KYIV – UkraineInvest’s activity log reads like a Who’s Who of corporate heavy weights looking to expand investments in Ukraine: South Korea’s Posco Daewoo, Holland’s Louis Dreyfus, Britain’s ED&F Man, and from the U.S.: Bunge, Cargill, Delphi and NCH Advisors.
“UkraineInvest continues to facilitate the Ukraine investment plans of global players in our sectors of focus, including Hutchison Ports’ Yuzhny Port concession, General Electric’s diesel locomotive modernization, Bombardier’s electric locomotive venture, EuroCape’s massive wind-farm project,” reads the half year report prepared by Daniel Bilak, director of the nation’s new investment promotion agency.
Drawing on a decade as partner at CMS Cameron McKenna Ukraine, Bilak knows how to pick his shots.
Brand new foreign investors are welcome.
Expansions by existing investors are more realistic.
“We are targeting existing players -- we want them to invest more,” Bilak said in an interview in his open-walled office on the ground floor of the Cabinet of Minister, six floors below the office of his boss, Prime Minister Volodymyr Groysman.
“If we can focus on the success stories we have in Ukraine and make existing investors apostles who evangelize for Ukraine abroad, that makes Ukraine more attractive,” he said, explaining the problem solving work his office takes in cooperation with Ukraine’s Business Ombudsman Council. “Our job is to make existing investors happy campers -- in order to unlock new investment.”
“Ukraine as a whole is a brand with a damaged reputation,” said Bilak, a Canadian-Ukrainian lawyer with 25 years experience in Kyiv. “Our job has been to change the narrative about Ukraine to attract new investors.”
In a mind-spinning marathon of Ukraine conferences here and abroad – 29 in three months -- Bilak has told listeners to look at the comparative advantages of Ukraine’s industrial clusters: auto parts and IT in the West; wood processing in Zhytomyr; agro processing and logistics in Mykolaiv and Kherson; and energy and manufacturing in Eastern Ukraine.
To avoid falling into the ‘KyivInvest’ trap, Bilak opened a UkraineInvest office in Ivano Frankivsk in June and has held investors meetings in regions across the country. UkraineInvest offices are planned for central and eastern Ukraine.
“Ukraine’s drivers are exports, agribusiness, energy efficiency, energy, manufacturing,” he said.
“We have to make the economics of investing in Ukraine compelling – auto parts, agrobusiness, tech,” said Bilak, who also holds the title of Chief Investment Advisor to the Prime Minister. Referring to the free trade pact that formally starts next week with the EU, he said: “The attraction of the DCFTA is huge.”
“If you go into a European boardroom, a decision about investing in Ukraine is part of their global view,” he said. “For an auto parts manufacturer, it’s: Are we investing in electric cars? or internal combustion engines?”
Auto parts is a growing Ukraine success story – one that Bilak hopes will stimulate other manufacturers to open factories here.
“There is half a billion dollars of investment by 25 companies across seven or eight oblasts that are now part of the European supply chain,” he said of this fast growing sector which now employs 43,000 Ukrainians. “Every car made in Germany has Ukrainian-made car parts.”
Victims of their own success, foreign manufacturers are sidestepping growing labor shortages in Western Ukraine, by expanding East, from the EU border toward Central Ukraine.
“Fujikura is opening in Cherkasy, their fourth plant in 18 months,” he said referring to a Japanese auto parts company that is expanding from Lviv to Vinnytsia and to Cherkasy, a city on the west bank of the Dnipro.
“Leoni is opening September 29 in Ivano Frankivsk,” he said referring to a German car parts company that is expanding from its Lviv region base to open a new plant 200 km to the Southeast.
Bilak says Ukraine now is competing with the labor hungry nations of Central Europe.
“Czech Invest and Slovak Invest have opened offices here,” he said with a wry smile about his ‘competitors.’ “These offices are not promoting investment -- they are recruiting Ukrainians to work in Czech and Slovakia.”
“In two to three years, when Ukraine is going to be booming, we are going to look back and see the tipping point was visa free,’’ he said of the visa free regime with the EU that started June 11. “There were 200,000 applications for electronic passports. It crashed the system. My housekeeper is applying for a biometric passport.”
“Last year, 1.3 million Ukrainians went to Poland last year,” he continued. “We want them to stay here.”
With a brain and labor drain potentially undermining Ukraine’s economic recovery, Bilak’s team work to attract investments that will provide better paying jobs. One key is to add value to Ukraine’s nation’s raw material production.
“We are not the bread basket of Europe, we are the food basket of the world,” Bilak said, referring to Ukraine’s growing agricultural productivity.
“But most is low value added – sowing, harvesting and shipping grains,” he said. “We need to set the ag value chain on fire -- corn processing, wheat processing. That is starting to happen. We are already number one sunoil processer.”
A quick payback for UkraineInvest has been to help large, existing investors get over hurdles.
Bilak cites the notorious case of “the blue building,” an abandoned Soviet era ruin owned by the Odesa port. It was holding up a $120 million port investment by Louis Dreyfus Co., the Amsterdam-based agro-merchant multinational. Last month, after UkraineInvest facilitated meetings, the Finance Ministry approved the investment, allowing demolition of the old building.
Success has many fathers. In the future, it will be difficult to ascertain UkraineInvest’s clear paternity over specific investments.
Also, discretion dictates that UkraineInvest respect confidentiality wishes of business partners.
UkrainInvest’s latest activity report, out this week, is littered with tantalizing hints of future investments in Ukraine’s pipeline.
“Consultations with major investor on the construction of a new $500 million grain terminal and processing plant,” reads the report. “Consultations on major equity investment in existing agricultural holding company doing business in Ukraine.”
“Consultations with major investor on $100 million fracking expansion plan,” the list continues, referring to an oil and gas project. “Major European auto-maker: organized meeting with PM and consultations re: EUR 100 mln investment in auto production.”
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Posted Aug.. 29, 2017