If you're managing a business, you should best listen closely to what your biggest client tells you. If it's a country you're dealing with, make sure your biggest investors feel comfortable.
Yet Ukraine's biggest investor, the European Bank of Reconstruction and Development, is not feeling the love.
“Our plans are very clear, we want to
stay engaged in Ukraine in 2013, of course, but also in the longer
term,” said Suma Chakrabatri, the EBRD president, said at a press
conference in Kyiv on Feb. 5. “But the scale and scope of our
investment is linked to the business climate, and in recent months,
as you all know, the business climate has deteriorated.”
The international lender is Ukraine’s
biggest financial investor, funding 35 projects last year for a total
$1.2 billion, in line with the average $1 billion in investment over
the past four years. Two thirds of this goes to the private sector,
which has been struggling under administrative pressure and a lack of
growth.
Thus, if businesses are unwilling to
take on the risks that Ukraine presents, the EBRD officials warned,
the lending will also suffer.
“We would like to continue investing
a billion (dollars) a year, but the business climate has to get a lot
better for us to reach that goal,” Chakrabatri said.
For that to happen, he added, numerous
reforms must not only be passed, but also implemented correctly. One
of the suggestions being considered, he noted, is the possibility of
creating the office of an independent ombudsman to be the voice of
business.
During the current visit to Ukraine he
met with Ukrainian President Viktor Yanukoyvch, Prime Minister Mykola
Azarov, Finance Minister Yuriy Kolobov and Energy Minister Yuriy
Boyko to discuss the potential solutions to the country’s problems.
Chief among the concerns voiced are
problems with the customs services, the tax administration, and the
courts, which fail to provide independent rulings and ensure that
property rights are respected. These and other forms of pressure have
been reported not just by EBRD partners, but by the wider business
community, said Andre Kuusvek, the bank’s country director for
Ukraine.
“We have heard a lot more complaints
from enterprises (recently), with a particular worsening for
companies that are locally owned,” Kuusvek said. “We have seen
more pressure on locally owned entreprises that possibly do not have
the same remedies – they may not have an embasssy to go to, or
access at the highest level to raise issues.”
Yanukovych has repeatedly stated his
goal is to bring Ukraine into the top 100 of the World Bank’s annual
Doing Business ranking. So far, the country has made minor steps in
this direction, moving from 152nd worldwide in the 2012 ranking to
135th in the latest edition. Nonetheless, business leaders warn that corporate raiding and pressure from tax authorities, among others, are as bad as ever.
Ukraine’s Foreign Minister Leonid
Kozhara today announced that the EBRD would be contributing to a 308
million euro ($420 million) modernization project for the gas
pipeline Urengoy-Pomary-Uzhgorod. This is a pilot project meant to
launch a wider renovation of the country’s gas transit system that
has long been planned but has spent years in drawers. Kuusvek
confirmed that the EBRD would indeed be going ahead with the
endeavor, financing half the sum with the rest coming from the
European Investment Bank.
Over the years the EBRD has contributed
over $10.7 billion to 318 projects, modernizing Ukraine’s energy
sector, agriculture, infrastructure and financial enterprises. If the
government wants that number to keep growing, it better get its act
together.
Kyiv Post editor Jakub Parusinski
can be reached at [email protected]
