From the outside looking in, it is difficult to see how exactly Ukraine works as an entity, or how it stays together. It is a fractious, bipolar country, all but pulled in half by tensions both internal and external. So, how to go about pursuing a co-ordinated, cohesive investment promotion strategy and national economic development plan?
That question was a hot one at the Lviv International Economic Forum, which was held in early October. InvestUkraine, the national centre for investment promotion, is working to resolve the question, and its new director, Olena Hantsyak-Kaskiv, was on hand, taking lots of notes throughout discussions and eager to glean best practices from the international participants.
The most interesting domestic participant, however, was the one who is a central player in the divisive, tumultuous politics of the country but also perhaps the only one with the star wattage to raise (if not improve, which is a matter of opinion) its profile internationally.
Appearing at the final session of the event, prime minister Yulia Tymoshenko draws a standing-room-only crowd – a diminutive, doll-like figure who sits demurely with ankles crossed wearing a white lace dress and famous blonde braid wrapped around the top of her head, while introductory remarks are made ahead of her keynote address. She is a controversial yet charismatic figure with a complicated biography, from oligarch and so-called ‘gas princess’ who made a fortune in the energy industry, to antagonist in the Orange Revolution that followed questionable presidential elections in November 2004 and brought her erstwhile ally Viktor Yushchenko to power (whom she will challenge in presidential elections in January 2010).
Speaking to fDi (in Ukrainian) on the sidelines of the forum, she is every bit the partisan, pinning the blame on political opponents and positioning her bloc as the solution to the instability, although, it must be said, with no small amount of charm.
“Indeed, right now there is a political crisis in Ukraine that has been caused by two factors. First of all, it’s an absolutely unprofessional constitutional reform conducted during the last presidential elections with all its consequences right now; and, secondly, [we are facing] the next presidential elections which always, in any democratic society, mean competition and today complicate relations between all presidential candidates,” she says.
“However, I do hope that by the middle of next February the rivalry will be over, and then the Ukrainian parliament, and all political forces, will be ready for a new constitutional reform that would clean this intolerable chaos.”
Chaos, certainly, is not a state that investors enjoy – economic, political or otherwise. Yet the prime minister would urge investors not to bide their time while she works the political angle and while the economy seeks a way back from the brink.
“I believe that even today neither the political situation nor the current crisis should prevent investors from bringing investments into Ukraine, as right now there are most suitable opportunities for that,” she says.
Foremost among these opportunities, from the prime minister’s perspective, include the energy sector – an area she knows intimately and a hot-button issue if ever there was one, given the geopolitical complexities surrounding European energy dependency on Russia, and Russia’s willingness to make full political use of this upper hand.
“Ukraine indeed offers great opportunities; particularly, immense possibilities lie in the energy sector, where Ukraine lags behind in an efficient power-consuming of both industrial and household sectors. That’s why Ukraine needs investors particularly in this sector,” she says.
The prime minister devoted a decent chunk of her speech at the forum to promoting renewable energy initiatives. “Today we have everything in place for Ukraine to join the common efforts for using alternative sources of energy,” she said.
Tax benefits on renewable energy
From January 1, 2010, new legislation will come into force under which companies involved in using alternative regenerative sources of energy will be exempt from paying taxes for 10 years. It is a significant change.
“Currently in the whole spreadsheet of the Ukrainian energy consumption, it’s only 0.83% that is generated from using alternative energy sources. At the same time in [developed] countries, where they are much more involved in this matter, a share of energy coming from those sources is up to 15% and in certain cases even to 25%,” she says.
“We have to remember that Ukraine has simply unlimited resources that can be used as regenerative alternative sources of energy. That’s why I would like us to work more on this problem... This is the exciting and new prospects for the potential investors into our economy.”
Days after the Lviv event, she told local media that Ukraine will cut purchases of Russian gas next year, following a statement by Gazprom CEO Alexei Miller that the company will not reduce the volumes of gas supplied to Ukraine in 2010.
Energy sector importance aside, Ukraine is still largely an agricultural country. It offers “the highest-quality soils”, which have not been fully exploited for agribusiness. “That is why it is necessary for the future investors to come here and assess the current situation to decide what investments are needed and how they would work in the most efficient way,” Ms Tymoshenko comments to fDi before making her way through the crush of people all shouting for her attention. “They have to come here to work as this sector offers great opportunities and markets for the produce, as well as fantastic export potential.”
Deputy of parliament
1998Strategic Committee on Budgeting of the Ukraine Parliament