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November 2016

ADVANTAGE ESTONIA From Tallinn’s Smart City to e-Residency: exploring Estonian innovation as Ukraine joins the Digital Age

Inside: Monthly American Chamber of Commerce in Ukraine Newsletter


Ulf Schneider Founder and Managing Partner

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November 2016

ADVANTAGE ESTONIA From Tallinn’s Smart City to e-Residency: exploring Estonian innovation as Ukraine joins the Digital Age

BUSINESS UKRAINE MAGAZINE/NOVEMBER 2016: This month’s issue focuses on Estonia and explores how the tiny Baltic nation’s inspirational embrace of digital technologies has helped create the most competitive business climate in the entire post-Soviet region. As Ukraine seeks to transform its own economy and make the most of the country’s world-beating IT sector, there are significant opportunities to learn from the success of Estonia’s own impressive transformation. (Cover image: Ülemiste City is Estonia’s flagship smart business campus located strategically close to Tallinn International Airport in the nation’s capital city)

Inside: Monthly American Chamber of Commerce in Ukraine Newsletter

Fake news is a weapon of mass destruction With the election of Donald Trump, fake news has become the story of the year. Since Trump won the White House, there has been an endless flow of articles heralding the dawn of the Post-Fact Age or analyzing the fake news phenomenon and pontificating over how to counter it. Meanwhile, purveyors of fakery have been giving interviews explaining the mechanics of their black art and outlining their motivations. For some, fake news is a legitimate political tool. For others, it is a source of banal entertainment or a moneymaking scheme. One thing is clear – we are only beginning to understand the implications of a trend that poses existential challenges to the entire news media industry and the way public opinion takes shape. The initial response to the rising tide of fake news has been to apportion blame, with Russia emerging as the most popular culprit. Everyone from the European Parliament to the Washington Post has pointed the finger squarely at the Kremlin. This is a dangerous oversimplification. The Russian government has indeed invested billions of dollars in sophisticated international disinformation operations involving everything from slick in-house media platforms like Russia Today TV channel to multilingual armies of online trolls. However, this is simply an expansion of domestic Russian policy as Moscow tries to even up the odds in an unequal struggle against the vastly more attractive and powerful Western world. Fake news has always been a cornerstone of Kremlin statecraft. Crucially, Russia did not create the environment in which fake news is prospering. If we wish to understand the fundamental causes of the problem, we will have to move beyond condemnations of Russian information aggression and explore why Western audiences are so vulnerable to invented realities. Why are the citizens of the world’s most mature democracies ready to believe random news sources and hostile powers ahead of their own mainstream media? It is possible to identify a number of factors. The entire Western world seems to be suffering from an extended identity crisis that began with the end of the Cold War and gained ground amid the excesses of Pax Americana. Denied the stimulus of ideological opposition, Western societies have lost sight of the fundamentals that made liberal democracy so much more appealing than the totalitarian alternatives of the twentieth century. This has fuelled a mood of profound distrust towards everything from foreign policy to the mainstream media. Western audiences are now increasingly likely to side with fringe figures and authoritarian despots over their own leaders, while instinctively questioning anything they associate with a vaguely defined “establishment”. The all-conquering Western model has become a victim of its own success. November 2016

The rise of the internet has dovetailed perfectly with this broader trend. Social media allows low-budget newcomers to compete with venerable broadcasters on a relatively level playing field. This has led to revolutionary changes in the way we consume news, but it has also made audiences far more vulnerable to deliberate disinformation. Online news platforms cost a fraction of the budgets required to run a traditional newsroom, but often look virtually identical. They can operate without consideration for the kind of fact-checking obligations and ethical issues constraining legacy media brands. Conspiratorial worldviews once consigned to seedy backstreet bookshops now enjoy global exposure. There is currently no consensus on how to combat the fake news pandemic. Bans and blacklists will only serve to create fertile ground for further fakery. The key long-term task must surely be to rebuild the credibility of the mainstream media, but this will take time. In the short-term, the priority is to alert audiences to the very real dangers posed by fake news and help people to avoid being misled. Disinformation of a deliberate and calculated nature is not merely an underhand political ploy or a novel way to generate online clicks. When deployed effectively, fake news has the potential to become a weapon of mass destruction. Ukraine knows this better than anyone else, and the Ukrainian experience can play an important role in educating international audiences. The ongoing Russian hybrid war in Ukraine has been justified almost exclusively by fake news. Whether we are talking about non-existent genocide against the Russianspeaking populations of Crimea and eastern Ukraine, or phantom Nazis seizing power in Kyiv, the entire campaign has relied on carefully calibrated and professionally produced disinformation. As a result, more than 10,000 people have lost their lives. This tragedy has provided Ukrainians with unique insight into the deadly potency of fake news as a weapon of hybrid warfare. Sharing this knowledge could prevent escalation and help protect other countries from a similar fate. The Kremlin has already demonstrated an appetite for widening its information offensives, while likeminded powers will inevitably seek to replicate Russia’s success. Ukraine was the first major victim of twenty-first century information aggression, but it will not be the last. Peter Dickinson Business Ukraine magazine 5


investment

Canadian to lead investment promotion office Toronto native Daniel Bilak seeks to promote the new Ukraine to international investors There is a broad consensus in today’s Ukraine that the country’s ability to attract international investment will play a decisive role in determining the ultimate outcome of the Euromaidan Revolution. Only international investment can provide the economic buoyancy required to cement the country’s European pivot and defeat Russian hybrid aggression. Attracting international investment necessarily means improving the business climate and combating corruption. It also means overcoming decades of communications failures and promoting Ukrainian investment opportunities to global audiences with limited knowledge of what the country has to offer. Ukraine’s newly established investment promotion office, Ukraine Invest, seeks to improve international investor awareness and attract much-needed FDI to one of Europe’s least developed and largest markets. Ukraine Invest is headed by Daniel Bilak, a Canadian with decades of Ukraine experience who formerly advised the Ukrainian government on reform issues and joined this new investment initiative from his most recent role as Managing Partner at CMS Cameron McKenna in Kyiv. Business Ukraine magazine invited Mr. Bilak to introduce Ukraine Invest to readers and outline the priorities for the year ahead. As Director of Ukraine Invest, I will oversee a team consisting of three Deputy Directors – Petro Mastiaszek, Ulyana Khromyak and Deborah Fairlamb – and approximately 10 other team members who all come with extensive experience in working with investors, client service and marketing. We are committed to being transparent in our work and adhering to the principles of integrity, innovation, passion and professionalism. Ukraine Invest was established on 19 October 2016 as an advisory body to the Cabinet of Ministers of Ukraine. Initiated by the Office of Prime Minister Groysman, and coordinated by Oksana Markarova, Government Investment Commissioner and First Deputy Minister of Finance, Ukraine

Invest is funded and supported by the Western NIS Enterprise Fund (WNISEF) which contributed USD 750,000 to launch and support our activities. This funding will enable us to work directly with investors, provide the resources to develop a strong communication platform to raise awareness about Ukraine’s investment opportunities, and allow for the employment of the best investment experts with international experience. Independent funding is important for a number of reasons. It provides transparency, commitment to mission, long-term focus, and ongoing support, since this is not a profit-generating office. It will also provide some autonomy and should reduce the possibility of bureaucratic interference. In practical terms, it permits Ukraine Invest to engage experts who are familiar with the needs and expectations of international private investors and companies, and to employ the tactics that can best reach them.

Promoting Brand Ukraine

Ukraine Invest will focus on three areas: supporting existing and new investors; increasing the ease of doing business by improving communication between the authorities, business, and international organizations; and promoting Ukraine’s brand as a country where attractive opportunities exist for investors. Our mission is to elevate Ukraine in the global economy through investment and economic growth. Our vision is to unlock USD one billion in new Foreign Direct Investment (FDI) in Ukraine by 31 December 2017 through a number of measures including providing relevant, concise and actionable information that matters to foreign investors considering Ukraine. We will provide investor services to existing and new investors in Ukraine, including facilitating contacts with government authorities while identifying opportunities and organizing meetings with potential local partners. We will also focus on enhancing the ease of doing business in Ukraine by focusing on outreach, communication and collaboration with key stakeholders such as business associations, embassies, ministers and key government agencies to help improve the investment environment, as well as targeting specific systemic impediments to business operations. The regions of Ukraine are of major

importance for long term and sustainable growth in Ukraine. Our work will eventually also be rolled out on the regional level. It is important to stress that Ukraine Invest is not a transaction office – we can provide a choice of referrals of what we see as best-in-class or the most appropriate opportunities for incoming investors. We also do not complete with local investment banks or legal and consulting firms – instead, we will provide country and sector level information for a public audience.

Anticipated impact

Ukraine Invest is realistic in scope. We cannot eliminate all the complexities of investing in Ukraine. What we can do is help investors understand the processes, answer questions, and if they do have issues, work on their behalf to help facilitate issue resolution. We will provide referrals, make introductions, source investment opportunities, and generally help potential investors as an advocate on their behalf. We have already started to deal with certain problematic investor cases, as well as to curate dozens of stories of foreign investors operating successfully and profitably for years in Ukraine. We are also in touch with many new interested investors who are exploring opportunities for investment across the country. Western NIS Enterprise Fund (WNISEF) is a USD 150 million regional fund and a pioneer in Ukraine and Moldova with more than two decades of successful experience investing in small and mediumsized companies. WNISEF is funded by the US government via the US Agency for International Development (USAID). Since its inception, WNISEF has invested over USD 168 million in 118 companies employing around 25,000 people, and has made it possible to unlock USD 1.4 billion in funding for companies in Ukraine and Moldova. In 2015, WNISEF launched a USD 35 million legacy program focused on export promotion, local economic development, impact investment, and economic leadership. WNISEF is funding innovative, high-impact, reform-focused programs and aims to support Ukraine and Moldova in this critical period by developing sound economic policy and leadership.

About the author: Daniel Bilak is the Director of the Investment Promotion Office of Ukraine

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geopolitics

Ukraine and President Trump Trump’s admiration for Putin has caused panic in Ukraine but US-Russia thaw not guaranteed American voters succeeded in surprising everyone by electing Donald Trump. Many in Kyiv now fear Ukraine will pay the highest price. During the campaign, Trump frequently suggested he could deal constructively with Vladimir Putin, and even expressed admiration for the Russian leader. With Ukraine and Russia locked in a semi-frozen conflict and Ukrainian soldiers dying almost daily, any thaw in US-Russian ties could see Ukraine becoming a bargaining chip. The US election result sparked considerable panic among Ukraine’s leaders. Nobody in Kyiv had seriously considered the possibility of a Trump victory. Admittedly, no major US pundit or newspaper (with the exception of the Los Angeles Times) predicted a Trump victory either. However, Ukrainian leaders were at fault for failing to establish ties with the Trump campaign. During the primaries, the Ukrainian government cultivated cozy ties with the campaigns of Governor Kasich, Senator Rubio, and Senator Cruz among others. After the primaries, Ukraine appeared to put its eggs entirely in the “Hillary for President” basket. Ukraine now finds itself in a precarious positon with the US president-elect. Some Ukrainians (including some in the diaspora) recommend attacking Trump and announcing their opposition to the new US administration. This would be disastrous. Ukraine’s economy is currently reliant on the International Monetary Fund (IMF) - of which the US is the primary contributor and influencer. US-led sanctions on Russia over the annexation of Crimea and war in the Donbas are a key reason why the Russian army has not advanced deeper into Ukrainian territory. In addition, US technical assistance and humanitarian aid are critical to rebuilding the country and reforming state structures. Ukraine must therefore maintain a strong relationship with the United States. What can Ukraine do to ensure its historically positive relationship with the United States remains strong under a Trump presidency? The Ukrainian government must urgently take three steps prior to Inauguration Day in January 2017.

1. Hire Professional Lobbying Help

The Ukrainian diaspora and diplomats in Washington play important roles in promoting Ukrainian interests, but neither group are professional lobbyists. Every country that is serious about its national interests hires professional lobbyists in Washington. Diaspora and diplomats will see their influence and results maximized when working in tandem with a DC lobbying firm. Russia understands this well and has spent as much as USD 50 million in a single year to hire powerhouse former Senators to lobby their interests. Meanwhile, Ukraine’s government saves kopeks by relying on the goodwill of Uncle Sam. If Ukraine wants sanctions to stay and support to continue at current levels, it is time to invest in professional lobbying help. Given that the new administration and both Houses of Congress are Republicans, Ukraine would be wise to hire a firm with strong Republican ties. In normal situations, a country would want to hire a lobbying firm that is primarily bipartisan. Given the pre-

vious overinvestment in Clinton and the Democrats by the Ukrainian administration, they now need to overcompensate for this miscalculation.

2. Cultivate Capitol Hill Ties

During Euromaidan, the Ukrainian diplomatic mission in Washington and the diaspora both played key roles in informing Congress about the need to confront President Yanukovych. While Ukraine’s government recruits lobbyists, Ukraine’s diplomats and diaspora must seek out allies on Capitol Hill. ProUkrainian hawks on the Senate Foreign Relations Committee like John McCain, Marco Rubio, and Rob Johnson were all recently re-elected. These Republican lawmakers will continue to play a critical role in deciding Ukraine policy. It is crucial to remind them of the importance of sanctions, foreign aid, and lethal arms for Ukraine. Democrats in the House including Ukraine Caucus Co-Chairs Marcy Kaptur and Sander Levin must also be cultivated. While Ukraine needs Republican lobbying help to improve ties with the incoming presidential administration, it is vital for the Ukrainian diaspora to act as a watchdog of both parties, and not just a lapdog for one party.

3. Fight Corruption

Ukraine will inevitably face scrutiny from the Trump administration over its perceived one-sided support for Hillary Clinton. The best way to demonstrate that Ukraine is still worth supporting is to show concrete results in the fight against corruption. Maintaining the current slow pace will only amplify voices near Trump that suggest Ukraine is not worth the political cost to America’s relations with Russia. Ukraine has had more than two years to show real progress in fighting corruption. Now is the time for the country to put some “bandits in prison”. Cosmetic tweaks and e-declarations are no longer sufficient. Jailing Yanukovych-era officials for theft and other crimes will reinforce the message that Ukraine is a potential success story that deserves continued US support. Trump loves success stories and hates losers. Following the 2008 US presidential election, some foreign policy advisers to Barrack Obama took issue with Georgia for its perceived support of John McCain. This resulted in a more distant US-Georgian relationship and eventually contributed to the subsequent election defeat of Mikheil Saakashvili. Ukraine’s government would be wise to take immediate action to avoid a similar fate.

About the author: Brian Mefford is Director of Wooden Horse Strategies LLC, a political and business consulting firm based in Kyiv. Mefford is a former Director of the International Republican Institute (IRI) and adviser to Ukrainian President Victor Yushchenko. He has lived and worked in Ukraine for 17 years.

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politics

Ukraine has image problems in Washington DC Ukraine fatigue was a concern long before Trump election and Poroshenko is partly responsible As the reality of Donald Trump’s election victory began to dawn early on 9 November, former US Ambassador to Russia Michael McFaul Tweeted: “Biggest loser in the world tonight – Ukraine.” Many in Kyiv agreed. Donald Trump’s well-publicized praise for Vladimir Putin, coupled with the Kremlin ties of numerous figures within his inner circle, led many to assume a Trump presidency would spell trouble for Ukraine’s strategically crucial US alliance. Ukraine must now convince the incoming Trump administration that it deserves continued support. This would be challenging enough in itself. However, Ukraine must also contend with the image problems facing two of the country’s key representatives in the American relationship – Ukrainian President Petro Poroshenko and Ukrainian Ambassador to the US Valeriy Chaly.

Running out of excuses

President Poroshenko’s deteriorating image in the US capital mirrors his low approval ratings at home. Many in Washington DC have come to regard him as untrustworthy. They believe he never intended to pursue the publicly touted policy of “de-oligarchization”. Instead, he is seen as a man as who prefers to continue striking opaque backroom deals. This is close to perceptions of the President in Ukraine itself. Earlier this year, Ukrainian MP Serhiy Leshchenko summed up public frustrations when he wrote, “Instead of fighting against the oligarchs, the government forces them to make concessions and to share.” The fact that President Poroshenko is the only Ukrainian oligarch to have grown richer since 2014 has also raised eyebrows across the Atlantic. Ukrainians are unlikely to be buying more chocolate in wartime, after all. President Poroshenko’s image took a particularly hard hit in American political circles thanks to his steadfast support for Viktor Shokhin as Prosecutor General despite former US Ambassador Geoffrey Pyatt’s public condemnations. Pyatt directly accused Shokhin of blocking criminal investigations and obstructing reforms, but Poroshenko spent months rejecting calls for Shokhin’s removal before eventually bowing to public and political pressure. Ambassador Chaly suffers from image issues of an entirely different nature. Ukraine’s current Ambassador to the US was President Poroshenko’s deputy when he briefly served as foreign minister at the end of Viktor Yushchenko’s presidency. Prior to that, he made his name at Kyiv’s best think tank, the Razumkov Ukrainian Centre for Economic and Political Studies. Since his arrival in Washington DC in summer 2015, critics have accused Ambassador Chaly of being disorganized and unfocused. Like former Ukrainian Presidents Leonid Kravchuk and Viktor Yushchenko, Ambasador Chaly has a reputation as a poor com-

municator who is easily distracted and capable of speaking at length without actually saying anything. This trait is common enough among Ukrainian politicians, but that has not stopped detractors from labelling him as a windbag and a know-all who is prone to arrogance. These are dangerous qualities in someone charged with managing Ukraine’s most important diplomatic relationship.

Poroshenko’s plummeting prestige

President Poroshenko used to enjoy considerable prestige in Washington DC. In September 2014, he addressed the US Congress and received repeated standing ovations during a powerful speech that was widely recognized as historic in stature. This goodwill appears to have largely evaporated over the intervening two years of stuttering reforms and continuing corruption. In Washington DC political circles, it is becoming increasingly common to encounter the view that President Poroshenko is losing touch with reality and no longer listens to other people’s opinions. Many Ukraine observers in the US speak of a siege mentality taking over the Poroshenko presidency, leading the Ukrainian leader to view all critics and opponents as traitors in the pay of Russia. This blame game has done little to distract attention away from the phony war against corruption. Over the past few months, almost all the Ukraine specialists I spoke to have confirmed that they now view President Poroshenko as the single biggest obstacle to genuine reforms. As the situation turns against him, many now fear President Poroshenko could become increasingly detached from contemporary political realities in the manner that befell Viktor Yushchenko – another Ukrainian leader initially lauded in Washington DC before falling out of favour when he failed to deliver. Poroshenko’s reputed self-image as a national saviour does not tally with his plummeting approval ratings and the general mood of discontent in the country, nor does it fit with the increasingly sceptical reception he now receives internationally.

Political appointments vs professionalism

Ambassador Chaly comes across as a loyal ally of President Poroshenko. This inevitably leaves him open to accusations that he was parachuted into a job for which he is not qualified. Unlike previous Ukrainian Ambassadors to America, Chaly is not a professional diplomat. Although every country sends political appointees as ambassadors, critics have argued that it is strategically unwise to appoint anyone but a veteran diplomat as envoy to the world’s most important country, especially when the bilateral relationship with the US is so crucial for Ukraine’s national security. With a Trump White House now taking shape and the inauguration just weeks away, Ukraine needs to be able to call on its most seasoned diplomatic talents. Instead, Ukraine must compete with Russia for Donald Trump’s attention, while also dealing with negative image issues that threaten to undermine the country’s credibility.

About the author: Taras Kuzio is a Senior Research Fellow at the Canadian Institute of Ukrainian Studies, University of Alberta. His most recent book ‘Ukraine: Democratization, Corruption and the New Russian Imperialism’ (Praeger, June 2015) surveys modern Ukrainian political history from 1953 to the present.

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business news

New Conceptual Jaguar Land Rover Dealership

Mid-November saw the official groundbreaking ceremony for the first of the next generation of conceptual Jaguar Land Rover dealerships in Ukraine. The new facility, which is scheduled to open for business in the first half of 2018, is part of a global initiative and will feature a range of innovations include a novel drive-through function. Owner and CEO of Winner Group of Companies in Ukraine John Hynansky and Head of the Management Board and General Director, Winner Imports Ukraine, Petro Rondiak led the groundbreaking ceremony at the site of the future dealership close to Kyiv’s Boryspil International 14

Airport. Mr. Rondiak said that once completed, the 7,656 square meter dealership complex would represent “a new level in service” with all sales staff and technicians completing specialized training courses at Winner’s in-house college. Star attractions at the new dealership will include the hotly anticipated electric Land Rover model. Winner Imports Ukraine is the official importer of Ford, Volvo, Jaguar, Land Rover and Porsche in Ukraine. The company entered the Ukrainian market in 1992 and currently has a network of dealerships across Ukraine including 56 sales and service centers. www.bunews.com.ua


About the author: Ms Urve Palo is Estonian Minister of Entrepreneurship and Information Technology

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Estonia’s impressive e-revolution offers a wealth of inspiration and opportunities for Ukrainians

T

wenty-five years ago, Ukraine and Estonia faced similar challenges and made fundamental decisions that are still shaping the two countries’ present-day life and future development. Estonians decided to reinvent our methods of governance completely in order to gain ultimate effectiveness and transparency. Together with the business sector, we decided to transform Estonia into a state based on digital solutions and services. The fundamental starting point of this transformation was not a technological decision, but rather a political commitment that all people in Estonia should have a secure online identity and secure access to digital services – including the ability to sign anything digitally. These digital signatures would be equal to signatures on paper. As a result, Estonia is now one of the most developed digital societies in the world. It is a country where digital signatures are preferred to physical ones. A third of the population votes in parliamentary elections online. Companies are established and administered online. Almost all taxes are declared digitally. Estonia’s digital advancement is unprecedented in the world. Technologically, most countries could theoretically follow our lead, but it is more difficult to reach the necessary political consensus that lays out a legal environment for a comprehensive and safe system of e-services enabling the creation of a truly digital society.

and online services development. This work continues. Estonian experts and companies are ready to share all our digital knowhow and help build solutions for the whole of Ukraine.

Estonia’s digital story is already over 15 years old, and we are always ready to share our experience and knowledge. We would like to see cross-border digital services and data exchange happening across Europe and on a global scale. Estonia and Finland are currently pioneering this approach by connecting our systems and databases over the X-Road data exchange platform. This could then expand to X-Road Europe. The Finnish-Estonian data exchange is the first time another country has based its full e-government infrastructure on a solution developed in Estonia, but it will not be the last. The Estonian-based e-Governance Academy has worked on a similar project entitled “e-Governance Support to Ukraine” together with a number of regional and local authorities in Western Ukraine that expressed their interest and support for the integration of ICTs in their governance. In parallel, the e-Governance Academy and experts from Estonia have been assisting the Ukrainian government in the development of e-governance policies and processes including legislation development, capacity building, communication activities,

This progress does not mean we can rest on our laurels. The Estonian economy is expected to grow 1.3% this year and 2.5% in 2017. We want it to grow faster. We are actively looking for resources to bolster our labour market. This means exploring how to attract more foreign talent, speed up the transition to a knowledge-based economy, and make our business environment even more attractive. That is why we are also eager to invite talented Ukrainians to join Estonian start-ups, tech companies and other industries via the Work in Estonia programme. Estonia and Ukraine might not be particularly close geographically, but there are excellent bilateral relations including a deep connection between our people and a steady relationship economically. Estonia is a steadfast supporter of Ukraine’s sovereignty and territorial integrity. We support Ukraine’s European integration efforts and reforms. Our countries see each other as reliable economic partners with good potential, both being gateways to significant resources and markets. As part of the EU, as well as the Nordic cultural and economic community, Estonia can also serve as an effective hub for Ukrainian entrepreneurs looking to the EU and Scandinavia.

Supporting e-governance in Ukraine

estonia in ukraine

How Estonia became a Nordic digital hub

Entrepreneurs and e-Residency

One of the latest breakthrough initiatives in Estonia is e-Residency. It is an initiative that was born globally – a state-issued, secure digital identity for non-residents from around the world. E-Residency allows digital authentication and the digital signing of documents. It lets you open a company online as well as using all the other convenient digital services that were previously available exclusively to Estonian citizens. Following the project’s launch in December 2014, we now have more than 14,000 e-residents who have founded about 1000 new companies. Thanks to this innovation, Estonia has become the first digital society in the world. We are clearly moving towards the idea of a country without borders. Entrepreneurship is deeply embedded in Estonia’s mindset. Skype was born here and it served as a role model to kick-start a generation of entrepreneurs whose aspirations do not end at the physical borders of their home country. Estonians are currently behind more start-up businesses per capita than any other nation in Europe – and second only to Israel globally.

Wanted: Ukrainian talent

“Estonian experts and companies are ready to share all our digital knowhow and help build solutions for the whole of Ukraine” November 2016

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estonia in ukraine

Estonia focuses IT aid efforts on Ukraine

Ambassador Gert Antsu on support for Ukrainian e-governance and living with Russian realities 1990s when Estonia’s integration process began in earnest. As one of 10 nations working towards future membership, Estonia benefited from a sense of collective momentum that Ukraine does not enjoy. “All the candidate countries competed against each other,” Ambassador Antsu recalls. “There was always the danger that you might fall behind and end up relegated to a second wave of enlargement. This was an important tool. It played on the vanity of our politicians and helped maintain political support for reforms. Ukraine lacks this peer pressure and must effectively compete with itself.”

No EU membership roadmap

About the interviewee: Gert Antsu is the Estonian Ambassador to Ukraine Estonia’s new Ambassador to Ukraine Gert Antsu is something of an expert on the politics of European integration. Prior to his summer 2016 arrival in Kyiv, the engaging Baltic diplomat had spent almost half his 18-year civil service career as part of Estonia’s diplomatic presence in Brussels – initially as deputy head of the Estonian mission to the EU itself, then for the last four years as Estonian Ambassador to Belgium. This experience has provided him with important insight into the challenges facing Ukraine as it seeks to draw closer to the EU while transforming itself from within. Ambassador Antsu sat down with Business Ukraine magazine at the stylish new Estonian Embassy building on Kyiv’s Pushkin Street to discuss post-Maidan reforms, EU unity, and Estonian support for Ukraine’s digital revolution.

A changing EU environment

Ukraine’s post-Maidan pivot towards the European Union is widely viewed as Europe’s most ambitious geopolitical project since the last great wave of EU enlargement, which culminated in the accession of 10 new member states in May 2004. Estonia was one of three former Soviet Republics among those 10 new EU members, making it theoretically well placed to offer informed advice to Ukrainian policy-makers looking to plot a course towards Brussels. Ambassador Antsu believes Estonia can play a supporting role in Ukraine’s integration process, but is wary of drawing direct parallels. Crucially, the Baltic nation did not have to address the geopolitical ambiguity Ukrainian society has wrestled with for much of the past two decades. “It is difficult to compare Ukraine’s current position with the Estonian experience,” he says. “Practically from Day One, it was always clear that Europe was our destination. For Estonia, regaining independence was first and foremost a means of returning to Europe.” The Europe of today is also strikingly different from the EU of the mid18

In another sign of the changing times, Ukraine also has make do without a specific end goal to drive its integration ambitions. While the nations of the 2004 enlargement wave were able to focus on the clearly signposted objective of European Union member status, Brussels has been extremely careful to avoid any reference to possible future Ukrainian membership. Ambassador Antsu cautions that too much focus on this absence of a membership perspective could be disastrous, leading to a depressed mood that could completely derail reform efforts. Instead, he says Ukraine should seek to pursue reforms for itself and not in order to meet Brussels expectations, and argues this approach may eventually prove decisive. “If Ukraine reforms and becomes a model of successful transition, it will actually become very difficult to keep it out of the EU.” The Estonian Ambassador is moderately generous when it comes to assessing the progress Ukraine has made since the Revolution of Dignity. In response to increasingly vocal claims that nothing has actually changed in the country, he argues there have been more reforms since 2014 than in the entire preceding 23 years of Ukrainian independence. Nevertheless, he accepts that the pace could have been significantly faster. “Nobody said it was going to be easy, but concrete steps are being taken and specific deadlines are being met.” Regardless of the frustrations over the speed and depth of the transformations taking place in post-Maidan Ukraine, it remains far from clear whether a more dynamic reform process would have had a decisive impact on the country’s European integration progress. Indeed, the timing of Ukraine’s big geopolitical gambit could hardly have been worse, with the EU currently struggling to address the twin ailments of enlargement fatigue and a rising tide of nationalist populism. Once you factor in the mood of anti-immigrant anxiety generated by the Syrian refugee crisis, you have a near perfect storm of EU opposition to greater engagement with Ukraine. Then there is the entire issue of the Russian hybrid war in east Ukraine, which has sparked markedly different reactions across the 28-nation bloc. While the European Union has so far managed to maintain a united front in response to Russian aggression in Ukraine, the process has been fraught with difficulties. Various individual EU nations have sought to safeguard their bilateral economic and political ties to the Kremlin by attacking sanctions, while business communities across the continent continue to lobby for a return to ‘business as usual’. Ambassador Antsu plays down these differences as the inevitable result of such a broad and geographically diverse union. “It’s natural to have a range of different attitudes within the EU,” he says. “From the Estonian point of : www.bunews.com.ua


estonia in ukraine

: view, events closer to the Mediterranean and the Middle East are more

distant. For others the opposite is true.” When it comes to the Russian threat, geography certainly does seem to play a major role in determining responses. Support for sanctions is generally stronger in frontline nations located close to Russia’s borders, despite the fact these countries have also suffered the greatest financial losses in the tit-for-tat sanctions confrontation with Moscow. “There are some things that are more important in the long-term than the immediate benefits of selling apples,” the ambassador quips. He says one of Estonia’s current tasks is to engage with EU partners and help highlight the dangers posed by a resurgent Russia. “It is objectively true to say we are more knowledgeable about Russia and the surrounding region. There used to be a perception (within the EU) that we were anti-Russian when we talked about certain threats. It is sad to see those threats materialize, but it has also increased the credibility of our warnings.” Ambassador Antsu regards the existing sanctions as a major EU achievement, but acknowledges that the current response does not go as far as many of those closer to the conflict zone would have liked. “This crisis has been the biggest test yet for a common EU foreign policy. There have been intense debates but we have always managed to arrive at a common stance. Some, including Estonia, would have liked to see a stronger policy, but others wanted less. With 28 member states, that is only to be expected.” The election of Donald Trump as the next US President has heightened regional security concerns, not least due to Trump’s ambiguous campaign trail comments regarding NATO and his team’s remarks describing Estonia as ‘a suburb of St. Petersburg’. “The US is a crucial partner for all NATO member states and an important partner for the EU,” the ambassador says. “We hope the US will continue to value the Trans-Atlantic partnership in the same manner as before. It is really important for the US to continue its contribution to European security even if we can agree that European partners will have to increase their own defence expenditures to meet NATO obligations.”

Estonia adapts to the new post-Crimea Russian realities

The Russian attack on Ukraine has forced the entire Baltic region to reassess its security policy, with Estonia’s Baltic neighbours dramatically boosting military spending while seeking a greater deterrent presence from NATO allies. Ambassador Antsu describes the Russian takeover of Crimea as an ‘incredible event’ that few could have previously imagined possible, and sees it as a watershed moment in modern European history. “On an emotional level, it was shocking,” he says. “Although most of us recognized that it was still extremely unlikely, people in Estonia inevitably began playing out scenarios in their heads and asking ‘could the same thing happen to us?’” With Russian-speakers making up just over 25% of the Estonian population, the tiny Baltic state is also ostensibly vulnerable to the kind of hybrid destabilization tactics deployed by the Kremlin in Ukraine. Efforts to integrate this population have received a significant spur following events in Ukraine, but most observers believe local conditions are sufficiently different to deter the Kremlin. “The economic argument is a big factor,” says Ambassador Antsu. “If you could go back in time to before the conflict and invite Russian-speakers in Ukraine to migrate to Russia, many might have been tempted if there was a good job on offer. In Estonia, there are very few who would be willing to move. Economically speaking, they are better off than Russians living in Russia. Despite 20

the propaganda, their political rights are also much better protected in Estonia than they would be in Russia.” Estonian efforts to counter Moscow’s influence on the country’s Russian-speakers have included creating a Russian-language TV channel, but Ambassador Antsu recognizes the difficulties in trying to take on the vast Kremlin media empire with the limited resources at Estonia’s disposal. “It’s an impossible task. Russian state-run media does not have much in common with journalism as we perceive it in the West, but it has massive funding and very high production qualities, with the kind of pop culture shows that are attractive to modern audiences. It is hard for Estonians to create something on the same level. Russian TV produces programming for 100 million viewers. In our case, it is closer to 100,000 viewers. What we can do is offer an alternative. We can offer local content. And we can offer the truth.”

Aiding Ukraine’s e-revolution

In many ways, Ukraine is currently Estonia’s first line of defence. This strategic importance is underlined by the fact that Ukraine is the largest recipient of Estonian cooperation aid. “For much of my career Estonia was a recipient nation itself, so we are relative newcomers as a donor nation. It feels like we have grown up and matured,” says the ambassador. The sums involved are relatively underwhelming when compared to the vast amounts of international funding currently flowing to the Ukrainian government (Estonian aid to Ukraine totaled EUR 2.7 million in 2015), but it is nevertheless significant that Tallinn has chosen to prioritize support for Kyiv. These aid efforts focus primarily on Estonia’s main strength – the country’s world-beating IT sector. Key initiatives include e-governance capacity building and introducing internet-based learning tools for Ukrainian schoolchildren. The objective is to help Ukraine make the most of its own IT potential and create a more digitally integrated economy. The ambassador acknowledges Ukraine has a long way to go before catching up with Estonia - where voting in elections has long been possible online - but he remains convinced the cost savings and transparency benefits of electronic innovation will quickly make themselves apparent.

Reforms and approval ratings

Attempts to make Ukraine more e-efficient are just part of a massive overhaul currently underway throughout the country. Resistance is coming from numerous quarters, with a deeply embedded old guard eager to prevent the proposed changes in Ukrainian society from disrupting their lucrative self-enrichment schemes. At the time of Ambassador Antsu’s interview with Business Ukraine magazine, the country was still reeling from the revelations contained in e-declarations outlining the vast personal wealth amassed by thousands of politicians and civil servants. These e-declarations illustrated both the e-governance opportunities open to Ukraine and the huge task of transforming a deeply corrupt system. Ambassador Antsu warns that a populist backlash could potentially derail the already slow-moving reform process and counsels political courage. Based on his own memories of the often deeply unpopular Estonian reform process during the 1990s, he says Ukraine’s leaders would be wise not to focus too much on falling approval ratings. “You have to take the longer perspective and not worry about short-term setbacks. It is a law of nature that ratings will drop significantly for any reformers. In a country waging war, there is no miracle recipe unfortunately. One has to keep the faith. There is no other way.” www.bunews.com.ua


ESTONIA – INNOVATIVE PLATFORM FOR INTERNATIONAL BUSINESS Expand your business to the EU – using Estonian e-Residency you can establish and run a locationindependent international business online! » investinestonia.com Apply for Estonian e-Residency » e-resident.gov.ee

The Digital Society


Going global via Estonia Baltic state offers IT inspiration and inviting business environment for Ukrainian entrepreneurs

Estonia is the same size as Denmark with a population not much larger than an average oblast in Ukraine. Despite being a small country, Estonia is familiar to Ukrainians. There are 28,000 Ukrainians in Estonia, making them the second largest minority in the country. Our nations shared 50 years of history in the Soviet Union before going our separate ways. After regaining independence in 1991, Estonia decided to perform fundamental reforms in order to boost its economy and attract investment. As part of this process, it was crucial to discard the Soviet legacy. Instead of making incremental changes to existing legislation, Estonia set itself the goal of implementing the most businessfriendly regulations possible with maximum transparency and simplicity.

Crossroads of East and West Although it is part of the Baltic States, Estonia is a Nordic country at the crossroads of East and West. As Samuel Huntington stated, the Estonian border is also the border of Western civilization. This gives Estonia all the more reason to be an active member of the Western cultural and economic space, including numerous international organizations. Today’s Estonia is a member state of the European Union, NATO, and the OECD, as well as the Eurozone and the Schengen area. Estonia is also a founding member of the Digital 5, or D5 – a network of leading digital governments with the common goal of strengthening the digital economy. In the second half of 2017, Estonia will hold the Presidency of the EU. Twenty-five years ago, radical reforms were inevitable and Estonia made a number of tough decisions that set the pace for sustainable economic de-

About the author: Jaan Heinsoo is Head of CEE representation at the Estonian Investment Agency

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Welcoming business environment

Estonians are partial to rankings. Rankings seem to like Estonia, too. According to the Heritage Foundation, Estonia ranks among the top ten countries globally in the Index of Economic Freedom. The World Bank placed Estonia sixth in Trading Across Borders and twelfth in Ease of Doing Business, while the Tax Foundation ranked Estonia first in the world in its annual Tax Competitiveness Index. These positive assessments are due to policies like the zero percent corporate income tax on undistributed profits applicable for all companies at all times. This gives companies in Estonia the opportunity to plan their own taxes – income tax is only payable when owners decide to distribute dividends and all taxes are declared online. These advantages are easily accessible for entrepreneurs around the globe – you can run your business in a cost-efficient and hassle-free way across borders, without the need to hire a local director (unless you want to, of course). With the lowest government debt in Europe and a balanced state budget as well as political and financial stability, Estonia enjoys the long-term confidence of foreign investors, whose presence in turn helps the economy to develop further.

Innovative platform for international business

The key benefits of Estonia for foreign investors are a business-friendly economic environment and tax system, flexible labour policy, and stateof-the-art e-solutions which have revolutionized the way we conduct our everyday lives and businesses. E-solutions developed in Estonia have improved the lives of people worldwide, and we are constantly working on new innovations. For example, Estonia is the first country to offer eResidency – a transnational secure digital identity available to anyone in the world interested in running an international business online. Using an Estonian e-resident’s digital ID card allows you to establish an Estonian company at home in just 20 minutes and fully manage it online anywhere you are, conveniently and efficiently. All of Estonia’s databases are interconnected through innovative X-Road technology, which has reduced bureaucracy to virtually zero. During the last two decades, the Estonian manufacturing sector has gradually transformed with the help of foreign investors, mainly from Finland and Scandinavia. Today, it is on its way to a new industrial revolution, or as the Germans call it – Industry 4.0. The Estonian IT sector is developing cutting-edge solutions for modern manufacturing. Our “smart factories” pioneer the latest technologies in automation and data exchange. This knowhow, together with the country’s logistics infrastructure and statesupported industrial parks and business support agencies, make the Estonian value proposition particularly attractive for Ukrainian production companies looking for a near-shore production hub and gateway to the EU.

Europe’s start-up capital

As many foreign investors have noted, Estonia is a very entrepreneurial country and Estonians are eager to cooperate with partners from all over the world. Inspired by Skype – one of the first Estonian start-ups – the country has the largest number of start-ups per capita in Europe and second in the world. These young companies benefit from a liberal business environment and supporting entrepreneurial ecosystem. There are over November 2016

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Estonia ranks first in the world in Tax Competitiveness Index and among top 10 in the 2016 Index of Economic Freedom position in the world in Trading Across Borders 12th in Ease of Doing Business 23rd in Corruption Perception Index

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velopment throughout the following decades. We have not yet reached our goals – in order to achieve comparable living standards to Western Europe, reforms must continue. However, experts including the likes of the Heritage Foundation have called the achievements so far “an economic miracle.”

minutes to establish a company

percent corporate income tax on reinvested profits

first place in Europe for number of startups per capita you can manage and control your business online

there is easy access to EU and Scandinavian markets need to hire local members of the board

115,000 active enterprises in Estonia, the majority of which are profitable. In a small market like Estonia, it is natural to think globally from Day One.

Strengthening Estonian-Ukrainian ties

Estonia and Ukraine are actively involved in trade and investment – Ukraine currently lies in fifth place in terms of Estonian investments abroad. The majority of Estonian investments have focused on the Ukrainian financial and insurance sectors, wholesale and retail trade, R&D activities, and the processing industry. Expansion to Estonia also offers lucrative opportunities for Ukrainian investors. We have recently seen many Ukrainian companies taking an interest in these opportunities. Combining innovations with a favourable geographical location at the crossroads of Eastern Europe and Scandinavia, Estonia is a unique gateway for Ukrainian enterprises to Scandinavian and EU markets. The advantages can be equally beneficial for IT development centres, manufacturing and assembly facilities, group headquarters, and sales departments. In order to capitalize on the Estonian business environment and synergies for Ukrainian entrepreneurs, Enterprise Estonia, a state foundation for business support and development, has established a representation in Central and Eastern Europe with a focus on Ukraine. As part of the Estonian Investment Agency based in Tallinn, it provides the full spectrum of soft-landing services on behalf of the Estonian government to companies interested in establishing a business in Estonia.

The Estonian Investment Agency at a Glance

The dedicated team of professionals at the Estonian Investment Agency offer support for companies investing and expanding in Estonia. We aim to work together with you all the way from initial information requests to ramp-up of operations. Our services are confidential and completely free of charge. Contact us and experience the ease of doing business in e-Estonia – a low-risk, high quality, competitive location for your company. We offer you access to a world class ICT infrastructure, the lowest public deficit in the EU, low wage inflation, and a simple tax system. For further information please visit www.investinestonia.com 23


Estonian investor leads the way in Ukrainian retail real estate market London-listed Arricano finds retail sector success by adapting Estonian innovation to Ukrainian realities

When Arricano first arrived on the Ukrainian retail real estate market in 2006, the plan was to build ten new shopping malls over the coming decade. Ten years later, the majority Estonian-owned company boasts six malls and has plans for further 24

expansion in a Ukrainian retail market that remains well short of saturation. However, Arricano is also locked in a legal battle over ownership of a flagship mall in what management say is a test case for Ukraine’s rule of law that will have far-reaching ramifica-

tions for the country’s international investment climate.

Estonian investment

The majority shareholder in Arricano Real Estate Plc is Estonian investor Hillar Teder, www.bunews.com.ua


Majority shareholder of Arricano “Ukraine is a country with huge potential that has to be developed. This development is only possible with the involvement of investment. Commercial real estate development is quite a complicated business, but it also has the potential to change the country, change cities, affect people’s lives, and provide new jobs. Over the years of doing business in Ukraine, the company has faced numerous challenges, all of which have been resolved with the exception of one problem – the contested ownership of SkyMall. When the government realizes that this unresolved problem remains one of the most significant barriers for European investors who are considering whether to enter the Ukrainian market, then everything will change for the better. Ukraine needs investments!” who owns a 55.45% stake in the company. Mr. Teder is an Estonian property developer with business interests in Estonia, Latvia, Russia and Ukraine. He entered the Ukrainian market at a time when the country had very few modern international-quality shopping malls. “At the time, Ukraine was seen as the last great Eldorado for European retail,” recalls Arricano CEO Mykhailo Merkulov. This underdeveloped environment has proved both attractive and challenging, not least due to the broader instability issues affecting the Ukrainian business environment over the intervening decade. The past three years of revolution and armed conflict have been particularly challenging, but recent results posted by Arricano point to the management team’s success in weathering the storm. Operating profits grew in 2015 by 21% in US dollar terms, with a further 21% increase compared to the first half of 2015 posted up to July 2016.

Baltic efficiency

The company’s Estonian ties have helped determine Arricano’s development strategy in Ukraine, with Mr. Teder and a number of fellow Estonians in senior management positions providing insights courtesy of their experience. “As a company we benefit from our Estonian shareholders in several ways,” says Mr. Merkulov. “They have introduced a European business culture to the Ukrainian landscape. They also bring a global perspective of

how Ukraine can develop to contemporary European levels. This is very important, as companies rooted exclusively in Ukraine have a tendency to acclimatize to local circumstances and to accept the status quo.” When discussing the details of this Estonian input, Mr. Merkulov keeps coming back to one word – efficiency. He speaks admiringly of the streamlined management practices in Estonia that allow just three people to oversee the running of an entire shopping mall complex, and sees this as a goal for the coming years. “We currently have six or seven people per mall, but this is already far less than the norm elsewhere in Ukraine, where you might have up to twenty people running a mall.” Adopting Estonian efficiency innovations is not always a straightforward process. Legislative and bureaucratic obstacles remain in place that prevent Ukrainian retail real estate companies from shedding unnecessary management positions. Mr. Merkulov points to laws requiring backup and supervisory staff for things like routine electrical work, and complains that much of the existing legislation governing the sector dates back to the Soviet era. “These barriers do not bring any value and merely create additional hassle. Integration with the EU will help us to remove these outdated rules based on old technologies.” Estonia’s famed e-innovations have also proved a source of inspiration for Arricano. “Estonia is currently showing the rest of the

Jaanus Saarlayd

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Hillar Teder

EU how to be digitally efficient. This also means plenty of ideas for us, especially in terms of internal company administration,” says Mr. Merkulov. “I come away from every meeting with our Estonian colleagues with numerous new ideas, often involving things already in use in Estonia. For example, we have introduced electronic document flow systems within the company. This has reduced the risk factor from human error and helped speed up the management decisionmaking process.”

From shopping center to social hub

Estonia is at the cutting edge of the global digital revolution, but the sheer pace of the changes this is generating threatens to transform the retail industry completely. With more and more retailers moving towards ecommerce, this will have major repercussions for companies like Arricano whose business depends on attracting customers to shopping malls. “Shopping culture is changing, but we see this as an opportunity rather than a threat,” says Mr. Merkulov. “Over the coming decade, we expect retail space to change dramatically. The necessity of physically visiting shopping complexes in order to purchase goods will diminish. We are already seeing the rise of e-commerce and the development of virtual technologies that allow people to do things like try clothes online. However, there are services that cannot be provided :

Arricano Director of Operations and Maintenance “I have been working in Ukraine since 2011. During this time I was not only a witness to how the commercial real estate sector was changing, but was also able to influence these changes as a member of the largest and one of the most successful real estate developers on the Ukrainian market. In Estonia, we have been watching the development of the Ukrainian shopping mall sector with great interest. We have noted the emergence of new European facilities and the country’s first international-quality shopping malls. As someone who is responsible for the operations of five malls, I can confirm that today’s new generation of Ukrainian shopping malls are even better than most malls in Estonia. They feature thoughtful formats and include unique concepts. The entertainment component of commercial real estate is particularly highly developed in Ukraine, which reflects the local mentality. Ukrainians tend to spend a lot of free time in shopping malls. Ukraine is now generating interesting formats for the European retail market as a whole.” November 2016

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Raul Parusk Non-Executive Arricano Director “The London Arbitration Court considered all the facts before confirming the theft of SkyMall. We have also appealed to

various authorities in Ukraine to investigate the case. Unlike the London Court of Arbitration, the cases concerning SkyMall

in Ukraine have either been hindered or closed. The decision of the London Court of Arbitration is good news for Arricano. However, if you look at the wider implications for Ukraine at the state level, then the news is not so promising. All these

actions took place after Euromaidan. As a citizen of Estonia working in Ukraine, I observe that little has changed since the Yanukovych era in terms of the Ukrainian system of law enforcement. However, I believe Ukraine will change and become

closer to European standards in all aspects of life: starting from business to the individual rights of citizens. We hope that the London court decision will still be a catalyst for the Ukrainian authorities. This includes the aim of changing the country’s legal framework.”

: online, and these will become the focuses of

future shopping centers. We anticipate the transformation of the shopping center into a social hub where you spend time outside of work and home life. We’re trying to be ready for that.” These preparations include the expansion of food courts and entertainment options at Arricano malls. The company is also opening service centers in its Kyiv properties that will feature a range of on-the-spot services such as tailoring, shoe and jewelry repair, and key cutting. “People today have less and less free time, so the convenience of having everything in one place is particularly attractive,” explains Mr. Merkulov.

Huge room for growth

Arricano’s plans for future development include additional malls, with land plots already identified in Kyiv and Odesa. The past year has seen a return to expansion on the Ukrainian real estate market, with a number of high-profile mall openings in the capital and major regional cities. Despite the arrival of numerous new shopping centers, Mr. Merkulov believes there is still significant room for further growth. He identifies three key factors that are likely to drive market expansion in the coming years: the arrival of major international retailers, the upgrading of existing shopping facilities, and the growth of Ukrainian consumer spending power. “We see huge potential for retail in Ukraine. Purchasing power will inevitably increase. GDP

per capita is currently at the level of the poorest African countries. Over the next decade, this figure will not just double or triple, it will increase by a factor of ten. This will draw in many of the major international retail players who are currently not present in the Ukrainian market.” He argues that around 70% of today’s shopping space in Kyiv is not of a professional standard and will either be closed or completely renovated. There is also the entire underdeveloped segment of smaller complexes in medium-sized towns and regional centers to consider. “Compared to the rest of Eastern Europe, many of the smaller formats have yet to implemented here. Single story retail parks that are common in places like Serbia and Romania have yet to appear in provincial Ukraine. They are not as glitzy as the fancy new malls appearing in Kyiv, but they are ideal for smaller cities. This is a huge country with an enormous population, and they are all enthusiastic consumers – even when the situation is as it is today.”

About the interviewee: Mykhailo Merkulov is CEO of Arricano Real Estate Plc

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Rule of law concerns This room for retail sector growth is likely to attract the attention of additional international retail real estate investors, but Arricano’s ongoing legal battle over ownership of the SkyMall complex in Kyiv highlights the continuing concerns many investors harbor over the risks involved in entering the Ukrainian market. Mr. Merkulov describes the current situation as ‘the biggest raider case in the Ukrainian real estate market involving an international company’ and says the issue has become politicized due to the accused party’s alleged close ties to current senior political figures. Arricano has sought to defend its minority interest stake in SkyMall via the London courts, but has so far been unable to enforce these court rulings in Ukraine. “This is a test case for all international investors that addresses key corruption issues in the country,” says Mr. Merkulov. “It points to the need for reform in the prosecutor’s office, the state registry service, and the courts. There have been clear violations of the law. If this case is resolved, it will send a signal that justice has been established in Ukraine.”

www.bunews.com.ua


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Ukrainian Fashion Department Store with an Estonian Connection

U

krainian designers are currently among the hottest trends in the fashion world, with Ukrainian collections starring at Paris Fashion Week, being worn by European royalty, and adorning the pages of Vogue magazine. There has also been a marked upswing in domestic demand for Ukrainian designer labels thanks to heightened awareness of local brands and a broader post-Maidan enthusiasm for all kinds of ‘Made in Ukraine’ produce. The first major retail initiative promoting Ukrainian designers was the NAMES’UA department store within Arricano’s Prospekt Mall on Kyiv’s Left Bank. Opened in autumn 2015, NAMES’UA is managed by Karkat Fashion, a Ukrainian subsidiary 100% owned by Estonia’s Karkat Fashion International. The department store stocks collections by more than 60 different Ukrainian designers and has proved a big hit with consumers, attracting over 150,000 visitors in its first year. “This is a one-stop-shop for anyone who wants to buy Ukrainian brands, to be different, and to get highquality clothes while also saving money,” says Arricano CEO Mykhailo Merkulov. “Before NAMES’UA opened, people who wanted Ukrainian designer label clothing generally had to go to the individual showrooms of each designer. Now everything is available at a single destination. It has proved so popular that people are travelling across the river from Right Bank Kyiv to visit. Our customer surveys have found that around 7% of total Prospekt Mall customers are now from the more developed Right Bank districts of the city, where most of Kyiv’s retail options have traditionally been located. This is quite literally a fantastic development in every sense, and far beyond our initial expectations.” November 2016

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Ülemiste City in a nutshell

Ülemiste City today

Ülemiste City is the biggest smart business campus in the Baltics. It is located in Tallinn, Estonia. The campus is conveniently positioned within a five-minute walk from Tallinn International Airport and the railway station. It is a 15-minute drive to the city center and to the port of Tallinn. The campus is situated within close proximity to highthroughput intercity highways on the Tallinn-Tartu and Tallinn-St. Petersburg routes. More than 300 companies are already located in Ülemiste City, 21% with an international background. Every day more than 8,000 employees arrive to Ülemiste City to work. Along with Estonians, representatives from over 50 countries work in Ülemiste City, making it the most international area of Tallinn.

Ülemiste City features more than 100,000 square meters of office space and around 10,000 square meters of cultural and educational spaces. Current Ülemiste City tenants include the creator of one of the world’s most effective e-Tax systems, the Estonian Tax and Customs Board. You will also find a large number of the IT companies behind the success story of Estonian e-government, as well as offices and development centers of many foreign corporations and a dedicated E-Showroom presenting the innovation for which today’s Estonia is famous. The campus offers a full range of services designed to increase the efficiency of businesses, keep expenditure under control, and decrease the environmental load. Additional services provided for employees help them to manage their daily errands as smoothly as possible. Alongside an array of other restaurants and coffee shops, the business campus houses “Dvigatel” - the largest restaurant in Estonia. There is also a kindergarten, a dentist, a private medical clinic, and a drycleaners. A sports club with a swimming pool and a grocery store will soon open. The largest shopping center of Estonia is located only a few minutes walk away. Ülemiste City is a community that seeks to give back. Regular events hosted at the business campus make communication with one another easy. It is possible to introduce services, organize meetings and stage joint events, helping to create new effective business contacts together. The numerous B2B services offered by other campus tenants are always at the disposal of companies as well.

History of the Ülemiste district

The Ülemiste City district has a long history stretching back to long before the concept of the current Smart City was first developed. In 1897 Nicholas II, the last Emperor of Russia, approved the articles of association for a new company – the public limited company “Dvigatel” (the Russian word for engine). The core activities of this new company were the maintenance of planned railways, production of railway wagons, and the maintenance and repair of locomotives. The Dvigatel area survived both WWI and WWII, switching to military manufacturing during each conflict. In the 1980s, the plant began mass-production of nuclear energy equipment. Preparations were also made to develop a space missile shield system. When Estonia regained independence in 1991, Dvigatel lost all its market potential in its current form. In 1996, the complex was reestablished and privatized by Mainor AS.

The beginning of Ülemiste City

In 2005, a decision was reached to completely restructure the area. As Tallinn was lacking a modern technology campus, the idea was to develop a knowledge-based and modern Smart City. As a reference model for the future Ülemiste City, the owners chose Kista Science City, which is a technology campus near Stockholm sometimes referred to as the Silicon Valley of the North. Ülemiste City has given this historical industrial area of Tallinn a new lease of life. The former heavy industries of the district have been replaced by modern office spaces, as well as green areas and parks which bind the offices into a unified whole, creating an inspiring environment for all the companies operating here. In 2010, Mainor AS began cooperation with one of the biggest commercial real estate developers in the Nordics region – Technopolis Plc. A third of the campus is now being developed by Technopolis Ülemiste AS. 51% of Technopolis Ülemiste AS is owned by Technopolis Plc and 49% by Mainor Ülemiste AS. Technopolis develops, owns and operates a chain of 20 smart business campuses in Finland, Sweden, Norway, Estonia, Russia, and Lithuania that combine services with flexible and modern office space. Technopolis provides services in more than 120 modern office buildings employing nearly 49,000 people. Technopolis Plc (TPS1V) is listed on NASDAQ OMX Helsinki. November 2016

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Exploring Tallinn’s Innovative Smart City

The future of Ülemiste City

The vision is that Ülemiste City will be the new CBD of Tallinn and one of the top hotspots in Europe. The campus will grow in the near future from 100,000 square meters to 200,000 square meters of commercial space, while the campus population will rise from 8,000 to 15,000 people. The number of companies will increase from 300 to 500. Hotel and residential area development will start. Located at the crossing point between the airport and the future RailBaltic railway terminal, Ülemiste City’s developed infrastructure and smart city concept will make it the most important business center in Tallinn. One of the strategic missions of Ülemiste City’s management is to attract international businesses and innovators to the campus and to Estonia. In order to make this a convenient and attractive option for international clients, Ülemiste City provides all-inclusive business relocation and soft landing services.

WHY ESTONIA AND WHY ÜLEMISTE CITY? “After thorough analysis of several locations in Europe, Tallinn was identified as the most favourable location for an IT Center due to its local business climate, well developed e-government infrastructure, and overall IT focus and IT-student ratio. Another important factor for the decision was the possibility to expand our office space continuously according to our needs. The 400 square meters of space rented at the beginning has already expanded to 3,000 square meters.” Mart Ambur, CIO EMEA Region, Kühne + Nagel, tenant in Ülemiste City

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Estonian e-Residency

Estonia’s e-Residency initiative has attracted media attention but what are the practical benefits? Over the past few decades, Estonia has earned a reputation as one of the leaders of the global e-revolution. For the past two years, the country’s novel e-Residency initiative has served as an international flagship for Estonia’s digital credentials. Business Ukraine magazine spoke to Katre Kasmel to find out what all the excitement is about.

Estonia’s e-Residency initiative has generated considerable global buzz. Why has it attracted so much attention? Estonia is the first country in the world to offer e-Residency. In practical terms, this means a transnational and secure digital identity available to anybody in the world interested in running a location-independent international business online. Sounds interesting - but is it more than just a clever gimmick? Absolutely. E-residents receive a digital ID card (eID) which enables secure digital authentication and digital signing of documents. This digital signature and authentication are legally equal to handwritten signatures and face-toface identification in Estonia and, upon agreement, between partners anywhere around the world. The digital ID card gives access to Estonian e-services, which allow e-residents to do a range of things. You can establish a company within a day and administer the company online from anywhere in the world. You can conduct all banking online, including electronic bank transfers. The card gives you access to international payment service providers as well as to the EU Single Market. It allows you to digitally sign documents (e.g. annual reports, contracts) within your company as well as with external partners. You can also declare taxes online. All this can be done in a cost-efficient and hassle-free way, without the need to hire any local director or representative.

Can it serve as a passport? No. The e-Residency card does have some limitations.

It is not a physical ID card or a travel document as it has no photo. It is also important to stress that e-Residency does not entail citizenship, tax residency, residence permit, or rights of entry to Estonia or the EU.

How can people apply? Applications can be submitted at the e-Residency website (e-resident.gov.ee). You need to fill in the online application, upload your document photo and a photo of your identity document, state your reason for applying, and pay a EUR 100 fee. Once you have submitted your application, the Estonian Police and Border Guard Board run an applicant background check, which takes about 10 working days. Once the application is approved, you will be invited to your chosen pick-up location to identify yourself, give fingerprints, and collect your e-resident eID, which comes with a card reader. The whole process should not take more than a month, but may vary based on demand and pick-up location. You can pick up your card from Estonian embassies and consulates in 35 countries around the world, or at Police and Border Guard Board service points in Estonia itself. Who created the concept? In April 2014, the Estonian government accepted the outline concept for the future e-Residency programme. The initiative came from Taavi Kotka (Estonia’s Chief Information Officer), Ruth Annus (Head of the Migration and Border Policy Department at the Estonian Interior Ministry) and Siim Sikkut (ICT Policy Adviser for the Strategy Unit of the Government Office of Estonia). A couple of months later, the concept featured in a business ideas contest initiated by the Estonian Development Fund and Sten Tamkivi, the former head of Skype. Originally called, “Ten million ‘e-

Estonians’ by 2025”, this vision won the contest and formed the basis for the current e-Residency programme. It quickly gained unprecedented support from all political parties and received a green light from parliament. As co-founder Taavi Kotka explained, “Estonia is the first country to have a state-run app store. The platform is eResidency. Instead of games, calendars or yet another word processor, it gives you government.”

How many e-Residents are there today? We have received 15,862 applications so far from 135 countries. The top five countries in terms applications are Finland (2,535), Russia (1,216), USA (946), Ukraine (811), and the UK (807). More than 2,100 e-residents currently manage their company via e-Residency and over 1000 new companies have been created by eresidents. Just over forty percent of e-Residency applicants are entrepreneurs interested in administering a location-independent international business online and 24% of the applicants are interested in bringing their business to Estonia. E-Residency seems popular among Ukrainians. Why should Ukrainians consider applying? For entrepreneurs in Ukraine, we have just launched a new webpage (ukrainein.eu) that lists the benefits of e-Residency and provides an overview of the programme while offering useful links and contacts. Who qualifies for e-Residency? Anyone in the world can apply to e-Residency.

Do you reject many applicants? If so, on what grounds? About 1% of the applications are rejected. The decision to reject an application is made by the Estonian Police and Border Guard Board following the applicant background check. Have other countries shown an interest in learning from Estonia’s example and creating similar e-Residency schemes of their own? Yes. For example, the Netherlands, Singapore, and Lithuania have all expressed considerable interest in the programme.

About the interviewee: Katre Kasmel is Head of Marketing and Communication for Estonia’s e-Residency programme

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estonia in ukraine

Estonian opportunities

for Ukrainian businesses

Ukrainians enjoy advantages from registering in Estonia and using Baltic state as global gateway

Ukrainian businesses are increasingly exploring the opportunities presented by registration in foreign countries. With the Ukrainian economy as a whole seeking to reorient itself away from the traditional focus on Russia and other CIS markets, many local entrepreneurs and business owners have turned their attention towards EU member states as potential locations. One of the most attractive options is Estonia, a small Baltic nation with a big reputation as a welcoming base for international business. Estonia’s appeal rests on a number of factors. The country is most famous for its digital innovation – a process that has made it Europe’s unofficial startup capital and a world leader in the ongoing e-revolution. Other attractions include an advantageous business climate and the predictability provided by relative political stability. Business Ukraine magazine spoke to a number of Estonian companies to ask what the country can offer to Ukrainian businesses.

Easy access to e-services

“As well as a transparent and well-functioning legislature, Estonia has an investment-friendly taxation system,” says Hannele Tilk, Managing Director at Leinonen Ukraine. “You don’t even have to go to Estonia to start a company. The e-Residency programme gives 32

you easy access to all the services and support needed to start your own company from abroad and use all available e-services in Estonia. It can take as little as fifteen minutes to start a company. Opening a bank account in Estonia is also easy. As of the beginning of November this year, all of the larger banks operating in Estonia now allow you to open bank accounts using video conferencing as a means of identification, providing an important opportunity for e-residents around the world,” Ms. Tilk explains. She adds that new arrivals can also expect to receive support from a variety of state initiatives. “There are many possibilities to apply for support when opening your business in Estonia such as start-up grants, the Enterprise Development Programme, Export Grant for Creative Industries, and many more.”

Tax policy

Gert Jostov, the Chairman of the Board of Technopolis Ülemiste AS, one of the companies behind Tallinn’s flagship Smart City business campus, also highlights the attractions of business-friendly Estonia’s fiscal policy. “One of the general reasons why companies choose to come to Estonia and to the Ülemiste City campus in Tallinn is our tax system. According to the OECD International Tax Competitiveness www.bunews.com.ua


Ideal environment for innovation

Margus Nõlvak, Chairman of the Management Board of Mainor Ülemiste AS, sees the Baltic nation’s compact size as a distinctive advantage, allowing new arrivals to enjoy networking benefits while serving as a practical testing ground for innovation. “Estonia is often called a start-up paradise as it offers great networks of investors and mentors along with numerous business and innovation accelerators,“ he offers. “It also has the highest number of start-ups per capita in Europe. Due to the country’s small size, Estonia offers great opportunities to try out ideas before heading to bigger markets like the US and Asia. Some successful examples of Estonian products that have gone global include Skype, Playtech, and Transferwise.“

EU advantages

Mr. Nõlvak points to Estonia’s geographical location as an appealing factor, making it a convenient gateway for Russia, the Nordic states, and the European Union as a whole. He also stresses the country’s

November 2016

favorable business climate and says there are a number of practical advantages that are particularly appealing to Ukrainian businesses. “Ukrainian companies starting their business in Estonia enjoy the same business and juridical advantages as local companies. The ease of starting a business, the favorable business and political environment, and widely spoken Russian and English should enable Ukrainian companies to take their first steps in comfort. Estonia offers simplified visa procedures for entrepreneurs from countries outside the EU and also has various governmental support programs for business and individuals coming to Estonia. Companies located in Estonia are protected by EU legislation and have access to financing from the Northern and Western European banking sectors, allowing them to take advantage of lower loan interest rates and other financial tools.“

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Index Report, Estonia ranks as the best among the 35 member states for the third year in a row. Estonia has a 20% tax rate on corporate income that is only applied to distributed profits. Reinvested profit is not taxed,” offers Mr. Jostov. He also points to the competitive local labor market, which offers companies access to highly skilled and qualified candidates while involving significantly more attractive expenditures than those encountered elsewhere in the Nordic and Northern EU regions. “Compared to other Northern European countries, labor costs in Estonia are still somewhat lower, but the business environment and culture are similar.”

Increasingly attractive

Oleksandr Liulkov, Managing Partner in Ukraine for Tallinn-based law firm Magnusson, says more and more Ukrainian companies have been turning to Estonia over the past few years and attributes this trend to the country’s stability and competitiveness. “Traditionally, investments in and out of Ukraine have been structured through Cyprus, the Netherlands and some other jurisdictions. In recent years, the share of investments made through Estonia demonstrates constant growth. This figure has grown from USD 52.8 million in 2006 to USD 314.6 million in 2015 (sources: State Statistics Service of Ukraine, Bank of Estonia). What is driving this growth? Estonia is a safe, politically and economically sustainable country. In addition to this, Estonia enjoys leading positions in tax competitiveness, internet freedom, digital economy, and economic freedom.”

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The Estonian leading Ukraine’s e-revolution Dnipro Deputy Mayor Jaanika Merilo has been at forefront the Ukrainian push for digital government

“They do not know that behind the smile of an angel lies a terrible vixen who drinks the blood of bureaucrats and corrupt officials.” Ukrainian blogger Yuriy Butusov’s memorable description of Jaanika Merilo

It is not easy being a foreign reformer in Ukraine. The allure of transforming Europe’s largest country has attracted people from across the post-Soviet region and beyond, but over the past twelve months most have either resigned in frustration or been forced out. Estonian-born e-revolutionary Jaanika Merilo is one of the relatively few members of this international brigade who are still active in the struggle to build the new Ukraine. Her thousands of Facebook followers will testify to the Estonian’s resilience (and remarkably good humor) as she tries to bring Ukraine into the Digital Age. Ms. Merilo has held a range of positions in both Kyiv and Ukraine’s regional capitals since first aligning herself with the country’s reform efforts in early 2015. She currently holds a number of posts across the country. As well as serving as Deputy Mayor of Dnipro (formerly Dnipropetrovsk), she leads 34

Lviv Mayor Andriy Sadoviy’s efforts to introduce e-government, and is also part of Minister of Infrastructure Volodymyr Omelyan’s IT reform efforts. “I have the honor of working with three really great reformers,” she says matter-of-factly. The Euromaidan Revolution was not the point of departure for Ms. Merilo’s relationship with Ukraine. Born in the Baltics to an Estonian mother and Ukrainian father, she spent many of her childhood summers in Ukraine. After an international education, she began her professional career as a programmer and internet bank specialist before moving into investment banking – a sector that brought her back into contact with Ukraine almost ten years ago. Ms. Merilo spoke to Business Ukraine magazine about the role of digital technologies in combatting Ukrainian corruption and the potential benefits of learning from her native Estonia’s own e-revolution. : www.bunews.com.ua


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: In 2014 many foreigners entered Ukrainian government service and joined the post-Maidan reform crusade. Most have now either resigned or been removed from office, but you remain as active as ever. What is the secret of your longevity? I would like to think the main secret is that I do not view my work in Ukraine as a short-term managerial assignment. I regard Ukraine as my second homeland and see it as a duty to contribute to the positive development of the country. I try to support the changes taking place in Ukraine by implementing practical technological solutions that can help fight corruption and improve people’s everyday lives. I also focus on doing my job and try to avoid any political power struggles and intrigues. It is all too easy to become distracted from the task in hand. I try to remain results-oriented and ignore all the political scheming. Prominent Ukrainian journalist and blogger Yuriy Butusov memorably said of you: “They do not know that behind the smile of an angel lies a terrible vixen who drinks the blood of bureaucrats and corrupt officials.” Is this a fair reflection of your interaction with Ukrainian state officials? It was a very funny and, in many ways, spot-on description. I am very intolerant of people who oppose reforms and are involved in corruption. I might smile but I am truly very demanding of myself and of others. I tend to protest immediately if a politician or bureaucrat tries to oppose reforms that I know will improve standards of living. In such circumstances, I use all the available tools to protest – from my limited official authority to social media posts raising the alarm over efforts to block reforms. This is probably why Mr. Butusov said that even when I smile, I do not compromise on my demands for transparency or reform, and will go all-out to make things happen. He was warning people not to underestimate me! Having said that, I try to work with the people who share my goals and prefer to concentrate on achieving results rather than engaging in confrontations. Many commentators call anti-corruption efforts a second war Ukraine must wage alongside the struggle against the Russian hybrid war. However, those with practical experience of attempting to implement major reforms also often complain of excessive bureaucracy. Which is the greater obstacle to Ukrainian reforms - corruption or bureaucracy? I would say both are equally major problems but in many ways, bureaucracy is more dangerous. It is possible to fight corruption by changing the system, but the passive opposition of bureaucrats who do not want the system to change is more damaging in the long-term as it prolongs the fight against corruption. I regard e-government as a key way to change the system as it minimizes interaction between civil servants and the public. For example, if you can order the necessary documentation online via your electronic bank ID and receive it through the post, then you will no longer need to pay any unofficial “fees” to bureaucrats in order to speed the process up. I believe in changing the system rather than just switching officials.

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You are very active on social media and regularly post news of e-government reform efforts. How effective a medium is social media in the Ukrainian reform process? Actually, social media is surprisingly effective if you need to gather support among the progressive community or engage a specific politician for some particular issue. It will take a very long time before I am able to explain what I am trying to do to everyone, but social media is a quite efficient channel to consolidate support among people who already understand my cause. It is also a good way to provide quick status updates on activities and explain my views. I just discovered a new button on Facebook – videocast. This is an extremely convenient function, allowing me to broadcast video blogs rather than writing long posts. You are at the forefront of Ukraine’s e-government revolution - what do you regard as the biggest breakthroughs so far, and what should be the priorities for the coming few years? It is probably accurate to say that in many areas, the impact of key reforms is not yet tangible. Nevertheless, progress is being made. In terms of e-government, over the past two years Ukraine has climbed from eighty-seventh to sixty-second place in the UN’s e-government development index, and jumped from seventy-seventh to thirty-second in the e-participation index. I regard the biggest single breakthrough as the launch of ID cards with digital signatures. Other successes include creating open data portals and e-petitions, together with launching the country’s first real e-services. I am particularly proud that during elections in Lviv and Dnipro, we have been able to publish 100% of election protocols online in real time. I hope the next great breakthroughs will be e-elections, e-tickets for public transport, and legislation covering MobileID and BankID – this would pave the way for genuinely broad access to a whole range of e-services.

You are currently Deputy Mayor of Dnipro. What are the key focuses of your work in this role? I am very fond of the job description given by Mayor Filatov in one of his Facebook posts: “Jaanika is my Deputy Mayor responsible for fighting human laziness and stupidity.” Joking aside, I am responsible for a range of issues including e-government initiatives, upgrading Administrative Service Centers, supporting the adoption of the ProZorro e-procurement system, launching e-tickets, reforming firefighting services, and a number other areas. Broadly speaking, I would like to think of my post as Deputy Mayor for Reforms. Many foreigners find themselves enchanted by Ukraine and seek to contribute to the country’s development, only to become disillusioned by the many obstacles and cultural barriers they encounter. Have you experienced similar frustrations? What would be your advice to anyone who thinks they can make a contribution to building the new Ukraine? I have never had any illusions about the realities of today’s Ukraine as I spent part of my childhood here as well as much of the past ten years. I think I have

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we can actually move faster than many leading IT nations because we do not have to reinvent the wheel. Everything is already there - we just have to make good use of it.

How does the current IT innovation culture in Ukraine compare to Estonia? The Estonian IT ecosystem is probably 10-15 years ahead of Ukraine. When Skype emerged, Estonians were already asking themselves: “What should we do to make this success part of a long-term trend and not just a one-off?” Estonia has launched over 40 different IT ecosystem support programs. Even more importantly, there is widespread recognition that value-added and export-oriented innovation is the national priority. There are now all sorts of associations, incubators and accelerators in Ukraine, but the government has not yet defined this as a national priority or contributed in any meaningful way.

Many observers have pointed to the prominent role played by women in Ukraine’s reform efforts. Nevertheless, Ukraine is still far behind the rest of Europe in terms of the number of women in politics and private sector management positions. What is your assessment of gender politics in Ukraine based on your personal experience in both business and politics? I have a zero tolerance approach towards discrimination of any kind – especially gender-based discrimination. Maybe it is strange to say, but I have never really experienced much gender discrimination in Ukraine. Perhaps I have just learned to deal with it at the very early stages. My background has also helped me to feel comfortable in male-dominated environments. I started out as a computer programmer at the age of 16 when almost all my colleagues were boys. Then I moved into investment banking in Finland, which was truly a very masculine environment and traditional man’s world. In Ukrainian politics, I do not encounter direct discrimination, except perhaps in terms of overreactions to things that would not attract attention if done by a man. Some of the comments and news stories I see about discrimination are very ugly, but Ukrainian politics in general is not a particularly pleasant environment. There are still signs of chauvinism in Ukrainian society, but when you take into account how many more women there are in Ukrainian politics today compared to a decade or so ago, there is clear progress. I think it will become more and more common to see women in leading positions throughout Ukrainian society. Ultimately, gender does not matter – skills, experience, motivation and drive are what count.

You are from a mixed Estonian-Ukrainian family. What was your childhood image of Ukraine while growing up in Estonia? I have spoken Ukrainian with my father all my life. He was very keen to teach me the history and culture of Ukraine. I used to spend three months every year in Ukraine when I was growing up, so I have always felt as much at home in Ukraine as in Estonia. Even though I lived most of the year in Estonia, I was very much in tune with the Ukrainian mentality, habits and traditions.

What can Ukraine learn from the success of the digital revolution in Estonia? Estonia has already clearly defined the building blocks for e-government and it is theoretically possible to copy the entire structure. The fundamental foundation stones for the entire system are e-identification and authorization programs, together with interconnected e-registers. We have already copied much of the Estonian experience in our existing initiatives. When we were developing the ID card system and Ukraine’s first e-services, the Estonian government helped to engage experts and organize a fact-finding trip to Estonia for Ukrainian decision-makers. The BankID initiative drew directly on Estonian experience. The MobileID concept has been piloted using Estonian technology. These are just a few examples. I am convinced that by copying Estonia, which is the most advanced country in Europe in terms of e-services,

November 2016

What do you miss most about Estonia? I have no time to dwell on this as I work a minimum of around 80 hours per week. I also spend my weekends in Estonia. In terms of mentality, I do miss Estonian attitudes towards getting results and not focusing on intrigues and plotting. I would very happy if the Ukrainian business and political cultures became more result-oriented.

estonia in ukraine

a good understanding of the mentality and appreciate that implementing change was never going to be fast or easy. As I said in a previous interview regarding the departure of one so-called reformer during the early days of the post-Maidan period: “What did he expect? Did he think it was going to be a walk in the park?” While I never thought it would be simple, I have been surprised and disappointed by some of the trends I have noticed. The self-styled progressive forces and young reformers in the country often let themselves become carried away by their egos rather than consolidating their forces. They sometimes undermine each other’s initiatives instead of focusing on the overriding goals we all share. They act like small children throwing tantrums. It is not very helpful behavior. My advice to anyone seeking to support Ukraine would be to avoid intrigues, remain grounded, do your job, and concentrate on results. If you are sufficiently stubborn, change will come.

If you could recruit anyone from the spheres of international business and politics to serve on your Ukrainian reform ‘dream team’, who would you choose? That is a very good question. If we look at famous people, I would mix my team with visionaries and pragmatists. The visionaries would include Elon Musk and Richard Branson together with someone like Michael Bloomberg. However, I would not overestimate the need for foreign expertize – there is so much at this stage that we can just copy-paste-adapt-execute without trying to create new models. I believe I already have many of the necessary components of a reform dream team in place here in Ukraine. We just need to continue our work, keep the faith, and never lose our sense of inspiration.

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Russian attack on Ukraine was ‘no surprise’ Ex-Estonian FM Marina Kaljurand on Trump, EU sanctions, and Russian hybrid war in Ukraine Ever since 2000, Vladimir Putin’s Russia has made a habit of regularly identifying national enemies. For the past few years, Ukrainians have been the leading adversaries, although for a period in late 2015 and early 2016, they had to compete for this dubious accolade with Turkey. America is naturally an ever-present on the list, consistently ranking among the top enemies of Russia. Other popular villains during Putin’s sixteen-year reign have included Georgia, Poland, and Chechnya. For a brief period in late summer 2007, the honor of “most hated nation” went to tiny Estonia. The Baltic country earned Russia’s wrath by deciding to move a WWII monument from downtown Tallinn to a military cemetery on the outskirts of the city. The Kremlin responded by launching a massive cyber attack and unleashing an avalanche of anti-Estonian coverage on Russian TV, leading to riots in Tallinn and attacks on the Estonian Embassy in Moscow. In retrospect, this hybrid Russian offensive was a taste of things to come. It was a watershed moment in the evolution of the Putin doctrine, paving the way for bolder acts of aggression. Estonian diplomat and former Foreign Minister Marina Kaljurand was the Estonian Ambassador to Moscow at the time of the confrontation. Based on her experiences in Russia, she says the subsequent Kremlin takeover of Crimea and hybrid war in eastern Ukraine did not come as a complete surprise. “There were signs from Russia that were leading in that direction, so I cannot say it was a complete shock. We had seen the cyber attacks against Estonia in 2007 and the war in Georgia in 2008. I think the EU and NATO did not react sufficiently to these earlier steps by Russia. We returned to business as usual within 6 months of the Georgia conflict.”

The danger of demonizing Russia

Speaking to Business Ukraine magazine in Kyiv while in the Ukrainian capital to deliver a series of lectures at the Civil and Political School (CAPS), Ms. Kaljurand recounts how her time in Moscow introduced her to two very different sides of contemporary Russia. “2007 was the low point of our bilateral relations. There was not much official contact. There were attacks on the Embassy and on me personally. However, the attitudes I encountered among ordinary Russians were completely at odds with the official position. It was clear the physical attacks were a red line for the Russian people. They would stop me in the street to express their support and sympathy. Many said they did not agree with the policies of the Estonian government, but this was not the way to treat diplomats.” Despite the aggressive tactics used against her, Ms. Kaljurand remains generous in her praise of Russia. Ever the diplomat, she stresses her affinity for the Russian people (“Their heart is in the right place”) and emphasizes the importance of understanding Russian concerns rather than simply demonizing the Kremlin. Neverthless, she accepts that question marks remain over Russia’s willingness to engage honestly with the West. “Naming and blaming is never a good approach. Cornering people also doesn’t help. However, if somebody wants to be cornered in order to convince their own audience that everyone is against them, there is not much we 38

can do. I would like to see Russians united in promoting something and not just united against NATO, America, Europe, and so on.” She is critical of the West’s failure to adopt a tougher stance towards Russia in the 2000s, but does not support policies that would further isolate ordinary Russians from contact with the democratic world. “We have to understand what the Russian people are thinking. I had the opportunity to discuss politics and history in the kitchen with many Russians, just like in the ‘good old days’. For them, democracy is not what it means for us. They associate democracy with the Yeltsin years. He was a much more democratic ruler but salaries were not paid, shops did not have food, and kindergartens closed. That is what Russians remember about democracy. They simply do not see democracy as we do. This is why it is extremely important for young Russian people to have the opportunity to go to Europe. They must be able to visit Estonia to see what it means to be a democratic country. Their thinking is different and we have to acknowledge that.”

EU unity optimism

From July 2015 until September 2016, Ms. Kaljurand served as Estonian Foreign Minister, placing her in the frontlines of diplomatic efforts to push back against Russian aggression in Ukraine. Estonia is widely regarded as particularly vulnerable to Kremlin hybrid attack, with military analysts widely identifying the Baltic nation as a likely target if Russia chooses to test NATO resolve. Ms. Kaljurand stresses the need to view the implications of current Russian policy in a far broader context. “We are not talking about a threat to Estonia or a threat to the Baltics. We are talking about a risk to the whole of Europe, to the EU, to NATO.” It is far from clear whether all of Ms. Kaljurand’s former EU colleagues share this sentiment. She recognizes the difficulties of reaching a consensus on Russia that suits all 28 EU member states, but cautions against reading too much into pro-Russian statements issued in national capitals on the eve of major EU meetings. “Within the EU it is no secret that countries have different ties to Russia. They have different business interests with Russia and different cultural ties. Before coming to foreign policy summits in Brussels, foreign ministers often say a variety of very different things in their own capitals, but once we down at the table, it has been relatively easy to agree on the principles of how we should build our relations with Russia.” Her advice to EU foreign policy analysts is simple. “Don’t pay so much attention to what political leaders tell their domestic audiences. Pay attention to their official positions as expressed in Brussels.”

No panic over Trump presidency

The election of Donald Trump as the next US President has generated doubts over the entire future of the international coalition opposing Russian aggression in Ukraine. Audiences throughout Eastern Europe were left alarmed by Trump’s campaign trail praise for Vladimir Putin, while prominent Trump supporter Newt Gingrich notoriously described Estonia as ‘the suburbs of St. Petersburg.’ www.bunews.com.ua


estonia in ukraine About the interviewee: Marina Kaljurand served as Estonian Foreign Minister from July 2015 until September 2016. She was previously Estonian Ambassador to the US (2011-2014) and Russia (2005-2008) Ms. Kaljurand, who served as Estonian Ambassador to the US from 2011 until 2014, does not see the advent of a Trump White House as cause for undue concern. “We should react calmly. This was the democratic decision of the American people and we will have to live with the new reality it creates. Right now, the most important thing is to build working contacts with Donald Trump and his team. It will be a challenging time for our diplomats and politicians. Nevertheless, my message is ‘don’t panic’. Let the president-elect come out with his policies. We have all seen how he is already stepping back from some of his campaign promises. Let’s give him time to think. Let him go through the transition. Meanwhile, we will continue networking.” And that ‘suburbs of St. Petersburg’ comment? “Everyone is paying a lot of attention to that remark, but we must also pay attention to the comments that followed. Many people close to president-elect Trump have said it was not the right kind of statement to make. If you want to have the full picture, you have to look at subsequent November 2016

comments made by others, many of whom will have positions in the Trump administration.” One area were US president-elect Trump and Ms. Kaljurand see eye to eye is on the need for NATO members to increase their military spending. “European NATO members have to do their fair share and pay their way. Estonia has been reaching the 2% target for many years and this has given us the right to be vocal in reminding our allies to do likewise. It’s been really encouraging over the past year-and-a-half to see many countries, including our Baltic neighbours, increasing their military spending.” Since leaving the Foreign Ministry in September, Ms. Kaljurand has yet to decide on her next steps. An independent politician with no affiliations to any Estonian political party, she is not sure whether she will return to the diplomatic service or seek new challenges elsewhere. Given her unique insights into contemporary Russia, America, and the EU, it is likely Estonia will want to make full use of her diplomatic skills for some time to come. 39


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Baltic state offers visitors a fascinating combination of digital modernity and timeless organic nature The world’s largest travel guidebook publisher, Lonely Planet, recently named Estonia as the number one best value destination for 2016. While explaining their choice, Lonely Planet authors advised anyone visiting to the Baltic state to make sure they headed straight for Estonia’s virgin forests. Any travelers looking to follow this advice will certainly have little trouble finding wooded areas - more than half of Estonia is blanketed in lush forest, making it one of the most unspoiled landscapes in the whole of Europe. This timeless natural beauty is one of Estonia’s greatest assets – it is also in complete contrast to the country’s ultra-modern e-economy and emphasis on high tech innovation.

From IT hub to organic oasis

Estonia is widely recognized today as one of the world’s leading digital societies. Despite the country’s relatively tiny size and small population, it is a major innovator that contributes much more than its fair share to the global e-revolution. Estonians do literally everything online, from shopping to voting. The country as a whole enjoys a wellearned reputation as the start-up capital of the EU. Unsurprisingly, Tallinn is one of the most self-consciously modern cities in the entire region. However, within minutes of the digitally dynamic downtown area, you can encounter the seemingly endless horizons of the eternal Estonian forest. The Baltic country’s virtually untouched nature has inspired an entire ‘Organic Estonia’ movement that seeks to protect this national asset while marketing it to the outside world to enhance the Estonian brand and improve both physical and spiritual health.

Supporting sustainable wellness

The ‘Organic Estonia’ concept earned a grant in 2015 after winning Estonia’s Development Idea competition – an annual event organized by the Estonian Development Fund. One of the authors of the ‘Organic Estonia’ concept, Estonian entrepreneur Siim Kabrits, says the idea is to preserve the country’s ecological assets while also celebrating ancient Estonian traditions. “Organic Estonia refers to a state which values clean food and a free, natural state of being. Organic Estonia is also in tune with the global trend of appreciating the sustainable and adopting an environmentally aware way of thinking. The organic way of life benefits everyone. It offers the best chance for a successful future as well as the key to ensuring the health and wellbeing of the generations to come. It is Estonia’s trump card to show that as a small country we do things differently, in a caring and sustainable manner.”

Green tourism

In practical terms, the Organic Estonia initiative focuses on four areas: forests, food, cosmetics, and tourism. For visitors to the country, this means a wealth of ecologically friendly and healthy tourism options. Estonia has 20 accommodation providers that have received the internationally recognized Green Key environmental label. To qualify, at least half of the ingredients on the breakfast menu must be local. All crockery must be reusable, and over-packaging must be November 2016

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Organic Estonia reduced to a bare minimum. Water must be used sustainably. For example, at the ideal Green Key venue, toilets would use rainwater. The Estonian Eco-Tourism Association and Estonian Rural Tourism NGO have also created the local organic tourism quality label EHE The Natural Way. Almost fifty tourism farms and excursion providers have earned this quality label and offer environmentally friendly and sustainable tourism services. Mr. Kabrits hopes to see the Organic Estonia concept gain momentum in the coming years, and advocates designating the one hundredth an-

niversary of the Republic of Estonia in 2018 as an ‘Organic Year’ in Estonia. “Let’s think big. Let’s show the world that we care about nature, the environment, and future generations,” he says.

Organic Estonia in Numbers

- 51% of Estonia’s 45,339 square kilometer territory is covered in forest. - This share of forestland places Estonia in fifth place in Europe behind Finland, Sweden, Slovenia and Latvia. - Most Estonian forests are pine forests (33.1%), birch forests (31.1%), and spruce forests (16.2%). - The most densely forested area of Estonia is the island of Hiiumaa – 72.4% of the island is covered in forest. Other heavily forested regions of Estonia include Ida-Virumaa in eastern Estonia (60.4%), Valgamaa in southern Estonia (57.7%), and the island of Saaremaa (57.6%). - With 16.3% of organic arable land, Estonia ranks in third place among European Union member states and fifth place in the world. In terms of hectares, Estonia lies in eighteenth place within the EU and thirty-sixth place globally. - In 2004, organic arable land made up 5.7% of the Estonian total. By 2013, this figure had risen to 16.3%. - Nearly 50% of Estonian sheep and cattle are raised on the principles of organic farming. - The share of organic enterprises rose by 32% from 2006 to 2013. - By the end of 2013, there were 1,553 companies listed on Estonia’s national Registry of Organic Agriculture. 41


estonia in ukraine

Eating out in Estonia

The hip Estonian restaurant scene is all about freshness with a strong Nordic flavor Estonia boasts a vibrant dining out scene that fits well with the country’s reputation as an up-and-coming Nordic hub while remaining refreshingly unpretentious. The Baltic nation’s digital revolution has not managed to disconnect Estonians from nature, and many still like to know where their food comes from. For this reason, savvy city dwellers often take the time to work the fields and enjoy the fruits of their labor throughout the year. This passion for natural produce has inspired many Estonian restaurants to go organic and use local delicacies in their culinary creations.

A culinary crossroads

Like many aspects of Estonian culture, Estonian cuisine reflects the country’s position at one of the world’s great cultural crossroads. The local menu features many of the tastiest elements from neighboring countries. In restaurant after restaurant, you will encounter dishes containing traces of Scandinavian, Russian, and German culinary traditions. Naturally, there is also no shortage of mainstream influences from global classics like French and Italian cuisine. One of the key themes you will notice during your Estonian gastronomic odyssey is the commitment to freshness and natural flavor. Estonian chefs, food establishments, and retailers alike all share a similar understanding of the essence of Estonian cuisine, and this is typically reflected in loyalty to healthy ingredients cooked into simple dishes that echo the very best of ancient Nordic culinary traditions. One of the cornerstones of every Estonian meal is bread. In fact, bread is so important that it has at least three different names in Estonian. Black rye bread with a thin crispy crust is a healthy and very original gift to bring back from your trip to Estonia. You will find a range of different options coming in all shapes and sizes at your local supermarket or grocery store. Meanwhile, many restaurants also serve freshly baked bread rolls using their own jealously guarded secret recipes. With a spread of Estonia’s famous full-fat salty butter, this local bread is sure to tingle your taste buds. International and fusion gourmet food can be enjoyed very inexpensively in Estonia, making this a desired destination for foodies. A five-course gourmet feast in Tallinn can cost half the price of a similarly extravagant dinner in most European capitals. Fans of Euro-exotica will also be delighted by the range of medieval food available in some Estonian restaurants - have you tried roast bear recently, or maybe a dish of wild boar? If carnivorous excesses leave you cold, fear not. Vegetarian and veganfriendly gourmet joints spring up in Estonia’s larger cities like mushrooms after the rain. Then there are the mushrooms themselves. Have you ever tried Estonian chanterelles? This woodland mushroom, considered a delicacy in much of Western Europe, comes fresh and inexpensive in Estonia’s grocery stores and markets.

Classic Estonian dishes

Make sure you try the famed Estonian black bread. Look for fresh, handmade loaves baked in Estonia’s many organic farms. Smoked meat and fish are Nordic classics that have long been mainstays of any Estonian feast. Alder wood gives Estonian ham, sausages and meat 42

products a natural and flavorful taste. Dairy products are the pride of Estonia. You will never see anything like the long winding dairy aisles in Estonian supermarkets. Browse the shops for cheese, curd puddings, and chocolate-covered curd bars called “kohuke”, as well as yoghurt and sour cream. Some supermarkets even stock up on fresh, unpasteurized milk. Most popular Estonian cheeses are either pure-tasting, dense, and curdy, or smoked and bold-flavored. The traditional sauerkraut and black pudding is a vital part of every Christmas dinner in Estonia. The soft and juicy fermented cabbage compliments the spiced sausages topped with cowberry jam. The traditional Estonian dessert kama is considered an acquired taste by some and a tasty treat by others. This hearty dish is sweet and filling, made of cooked, dried and ground rye, barley, and peas. It is best enjoyed with fermented milk, with an optional sweetener of your choice. Sweet-toothed visitors will also love the local marzipan. Did you know that according to medieval legend, marzipan was first made in Tallinn as a pharmaceutical experiment? Once you’ve tried it, you may well end up wishing all medicine tasted as good as Estonian marzipan. Much like their Ukrainian cousins, Estonian grandmothers are world champions when it comes to jam making. To taste these timeless delicacies, simply head out to the country or to your local outdoor market for jars of blackcurrant, blueberry or buckthorn jams and pickled vegetables. www.bunews.com.ua


2016 Ukraine End of Year Review Andy Hunder, President of the American Chamber of Commerce in Ukraine

of Ministers of Ukraine. We sincerely hope that this institution will be of real help for businessmen eyeing opportunities in Ukraine, and, most importantly, will effectively implement national communications strategy targeted at raising Ukraine’s investment profile.

Serious challenges remain

Many have been disillusioned by the slow path of reforms in Ukraine, while others have been encouraged by the gradual but undeniable progress.

Grounds for optimism

One thing we are absolutely certain about is that Ukraine is set on the path of reforms. It works hard to deal with external threats and address domestic challenges. The state receives international financial and technical support, has a Government made up of willing reformers and a strong civil society that keeps pushing for real changes. 2016 has seen the continuation of the IMF program, delivery of the macro-financial stability, improvements in the fiscal and tax policies, further cleansing of the banking sector as well as efforts to tackle top-level corruption with e-declarations initiative. Compared to previous year results, Ukraine has moved three places up in the World Bank “Doing Business - 2017” rating, signifying gradual but internationally recognized advancement. Experts of the World Bank calculate that, on average, each point in the rating accounts for additional $500m of investments into the country’s economy. Compared to the previous year, Ukraine improved its positions in registration of enterprises, electricity connection and taxation. In 2016, general outlook for Ukraine’s banking system was changed from “negative” to “stable” by Moody’s Investors Service. Official reserve assets of the NBU recovered from US $5.6 billion in February 2015 to US $15.6 billion in September 2016. Furthermore, Ukraine now has 16 working Free Trade Agreements (FTAs) with 45 countries. 2016 was not the most successful for Ukraine in terms of attracting foreign capital. However, a new institution was launched to support existing investors and attract the new ones – Investment Promotion Office under the Cabinet November 2016

Although many positive developments have already taken place in the country, some of the most detrimental problems remain largely unsolved. Ukraine continues to suffer from rampant corruption, weak judicial system and deeply entrenched bureaucracy. Inability to quickly tackle these issues raises doubts about Ukraine’s commitment to follow the course of much-needed reforms. According to UNCTAD data, Ukraine currently receives one of the lowest amounts of FDI per capita in the Emerging Europe and CIS region. To make matters worse, Ukraine has a serious image problem, which was emphasized this year by the Economist Intelligence Unit in its Global Livability Ranking. According to the report, Kyiv is among ten least livable cities in the world. Due to poor protection of the intellectual property rights, heavy dependence on foreign creditors and systemic challenges described above, business environment in Ukraine is often seen as hostile by international investors.

Expectations of investors

Many investors remain cautious about making real commitments. Ukraine will need to show tangible progress on the path of reform to receive additional capital, which is of exceptional importance at this stage of national development. By implementing several important tasks, Ukrainian Government will make the country significantly more attractive in the eyes of both local and foreign investors. Among the crucial elements of the to-do list are further currency control liberalization, transparent privatization starting with the Odesa Portside Plant in December, implementation of measures that ban trading and distribution of illegally imported goods and services and, finally, – simplification of tax legislation by adoption of the Draft Law #5368 “On Amendments to the Tax Code of Ukraine regarding Improvement of Investment Climate in Ukraine” which, inter alia, foresees implementation of a single register for VAT refund, introduc-

tion of “electronic cabinet of taxpayer”, improvement of the procedure of administrative appeal and fixing the problem on tax loss carry forward while reorganizing legal entities.

Saying Thank You

The American Chamber of Commerce in Ukraine held its Traditional Thanksgiving Dinner on November 19th at the Hotel Hilton Kyiv and recognized organizations and individuals who have made the most significant contribution to the development of a favorable business environment in Ukraine and promoted the country’s image internationally.

U.S. Secretary of Commerce Penny Pritzker and the team at the United States Department of Commerce were recognized for strong and continuous support of Ukraine; Business Ombudsman Council – for fighting corruption, simplifying bureaucracy and improving the business climate; Oksana Drozach, Senior Consultant, International Trade and Customs, PwC – for her contribution to the introduction of the Authorized Economic Operator concept in Ukraine. At the highlight of the ceremony AmCham members expressed their most sincere gratitude to the Ukrainian Paralympic Team, who topped the medals table in third place at the Rio 2016 Paralympic Games. Sportsmen were awarded for will-to-win spirit and honorable representation of Ukraine in the international sports arena.

Entering with hope to 2017

We are confident that Ukraine is moving in the right direction. It can’t yet boast a muscular and well developed democracy or a prosperous economy, but confident strides on the way to success are being made. To all the skeptics and pessimists our answer would be simple and concise: little progress is not zero progress. Taking into account all the internal and external factors impeding swift economic growth in Ukraine, one can draw a conclusion that the country is doing quite well. The American Chamber of Commerce in Ukraine will continue to support the state in its rigorous fight against the old system which opposes vital changes, and will make every effort to guard the interests of the business community.

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industry

Kazakhstan as Ukraine’s Asian air hub Air Astana expands Kyiv flight services amid growth in number of Ukrainian passengers How have Air Astana services to Kyiv been impacted by the instability in Ukraine since 2014? These are very challenging times for Ukraine and we have a great deal of empathy for the difficulties the country is facing. Air Astana launched regular flights from Astana and Almaty to Kyiv in March 2013. These services progressed well, expanding from three to five weekly flights to each destination. However, due to safety issues and the uncertain situation in Ukraine in 2014, we had to cancel Astana flights, leaving three weekly Kyiv–Almaty flights. Fortunately, the situation stabilized in 2015 and we registered an increase in passenger traffic. Over the past year, we have twice increased our flight frequency, and now fly daily on the Kyiv–Almaty route. Which segments of the Ukrainian air travel market offer the most potential for further growth? After a number of difficult years, we have started to see an increase in air traffic. According to Ukrainian airport data, air traffic increased by 16.2% in January-August 2016 compared to the same period in 2015. Meanwhile, trade and cultural ties between Ukraine and Kazakhstan continue to develop. Air Astana is also a convenient hub for Ukrainian passengers offering connections across Asia including Bangkok, Ho Chi Minh, Kuala Lumpur, Hong Kong, Tashkent, Dushanbe and Bishkek. Given all these factors, I would not want to identify any single segment of the travel market. Leisure traffic, business travel (MICE), and the corporate segment are all growing. We expect this growth to continue. Almaty and Astana serve as air travel hubs for the whole of Asia. Which connecting destinations are most popular among Ukrainian travellers? We are currently seeing growth in all transit travel from Kyiv via Almaty, but the most popular destinations among Ukrainian travelers are Beijing, Delhi and Seoul.

Kazakhstan has a visa-free regime for Ukrainian tourists. What do Astana and

Almaty have to offer visitors from Ukraine? Kazakhstan is working hard to attract tourists to the country. We have visa-free regimes with a wide range of countries in addition to Ukraine including Australia, Belgium, Finland, France, Germany, Hungary, Italy, Japan, Malaysia, the Netherlands, Norway, Singapore, Spain, Sweden, Switzerland, the UK, the United Arab Emirates, the USA, and for citizens of CIS countries. Kazakhstan will be hosting EXPO 2017 and Winter Universiade 2017 next year, so we expect this visa-free list to continue expanding. Astana is one of the youngest and coolest capitals in the world. The city is growing rapidly. It is full of modern and futuristic buildings. Things are moving so fast that every time I visit Astana, I see new buildings, roads and streets! We are particularly proud that UNESCO has dubbed Astana, “The City of Peace.” I could talk endlessly about the charms of Almaty. It is a very memorable and inspiring city – particularly due to the contrasts offered by stunning mountains and modern city life. In winter, after a week of work you can escape into the mountains and go skiing. It only takes about 30 minutes to get to the Shymbulak ski resort. Or you can go ice-skating at Medeo Rink. The city is full of amazing places and nobody comes away unimpressed. Air Astana currently offers visitors to Astana and Almaty a Stopover Holidays programme. This includes transfers, accommodation and tailor-made tours. Moreover, for international transit passengers we offer USD 1 Stopover Holidays either in Almaty or Astana. This includes transfer, accom-

modation and breakfast. You can book directly via our website (www.airastana.com).

Asian airlines have set the global standard for in-flight service over the past decade. What can passengers on Air Astana flights expect? Air Astana is regularly recognized for its service excellence. At this year’s Skytrax World Airlines Awards event, we once again received a four-star rating together with “Best Airline in Central Asia and India” accolade. Air Astana has achieved this rating for the past five years, while winning “Best Airline Staff Service in Central Asia/India” for four years in a row. Nevertheless, we do not rest on our laurels. Air Astana has a young fleet and on 8 November we received a brand new Airbus 320neo, becoming the first airline in the CIS to acquire this new model. It is the first of 11 new planes including four A321 LRneos, for which we are the launch customer. As a full service legacy carrier, we offer standard baggage allowance, meals and drinks, with a wide selection of special meals that can be pre-ordered. Passengers enjoy entertainment onboard and amenity kits. We always pay special attention to younger travellers. Business class passengers can enjoy our business lounges. In flight, they can use iPads for IFE together with branded amenity kits and superior food and drink. We also have an innovative tool, MyUpgrade, for passengers who want to experience business class but have not enjoyed the opportunity so far. After purchasing a ticket, passengers can bid online for an upgrade through our website.

About the interviewee: Tomiris Tleubayeva is the Ukraine Country Manager for Air Astana 52

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real estate

How to avoid the home improvement blues in Ukraine Renovating a Ukrainian property can be a rewarding experience if you find the right partners Let’s say you bought an apartment in a Tsarist or Stalinka building in Kyiv, or perhaps an Austro-Hungarian-era apartment in Lviv. You did your technical due diligence of the building beforehand and, based on research (or gut instinct), you believe that your investment will benefit from future gentrification of the neighborhood. Now comes the fun part - renovating your antique apartment. This will entail not only financial investment, but also significant investments of your time, emotions and nerves. It will pay dividends if you know what to expect.

Working with designers and architects

If you decide to work with a local architect and designer, make sure that you convey your vision to them and check-in frequently to confirm that you understand each other, especially early in the process. Many Ukrainian architects and designers seem to have an affinity for putting in curves instead of straight lines (which would be more consistent with the style of older buildings in Kyiv and Lviv). Assembling a “mood board” can be a great way to share your vision with your designer and architect. This way, they will have a mounted collage that will serve as a reminder of the visual effect you are trying to achieve.

Finding the right specialists

Much like the rest of Ukraine’s real estate services sector, the home design and renovation industry is incredibly fragmented. In big cities like Kyiv it’s possible to find foreign-owned and operated firms that will do turn-key renovations, but you can expect to pay a high price for such services. Local companies vary widely in quality. Many companies can do more than one task but few do everything well. Connections between different workers do exist - your electrician might know a good painter - but it is not like the US, where an argument with one contractor puts you on a blacklist with all of the contractors in your area. Ukraine is a long way from having professional guilds, associations, and unions for tradesmen. Finding architects, designers, and contractors is something that your real estate agent, lawyer, or notary can often help you with. For expats (and those who understand English), Facebook groups, online forums, and expat clubs can also be good sources for recommendations. If your budget won’t allow you to use a turnkey design and building firm, then be prepared to carefully vet and monitor your contractor and laborers much more than you would in Western countries. While it might sound pessimistic, you will want to check that workers know the basics. Laborers are often just people picked up at the train station. This can mean that the man tearing down your plaster might not really understand that he is supposed to leave the cornices up. British expat Ashley found a local contractor for his Lviv renovation project by word of mouth. He was

fortunate that the man he hired worked with an architect and a team of builders. The contractor was able to deal with obtaining local permits, saving the owner considerable hassle. Ashley was impressed by the craftsmanship of the workers, who were able to replicate the original woodwork around the Austro-Hungarian-era doorframes and do an excellent job with the plumbing and flooring. The keys to this success were providing clear instructions to the workers, having a shared vision of the renovation among the whole team, and being hands-on and available every day after the renovation moved from the design stage to the gutting and rebuilding stages. If left to their own devices, builders may take the easy option (and often the cheaper option). When it came to sourcing materials for his renovation, Ashley found that it was best not to delegate everything to the local contractor. This way, you can avoid any mark-ups or cutting corners.

Building permits and utility connections

In Ukraine, you don’t need a building permit to start renovating your apartment if you don’t intend to change the planning (“planirovka”) by removing or moving walls, or somehow changing the overall layout. Otherwise, you will need to submit your plans and wait for approval. In Kyiv, the relevant body is the Kyiv City Bureau of Technical Inventory (BTI). If you do your renovation without approval from the BTI, then you could face hefty fines and/or problems when you sell the apartment. When dealing with BTI and similar authorities, you should prepare yourself well beforehand and demonstrate maximum awareness of the legal and construction aspects during meetings. Owners who hint at bribes for “expediting issues” can often create more headaches for themselves. You should budget for up to two months to receive approval from BTI, provided your renovation will not involve any work on your building’s facade or significant reconstruction within the building outside your apartment. In such cases, much more time will be required. For standard utility hookups, contact your utilities service center with an application and explain which services you require. The steps for standard connections are usually described on their websites. Expect the process to take a few weeks. Non-standard requests can often take several months and will require full understanding of the issue and your dogged persistence to force the local utilities to take action.

Fortune favors the romantic

Ashley in Lviv believes that a certain naiveté for first-time owners of apartments in historical buildings can be a prerequisite. “Restoring an apartment in an older building gives you the chance to live in luxury. But you need to love the architecture because there will be headaches and surprises. Apartments in these buildings can have an unpredictable cost of ownership. But for me the process has been well worth it.” Special thanks to James Hydzik and Anna Kryvenko in Kyiv and Ashley in Lviv for their contributions to this article.

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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Ukrainian agricultural industry

insurance innovation New insurance service to mitigate risk and boost agribusiness growth by encouraging investment Over the past three years of chronic domestic instability, Ukraine’s agriculture sector has been one of the bright spots on an otherwise troubling economic map. Agricultural exports have risen and global market share has expanded as Ukrainian farmers seek out new clients to replace traditional reliance on Russian buyers. An innovative crop insurance program launched in September 2016 by Credit Agricole Bank and partners now aims to maintain this momentum by reducing the risks faced by farmers and giving Ukrainian agribusinesses the confidence to invest in essential upgrades.

Insuring future Ukrainian agriculture growth

“Now is the right time to demonstrate to the market that the future has arrived,” says Credit Agricole Board Member Larysa Bondarieva. She sees the insurance initiative as a reflection of the renewed sense of confidence currently in evidence across the Ukrainian agriculture sector, and says it is very much in line with the France-based bank’s traditional focus on supporting market innovation. “Risks will always exist, but they can be mitigated. If agriculture companies have the added assurance of a guaranteed income at the end of the season, they will continue to invest. We want to insure the growth of investment in the Ukrainian agriculture industry.” Launched jointly by Credit Agricole Bank, IFC, Syngenta and AXA Insurance, this new insurance product offers coverage for wheat crops and marks an important expansion of the underdeveloped agro-insurance market in Ukraine. At present, the level of crop insurance in Ukraine is around 5%, compared to approximately 80% in the US, despite the fact that both nations are leading global wheat and corn producers. “The main reasons for this current difference include a previous lack of confidence in the limited number of available insurance products, and the negative experiences of many individual Ukrainian agricultural companies. Our goal was to create a really efficient insurance product that mitigates risks for both the clients and the bank,” explains Ms. Bondarieva.

Creating collateral confidence

Ukraine’s agriculture industry is currently attracting admiring glances from many within the international investment community, but it re-

mains a necessarily inexact science dependent on such notoriously unpredictable elements as crop failures and the weather. The country’s famed ‘black earth’ makes it one of the most attractive agricultural options on the planet, but the domestic infrastructure requires modernization before Ukraine can make the most of its international agribusiness appeal. Ms. Bondarieva believes innovation begins at home, and says offering credible insurance services is one way of bolstering internal investment in the Ukrainian agriculture sector. Credit Agricole’s experience in other international markets has shown that such services encourage local farmers to invest more in their own development, while also providing sources of financing with added confidence in the market. “One of the problems facing Ukrainian farmers is restricted access to capital due to limited collateral. Around half of agricultural equipment in Ukraine today is outdated – we cannot consider 30-year-old tractors as good collateral. However, if crops are insured, this makes the sector more attractive to banks while also protecting farmers.”

Support for SMEs

Improved agricultural insurance options will be particularly welcome among Ukraine’s agribusiness SMEs – a sector both Ukrainian Agrarian Policy Minister Taras Kutoviy and Ms. Bondarieva identify as a priority for the further development of the wider market. As if to illustrate the point, Ms. Bondarieva says many of Credit Agricole’s major multinational partners have asked how the bank can help support the growth of their local Ukrainian partners. “Small and medium-sized Ukrainian agricultural enterprises are often currently underfinanced,” she confirms. “We try to support their development as part of our broader efforts to contribute to every stage in the value chain.” This often means providing financing for infrastructure and equipment upgrades – a process that has gained noticeable momentum over the past eighteen months. Ms. Bondarieva says the Ukrainian agriculture market experienced an understandable freeze throughout 2014 and during the first half of 2015, but points to a significant subsequent upswing in activity. “There has been a return to optimism and a growing sense of confidence among Ukrainian agricultural companies since

“Risks will always exist, but they can be mitigated. We want to insure the growth of investment in the Ukrainian agriculture industry.”

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agriculture

About the interviewee: Larysa Bondarieva is Head of the Corporate Business and SME Department and a Member of the Board at Credit Agricole Bank in Ukraine summer 2015. We have started to see a greater readiness to invest and upgrade. Banks have also become more willing to take risks on Ukrainian agribusiness companies.”

Optimistic IT outlook

This sense of optimism is partially the result of attractive forecasts predicting a growing share of global markets for Ukrainian agribusiness companies. Speaking to Bloomberg in October, Cargill representative in Ukraine Martin Schuldt said that by the mid-2020s Ukraine could become the world’s number three food producer after the US and Brazil, while former US Ambassador to Ukraine Steven Pifer referred to the country as, “A big answer to the question of how you feed the world.” Ms. Bondarieva is in general agreement with these positive long-term assessments, and believes the challenging economic and geopolitical environment of recent years has actually played a key role in forcing Ukrainian agribusinesses to become more internationally competitive. “The difficult recent situation has pushed more and more Ukrainian agriculture companies to think about investing in upgrading equipment and has made them understand that they must diversify their markets globally,” she says. One of the most promising trends identified by Ms. Bondarieva is the growing role of IT innovation in the Ukrainian agriculture sector. “Our Ukrainian clients are very open to new technologies and are always studying the latest international innovations. The control centers at many Ukrainian farms now resemble space stations,” she reflects with a smile. This adoption of digital solutions owes much to Ukraine’s own November 2016

booming IT industry, with the process benefiting from the marriage of the country’s programmer and farming communities. “The innovative approaches we are seeing in the agriculture sector are often home grown, with an increasing number of in-house solutions created by Ukrainian IT specialists,” shares Ms. Bondarieva. “The stereotypes of old-fashioned Ukrainian agriculture have themselves become outdated. Agriculture now offers very attractive and interesting career opportunities for ambitious young Ukrainians. It is fashionable and offers Ukrainians the chance to build an appealing future.”

Breadbasket of the world

Like many specialists involved in Ukrainian agribusiness, Ms. Bondarieva sees the agriculture industry as one of the cornerstones of the country’s future economic growth, and says farming could play the same role for Ukraine as oil did for the Middle East in the second half of the twentieth century. While admitting that much more is required to promote Ukrainian agriculture as an international brand, Bondarieva says recent experiences at international business forums have convinced her that word of Ukraine’s legendary fertility is spreading to ever-wider audiences. “For the past 25 years we’ve been calling Ukraine Europe’s breadbasket, but I am now hearing this more and more often from other sources. During a recent forum in Paris, numerous representatives from the French business community said to me, ‘we know that Ukraine should be the breadbasket of Europe.’ This is real progress, but it is no longer only a question of Europe. Ukraine can now aim to become the breadbasket for the Middle East, Africa and Asia as well.” 57


agriculture

Ukraine could create unrivalled agri-tech empire IT wealth and black earth fertility make Ukraine a natural agri-tech cluster location According to a recent report produced by AgThentic, USD 9.65 billion has been invested in agri-tech start-ups worldwide since 2013, with over USD 4.6 billion invested in the past year alone. With some of the best farmland in the world, Ukraine has a land bank capable of feeding 500 million people. Ukraine is also recognized internationally for its technical human capital, boasting the fourth largest pool of IT specialists in the world. Accordingly, Ukraine is an ideal position to champion the development of disruptive agri-tech solutions, based on two wellacknowledged Ukrainian strengths: agriculture and IT.

Global agriculture superpower

Ukraine is fast gaining a reputation as a global agriculture superpower. This year the country is on track for another record harvest of over 60 million tonnes of grain and 17 million tonnes of oilseeds. Ukraine is now the number one global producer of sunflower seeds and oil, number two global exporter of grains, number three global exporter of corn and producer of barley, number four global exporter of barley, and number five global producer of corn. There is every reason to believe this strong performance will continue. Ukraine has one-third of the world’s fertile black earth “chernozem” soils and 32 million hectares of arable land. Compare this figure with the total EU-28 arable land bank of 105 million hectares.

Challenges remain

Even though Ukraine’s agriculture sector is booming, it is far from reaching its full potential. Ukrainian cereal yields per hectare stand at 80% of European Union averages and just 58% when compared to cereal yields in the USA. Ukrainian agriculture growth faces a number of key economic impediments. The main hurdle for farmers is access to credit. The lack of a functioning banking and leasing apparatus in Ukraine makes financing capital expenditure challenging. Between 2011-2013, Ukraine imported on average USD 618 million of agriculture equipment per annum. For 2014 and 2015, this figure halved to USD 308 million annually. However, agriculture equipment spare part imports reached record levels in 2015. This indicates a pent up demand for technological investment in the sector. Ukrainian farmers also receive little or no subsidies when compared to their EU counterparts. If Ukrainian farmers were to receive the same level of direct support enjoyed by German or French farmers, it would inject an extra USD 10 billion cash per annum into the Ukrainian arable farming sector. Ukraine can produce crops with unrivalled cost efficiency. Nevertheless, the price paid for grain loaded in Odesa is a world market price. Grain logistics costs in Ukraine average 40% higher than those in Germany and France, and 30% higher than the USA. This results in a smaller share of the world market price remaining with agricultural producers. To put these higher supply chain costs in perspective, if Ukraine could match the USA in Farm Gate

Prices vs World Prices, it would have resulted in an added farm gate value for wheat and corn of USD 1.4 billion in 2015. All of these factors create a greater impetus on planning and management within the sector, thereby enhancing the need for more timely information, analytical tools, and management systems.

Ukraine as agri-tech innovator

Ukraine should seek inspiration from other success stories globally where countries and regions have carved out their own technological niches on world markets. For example, eight of the world’s top 10 medical devices companies are located in Ireland, employing over 20,000 people and generating sales exceeding USD 6.5 billion annually. With a population of less than 100,000 people, the Galway region in Ireland is now Europe’s premier cluster of medical device companies. In Germany, the concept of clustering the chemical industry around 35 dedicated chemical parks helps make Germany the number one chemicals producer in Europe with over 25% of market share and USD 180 billion in export sales. In southeast Poland, an aerospace cluster in the so-called “Aviation Valley Cluster” has grown from 18 member companies in 2003 to 152 today, with employment growing from 9,000 to 24,000 people, including many high-skilled jobs. Ukraine should aim to advance the same goals through the promotion of an agri-tech cluster. Such an ecosystem would help advance the adoption of technical solutions, knowhow and services throughout the Ukrainian agriculture industry. It would also enhance the creation and commercialisation of early stage start-ups in agri-technology with the support of a dedicated seed-fund. It could help develop and incubate disruptive technologies through agri-tech incubators in universities. Ukraine is arguably the best country in the world to develop such an agri-tech cluster. Ukrainian farmers receive little or no subsidies. This creates a stronger economic need for Ukrainian farmers to adopt technological solutions that help advance productivity and efficiency on their farms. Ukraine has both the scale and capacity to develop solutions at a faster pace than others. With large farms needing to improve efficiency quickly, Ukrainians can test new solutions in numerous locations rapidly, thereby shortening the time from concept to commercialization. Ukraine also has the human capacity for such a bold undertaking. It has the fourth largest pool of ICT experts in the world, and despite having less than 1% of the world’s population, Ukraine boasts 6% of the world’s physicists, mathematicians and computational scientists. Working to create technology for agriculture may not sound all too stimulating for some. However, this may be shortsighted. At a time when leading technology companies like Google gain plaudits for developing self-driving cars, it is worth noting that farm tractor autosteering and self-guidance technology is already in use today on farms in over 100 countries worldwide. In general, agriculture is a lot more technologically advanced than one might expect. The timing and conditions are now right for Ukrainian entrepreneurs to advance this development further.

About the author: Tom O’Callaghan is a Director of Borsch Ventures (www.borschventures.com) responsible for Ag-Tech

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agriculture

Ukrainian agriculture needs to build brand confidence Investors still wary of Ukraine risks due to negative experiences and rule of law concerns In late October, Ukrainian agricultural companies were among the many to exhibit their wares at SIAL, the world’s largest food innovation exhibition held each autumn in Paris. More than seven thousand companies took part in the annual event, which brings together players from what remains the largest single industry in the world – the food industry. Of all the international events that Ukraine needs to target, this is arguably the one with the greatest strategic importance. Agriculture is currently the country’s biggest source of export revenues and by far the most attractive investment option. With Ukraine’s agricultural potential still significantly underexploited and a rising global population creating insatiable demand for foodstuffs, the rise and rise of the Ukrainian agribusiness sector is all but assured. Nevertheless, this event served as a reminder that much work lies ahead before Ukraine can hope to take up its rightfully prominent place on global food markets.

Group, which created a gorgeous ‘Meat Corner’ that stood out even in the company of many of the world’s top meat exporters. While these developments point to Ukraine’s growing awareness of the need to invest more into marketing the country’s agricultural opportunities to international audiences, conversations during the forum suggested that huge challenges remain.

SIAL is a forum that Ukrainians have been progressively discovering in recent years as the Ukrainian agribusiness sector becomes increasingly selfconscious about its huge potential as a worldwide grain basket. This mounting presence on the international stage also reflects the geopolitically driven need to find alternatives to Russian markets. This year’s event represented a landmark for Ukrainian participation – for the first time, Ukraine had its own national stand in the pavilion for international representations. Kudos for this breakthrough must go to the Kyiv Chamber of Commerce, which managed the Ukraine stand. A number of Ukrainian agribusiness enterprises were also present in an independent capacity at SIAL 2016, preferring to run their own stands in pavilions dedicated to their particular product lines. The most eye-catching and attention-grabbing Ukrainian presence came courtesy of MHP

One very important French vegetable oil industrialist, who is also a key representative of the French farming industry as a whole, spoke to me frankly about the quality concerns he has regarding Ukrainian produce. “We have only just managed to resolve the problems created a few years ago by the delivery of contaminated sunflower oil,” he explained. “Now we find ourselves facing a new problem due to a cargo of sunflower oil that does not meet the necessary standards and differs from the tests conducted before freight transfer. How can we feel confident?” Numerous high-profile forum participants shared this sense of scepticism. A potential buyer who is very interested in organic sunflower seeds (the EU currently has a huge deficit and is looking for additional imports) commented on his reluctance to purchase from Ukraine: “I fear we will have a repeat of our experience in recent years, when we received a delivery of products with falsified certification.” Another Western company exploring the possibilities of purchasing organic fruit from Ukraine

Ukraine’s rising international profile

Lack of confidence in Ukraine

voiced similar concerns. After speaking to many professionals at the event, the consensus was, “We need to have more confidence before we start investing in Ukraine. First and foremost, we need to have confidence in the rule of law.”

High price of a bad reputation

During the SIAL opening ceremony, the president of the fair, Jean Philippe Girard, concluded that the greatest challenge for next twenty years is to support sustainable development while improving confidence between farmers, industrialists, distributors and end clients. Confidence is the first step towards increasing investments, he stressed. Based on his own personal experience, he invited Ukrainian visitors and participants to focus on improving the rule of the law. This is clearly advice that Ukrainian agribusinesses would be foolish to ignore. Mr. Girard’s comments reminded me of one of the key messages in Nobel Prize-winning economist Jean Tirole’s most recent book: “The collective reputation is a public good for the entire community. An individual has lower incentives to behave well if his community has a bad reputation. It is better to avoid a bad reputation at all costs because it becomes self-fulfilling.” Confidence and transparency are growth drivers. Sustaining both should be the priority for Ukraine’s elite, in both business and government. Ukrainian agriculture has almost boundless potential, but negative international perceptions and a lack of trust continue to serve as major obstacles to fulfilling this potential.

About the author: French agro-economist Jean-Jacques Herve (jj-am.herve@wanadoo.fr) has been working in Ukraine for more than ten years. He was a councillor to the government for agriculture from 2005 to 2008 before joining Credit Agricole Bank to develop the financing of the farming sector in Ukraine. He now runs independent agricultural consultancy business AgriAudit JJ and has a special interest in supporting cooperatives.

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CURRENT INVESTMENT OPPORTUNITIES Medical Services Company

Production of original accessories for home and garden

Sector: Healthcare Region: Kyiv Stage: Expansion

$400,000 / 25% equity

Description: Providing medical services for insurance companies Delivery of medicines from insurance companies Sales of medicines and drugs via private pharmacy chain About 70% of the investment will be channeled into inventories to increase delivery sales. The other 30% will be absorbed for purposes of launching new sales points.

Agricultural company 2 000ha of land and quail farm

Sector: Agriculture Region: Chernihiv region Stage: Fully functioning business

Sector: Production of metal products Region: Kyiv Stage: Expansion

$150,000 / debt financing, interest rate 25% in local currency and 15% in foreign currency

Description: The company has produced home and garden metalwork accessories under private TM for 7 years. The major product groups are for the support of plants: stands for flowerpots and balcony baskets; brackets and shelves for cachepots; garden furniture; hangers and hooks for clothes; souvenirs, as well as various technical elements (parts for medical equipment and furniture) Restoration of production facilities after fire Increasing supplies for the local market in retail chains and specialized stores (garden centers, florists and decor shops, furniture stores etc.) Entering the Baltic-Nordic market through the SENUKAI trade network (160 stores in Lithuania, Latvia, Estonia, Finland, and Belarus)

Mill complex

$2,000,000 / 100% equity

Description: Land bank of 2 000ha under lease agreements for 15 years until 2022-2024 Barnyard (8,12ha) Quail breeding: incubating-brooding- hatching — raising pen-brood stocking — poultry slaughter — cooling — Packaging of eggs and meat A complete set of agricultural machinery including freight transport, special purpose transport, cars, and other agricultural machinery Warehouses for 1,000 tons of grains; asphalt barn floor with roofing; grain cleaning complex BSH-50 and intake pit; computerized weighing station with scales for 20 and 60 ton freight forwarders

Sector: Agriculture Region: Chernihiv region Stage: Fully functioning business

$1,200,000 / 100% equity

Description: Wheat meal with a production capacity of up to 50 tons per day Rye mill — production capacity of 12 tons per day Packaging line — 10 tons per day Certified laboratory The complex has well-established system of raw materials procurement and sales of products that ensures a rapid return on investment and profits The production base is 50 meters from the feeder railroad The land plot of 1,644ha is in permanent use Production space of 1 008 sq.m. (with heating), warehouse of 770 sq.m., administrative and accommodation two-storey building of 576 sq. m. Utilities (gas, electricity, and water)

Contacts: 24 Starovokzalnaya St., Kyiv, 03150, Ukraine Tel.: +38 067 713 65 71; +38 067 354 01 75 Tel.: +38 044 223 39 71 E-mail: ib@inventure.ua Web: http://inventure.ua Web portal: https://inventure.com.ua

InVenture Investment Group is an experienced partner with a proven track record in the Ukrainian Private Equity and Venture Capital market. InVenture Investment Group offers a range of services including investment finance support, M&A advisory services in a range of industries, development and implementation of investment strategies, and private banking.


Kyiv Marks Beaujolais Noveau Arrival in Style

Fans of French wines gathered at the InterContinental Hotel in Kyiv on 18 November for the traditional annual Beaujolais Nouveau evening. The event was hosted by French Ambassador to Ukraine Isabelle Dumont and was organized by the French Chamber of Commerce in Ukraine, which brings together more than 110 French companies operating in Ukraine. This fun networking evening also had a charitable dimension, with almost UAH 300,000 raised to support French Red Cross efforts to aid families displaced by the Russian Hybrid War in eastern Ukraine. With special thanks to event sponsors Credit Agricole Bank, Limagrain, MaĂŻsadour, Mazars, Auchan and Lactalis.

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Members of Ukraine’s international community gathered at downtown Kyiv hipster

haven the Pinchuk Art Centre in late Novem-

ber for a special evening focusing on DanishUkrainian relations entitled, “Fryday W:

networking events

Danish-Ukrainian Relations in Focus

Denmark’s Engagement in the New Ukraine.”

Danish Ambassador Christian Dons Christensen spoke of Denmark’s efforts to assist Ukraine in the battle against corruption and

to promote trade and investment. Guests enjoyed the opportunity to converse with the

Ambassador and discuss bilateral ties. The evening featured a prize raffle with guests

receiving some great prizes donated by generous Danish event partners.

November 2016

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Colorful Cossack Fun in Autumnal Kyiv Ukraine’s international community donned their vyshyvankas and celebrated their love for Ukraine at a

fun themed networking evening in late November. The ‘Cossack Night’ event was organised by networking community Fryday Kyiv and traditional Ukrainian restaurant Korchma Taras Bulba. Members of local

American football team The Kyiv Patriots, along with their charming cheerleading counterparts, felt they

could not pass up such an opportunity to show their passion for Ukraine. Guests enjoyed traditional Ukrainian music from the Virsky Ensemble along with a healthy selection of national Ukrainian cuisine and mas-

terclasses in the art of creating verenyky. Follow Fryday Kyiv on social media for more information on the best parties and themed events in the Ukrainian capital.

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networking events

TUCC Gives Belmondo Restaurant a Five-Star Review The Ukrainian Connoisseurs Club (TUCC) gathered at Belmondo restaurant in down-

town Kyiv in early November to sample the venue’s French cuisine. “We were enchanted by a menu featuring all the core favourites of typical French cuisine including fois gras,

frog’s legs and duck - but no snails! Everything was cooked to perfection and presented in style by the young and very talented chef Alexey Baranov,” commented TUCC Presi-

dent Terry Pickard. This fine dining came accompanied by a selection of French wines served with each course and presented by the venue’s sommelier Alexander. Mean-

while, mineral waters Perrier and Vitel came courtesy of event sponsor the Pilsner Company. “We are sure nobody will be surprised to learn that when we totted up the score November 2016

sheets the next morning, Belmondo earned a five-star rating,” confirmed Mr. Pickard.

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Will Putin ever face justice for Ukraine war? International Criminal Court acknowledges Russian aggression in Ukraine but no trial on horizon A landmark report issued in mid-November by the International Criminal Court in The Hague classified the war in eastern Ukraine and the occupation of Crimea as international conflicts between Russia and Ukraine. The findings are a major blow to the Kremlin, which has long denied any direct military role in Ukraine. Immediately after publication of the report, Russia announced its withdrawal from the ICC, saying the court had, “failed to meet expectations to become a truly independent, authoritative international tribunal.” Ukraine has vowed to continue pushing for ICC prosecutions over Russian war crimes in Crimea and the Donbas region of eastern Ukraine, but the Kremlin’s decision to distance itself from the international body makes the prospect of any future war crimes trial highly unlikely. Nevertheless, the ICC report represents one of the most credible confirmations to date of Russian responsibility for the bloodshed in Ukraine. While it may not pave the way for the spectacle of Vladimir Putin on trial in The Hague, the report raises serious questions over Moscow’s role as a mediator in the peace process, and shatters the Kremlin’s hybrid war façade of plausible deniability. The Hague’s findings are the latest setback for Moscow as it scrambles to defend its increasingly Kafkaesque claims to non-combatant status in the Ukraine conflict. In September, a Netherlands-led international investigation into the July 2014 downing of flight MH17 over eastern Ukraine declared Russia the guilty party, while in November the United Nations General Assembly voted to recognize the Russian military occupation of Crimea. Business Ukraine magazine spoke to prominent Russian political commentator Slava Rabinovich about the possible implications of the ICC report. What will it mean for the conflict in eastern Ukraine, and what impact could it have on Kremlin hopes of securing a thaw in relations with the incoming Trump White House? The International Criminal Court (ICC) recently concluded that the annexation of Crimea constituted an international armed conflict between Russia and Ukraine. However, Moscow does not recognize the authority of the ICC. Does this render the ICC findings purely symbolic, or could the report have any legal implications for Russia? A criminal clan has seized power in Russia and turned the entire country into a personal fiefdom where they are able to control all natural and human resources like medieval lords. At the same time, they also control one on the largest nuclear stockpiles in the world. This is an unprecedented situation and nobody really knows how things will develop in future. Nevertheless, it is important to remember that neither Slobodan Milosevic, nor Saddam Hussein, nor Nicolae Ceaușescu could ever have imagined they would go on to face their own trial. Personally, I think there is a good chance Putin will eventually have to face justice for all the crimes he has committed both in Russia and abroad. The ICC report also pointed to direct Russian military involvement in eastern Ukraine. As evidence of the Russian army role in eastern Ukraine continues to mount, will we reach a point where 66

About the interviewee: Slava Rabinovich is the CEO and CIO of Diamond Age Capital Advisors and a well-known Russian political commentator. the Kremlin drops its denials and seeks to justify its military intervention? I do not believe that the Kremlin will ever consider reversing its current policy of denials or try to justify intervention. Nor will Russia dare to launch a full-scale military offensive. The Kremlin sees the conflict in the Donbas as a war against the West as a whole that is being fought on Ukrainian soil, and they understand perfectly well that it can no longer be won. In fact, in a very literal sense, they appreciate that the war has already been lost. Nevertheless, they will not surrender. Instead, we can expect a continuation of the current hybrid efforts to create as many problems for Ukraine and the West as possible. One of the key objectives is to secure as advantageous a position as possible for future negotiations. They are already pondering how to retreat from Ukraine, but they will never publicly admit their involvement in the war because this would significantly increase the likelihood of international prosecution.

Regardless of the realities on the ground, Russian diplomacy has traditionally advocated the need to uphold international law. To what extent has the war in Ukraine forced the Kremlin to change this stance? It is completely transparent to anybody who is not under the direct influence of Russian state propaganda that the Kremlin’s mantras about the sanctity of international law have exactly the same value as Hitler’s earlier pronouncements. The Kremlin knows this but continues to behave as if everyone it interacts with is a complete idiot. I personally think the real idiots in this case are the people sitting in the Kremlin who are behaving in this manner. All those bold statements about Russia upholding international law are nothing but an attempt to deny the obvious. I find it comical when representatives of the self-styled Russian liberal media from outlets like ‘Echo of Moscow’ try to depict Putin as a stickler for legality. These commentators do not appear to understand how ridiculous the Kremlin looks whenever Russian officials try to portray themselves as advocates of international law. www.bunews.com.ua


Will the ICC report make it more difficult for the incoming Trump administration and pro-Putin forces within the EU to push for a thaw in relations with Russia? I think a thaw in bilateral relations between the US and Russia is theoretically possible if Russia changes its own behavior. However, there is very little chance of this happening. The ICC report identifying Russia as the aggressor in Ukraine will not have any major impact on the situation one way or another, because the framework for bilateral cooperation between Trump and Putin is already clear. This framework will remain relatively narrow regardless of whether Trump seeks to pursue his personal vision for a new relationship with Russia. Even as US President, Donald Trump will find that he is constrained by a sophisticated system of checks and balances. A

quick look at the candidates to serve in the Trump administration also makes me doubt that there will be much in the way of common ground for friendship between Vladimir and Donald. Russian policymakers regard most of the people under consideration for the Trump White House as hawks or even outright Russophobes. Trump as president is also likely to be a very different proposition to Trump on the campaign trail. Once he takes office as US President, Trump will have a range of tools at his disposal to influence Russian policy. Taking into consideration his psychological profile and personality type, I think it is reasonable to expect him to take full advantage of this. Coming back to your question, the ICC report has not transformed the situation but does make others even more wary of engaging with Russia. There has been a strengthening of the international position towards Russia in recent weeks, leading to a number of statements, resolutions and decisions targeting Putin’s regime. As well as the ICC report, the United Nations General Assembly voted to recognize the Russian occupation of Crimea. New names have appeared on the sanctions lists. All these measures are part of efforts by the outgoing Obama administration to hem President Trump in and reduce his wriggle room in dealing with Russia. At this stage, a major thaw in US-Russian relations seems even more unlikely than a war crimes trial with Putin in the dock.

interview

How has Russian public opinion responded to the ICC report? Does the Russian public genuinely believe Kremlin denials of a Russian military role in Ukraine, or do they merely regard these denials as a necessary deception? This question is very easy to answer, because 99% of Russian state TV channel viewers do not have the slightest idea about the ICC report. They cannot have an opinion about something they know nothing about. Those few people who do know about this report represent such a small percentage of the population that they fall within the statistical margin of error for any opinion poll. In reality, in today’s Russia there is no such thing as public opinion in the Western sense – just state propaganda.

About the author: Fedor Klimenko is Editor of The Russian Monitor (rusmonitor.com)

November 2016

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society

Life in the Gray Zone Residents of frontline towns like Svitlodarsk do not quality as IDPs but feel full brunt of conflict There are few things more endearing than watching a pensioner double over with hearty laughter. It makes you forget that Svitlodarsk is located in the gray zone, approximately 12km from the contact line separating Ukrainian and separatist controlled territory. Life in this virtual no-man’s-land continues, but the plight of residents is often overlooked by the outside world. According to the United Nations Office for the Coordination of Humanitarian Affairs (UN OCHA), as of 18 October 2016, 3.1 million people in Ukraine are in need of humanitarian assistance. 1.7 million are officially registered as internally displaced persons (IDPs). Meanwhile, an estimated 800,000 conflictaffected people live in “gray zones” along the highly militarized and poorly served contact line. These people are among the most vulnerable in Ukraine. Many are not IDPs because they never left their homes. Civil society organizations such as the Right to Protection (R2P) play a critical role in sustaining life in these areas by providing aid and services to these people every day.

A day in the life of Svitlodarsk

In early November, I accompanied an R2P community assistant in North Donetsk, shadowing her as she accomplished her daily tasks. R2P’s 40 community assistants, who are often displaced persons themselves, work at the grassroots level with IDPs and conflict-affected populations in Dnipro, Kharkiv, Zaporizhzhia and government controlled Donetsk and Luhansk regions to help address their everyday problems. We set off from Sloviansk at 8am. Sloviansk is 100km north of the city of Donetsk. It is small and safe. To see the city today, you would never realize that on 12 April 2014, Sloviansk was the first city to fall to Kremlin-backed separatists under the command of Russian citizen Igor Girkin (aka “Strelkov”). Ukrainian authorities liberated Sloviansk in early July 2014.. After passing Bakhmut (formerly Artemivsk), the road becomes noticeably bumpier, even by Ukrainian standards. As we draw closer to the contact line, we pass abandoned pillboxes, destroyed dachas, and checkpoints fortified with anti-tank spikes. Machines of war lie in wait. The Svitlodarsk bulge still sees combat sometimes, as do many places along the contact line. Svitlodarsk is strategically important because it is home to a huge power plant. On one side of a beautiful artificial lake lies the town of Svitlodarsk itself. The plant is on the other side. Svitlodarsk literally means ‘creator of light’, which is a great name for a power plant city. The population of Svitlodarsk do not qualify as displaced for the simple reason that they never left. Nevertheless, the conflict-affected population often has as great a need for support as IDPs from the nearby socalled Donetsk and Luhansk National Republics. As we enter the town, it is striking how ordinary Svitlordarsk seems. The town is green and full of life. People go about their daily routines much as they do elsewhere in provincial Ukraine. The facilities look on par with those of similar Soviet-era towns. Although much

war damage has been repaired, evidence of the conflict remains. The town was heavily shelled. A resident shows me the ruins of her garage. Metallic scraps of the Grad rocket that hit it are still visible on top of the rubble pile. Housing, land and property (HLP) issues constitute a major need throughout eastern Ukraine. In this respect, Svitlodarsk is entirely typical. The highlight of the trip is a visit to the pensioners’ clubhouse. The room contains pensioner-made crafts, clothing pin designs, drawings, needlework and more. The ringleader is an adorable ethnic Russian of about 70 with short light brown hair, almond eyes, a few gold teeth and a contagious laugh. She moved to Svitlodarsk from Siberia about 45 years ago and used to operate heavy machinery at the local power plant. Although I cannot understand her very well, the positive energy she exudes makes the clubhouse a place you just don’t want to leave. One of the pensioners gives me one of her origami-like masterpieces. It is currently displayed in my office, directly to my left as I write this account. This pensioner never left Svitlodarsk, even during the heaviest fighting. Her eyes fill with tears as she tells me how the windows in her flat were blown out and she was left without utilities for days. Support for this community is limited. R2P provides legal awareness raising sessions to local pensioners along with individual legal advice. Other organizations provide community-building activities. Although providing these pensioners with crafts is not a lifesaving form of aid, it raises their quality of life tremendously by providing a vital social outlet.

Ukraine’s forgotten victims

The most surprising aspect of my visit was the seeming normalcy of Svitlodarsk. Life goes on in the gray zone and these communities persevere despite facing numerous daily challenges stemming from their physical proximity to the contact line. In particular, infrastructure, freedom of movement, access to social payments and services, and preparation for winter are among the most acute issues in the gray zone. Although providing services to vulnerable gray zone communities like Svitlordarsk is a key priority for Ukrainian civil society, more resources and attention are required to make life function as it should for those who remain.

About the author: Stuart Linder (S.linder@r2p.org.ua) is a development officer with the Right to Protection (r2p.org.ua) which works in partnership with global refugee aid NGO HIAS.

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Afro-Ukrainians

After Euromaidan Did Ukraine’s Revolution of Dignity succeed in making national identity more ethnically inclusive? Ukraine’s 2014 Revolution of Dignity has been widely hailed as a watershed moment for the country’s evolving sense of national identity. The revolution itself, together with the consequent Russian hybrid assault on Ukraine, are said to have sparked a fundamental reassessment of what it means to be Ukrainian. As a result, narrow definitions of Ukrainian identity rooted in linguistic and ethnic interpretations have given way to a broader civic understanding that embraces people from a far wider variety of backgrounds – at least in theory. This narrative is heartwarmingly multicultural, but does it extend to often overlooked minority groups like the country’s Afro-Ukrainian community?

Multicultural for centuries

Ukraine has been a multicultural society for hundreds of years. As one of the world’s great borderland regions connecting Europe, the Middle East and Eurasia, Ukraine has always been a crossroads land that organically embraced the concept of multiculturalism centuries before it became fashionable in the West. It is a place where Poles, Russians, Armenians, Jews, Georgians, Greeks, Tatars, Turks and a host of other national groups enjoy ancient histories and have each left their imprint on the country’s collective folklore. Ethnic Ukrainians have always played a prominent part in this cosmopolitan cultural mosaic, but due to the absence of a sovereign Ukrainian state until 1991, there has been a long-standing tendency to see Ukrainian national identity exclusively in terms of language and ancestry. As a result, many of the people who became Ukrainian citizens in 1991 did not necessarily self-identify as Ukrainians. In this context, even terms like ‘ethnic Russian’ and ‘ethnic Ukrainian’ can be seen as misleading, given the high levels of intermingling over the centuries in what has always been one of Europe’s great gateway regions.

Post-Soviet identity crisis

Ever since the collapse of the Soviet Union, the fledgling Ukrainian state has struggled to find the right formula for a national identity capable of uniting all segments of society. In a young and diverse country trying to reinvent itself as an ancient nation, attempts by the state to support the Ukrainian language and rehabilitate key figures from the Ukrainian liberation movement often proved counter-productive. Politicians on all sides did not help matters by exploiting existing regional and inter-generational divisions within post-Soviet Ukrainian society for short-term populist gain. Meanwhile, the chronic corruption of state structures and the absence of a coherent national narrative alienated large swathes of the population and left others apolitically indifferent. The upheavals in Ukrainian society since 2013 have radically altered this picture. The Euromaidan Revolution energized the debate over Ukraine’s place in the world, while Russia’s subsequent hybrid attack propelled the issue of national identity to the very top of the national agenda. As the Kremlin offen70

sive unfolded in early 2014, millions of Ukrainian citizens found themselves having to make some fundamental choices. Did they want to remain part of Ukraine? Was this, in the final analysis, their country? Perhaps unexpectedly, the answer to both these questions was an overwhelming ‘yes’.

Russian-speaking Ukrainian patriots

The Kremlin’s hybrid war tactics depended on significant support from the local population, but this largely failed to materialize. Instead, Russia found itself forced to import its own insurgents while scaling down its imperial ambitions. Grandiose plans to occupy half the country ended up netting less than 5% of the Ukrainian mainland. Rather than answering the clarion call of the Kremlin, tens of thousands of Russianspeaking Ukrainians from regions targeted by Putin’s hybrid campaign chose to sign up for the Ukrainian Armed Forces or join the many patriotic volunteer battalions hastily formed to save the country. This popular resistance of 2014 has all the makings of a national foundation myth. It saw everyone from Orthodox Jews to Crimean Tatar Muslims standing shoulder to shoulder in defence of Ukraine. The frontlines resembled wider Ukrainian society in microcosm, with Ukrainian and Russian languages used interchangeably and little thought given to oversimplified and unhelpful definitions of ethnicity. This unexpected wave of Ukrainian patriotism was to prove decisive in stemming the tide of Putin’s hybrid attack. Many commentators believe it also marked a turning point in the search for an inclusive Ukrainian national identity. Ever since the pivotal events 2014, the idea of Russian-speaking Ukrainian patriots no longer seems paradoxical. Instead, there is a growing understanding of Ukrainian identity in a civic sense, embodying notions of patriotic pluralism and European democracy. Today’s Ukraine has never been more self-consciously multicultural. The country has a Jewish Prime Minister surrounded by a Cabinet drawn from an array of religious and linguistic backgrounds. Ukraine’s Eurovision Song Contest-winning diva Jamala is a Crimean Tatar and a Muslim. Foreign nationals serve throughout government and manage key stateowned enterprises. The man whose Facebook post is widely credited with sparking the Revolution of Dignity is himself an Afghan immigrant. This is the diverse Ukraine that few outside the country are familiar with, and one that flatly contradicts attempts to depict post-Maidan Ukraine as a hotbed of nationalistic intolerance. Nevertheless, today’s Ukraine continues to face enormous social issues relating to race, religion and sexual orientation. Violence and discrimination against ethnic and sexual minorities remains an everyday concern that critics feel the government is failing to address. As the country marked the third anniversary of the Revolution of Dignity, Business Ukraine magazine spoke to members of the Afro-Ukrainian community to see how they felt about the broader changes taking place in Ukrainian society. : www.bunews.com.ua


society

Afro-Ukrainians Helen Sanogo, Gabriella Massanga, Victoria Olize, and Kristina Agu

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:

Tangible changes Glamorous Gabriella Masanga is probably one of the most recognizable faces among the Afro-Ukrainian community. A former catwalk model, she currently works as a TV presenter and is best known for hosting the daily weather forecast on 5 Kanal. “The changes in society are tangible,” she says. “The revolution has ushered in a new understanding of what it means to be Ukrainian. People are now much more actively engaged in the nation-building process and there is more openness in society. I can still remember the communist-style rigidity and passiveness that was common when I was growing up. This lingered on after the fall of the Soviet Union, but we are now seeing a major transformation.” Ms. Masanga claims she does not personally encounter racism in her everyday life, but says there is still a novelty factor associated with being AfroUkrainian and admits this can often generate unwanted and unflattering attention. “When I am out in public, I often get the sense that am I am an object of fascination because I stand out. Strangers will ask me where I come from, while people are regularly amazed to hear me speaking perfect Ukrainian!” This sense of otherness is perhaps understandable. While exact statistics are not available, the Afro-Ukrainian community ranks among Ukraine’s smaller minority groups. It traces its roots back to the Soviet Union’s courtship of post-colonial Africa, which saw tens of thousands of young Africans invited to study in towns and cities across the USSR from the late 1950s onwards. Kyiv-based Nigerian Dr. Johnson Aniki is the Head of the African Community in Ukraine. He has been living in the Ukrainian capital for more than two decades after first arriving in the country during the twilight years of the Soviet era. “We have no official figures, but I would estimate the size of the Afro-Ukrainian community at more than 10,000 nationally,” he says. Dr. Aniki has noted a significant improvement in race relations within Ukrainian society over the past few years. However, he attributes this process to a combination of government efforts and greater social awareness in the run-up to the Euro 2012 football championship, rather than the unifying effects of more recent upheavals. During the buildup to Euro 2012, international media coverage focused on an alleged far-right threat to ethnic minority fans visiting Ukraine. The negative attention even led to some calls for a boycott, but the championship was a huge success, with no major incidents of racial of xenophobic violence. He believes the negative coverage forced Ukrainians to confront the issue of racism and helped foster greater tolerance. Dr. Aniki sees a positive contrast between the relatively accepting attitudes he encounters in today’s Ukraine with the rising tensions of the earlier post-independence years. “In Soviet times, racial abuse was a major taboo due to the dominant political philosophy of internationalism, but after the collapse of the USSR, attitudes changed. The poverty of the early post-Soviet years was a major factor fuelling hostility towards foreigners.” He identifies the mid-2000s as the lowest point in Ukrainian race relations. Skinhead movements were on the rise in much of Ukraine at the time, and escalating violence against ethnic minorities eventually led to a number of deaths. “Racial hatred was a deadly threat – not just to Africans and Afro-Ukrainians, but also to other ethnic minorities including Arabs, Chinese, Indians, and Vietnamese.” This wave of violence led many embassies to issue specific security warnings advising members of ethnic minorities to exercise extreme caution and avoid many public places. The deteriorating

situation sparked considerable international condemnation but many felt Ukraine’s reaction was inadequate. Dr. Aniki remains highly critical of the government’s failure to respond sufficiently to the challenges posed by skinhead violence, but says relations with law enforcement organs have improved considerably over the intervening decade. Incidents like the attacks on black supporters during a 2015 Dynamo Kyiv Champions League match serve as reminders of the challenges Ukrainian society continues to face in confronting racial hatred, but Dr. Aniki classifies the current situation as more or less “peaceful coexistence”.

Ukraine must seize post-revolutionary opportunities

Twenty five year old Kharkiv-born Afro-Ukrainian musician Victoria Olize shares Dr. Aniki’s broadly optimistic prognosis for Ukrainian race relations, but feels the government could be doing much more to confront negative attitudes and damaging stereotypes in society. “There should be no sacred cows. Social and racial prejudice of any kind cannot be taken lightly. The government needs to work with the mainstream media proactively to promote ideas of inclusiveness throughout society,” she offers. Ms. Olize says she has noticed signs of significant shifts in Ukrainian society since Euromaidan, but is cautious of reading too much into the situation at this relatively early stage in the process. “The changes taking place in Ukraine need to be handled with care. Change is good in any society as long as it is sincere and brings people of different backgrounds together. The revolution has created an opportunity for all Ukrainians to come together, which is obviously a good thing, but we cannot take positive change for granted.” Fellow Kharkiv native Kristina Agu is part of the new generation of postSoviet Afro-Ukrainians. The seventeen year old has come of age at a time when many of her fellow Ukrainians are also discovering their sense of identity against a backdrop of political turmoil and conflict. Like many of the younger generation of Ukrainians, she embraced the Euromaidan movement. She speaks of the protests as the birth of political consciousness among many of her peers, and remains enthusiastic about the evolving identity debate currently taking place in the country. Ms. Agu singles out the formation of the Patrol Police service as the most striking street-level change in post-Maidan Ukrainian society. This is partly due to her own negative encounters with racial harassment involving members of the pre-revolutionary Ukrainian police force. “The reform of the police has been a particularly welcome development since Euromaidan. The police now play a more constructive role in society. As a little girl, I can remember witnessing the police brutally harassing African market traders in Kharkiv without any apparent concerns for due process. Today’s police are much friendlier and more positive.” Kyiv restaurant guest manager Helen Sanogo spends her working days mixing with a wealthy international clientele that includes many of Ukraine’s high rollers. She says her Afro-Ukrainian background has helped her to feel comfortable in any company, and argues that Euromaidan has helped Ukrainian society to become similarly inclusive. “The revolution has led to new attitudes towards Ukrainian identity,” she says. “Ukrainians now have a greater sense of unity and solidarity, irrespective of ethnic background.” Ms. Sanogo believes this shift in thinking is partly down to the recognition that in these turbulent and historic times, all Ukrainians share a common fate, no matter what their ethnic or religious backgrounds may be. “We all realized that we have no other country.”

About the author: Cosmos Ojukwu is a Kyiv-based Nigerian journalist who has been covering Ukrainian affairs for more than a decade

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opinion

Time to debunk the myth of a Ukrainian nationalist menace

The election of Donald Trump is the latest indication that the post-Cold War globalist consensus is over. We are now entering a new era of anti-establishment populism. Trump’s triumph is part of a broader pattern across the Western world characterized by the rise of anti-immigration, nativist parties that until relatively recently would have been considered part of the far-right fringe. The mainstreaming of people like Marine Le Pen and Geert Wilders, coupled with the Brexit referendum victory, all point to a broad and sweeping shift of the political middle ground towards the nationalist right. This sea change in the political mood throughout the developed world puts Ukraine’s own alleged ‘nationalist menace’ into perspective. For the past three years, narratives warning of a Ukrainian nationalist threat have been promoted by the Kremlin and embraced by many in the international media. Such assertions are directly at odds with the available electoral evidence on the ground. Since the 2014 Revolution of Dignity, the Ukrainian political arena has indeed witnessed the arrival of numerous new nationalistic parties. However, not one of these parties has emerged as a serious contender. Opinion polls consistently place collective support for all of Ukraine’s nationalist parties at between six and eight percent. This tallies with the results of the autumn 2014 parliamentary election, which saw all nationalist political parties fail to pass the five percent threshold. Compared to the rest of Europe, where it is now commonplace for nationalist parties to win upwards of a

Fascist threat? Ukraine’s post-revolutionary national awakening has sparked scare stories about the rise of far-right extremism in the country, but in reality nationalist political parties enjoy far less support in Ukraine than they do elsewhere in today’s Europe. quarter of the vote, support for nationalist parties in Ukraine is actually strikingly low. Given the circumstances, this is particularly noteworthy. Ukrainian society is currently in the midst of a post-revolutionary national awakening while also engaged in what many regard as a war of independence against Russia. If nationalism cannot flourish in such a frenzied environment, you have wonder what all the fuss is about. Much of the hype over Ukrainian nationalism can be directly attributed to Russian information attacks, but this is only part of

the picture. It is also crucial to recognize the role played by Ukraine’s previously low international profile and relatively recent emergence from obscurity. After decades of regarding Ukraine as part of Russia, it is only natural that many outside observers are ready to perceive unexpected expressions of Ukrainian independence as somehow extremist in nature. In reality, Ukraine is probably among the least nationalistic nations in today’s Europe, but it may be some time before this message reaches the international mainstream.

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Profile for Business Ukraine magazine

Business Ukraine November 2016  

Business Ukraine November 2016  

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