There is a saying: if the mountain will not come to Muhammad, then Muhammad will go to the mountain. The same thing is happening with foreign investments in Ukraine. Since foreign investors still have many prejudices about our country and are afraid to invest here because they are not familiar with the nuances of our legislation and bureaucratic habits, it was decided to get a few of them together and explain that Ukraine is a country where you can do business.
The people who should be doing the explaining are not bureaucrats or even Ukrainian businessmen accustomed to living and operating in such conditions, but other foreign investors, who have spent some time working in Ukraine. It was decided to begin with Estonia, Ukraine’s former Soviet neighbor, because Estonians apparently understand us better than wealthier Western Europeans.
“You can work in Ukraine,” says Scott Brown, a lawyer with Frishbern & Partners. He has worked in Ukraine since 1998 and emphasizes that “there is no Mafia here.” After tipping his hat to stereotypes dating from the 1990s, he said the problem for most Western investors is the fact that they can obtain information about Ukraine only from the press, where everything is presented through the prism of politics without dwelling on legislation and the actual status of the economy.
In his opinion (which happens to differ cardinally from that of the Ukrainian expert community), politics in this country does not have any special impact on business. It is considerably more important to know what is happening with laws. Brown reassured several wary Estonian businessmen and bureaucrats by declaring that Ukrainian legislation is perfectly acceptable for doing business. There is even a law on foreign investment procedures, which lacks clear-cut guarantees for investors (here’s a minor shortcoming for you!)
After declaring once again that Ukraine is a beautiful country for investments, with a good geographical position, cheap manpower, and vast consumer market, the veteran investor proceeded to feed his potential colleagues information indicating that they would do best by starting their own companies because branches can have problems with taxes (foreigners operating in Ukraine generally tend to keep clear of shares and joint stock companies, preferring to do business with limited partnerships). His summary sounded somewhat paradoxical to his Estonian audience: “There are no benefits for foreign investors in Ukraine; you will have to work on par with all businesses.”
Along with his laudatory comments about Ukraine, Brown criticized the slowness of our bureaucrats, noting that it takes them too long to draw up all the paperwork. He also cautioned the businessmen in the audience (who were apparently impressed by his presentation and willing to make investments in Ukraine) to check their papers without trusting standard contracts. “What works in Poland or France won’t work here,” he declared, stressing that every business partner should be checked twice.
His recommendations were supplemented by a description of Ukrainian tax peculiarities. Their main feature is equality of all investors, foreign as well as domestic ones, noted Natalia Maksymenkova, senior consultant at Deloitte & Touche Ukraine. She told her Estonian colleagues about the rates and specifics of Ukrainian taxation. In this part of the enlightening forum the Estonians should have been surprised by amendments to the Ukrainian budget that can instantly change the tax laws. Her statement hit the mark, as the faces of some of the businessmen in the audience became more somber.
The next pill offered was no sweeter. Upon entering a new country, an investor needs banking services, and it would be good to know in advance what bank to turn to and what to expect from it. At this point the Estonians should have been reassured. Oleksiy Nikolaienko, deputy commercial manager of Calyon Bank Ukraine, emphasized that “Ukraine’s largest banks have been bought out by foreigners.” In other words, one can do business with them and expect European-style service.
However, this expert says that there are still problems in Ukraine’s banking sphere. Banks here are loath to undertake long-term projects. It is difficult to obtain long-term hryvnia loans; companies face foreign exchange risks because of Ukraine’s dependence on the US dollar. “Nevertheless, it is possible to find a bank as a reliable business partner in Ukraine,” Nikolaienko assured the audience.
This is the first time such an explanatory forum has been held in Ukraine. Its results are anyone’s guess so far. But the idea is good.
