In addition to its golden-domed churches, majestic tree-lined boulevards and vistas over the Dnieper River, Ukraine’s historic capital city of Kiev boasts many lesser-known attractions.

One of these is the Pecherska Lavra or ‘Monastery of the Caves’, a complex system of 11th-century underground tunnels and caverns, often full of monks chanting Orthodox incantations in the Old Church Slavonic language. Not far from this is the head office of the State Agency for Investment and National Projects of Ukraine, a new government initiative to attract foreign money to domestic projects.

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In many ways the Ukrainian political system can be said to resemble the bewildering patchwork of passages, living quarters and underground chapels that make up the Lavra. The new initiative is an “experiment” in project management, says Vladyslav Kaskiv, head of the state agency and a member of the Ukrainian government. “This is all about personal responsibility for concrete projects, which are the priority for our president. Investment is like oxygen in the blood. You cannot do anything without it.”

Widening their appeal 

While previous initiatives in Ukraine have focused on attracting investment from Europe, the latest series of Invest Ukraine roadshows is also taking place in Asian capitals. “There is a sea-change in our markets,” says Vladyslav Kaskiv, head of the State Agency for Investment and National Projects of Ukraine. “We have put a big accent on government communications with Asian countries since last year. These are already showing solid results.”

Countries recently visited by Mr Kaskiv and his team include Japan, China, Vietnam and Brunei. Partnerships with Asian investors are often preferred because their governments are able to underwrite their investments in industrial projects with state guarantees, due to stronger national finances. “In today’s environment, you need to actively move and search, not just stand in one place,” says Mr Kaskiv.

Political dimension

Ukraine has been somewhat starved of this oxygen of late, as investors are put off by the country's instability and concerns surrounding the trial and imprisonment of both business figures and opposition politicians. The most recent case involves former prime minister Yulia Tymoshenko, who was sentenced to seven years in prison for apparently exceeding her authority in gas price negotiations with her Russian counterparts. Other members of her party are also behind bars.

These incarcerations have taken place despite the protests of EU officials and foreign diplomats, who are threatening to withdraw the the Ukraine's membership to a free-trade pact with the EU.

The high-profile, politically driven Tymoshenko case is yet to reach its full conclusion, says Mr Kaskiv. “There is much criticism of Ukraine. But we are already at the culmination of our integration into Europe,” he says.

In the long term he envisages solving Ukraine’s key political disputes through investment projects. “If you talk about politics, all of Ukraine’s problems stem from one gas pipe connected to Russia,” with the provision of energy attracting many corrupt practices from rival, profiteering businesses. “We can break the spine of this corrupt system by building a new liquefied natural gas [LNG] terminal in Ukraine.”

Not only does Mr Kaskiv aim to finance natural gas exploration on the Black Sea shelf – off the vast country's southern coast – but he is also seeking to improve energy efficiency by incentivising the insulation of Ukraine's houses, which currently use four times as much energy on average as their European neighbours.

“Not only do we currently buy gas for high prices from Russia, but we then lose more money by giving discounts to domestic users,” says Mr Kaskiv, who wishes to steer the country to a new era, if not one of energy self-sufficiency, then at least one where they are less dependent on their neighbour to the east.

Outside help

A series of other new projects – including the financing of a bid for the 2022 Winter Olympic Games and a 'Clean City' waste recycling initiative – will work according to open tenders. The Clean City project envisages major opportunities for foreign partners interested in processing and recycling waste materials and using them to create alternative fuels. It is planned for large Ukrainian conurbations including Kiev, Dnipropetrovsk, Donetsk and Kharkiv.

Solid waste is currently disposed of in more than 4000 heavily overloaded landfill sites, which fail to meet basic environmental safety standards, and concern is mounting that seepage may be polluting water supplies. The Olympic bid will focus on the historic western city of Lviv, and the nearby Carpathian mountain range. The government plans to finance both of these new projects through foreign private investments rather than funds from the state budget.

Ukraine has had to learn from the mistakes it made when preparing for the Euro 2012 football tournament, which the country is co-hosting with Poland.

While modern stadiums in eastern cities Kharkiv and Donetsk were built respectively by local oligarchs Oleksandr Yaroslavsky and Rinat Akhmetov – Ukraine’s richest man – the Kiev and Lviv stadiums were financed by the already overstretched state budget. Opposition politicians calculated that $14bn of taxpayers funds was spent preparing stadiums, roads, air terminals and other public facilities for the tournament.

“The majority of costs were covered by the state,” admits tournament director Markiyan Lubkivsky. “I hope that the lesson of Euro 2012 will also change the investment attractiveness of our country and next time... Ukraine will benefit from foreign investment flows as well. Euro 2012 is just a first step on this uneasy road as we have to root out the legacy of Soviet times prior to attracting international investment.”

New model

The process of appointing favoured companies to contracts without open tenders has proved unpopular with many Ukrainians, including government members. As part of the ruling authorities, Mr Kaskiv will not comment on the ethics of recent questionable practices and allegations of corruption made during the run-up to the tournament. He says that he is bound by collective responsibility for the actions.

Mr Kaskiv favours a new model of financing major projects, however, that will involve a public-private partnership model, with the lion’s share of costs provided by foreign investments rather than state money.

“My priorities are national projects and investors must see a transparent process for them to succeed,” he says. “When investors come here, they see low labour costs, highly qualified people and a wealth of natural resources, which really opens their eyes. The problems are the lack of infrastructure, [and the] bureaucracy and corruption, which the president has been addressing. If these problems go, then everything will be fine.”