While the nation has been in recession for much of the last year, Ukraine’s richest got even wealthier.
The elite list now includes President Viktor Yanukovych’s elder son, Oleksandr, with a net worth estimated at $367 million. According to Korrespondent magazine’s latest list of 100 richest Ukrainians, published last month, the new threshold for making it on the list is $72 million – up from $40 million a year ago. Those are astronomical figure for an average Ukrainian with a monthly salary of $392.
According to official figures, Ukraine’s economy has been shrinking since the third quarter of 2012. Difficult market trends, a poor local business environment and uncertainty with domestic policy all played a role, according to the European Bank for Reconstruction and Development.
Lower external demand and subdued steel and other commodity prices have led to a contraction of key sectors like machine building, steel and chemicals, while construction has continued to decline. Industrial output in November decreased by 4.7 percent compared to the same period last year. A month earlier, the decline was 4.9 percent, according to the State Statistics Service.
Faced with a negative current account and government budget balances, international credit worthiness agencies have also taken notice. Moody’s Investors Service downgraded on Sept. 20 Ukraine’s government bond rating and placed the rating on review for downgrade.
Despite this, the net worth of the richest in Ukraine increased spectacularly. These include Odesa businessman Borys Kaufman, Kyiv city council secretary Halyna Hereha and her husband Oleksandr and president’s elder son Oleksandr Yanukovych, a dentist by training.
By far, the newcomer of the year is 28-year-old Serhiy Kurchenko, who debuted on the list in7th place, with an estimated $2.4 billion fortune. The mysterious businessman who in just one year bought Metalist football club in Kharkiv, Odessa oil refinery, Kherson oil transshipment complex and UMH Group, wasn’t included in last year’s compilation. Korrespondent also belongs to Kurchenko.
Also debuting are Serhiy Lyovochkin, the president’s chief-of-staff ($425 million), owner of Eldorado retail network Viktor Polishchuk ($338 million), as well as retailer and developer Viktor Yushkovsky.
“We have to keep in mind that profitability of business in Ukraine is much higher than in the Europe. And Ukrainian oligarchs primarily invest in profitable businesses,” Olexandr Okhrimenko, president of the Ukrainian Center of Analysis said. A quarter of the richest Ukrainians – about 25 percent – make money in metallurgy, assets many of them acquired on the cheap during the initial round of post-Soviet privatizations. Other lucrative businesses are agriculture (14 percent), energy (13 percent)and realestate (11 percent).
The richest ranking shows the greater concentration of wealth in a few hands. Ukraine’s richest 100 have a combined net worth equivalent to 37.6 percent of the gross domestic product, which is roughly $180 billion a year. By contrast, the corresponding figure is 20.5 percent in Russia, 7.9 percent in the U.S. and 3.8 percent in China.
But this estimation may change in 2014, experts say. Taking into account the recent rapprochement with Russia, billionaire Dmytro Firtash may get even richer, according to Volodymyr Dubrovsky, a senior economist at Case Ukraine. Other businesses might face encroachment by Russian oligarchs next year.
But economic forecasts don’t bring optimism.While the current recession may be coming to an end, any recovering is likely to be sluggish without major structural changes – including less corruption – according to the European Bank for Reconstruction and Development.
Kyiv Post writer Mariia Shamota can be reached at [email protected].
