Ukraine

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8:39 AM Thursday, October 19, 2017
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UBJ AM Sept. 18, 2017
German investor complains of government pressure; Siemens complains of Russian pressure; Foreign trade is up; Startups fare well with crowdfunding platforms
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• Martin Schumacher, managing of Metro Cash & Carry Ukraine, Germany’s largest investment in Ukraine, told Prime Minister Groysman at the YES conference that “aggressive actions by government agencies” has “muted” his enthusiasm to expand the retail chain beyond its current level of 31 stores. In response, Groysman warned government employees: “Those who infringe on business interests will be controlled and destroyed.”

• Germany’s Siemens has stopped supplying new compressors to equipment modernize Ukraine’s gas transportation system out of fearing losing orders in Russia, Andriy Koboliev, board head of Naftogaz, Ukraine’s gas transporting monopoly, told the Yalta European Strategy meeting on Saturday. He said: “We had a call from Siemens, and they said that if they delivered another piece of the equipment, their supplies to Russia would be reduced to zero.”

• Ukraine’s foreign trade is registering a healthy increase year over year. From January to July, exports were up 22 percent and imports were up 29 percent. The trade deficit for the period is $2.7 billion, almost triple the level of the same period last year, according to the State Statistics Service.

• IMF spokesman Gerry Rice has listed key requirements for Ukraine to complete the fall review and win the next tranche: pension reform, measures to speed up privatization, concrete results in the anti-corruption effort, natural gas price hikes to market levels. Alexander Paraschiy of Concorde Capital reviews the reform measures and concludes: “Though all this seems like a lot, the government has been long aware of these requirements, and we see them as being possible to complete in order to get the tranche - which we expect at $1 billion - by the year end.”

• David Lipton, IMF’s First Deputy Managing Director, is frustrated with Ukrainian foot dragging on creating a market for farm land. Speaking to Ekonomichna Pravda before leaving Kyiv last week, he said: “"For the last quarter of the century I’m being told by various politicians that land reform in Ukraine is impossible. It is true that it takes time and benefits come over time. But it shouldn't take 25 years! We see the revival of agriculture, which is clearly among Ukraine’s strengths.”

• On leaving Ukraine last week, Lipton fired off two parting tweets: "Ukraine: Reforms are crucial to maintain intl. support & boost #growth. Keeping budget, energy prices right & fighting #corruption is key,” And: "Improving the business environment & supporting #investment are necessary to help #Ukraine catch up with the income levels of its peers."

• The government will create next year an Export Credit Agency to provide insurance and reinsurance to exporters, Natalia Mikolska, Ukraine's trade representative, told Interfax. She said insurance services are the simplest and have the maximum rate of return. Last year, the IMF and the National Bank of Ukraine opposed creating an Export Credit Agency, saying it would duplicate services provided by Ukreximbank.

• As a result of the 10-year ban on the export of logs, imposed on Jan. 1, capital investment in wood processing tripled during the first half of this year, to UAH 3.1 billion, or $120 million, according to Viktor Galasyuk, Chairman of Rada Committee on Industrial Policy and Entrepreneurship. The furniture industry grew by 27%, and exports of chairs and sofas grew by 40%, or $ 37 million.

With investment capital scarce and expensive, Ukrainian startups are having success with the world’s two largest crowdfunding platforms, Kickstarter and Indiegogo. As of mid-August, Ukrainian ventures have raised $1.9 million this year – four times their initial targets, according to analysis by the Ukrainian Venture Capital and Private Equity Association. For Ukrainian developers, Kickstarter was more popular, drawing 27 Ukrainian campaigns, or 77% of all projects. Successful funding campaigns included Jollylook, Senstone and UGEARS Hurdy-Gurdy.

• A delegation from Ukraine’s Ministry of Economy and Commerce is in Istanbul this week studying Turkey's experiences in Public-Private Partnerships, or PPPs. Led by Deputy Minister Mykhailo Titarchuk, the group will study the Yavuz Sultan Selim Bridge and the Eurasian Tunnel, two multi-billion dollar, cross-Bosphorus projects that opened last year. They also will study Istanbul New Airport. Scheduled to open one year from now, the airport is to have five 3,750 meter runways and a capacity of handling 150 million passengers a year. This will make it the world’s biggest airport.

• Moving to advance a Turkey-Ukraine free trade pact, Turkey is cutting import duties on a series of agricultural imports from Ukraine. Duties for imports of cattle drop to 26%, for wheat to 45%, barley to 35%, and corn to 25%, Ukraine Ministry of Agrarian Policy and Food reports.

• Defense and security spending grows by 15% in the 2018 budget, according to Prime Minister Volodymyr Groysman. Overall this spending will account for 5% of GDP.

• State gas producer Ukrgazvydobuvannya plans to double drilling next year, the company's executive director Alexander Romanyuk, has told pipe producers. The company produce 75 percent of gas in Ukraine. Last year it increased drilling by only 14 %. Recently, the government set a goal of self sufficiency in gas by 2020.

• The European Investment Bank is preparing two major energy loans: EUR 37 million to boost gas production at Ukrgazvydobuvannia fields and EUR 130 million to modernize power substations of electricity suppliers. Vice Prime Minister Volodymyr Kistion met with EIB Vice President Vazil Hudak and later said the agreement would be ready by December.

• During the first half of this year, DTEK Energo increased capital investments by 64%, to UAH 3.6 billion, or $140 million, according to Dmitry Saharuk, the company's CEO. Most of the money was spent on adapting power plants to new kinds of coal, after DTEK lost access to coal from the occupied territories in the spring. Overall, DTEK Energy plans to increase capital investment 30% year over year.

• This Thursday, President Poroshenko meets U.S. President Donald Trump in New York, on the margins of the annual United Nations General Assembly, President’s Spokesman Svyatoslav Tsegolko has said.


For comments and story tips, email UBJ Editor James Brooke at james.brooke@theubj.com

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