Sending law enforcement officers in balaclavas armed with Kalashnikovs kicking down a company’s office door in a frantic search for financial records or tax documents is quite possibly the worst message a government can send to business owners, shareholders or executives. This is what I told President Petro Poroshenko a couple of years ago in a hall packed with five hundred business leaders during one of his regular meetings with the international business community. Consequently, parliament introduced new legislation curtailing the brutality of business inspections. These dramatic raids on business are now all but a memory of the low points that investors faced while doing business in Ukraine years ago. Many reforms have been introduced since 2015, and Ukraine has started reappearing on investors’ radar screens. However, foreign direct investment (FDI) remains too small, around 2 percent of GDP.
As Ukrainians prepare to elect their next president later this month, whoever wins, either Poroshenko or newcomer Volodymyr Zelenskiy, he will need to focus on attracting FDI. Though the president bears responsibility for the nation’s defense, foreign policy, security service, and prosecution service, he should play a key role in attracting investors to launch their operations or manufacturing in Ukraine. Especially since both candidates are successful businessmen, the next president should watch closely that investors are welcomed and treated well.
I hear numerous success stories of businesses profitably operating in Ukraine, something that I learn day after day when speaking with our members. In March, I visited Uzhhorod, a city 500 miles west of Kyiv, for a factory expansion opening by Jabil, a global manufacturing services company headquartered in Florida. The company employs 177,000 staff globally, with 3,300 in Uzhhorod, one mile from the EU border with neighboring Slovakia. Jabil Ukraine makes hundreds of thousands of Nespresso coffee machines, those same machines advertised by actor George Clooney and sold around the world. A stone throw’s away from Jabil stands the Yazaki factory, a global automotive parts supplier. The plant produces cable harnesses for the new all-electric Jaguar I-Pace electric crossover SUV. In neighboring Mukachevo, Flex, an American multinational technological manufacturer, has a workforce of more than 3,000 people manufacturing consumer electronics that are exported around the globe.
The business community in Ukraine knows what to expect with another five years of a Poroshenko presidency. If reelected, it will likely be a business as usual approach.
We know much less about Zelenskiy. Although he is a household name, a highly talented TV performer, comedian, and a successful business owner, we don’t know how he may perform as president. His election program, thus far, is extremely thin on any details.
I met Zelenskiy a fortnight ago. He delivered a message that he is surrounding himself with reformers, the likes of former Economy Minister Aivaras Abromavicius, former Finance Minister Oleksandr Danyliuk, and MP Serhiy Leshchenko. During the meeting, Zelenskiy focused on assuring us that his views and intentions are aligned with the business community’s priorities, specifically on rule of law, macroeconomic growth, and fighting corruption.
I raised the topic of intellectual property (IP) intensive industries, something Zelenskiy understands well, as his entertainment business has made him a small fortune. IP-intensive industries with proper copyright, patents, and trademarks enable people to earn recognition and financial benefit from what they invent or create. Such industries account for over 38 percent of the United States’ GDP. This is an area where Ukraine can grow significantly.
Ukraine’s economic growth at about three percent over the past three years is positive, but the country must increase this growth significantly in order to augment national wealth. This can only be achieved by significantly boosting FDI.
Stories like Nespresso coffee machines being made in Ukraine are lost in the international media today due to the clutter and noise around the elections. Whoever wins on April 21, attracting FDI will be absolutely crucial in boosting Ukraine’s sluggish but highly promising economy.
Andy Hunder
President
AMERICAN CHAMBER OF COMMERCE IN UKRAINE
One troy ounce=31.10 grams
Lviv International Airport in March 2019 increased passenger traffic by 59.2% compared to March 2018, to 133,900 people, according to the official page of the airport on Facebook. At the same time, the number of serviced flights last month increased by 31.3%, to 1,292. Some 119,100 passengers were transported on international flights (a growth by 70.4%), and 14,800 people on domestic flights (an increase by 4.2%).
In the first quarter of 2019, some 369,400 passengers (328,800 on international and 40,600 on domestic flights) travelled through the airport, which is 53.5% more than in the same period of 2018.
The number of flights in January-March reached 3,606 (3,053 international and 553 domestic), which is 26.7% more than in January-March last year.
As reported, in 2018 passenger traffic rose by 48% compared with 2017, to 1.598 million people.
Export of agricultural products from Ukraine in January and February 2019 grew by 24.4%, to $3.5 billion, the press service of the Agricultural Policy and Food Ministry of Ukraine has reported, referring to acting Minister Olha Trofimtseva.
“The share of agricultural and food products of total exports of Ukraine was 43.9%. The leaders among the exported products were corn (share of total agricultural exports is 33.6%), sunflower oil, safflower or cottonseed (20.13%), and wheat and wheat mixture with rye (11.84%),” Trofimtseva said.
The press service said that according to the regional structure of agrarian exports in the first two months of 2019, Asian countries (worth $ 1.38 billion) had the largest share, the EU had $1.25 billion, Africa $559 million and the CIS $217 million.
The top ten importers of Ukrainian agricultural products in January-February 2019 included India (9.6%), Egypt (9.1%), Turkey (7.8%), the Netherlands (7.4%), Spain (6, 7%), China (5.8%), Italy (3.8%), Poland (3.3%), Germany and Belarus (2.9% each).
Ukrainian metal and mining enterprises in January-March 2019 tentatively increased rolled steel output by 1.3% year-over-year, to 4.727 million tonnes.
According to the Ukrmetallurgprom association, steel smelting grew by 4.5%, to 5.498 million tonnes, while cast iron output decreased by 2.1%, to 5.178 million tonnes.
In March 2019, Ukrainian metal companies produced 1.799 million tonnes of cast iron (114.7% to the previous month), 1.958 million tonnes of steel (116.1%), and 1.644 million tonnes of rolled steel (111.4%).
As reported, Ukrainian metal and mining enterprises in 2018 tentatively increased rolled steel output by 1% year-over-year, to 18.446 million tonnes. Steel smelting fell by 2%, to 21.06 million tonnes, and cast iron output increased by 2%, to 20.531 million tonnes.
Ukrainian metal and mining enterprises in 2017, taking into account the two months of operation of the enterprises on the government uncontrolled areas, reduced steel output by 12% year-over-year, to 21.284 million tonnes, rolled steel – by 14%, to 18.439 million tonnes, and cast iron – by 15%, to 20.035 million tonnes.
In 2016, Ukraine boosted steel output by 6% year-over-year, to 24.2 million tonnes, cast iron – by 8%, to 23.6 million tonnes, and rolled steel – by 6%, to 21.4 million tonnes.
