22 May 2010

Investing in Ukraine

It’s been a busy week for people talking about the future of Ukraine.
On the political front we had the Russian President visiting Kyiv on the first official state visit for a long time. Many people fear that the Russians want too much influence in Ukraine. We will see. Moreover, a certain video clip on YOUTUBE attracted a lot of attention showing the President of Ukraine being hit on the head by a wreath. Its funny, but I think it will only do him good as people begin to empathise with him.

Regarding business, the annual Ukraine Investment Summit took place in London at the start of the week. Feedback indicates that investors are still ‘considering’ Ukraine as a potential investment location but as ever the legal environment in Ukraine still creates problems for potential investors. Corruption is still a problem and let’s face it will continue to be. For those who intend to wait for large scale changes to take place in the business environment in Ukraine, they will be a waiting a long time.

It’s sad that many investors are put off by the lack of transparency, lack of legal protection and overall lack of confidence in the safety factors when considering a major investment in Ukraine. I’ve only been here seven years and recently I was talking to friends who have been here 15 years plus and they are STILL waiting for corruption to stop. But they still carry on with business as best they can. I still remember one Ukrainian friend telling me “Why should we make it easy for foreign investors, this is our country”.
Maybe he has a point. Ukraine is not in the EU so does not have to conform to too many rules and regulations. However steps are afoot to draw up a Free Trade Agreement between Ukraine and the EU, which I’m sure will contain many demands from the EU regarding level playing field activity.

The banking and property markets are still flat here but there are signs that the retail sector is picking up. Ukrainians do like spending money, so they need to find an outlet.
As said many times before this year can only be better than last year. But so far things appear to be picking up slowly, which may also be a good thing. The boom years are certainly over and behind us. My main concern is that we do not start to witness to much economy activity which turns out to be just ‘smoke and mirrors at work’.

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