of local government should not be limited to making the city richer financially. It must include creating comfortable lives for citizens based on trust and opportunities for professional and personal growth,” offers Ms. Johnson, who teaches English literature to ULA students and visits Mykolaiv at least once a month. She believes better transport connections could give the city a further boost. “Mykolaiv has made considerable progress in the last few years, but there is still room for improvement. Mykolaiv needs to create a convenient form of transportation to allow both investors and opinion leaders to visit. With improved connections to the rest of Ukraine, Mykolaiv will be able to achieve a tremendous impact for the city and its citizens.”

About the author: Iryna Ozymok is LED Program Manager at the Western NIS Enterprise Fund 16


Mykolaiv’s landmark commercial/recreational/hotel complex

YUZHNYY BUG


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Miracle Mayor of Mykolaiv

Can Oleksandr Senkevych live up to his election promise of a fresh start for the south Ukrainian port city? cied candidate who represented the city’s traditionally pro-Russian establishment. Mayor Senkevych’s election success was so unexpected that many in the media dubbed it “The Mykolaiv Miracle.” This miracle was possible thanks to the support of local activists who volunteered to help run an innovative multimedia campaign that focused on novelties like flash mobs and social media messaging. Finances came via crowdfunding and relied heavily on donations from the Mykolaiv SME sector. Young voters were among the specific targets, while Senkevych supporters lined the streets every morning with handheld signs in a bid to counter his rival’s dominance in outdoor ad-

vertising and print media. This was the one of the few municipal campaigns to gain momentum in the former Party of Regions strongholds of southern and eastern Ukraine. The Maidan spirit of 2014 has struggled to cross over into regions of the country that have traditionally voted for pro-Russian parties, and the local elections of late 2015 saw a string of old guard candidates returned to office. As the exception to this rule, Mykolaiv’s new mayor quickly became a symbol of the possibilities created by popular mobilization around an attractive and untainted candidate offering the tried and tested political panaceas of hope and change.

Consensus and Compromise

About the interviewee: Oleksandr Senkevych is the Mayor of Mykolaiv It is mid-May 2017 and Mykolaiv Mayor Oleksandr Senkevych is holding his first town hall-style meeting with local residents. The gathering is taking place in one of the city’s many leafy park areas, close to the Soviet-era House of Culture and Construction. A crumbling Hammer and Sickle crest on the building façade looms over a crowd of a few hundred as Mayor Senkevych addresses a range of mundane municipal issues. He may still be relatively new to public office, but he is clearly an accomplished orator, engaging with the crowd and politely listening to complaints before offering up a stream of detailed answers interspersed with occasional humor. “That’s an excellent question,” he quips at one point. “Was that one of our people?” The crowd seems pleased with this genial approach. The assembled babushkas titter at his gags and mutter approvingly among themselves, with many shuffling off following gentle coaxing from the mayor in order to write down the specifics of their complaints at a nearby information booth provided for the occasion.

Unlikely Election Victory

All this is a long way away from the high drama and even higher expectations that accompanied Mayor Senkevych’s autumn 2015 election victory. Few gave the thirty-something IT entrepreneur much chance when he entered the mayoral race as the candidate for Lviv Mayor Andriy Sadoviy’s Self-Help Party. However, he was able to tap into a surprisingly large post-Maidan desire for a fresh start and secured an unlikely second round triumph over a widely fan20

More than one and a half years into his tenure as city chief, Mayor Senkevych faces the day-to-day challenges of delivering on his lofty campaign promises. He must do so while working with a largely unreconstructed municipal council dominated by representatives of the former Party of Regions, which has rebranded itself as the Opposition Bloc but contains many of the same old faces representing the same entrenched interests. “I cannot say it is easy. There is a political component to everything,” Mayor Senkevych tells Business Ukraine magazine when he sits down to talk to the publication in his spacious City Hall office. He sees room for guarded optimism in the progress achieved so far. His first attempt at agreeing an annual city budget in 2016 ran into repeated obstacles and ended up being almost half a year behind schedule. “2017 was better. We tried to seek consensus and identify shared interests,” he says. Mayor Senkevych believes the key task is to find common ground and not lose sight of the fact that beyond party affiliations, individual council members must also live up to their election commitments and demonstrate the benefits they bring to their constituents. He says his entrepreneurial background has proved particularly helpful in establishing a dialogue between rival political factions. “Our strategy is to introduce the business concept of win-win cooperation into the management of Mykolaiv. If we allow a situation to develop where my opponents block me and I retaliate by blocking them, then the ultimate loser will be the city itself.” He points to a recent unanimous council vote in support of an EBRD credit to overhaul Mykolaiv public transportation as an example of how municipal organs can function effectively when the city’s core interests are at stake.


investing in mykolaiv

Soviet Nostalgia

Attracting International Investment

The other great obstacle Mayor Senkevych identifies is a mood of relentless negativity that he says infests the regional media and serves to sap the positive energy of the population. “If you do a Google search of news from Mykolaiv, you will find nothing but depressing information,” he reflects. This debilitating trend is present throughout contemporary Ukrainian society, but Mayor Senkevych believes it is particularly pronounced in Mykolaiv due to the economic malaise caused by the decline of the once mighty shipbuilding industry, together with the presence of a plethora of politically motivated online information portals that vary greatly in journalistic quality. This tendency to see the downside of every situation makes Mayor Senkevych’s 2015 election win all the more remarkable. It also raises the question of whether disillusionment with the future direction of the city could lead to rising support for Kremlin efforts to detach the region for Ukraine. Mykolaiv was part of the large swathe of Ukraine targeted by Moscow during the failed 2014 “Novorossia” campaign that saw hybrid Russian forces attempt to spark insurgencies throughout much of southern and eastern Ukraine. While the city firmly rejected Kremlin calls to rise up against Kyiv, it remains relatively close geographically to Occupied Crimea and the ongoing conflict in eastern Ukraine. Mayor Senkevych is unimpressed by Kremlin claims of significant local support and believes that the key to long-term stability lies in securing the economic future of the city. “The issue we face is not people loving Russia or supporting the policies of Putin. It is all about nostalgia for a Soviet era when the city expanded and achieved a certain level of fame. The population of today’s Mykolaiv is not particularly interested in Russia itself, but there is a tendency to associate Russia with positive reminiscences about the Soviet past. Ultimately, Mykolaiv residents care about supporting their families and improving their standard of living.”

One of the key routes to greater prosperity is the attraction of international investment. Mykolaiv has recently excelled in this area, leading Ukraine in terms of international investment volumes in 2016 thanks to a number of major riverside port developments designed to boost the city’s agribusiness infrastructure capacity. In tandem with this influx of international investment, Mayor Senkevych says that the past few years have also seen a marked shift away from Russian markets as geopolitical necessity has forced local businesses to look further afield and broaden their horizons. “We are now seeing companies diversifying their operations and coming to the realization that we can manage perfectly well without Russia. The more international businesses we are able to attract to Mykolaiv, the more people will appreciate that we no longer rely economically on ties with Russia.” In order to make this happen, Mayor Senkevych says is ready to act as a lobbyist for any companies looking to invest in the city, and speaks with animation about the excellent human resources Mykolaiv boasts. “This city has grains and brains,” he offers.

www.bunews.com.ua

It’s the economy, stupid

Ultimately, economic issues will probably be decisive in determining the future of this former center of Soviet shipbuilding and headquarters of the Russian Imperial Navy. Mayor Senkevych was elected because enough of the population were tired of the same old corrupt mismanagement and wanted something new. It will now require much more than catchy slogans and the politics of engagement to maintain this enthusiasm. Mayor Senkevych is well aware of this reality. “We have carried out a number of surveys to gauge the priorities of the population,” he offers. “These surveys consistently demonstrate that for the majority of Mykolaiv citizens, economic factors are more important that democratic values.” 21


Expanding Mykolaiv’s

Seaport Potential UPSS Terminals plans to upgrade Mykolaiv port complex as infrastructure investment continues

its agricultural capacity. Founded in 1990, UPSS Terminals currently operates a major processing, storage and transshipment port complex at the Dnepro-Bougsky Sea Port in Mykolaiv. The complex offers export, import and transit services while boasting convenient road and rail transportation connections that bypass Mykolaiv city and link up directly to Ukraine’s key intercity arteries. UPSS Terminals plans to launch a major expansion of the port complex in the coming years to boost transshipment capacity, construct new berths, and add a range of production, processing and storage facilities. The upgraded port complex will undergo dredging to increase the draft restrictions for the vessels the new complex can handle, while a full scope of customs and certification services will be available on site. Business Ukraine magazine spoke to UPSS Terminals Executive Manager Dmytro Falko about the importance of improved infrastructure for the further development of the Ukrainian agricultural industry, and the role Mykolaiv can play in this process as the country’s major gateway to global markets.

About the interviewee: Dmytro Falko is the Executive Manager of UPSS Terminals Ukraine’s agriculture sector is currently booming. This success has helped to attract investor interest to the agricultural infrastructure sector, with a number of eye-catching investments in recent years. Ukrainian sea and river ports are obvious focuses for this infrastructure investment. As gateways to global markets, they play a crucial role in getting Ukraine’s agricultural wealth to customers around the world and help to determine the volumes Ukrainian producers are able to ship. Mykolaiv is a leading port for the Ukrainian agribusiness industry, and has been a key focus of investment as the country looks to upgrade

What impact will the new port complex development have on the local economy? Initially there will be 250 new jobs created, and this will rise to 1200 once the project reaches full implementation level. Indirectly, we expect it to lead to the creation of at least 6,000 regional workplaces in related businesses such as construction, transport, agriculture, and food processing.

Since 2014, Ukrainian agricultural producers have made a conscious effort to expand into new export markets. How has the geographical distribution of your client base developed in recent years? Let me put it this way - the world map where we mark the destinations of our shipments barely has any room left for new flags! All customers are different in terms of their requirements but this does not create any specific problems for us as we have a sufficient variety of storage facilities to meet the quality control needs and specifications of virtually any client. We have always traditionally supplied to countries in the Mediterranean and Atlantic regions including Greece, Turkey, Italy, Spain, France, and the UK. In recent years, there has been a marked increase in demand from Israel,

“The development of port complexes for the transshipment of grain and other agricultural products is vital for the further growth of the Ukrainian agriculture industry”

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investing in mykolaiv

North Africa, and Asian countries such as India and Thailand. This trend is strengthening. It offers exciting opportunities as we seek to expand our port complex.

Many Ukrainian and international investors currently view the agriculture sector as the most attractive opportunity in the country. Due to this heightened interest, there are numerous infrastructure projects at various stages of development. Are you confident that demand will be sufficient to meet the increased capacity envisaged by the many infrastructure improvements presently in the pipeline? Despite the numerous challenges currently facing the Ukrainian economy, the agriculture sector continues to develop dynamically. It would actually be accurate to call it the engine driving the entire Ukrainian economy behind it. The key factors driving the growth of the agriculture sector are the development of infrastructure and logistics. It is all very well to sow fields and grow a good harvest, but it is equally important, if not decisive, to have an efficient delivery system to bring your agricultural produce to global markets via the country’s ports. This makes the development of port complexes for the transshipment of grain and other agricultural products vital for the further growth of the agriculture industry. Every addition to Ukraine’s agricultural infrastructure creates more opportunities for the country’s producers to receive a fair price for their commodities. With the global population growing and demand set to rise for many years to come, Ukraine needs as much agricultural infrastructure expansion and improvement as possible. What do you see as the key obstacles to the further development of www.bunews.com.ua

Ukraine’s agricultural infrastructure? The port sector has been able to develop in spite of the relative absence of state backing. Large-scale investment projects must often confront the reluctance or inability of the state bureaucracy to provide the desired support. There are no clear rules governing the land market or returns on investment. Investors also face extremely long licensing procedures. If we can solve the problem of a corrupted bureaucracy, then we will be able to develop the sector much more effectively in the future.

Despite the obvious appeal of Ukraine’s agricultural sector, the country’s economic recovery remains fragile and the geopolitical environment in the region is unstable. In the current conditions, how challenging is it for Ukrainian companies engaged in agricultural infrastructure to attract investment? I do not agree with assessments that Ukraine is currently experiencing a period of economic crisis. There are certainly some difficulties associated with heightened risks – including of a military nature – but this has not prevented us from developing the agricultural infrastructure sector or attracting investment. In order to facilitate the arrival of additional new investors to the Ukrainian market, it is important to demonstrate our own faith in the market on a daily basis and our confidence in its future stability. The main capital of UPSS Terminals is our impeccable reputation and the trust we have built up over many years with our international partners. These reputational assets are invaluable to the company and help us to attract the partnerships we need in order to grow further. Other Ukrainian companies with similarly positive reputations are now enjoying the same advantages in this challenging but exciting period for the country. 23


Dutch Shipping Giant’s

Ukraine Brain Gain Damen Shipyards Group benefits from growing partnership with Mykolaiv engineering excellence

Mykolaiv may not currently be building many ocean-going vessels, but the city remains at the center of the global shipping industry and a source of highly prized engineering expertise. One company to have seized on the opportunities presented by the southern Ukrainian port city’s nautical talent base is Marine Design Engineering Mykolayiv (MDEM), a multiservice engineering company that provides a range of ship design and engineering, research, marketing, IT and communications services for Dutch-based global shipbuilding giant Damen Shipyards Group. The relationship between MDEM and Damen dates back more than a decade, beginning during the Dutch company’s ownership of Mykolaiv’s Okean shipyard. Despite deciding to end its shipbuilding operations in Ukraine, Damen officials remained committed to capitalizing

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on the successful cooperation it had established with the city’s large pool of ship design and engineering specialists. Over the past ten years, MDEM operations have grown in scale from an initial staff of five engineers to a current team numbering in excess of 150, while the range of services provided has expanded accordingly. On the eve of the recent MDEM tenth anniversary, Damen Shiyards Group Chairman Kommer Damen offered an encouraging appraisal that highlighted the increasingly prominent role the Mykolaiv partnership is playing in the Group’s global operations. “The idea of having an engineering and design service center in Ukraine was a good one and remains good because of the highly skilled and hardworking people available here and a relationship which is not just based on costs but also on intellectual capacity.”

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investing in mykolaiv

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www.bunews.com.ua


Teamwork in action Creating a complete digital 3D model of a ship including all systems and equipment and generating full production package for the yard

Tug acoustic analysis

Knowledge sharing

3D design of hull construction and ship systems

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From left to right: Olena Zhukova Managing Director MDEM, Kommer Damen Chairman Damen Shipyards Group


sion and raised the prospect of further integration with the Group’s global interests. “For us it is important that MDEM continues to grow and to take on new people. It is also crucial to keep up with technological developments throughout the industry. This could mean personnel exchanges with other shipyards within Damen Shipyards Group. But in principle, we are committed to remaining in Mykolaiv and growing here because it is a very efficient relationship for our whole group.” The MDEM experience offers insight into the possibilities for Ukraine as the country looks to make the most of its world-class intellectual capital while boosting the domestic economy and creating the conditions for Ukrainians to build their futures at home rather that looking abroad. Business Ukraine spoke to MDEM Managing Director Olena Zhukova about her vision for sharing Mykolaiv’s shipbuilding knowhow with global partners, and asked her how she sees the engineering outsourcing industry developing in the coming years.

How has the concept behind MDEM evolved since the company was founded? In 2006 Marine Design started engineering activities in Ukraine when a small group of engineers was contracted by Spanish company ATN for a Seismic Research vessel. The first project for Damen – aluminium monohull fast ferry DFF8415 – was granted as a vote of confidence in our potential. During its execution, about 20 skilled engineers joined MDEM and, inspired by the results of the first project, the team willingly adopted new design approaches. We quickly grew to 60 specialists and started to explore other fields of cooperation with Damen. This period was marked by the expansion of MDEM’s client portfolio and diversification of its services. Besides basic and detailed engineering, MDEM became involved in R&D projects, finite elements analysis of strength and dynamics for maritime and offshore structures, in relevant modeling and simulation, workflow and application development. As the quality of cooperation continued to improve, MDEM joined the Damen family in 2010. Following further integration into corporate systems, our digital departments started to provide services in maintenance standards and part catalogues, to support central IT&IM in maintenance infrastructure and applications, and to participate in on-line and off-line market communication, thus developing remote capacity for Damen virtual teams.

terest in the industry and engineering activities in particular. Needless to say, the National University of Shipbuilding is and will always be the wellspring of maritime spirit and enthusiastic graduates. Attending international specialised conferences, visiting yards abroad, and keeping contacts with equipment suppliers and solution providers allow us to stay up-to-date with technological trends. We encourage knowledge sharing and networking with engineering partners, international professional societies and the local shipbuilding community.

investing in mykolaiv

: Mr. Damen also stressed the importance for MDEM of continued expan-

Based of the MDEM experience of providing engineering services to a global shipbuilding industry leader, do you think this sector of the knowledge industry could develop further in Mykolaiv? The knowledge and the positive experience gained in cooperation with Damen let us speak with confidence that our business model can be successfully replicated to the benefit of the city and new investors who come to Ukraine. Our best practices in innovation outsourcing can serve as a useful tool to boost the export of knowledge intensive services and we cherish the hope that Mykolaiv’s professional community will further evolve. We strive to support the next generation in expanding their expertise, enabling them to undertake more challenging projects and to develop innovative solutions. In the meantime, we are working on the growth strategy for our own capacity and further diversification of our intellectual digital products and services portfolio. You currently provide engineering and communications services for Damen colleagues around the world. What kind of challenges have you faced in finding a common language between the MDEM team and your international colleagues? At the very beginning of our collaboration we sometimes faced difficulties in understanding the way of thinking of our Dutch colleagues. However, we learned to recognize cultural differences. With a professional approach and broad communications we quickly gained synergy in working together. Nowadays we may have challenging discussions from time to time, but only in our strive for excellence! What are your development plans for the coming years? In response to this question, I would like to appeal to the Olympic motto: Citius, Altius, Fortius! Following this principle we can bring our bravest dreams and unbelievable projects into reality in our beloved city!

Where do you recruit your team and how are they able to keep abreast of the latest developments in the international shipbuilding industry? We are always glad to welcome highly qualified specialists with deep knowledge and an innovative approach. However, a major part of our HR strategy is to provide opportunities to young people. We cooperate closely with Mykolaiv National University of Shipbuilding. The best graduates join the MDEM family where they attend special training programmes, receive coaching from our senior specialists and project managers, and enjoy the possibility to work with our Damen colleagues abroad as part of project teams. MDEM helps to keep Mykolaiv at the cutting edge of the international shipbuilding industry. How does MDEM benefit from the city’s rich shipbuilding heritage? Despite the current state of shipbuilding in the Mykolaiv region, the existing traditions, knowledge, and continuity of generations still boost inwww.bunews.com.ua

About the interviewee: Olena Zhukova is the Managing Director of Marine Design Engineering Mykolayiv

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PepsiCo Performance with Purpose in Mykolaiv Region Global brand seeks to lead by example with health, ecology and community initiatives Smachnenka, together with the baby food brand Agusha, which became part of PepsiCo’s business in early 2011 after the acquisition of WBD. Overall, the company in Ukraine currently has a diversified portfolio of food and beverages including natural juices, dairy, and baby food. This nutrition portfolio represents 60% of PepsiCo business in Ukraine. We intend to further develop in this direction.

Healthy options, local ingredients

In line with the above mentioned strategy, since 2016 we have begun offering Ukrainians a series of innovative products in a range of categories: Agusha Bilakt and Zasynaiko in the baby food segment; Slovianochka mix of kefir and fruits in the diary segment; Sandora Fitness with minimum calories in the juice category, and Sandora Frutz in the drink segment. Last but not least, Pepsi without sugar entered the Ukrainian market this year. This process will continue as we seek to increase access to more nutritious options and provide products for less well-served demographics. As part of our policy of supporting Ukrainian agricultural producers, we aim to use local raw materials including milk, fruits, vegetables and sugar at our production sites. In 2016, our Ukrainian plants processed around 145,000 tons of milk and more than 30,000 tons of local fruit and vegetables.

Sustainable environmental performance About the author: Irina Kozlova is the General Manager of PepsiCo Ukraine This year PepsiCo marks the twenty-fifth anniversary of its entry into the Ukrainian market and the tenth anniversary of the purchase of Sandora, a leading national juice manufacturer in Mykolaiv region. PepsiCo Ukraine General Manager Irina Kozlova explains how sustainable development strategies and social responsibility policies are helping to create competitive advantages on the Ukrainian marketplace.

Business is not only about profits The long-term PepsiCo business development strategy is not limited to profitable growth alone. It is a much broader concept that reflects the new realities of today’s world, where no company can hope to be successful without taking its impact on the wider community and environment into consideration. In October 2016, PepsiCo Chairperson and CEO Indra Nooyi identified the three main focuses for Performance with Purpose (PWP) as the concept enters its second decade: Product, Planet and People. PepsiCo not only declares its commitment to the PWP agenda, but actively implements this approach. Product means the development of a portfolio focused on nutrition while working to improve the nutritional value of existing products by reducing sodium, sugar and fat content. The ongoing development of the PepsiCo portfolio in Ukraine reflects the credibility of this commitment. The first step in this direction was made in 2007, when the company acquired Sandora, the largest juice producer in the south of Ukraine, represented by juice brands Sandora and Sadochok. The company’s portfolio also includes carbonated drinks Pepsi, 7UP, and Mirinda, cold tea beverage Lipton Ice Tea, and mineral water Aqua Minerale. In the snack market, the company is represented by the Lay’s and “ХрусTeam” brands. In addition, a major part of the company’s nutrition portfolio focuses on the dairy category with the brands Slavyanochka, Chudo, and 28

As a company, PepsiCo aims to minimize our impact on the environment and celebrate ecological awareness. In addition to working on operational optimization and the maintenance of equipment, a number of water and energy saving projects have allowed us to introduce water recycling, heat and cooling recovery, insulation, automation, and interlocking initiatives. In 2013, we introduced wastewater treatment facilities at our plant in Mykolaiv region. With four production sites, PepsiCo has managed to achieve significant progress in reducing the consumption of natural resources across the company’s production footprint. This has been possible by applying technologies that reduce the consumption of natural resources and mitigate any negative environmental impact. Since 2013, after full integration of the company’s dairy business into the PepsiCo structure in Ukraine, we have made visible progress in saving natural resources per ton of produced items: water consumption has decreased by 11.9%, natural gas consumption is down 8.4%, and there has been a 2.2 % reduction in the use of electricity. The company has also been at the forefront of recycling efforts in Ukraine. Around 98% of all waste at our plants in the Mykolaiv region is recycled. Meanwhile, waste recycling has been in practice at all PepsiCo offices in Ukraine since 2014.

Corporate engagement culture

Ukraine boasts one of the most engaged PepsiCo teams in the world. Surveys have identified that over 85% of Ukrainian employees are proud to work for our company, share PepsiCo’s vision, support its strategy, and are optimistic about the business’s future in Ukraine. We are working to build a more inclusive and innovative future via internal tools like Eureka – a program that allows employees to share their knowhow and ideas, and to receive real support in implementing them. Over the course of the past six years, numerous ideas generated via Eureka have helped us to improve the productivity of our operations and save money. For example, in 2016


investing in mykolaiv

alone, we successfully implemented 27 cost-saving initiatives at our plants via this program. We encourage employees and their managers to identify individually tailored work schedules and locations in order to achieve a flexible and fruitful worklife balance. Many of our back office employees could just as easily work from home, build virtual teams, or choose any PepsiCo location to work from, rather than finding themselves anchored to a certain desk in a certain office. We also do our best to promote healthy lifestyles for our employees. This has meant supporting an increasing number of Ukrainian associates to take up sports through engagement. For example, our current “Healthy Living” campaign educates employees on how to start and maintain a healthier lifestyle. Its goal is to encourage people to adopt healthy habits in all spheres of their everyday life including diet, physical activity, personal routines and so forth. Fostering the next generation of leaders is also a priority for us. We develop talent and aim to provide Ukraine’s brightest graduates with the opportunity to build successful careers in our company. This year we have launched a traineeship program for talented students. Seven applicants out of more than 550 initial candidates passed the entrance examination and are now receiving training in marketing, finance, logistics analysis, market research, and manufacturing. The most diligent and successful trainees will be invited to continue their careers with the company once the initial training period is complete.

Social and charitable programs

Our goals in the people sphere are achievable through the promotion of diversity and building up sustainable communities. In other words, it is all about www.bunews.com.ua

investing in local people. Providing a safe and inclusive work place for our 3600 associates in Ukraine is fundamental. We also actively support and invest in charities, local schools, orphanages, and hospitals across Ukraine. Since 2013, PepsiCo in Ukraine has installed water purification systems in orphanages and other public places for children in the Mykolaiv region. So far, 28 systems have been installed, meaning that 3000 children in rural areas now have access to clean water for drinking and cooking purposes. This year we aim to expand this initiative to other regions of Ukraine. In 2016, we donated 160 tons of products to people in need through our long-term partner Foodbank and other charity funds. The company regularly holds cooperative charity initiatives with Tabletochki, Blagomay, and Ukrainian Philanthropic Marketplace to raise donations and help save lives. Since 2016, PepsiCo in Ukraine has been actively involved in the “School Recycling” project. This initiative teaches children and their families the basic principles of responsible waste recycling. Ecological lessons are already underway at a number of Mykolaiv schools. There are now plans to expand this project to other regions of Ukraine later this year. For the second year in a row, PepsiCo in Ukraine is a sponsor and active participant in the country’s largest voluntary eco-campaign. This annual mass clean-up event gathers nearly one million Ukrainians for a one-day drive to tidy public green zones. Our participation in this clean-up initiative helps to unite PepsiCo employees from different cities across the country. We believe that our commitment to Performance with Purpose will lift our company to new heights in the coming years. But we recognize that we cannot reach these heights alone. Delivering solutions to shared challenges will require close collaboration with government bodies, nongovernmental organizations (NGOs), and other stakeholders. 29


Ukrainian Troy Archeological treasure trove points to Mykolaiv’s ancient origins and threatens to rewrite history books

According to the history books, Mykolaiv was founded in 1789 as part of Russian Empress Catherine the Great’s march through Ukraine towards the northern shores of the Black Sea. This late eighteenth century foundation date remains central to the mythology of the city, placing it firmly within the imperial Russian narrative as the last of the settler cities established in southern Ukraine by Catherine’s favorite, Prince Grigory Potemkin. Relics of this imperial inheritance still abound throughout today’s Mykolaiv. Giant busts of Tsarist admirals and dilapidated nineteenth century admiralty buildings remind visitors of the city’s illustrious 30

past as the headquarters of the Imperial Russian Navy. Vintage cannons stand guard over the estuary, offering echoes of Mykolaiv’s role as a key staging post for Russian forces during the mid-nineteenth century Crimean War. Even the orderly downtown layout of neatly intersecting boulevards is suggestive of a centrally planned colonial undertaking. There is much truth to this vision of Mykolaiv as a product of the Tsarist Empire’s southwards expansion. However, the history of the city does not actually begin with the arrival of the Russian fleet. There is archeological evidence that Mykolaiv’s earliest urban com-


investing in mykolaiv

munity appeared three thousand years before Russian troops first set foot in the area. These archeological finds have excited and confounded the international academic community in equal measure. The implications of the discoveries in Mykolaiv could reverberate throughout Eastern Europe, altering our understanding of the civilizations that once populated the Black Sea region and the northern extremities of the ancient world.

Underfunded Archeological Treasure

The site of Mykolaiv’s archeological treasure trove is underwhelming to say the least. Known locally as “Diki Sad” (“Wild Garden”), at first glance it appears as little more than an abandoned and overgrown construction site. Diki Sad is perched high above the point where the Inhul and Southern Bug rivers meet in what is the geographical heart of the city. It is an obvious location for an ancient settlement, offering great riverside infrastructure and steep defenses. These natural advantages are no longer quite as persuasive as they once were. Today, there is little to suggest that it is a site of major national importance. A half-collapsed wooden fence does a poor job of protecting the area from either intruders or the elements. The current population of the ancient city seems to consist exclusively of junkies and vodka-swilling vagabonds ready to snarl and stare at anyone foolish enough to disturb their intoxicated idyll. The only evidence of the site’s potential significance are the numerous archeological pits dotted around the three-hectare plot. This is the Ukrainian Troy – an underfunded archeological breakthrough with a history mirroring Ukraine’s own postindependence struggle to make itself heard on the international stage. Archeological attention first focused on Diki Sad in the late 1920s when Soviet academics uncovered evidence of an ancient settlement. Prior to this discovery, the site has been a garden used by the city’s swaggering naval officers. The Soviets showed no great inclination to expand on their initial discoveries, and the serious business of excavations only really began with the dawn of Ukrainian independence in 1991. What they uncovered has challenged existing theories about the development of civilization in the Black Sea-Danube region. The city that once stood at Diki Sad dates from the twelfth century BC – roughly the same period as ancient Troy. It is believed to have been the work of Cimmerians – a tribal people most famously associated with the fictional character Conan the Barbarian. Unlike other regional archeological discoveries from this period, the Diki Sad site boasts all the indications of a significant urban dwelling. There is evidence of intricate defensive structures, stone bridges, watchtowers, storage facilities, and sophisticated residential buildings. While small by today’s standards, the defended inner core of the site was probably home to around 700 people, making it a relatively large city of the time. This flatly contradicts accepted archeological wisdom for the period, which has long held that the tribal peoples who populated the southern Ukrainian steppe lands were nomadic. This nomadic thesis has served to create the image of southern Ukraine as the borderland between so-called civilized and steppe cultures. Diki Sad suggests a highly developed urban community that flies in the face of this previously neat civilizational divide. Evidence has been uncovered of trade with Asia Minor and the Baltics, suggesting the city could have operated as a sophisticated commercial hub over a thousand years before the Kyiv Rus civilization rose to prominence thanks to exploitation of the same Baltic-Black Sea trade routes. www.bunews.com.ua

Three Thousand Years of History “Fifteen years ago, people used to laugh at us when we talked about Diki Sad at international conferences. But now there is growing academic interest,” offers Oleksandr Smirnov, the deputy head of the Diki Sad excavation team at Mykolaiv National University’s History and Archeology Department. The infectiously enthusiastic Mr. Smirnov is one of the reasons why the secrets of Diki Sad are now being slowly but surely uncovered. He was an university student in the early 1990s when exploration of the site began, and has remained intricately involved in the project ever since. He now leads his own students on weekend digs that provide the undergraduates with valuable experience while helping to move the cash-strapped excavation works forward. It is a slow and painstaking process marked by occasional breakthroughs such as the discovery of ritual utensils or a new gateway into the inner core of the city. In common with virtually every other representative of the Ukrainian academic community, Mr. Smirnov complains about a chronic lack of financial resources. His immediate goals are modest enough – he says he dreams of securing sufficient investment to pay for proper perimeter fencing and guards to protect the site. In the medium term, he hopes to find international donors willing to back the further development of Diki Sad. Ultimately, the objective is to transform the area into an open-air partial reconstruction of the ancient city that would highlight Mykolaiv’s three thousand years of history and its role as a pioneering outpost in the spread of urban culture throughout the region. “The findings at this site demonstrate that the ancient Ukrainian steppe was not only home to nomadic tribes,” offers Mr. Smirnov. He believes the revelations of Diki Sad are of more than academic interest. As well as challenging archeological orthodoxy with regard to the divide between nomadic to urban cultures, the site also exposes the historical illiteracy of Russian imperial posturing. According to Mr. Smirnov, the establishment of Tsarist Mykolaiv in 1789 was merely the continuation of a cosmopolitan regional narrative stretching back millennia. “The idea that this was virgin land settled by the Russians is a complete myth. This part of Ukraine was never empty. Urban life began with the Cimmerians and has continued ever since,” he explains. “As well as the Ukrainians themselves, the region has served as home to Greeks, Byzantines, Genoese, Crimean Tatars, and Ottomans. There have always been communities living here.” 31


Mykolaiv Development Agency (MDA) assigns a dedicated team for investment projects entering the city. The team then supports the investor in acquiring necessary information, supplies data on available human capital, infrastructure etc. and provides assistance with legal procedures. The MDA team acts as a liaison office between the investor and various local government offices. The MDA can also provide support with feasibility studies, business plans, data analysis etc.

Distance From Mykolaiv Ports Rotterdam 15 519 km | 11 days

London

Hamburg 7 065 km | 11 days

6 518 km | 10 days

Mykolaiv

Marseilles New York Los Angeles 17621 km | 30 days

9 985 km | 16 days

3 308 km | 5 days

Shanghai 15 519 km | 24 days

Istanbul 733 km | 1 days

Dubai 7 645 km | 12 days

Hong Kong

Mumbai 7 865 km | 13 days

14 220 km | 23 days

Singapore 11 517 km | 19 days

Adelaide 16140 km | 30 days


Grain Export

Dry Cargo Export

VIA MYKOLAIV PORTS

70% passes through Mykolaiv

70% of grain that Ukraine exports to the world markets passes through Mykolaiv. City ports are best-equipped for handling dry cargo in Southern Ukraine.

2005

2010

3 642 000 tonnes

9 679 500 tonnes

2015 22 352 970 tonnes

Dry cargo volumes handled by Mykolaiv ports have been steadily growing in recent years, topping impressive 600% growth rate in the last 10 years. The ports are investing into their capacity extension, with river bed dredging works, improved cargo servicing, etc.

Export from Mykolaiv

Agricultural Products

Equipment & Machinery

Oil Products & Lubricants

Timber & Forestry Products

805 344 500

167 570 300

39 153 900

17 152 200

INVEST IN

MYKOLAIV

For more information please visit www.investinmyk.com


Riga

Moscow

Baltic Sea

North Sea

Minsk Amsterdam Warsaw Brussels

Kyiv

Prague

Mykolaiv Odesa

Bucharest

Black Sea

Caspian Sea

Rome

Logistic Hub Mykolaiv is situated in the centre of Southern Ukraine. Three European transport corridors cross the city. It also provides access to the New Silk Way via Black Sea link. Baltic Sea – Black Sea

Black Sea Economical Cooperation

Highways

Rotterdam Hamburg 2 384,8

2 014,7

Riga

Budapest

Warsaw

1 489,8

1 330,2

1 236,5

Eurasian Transport Corridor

Railways

Mykolaiv

Rotterdam Cologne 2 384,8

2 218,7

Prague

Vein

Warsaw

1 666,4

1 594,6

1 236,5

Mykolaiv


Population

126 925 25-39

46 658

LABOUR POOL

344 507

15-24

POPULATION

489 088 65 090

40000

137 988

0-14

79 491

STUDENTS

40-59

65+

60-64

32 936

70%

30%

26 986

13

Universities

13 157

28

Vocational schools

16 000 LIBERAL ARTS 14 000

Management

12 000

Finances

10 000

Linguistics

8 000

Law Other

6 000 IT AND ENGINEERING 4 000

IT

2 000

Engineering Other Technical

NATURAL SCIENCES AND ARTS

Natural Arts OTHER MAJORS

Other


Caring about Healthcare Andy Hunder, President of the American Chamber of Commerce in Ukraine

The American Chamber of Commerce in Ukraine supports the new team at the Ministry of Health of Ukraine in the reform process. Progress is clearly visible, but much still needs to be done.

The greatest wealth is health

The average life expectancy of a Ukrainian male is ten years shorter than that of an average man living in Switzerland. Ukraine’s healthcare system has witnessed years of neglect and dwindling funding, resulting in Ukrainians paying over 46% of healthcare expenditures out of pocket, compared a world average of 18%. However, over the past year, the situation has started to change.

Ever since the new team of professionals took over Ukraine’s Health Ministry they are proving to be serious about reform. Headed by US-native Ulyana Suprun, a former volunteer and director of humanitarian initiatives of the World Congress of Ukrainians, the Ministry of Health of Ukraine has already launched a number of reforms, namely: introduction of system of international protocols for treatment, transfer of hospitals from state to communal provision and a new format of transparent public procurement of medicines through international organizations, which certainly brought Ukraine to a new level of quality and transparent procurement.

The recent launch of a new reimbursement system of medicinal products is a good and long-awaited step. The Chamber’s Healthcare Committee, in close cooperation with the Ministry of Health, have been continuously working on reaching a fair balance in the establishment of the reimbursement mechanism that will provide patients with access to affordable and quality medicines in Ukraine. Sadly, in some regions of Ukraine this procedure is being disrupted locally. Thus, it is vital now for the Government to be unquestioning and to intervene in the situation in order to stop the resistance. This reimbursement mechanism should work properly and fully in every region of Ukraine.

Bad Medicine

The establishment of the National Essential Medicines List, which was proposed by the Government in March, has, however, created risks for the patients. First, there is limited access or in certain cases no access at all to some medicinal products, which are not covered by international procurement. Second, there is a risk of interruption of the therapy. In the sphere of healthcare hardware and medical devices nothing has been done either. Healthcare Intellectual Property Rights protection also leaves much to be desired. Ukraine should build a strong IP rights regime, which ensures and ac-

celerates patient access to innovative treatment. A weak Intellectual Property regime in its turn can be a deal-breaker for a technology firm that is looking to invest.

Trying to watch out for trends, the Chamber launched a Healthcare Marketing HUB, an effective platform for the dialogue on business performance in the Ukrainian pharmaceutical market, which assembles industry professionals from leading companies to discuss innovative ideas, development of the industry’s vectors and tracking new market trends.

No reform – no investments

In terms of healthcare potential, Ukraine has a lot to offer. Already, international investors are interested in the Ukrainian market. But now the high-quality healthcare reform is crucial to attract Foreign Direct Investment. Such factors as efficient and transparent medicinal products’ registration system and IP rights regulations, developed and sufficiently financed medicinal products reimbursement system, competitive tax system, level playing field for investors, continuous and structured dialogue between the industry and the government are especially important in determining new investment. The successful implementation of healthcare reform requires the bold will of politicians, support from the business community and an understanding from people. Everyone has to be engaged in the reform process and finally make Ukrainian healthcare a right, not a privilege.

35


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Five Years of Ramada Encore Kiev

The Ramada Encore Kiev hotel marks five years of operations this year, having first opened its doors for business in the Ukrainian capital city in 2012. A popular venue for business and society events, Ramada Encore Kiev recently added to its hosting appeal by unveiling the largest hotel banquet hall in the Ukrainian capital. The hotel stands prominently on one of the main highways connecting Kyiv to the south of the country. It boasts convenient connections to Kyiv’s two international airports and city center attractions, while also offering the relative tranquility of a location surrounded by the lush greenery of the Ukrainian countryside. There are a range of amenities on offer nearby courtesy of the neighboring Atmosphera and Domosphera retail and entertainment complexes, where hotel guests can enjoy everything from shopping and fine dining to karting and bowling in the immediate proximity of the hotel itself. The hotel is part of the Wyndham Hotel Group – the world’s largest hotel company based on number of hotels with a global portfolio of more than 8,000 hotels. Ramada Encore Kiev has received numerous awards over the past five years, including the Wyndham Hotel Group’s “Hotel of the Year” accolade (EMEAI region) in 2014 and the Group’s “Above and Beyond” award for 2016. It has also been the recipient of TripAdvisor Certificates of Excellence in 2015 and 2017, and a TripAdvisor Travelers’ Choice award in 2017. Over the past five years, the Ramada Encore Kiev has earned a reputation as the unofficial Kyiv conference capital. Facilities include

the Kyiv Event Hall, Ballroom, and 18 fully equipped meeting rooms along with coffee break areas and utilitarian suites complete with a full range of state-of-the-art presentation tools. The hotel regularly hosts national and international industry events, conferences, and forums. Event participants often spend multiple days as guests of the hotel, taking advantage of 264 rooms and 58 apartment suites in a range of sizes, along with two fully-equipped fitness centers, two restaurants, sushi bar and summer terrace. The latest addition to the Ramada Encore Kiev facilities ensemble is the Banquet Hall (pictured, right). Capable of accommodating 540 guests for a cocktail reception, 700 people seated theater-style, and 500 guests for a gala plated dinner, this 920 square meter area is the largest hotel banquet hall in Kyiv. It boasts top-of-therange equipment and flexible formatting, making it ideal for a wide range of events including everything from society occasions and award ceremonies to industry gatherings and business conferences. Highlights include adjustable lighting to create the right ambience for every event, stylish hall decorations and table settings, and a giant LED screen measuring 230cm by 587cm. The Banquet Hall offers full service catering and comes with the support of experienced event managers who provide expert guidance every step of the way. Free parking for hundreds of guests is also available, making it an ideal location for large-scale events catering to people traveling from across Kyiv.


promotion


reforms

Ukraine’s Open Data Revolution

Greater transparency can play a key role as Ukrainian society moves beyond the post-Soviet era development of public demand and strengthening the capacity of target audiences to use open data. Success very much depends on the development of social and commercial projects based on open data. We are already seeing dramatic growth in the use of open data in the EGAP Challenge initiative (a national competition and incubation program for IT projects in e-democracy), with a 300% increase in projects using open data to build public services for citizens and businesses.

Why Open Data Matters

About the author: Victor Liakh is the President of the East Europe Foundation Ukraine has made huge progress in the field of open data since 2014. The country has introduced a wide range of reforms designed to increase public access to information. This has garnered international recognition, with Ukraine leaping thirty places in the latest annual Global Open Data Index. However, not everyone has grasped the importance of this cultural shift. Many cynics have responded by claiming that Ukraine is now Europe’s most transparent and corrupt country at the same time, while others have been underwhelmed by the lack of tangible results from this new-found commitment to open data access. Business Ukraine magazine invited Victor Liakh of the East Europe Foundation to outline why Ukraine’s open data revolution is worth getting excited about.

All Data is Public Data In recent years, the Ukrainian government has embraced a new concept of openness. This reflects the belief that, to paraphrase Margaret Thatcher’s famous observation about government money, there is no such thing as government data, only public data. Key developments include the founding of a national government body – the State E-Governance Agency – to streamline e-government and open data activities in the country. In cooperation with civil society, this agency has introduced a national open data portal providing free access to state registers. It has also developed a draft road map for further open data development. Thanks to these efforts, Ukraine has leapt up the Global Open Data Index, climbing from fifty-fourth place in 2015 to twenty-fourth position in the most recent ranking, placing the country ahead of many EU member states. In 2016, Ukraine also became the first post-Soviet country to join the international Open Data Charter. Seventeen countries so far have joined the Charter, committing themselves to the key principles of “open by default,” releasing timely and accurate information, and offering government data in a manner that is accessible and useable. These principles directly informed the Ukrainian government’s 2017 Open Data Road Map, which the East Europe Foundation (EEF) helped prepare. Open data is not only about data disclosure and accessibility. The comprehensive approach to open data currently embraced in Ukraine also includes increasing the accessibility and quality of public data. It means building the capacity of the authorities to disclose public data, while creating the requisite political will to open important registers. Regulatory support is crucial, as is 50

In general, open data makes life easier and safer. One example is a project that allows anyone to monitor the registration data of Ukrainian companies and court registers. With this information, entrepreneurs can carry out background checks on their contractors and protect their business. Information taken from open public registers and other sources is accessible directly via Telegram, Facebook Messenger, Skype, and Viber. Another example is EcoInfo, a GIS environmental monitoring service that allows users to monitor the level of air, water, or land pollution anywhere in the city. It works with big data from multiple sensors located all over Ukraine and is widely used by Ukrainian citizens, eco-activists, government, and business. Meanwhile, BldngInfo is an interactive city map that demonstrates the utilities used by individual houses, streets, and districts. The authorities are able to analyze consumption in terms of gas, water, electricity, and heating, while residents can assess the effectiveness of communal services reforms. Healthcare also benefits. The Donor.ua portal contains a database of donors, recipients, volunteers, and medical facilities where a person can donate blood. This allows users to carry out automated searches for appropriate donor recipients. The portal sends information requests to donate blood at a particular location. It can literally save lives. One of the most effective examples of open data at work in the new Ukraine is the public spending portal (spending.gov.ua) established by the Ministry of Finance. The portal contains and discloses data about the public financial transactions of 39,000 public funding recipients. This involves more than 53 million transactions and more than 18 million state contracts and reports. It is a goldmine for investigative journalists and civil society. As access to open data has expanded in Ukraine, civil society has moved the process further forward and developed tools to analyze different aspects of budget spending. Some portals now allow citizens to monitor specific public spending in their communities. This evolutionary process will continue. It is crucial now to inform the Ukrainian public of the new possibilities created by increased open data access. The goal is to make sure the average Ukrainian has sufficient e-instruments within the next five years to monitor and control state services. Openness means honesty, which means freedom and growth. It can also help to create wealth. Open data stimulates greater competition in the private sector. In the UK, for example, open data has been credited with generating 0.5% GDP growth. Open data is also a vital tool in the fight against corruption. While open data adoption has yet to make a major impact on Ukraine’s struggle against deeply entrenched corrupt practices, progress in curbing state corruption will inevitably come thanks to the greater transparency and public accountability created by open data practices. Taken collectively, these benefits have the potential to take Ukraine to the next level. The key now is make use of the opportunities created by the country’s ongoing open data revolution.


society

Beyond the Bolsheviks: Ukraine’s Revolution Ukraine’s epic independence struggle began in 1917 and remains very geopolitically relevant today

About the author: Marina Pesenti is the Director of the Ukrainian Institute in London. The Ukrainian Institute in London (www.ukrainianinstitute.org.uk) is a UKbased charity focused on informing and educating the UK public on Ukraine’s current affairs, history, arts and culture. Images of the 1917 Russian Revolution have flooded the London of 2017. Marching Bolsheviks and Red Army soldiers point at me from posters on every corner of the British capital and bring with them a strange feeling of returning to the Soviet Ukraine of my childhood. The Royal Academy of Arts blockbuster show, “Revolution: Russian Art 1917-1932”, dazzled its audience earlier this year with a magnificent display of arts and cinema. Meanwhile, the British Library’s “Russian Revolution: Hope, Tragedy, Myths” exhibition unearthed interesting archival documents and artefacts from its collection. Towards the end of the year, “A Red Star Over Russia”, will be the headliner attraction at the Tate Modern gallery. Dozens of less high-profile events are also taking place in the British capital. There has been little mention of Ukraine in this flurry of Russian Revolution retrospectives. For example, Kazimir Malevich was an ethnic Polish avant-garde artist born in Kyiv who spent his formative years in Ukraine and spoke Ukrainian. His art took up a whole room at the Royal Academy, but visitors learned that he was unequivocally “Russian”, despite the fact that many of the paintings on display refer to his “Kyiv period”. Olexandr Dovzhenko, the famous Ukrainian film director whose films focused on Ukrainian material, was merely “Ukrainian-born.” Cultural mapping aside, there is no mention of Ukraine as a major battleground during the tu52

multuous events of 1917. Ukraine’s statehood bid and its struggle for independence between 1917 and 1921 are not mentioned anywhere, nor is the fact that Ukraine was a major theatre for a so-called civil war involving a dizzying array of opposing sides and nationalities. This is no surprise. Ukrainians should not be deluded into thinking that it will be ever be allocated a place in this grand narrative. All exhibitions of this kind take years to prepare and involve major Russian galleries and museums along with funding from Russian oligarchs. Moreover, many British curators have an inherent bias towards events and arts originating in non-Russian parts of the former Tsarist Empire, typically placing them under the Russian umbrella or ignoring them altogether.

Telling Ukraine’s Story

The Ukrainian Institute in London has decided to build a narrative of its own by launching “The Century of Ukrainian Revolution: 1917-2017.” This is a themed series of events where the Ukrainian story of the 1917 Revolution is told by academics and visualised through 1920s cinema and publishing projects. US historian Professor Mark von Hagen launched the project with a lecture on the importance of the Ukrainian Revolution for a more nuanced appreciation of the geopolitical conflicts following the collapse of Tsarist authority. Professor von Hagen explained how after many years of studying the Russian Revolution, he concluded that the state the Bolsheviks were building was a neo-imperialist project. He reminded his British audience that Soviet rule in Ukraine followed two Russian-Ukrainian wars in the wake of the Bolshevik Revolution. As part of the project, fellow US historian Anne Applebaum will be unveiling her latest book focusing on the early history of Soviet Ukraine and dealing with the Holodomor - a central event to Ukraine’s identity. “Red Famine. Stalin’s War on Ukraine”, will be the star attraction on 28 September at the EBRD headquarters in London at an event co-hosted by the Ukrainian Institute. There is another “Ukrainian Revolution” crucial to our understanding of this period. Throughout the 1920s, Ukraine experienced the intense development of its cinema industry, with dozens of highly experimental avant-garde films produced. These included the famous “A Man with a Movie Camera” by Dziga Vertov. Filming for this innova-

tive piece of cinematography took place in Kyiv, Odesa and Kharkiv, but until now it has enjoyed an international reputation as a “Russian” movie. The head-spinning 1920s development of Ukrainian cinema was driven by VUFKU, a peculiar acronym standing for “All-Ukraine Cinema and Photo Directorate.” VUFKU produced 40% of the Soviet film output during the early Bolshevik period and enjoyed the freedom to sign contracts in Western Europe and North America where it actively distributed its material. All of this came to an abrupt end with Stalin’s rise to power in the late 1920s. Brutal repressions of the Ukrainian arts scene followed. Two of VUFKU’s best films – “In Spring” by Mikhail Kaufman and “The Profiteer” by Mykola Shpykovsky - were screened in London earlier this summer. The screenings proved possible thanks to partnership with the Kyiv-based Olexander Dovzhenko National Centre. More screenings of magnificent Olexandr Dovzhenko films will take place in autumn 2017. “VUFKU is still a hugely under-researched phenomenon of independent film-making in the early Soviet Union,” commented Dovzhenko Centre Programme Director Stavislav Menzelevskiy following a June screening of “In Spring” at Bertha DocHouse, one of the leading London cinemas focused on documentary screenings. The Ukrainian Institute is also adding another layer to the concept of the Centenary of the Ukrainian Revolution by shifting the focus to Ukraine’s national identity following the 2014 Revolution of Dignity. The debate will center on Ukraine’s complex relationship with the Soviet past and the country’s contemporary policies of “de-communisation”. Autumn will see the UK presentation of a book entitled: “Decommunised: Ukrainian Soviet Mosaics”. Osnovy publishing house Director Dana Pavlychko will present the book at the EBRD offices in London. The Ukrainian Institute’s role in promoting awareness of the 1917 Ukrainian Revolution is a major undertaking that has involved developing themes specifically for London audiences and identifying partners in Ukraine. The initiative has already enjoyed some coverage in the UK media, highlighting the possibilities of well-directed cultural diplomacy. Such efforts need amplification but this can only happen with greater support from government and business.


investment

Ukrainian State Interference Deters Investors

Government must reduce regulatory role in order to attract international investment for exports, state policy made for the benefit of particular firms, and restriction of competition are all examples of the major corrupt practices that deter investment and threaten to thrust Ukraine back into the communist-era Dark Age. The biggest threat to investment comes not from a police officer who demands a bribe, but from the system that gives him the power to demand a bribe. Much more power needs to be taken from the state and decentralized to the people and to the market. Only then will corruption cease.

About the interviewee: Christopher Andrew Hartwell is President of CASE (Center for Social and Economic Research) and Associate Professor at Kozminski University in Warsaw What is the current image of Ukraine within the European investment community? The current image of Ukraine is as an unfinished project - better than it was, but still not complete. For some industries, such as poultry and agro-processing, the potential outweighs the unfinished issues and many see it as ripe for investment. For other areas, the risk is still great and the overall uncertainty surrounding the viability of Ukraine’s reforms outweighs any sector-specific opportunities. Worries about an expansion of the war in the east are still at the back of people’s minds, but the investment community has done a good job of pricing that risk in. In reality, the image of Ukraine in the eyes of European investors is very much up to Ukraine. Continued reforms hold the key to improving this image. We often hear that corruption is the main barrier to greater international investment into Ukraine, but this is a very broad concept. Which specific corrupt practices serve as the greatest obstacles to investment? The problem with corruption in the Ukrainian context is that it is two-fold. It is the small-scale need to pay a bribe to get along which is still too common, and it is the large-scale control of key industries and need for political connections to succeed. Of these two, the problem of large-scale control and political meddling in the market is the more problematic. Selling licenses 54

Some economic analysts say excessive Ukrainian bureaucracy is as big a barrier to investment as corruption. Do you agree? This is a corollary to the previous point, which I think is more important. Yes, excessive bureaucracy is problematic, especially for investment, but the bureaucracy is just enforcing the too-numerous laws and directives that place the state squarely in the economy. If there were no export restrictions on timber, to take an example, there would be no need for a sprawling bureaucracy to oversee them. Bureaucracy is the symptom, state interference is the disease.

Where do you see the greatest opportunities for targeted reforms that could rapidly attract the attention of the international investor community? This is the easiest thing to highlight and the most difficult thing for Ukrainian politicians to actually do: wipe away the Agricultural Land Sale Moratorium. So much potential is locked away in Ukraine’s agricultural sector that can be unlocked by throwing open the floodgates and letting a land market come into existence. The current state of affairs benefits no one except the elites and the politically connected by keeping small landholders tied to their land in an echo of tsarist feudalism. Destroying the land sale moratorium would be a huge signal that this government actually respects property rights, which in turn would spur investment. In fact, it would increase investment across the board, not just in the agricultural sector. Ukraine’s national brand has suffered from decades of neglect and negative coverage. What are the most effective tools for communicating a positive brand message to key

audiences in the international political and business communities? In addition to structural change, Ukraine really needs to get a better grasp of English. Poland has succeeded so much because its young population understands English and can communicate in it. This is a huge selling point for potential investors. Poor English does not mean a low skill set, but it is a signal that priorities are not necessarily geared towards international communications. Estonia is another good example of a country with high-tech wizards who speak perfect English, and this is how they were able to really spread their message and ensure good PR on the international stage. How can Ukraine leverage its EU Association Agreement free trade access to European Union markets in order to attract greater international investment? The fact that the AA is in place means that the leverage is already done. What is needed now is for Ukrainian businesses to answer the call and step up their game, striving for higher quality standards, adhering to EU guidelines, and especially forging new links with EU businesses. Strong businesses will be able to attract investment. The allure of EU market access together with lower comparative labor costs is something that will not be lost on international investors. Ukraine just needs to make it easier to start and operate a business. In particular, the country needs to have a free and independent judiciary. This will attract businesses already interested in Ukraine’s innate advantages.

Some observers believe one of Russia’s main goals in keeping the conflict in eastern Ukraine simmering is to destabilize the Ukrainian economy and scare off international investment. Could such tactics succeed in the long-term? This will only succeed if Ukraine lets it succeed. The conflict is contained for now, and affects only a small part of Ukraine. While the conflict reduces the state budget and introduces levels of uncertainty that the country does not need, Ukraine’s future success is still very much in Ukraine’s hands. Continuing the current reforms and making this reform process more radical is something that Ukrainians can do themselves. Russia cannot take that away.


WEST UKRAINE’S LIFESTYLE GUIDE №100/April 2017

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Steampunk Superheroes of

Ukrainian Independence Comic book blockbuster seeks to bring 1917 Ukrainian Revolution heroes to post-Maidan audiences When people think of Ukraine’s long struggle for independence, they tend to focus on the WWII-era insurgent army that fought both Nazis and Soviets, or the Cossack statehood bids of the seventeenth and eighteenth centuries. This is perhaps understandable: the romance of Cossack leaders Bohdan Khmelnitskiy and Ivan Mazepa has captivated generations of Ukrainians, while the polarizing figure of WWII insurgency leader Stepan Bandera has cast a shadow over the national identity debate ever since the 1940s. However, prior to 1991, the closest Ukraine actually came to establishing a recognizable modern state was during the epic independence struggle that began in 1917. As Ukraine marks the centenary of those momentous events, a group of comic book artists is attempting to introduce today’s post-Maidan generation to an era of Ukrainian history that has direct relevance to the ongoing hybrid war with Russia.

Instant Comic Book Classic

The Ukrainian steampunk comic book “Volya” (“The Will”) hit bookstores in May. It proved an instant hit, selling out its entire initial 3,000 print run within weeks. The book was the star turn at the Kyiv Comic Con festival and attracted the attention of President Poroshenko during Ukraine’s popular annual literature fair (the Ukrainian head of state was one of a number of high-profile politicians to buy a copy). This popularity reflects the current fashion for all things Ukrainian among a population gripped by a national awakening that began with the 2014 Revolution of Dignity and gained ground in response to the subsequent Russian invasion of Crimea and eastern Ukraine. “The Ukrainian public is eager for patriotic themes,” explains the book’s author and primary investor Vyacheslav Buhayov. “The idea first came to me just over a year ago as the centenary approached. It has been one hundred years since the events we are addressing took place, and yet the historical narrative they are part of is still continuing today.” Although the Ukrainian comic book industry is currently miniscule, Mr. Buhayov had no difficulty in recruiting a team of high-quality artists for the project. He was able to find plenty of talent working as outsource artists for Western publishing houses, and drew on his own experience in the gaming industry. The result is a glossy and engaging hardback comic novel with slick production values and striking artwork.

Creative History

“Volya” is not a direct narrative telling of Ukraine’s failed 1917 statehood bid. Instead, the book is actually three separate fantasy tales set in the period and featuring a mishmash of genuine events and historical figures 56

alongside surreal elements and outlandish inventions. This may have been a wise choice. Not only was Ukraine’s 1917 revolution doomed to eventual failure – it is also one of the most complex and confusing historical narratives imaginable. Ukraine witnessed two separate attempts at state building during the period, with fledgling Ukrainian states established in both Kyiv and Lviv.

Numerous different regimes came to power only to fall with indecent haste, while White Russian forces and Bolsheviks vied with Poles, Germans, AustroHungarians and Anarchists for dominion over Ukraine. Amid the chaos, Kyiv changed hands an estimated 18 times, while other Ukrainian cities fell to one or other of the conflict’s participants on dozens of occasions. This makes the period something of a minefield for historians and largely impenetrable to wider audiences. “Volya” has sidestepped this difficulty by presenting fictional drama based loosely on real events without claiming to be offering a definitive historical version of the period in its entirety. Nevertheless, there are plenty of familiar faces. The leading lights of Ukraine’s independence struggle such as Hetman Pavlo Skoropadsky and Mikhailo Hrushevskiy feature prominently alongside the likes of legendary Ukrainian anarchist Nestor Mahkno and a supporting cast including an array of dashing military characters, nubile Polish spies, and Bolshevik zombie soldiers. Russian Tsar Nicholas II appears as a phantom apparition in one episode, while Bolshevik leader Vladimir Lenin pops up as a cyborg terminator. Meanwhile, topless chorus girls brandishing bottles of champagne or lounging in smoke-filled war rooms provide the obligatory teenage titillation.

Low Budget Hollywood Blockbuster

The steampunk genre takes its inspiration from late twentieth century science fiction portrayals of the Victorian era, and this enthusiasm for H.G. Wells-style futuristic engineering is ever-present throughout “Volya”. The creators of the comic clearly have a passion for WWI technology and the pages of the book are crammed with weird and wonderful prototype contraptions alongside authentic warships, airships, planes, guns and uniforms from the period. Many of the characters possess superpowers, but the settings come with an eye for historical accuracy right down to the wartime posters and Kyiv city panoramas that feature as occasional backdrops to the action. It is all highly unorthodox and slightly bonkers, but it is undeniably fast-paced and extremely engaging. The :


culture

www.bunews.com.ua

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culture

: overall effect is reminiscent of a storyboard for a Hollywood war movie set in

1918 Ukraine. This, it transpires, was exactly the idea from the very beginning. “We wanted to create a blockbuster for the domestic market,” says Mr. Buhayov. “People are eager for Hollywood-level quality and comic books are a way of achieving the Hollywood effect without big budgets.” He believes that part of the book’s charm lies in its unapologetically positive spin on Ukrainian history. Ukrainian characters appear as bold and daring throughout. They enjoy the support of a mighty military equipped with the finest technologies of the period. In one episode, Crimea is conquered. In another, readers see maps of Greater Ukraine including swathes of modern-day Russia and learn of Ukraine’s early twentieth century dominance in a range of agricultural and industrial sectors. It is a swashbuckling, self-confident side of Ukraine that is all-too-often missing from the country’s history books. Mr. Buhayov says there is huge public demand in today’s Ukraine for the kind of swagger more commonly associated with American historical epics. “The Ukrainian information sphere is full of materials bemoaning Ukraine’s tragic fate and difficult history. Frankly speaking, it is depressing,” he says. “I was convinced – and remain convinced – that people want something more inspirational.” He sees the book’s key target audience as adult males aged 30 to 50 who are interested in military and historical themes, but says one of the comic format’s greatest strengths is its crossover appeal to other demographics. “This pop culture approach allows us to reach out to much wider audiences than might have been possible with a more traditional historical product. The comic format is appealing to people who are otherwise apolitical or disinterested in patriotic and historic themes. This includes teen audiences and older readers with more traditional Soviet sympathies. We do not expect anyone to change their worldview overnight, but hopefully it will encourage readers to investigate more about the period for themselves.” For many of those who grew up in the Soviet era, “Volya” will seem borderline blasphemous. The Bolshevik Revolution remains probably the single most propagandized event in world history, while Ukraine’s parallel 1917 revolution had no place in Soviet narratives, disappearing without a trace until the www.bunews.com.ua

collapse of the USSR in 1991. Even today, efforts to highlight Ukraine’s early twentieth century independence efforts are capable of ruffling feathers among modern Russian audiences. The appearance of “Volya” provoked a chorus of disapproval from the Russian media, with some commentators calling for the comic to join the Russian Federation’s list of banned publications. “We owe them for all the free PR they provided,” quips Mr. Buhayov. “The funny thing is that there was huge criticism from Russia but also great interest in reading the book.”

Franchise Plans

Despite its popularity, “Volya” has not yet made anyone rich. Sales of the small initial print run covered the project’s production costs but generated little profit. The team behind the book are now expanding their sales network to include bookstore chains across the country. However, the sums involved remain tiny and reflect a comic book publishing industry still in its infancy. Mr. Bohayov believes the success of “Volya” could help to change this, serving as a catalyst for the further development of the sector by highlighting the potential of the domestic market and inspiring others to enter the fray. His own recruitment efforts have convinced him there are more than enough artists and writers to support a vibrant comic culture, while the ongoing expansion of the Ukrainianlanguage publishing industry will act as a further engine for the genre’s development. There are already plans underway for a follow-up edition to “Volya” that will focus on a single feature-length story set in the same era and based along the same steampunk fantasy lines as the three separate episodes in Part I. Beyond that, Mr. Bohayov has dreams of expanding the franchise beyond comic books. There have been discussions with potential partners over an animation movie version and initial trials have begun. He also sees huge potential for merchandising and talks of creating a Marvel-style universe of characters rooted in Ukraine’s early twentieth century history. Nestor Makhno action figures and Hetman Skoropadsky coffee mugs may currently seem a little far-fetched, but nothing can be totally ruled out given the current Ukrainian enthusiasm for formerly forbidden chapters in the country’s history. 59


Volunteer Miracle of 2014 Ukraine’s Dunkirk Moment

Everyman spirit that saved Ukraine from Putin’s partition plan contains a powerful unifying message

One of the biggest blockbuster movies of summer 2017 looks likely to be “Dunkirk”, a WWII drama set on the beaches of northern France in summer 1940 as Hitler’s panzer armies closed in on pockets of trapped and surrounded allied forces. The film introduces global audiences to one of the most celebrated events in modern British history – the successful evacuation of over 300,000 soldiers by a makeshift armada of merchant shipping and pleasure boats manned by civilian volunteers who braved the Luftwaffe to cross the English Channel and bring the stranded troops home. British audiences are already well aware of the legends surrounding Dunkirk – it has been part of the national fabric for the past seventy-seven years and 60

remains a huge source of patriotic pride. Even today, “The Spirit of Dunkirk” remains a byword for British bravery and resourcefulness that serves as a rallying cry for any situation when all hope seems lost. The mythologizing around Dunkirk has helped to cloud out the somewhat uncomfortable reality that it was actually a desperate retreat in the wake of an unparalleled military disaster. The Dunkirk evacuation was the last act in the collapse of allied resistance to the Nazi onslaught in Western Europe. It ranks among the most comprehensive defeats in the annals of British military history, yet it is remembered as one of the country’s finest hours. This is not merely the result of clever wartime propaganda. Dunkirk contin-


Ukraine’s Volunteer Miracle

As Ukraine seeks to consolidate its post-Maidan national identity, the country could learn much from the British reverence for Dunkirk. The events of 2014 in Ukraine share much of the everyman volunteer drama that make the Dunkirk story so powerful, and could have a similarly galvanizing effect on Ukrainian national spirit if placed in the proper historical context. In the spring of 2014, Ukraine faced seemingly overwhelming odds as Russia’s surprise offensive claimed Crimea and then spread into eastern regions of the Ukrainian mainland. There was an air of dreadful inevitability as town after town fell to Russian hybrid forces and their local collaborators. Ukraine’s threadbare military was hopelessly outmatched and clearly unable to defend the country. By mid-April, many in Kyiv were preparing for the imminent arrival of Putin’s “little green men” in the Ukrainian capital itself. Then something incredible happened – ordinary Ukrainians took up arms and fought back. The volunteer battalions who helped bring the Russian advance to a halt were among the most ragtag formations in modern military history. Armed with whatever came to hand and often dressed in mismatching items of uniform, these largely untrained citizen soldiers were in the vanguard as Ukraine liberated town after town in late spring and early summer 2014. Behind them stood an entire nation of volunteers working to feed, fund, and outfit Ukraine’s improvised army. Together, they did enough to contain the Kremlin insurgency and convince Moscow that further escalation would prove prohibitively costly in terms of both blood and treasure. It was a military miracle more dramatic than the most far-fetched of Hollywood blockbusters, and it saved Ukraine from impending extinction as an independent state.

Uniting Ukrainians

Much like Dunkirk, Ukraine’s military miracle of 2014 was not a glorious victory. It did not end the war or even fully liberate the country. Crimea and the eastern Donbas remain occupied, while Ukrainians continue to die on an almost daily basis. Nevertheless, the volunteer spirit of those fateful months has all the elements of a national epic. It is a story with the potential to play a prominent role in Ukraine’s nation-building efforts. Unlike narrow definitions of Ukrainian identity rooted in language and ethnicity, the volunteer narrative can unite modern Ukrainians of all backgrounds by emphasizing the diverse nature of the forces that came to the country’s rescue in its hour of need. As the volunteer battalions took shape, nobody asked whether someone was a Russian-speaker or a Ukrainian-speaker. Former Berkut officers and Maidan protesters stood shoulder to shoulder. Jews, Muslims, Catholics, Orthodox and atheists all marched together, indifferent to petty peacetime squabbles. In extremis, they found that they were all Ukrainians. Inevitably, this surge in patriotic spirit was not universal. Many Ukrainians were opposed to the Revolution of Dignity itself and remained unmoved as the country struggled to resist Russia’s hybrid assault. However, even those who sympathized with the Kremlin’s initial “Russian World” proclamations might pause before condemning the volunteers who helped prevent cities like Odesa, Kharkiv and Mykolaiv from sharing the fate of Donetsk and Luhansk. The fact that Russia’s incursion has been limited to a small beachhead in Ukraine’s southeastern borderlands is reason enough to recognize the contribution of Ukraine’s volunteers. In the final analysis, they are the reason why tens of millions of Ukrainians are able to sleep soundly in their beds at night. www.bunews.com.ua

Awkward Reminder Ukraine has certainly not forgotten the volunteer heroics of 2014, but the country has not yet done justice to the scale of their achievement. This may be partly due to political expediency. The volunteer narrative serves as an awkward reminder of the Ukrainian state’s failure to provide the basic protection against foreign aggression that is the most fundamental responsibility of all governments. There is also presumably considerable discomfort among the country’s political leadership over the glorification of paramilitary formations that they struggle to control, alongside a reluctance to champion successes they cannot claim. Others may argue that with the conflict still ongoing, it is simply too early to celebrate the inconclusive military reprieve of 2014. However, even the most optimistic observer would admit that there is currently no end in sight to the conflict. The present low-level fighting in eastern Ukraine may continue for many years to come. Ukraine cannot wait forever before moving forward.

society

ues to stir emotions because it celebrates the everyday Britons who rose to the challenge at a time of unprecedented national peril, sailing into the jaws of the Nazi war machine knowing that many would not return. It was an inspiring example of ordinary people thrust into extraordinary circumstances, and it has occupied a central place in English folklore ever since.

A Story Worth Celebrating

In the absence of a Dunkirk-style Hollywood movie of their own, Ukrainians should focus on telling the stories of the everyday folk who joined the volunteer wave of 2014, including everyone from frontline fighters to online fundraisers. The names of these assorted bank managers, computer programmers, Afghan war veterans, students, and medics should become household words. There should be museums, public holidays, documentaries and TV specials. Most of all, the selfless volunteer ethos of 2014 should be recognized as the epitome of the Ukrainian national spirit. Highlighting these relatively recent events makes a lot more sense than focusing public attention on the most controversial figures from Ukraine’s troubled twentieth century experience. The current emphasis on Stepan Bandera and Ukraine’s WWII-era independence fighters continues to divide Ukrainians and unnerve international allies, preventing many from fully embracing Ukraine’s cause. The outside world simply has no appetite for a nuanced debate over the appalling choices facing Ukrainian patriots caught between Stalin and Hitler, and is understandably allergic to any kind of association with wartime atrocities. At a time when sustained international support is absolutely essential for Ukraine’s future success, this matters more than ever. The twenty-first century volunteer movement is not without its own controversies and dark moments, but it has infinitely greater potential to unite the nation and engage global audiences.

Transcending Ethnicity and Ancestry

All countries need their fair share of national legends, but the fact remains that Ukraine has spent much of the past twenty-five years arguing bitterly about the past. These memory wars have transformed Ukraine’s post-Soviet generation into hostages of their own history, preventing the country from developing a more coherent and inclusive sense of self. Ukraine’s historical narrative clearly requires a comprehensive reappraisal, but the current overriding priority must be national consolidation. This means placing the emphasis on themes with the potential to appeal to the majority of the population. The events of 2014 are tailor-made for this task. Like Dunkirk, Ukraine’s 2014 experience is a tale of breathtaking bravery with a cast of unlikely heroes drawn from every walk of life. The story of Ukraine’s volunteer miracle transcends politics, religion, ethnicity and ancestry. It is the story of a nation coming of age, and it has the potential to inspire Ukrainians for generations to come. An abridged Russian-language version of this opinion article was published on 9 June in Novoye Vremya magazine

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Kyiv rental property market investment guide The annual summer scramble for expat residential accommodation offers key investor insights

Summer has arrived in Kyiv and soon everyone will begin leaving for annual vacations. Late July through August in Kyiv can be an especially quiet time, but not for real estate brokers who work with expats during this peak relocation season. Often such clients have big budgets, sign rental contracts for 2-3 years, and prefer to live downtown in the most sought-after neighborhoods. Their search could described as a mad scramble for expatsuitable housing that meets their extensive list of requirements for location, size, layout, renovation quality, amenities, and of course, price. It is during this “hot season” that the supply deficits and shortcomings of the Kyiv rental housing market for expats really come into focus. If you are thinking of investing in Kyiv’s residential real estate market, the relocation season can provide useful insights when considering which investment properties might offer the best annual yields and returns.

Golden Gate: Expat Central

The area around Golden Gate (Zoloti Vorota metro) is the location of choice for many expats in Kyiv’s upmarket and premium segment. More than 60% of embassies and international organizations are located in this historical neighborhood, which is also home to scores of upscale restaurants and cafes. Foreign tenants prefer the flatter streets close to the metro station such as Yaroslaviv Val, Reitarska, Lysenka, and Zolotovoritska. Even though many expats may have cars or rely on taxis, often they are not keen on being too far from Golden Gate metro. For particularly demanding tenants, 28 or 30 Yaroslaviv Val, which is close to the Italian Embassy, may already be considered too far away. This is something to keep in mind if you are a property investor considering buying, renovating or letting out an apartment for rental income in this upmarket neighborhood. Many apartments in the Golden Gate area are in historical tsarist era buildings and have lots of character. However, some tenants prefer the modern amenities you find in new buildings, such a

concierge and secure underground parking. There are less than a dozen new buildings in the prime rental area of Shevchenko district within a ten-minute walk from Golden Gate. These are luxury buildings and the rental apartments in them are pricey and in very short supply.

Downtown Greenery

If you have the budget, it is possible to find rental housing near green space in the very heart of Kyiv. Close to Golden Gate is the Fomin Botanical Garden. Apartments on streets like Pyrohova and Leontovycha can offer especially good views of the Botanical Garden. Opposite the National University and close to Lva Tolstoho metro is the small but lovely Taras Shevchenko Park. Lva Tolstoho Street and tiny Tereshchenkivska Street have apartments that look out onto this park. In terms of total green space, Kyiv is one of the “greenest” capital cities in Europe. It boasts numerous centrally located parks and green areas including beautiful Mariyinskiy Park near the extremely pricey Pecherskiy Lipki neighborhood in the government district. A little bit further out from the center is Hryshko Central Botanical Garden. This area is 1.5km from Druzhby Narodiv metro but boasts numerous modern luxury residential and business complexes. Plenty of new complexes are located around Kyiv’s largest park, Holosiivskyi

National Nature Park, and are often close to metro stations. Demand for expat-friendly detached houses in some of Kyiv’s greener suburbs has dropped significantly since 2014. Many Western companies have extracted their expat country directors, but falling downtown rental rates may also be a factor. An elite 200 square meter apartment in the center of Kyiv might now cost USD 2500-4000 per month compared to USD 5000-6000 prior to the onset of the conflict with Russia.

Other Expat-Friendly Kyiv Neighborhoods

Readers familiar with Kyiv might ask, “What about apartment rentals near Maidan and Khreshchatyk?” Although some expats do choose to live on relatively quieter side streets close to Maidan and Khreshchatyk, the noise, traffic and parking problems that come with living in the very heart of the city make these neighborhoods more suitable for the daily/short-term rentals market. Some expats do elect to live near Teatralna metro station and the National Opera House, but living here can often also be noisy due to traffic and the proximity to Khreshchatyk. Beyond the very center of town, expat-friendly locations include charming riverside Podil, which can be a bit less expensive than Shevchenko, Pech-

About the author: Tim Louzonis (tim@aimrealtykiev.com) is a co-founder of AIM Realty Kiev, a real estate agency that specializes in real estate for foreign expats. Tim is a long-time expat with Ukrainian roots; he first came to Ukraine as an exchange student in 1993 and returned in 2008

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Expats Returning to Kyiv

There is currently an absolute shortage of expatsuitable 90-100 square meter two-bedroom apartments in the prime rental area of downtown Kyiv. The supply of housing is already noticeably tighter than it was in 2016 and the full rush of the relocation season has yet to begin. While it would be an overstatement to claim that the big budget expat country directors are returning to Kyiv en masse, today there are noticeably more expats who are looking for housing than a year ago. So what does this mean for prices? As a general rule of thumb, you should budget at about USD 1000 per bedroom in the prime rental area. Why do we not see more investors acting upon the investment opportunities presented by the lack of expat-suitable downtown rental supply? Because of the low carrying costs for holding property, there are simply not a lot of attractive offers on the secondary market at any one time despite a gradual increase in sellers. Nevertheless, it is currently possible to find prices as low as USD 1,200-1,300 per square meter for downtown apartments in historical buildings with no lift. When properly renovated, such

properties can deliver annual yields of 10-12% or more. When told about such opportunities, many surprised foreign investors ask, “Why such a low price? Aren’t location and demand already priced into the market?” The answer is “yes” and “no.” Kyiv’s residential real estate market can be inefficient in many ways, but savvy local buyers will quickly jump on a property that is offered by a motivated seller at an attractive price. Local buyers are usually unconcerned by things like imperfect ownership documents and illegal/unregistered renovations, figuring that they can fix such problems after a purchase. Moreover, the vast majority of local buyers are comfortable with grey market transactions in physical cash, which also appeals to many sellers. Instead of buying individual apartments on Kyiv’s secondary market, many foreign real estate investors are seduced by the ostensible opportunity presented by the large number of derelict historical buildings in Kyiv’s central districts. Luxury condominium conversions of such buildings with Western-style renovations would greatly increase the supply of quality housing for expats, while preserving the character of these historical neighborhoods. Alas, today most of these buildings have complicated legal histories including disputed ownership, while other buildings have owners who are attempting to get their properties condemned so they can demolish them and build a luxury high rise on prime real estate. This does not

mean that conversions and renovations of historical buildings are impossible, but such ambitious projects are only for patient and determined investors who are prepared to work with local experts to overcome significant obstacles. Despite many of the natural advantages enjoyed by local buyers, sophisticated foreign property investors can bring a lot of much needed expertise to Kyiv’s residential real estate market. Currently, there is a mismatch between what local owners are offering the expat rental market and the preferences of these tenants. Foreign investors are better equipped to meet this market demand by improving both the quality of offerings and property management standards. It is worth bearing in mind that attractive deals on Kyiv’s secondary market tend to have an extremely short half-life. Foreign investors need an investment process built for speed so that property search, due diligence, and closing can all take place swiftly. This often requires a coordinated local team that includes real estate advisors who can consult on both the sales and rental markets and assist with property management. Investors would also be wise to seek out legal and tax experts who can structure deals, as well as notaries and bankers who can assist with closings and overseas bank wire payments. The Kyiv expat rental market offers a range of opportunities, but it can be challenging to navigate it without local knowhow.

real estate

ersk, and upper Holosiiv districts. Nevertheless, the reliability of demand for rental housing in less central areas of town is uncertain, making it difficult to project investor returns.

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networking events

Ramada Encore Kiev Marks Fifth Anniversary

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Guests enjoyed a black tie gala evening of festivities and fine cuisine in early June as the Ramada Encore Kiev hotel celebrated its fifth anniversary. The evening took place in the hotel’s spacious new banquet hall – the largest in the Ukrainian capital. The Ramada Encore Kiev has won a string of international awards and accolades since opening in 2012, including the Wyndham Hotel Group’s Hotel of the Year Award (EMEAI region) in 2014, the 2015 & 2016 TripAdvisor Certificate of Excellence Award, and 2017 TripAdvisor Travellers’ Choice. 65


President Poroshenko Attends

British Business Dinner

The British Ukrainian Chamber of Commerce (BUCC) held a dinner for Ukrainian President Petro Poroshenko in London in late spring that presented UK business representatives with the opportunity to discuss the investment climate directly with the Ukrainian leader. The evening was organized with the support of the Ukrainian Embassy in the UK and was attended by a host of senior Ukrainian officials including Presidential Administration Head Ihor Rainin, Foreign Minister Pavlo Klimkin, and National Investment Council Head Borys Lozhkin. They were joined by UK business leaders and BUCC member company representatives. Participants included Trafigura Pte, Arawak, EBRD, ED&F Man, AstraZeneca, Trailstone, Freightliner, Greenbrier, Hutchison Ports, Barclays Bank, Pictet, Shell and Invesco.

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Asters Law Firm Showcases Armenian Artist

In late May, Asters law firm and the U.S.-Ukraine Business Council welcomed guests to an arts evening dedicated to the work of Kyiv-based Armenian artist Boris Yeghiazaryan. The exhibition, which took place at the law firm’s central Kyiv offices, was part of the long-running ArtAsters project that aims to profile the best of the Ukrainian art scene while introducing the international business community to local artists. At the opening ceremony, Asters Senior Partner Armen Khachaturyan commented: “Yeghiazaryan’s creativity connects time, generations, and cultures. The colors used in his artworks are luminescent and the images are distinct and simple. This combination is magical, bringing us back to our childhood and reawakening almost forgotten feelings of global harmony.” Boris Yeghiazaryan was born in 1956 in Armenia. He studied art at Yerevan Art College and the Mukhina Art Institute in Soviet Leningrad before graduating from Kyiv Art Academy in 1986.

www.bunews.com.ua

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Credit Agricole Bank Presents New Model Branch In early June, Credit Agricole Bank presented a new model branch in Kyiv’s historic riverside Podil district. The new branch is located at 25 Sahaidachnoho Street. This Podil flagship branch will serve as the first stage in a global process that will involve upgrades and innovations at more than 150 of the bank’s branches across Ukraine. “The new model branch is designed to meet all of our customers’ needs and expectations by offering a high level of confidentiality, professional expertise, and exceptional experience along with modern digital services and live communication with bank staff,” commented 68

Jean-Paul Piotrowski, the CEO of Credit Agricole Bank in Ukraine. “The concept of the new model branch rests upon the customers’ needs and wishes since it was developed following research carried out for this purpose,” explained Galyna Zhukova, Member of the Management Board of Credit Agricole Bank responsible for retail business, network and digital. “Customers are proposed a fresh approach to servicing clients due to its special zoning and the way everything is organized inside, and also thanks to innovations concerning both the range of services and the workflow arrangement.”


networking events

www.bunews.com.ua

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Air Astana Resumes Astana-Kyiv Flights Kazakhstan’s national air carrier celebrated the renewal of direct flights between Kyiv and Astana in early June. A direct service connecting the capitals of Kazakhstan and Ukraine will now be available five times per week on Monday, Wednesday, Thursday, Friday and Saturday on Airbus A320 and Embraer 190 aircraft. Passengers can connect to a wide range of destinations via Astana including Seoul, Bangkok, and Beijing. Until 10 September, they will also be able to receive free tickets to the EXPO in Astana via the airastana.com website.

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networking events

Estonian Digital Innovation Networking Estonia is one of the world’s most advanced digital societies. The Baltic state was the first to declare internet access a human right, and is now the first to offer e-Residency, allowing the world’s population access to its digital infrastructure. Estonian e-Residents can establish and manage an EU company online no matter where they live or travel. To date, entrepreneurs in Ukraine have been the greatest benefactors of the scheme, having already established more than 200 companies. Last month local entrepreneurs gathered to hear Gert Antsu, Estonia’s Ambassador to Ukraine, tell the story of the digital nation. The event was organised by international networking community Fryday and was hosted together with start-up incubator iHUB. www.bunews.com.ua

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Turkish Business Community Hosts Kyiv Ramadan Dinner Ukraine’s vibrant Turkish business community gathered along with friends and colleagues in mid-June for a traditional Ramadan dinner (known as “Ramazan” in the Turkish language) at Kyiv’s Mangal Restaurant. The event was hosted by Turkish-Ukrainian Business Association TUID and sponsored by Turkish fashion label Colin’s, law firm Integrites, and Turkish FMCG giant Evyap. A wide range of representatives from the Ukrainian and international business communities attended the evening dinner, while Turkish Ambassador Yonet Can Tezel and Azerbaijani Ambassador Azer Khudiyev were among the guests of honor. 72


networking events

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and finally...

European Ukraine Exits the Post-Soviet Era

When did the Cold War actually end? Was it the night the Berlin Wall fell? Perhaps the final act was the failed KGB coup in Moscow? Possible alternative dates include the Ukrainian declaration of independence, the withdrawal of Soviet troops from Eastern Europe, or Gorbachev’s resignation on 25 December 1991. In reality, history is not nearly as neat and tidy as textbook chronologies might lead us to believe. The passing of epochs is generally a convoluted and imprecise affair that often only becomes apparent long after the fact. We now find ourselves caught up in a new period of transition as the post-Soviet world that emerged from the wreckage of the Communist collapse makes way for a new and far more confusing geopolitical landscape. The relative certainties of a quarter-century characterized by American dominance, European stability, and the march of democracy have given way to the ideological ambiguities of the post-truth era. While the fall of the Soviet Union once led some to declare “the end of history”, recent events have shown just how premature that particular obituary was. History is clearly back with a vengeance. As per the Cold War, the precise end of post-Soviet era is difficult to pinpoint with any accuracy. The Russian invasion of Crimea in early 2014 is probably the single most decisive event, while Brexit and the election of Donald Trump are also obvious candidates. More recently, Ukraine’s President Poroshenko caught the mood when he hailed the advent of Ukrainian visa-free travel to the EU as an historic landmark signaling his country’s final divorce from the Soviet past and reunion with the European family of nations. This last event may not have made global headlines, but it captured the essence of the emerging struggle between the values of international cooperation and the realpolitik of national interests encapsulated in Trump’s

“America First” rhetoric and Putin’s “Russian World” militarism. As this new era takes shape, Ukraine now finds itself closer to the epicenter of world affairs than at any time in the country’s history. It is probably no exaggeration to state that the fate of Ukraine will have enormous implications for the future of international relations as a whole. If Ukraine’s ambitious transformation is successful, it will breathe new life into the idea of European unity and greatly strengthen the global appeal of the democratic model. Ukraine’s failure would mean the opposite. Russia would be emboldened to expand its hybrid war further into EU territory, while isolationists the world over would proclaim the moral bankruptcy of globalism and lay the blame for the fiasco squarely on the shoulders of international institutions ranging from NATO to the IMF. Ukraine has also been the primary testing ground for the hybrid forms of modern warfare that the wider world is only now starting to come to grips with. Ukraine was the first country subjected to the Kremlin’s entire arsenal of information weaponry, including everything from leaked phone conversations and fake news to hack attacks and industrial-scale trolling. Moscow has honed the skills of its cyber warriors in Ukraine, with many seeing the massive late June attack as an indication of a new escalation in this novel form of international aggression. For virtually every crime the Kremlin currently stands accused of, it is possible to find a direct Ukrainian precedent. All this makes Ukraine arguably the key battleground in the multipolar era we are now entering. This newfound importance should provoke a long overdue international reappraisal of Ukrainian issues and lead to fresh consideration of the country beyond the narrow confines of the previously dominant post-Soviet context. Throughout the post-Soviet era, news from Ukraine tended to reach international audiences via the distorting prism of Russian narratives. With Ukraine and Russia now engaged in an undeclared war driven by Ukraine’s desire escape Moscow’s orbit and integrate into the EuroAtlantic community, it no longer makes sense to interpret Ukrainian affairs in this light. The changing tides of history mean that the Western world can no longer afford to ignore Ukraine as it did for much of the past 25 years. Like West Berlin during the Cold War, today’s Ukraine has become a potent symbol of a broader geopolitical struggle. It has acquired an importance far beyond its intrinsic strategic value and will inevitably remain high on the international agenda for many years to come. In this context, continued Western support for Ukraine is not a matter of moral obligations or foreign policy adventurism – it is pure political self-interest.

Letters to the editor: editor@bunews.com.ua Advertising inquiries: +38-067-4032762 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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Business Ukraine 05/2017  
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