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Foreign investors have become increasingly wary of Ukraine since Russia’s annexation of Crimea and the start of the rebellion in the east last year. But there is room for optimism.
This could be a good time for foreign investors, believes Robert Koenig, a US businessman and adviser to Kyiv mayor and former heavyweight boxing champion Vitalii Klitchko. “My own investment experience shows there is a lot of money to be made in a crisis situation,” says Koenig, who controls the Ukrainian franchises of luxury brands such as Tiffany, Burberry and Montblanc. “We are now at the bottom, so it’s definitely not time to sell.”
Indeed, at the time of going to press, Koenig and Klitschko were planning to visit New York and Washington to raise money for an investment fund focused on the capital’s urban projects. The fund is managed by Ukrainian brokerage Dragon Capital for pension schemes and wealthy individuals.
In addition to pressures from across the border, Ukraine’s government faces huge challenges of modernising and “de-oligarchising” a floundering economy dominated by four big business clans.
President Petro Poroshenko has achieved the first stage of this task by curbing the powers of metals, media and banking magnate Ihor Kolomoisky, recently stripped of his duties as governor after camouflage-clad men turned up at an oil company that Kolomoisky was battling to retain control of. One of the most vocal critics of the oligarchs is Serhiy Leshchenko, a well-known journalist and activist in the street protests that led to the abdication of President Viktor Yanukovich last year. Leshchenko has been elected to parliament in Poroshenko’s bloc. Armed people being sent on to the street outside the headquarters of [partially state-owned oil company] Ukrnafta was a challenge to the president’s legitimacy to govern Ukraine, says Leshchenko, a gangly, bearded figure, known for his fearless investigations. “Only Poroshenko has the right to do this. The president did the right thing by sacking him. This marks the first stage of de-oligarchisation of Ukraine.” Kolomoisky has denied that the armed men were summoned by him and that they came from one of the volunteer military battalions he supports.
The dismantling of oligarchs’ power must coincide with a small business renaissance. Remixing the economy by encouraging start-ups and entrepreneurs in information technology, farming and agriculture is undoubtedly the way forward, says political analyst and former presidential adviser Vadym Karasyov over green tea in his favourite O’Panas restaurant in Kiev. “Ukrainian economics needs to move from a post-communist model to a European model, involving a new middle class, but this will take at least 10 years.”
“At the moment, everything is imported — even toilet paper and toothpaste are Polish,” adds Leshchenko. “This is the opportunity for the rebirth of domestic manufacturing, which will be much cheaper for consumers than buying foreign goods. Currency devaluation means that for $300, people will work eight hours, five days a week.”
For foreign investors in particular, this may be a unique window of opportunity.
Source: http://www.ft.com/intl/cms/s/2/10cf75b4-efd4-11e4-ab73-00144feab7de.html#axzz3aVBPsvig
