Ukraine

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8:27 AM Friday, December 15, 2017
Real Estate
Construction Rebounds 23%
Red tape is down. Public private partnerships will boost growth. But real estate forum attendees say downsides are: corruption, brain drain, and squeamish foreign bankers
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KYIV – Construction in Ukraine is running at 23% over last year’s level, Lev Partskhaladze, deputy minister of regional development, construction and housing, said Thursday, citing figures through October.

Keeping pace, 6.9 million square meters of housing have been commissioned, 21% more than during the same period last year, the deputy minister told the Eastern Europe Real Estate Forum at the Fairmont Hotel.

The Forum produced insights into dynamism in unexpected areas of Ukraine’s economy.

Lev Partskhaladze, deputy minister for construction and housing, cites statistics indicated a strong rebound in construction in Ukraine.To his left, van Kompan, Managing Partner and Finance Tutor of the Edinburgh Business School, later said Ukraine needs catalysts to get out of low growth doldrums. (James Brooke)

Attack on Paperwork

On cutting red tape, Partskhaladze cited a World Bank survey indicating that Ukraine made big strides in ease of obtaining construction permits and ease of paying taxes. In rural areas, he said, the government aims to stream line the process of registering a farm land title -- from the current 55 documents and one year, to five documents and 40 days.

Ukraine is moving its land cadaster to block chain technology, a change that should disable double registrations and prevent unauthorized interference, said Natalia Kochergina, head of real estate at DLA Piper Ukraine. By offering online registrations of land titles, Ukraine is cutting registration times from two weeks to one day.

Big Catalysts Needed for A Growth Jolt

To spark strong economic growth, Ukraine needs catalysts – a private land market, foreign investment and major infrastructure projects -- said Ivan Kompan, Managing Partner and Finance Tutor of the Edinburgh Business School.

Since 1990, Poland has attracted four times the foreign direct investment of Ukraine, he said.

“To grow at 5 to 10% per year, we need to attract tens of billions of dollars in FDI,” he said.

Turkish construction companies are waiting for Ukraine's concession law before taking on big infrastructure projects, says Burak Pehlivan, president of TUID, the Turkish Ukrainian Business Association. British banks are waiting for the cloud to lift from Ukraine's image, says Yulia Stepanova, London-based EBRD senior banker for real estate. (James Brooke)

Turkey Waiting for Public Private Partnerships

A public private partnership law will trigger big spending in highway construction, predicted, Burak Pehlivan, president of TUID, the Turkish Ukrainian Business Association.

Such a law enabled $150 billion in Turkish infrastructure construction from 1990 to 2015, he said. This helped Turkey’s economy quadruple during this period.

“In Ukraine, we hope a PPP concessions law will take effect in April 2018,” he said. “A concession law will open the door for Turkish construction companies, for Turkish real estate companies, to invest more in Ukraine.”

To date, he said, Turkish construction companies have carried out in Ukraine167 projects worth a total of $6 billion. Crossing the Black Sea, 600 Turkish companies have invested $2.5 billion in Ukraine.

Tarkan Kadooglu said many Turkish investors are waiting to see a real effort against corruption before they cross the Black Sea. (James Brooke)

Pehlivan’s boss, Tarkan Kadooglu, flew in from Istanbul to address the gathering of real estate and construction executives.

“There are big opportunities here in construction of roads and big buildings,” said Kadooglu, who is president of Turkonfed, the Turkish Enterprise and Business Confederation, an association of 40,000 Turkish small and medium sized businesses.

Citing the new visa-free, passport-free travel regime between Turkey and Ukraine, he said he hopes that both countries will soon complete negotiations on a bilateral free trade pact.

In an interview, he said many Turkish investors are waiting, on the south shore of the Black Sea, for Ukraine to visibly cut corruption.

“Ukraine’s government should be more transparent, and there should not be any corruption,” he said. “The problems are not so big. But many Turkish investors are just waiting for government to increase transparency and diminish corruption.”

Barriers: Ukraine's Poor Image and Brain Drain

From a different corner, Yulia Stepanova, a London-based EBRD senior banker for real estate, said London banks resist joining syndicated loans for projects in Ukraine. In contrast, she said, they are opening to joining projects in Georgia, Mongolia and Kazakhstan.

For Adrian Salter, British-owner of MEP Engineering, the challenge is Ukraine’s brain drain.

“In the last six months, we have lost four engineers – one to Canada, one to Israel, one to Britain, one to Germany,” he said of his shrinking Kyiv office on Lva Tolstoho. Gesturing to the coffee break crowd of construction executives, he said: “And candidates are asking for salaries that the people here won’t pay.”


For comments and story ideas, please contact UBJ Editor in Chief James Brooke at james.brooke@theubj.com

Posted Nov. 23, 2017

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