Kyiv Post is introducing a regular new section – Exclusive Insights. It will contain interviews, transcripts and video, with prominent people from the business world, politics, the arts, science, technology and IT.
Bohdan Nahaylo: It’s my great pleasure to welcome to Kyiv Post Sergiy Tsivkach, the CEO of UkraineInvest.
Sergiy Tsivkach: Thank you for the invitation!
B.N: It’s my great pleasure to welcome to Kyiv Post Sergiy Tsivkach, the CEO of UkraineInvest.
S.T: Thank you for the invitation!
B.N: A few words of introduction? Tell us about UkraineInvest. We see it, we hear about it, but what does it actually do?
S.T: UkraineInvest is a typical IPA – an investment promotion agency. These agencies exist almost in every country. The role of an IPA is to attract and promote investments, specifically foreign direct investments into the country. We are doing a very much similar thing, and also we take on some additional responsibilities, like support for investment. UkraineInvest provides investors with free of charge “one-stop support” consisting of reliable, current information and advice on doing business in Ukraine, identifying optimal investment opportunities. There’s that, and now we are paying special attention to attract investment into industry. This will contribute significantly to increasing FDI flows to R&D and manufacturing sectors and transforming the Ukrainian economy’s orientation into a high value-added one.
B.N: When was UkraineInvest founded?
S.T: UkraineInvest was founded in 2016, and back then it was a donor-supported organization. Since 2018, it has become a full-fledged state institution. As the only Government-authorized specialized institution, UkraineInvest works to effectively deliver on investment promotion, attraction, support and aftercare functions. Addressing investors’ needs on all stages of implementation of their projects in Ukraine, UkraineInvest is there not only to communicate the most attractive investment opportunities, but also to assist in resolving any operational issues investors may happen to face.
B.N: And what’s changed in the approach, or the strategies, since 2016?
S.T: Well, there’re so many things that are different now. Before we were acting more as a promotional agency. The previous teams did a great job in promoting Ukraine, but now we are moving towards activities similar to the investment banking sector, because we need to analyse financial projects, financial models, to support investors as they draft feasibility studies, and so on. And, also, as you know, the country is changing, Ukraine’s investors are changing…
B.N: Governments have changed, presidents have changed…
S.T: But the most important thing is that we have institutional memory and continuity. We still talk to UkraineInvest teams that were involved previously. We communicate with them, and we will be happy to support any new teams that come.
B.N. To what extent are you autonomous? I mean, comparing yourselves with, say, the National Bank. To what extent do you have to toe the line of the moment?
S.T: We are autonomous, within reasonable boundaries. When we have some ideas, we always come forward and speak to the Prime Minister of Ukraine, ministers, their teams or to relevant authorities in order to promote a specific sector of Ukraine. This is very important. By doing so, we are coordinating our autonomy with the need to promote Ukraine properly.
B.N: Give me some idea of the scale of your operations. Are you based only in Kyiv, or do you have representatives in the regional centers?
S.T: We are based in Kyiv, because we are a central agency, but we coordinate our activities with all regions of Ukraine. And our regions have their own economical investment attraction departments in regional administrations, in mayors’ offices, and in territorial centres as well. So, we currently work with them. Also, we cooperate actively with the Ministry of Foreign Affairs and the Ukrainian diaspora to promote Ukraine’s investment brand at the international level. We have established a Network of UkraineInvest Advisors. Being reputable and well-regarded representatives of the international investment community from various industries, UkraineInvest Advisors are meant to provide UkraineInvest team with insight and contribute their enormous experience to communicating Ukraine’s investment advantages to the world. Our goal is to connect Ukrainian regions to the world and vice versa.
B.N: What would you consider as the main achievements and successes over the last five or six years, and what have been the most difficult challenges you’ve faced?
S.T: Since 2016, UkraineInvest has managed to unlock and attract more than $4 billion in investments. During 2021 alone, we managed to attract and support investments for $750 million. Out of those $750 million, the majority of investments went to the manufacturing sector. So, at least 10 factories and plants will be built in Ukraine over the next 12 to 24 months. I think it’s the biggest achievement, because we, as UkraineInvest, are focused now mostly on the development of manufacturing. Manufacturing is the key to the development of the Ukrainian economy, just as for every economy worldwide. And we have some positive figures. In 2021, we saw a sharp increase in FDI inflows compared to 2020, for example, because in 2020 we saw negative figures at the level of -$35 million, and, in 2021, we think that the end of the year will be marked with a record high FDI inflow, namely, about $6.5 billion.
B.N: And that is despite the current tensions with Russia and the very difficult international climate?
S.T: Yes, absolutely. But we need to understand that this money is mainly not new to Ukraine. Most of it comes from reinvestment, so that’s from current businesses, foreign businesses with foreign capital that operate in Ukraine and still want to reinvest. It means that in 2021 businesses started to develop their activities again, and more than $5 billion came from reinvestment. Only $600 million came from new capital investment. I think this figure is still very positive, but it needs to be much higher, and we are working on that. Also, what we need to improve by attracting investment into manufacturing is gross fixed capital formation. It’s a special figure that shows the total amount of non-financial investments into the country. Unfortunately, it’s only about 13% as of 2020, and we are still working on the figure for 2021. And, 2022 is a new year, and we need to, again, go up, for example, to the level of 2007. Then, this number was 27% of Ukrainian GDP, and this is comparable to economies like Turkey and Germany. We can look at our neighbours like Poland – they have, 16.6%, as of 2020, so we are correlating our activities. All economic development in Ukraine, I think, is connected to manufacturing, because this is our future, and this is where we need to bring all our resources and make everything possible to bring investment to Ukraine. To help achieve this goal, UkraineInvest has initiated the MAKE in UA program aimed at development of manufacturing in Ukraine through targeted investment. Implementation of the Program will result in an increase in Ukrainian production and export of goods, direct investment attraction, job creation, Ukraine’s competitiveness improvement and, as a result, economic growth. Our aim is to double annual foreign direct investment in production by 2025.
B.N: And the legal framework?
S.T: The rule of law is a very important factor for the attraction of investment, specifically new investment, because investors need to analyse what’s happening in Ukraine. The rule of law, from my perspective, is something that you can start developing, and then there’ll be no end because you always have to become better. Has Ukraine become better since 2014, or 2012, specifically – those years? Absolutely! You cannot compare them! Do we need to go up even higher in these terms? Yes, because we need to ensure that the rule of law is applicable to all current business players in Ukraine, and to our guests as well.
B.N: Ok, if we can conclude now. Where are we at? It’s a very difficult moment – Ukraine is threatened; it’s at the centre of international attention. But, presumably, it’s also having a negative impact on the economy, economic growth, investment. Can you give us a brief overview of where things stand at the beginning of this difficult year?
S.T: It’s not an easy case, but we need to look at this from a different perspective. From the perspective of international media, when you watch international news, you’d think that all of Ukraine is in an active war-kind of condition, even in the capital of Ukraine. In reality, it’s different. Despite the war in the east and tensions – business operates as usual because Ukrainian business is already used to these threats from our neighbour.
B.N: But people know that low-scale war is continuing in eastern Ukraine, and that might be a disincentive…
S.T: We need to understand that in our case, we are not for war. We need to stay here and live happily. And to do that, we need to promote investments, the economy, and keep calm. I have not seen yet any serious signs of detraction from the international investment community from Ukraine connected to this case. I can see that the international investment community and Ukrainian investment community are following developments and waiting to see how things will develop. I cannot say that businesses are now actively leaving Ukraine. I suppose it will be tense for a month or two and then I hope, and I’m sure that all these conditions will go away, and Ukraine will see the development of investment inflows. Why am I saying that? Because we talked about the real achievements of 2021 and new developments of 2022. Only at the beginning of this year, we have received requests for EUR 1.5 billion in potential investments even from very strong international holdings that are considering Ukraine, and they put Ukraine on the shortlist among 5 countries. They see the possibility of bringing their plants to our country. Now we need to fight for it, we need to present Ukraine and bring investors to our beautiful and economically successful country. It will come. The law “On State Support For Investments Projects with Significant Investments in Ukraine” (commonly known as the “Investment Nanny” law) encourages new significant investors to enter the Ukrainian market, as well as promote expansion of existing businesses. At the moment we have 26 preliminary enquiries from investors that were submitted to UkraineInvest under this law for a total amount of more than $2 billion. At the end of 2021, we submitted two formal applications to the Ministry of Economy of Ukraine for a total amount of $96 million. These are projects of deep soybean processing and manufacturing of insulating materials. This year we set the task of submitting applications for at least $1 billion.
B.N.: That’s a very positive picture because usually a more dismal one is presented, as you’ve rightly noted. Look, let’s finish off by asking you, Sergiy, what would be your key messages now to investors, to the business community, diplomats, who may be watching or reading our interview?
S.T: My key message is to keep calm and to draw attention to Ukraine. Because Ukraine needs to stand out. So many countries were affected by the negative effects of the pandemic. More than 170 countries worldwide faced negative GDP growth, so Ukraine needs singling out. I’ve always considered whether you can turn a bad case into a positive case. At the moment, we have attention to Ukraine in international media, unfortunately, connected to a possible large-scale war case, but we need to turn this current interest into continuous attention to Ukraine in terms of economic development. For example, we have just seen Sir Richard Branson addressed the international business community about Ukraine. The very next day, UkraineInvest wrote to him proposing an international business event in Ukraine, or maybe in London, and bring business people together to think about how we can jointly invest in Ukraine, and by doing so develop security in the country and at the regional level.
B.N: Thank you very much, Sergiy, for this very informative discussion, and for sharing with us your insights and views.
S.T: Thank you very much!
