In the situation such as Ukraine finds itself today, almost less than half of that number attended the Adam Smith Conferences summit this year on Dec. 9-10. And most attendees were looking for investors rather than looking to become investors. Human nature is such that even otherwise intelligent investors can be wary of, or be resistant to, the opportunities that offer themselves to the brave and the wise in a situation such as Ukraine finds itself in today.
On the other hand, I couldn’t help thinking that the missing three or four hundred delegates were losing out on many, many opportunities – both to invest and make money, and to bring their expertise and their capital to bear in a situation when it could potentially benefit them and Ukraine even more than it did back in 2005.
Over and again, during the course of the first day of the summit, we heard from wise heads such as Francis Malige, managing director for Eastern Europe and the Caucasus for the European Bank of Reconstrution and Development, that investors are not motivated by politics but by profit and that, “we do not work in a country because of political motivations but because we believe there is money to be made.”
Indeed, Malige went on to emphasise that in the majority of markets which come under his remit there is conflict, in many cases intractable, and yet, “it is not impossible to work in a country even with a frozen conflict – and Ukraine is not a frozen conflict.”
His thoughts echoed that of almost every other speaker: that Ukrainian business culture values consistency and duration of relationships, that it is the people and institutions who do business now with Ukraine who will be trusted partners when the inevitable upswing comes and who will then be in a position to reap rewards for the investors who have stood by the country and invested their capital during this time of reform.
Timothy Ash, director of emerging market research for Standard Bank (and a Kyiv Post contributor) welcomed the bringing of foreigners into Ukraine’s institutions and told an amusing story about his recent appearance on Russian TV, when he suggested to the interviewer that perhaps Russia would benefit from following the example of the Ukraine, and indeed of the Bank of England (now headed up by Canadian Mark Carney), by bringing foreigners in to run its central bank.
“They got me off air very quickly,” he joked.
Speaker after speaker returned to the issue that not every asset in Ukraine is distressed, that peace exists in the vast majority of the country and that the international community has to realize that Ukraine currently has the most competent and least corrupt government in the history of the country. While we wish that things would change even faster, we must realize that there have been more concrete changes in the last 12 months than have in the previous 22 years.
Of course, there were calls for continuation of the process of reform, and yet the message was clear from the international investment community that there are already great opportunities for foreign direct investment in Ukraine in areas such as agriculture, information technology and real estate. As the reform process accelerates and deepens there is an appetite from foreign investors to also explore new, cleaner technologies than Ukraine has previously been known for and to make the most of existing opportunities in energy efficiency and regulation, for instance.
The benefits to the people of Ukraine of such investment will be many: not least in the importation of Western business practices, competences, advice and the influence outsiders will have in accelerating Ukraine’s moves towards the proper rule of law.
Inevitably, the political challenges facing Ukraine came up as well in many sessions: corruption, bureaucracy and taxation issues were front and centre to many discussions – and a recognition that while the new government is making many of the right noises, it is action the international investment community demands.
“Be open, be transparent, be bold, be honest, is my advice to the government,” said Simon Smith, British ambassador to Ukraine, during the session.
“Be different from Russia,” added the moderator, Edward Lucas, senior editor of energy, commodities and natural resources for The Economist.
Trond Moe, managing director of the Eastern Europe Group (speaking in one of the discussions for which I was also on the panel – “How to conduct business in an environment of ongoing unpredictability”) was quick to point out that it is in such times that the greatest profits can be made.
“We invested in Ukraine heavily in the past during periods of great instability – the Orange Revolution, for instance – and we made a lot of money, for ourselves and for Ukraine,” Moe said, adding that now is not a time to wait and see, for foreign investors, now is a time to prepare, to win trust and to build relationships.
All in all, I was pleased to see that the international investment community – or, at least, the enlightened members of that group who attended this summit – are able to see beyond the headlines and recognise that there is business to be done in Ukraine today, that there is even greater business to prepare for and that the people of Ukraine are with them in demanding, and enforcing reform.
Maybe the last word should go to Ash. “I’m a great believer that what doesn’t kill you makes you stronger – and Ukraine faces a very challenging future but also a very exciting future.”
Mohammad Zahoor owns the ISTIL Group and is the publisher of the Kyiv Post.
