Government, business leaders talk about how to spur investment in Ukraine

Business and government representatives gathered to discuss the investment climate at the New Ukraine Investment Conference in Parkovy Center in Kyiv on May 17.

The first session covered macroeconomic and geopolitical issues.

Dmytro Shymkiv, deputy head of the Presidential Administration, claimed that an EY, also known as Ernst & Young report highlighting corruption in Ukraine is misleading and praised Ukraine’s economic growth, which is expected to reach 2-3 percent this year. Still, despite the return to growth, Ukraine’s gross domestic product is officially about half of its 2013 level of $180 billion.

In April, EY said that Ukraine tops the fraud rating composed of 41 countries of Europe, the Middle East, India and Africa, according to a 2017 fraud survey conducted at the request of Ernst & Young. Oleksiy Kredisov, managing partner of EY Ukraine, was quoted on April 11 by UNIAN news agency as saying that “the lack of economic growth and absence of improvements in the business climate in our country in combination with the inefficient system of penalties may push businessmen for violation of ethical business conduct.” Shymkiv, however, noted improvements: Tax revenues are increasing and a new Supreme Court, which is in the final stages of the selection process, will be free of political bias. “We need to build institutions, and building institutions across the globe is a complicated process,” he said. He emphasized that the investment climate has been hampered by Russia’s three-year war against Ukraine and by “Russian companies trying to seize assets of Ukrainian companies in the east.”

He noted that the market for food grown with non-genetically modified organisms, or GMOs, is growing and that Ukraine, as a non-GMO country, is in a position to capitalize on this trend. Finally, he said that food security will become an increasingly important issue and predicted that within the next decade Ukraine will become the largest grain exporter in the world—overtaking even the United States — although he did stress that the country needs to improve its logistical capacity for storage and transit of food products in order to achieve this rather ambitious goal.

Gregory Brian Seel, treasury attaché for the U.S. Embassy in Ukraine, started off by saying that “2-3% growth in gross domestic product just isn’t going to cut it, so we’re thinking of ways to go from there.” He noted that, given Ukraine’s dependency on commodities, higher growth is unlikely to come from exports. “For us, it really comes down to investment, and the only way to drive higher investment is to improve the investment climate,” Seel said.

Seel said that reforms in the justice system and agriculture would lead to higher consumption and growth. He also reassured the audience that even with Donald Trump as the American president, the U.S. remains committed to Ukraine and that he expected no change in the policy of economic sanctions against Russia.

David Snelbecker, CEO of International Development Group LLC, delivered a short presentation on historical management in Ukraine. He said Ukraine’s managerial capacity has been hindered by its history of being occupied by outside empires. In order to overcome these disadvantages, he said the country needs grassroots and national support for change, noting that “reform won’t happen unless the people demand it.” He said Ukraine must improve public administration and management capacity, use more digital tools and convince oligarchs to accept changes.

Ihor Petrashko, deputy CEO of Ukrlandfarming PLC, started by accusing the news media of reporting the EY findings on corruption in Ukraine in a misleading manner. He said Ukraine needs to create a climate that encourages people to open small and medium-sized businesses and advocating the adoption of the integrated information systems for accounting that is used in many countries. He took a hard line on privatization, arguing that “the government mismanages all businesses under its control” and “everything needs to go private.”

Finally, Petrashko said that law enforcement reform is necessary to create a better business climate. Oleg Ustenko, executive director of the Bleyzer Foundation, struck a more skeptical note, saying that, despite some progress and a vibrant civil society, Ukraine has lagged behind its neighbors in terms of economic development for good reason. “The world is moving very fast, but Ukraine is not moving very fast,” Ustenko said. Corruption and the lack of rule of law remained the biggest obstacles to attracting investment, Ustenko said.

By Will Cohen