INVEST RESPONSIBLY: Investments in Ukraine —Achievements & Issues
10 min read
On the occasion of Entrepreneur’s Day in Ukraine
Sergiy Tsivkach, CEO of UkraineInvest, the government of Ukraine’s investment attraction and promotion office, published an article “Investing in Ukraine? Now is the ideal time”. The article reads the following:
«Investors may be nervous about Ukraine’s security and prospects, but this is the moment to make their move, says the head of UkraineInvest.
“The opportunity always lies in the middle of difficulty,” according to a quote by Albert Einstein.
Ukraine has long been known for its economic potential, and now it seems as though the country may be receiving another chance at becoming a breakthrough investment destination. Despite the illegal Russian war that is ultimately creating the need to rebuild Ukraine better, a number of international companies, including Kingspan, which recently made a €200m ($199m) investment announcement, have expressed interest in entering the country – but why?
There are several reasons…»
What are these reasons? S. Tsivkach listed them as follows: (1) Ukraine is rich in natural resources; (2) Ukraine has a ripe talent pool; (3) Ukraine holds large economic potential; (4) Ukraine’s government is investor friendly; (5) Investing in Ukraine is an act of honor; (6) The Ukrainian IT sector is booming; (7) Additional Ukrainian products are endless; (8) The open question; (9) A closer look at the Kingspan case; (10) Ukraine gets another chance.
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Years ago, I used to work for three years for Fidelity Investments — one of the largest American investment enterprises. That priceless experience and opportunity to talk to many highly qualified professionals in the field give me the right to offer my view on investing in Ukraine issues.
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…Okay, we can agree with all of these individual points. They not only sound optimistic and beautiful. There is certainly something behind each of these theses. Ukraine has an extremely large economic, in particular, investment potential.
Let me remind you that at the time of gaining independence in 1991, Ukraine inherited from the USSR a very powerful economy, which listed Ukraine in the ten (sic!) most powerful economies in the world. And this is without the fact that Russia would have to give Ukraine another 16% of the all-Union heritage that the Russian Federation, as the self-proclaimed heir of the USSR, left for itself.
Three decades have passed. During the years of its independence, Ukraine not only did not develop, did not increase its economic power, but on the contrary, it squandered what it inherited, and ended up among the poorest countries in the world.
The problem is that with the collapse of the USSR, what someone has now aptly called the “Great Theft” began in Ukraine. They stole state property (because it’s nobody’s property) and squeezed each other.
On this occasion, I will remind you of an extremely interesting episode, which few people talk about, because it remained unnoticed even then, although one of the characters of which was the newly elected president of Ukraine, Leonid Kravchuk.
If you thought I was referring to the destruction of Black Sea Shipping, one of the largest companies in the world, then you are wrong. Although the disappearance of this company was one of the great embezzlements that required investigation, this episode was most likely just business and had no visible relation to major world politics.
It is about a much smaller business, which turned out to be the beginning of major destructive processes in the formation of independent Ukraine in general and its economy in particular. This business is called Dynamo Football Club (Kyiv). “What a business!” — you might say. It depends from which point of view you look at it. Currently, we are interested in the topic of investments as a perspective for Ukraine.
So, as you know, L. Kravchuk was an ardent football fan. I know this well personally, having worked for several years as a deputy for Anatoly Moskalenko, Kravchuk’s suitor. Back in the USSR, Kravchuk became the honorary president of Dynamo (Kyiv). When opportunities for foreign investment opened up in Ukraine, people close to Kravchuk brought in the cooperation of a young successful entrepreneur from the USA, Jeff Ostrovsky, whose father lived in Kyiv. Ostrovsky bought Dynamo (Kyiv). As a politician, Kravchuk did not officially receive his share in this business, but people from his circle — Viktor Medvedchuk and the Surkis brothers (Grigoriy and Igor) did. They became Ostrovsky’s official business partners.
How difficult was to do business in the Soviet Union in general and in the Soviet Ukraine in particular, Jeff Ostrovsky told The Washington Post in June of 1991 that was published in Baltimore Sun as well (see: DOING BUSINESS IN THE SOVIET UNION CAN BE TOUGH_AND PROFITABLE — The Washington Post; Soviet dealings require patience Soviet Union is likened to the “Wild West.” – Baltimore Sun).
Cooperation quickly gained such momentum that these businessmen reached out to then still powerful M. Gorbachev, passing to him a painting by an American artist. Of course, they did not meet Gorbachev in person, but they showed Ostrovsky to the Russian special services…
Ukrainian Worldwide Information Network (UWIN) wrote about this on June 13, 2021 on 30 years anniversary of this event:
“Gift for Mikhail Gorbachev from America
This Spring it is exactly thirty years since the US press actively talked about the cooperation of American business circles with the USSR, in particular – with Ukraine. In this regard, we decided to publish on our website some of the materials that mention the names of businessmen and companies, which will remind many of the events of the early 1990s in both the United States and Ukraine. Our publications will be accompanied by photos from private archives that have not yet been published” (you could see this here at that time, but now the publication is not available).
Soon after that the USSR collapsed, Ukraine became independent, Kravchuk became president, diplomatic relations were established between Ukraine and the USA, and the young, energetic Jeff Ostrovsky, who himself, it would seem, had already firmly established himself on the Ukrainian investment market, initiated the formation of a whole pool of American investors to work in Ukraine. The President of Ukraine Kravchuk became interested in this initiative, who, according to information of a person close to Ostrovsky, privately and secretly came to Ostrovsky’s home accompanied by a young woman (I assume that it could be Kravchuk’s daughter-in-law). Obviously, work with potential investors was conducted without wide publicity.
Sometime in early 1992, a grand gathering of 800 (eight hundred!) American entrepreneurs and business managers was to take place in New York. But this meeting was not destined to take place: during the final preparations for the meeting, Jeff Ostrovsky was treacherously murdered. It was a high-profile murder that even The New York Times wrote about (see: Ambush at Home Ends Life and Dreams of Immigrant — The New York Times).
For the American crime investigators and for the American court, it was obvious that the murder of Ostrovsky was ordered, but because the orderers were far away, the American themis was limited to punishing only the executors. One can guess from the fact that shortly after the murder of Ostrovsky, Medvedchuk and the Surkis brothers took over his business in Ukraine. Well, according to the way Russian investors have actively started entering Ukraine, we can make a sure conclusion about which country’s shadow is hanging over this criminal case.
Leonid Roytman, one of the participants in the Ostrovsky murder, after serving a prison sentence, in his numerous interviews (Google will help you) for the media of Russian immigration in the USA, as well as for the media and burghers in Ukraine, not only confirms the involvement of Medvedchuk, the Surkis brothers and Russian mafia groups in the murder of Ostrovsky, but also reveals in detail the influence of the latter on the investment climate, investment policy and investment processes in Ukraine.
Russia’s war in Ukraine may have exposed numerous pain points in this area, but it hardly improved the situation. Competing with gangster Russian or pro-Russian capital is one of the biggest risks for civilized investors in Ukraine.
The law enforcement system is unable to protect domestic businesses and investments, and the protection of foreign businesses and investments is even more problematic. The problem here is not only the imperfection of the relevant legislation, but also the system of implementation of the current legislation and the right declared in the Constitution. It is not only about judiciary problems, but also problems of general culture, level of consciousness and civic maturity of Ukrainian society.
In this connection, the question of political culture, political integrity and political will of political and state institutions in their attitude towards businesses and investors also arises.
And here I will go back to purely investment topics. We will not delve deeply into the historical experience of independent Ukraine. Let’s look at investment practices of the last few years. As you know, during Petro Poroshenko’s presidency, there was a special investment body, which was formally headed by the president himself, and the secretary, that is, the “executive power”, was Boris Lozhkin, who before that was the head of the presidential administration. The project gained wide publicity, Lozhkin organized all kinds of investment events, traveled around the world to attract investments, etc. He was definitely able to attract some investments, even if they were not multibillion-dollar ones. Now it would be interesting to know what those funds were invested in and what profit they brought to Ukraine. Society should know about it, but it doesn’t. If Poroshenko as a politician can still be noticed in the information space, it is not so easy to see Lozhkin — the man has sunk to the bottom…
And now it is interesting to see what UkraineInvest is.
UkraineInvest is a government office for investment attraction and support, created in 2016, i.e. during Poroshenko’s presidency, to attract foreign direct investment and help existing investors expand their business in Ukraine.
During Zelenskyi’s presidency, the head of the “Servant of the People” faction in the Verkhovna Rada of Ukraine, Davyd Arakhamiya, headed the UkraineInvest Supervisory Board.
Here is the personal composition of this supervisory board: People’s Deputy Davyd Arahamiya, Deputy Minister of Digital Transformation Oleksandr Bornyakov, President of the American Chamber of Commerce in Ukraine Andy Hunder, Executive Director of the EBA Hanna Derevyanko, Minister of the Cabinet of Ministers Oleg Nemchinov, President of the Chamber of Commerce and Industry of Ukraine Hennadiy Chyzhikov , executive director of “Ukrainian House in Davos” Alexandra Chopivsky and people’s deputy Halyna Yanchenko (see: Арахамія очолив наглядову раду Офісу із залучення інвестицій UkraineInvest | Економічна правда).
One of very interesting figures on the UkraineInvest Supervisory Board is President of the Chamber of Commerce and Industry of Ukraine Hennadiy Chyzhikov, whose entourage consists of… Viktor Medvedchuk‘s and Viktor Yanukovych’s people.
You can read more about H. Chyzhikov here: President of the Kyiv Chamber of Commerce and Industry Mykola Zasulsky actively lobbies for the interests of the Kremlin | Публичная люстрация Геннадия Чижикова – президента Торгово-промышленной палаты Украины; Рейдеры Чижиков Геннадий Дмитриевич и Дубовой Александр Фёдорович в деле ТПП или эвтаназия украинского бизнеса • Портал Компромат; БІЗНЕС-СНІДАНОК З ВАСИЛЕМ ХМЕЛЬНИЦЬКИМ ТА ГЕННАДІЄМ ЧИЖИКОВИМ – Новини Київської ТПП — КТПП. Google will help you to learn much more.
Among the members of the supervisory board, we see Aleksandra Chopivsky, the daughter of the well-known Ukrainian-American businessman and philanthropist Yuri Chopivskyi, who has been investing in Ukraine for a long time and who, according to our information, was “robbed” in Ukraine by the late Ivan Saliy of more than one and a half million dollars.
The most recent example is related to Volodymyr Zelenskyy’s presidency. During his tenure, considerable investments from Western partners came to Ukraine. One of these investments came as an investment in the health of Ukrainians, because the Covid-19 epidemic began. At this moment, the President of Ukraine has initiated the so-called “Big Construction”, and so it is said that the money intended for the fight against Covid was allegedly redirected to the construction of bridges and roads, that is, as the people say, it was poured into concrete and rolled into asphalt. And then the large-scale war of Russia against Ukraine began, and a large part of the bridges and roads built and repaired with the funds of the Covid money was bombed by artillery and rockets and destroyed by tanks, that is, it became unusable. Good intentions turned into big investment losses. And why? But because Zelenskyy had “no time thinks strategically”, and to be honest, a person with a strategic vision would never have done such a disaster. Because, in fact, Russia’s war in Ukraine itself is evidence of the strategic incapacity of all presidents, governments and convocations of the Verkhovna Rada of Ukraine during all the years of independence.
I have written about this many times. So, you can read more, for example, in this article: “SOVEREIGN & INDEPENDENT UKRAЇNA: EXPERIENCE & PERSPECTIVES”.
From this article of mine, clever investors can understand that the Indepedent Ukraine continue to live under the social order established over one hundred years ago by Russian Bolsheviks. The entire history of the USSR as a authoritarian and totalitarian state with its administrative and command system of governing shows that it’s just impossible for economy to develop freely and successfully. That’s why actually the Soviet Union collapsed.
So, before making attempts to grow independently and freely into successful and prosperous country, Ukraine has to get rid of the Soviet social order and to have established a new social order based on Ukrainian national traditions and customs. Such change will eliminate many obstacles on Ukraine’s road to success and prosperity, and creating the best possible environment for investors and investments.
Unfortunately, Ukrainian society doesn’t even want to discuss this issue. Unfortunately, Ukraine’s partners in the West don’t even think about this issue. That’s why all are loosing — Ukraine, Ukrainian people, Ukraine’s foreign partners and their people.
It’s time to start thinking about this, because this issue is actually the most important one among Ukraine’s ability to win the war that Russia started against Ukraine.
Invest responsibly!
Volodymyr Ivanenko
On Topic:
Посол Швейцарії підбив фінансовий підсумок конференції з відновлення України в Лугано – Главком
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Системні зміни — перспектива для України: Збірка статей і нотаток. — Вашинґтон, 2020. — 393 с.
