Business news from Ukraine

ON WEDNESDAY KYIV’S BUSINESS COURT BEGINS TRIAL UNDER CANADIAN TIU CLAIM AGAINST NIKOPOL FERROALLOY PLANT

On Wednesday, the business court of Kyiv will hear a court case under a claim of TIU Canada, owned by Refraction Asset Management (Calgary, Canada), against Nikopol Ferroalloy Plant (NFP) due to the disconnection of its 10.5 MW solar power plant from the power grid in March 2020 year.
“Today’s hearing is the first date for the trial since the completion of the preliminary hearing last month,” TIU Canada said in a report, which is available to Interfax-Ukraine.
According to the report, the solar power plant with a capacity of 10.5 MW was disconnected by the NFP from the power grid on March 2, 2020 “despite the fact that only electricity producers have the right to initiate the disconnection of the plant from the power grid in accordance with Ukrainian law.”
TIU Canada aims to immediately restore the connection to the electric grid and plans to bring NFP and its shareholders to full responsibility in accordance with the legislation of Ukraine, the company said.
The company said that NFP took advantage of the fact that the solar power plant was connected to a substation located on its territory, and explained the need for shutdown by carrying out repair work.
According to TIU Canada, the illegal shutdown caused over EUR 1.5 million in losses to the company, which “continue growing every day.”
At the same time, the company refers in the report to the high assessment of its activities by the President of Ukraine Volodymyr Zelensky at Ukraine Reform Conference in Toronto in July 2019, who noted the priority of developing green energy and thanked the company for its work in this area.
“Now this case is becoming a test of President Zelensky’s readiness to protect foreign investors in Ukraine,” TIU Canada said.

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LITHUANIAN COMPANIES INCREASE NUMBER OF REQUESTS FOR BUSINESS DEVELOPMENT IN UKRAINE

The number of requests from Lithuanian enterprises for business development in Ukraine, search for new partners has increased, Ambassador of Lithuania to Ukraine Valdemaras Sarapinas has said.
“From our own experience, we can say that now we see an increase in requests from Lithuanian enterprises for business development in Ukraine, searching for new partners. By the way, the same can be said about Ukrainian enterprises. We observe especially great potential in the introduction of electronic services, as Lithuania has vast experience in this area and is ready to share it with Ukraine,” Sarapinas told Interfax-Ukraine.
He also said that a reduction in the supply chain can also reveal new opportunities for both Lithuania and Ukraine.
“Lithuania can also become an excellent platform from which Ukrainian enterprises can significantly increase their exports to the West. By way of example, I can cite Kormotech company, which moved part of its activities to Lithuania, and this made it possible to take advantage of the EU financial policy and increase its competitiveness in Europe and other markets,” the diplomat said.
At the same time, Sarapinas said that Lithuanian business in Ukraine is faced with such problems as non-transparency of the judicial system, unequal conditions of competition, and administrative pressure on business.
“I am not a businessman, so I can only convey the position that I hear when communicating with our entrepreneurs: Lithuanian business, as, by the way, investors from other foreign countries or local Ukrainian entrepreneurs face the same problems, namely, the lack of transparency of the judicial system, different conditions of competition, administrative pressure on business. In the area of combating these problems, Lithuania and other Western partners are ready to share their experience,” he said.
The ambassador also said that there are several large Lithuanian companies that are now planning investment projects in Ukraine, however, negotiations are underway on this matter.
“It was recently announced that the Novus retail chain, which is operated by the BT Invest investment company, is buying 35 Billa stores. This is the fairly large investment: according to market analysts, the deal is worth about EUR 65 million. There are also few more large Lithuanian companies that are now planning investment projects in Ukraine, however, now it would be better to refrain from commenting, since negotiations are underway,” he said.

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PANDEMIC ACCELERATES DIGITALIZATION OF BUSINESS PROCESSES

The pandemic has accelerated the digitalization of business processes for 39% of respondents out of 74 surveyed managers of companies in various sectors of the economy, 42% intend to reduce office space, according to a report “Business leaders’ view in Ukraine 2020: Special issue of COVID-19” by KPMG company in Ukraine. “Leaders understand that increased digitalization is one of the main drivers of organizational development. Companies have to reсonsider what customers want and how they can achieve it,” the report said on Friday.
However, capital shortages and a lack of consensus on key technology trends are the biggest challenges in accelerating digital transformation, the report said.
At the same time, the most successful were converting operations into a “figure” (39% of respondents) and the creation of new digital business models and income streams (36%), according to the survey, which was conducted from July 15 to August 31 of this year.
At the same time, 30% indicated that progress in digitalization not only accelerated, but put the company forward for years to come.
When asked about the barriers to digital transformation, 22% indicated a lack of capital to accelerate progress (7% globally).
According to world leaders, the biggest challenge is to focus efforts and investments in areas that will be promising in the future, while avoiding areas that may be only a short-term response to the pandemic.
As a result, 33% of global CEOs identified the biggest challenge in accelerating digital transformation as “a lack of understanding of future operational processes.” Companies need to understand if COVID-19-related changes (such as consumer behavior) are indicative of an ongoing trend, or just a temporary effect of the pandemic.
In Ukraine, “a lack of understanding of future operational processes” was recognized as the main challenge by 14% of managers , the authors of the report said.
Regulatory pressures were cited by many respondents as the top threat to businesses in 2020, while executives prioritized staff shortages last year.
“This risk continues to be on their radar, but has shifted to fourth position,” added the authors of the reports.
At the same time, according to the survey, 73% of respondents in the world and 39% in Ukraine are convinced that remote work has expanded their access to the pre-personnel reserve.

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KYIVSTAR READY TO SHARE SERVICES WITH BUSINESS TO LAUNCH NEW SERVICES

The mobile network operator Kyivstar is ready to share its resources and services with the business to create new applications and services for different models of cooperation, including partnership.
“As an operator, we are a very closed system. This is largely due to the fact that for us any type of partnership is a very high risk. We are a large business and, attracting a small partner, we take risks. Therefore, for many years we were caught in ourselves… But It seems to me that on a new evolutionary stage – IT and digital – we need to open up,” Kyivstar President of Alexander Komarov said at a conference in Kyiv on Thursday evening.
According to him, at present, the mobile communications market has a huge entrepreneurial potential, with which large companies are unable to fully cooperate due to the high bureaucracy of processes. At the same time, this area is very attractive in terms of the speed of generating ideas and their usefulness for the industry as a whole.
“We have such a concept – Open operator. Now we have a very fashionable story: an open API bank, when, in the long run, the exchange of impersonal customer information allows building additional business on top of basic banking processes and services. We have approximately the same vision for the mobile business,” Komarov said.
He also recalled that earlier Kyivstar tried to attract third-party developers at the level of accelerators, selected even several interesting projects, but “strangled them with its red tape.”
“We have studied the most popular areas for business partners, prepared certain technological API stacks for them, and in principle we are ready at the pilot level in the next six months to open and see if potential partners succeed in coming up with some business models or business services that would be of interest to our clients,” Komarov said.
He said that the operator’s openness for partner companies means the ability to technologically connect to the network and anonymized data of the operator, as well as the presence of an IT sandbox where ideas and products can be tested at the stage of their development.
According to him, Kyivstar is ready to consider various models of cooperation, including partnership. “The question of dividing money always arises, but our task now is to get people to talk about money,” he said.
Komarov also noted the plans of Kyivstar to soon transform from an operator into a modern digital-IT company capable of developing its own products and commercializing partner products quite successfully in its network.
Kyivstar plans to strengthen the internal development department by the end of the year, so that to have digital divisions with 120 people and at least 70 in-house developers.

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BUSINESS EXPECTATIONS INDEX UP

The Business Activity Expectations Index, calculated by the National Bank of Ukraine (NBU), in August increased by 1 point (p.), to 47.9 after growing in July and June by 1.5 points and 9.6 points respectively, however, remains below the neutral value of 50 points and signals the prevalence of pessimistic business expectations.
“Business is cautiously assessing the results of its activities against the background of the prolongation of the adaptive quarantine. Expectations of enterprises for the fourth month in a row are below the equilibrium values,” the central bank said on its website.
According to the report, in August trade enterprises significantly improved their expectations: the index increased by 4.3 points, to 52.3. The National Bank clarified that the optimistic expectations of respondents in this area are associated with the softening of quarantine and an increase in consumer demand.
It is indicated that representatives of the trade sector are optimistic about the increase in trade (the index increased to 51.5 from 48.9 a month earlier) and the volume of purchases of goods for sale (the index increased to 57.6 from 45.5).
In addition, retailers expect a significant increase in the cost of goods purchased for sale (the index rose to 74.2 from 61.4 in July) due to high purchase prices.
According to the report, despite a slight increase in the index of industry respondents – by 0.8 points – to 48.3, their expectations remain pessimistic. Representatives of this industry downgraded their estimates of stocks of raw materials and supplies (to 42.9 from 52.7 in July), at the same time they strengthened expectations for an increase in prices for their own production (to 63.3 from 59.1 in July).

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CREATION OF INVESTMENT COURT IN UKRAINE WILL HELP DOING BUSINESS

The creation of an investment court, an idea promulgated by Ukraine’s Justice Minister Denys Maliuska, could facilitate doing business in Ukraine, Omerta Organized Law Group head Yevhen Fedoseyev has said.
“The declared creation of an investment court will greatly facilitate doing business in Ukraine, because if investors have a virtually unconditional guarantee that in any case, their property rights and interests are practically not threatened, they will start investing more in our country,” he told Interfax-Ukraine.
The lawyer noted that this initiative is not new, and similar courts already exist in a number of countries.
“Investors from all over the world are increasingly turning to investment arbitration as a way of resolving a dispute with the state every year. This mechanism for protecting the rights of an investor has proved to be effective, which is confirmed by both the number of international bilateral and multilateral agreements containing clauses on investment arbitration, and the number of initiated cases, “he said.
Fedoseyev recalled that a permanent arbitration institute, the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry, has been operating in Ukraine for more than 25 years, however, appeals to him are not too popular, since none of the Ukraine agreements concluded on mutual assistance and protection of foreign investment provides for the ICAC at the Ukrainian Chamber of Commerce and Industry as an institution for resolving investment disputes, as well as because of general legal nihilism. ”
“Of course, the new court in Ukraine will need to develop a practice that has been built in the courts of Western Europe for decades, however, the transparency of the creation of such a body, its competence, objectivity can create a positive image not only for the body itself, but also for the state as a whole, which will ensure inflow of new investors into the country, “the lawyer emphasized.
As reported, in early July at a meeting with European business representatives, Maliuska announced an initiative to create a concept for creating a separate court that would deal with investors’ cases – arbitration or a separate court that would consider cases with the participation of business.

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