31 May 2011

Foreigners Banned from buying land in Ukraine

So, its official. Regarding land ownership.
Foreigners will be barred from buying Ukraine's farmland when Ukraine launches a massive privatisation programme next year, according to the country's agricultural policy minister.

"At the first stage, we will only be introducing the land market for Ukrainian nationals," said Mykola Prysyazhnyuk
"We understand that if we make the market free, then $30 billion will be enough - and that's not a lot for world financial corporations - to buy up all of our land," he said.


30 May 2011

Ukraine Economy Stumbles Towards a Recovery

A special report from Democracy Ukraine:

Ukrainian economy stumbles towards a slow recovery
The first months of 2011 have shown signs of a slow recovery for the Ukrainian economy. Industrial production has grown by 10.5% as of January 2011 compared to January 2010. The harvest volume this autumn is expected to increase up to 42 million tons. The national budget surplus for January-February 2011 accounts for 4.1 billion UAH (0.5 billion USD) owing to increased taxes, reduced expenses and an increase in the demand for raw materials on the world markets. The combination of the aforementioned factors as well as other positive developments have assured 4-4.5% GDP growth in Ukraine in 2011.

Ukraine’s macroeconomic performance has continued to improve since the beginning of the year. The metallurgy and engineering industries have been the most successful, compensating for slower growth rates in the chemical and agricultural sectors. The growth rates for February 2011, compared to January 2011, are the following: 16.5% growth in engineering, including 19.8% and 14.5% growth in the production of transport and machinery / equipment, respectively, 16.3% growth of the wood-working industry, 14.4% in the FMCG sector, 7.7% in the pulp and paper sector and 3.4% growth for the food industry. At the same time there was a decline in several industries: extractive industry (by 6.5%), generation and distribution of electrical energy, gas and water (by 2%) as well as in coke and petroleum industry (by 1.9%).

The global boom in steel prices raised the growth of metallurgy production to 17.4% in February 2011 compared to 13.3% in January 2011. The export of engineering products to Russia has increased up to 30.1% compared to the same period last year. The growth of the chemical industry peaked at 28.5% in January 2011 but dropped down to 17.4% in February 2011. The preparations for Euro-2012 stimulated development in the construction sector with growth of 6.1% as of January-February 2011. The relatively low growth of this year’s budget expenditures (by 13% compared to 2010) allowed the government to increase the wages of particular public sector employees (education and health care workers) in apparent response to the protests which started in the second half of the previous year. The baking sector has also demonstrated some signs of improvement. 'Naftogaz' has finally returned all 12.1 billion cubic meters of gas to 'RosUkrEnergo' according to the ruling of the Stockholm arbitration court.

Despite the gradual return to growth, the economy of Ukraine still faces many problems. The government’s low level of commitment to the implementation of reforms caused the IMF to defer negotiations over the next tranche of loan funding until June-July 2011. The rate of inflation is still growing. The government is yet to decide on a priority economic area between free trade with the European Union and a customs union with Russia, Byelorussia and Kazakhstan. The growth of world oil prices negatively affects the prices of oil-products in Ukraine, resulting in a the rise of the cost of transport services as well as municipal services (electricity bill has increased by 15% as of 1st April 2011, gas and heating bills - by 20% and 26%, respectively, since the middle of April 2011, tariffs for telecommunication services have increased by 10-35%). All of the aforementioned factors undermine the purchasing power of the population. Another problem is the sudden 90% increase in imports in February 2011 compared to February 2010, tipping the import-export balance 1.1 billion dollars further into Ukraine’s disfavour.

The fact that the Ukrainian population purchased 3.3 billion dollars in currency trading during the first three months of 2011 is indicative of the amassed capital of the ‘shadow economy' and the lack of public confidence in the future of the nation. The number of business owners and registered small and medium sized businesses has dropped by 30% compared to the first three months of 2010 as a result of the new tax legislation. Attempting to address this problem Verkhovna Rada opted to simplify the procedure of opening a business and give legal entities the right to establish a statutory fund of any size and in any number needed to start a business. But these measures have not been enough to remedy the situation and help the small and medium sized businesses suffering from the new tax code.

NBU Governor Serhiy Arbuzov commented on the IMF tranche saying that Ukraine expected to receive a double tranche from IMF in the amount of 3 billion dollars following the results of the first half of the year. But in order to receive this tranche the Ukrainian government are obligated to meet specific IMF requirements concerning the implementation of pension reforms, increase of tariffs, settlement of the VAT debt, grain quotas, etc. The National Bank of Ukraine however, is one of the few institutions to fully responded to the IMF conditional agreement requirements.

The Ukrainian government has voiced its intention to sign a settlement agreement with Vanco Prykerchenska Ltd., a requirement of initiating joint projects in Black Sea, which will come as good news for foreign investors. Although Prime-Minister Azarov predicts that it would take at least 10 years to develop the production of oil and gas in the Black Sea.

In summery a favourable environment in world markets and more considered approach to government activity in 2011 has assured a slow and slight recovery of the national economy. Any further progress will require substantial political will from those managing the country, professionalism in the government, a genuine fight against corruption and abuse of power together with renewed respect for democratic principles and norms. The economic policy of the government and President still faces numerous risks due to deteriorating living conditions with potential protests, the potential for a new wave of world economic crises and Ukraine’s vulnerability manifest in an unstable and misbalanced national budget.

People First Comment: Whilst the government should be congratulated for what looks like an economic turn around questions need to be asked as to the real causes of the apparent growth and the cost in social terms. Most certainly the upturn in world demand for commodities such as steel, chemicals and grain has enabled the government to show a large rise in exports but whether this is due to government policy or simply current circumstance is open to debate. Similarly the government’s statistics are rather odd as the growth rate is calculated in comparison with the crisis months and January of this year that includes a minimum two-week celebration of Orthodox Christmas and is therefore an economic anomaly

For economic growth to be sustainable we cannot just consider the figures. It is good that commodity exporting companies are able to cash in on growing world demand but this does not put food on the kitchen table for the majority or put children through school. Whilst export companies are expanding the SME sector seems to be doing exactly the opposite. The number of companies on the tax register has fallen dramatically over the past year. This may be because the tax authorities are being more efficient in prosecuting tax evaders or that they are simply milking the sector to death forcing entrepreneurs into the grey and black economies.

Certainly the tax authorities have become much more assertive in their bid to stamp out evasion and improve collection but some of their methods verge on extortion and human rights violation. Many SME owners are complaining about excessive and illegal demands that have no bearing on the reality of their businesses. One business owner recently reported to People First that the whole attitude of the tax police has changed. “In the past they would call to make an appointment and we would have a reasonable discussion, now they just barge in and make all sorts of demands based on hear say and rumour and sometimes this happens two or three times a month. It really is very short sighted and does nothing to build faith in the system.”

Another unprecedented policy is the writing off of commercial company debts to the State when the company is owned by people close to the authorities: a commercial debt of over $3 billion owed to Naftogaz was simply written off whilst the general public watch interest rates rise with no right off at all. Such policies can only breed public discontent.

Some fight but most just give up and plan their exit from Ukraine. One measure of this is the number of parents now seeking to join their children who are being educated abroad. In the past it was just the children of the middle class and wealthy, now it is whole family units and few will ever come back. In the last year Ukraine has become one of the top five countries in the world where the population is prepared to pack their bags and leave in search of a more equitable and secure future.

Whilst the current policies may ensure success for the commodity exporters and a higher than previous level of revenue collection they are very short term in outlook. Tax collection the world over is an issue for all governments and many systems have been tried and tested. In Georgia for example the tax levels were reduced, corruption was virtually eradicated and the state started to supply real levels of service and as a result State revenue levels have increased by 672% over the past 6 years and the people are happy about it.

But if you pay taxes and see nothing for it then eventually you have to question what you are paying for. Similarly simply increasing the efficiency of the tax collection system in an environment where the banks are not lending is a sure recipe to guarantee that you kill off the SME sector and that is nothing more than a self defeating philosophy in every sense of the word.

What do you think?

Another 'Only in Ukraine' comment

Can you imagine a politician from a country in the EU making the following comments:

Lytvyn against admitting foreigners to land market at early stage
(From Interfax-Ukraine)

Verkhovna Rada Chairman Volodymyr Lytvyn believes that foreigners could be admitted to the Ukrainian market of land only when the price on land catches up with that in Europe.

"I believe that the period of time should be designated when foreigners are prohibited from buying land. There should be a transition period until the level of land prices in this country is equal to the land price in European countries," Lytvyn said in an exclusive interview with Interfax-Ukraine.

"In my opinion, this approach can help ensure that we reach a compromise in the adoption of the law," he added.

The speaker believes that they should not set the date, when the land market is to be launched.

In his opinion, it is necessary to adopt laws on cadastre and land market, focusing on the lease of land, and to see how the law is working over time.

The Verkhovna Rada should have a possibility to modify these laws.

Ukraine does not want foreign investors in Agriculture?
I rest my case.

27 May 2011

United Kingdom gets tough on Visas.

The United Kingdom Border Agency (UKBA) have announced new changes to the knowledge of language and life (KOL) requirement for those who wish to settle in the UK. The changes apply to applicants of skilled and highly skilled migration categories.

The UK Government fees have been increased for most visa types including Tier 1 and 2 work visas, and Tier 4 student visas. Also, tough new rules have been implemented for student visas, including stricter criteria for educational institutions to become sponsors, and most students being limited to 5 years of study with no provision to bring dependents with them.

All this is in response to the public outcry in the UK, that there are too many illegal immigrants living in the UK.

26 May 2011

Only in Ukraine

In early 2010 I returned to Kyiv from a business trip. I was amazed to discover that the bookshop in our building at 6 Chervonarmiyska Street had been closed down and the premises had been 'taken over' by persons unknown who were now closely guarding their new acquisition.
Two very large trucks had been parked in front of the shop to provide protection plus 'guards' were living in the shop premises for who knows what reason.

Then.......the normal practice in Ukraine. NOTHING HAPPENED. All of us residents were hoping that maybe the new owners would turn the shop into a nice restaurant or cafe maybe. But we were obviously hoping for too much.

The shop windows were later boarded up and graffiti artists used the opportunity to make the site look like a ghetto. Why? many people asked? but nobody could get any answers from city hall.

It was only today that I read with great surprise the story in the Kyiv Post:

The Economic Court of Kyiv on May 17 declared illegal the results of an auction at which the Siayvo (Shine) bookstore 363.8 square meters at 6 Chervonoarmiyska Street was sold, returning the store to municipal ownership.

The auction took place in September 2009.

The court also declared invalid the agreement on the purchase and sale of the premises between Shevchenkivsky District Council and Abril Studio LLC and the agreement under which the premises were handed over to a third person.

The press release of Kyiv City State Administration reads that the bookstore has been returned to the municipal ownership of the city of Kyiv.

The conflict over the premises of the Siayvo bookstore has lasted for about two years.

Today the bookstore is closed.

Lets see what happens next. I know many people will be campaigning for the return of the bookstore.

But another example of an 'Only in Ukraine' situation.

23 May 2011

News from the BBCU

News Release

Contact: Dina Melnyk

Phone: (044) 235-7223


9 A.M.(Kyiv Time) 23 May 2011

Medical Tourism in Ukraine

Kyiv, 23 May 2011: British company – Medicare Europe with an office in Kyiv Ukraine is positive about the future of medical tourism in Ukraine.

Gerald Bowers – General Director of the British Business Club in Ukraine who helped to establish Medicare Europe in Ukraine recently sold his controlling shares in the company to two new investors from Canada and Georgia.

“The future for the development of medical tourism in Ukraine looks positive as more people from around the world see the benefits of receiving high quality medical treatment from private clinics in Ukraine” said Gerald Bowers. General Director of the BBCU.

Medicare Europe is a British company that identified the opportunity for patients in Western Europe to travel to Ukraine to receive high quality medical treatment for lower prices.

The company has a network of private sector clinic ‘partners’ in Ukraine providing high quality dental care, eye treatment, fertility treatment, cancer and also heart treatment.

The new investors in Medicare Europe expect the market for medical tourism to expand rapidly in Ukraine.

David Bolton a Canadian citizen and Ivetta Sharashenidze a Georgian citizen recently purchased 50% of the shares in Medicare Europe for an undisclosed sum.

Further details available from the BBCU Office in Kyiv:


Dina Melnyk

Tel: 2357223

Email: administrator@bbcu.com.ua

21 May 2011

The United Kingdom has been damaged beyond repair

The UK has suffered a huge credibility problem during the past few years and more so after the conviction yesterday of the ex-Government Minister, ex-Labour member of parliament, Mr Elliot Morley.

Morley was convicted of fraud. He fiddled his expense claims and claimed over GBP 30,000 too much for a mortgage he did not have on his second home. He was sentenced to 16 months in prison.
(Ukraine GPO take note)

The most annoying fact about this and similar cases of ex-MPs fiddling their expenses, is that it gets reported all over the world. Many of our commonwealth countries just cannot believe that THE BRITISH would cheat the system.

For as long as I can remember, the British government and its members of parliament have always been seen as the one place where corruption and 'monkey business' never took place.
The British system was always a great example to the rest of the world.

Sadly no longer is this the case. I don't think those ex-members of parliament realise the GREAT harm they have inflicted upon the image of the UK.
British people around the world and in particular those doing business overseas have been 'dented'. We can no longer hold our head up high as before. We have to admit that, "Yes, we are just as bad as the others, when it comes to dishonestly"


See: http://www.dailymail.co.uk/news/article-1389080/Disgraced-ex-minister-Elliot-Morley-jailed-claiming-30-000-bogus-mortgage-expenses.html

20 May 2011

Ukraine - Like Fred Karnos Army

Older British people will be familiar with the phrase 'Fred Karnos Army" or Fred Karnos Circus'.
For the rest of you, please Google it and you will find an explanation.

Why do I say Ukraine is like Fred Karnos Army?
Because a sure sign of instability in a country is the speed and way in which laws are changed so quickly and often being reversed after being implemented only a few months previous.

VAT for example.

This week the Ukraine Parliament adopted the Law* under which the VAT exemption on consulting, engineering, legal, audit, IT, etc. services is cancelled. Since 1 January 2011 it had been decided that VAT would not be applicable to 'services'.
It is expected to be signed by the President in the coming days and published by the end of May. On this basis, the Law will become effective starting 1 June 2011.
This would mean that:
local supply of such services will be subject to 20% VAT
supply of such services by non-residents will be subject to 20% VAT under the reverse-charge procedure
supply of such services to non-residents still will not be subject to VAT (but pro-rata of input VAT will be required)

* Draft Law No:8321 dated 31 March 2011

17 May 2011

IMF Warning to Ukraine


LONDON - Ukraine must pass vital financial and pension reforms before it can resume talks with the International Monetary Fund to resume a suspended loan programme, the IMF's country representative said on Monday.

Max Alier said there had been no IMF missions to Ukraine since February and none were planned until after the reforms were passed. "As of now, we're waiting for progress... before we set up dates for the next mission," he told Reuters on the sidelines of Adam Smith Conferences' Ukrainian Investment Summit.
Ukraine's $15 billion IMF programme has been effectively frozen by Kyiv's refusal to implement unpopular austerity measures such as raising the retirement age and hiking consumer gas prices by 50 percent. The IMF refused to release a $1.6 billion loan tranche scheduled in March after the government failed to pass a pension reform bill and watered down gas price increases for households.

"Structural reforms have been lagging, not for the last two years but for a number of years," Alier told the conference. He said Ukraine needed to bring down its "outrageous" level of pension expenditure, which at 18 percent of gross domestic product is one of the highest in the world. "This (reform) is very important for Ukraine's medium-term sustainability," Alier said. Savings from a reduction of pension spending could be better deployed to infrastructure, health and education, he added.

The IMF also wants Kyiv to repeal a measure introduced during the financial crisis that required the central bank to buy recapitalisation bonds from banks. "This is an extraordinary measure that made sense during the crisis and was meant to expire end-2010," he said.
Alier also warned that Ukraine's non-performing bank loan levels (NPL) were high. Though international bad debt measures are not strictly comparable, Ukraine's NPL level may be about 30 percent of total loans, he said. Ukraine's hryvnia currency has been under pressure since March when the IMF suspended the loan disbursement.

See Reuters Link: http://www.reuters.com/article/2011/05/16/ukraine-imf-idUSLDE74F1E220110516

14 May 2011

How long should a web site be 'Under Construction'?

How long should a web site be 'Under Construction'?

British - Ukrainian Chamber of Commerce (BUCC) [page under construction]
What a sad case. How bad. The site has been under construction since 2008.
Makes British business people look bad in Ukraine.
The BUCC needs to get a grip. I feel sorry for the members of this organisation

11 May 2011

Special presentation about the Cayman Islands

British Overseas Territory

The Cayman Islands’

International Financial Centre

No Taxes

One of the largest financial centres in the world

The BBCU invites you to our Networking Meeting

Thursday 2 June 2011 at 1900


BBCU Member - B.P. Dan Martiuk

Western International Group

Belgravia Business Club

18/1g Proreznaya St, Kyiv

Please reserve your place by contacting the BBCU before 27 May 2011

Tel: +38044 235 72 23

Email: administrator@bbcu.com.ua

Priority will be given to members of the BBCU

We look forward to seeing you

06 May 2011

UkraineInvestment Summit - London

Largest annual global investment conference for Ukraine, Mon-Wed, May 16-18, 2011
The 7th annual Adam Smith Ukrainian Investment Summit will take place on Monday to Wednesday, May 16-18th, 2011, in the Great Hall of the Chelsea Football Club in London. The Summit is the largest annual global investment conference for Ukraine.
The Adam Smith Ukrainian Investment Summit is the one and only original investment gathering on Ukraine, with a proven track record of welcoming hundreds of top executives from around the world. Therefore make sure that you are in the right place at the right time to join the Ukrainian and international business elite!
The new venue of the Great Hall of the Chelsea Football Club has caught the imagination of all and you can benefit from a Gala Evening and Awards Ceremony in the Club museum, wine-tasting from Artemovsk Winery and Kolonist, attendance of the last game of the season and accommodation in the deluxe onsite hotels.
DETAILS: Visit the Ukrainian Investment Summit website for details http://www.adamsmithconferences.com
This year’s speaker faculty is shaping up to be the most powerful yet, and here are just few highlights of who you will be able to meet and hear from at the largest investment gathering for Ukraine worldwide.

Iryna Akimova, First Deputy Head of Administration of the President of Ukraine
Anatoliy Maksiuta, First Deputy Minister of Economy of Ukraine
Petro Poroshenko, Chairman of the Supervisory Board, National Bank of Ukraine
Oleksandr Ryabchenko, Head, State Property Fund of Ukraine
Dmytro Tevelev, Head, State Stock Market & Securities Commission of Ukraine
Yuri Kolobov, First Deputy Head of the National Bank of Ukraine
David Liddington, UK Minister of Europe, David Liddington, MP,

A host of leading business figures in the speaker faculty will address the Summit for the first time including:

Sergey Taruta, Chairman of the Board of Directors, Industrial Union of Donbass
Oleg Salmin, Chief Executive Officer, XXI Century
Philippe Margraff, Commercial Director, UEFA
Viktoriya Tigipko, Managing Director, TA Venture
Ruslan Demchak, Founder & Owner, Ukrainian Business Group
Didier Casimiro, President & CEO of TNK-BP Commerce
Igor Livant, Fund Manager, Alpcot Capital Management
Frederic Lucenet, Director, Manufacturing and Services, EBRD
Leonid Bogdanov, General Director of developer UDC Holding
Dominique Fache, Chairman of Enel-OGK-5
They will be joined by top executives of such leading and most dynamic companies: System Capital Management, Lubel Coal Company, Donetsk Steel, Vanco Prikerchenska, Nestlé, Dyckerhoff Ukraine, Peterson Institute for International Economics, Ukrainian Independent TV Corporation, Kraft Foods, Rosinka, State Enterprise for the Financing of Infrastructure Projects, Sagro, Group DF, FIM Group, SOLID Group, Sintal Agriculture and many others.

Amongst the confirmed key financial institutions and funds are senior executives of: Alfa Bank Ukraine, Credit Agricole CIB, Morgan Stanley, First Ukrainian International Bank, Verno Capital, International Monetary Fund, Royal Bank of Scotland, Abris Capital Partners, ADM Capital Europe

The 60+ speaker faculty will take part in a program that features more interactive sessions than ever to maximize your benefit, including an International Economist panel, Tax Code debate, the ever-popular Institutional Investors session and discussions on the Investment Climate.

05 May 2011

Firtash buys control of Nadra Bank

Never a dull moment in Ukraine.

Dmitry Firtash, the Ukrainian billionaire, has paid over $400m for a controlling 90 per cent stake in Nadra, one of Ukraine’s most troubled banks.

Brave man. He certainly enjoys a challenge.
Maybe he is returning a few favours?

What would YOU do with $400m?


03 May 2011

Bureaucracy kills the customer.

In developing economies there are many similarities. Particularly in the service sector.
I spend time between Ukraine and Sri Lanka do to business.
The service sector 'practices' in both of these countries are similar.
Take for example the simple processes in a restaurant.

On too many occasions in both countries I see situations where customers get so angry due to the bureaucracy of the so called systems they operate.
I think it all stems from a culture of mistrust.

For example, you are in a restaurant and maybe there are only four or five customers.
At the end of the meal, the customer requests the bill. A normal process in developed countries where the bill will be provided to you within seconds/minutes. The waiter/waitress takes the cash or payment method and the whole process is completed within a few minutes.

NOT in developing countries. It will take maybe 10-15 minutes to prepare the bill.
Then they eventually provide the bill.
The customer offers payment and usually offers more than the required amount, expecting change to be given and only then will they think about a tip.

Unfortunately, this is where the lack of trust comes in to play.
The person who takes your money is not allowed to be involved in the process.
The bill together with payment must be taken to another party who proceed to check the accuracy of the bill and correct payment. Then after they have 'signed off' the transaction, another person will become involved in the issue of any change or confirmation of payment.
Eventually the 'change' may be sent to your table approx 15-20 mins later.

During this whole process the average customer will be totally frustrated as to WHY everything takes so long.

Its obvious that the process is far more important than the customer.
On far too many occasions I have seen restaurant customers HAPPY that they have enjoyed a great meal and even some good service, BUT the whole bill/payment/change procedure is the KILLER for most restaurants and the good experience turns into a nightmare for the customer.


01 May 2011

Corruption in Ukraine

Much has been written about the problems of corruption and the attempts to reduce corruption in Ukraine. Most people would agree that Ukraine is a very corrupt country. Public 'servants' almost everywhere will refuse to do anything unless they are provided with a financial inducements.

We all hear many stories of how public officials ranging from traffic police through to high ranking presidential officials will not do anything for you unless you offer certain sums in cash.
It is a way of life in Ukraine.

My personal experience is different in that I have NEVER paid a bribe in my life. I have been here since 2002. During this time I have experienced many situations where I was 'prompted' to offer a 'financial reward' to someone. But I have always resisted. Even when some of my expat British friends have said 'Oh just pay them it will be easier'. I have always stood my ground and refused to pay any bribes to traffic cops or government officials.

Do not misunderstand me. I have been stopped by traffic police many times and on some occasions I was speeding and guilty and I then asked for the correct 'protocol' to be followed.
No surprise that nothing happened and I have never received any notifications via the postal service. I doubt that the traffic police even bothered to submit any official reports even though I was clearly guilty of speeding. The reason being is that I clearly refused to pay any cash sums to people on the spot. On one occasion I was traveling with a car full of Ukrainians and they started to protest when I refused to pay any cash bribes to the police. For them it was not a problem, and they just could not see why anyone would refuse to pay as it made things easier.

THAT is exactly my point about corruption in Ukraine. Too many people are quick to pay whatever is needed to get the job done. They fail to see that while they continue to pay, the system will continue...on and on and on it will go.

For too many Ukrainian people corruption offers and facilitates an 'easy way out' of most situations. Why get complicated when we can just give this man or woman some money and all problems will disappear. Sad situation really.

I am sure that many people have paid bribes on my behalf without my knowledge.
During the past few years I have paid lawyers fees on many occasions which I am sure involved the payment of bribes on my behalf. (obviously this is all prior to the introduction of the recent UK Bribery Act coming into force).

Refusing to pay bribes has only cost me TIME. From the lowly traffic policemen who will keep me waiting for 15-20 minutes and then eventually lets me go, because he realises that I am not going to pay and he is wasting his time. Through to the employee at the National Bank of Ukraine who demanded 2 percent of the transaction value for agreeing to the granting of a license to obtain a loan from a foreign bank. Only to understand that I was NOT going to pay, but it cost me two months in delay and I'm sure complications made because I was not paying any bribes.

You can refuse to pay bribes in Ukraine and you will survive. Things will just take much longer.
The government claim to be doing something:
see: http://www.kyivpost.com/news/opinion/op_ed/detail/103190/