9th Kyiv Post CEO Breakfast focuses on 'Building Ties With Turkey' - Nov. 10, 2016

How to build business ties between Ukraine and Turkey, two Black Sea neighbors, was the topic of the 9th Kyiv Post CEO Breakfast on Nov. 9 in the Hilton Kyiv Hotel. Vasil Kisil and Partners law firm sponsored the event, which included 18 participants.

While Ukraine and Turkey have lofty ambitions of hitting $20 billion in trade annually, the volume is stuck around $5 billion this year — roughly two-thirds of which is made up of Turkish imports from Ukraine, chiefly steel but also about 25 percent agricultural products.

The lack of a free trade agreement has hurt ties between the nations, with agricultural tariffs remaining a sticking point to concluding a deal. Some recommend removing agricultural goods from the agreement which, if reached, should stimulate a sharp increase in investment and trade between the two nations. As negotiations linger, participants emphasized that both nations are losing opportunities for economic growth. The next target date for completion of a free trade agreement is during Turkish President Recep Tayyip Erdogan’s expected visit to Ukraine next year.

Even without the agreement, however, both nations have sophisticated and deep trade ties because of their deep familiarity with each other and close proximity. Investors in Turkey, a nation of 75 million with Iraq, Syria and Iran among its neighbors, has a higher tolerance for global instability than many Western investors who shy away from Ukraine because of Russia’s war. The two other most frequently cited impediments to investment in Ukraine include corruption and lack of rule of law.

An estimated 600 Turkish businesses are believed to be operating in Ukraine; the number of Ukrainian companies in Turkey is far fewer.

There is also a growing strategic component to the relationship. Turkey, a member of NATO but not the European Union, is seen as a bridge between West and East. Turkey and Ukraine also recently announced greater cooperation in the defense sector. Ukrinform quoted National Security and Defense Council Secretary Oleksandr Turchynov on Oct. 24 as saying: “We are working on the implementation of certain projects and a wide range of tasks, in particular, the production of armored vehicles, rocket construction, aircraft construction, and others.” Turchynov said.

Both nations have historically been energy dependent on Russia, creating another possibility for greater cooperation to achieve energy independence — such as possibly through the joint production of electric cars. With Turkey having a more advanced economy — more than twice the per-capita gross domestic product in most indexes, the sentiment was expressed that Ukraine has more to learn from Turkey than vice versa.

Several Turkish firms have become visible leaders in different sectors, including travel, telecommunications and banking. But, as with so many sectors in Ukraine, problems are encountered with vested interests in Ukraine who try to curtail free and fair competition.

In air travel, airlines are pushing for open skies agreements in a sector currently by Ukraine International Airlines, owned by billionaire oligarch Ihor Kolomoisky.

In telephones, fairness is sought in the awarding of frequencies and also the ability of customers to be able to change their service provider while keeping the same telephone number. But parliament has stalled passage of a law allowing number portability, creating suspicions that vested interests are blocking lawmakers.

In banking, owners complain that legislation on creating creditors’ rights is also stalled in parliament. Strengthening the protection of lenders is seen as helping banks collect on defaulted loans — a huge problem in the country’s $11.4 billion in banking losses in the last several years.

Participants in the 9th Kyiv Post CEO Breakfast on Nov. 9 in the Hilton Kyiv Hotel include:

Andriy Stelmashchuk, managing partner, Vasil Kisil and Partners

Alexander Borodkin, partner of Vasil Kisil and Partners

Turkish Ambassador to Ukrane Yonet C. Tezel

Burak Pehlivan, president of the Turkish Ukrainian Business Association

Dincer Sayici, country manager, Turkish Airlines

Burak Ersoy, CEO, lifecell

Onur Anliatamer, chairman of the board, Credit Europe Bank

Arda Torman, CEO of Colin’s

Olga Chubrikova, director general for state protocol, Ministry of Foreign Affairs of Ukraine

Yuriy Pavlov, adviser to the president of the Ukrainian Chamber of Commerce and Industry

Enis Atasoy, finance director of Beko Ukraine