UKRAINE

Ukraine finds itself in a special position wherethe future of the country will be determined in

the coming months

See this report at worldfolio.co.ukMonday, January 23, 2012

AN INDEPENDENT SUPPLEMENT BY UPPER REACH ON UKRAINE

Taking centre stage

UKRAINE IS the second largest countryin Europe, a land of vast fertile plainsof barley and wheat as well as heavyindustry, with a population of morethan 45 million. Once the economiclynchpin of the Soviet Union, today itis a country in transition, graduallyshedding the legacy of the commu-nist decades that have for too longheld back its economic, political andsocial development, and seeking abrighter future for its citizens.

Since entering office in 2010, Pres-ident Viktor Yanukovych has spokenof implementing a series of compre-hensive economic, governmental andpolitical reforms aimed at trans-forming Ukraine into a dynamic, free-market democracy.

Business and government leaderswould like to see the pace of reformaccelerated in 2012, with top prioritygiven to changes aimed at facilitating

enterprise and stimulating investment.Economically, the country is back

on track after the global financial andeconomic crisis checked its run asone of Europe’s top emerging mar-kets. In 2011, prices and tariffs in-creased by only 4.6 per cent, repre-senting Ukraine’s lowest rate in thepast eight years. Furthermore, GDP ex-panded by 5.2 per cent in 2011 – thehighest figure in the region, beatingan estimated 1.6 per cent for the EUand 4.5 per cent for CIS countries.

Economic growth, which is greatlyaided by the country’s appeal for in-ternational business, is expected tobe given an extra boost this year byUkraine’s co-hosting of the 2012 UE-FA European Football Championshipsin collaboration with Poland.

Key to Ukraine’s future is a prag-matic foreign policy and its relationswith its neighbours. Ukraine should

make use of its geopolitical advan-tages and become a bridge betweenRussia and the West.

Negotiations on an associationagreement between Ukraine and theEU were completed at the end of 2011,but at the time of writing the deal wasstill waiting to be signed, delayed bythe fallout from the imprisonment lastOctober of opposition leader and for-mer Prime Minister Yulia Tymoshenko.

Proceeding with the agreement,which includes a comprehensive freetrade area, is in the interests of bothsides. For Ukraine, furthering politi-cal association and economic inte-gration with the EU, its largest tradepartner, would enhance the creationof a more predictable climate for do-ing business, attract new invest-ments into the economy and takethe country a step closer to eventu-al EU membership.

In an encouraging sign of faith, theEuropean Bank for Reconstruction andDevelopment (EBRD), the largest foreignfinancial investor in Ukraine, last yearmade its second-largest contributionsince the start of its operations in thecountry in 1993, increasing its invest-ment by 7.1 per cent, compared to 2010,with 41 new deals worth €1.02 billion(£843 million).

Andre Kuusvek, EBRD director forUkraine, says: “We have increasedthe level of investment very signifi-cantly since the crisis of 2008-2009.Out of the total €7.2 billion of invest-ment, half of that was done over thepast three years,compared to thepast 16 years be-fore that. Thisdemons trate sthe commitmentwe have.” �

Taking centre stage

UKRAINE2An advertisement supplement by UPPER REACH

Major economic, political and social ties bind thetwo countries

When presenting his credentials in 2008, LeighTurner, the UK Ambassador to Ukraine, declared:“What happens here is of immense significance forthe UK, for Europe and for the world.”

Ukraine is important, strategically, economicallyand, crucially, as a source of future agricultural pro-duce – it has 25 per cent of the arable land in Eu-rope and 33 per cent of the black earth in the world.It is the largest country wholly in Europe and bor-ders four EU member states. It is also the mostdemocratic country in the Commonwealth of In-dependent States, having held four free and fairnational elections since 2004.

Ukraine’s population of 45 million people is arapidly growing market for foreign countries: UK-based companies exported £545 million of goodsand services there in 2009 and have invested$2.376 billion (£1.55 billion) there since1992.

The UK is the sixth largestforeign investor in Ukraine.The Ambassador says:“Ukraine is a valued friendand partner. We co-oper-ate extensively and pro-ductively in internationalorganisations such asthe United Nations, theOrganisation for Securi-ty and Co-operation inEurope, and theCouncil of Europe.”

He is candidabout problems, inparticular a report-ed lack of indepen-dence of the courts. Nev-ertheless he has an abidinglove of Ukraine and remainsconfident about the future.

He says: “We believe that if we can get the EU-Ukraine association agreement and the deep andcomprehensive free trade agreement, this will cre-ate a strong momentum for reforms. I hope thatwill in turn generate pressure to ensure that thecourts are more independent, which will encour-age more foreign investment.”

In partnership with Poland, hosting the 2012UEFA European Football Championship is an im-

mense opportunity for the nation, butEU accession is what will complete

the journey. The British Council opened inUkraine in 1992, and now oper-ates centres in Kyiv, Odessa,Donetsk, Lviv and Kharkiv.Bate C. Toms, chairman, round-

ly echoes the Ambassadors’spositivity, especially in terms of

Ukraine’s agricultural vitality andimportance.

“Ukraine can easily increase itsfood production four-fold

to become theworld’s leadingproducer,” hesays. He cautions thatif the UK wantsto wield real in-fluence in aworld wherefood, ratherthan oil andgas, is to be ofparamount im-portance, con-

tinued invest-ment in – and dia-

logue with – Ukraine isof utmost importancefor this and futuregenerations.

UK-UKRAINE FRIENDSHIP CANBENEFIT BOTH COUNTRIES

While enjoying growing assets, a diversifiedportfolio and high return on public funds, ITTGroup is also confident the agricultural sectoris set to boom

Despite possessing the backbone for a poten-tially strong economy – Ukraine is rich in re-sources, strategically located and endowedwith an educated workforce – the nation isranked 145th out of 183 countries in the WorldBank’s ease of doing business index. Howev-er, this position is set to improve with newgovernment measures to stimulate businessdevelopment.

With upcoming events such as Euro 2012 set

to take place in Ukraine, the country is set totake another step torwards reaching its mass-market potential. Coupled with social ameliora-tions – such as the establishment of pensionreforms – local, experienced companies suchas ITT Group are prepared to set the lead in at-tracting and orienting foreign investment.

Oportunities exist for early birds. “Ukrainedoes offer tremendous opportunity for growth,and whoever invests now will get more benefitsthan those who come later,” says Oksana S.Markarova, president of the ITT InvestmentGroup (ITT), highlighting the importance of tim-ing for successful foreign investments.

ITT knows first-hand the results that the

Ukrainian market can pro-duce. “We work more withforeign companies thatcome here,” explains MsKarkarova, and commentson Ukraine’s willingness tocontinue moving in this di-rection: “If you do this it canincrease competitiveness.”

ITT, founded in 1995, is aconsolidated 100 per centUkrainian-owned companythat provides leading servicesof brokerage and investmentbanking, private equity, assetmanagement and funds and investment consult-ing in Ukraine.

Despite the modest size of the Ukrainianmarket, the country boasts the benefits of nothaving fully merged into the European or Worldeconomy. “While we watched the crisis evolv-ing in other countries it did not have that muchof an impact on us,” explains Ms Markarova.“When something happens in London, it doesnot affect us too much.”

In the long run, this “isolation” as somemight describe it, proved advantageous for theUkrainian market as it is now at the forefront ofinvestment targets. “When you do something in

Ukraine you see the results of your work al-most immediately,” says Ms Markarova.

With a proven track record, today four corecompanies lead ITT’s main lines of business:ITT-Invest, ITT-Management, ITT-Real Estate andITT-Capital. “We work in accordance with inter-national standards of governance and we arePricewaterhouseCoopers audited,” says MsMarkarova.

Though the chemical industry and metal pro-cessing are the traditional sectors in Ukraine,for the future Ms Markarova envisions “the coresources for growth will come from agriculturalbusiness and food processing.”

While we watched the crisis evolving in other

countries it did not have that much of an impact on us”

OKSANA S. MARKAROVA, President of ITT Investment Group“

Following the unification of Avangard and Ukrland-farming, Ukraine can play a major role in alleviatingthe global food crisis

In an encounter between Oleg Bakhmatyuk, chairmanof Avangard Ukrlandfarming – Ukraine’s leading inte-grated agricultural producers – and the Prime Ministerof Singapore, in which food markets were discussed,the latter said to the former: “In this world there aretwo incomparable weapons: no food and no water.”

And at that moment, Mr Bakhmatyuk was reaf-firmed in his belief that Avangard’s merger with Ukr-landfarming had created a vehicle with global appeal.The transfer of 77.49 per cent of Avangard – the largestproducer of chicken eggs in all Europe and Asia – toUkrlandfarming, was part of the largest merger in2011 in all Eurasia.

Mr Bakhmatyuk announced: “Due to the constantthreat of food crisis, we intend to be the flagship ofUkrainian exports of food to developing countries, aswell as leader of the domestic food market.”

Ukrlandfarming has positioned itself as a globalplayer – it recently pulled off a historical US$600 mil-lion loan to optimise its production – and is currentlythe number one landowner in the country.

Regarding the appeal of the sector, Mr Bakhmatyukexplains: “Investors are thirsty for security and it is asafer harbour to invest in agriculture compared tomore volatile alternatives. Real markets in times of cri-sis become increasingly more attractive to investors.Agriculture is maybe the only sector that can substan-tially boost cash flow in Ukraine.”

With an agricultural past inextricably linked to itshistory, Ukraine boasts a strategic location – at acrossroads between Europe and Asia – and is a coun-try of temperate continental climate with much of itsterrain consisting of fertile plains and plateaus.

The country’s potential is and has always been evi-dent to the world. When still a part of former SovietUnion, Ukraine’s fertile black soil generated more thana quarter of the entire Soviet agricultural output, andits farms provided substantial quantities of meat, milk,grain, and vegetables to other republics.

Ukraine now has the opportunity – and capabili-ty – to capitalise on the world food crisis. Whatdistinguishes the country from others is that it is

one of few that still have the potential to increaseits agricultural production. “Argentina and Brazilhave nearly reached their potential, while Ukraine’sminimum growth is estimated at three to fivetimes, according to analysts, which makes this anextremely attractive investment opportunity,” ex-plains Mr Bakhmatyuk.

“Ukraine is perhaps able to feed much of the worldbecause of its potential for agricultural output and itsproximity to other regions. We can fill 40 per cent ofthe food deficit that’s in North Africa,” he adds.

“Ukraine is estimated to be capable of producinganything from around 120 and 180 million tonnes ayear. Given that Ukraine consumes domesticallyaround 25 million tonnes, this can make Ukraine –within the next decade – a clear global leader in ex-porting grain, and also a global leader in the produc-tion of proteins,” says Mr Bakhmatyuk.

READY TO FEED THE WORLD

OLEG BAKHMATYUK, Chairman of Avangard Ukrlandfarming

INVESTMENT IN UKRAINE: MANY REASONS TO BE CHEERFUL

LEIGH TURNER, UK Ambassador to Ukraine

UUKKRRAAIINNEE PPRROOJJEECCTT TTEEAAMM:: TIM BRADLEY, ROCIO DE MINGO AND IRAMA VEGA

UPPER REACH, 68 King William Street, London EC4N 7DZ Tel: +44 (0)207 959 2424, Fax: +44 (0)207 959 2201

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UKRAINE 3An advertisement supplement by UPPER REACH

Reforms and dialogue arevital to progress

ADHERING TO common European values is anindispensable pre-condition for Ukraineeventually joining the EU, and a challenge for thegovernment of the former Soviet republic.

Just how much of a challenge, and just howmuch Ukraine’s credibility rests on meeting it,has been illustrated by the recent case of formerprime minister Yulia Tymoshenko, whoseimprisonment for seven years on corruptioncharges last October prompted internationalprotests, including from the EU.

President Viktor Yanukovych has sincedeclared there is a pressing need for reform ofcriminal justice and of the outdated criminalcode under which Ms Tymoshenko was

convicted. “I am convinced that once we fulfilthis difficult job Ukraine will get modernEuropean standards in justice, procedures andhuman freedoms,” he said recently.

He acknowledges there are still many issuesof the harmonisation of national legislation withEuropean standards unresolved but says thegovernment will do everything to bring Ukrainecloser to European democratic standards of life.

Modernisation of the country should bebrought about in open dialogue with theUkrainian people. “We should arrange aserious dialogue with society, go and meetthe people. We should not hide. We have ourflaws, mistakes, but we are talking about

them, we correct them,” he says. Jose Manuel Pinto Teixeira, head of the

delegation of the European Union to Ukraine,says it will take “real and serious” leadership forUkraine to move into line with European values,but that it is essential to European integration.

“Tackling the challenges of Ukraine in aserious way would definitely transform thecountry into a successful nation and create amore balanced distribution of wealth, which issomething that Ukrainians expect and the EUsupports,” he says.

Jorge Zukoski, president of the AmericanChamber of Commerce in Ukraine, says theproblems of the Soviet legacy in the businessarena need to be tackled, as well as the political,judicial and social spheres. “Ukraine needs toincrease its competitiveness. A lot of this comesdown to the fact that there needs to becomprehensive legislative and regulatory reformthat will be implemented in a wide variety ofdifferent areas.”

Roman Shpek, an advisor to the Presidentand senior advisor at Alfa-Bank, Ukraine,

agrees that only reform can guarantee Ukrainea successful future and a realistic prospect ofEU membership.

“In addition to improving the political systemthat guarantees democracy, freedom of speechand fair justice, it is also important tostrengthen the competitiveness of oureconomy,” he says.

Vitaly Klitschko, leader of the UkrainianDemocratic Alliance for Reform, believes Ukraineis far from meeting European standards, but thatwith sufficient political will the country couldchange within a relatively short period of time:“European and world politicians are on our side –everybody is interested to see Ukraine as amodern country with political and economicstability.”

Lev Partskhaladze, chairman of the board ofthe Ukrainian Building Association, seesevidence of significant progress in his sector ofthe economy, where bureaucracy and corruptionwere deterring investment in construction. “Wehave taken the best of experience from othercountries and used this as a basis,” he says. �

Bringing the way Ukraine does government, business and the law into line with Europe is a majorchallenge for the government and has spurredprogressive changes

“Joining the EU will make us moreopen, democratic and competitive”

AN ADVISOR TO THE PRESIDENT and senioradvisor at Alfa-Bank, Roman Shpek, feels thatthe International Monetary Fund’s support ofUkraine’s macroeconomic, fiscal, budget andpolicy is vital. “It is not just about access tomoney but it is about recognising economicreform as well,” he says. “The President and theIndependent National Bank are crucial forUkraine. President Yanukovych correctlydetermined the course of reform and hedetermined the long-term goals.

Alfa Bank (Alfa), a Ukrainian universalcommercial bank headquartered in Kiev thathas been assigned ratings by Standard & Poor’sand Fitch Ratings CIS Limited, shares thenational strategic goal of European integration,which Mr Shpek believes will lead to animprovement in “living standards and labourproductivity, as well as environmentalprotection and healthcare, etc.”

Mr Shpek is confident that “joining the EU willmake Ukraine a more open, democratic andcompetitive state.” The first necessary stephowever towards becoming a member of thecommon market will be to increase privateinvestment in the country as, according to MrShpek, “Ukrainians do not just need money, weneed new knowledge, new technology andaccess to new markets.”

To achieve its long-term goal of forming partof the G20, Ukrainian market experts havecalculated a required indispensable economicgrowth of 9 to 11 per cent. “We have thegreatest potential in the agriculture sector. Weneed to attract investment banks andcorporate banks; this will help to increasedomestic consumption,” says Mr Shpek.

According to Alfa’s senior advisor, to dateapproximately 68 per cent of Ukrainian GDPgoes to exports, a positive contribution to thecountry’s economy, though domesticproduction and consumption have decreased.

Structural reform and privatisation toincrease competitiveness could be key indrawing investments to boost domestictrade.

Regarding the issue of non-performing loans within the Ukrainianbanking system, Mr Shpek affirms thatthe matter has been tackled andconfidence in the sector restored. “Thelevel of deposits in Ukrainian bankshas increased significantly and thelevel of credits in the economy hasincreased as well. Now all bankersand government officials areworking together to reduce thelevel of non-performing loans,”details Mr Shpek.

As Ukrainians pumpmoney into their banks,foreign investors have madethe country’s agriculturaland energy sectors theirtargets. “We will start toprivatise energy generationcompanies this year and wewill continue to privatiseenergy distributioncompanies. We havespecial green tariffsfor renewable energyand a lot ofcompanies fromGermany andSpain are lookingat the possibilityof investing inwind and solarenergy,” adds MrShpek.

Presently, theEU is Ukraine’sbiggest trade

partner, followed by Russia. New technologyand electronic equipment come mainly fromthe European Union or the US, while most of thecountry’s energy sources, including gas, metaland oil, come from Russia. “Thanks to PresidentYanukovych we have significantly improved ourpolitical and economic relations with Russiaand our trade has increased. This is veryimportant because it has opened up theRussian market to Ukraine for the buildingindustry and the food processing industry,”explains Mr Shpek.

Infrastructure developments, resulting frompreparations for the upcoming Euro 2012football tournament, will have a positive booston local consumption and possibly unbolt theUkrainian market to the EU. “There is a lot ofgood food in Ukraine and lots of good, smallrestaurants with international cuisine and goodservice, ” notes Mr Shpek, optimistic that theinflux of tourists will create a consumer trendin Ukraine that will stick with the Ukrainians.

Regarding economic trends and movements,the UK is one of Ukraine’s reference markets.“London is the world financial centre and theUK is a very important part in the political,financial and general economic sense becausethere are a lot of British companies operatingover here,” says Mr Shpek. �

Ukrainians donot just need

money, we need newknowledge, newtechnology and accessto new markets.”

ROMAN SHPEK, Senior Advisor to Alfa Bank

“

Roman Shpek, an expert on economic matters in Ukraine, comments on the economical climatesurrounding its aim to become a member of the EU and form part of the G20

Alfa-Bank’s senioradvisor Roman Shpekbelieves cooperation

between thegovernment, national

bank and the IMF iscrucial for capital and

recognition ofeconomic reform

UKRAINE4An advertisement supplement by UPPER REACH

WITH ITS VAST FIELDS of wheat and barley, sun-flower, beets and other grain and oil crops, it iseasy to understand how Ukraine gained itsnickname of the breadbasket of Europe.

Ukraine is responsible for 60 per cent of worldsunflower exports. It is the world’s top exporterof barley, a major supplier of wheat and also ex-ports significant quantities of milk and meat.

Russia, Western Europe and China provideready markets, and as global food shortagesbecome an increasing problem, Ukraine is oneof the few countries in the world that could bein a position to make a major contribution to-wards solving it.

However, to make that happen the countryneeds a state-of-the-art agricultural sector toenable it to become a major supplier of high pro-tein-based foods. This will require the invest-

ment of large sums of money in new technolo-gies and infrastructure, which can only be pro-vided by a major increase in international anddomestic investment into the agricultural sector.

Nobody doubts the huge potential ofUkraine’s fertile “black earth”, which once wasused to produce 25 per cent of all agriculturaloutput in the former Soviet Union. Blessed witharound one third of the world’s humus-rich soil,some 54 per cent of Ukraine’s land is arableland – yet today only around half of it is beingused for the cultivation of crops.

With sufficient investment, the agriculturalsector could become the most profitable in theeconomy; currently, it accounts for around 25per cent of Ukraine’s gross domestic product.Land reform and application of the latest farm-ing technology would boost production both forexports and domestic consumption, and enableinvestors to reap enormous profits.

Ukraine’s government is keen to see produc-tion levels raised. “Our realistic goal, backed upby scientific and economic research, is to dou-ble the production of grain crops in the nextthree to four years,” says Mykola Prysyazh-nyuk, Minister of Agrarian Policy and Food.

Indeed, analysts believe that with billions of

dollars of investment Ukraine could double itsannual harvests to around 50 million tonnes andover the next decade become one of the world’stop exporters of meats. Exports aside, there is al-so the potential for huge sales within Ukraine it-self, given the size of the domestic market.

Unsurprisingly, almost all the world’s leadinggrain-trading companies are already represent-ed in Ukraine and they are eager to see thesector liberalised and opened up fully to inter-national trade. Mr Prysyazhnyuk says: “Wehave a clear understanding of the reforms nec-essary in the agrarian sector in order to be ableto increase the pace and volume of agriculturalproduction. We live in the country that can

boast the highest potential for increasing thevolume of agricultural production worldwide.”

He says the first priority for the governmentis the completion of its land reform programme,but he cautions that Ukraine cannot simplyadopt the agrarian model of other countries.

The Minister believes the way forward is forlarge-scale production, farming and individualproduction to coexist and develop parallel toeach other. “The combination of these three di-rections will enable us to fulfil the tasks wehave set ourselves,” he says.

He acknowledges the need for administrativereform and the general creation of a favourableinvestment climate. Ratification of the freetrade zone agreement with the EU would be apositive signal for potential investors. With athird of the population living in rural areas,labour costs are low; around a quarter of theworkforce is engaged in agriculture or forestry,while agro-industry accounts for one-third ofagricultural employment.

The EBRD and the World Bank believe Ukrainehas the potential not only to significantly in-crease its grain production, but also to exportmore semi-finished and finished premium-quality food products.

They say the country could have a significantimpact on the world food situation, while benefit-ing from significant gains in terms of export rev-enue, economic growth and rural development.

“With the right policies, levels of investmentin agriculture can be increased and output canbe increased significantly as well,” says GillesMettetal, EBRD’s agribusiness director. �

Land market reform increases focus on Urkaine’s agro-potential

All eyes on Ukraine’s agriculture sector

A new plant in Vinnytsiawill convert agriculturalwaste into biomass fuelpellets that will provideenergy for local state-runenterprises andhouseholds and create jobs

THE FIRST LARGE-SCALE project in Ukraine toproduce biofuel is on track to be piloted in June.The joint venture is the brainchild of the Insti-tute of Environmental and Energy Conservation(IEEC), which has partnered with Smart Holdingas the main investor to help turn it into reality.

More than 90 per cent of the factory’s con-struction is already complete. The initial tech-nology for processing the raw material – wastestraw, which will come mainly from the rice,rapeseed, soy and sunflower industries – is be-ing provided in February by two German compa-nies: Claas and Amandus Kahl.

Owned by leading Ukrainian businessmanVadim Novinsky, Smart Holding was chosen as

the perfect investment partner for the pilot pro-ject. It is one of the largest groups of companiesin the country and has investments in a widerange of industries, including metals, mining,and non-metallic and construction materials.

The IEEC provides professional consultancyservices in energy and environmental auditand management, project development, andthe implementation of state-of-the-art energy-efficient technologies. It is also involved in re-duction of fuel consumption and pollution ofthe atmosphere, including greenhouse gasemissions.

Co-owner of the IEEC Sergey Fedorovich Yermilov pro-vides an overview of the landmark scheme.

HHooww ddoo yyoouu sseeee tthhee bbiioommaassss pprroojjeecctt ddeevveellooppiinngg?? If the pilot project is successful, in future we willproduce one million tonnes of biofuel; andUkraine will be able to reduce imports of naturalgas from the Russian Federation by 500 millioncubic metres annually.

We are already pretty sure that it will be prof-itable – this we can infer from the business plan,but only time will show how attractive it is forother enterprises and whether all the regions ofthe country will be interested in cooperating.

Taking into consideration the fact that our gov-ernment expects stable growth in grain crops

harvests, amounts of agricultural waste will alsogrow larger. To date, this waste has not beenmade use of. We either ploughed it back into thesoil or it was simply burnt.

A few years ago Ukraine harvested nearly 30million tonnes of grain crops per year. Last yearwe improved the result up to 40 million tonnes;this year it is around 45 million tonnes already.The planned production of grain crops in thecoming years is 80 million tonnes. This meansthat we will have huge volumes of excessive agri-cultural waste that needs to be recycled. We feelthat the best way to recycle it is to produce sus-tainable biofuel.

Parallel to this, machine building industry willbe developed: we plan to produce special equip-ment, such as boilers, because Ukraine has anacute need to modernise 30,000 heating sta-tions. Thousands of jobs can be created.

IIff tthhee ppiilloott ggooeess wweellll,, wwiillll yyoouu bbee llooookkiinngg ffoorr aaddddii--ttiioonnaall iinnvveessttoorrss aanndd ppaarrttnneerrss??At present we have the funds to complete thisfirst pilot project. But if we decide to expand, it isevident that we will need more investments andnew connections. That is why our goal at this mo-ment is to inform the Western community thatsuch an initiative has been launched in Ukraineand to evoke interest among potential partners.

Reaching one million tonnes of biofuel produc-tion will be our second target, and if we are suc-cessful at this stage, we will expand the projectfurther: up to five or 10 million tonnes. Accordingto the calculations carried out by the Academy ofScience of Ukraine, the potential of biomass inour country amounts to 27 million tonnes. Yousee that the potential is huge.

WWhhaatt eellssee iiss tthhee IIEEEECC ddeevveellooppiinngg??We are working on a set of programs aimed tosolve the environmental problems and improvethe energy efficiency of enterprises. We are alsoelaborating special projects for metallurgical in-dustries owned by SCM, Metinvest and SmartHolding. We have also developed a number oflarge-scale projects for the Industrial Union ofDonbass and some other companies. To sum it allup, I would like to say that our experience in thedevelopment of energy efficient and environmen-tally attractive projects has given good us con-nections and an oportunity to create new ways ofwidening the Ukrainian market of energy efficienttechnologies.

It is very difficult to explain everything aboutour company in such a short article. You will findmore information on the activity of the IEEC atour company’s website:

wwwwww..iippeeee..oorrgg..uuaa

IEEC and Smart Holding createUkraine’s first major biofuel plant

Our country canboast the highest

potential for increasingthe volume of agriculturalproduction”“

We have a clearunderstanding

of the reforms necessary in the agrarian sector toincrease its pace andvolume”

MYKOLA PRYSYAZHNYUK, Minister of Agrarian Policy and Food

“

UKRAINE 5An advertisement supplement by UPPER REACH

CURRENTLY TOP on the list ofUkraine’s political agenda is reform-ing the energy sector, given risingglobal prices and the country’s de-pendence on imported energy sup-plies, primarily from Russia. By theend of 2011, Ukraine was relying onimports to meet about three-quartersof its annual oil and natural gas re-quirements and 100 per cent of itsnuclear fuel needs.

The overriding objectives of thecountry’s current strategy are to en-sure its energy security and statusas a significant transit country. Asthe main route for transferring Russ-ian gas into Europe, Ukraine is vitalto both European and Russian ener-gy interests.

In February 2011 Ukraine became afull member of the European EnergyCommunity, a move seen as a signifi-cant step in its integration into the EUenergy market and as an importantopportunity for more complex energyreforms to take shape within the coun-try. As part of its membership obliga-tions, from 2012 to 2018 Ukraine willhave to implement additional ele-ments of EU energy policy that regu-late the electricity market and otherenergy-related environmental issues.

“We understand that problems ofcorruption, bad management, low-

quality legislation and regulatory poli-cy are quite serious in our country.Fair evaluation is the basis for findingthe solution to these problems,” as-sures Vladyslav Kaskiv, head of theState Agency for Investment and Na-tional Projects of Ukraine (SAINPU).

“This country has an excellent po-tential in oil and gas,” says Dr JimBown, president and head of repre-sentation at Vanco Energy Company,an independent oil and gas explo-ration company registered in theUnited States that carries out deep-water exploration and development ofoil and gas deposits worldwide.“Ukraine needs to move forward veryquickly towards energy indepen-dence because the economy will ben-efit tremendously.”

Among the projects currently con-sidered of top national importance isthe liquefied natural gas (LNG) termi-nal. Mr Kaskiv is confident its comple-tion could transform Ukraine’s posi-tion in global politics and raise Ukrain-ian living standards. “It could ruin themonopoly of the Russian Federation.The given question is not of an eco-nomic, but rather of a geo-economicand geopolitical nature,” he says.

Works in the Black Sea are expect-ed to begin once the feasibility studyis concluded. The LNG terminal will

handle an estimated capacity equal to10 billion cubic metres by 2017.

“There are a great number of advan-tages for locating enterprises in ourcountry: ideal geographical position,much lower prime cost, highly quali-

fied labour force and among the mostliberal legislative terms throughoutthe entire Europe,” details Mr Kaskiv.

The head of SAINPU denies reportsin December 2011 suggesting delaysin the development of the LNG project

are due to a lack of investor interest,and announced possible alternativeson its final location. “One option is inthe Odessa region near Yuzhnyi port;another is in the Mykolayiv regionnear Ochakiv port.” �

Energy diversification will give Ukraine theoptions it needs as it sets its sights on fullysatisying its domestic energy requirements

Moving towards energy independence

Located on the main route for transporting Russian gas into Europe, Ukraine is in a prime position to capitalise on global energy markets

The Ukraine Economic Reform Fund is an interna-tional organisation supported by contributions fromprivate companies all over Ukraine. The Fund’s ac-tivity is focused on supporting projects aimed at thesuccessful implementation of economic reforms,stabilisation of the Ukrainian economy, and the im-provement of Ukraine’s image abroad. The Fund wasfounded in 2010, and its official presentation tookplace on January 14, 2011. Lyubov Rudyuk, president of the UkraineEconomic Reform Fund, explains how thefund will help boost Ukraine’s economy.

HHooww ddiidd tthhee iiddeeaa ffoorr tthhee rreeffoorrmm ffuunnddccoommee aabboouutt??The idea of how international companiesexpanded their activities and built their net-works has always interested me. I want-ed to create an institution in Ukraine whichwould incorporate the best internationalpractices while reaching out to the na-tional and international organisations. Thisis how the idea of creating the UkraineEconomic Reform Fund (UERF) cameabout. Today, the Fund covers the wholecountry, by working with different organ-isations, including the Ukrainian Cham-ber of Commerce, which is represented inevery region of Ukraine. The Fund also maintains itspresence in European countries and plans to further ex-plore the opportunities of international cooperation.

CCaann yyoouu tteellll uuss aa bbiitt mmoorree aabboouutt tthhee oorrggaanniissaattiioonn??UERF has a group of about 30 young professionals whowork closely with the government. We also reach out tothe high-level officials, decision and policy makers ofthe countries who are willing to share their first-handexperience. Our Advisory Board consists of people whoare on the Committee of Economic Reforms supervisedby the President of Ukraine.

UUEERRFF wwaass ffoouunnddeedd iinn 22001100.. WWhhaatt hhaavvee bbeeeenn iittssbbiigg ssuucccceesssseess??Our Harvard Program relates to human capacity, as wellas the country’s positive international image. While itis common enough for most people to go abroad to en-roll in business schools, this is the first time ever thatwe are bringing people in to study in the School for Pub-lic Administration.

In fact, Harvard’s management was surprised byhow young the group was. Whatthey saw was a group of vibrant,English-speaking young profes-sionals who were keen to learn. Thepilot program was a success. In away, it is a totally new concept.Launching the information cam-paign about Ukraine on CNN andBBC was a good start. In additionto the information campaign wehave launched a supplementaryproject about the country in theform of a brochure, which was dis-tributed at the World Economic Fo-rum in Davos, The EconomistUkrainian Summit and other im-portant international events. Apart from beautiful pictures of Kiev,the brochure also contained moti-

vational quotes from Western businesses based inUkraine. We continue to publish these kinds of brochures.However, we do need more concrete, themed events ded-icated to Europe. This is the next direction that we wouldlike to take as a fund.

WWhhaatt iiss yyoouurr lloonngg--tteerrmm vviissiioonn ffoorr tthhee FFuunndd??I would like to see Ukraine implement the vision and as-pirations which the government and the President havedeclared as their agenda.

In the next five years, I would like to be in a positionto say that we have helped make these ideas a reality.

UNIQUE FUND WILL RAISEUKRAINE TO THE NEXT LEVEL

LYUBOV RUDYUK,President of the UkraineEconomic Reform Fund

UKRAINE6An advertisement supplement by UPPER REACH

THE FOUNDATIONS of higher education in Ukrainewere laid in the 16th and 17th centuries, when urbanpopulations began to organise fraternities, whichbegan printing books and opening schools. In 1632,the first institution of higher education in Ukraine –Kyiv-Mohyla College (now KNU) – was created withthe unification of the Kyiv and the Lavra brother-hood schools. The new college accepted studentsmainly of the upper classes, government officials,priests, rich burghers and Cossacks. Students wereinstructed in languages, along with poetic andrhetorical skills, Greek and Roman literature, philos-ophy, and theology.

The college, and others that followed, acquired areputation for excellence, in particular in the sci-ences – a characteristic that was strengtheneddown the centuries. However, Ukraine’s ZerkaloNedeli newspaper has reported that the communistleadership took unprecedented steps to ruin theUkrainian school of maths and other sciences af-ter the Bolshevik coup in 1917. The famous Kyivschool of algebra was liquidated and scientific at-tentions moved to Moscow, which became the sci-entific focal point. During the decades that fol-lowed, gifted graduates went to Moscow and touniversities that practiced USSR-wide “wun-derkinder” selection. Nonetheless, the achieve-ments of Ukrainian scientists of the Soviet yearsin areas such as cybernetics and space explo-ration remain redoubtable.

After the Soviet Union broke up, the best andbrightest were no longer dispatched. Numbers ofUkrainian graduates rose significantly and manystayed in their homeland to teach. Ukrainian stu-dents continue to win an impressive, if not un-precedented, number of prizes at internationalcompetitions, especially in maths. Ukraine now hasa huge academic potential of brilliant teachers andtalented students and nearly 100 per cent literacy.

After independence, Ukraine began updating thecontent, forms and methods of teaching to increasethe intellectual potential and international allure ofthe country.

In recent years, further reforms have been initi-ated, which included merging or closing down agreat number of the smaller universities, and ac-tively developing scientific and research activity inthe larger institutions. The aim was to providethem with substantial funding for scientific re-search so that they achieve, and surpass, interna-tional levels of excellence.

Kyiv National University (KNU) – commonly re-ferred to as “the Harvard of Ukraine” – is the coun-

try’s flagship university. It has more faculties and de-partments than any other comparable Ukrainian in-stitution and provides specialist training in a greaternumber of fields. It employs more than 2,000 acade-mic and 1,000 scientific staff: 82 per cent of lecturershave academic degrees and status.

“We have very strong human resources. More than500 of our employees are professors with PhDs, andnearly 1,300 PhD-level associate professors. This isthe potential that no other university in Ukraine has,”says Prof Leonid Huberskyi, rector of KNU.

Close cooperation with the National Academy ofSciences is another contributor to success. Alumni ofthe academy are engaged to teach and act as scien-tific advisors, as well as manage dissertations. Stu-

dents also get to perform research throughout theacademy’s many institutions. Two years ago, a re-search park was created and there are plans to fur-ther engage the academy in business and manufac-turing, in particular in the field of applied research.

The university works closely with Samsung, MTS,

Intel, Microsoft and other market leaders. The Depart-ment of Cybernetics recently signed an agreementwith Microsoft, which has provided the faculty with asupercomputer. “International cooperation brings usvery significant results,” says Prof Huberskyi.

Research activities in nanotechnology, biotech-nology and high technology are keenly promoted,and KNU recently initiated a teaching-research cen-tre where just 75 Master’s students are enrolled. “Weaim to individually prepare genuine scientific elite,”says the rector.

KNU enjoys cooperation agreements with leadinguniversities worldwide. Their Institute of Biology co-operates with the German Technical Institute on aresearch programme in biotechnology that aims toidentify markers of cancer. In addition, their Insti-tute of Chemistry cooperates closely with the Uni-versity of Toulouse. “Our professors and graduatesgo to there for training, and their professors, includ-ing even the Nobel Prize winners, come to us,” saysProf Huberskyi.

Kyiv National Economic University (KNEU) is thelargest economic higher educational establishmentin Ukraine and is highly respected in economic-acad-emic circles. Founded in 1906, it had 229 studentsand 22 teachers; today, more than 36,000 studentsare enrolled on its courses.

“During the Soviet times, we had a very powerfulscientific basis. The majority of traditional Ukrainianuniversities, the ones that were established beforethe war or even before the revolution, retained thispositive feature: fundamentality and a scientificgrounding of education. Only education which is seri-ously backed up by science has high quality,” saysKNEU’s rector, Prof Anatoly Pavlenko. “At KNEU wehave successfully managed to retain this high qualitybasic education.”

The quality of KNEU graduates is renowned;both business and government representativesoften select students still in the third year of theirstudies. KNEU also regularly conducts large careerfairs, in which 30 to 40 of the best Ukrainian com-panies participate.

“We constantly study the labour market and seethat there is practically no unemployment problemamong our graduates. This, we believe, is a good indi-cator,” says Prof Pavlenko, who also underlines theneed for international collaboration.

“Ukraine ranks first among European countries interms of consumption of energy and we take pains toestablish cooperation with foreign scientists in thedevelopment of alternative energy sources and ener-gy efficient technologies,” says Prof Pavlenko. �

Ukraine’s historical scientific promi-nence feeds its future potential

The nation’s scientific and engineering pi-oneers have left an impressive legacythat has provided a substantial basis forprogress and development. It is an en-dowment that will play a key part of thecountry’s future. “The economic reformprogramme for 2010-2014 envisages theimplementation of a number of strategi-cally important national projects. Re-search intensity and innovation shouldplay a decisive role,” says Prof Boris Pa-ton, president of the National Academy ofSciences of Ukraine (NAS) and the firstperson to have been awarded the title ofHero of Ukraine – the highest state deco-ration that can be awarded to a citizen.

Multi-disciplinary research at the NAS includes ad-vancing nanotechnology, the development of energyefficient LED lighting and the reduction of carbonemissions in the energy industry. “With proper fund-ing of innovative projects and activities we will be ableto halve the consumption of natural gas within thenext five years,” Prof Paton adds. “Also, the IT industrycan be one of the leading industries of our country ifappropriate investments are attracted.”

The nation’s IT outsourcing industry is currentlyworth $1 billion and is expected be valued at $5 billionby 2015. According to Prof Volodymyr Semynozhenko,head of the State Agency on Science, Innovation andInformation of Ukraine, the IT sector grew by 40 percent last year. “By 2015, we expect it to account for 8

to 10 per cent of Ukraine’s GDP,” he says. “Ukrainianspecialists are producing electronic driving licencesfor EU countries and electronic passports for Interpol.Our specialists also participate in huge projects insuch spheres as oil processing and rocket building;they create not only programming outsourcing com-panies but also complex enterprises.”

Prof Semynozhenko says the government iscurrently involved in devising a tax stimuluspackage for innovation, the creation of scientificand technological parks, and a support fund forsmall innovative science-intensive enterprises,as well as establishing a patenting fund and thesetting up key laboratories that employ the lat-est achievements and technologies.

SCIENCE AND TECHNOLOGYBURGEONING IN UKRAINE

Many Ukraine-educated researchers, scientists and engineers haveplayed major roles in cybernetics, rocket building and engineering

A legacy of educationUkraine has produced some of the world’s finest minds thanks to its universities

The majority oftraditional

Ukranian universitieshave retained a verypowerful scientific basis”PROF LEONID HUBERSKYI, Rector of Kyiv National University

“We constantlystudy the labour

market and see there is nounderemployment problemamong our graduates”PROF ANATOLY PAVLENKO, Rector of Kyiv National Economic University

“

UKRAINE 7An advertisement supplement by UPPER REACH

HHooww ddoo yyoouu ppeerrssoonnaallllyy aasssseessss tthhee bbuussiinneessss cclliimmaatteeiinn tthhee ccoouunnttrryy aanndd wwhhaatt iiss nneeeeddeedd ttoo iimmpprroovvee iitt??One of the most important problems of our country to-day is a lack of awareness in West about the Easternmentality. We are a young country. The history ofUkraine is very complicated. Over the last 300 years,we have rarely enjoyed independence, as our state ison the border between East and West. Nevertheless,we want to make Ukraine free and rich, and create allnecessary conditions to ensure that people live hereas comfortably as possible. However, this is a very dif-ficult task.

HHooww ddoo yyoouu ffeeeell aabboouutt tthhee iimmpplleemmeennttaattiioonn aanndd pprrooggrreessssooff PPPPPPss ttoo iimmpprroovvee tthhee bbuussiinneessss cclliimmaattee??I’ll tell you: we have no other choice. I will tell you veryaccurately the differences of the era of Leonid Kuchma,the era of Viktor Yushchenko and the Viktor Yanukovychera. When Mr Kuchma came to power, Ukraine did nothave a functioning private sector and was not a state. Itwas a confusing time. Leonid Kuchma deserves a lot ofcredit for his 10 years in power because Ukrainians cameto understand that they have their own country. The firstwave of privatisation began, and we started to buildsomething. As for the Orange Revolution, I want to saythat its ideas were right and good. However, those inpower paid more attention to clarifying their relation-ships between each other than to the promotion ofUkraine’s progress, the establishment of international con-tacts, and the improved efficiency and effectiveness ofthe public and private sectors. It’s not their fault, but itwas difficult for them. Therefore, what a challenging lega-cy Viktor Yanukovych inherited after his election for pres-ident. Believe me, it was very sad. Today the situationhas stabilised, but not all at once. I can say that if a per-son works in a different direction, and works effective-ly, the pressure he feels from the state has significant-ly decreased compared to previous years. The questionis, what is important for private business? It is impor-tant that the business is less interfered with from out-side. Unfortunately, one of the main problems in Ukraineis excessive powers of officials. Today, efforts are madeto reduce bureaucracy in the country. Sometimes thesemeasures are successful, sometimes they are not. Wefeel these changes and we can say that the direction tak-en by the current Government is the right direction. Ofcourse, not everything, but we are at the beginning ofa long journey. Despite the fact that the will of the Pres-ident is the fundamental basis for the direction, noteverything depends on him. Likewise, not everything de-pends on the will of PM Mykola Azarov or VPM SergeiTigipko – top officials in the government. It is importantthat the entire chain of command works cohesively. Ifany official of a regulatory inspection – whether it be fire,tax or any other service – is not kept under strict con-trol, it can hurt small, medium, and even large busi-nesses. The main task today is to clean all that verticalbureaucracy and military officials that prevent the de-

velopment of progressive movement in Ukraine. This isachieved through public and government control and su-pervision of law enforcement. I see that today the coun-try’s leaders want to address this issue, which is a pos-itive, because the previous government, declared thesame desires to change on paper, but they were afraidto implement them in reality. The fact is that undermin-ing the power of government officials is a big risk for anyleader. I can see how it is done today and I must say thatit is very complex. I see concrete steps that have beenmade throughout the previous 20 years. I am an opti-mist. I think that we will achieve significant progress.

BBaasseedd oonn yyoouurr eexxppeerriieennccee aass aann MMPP,, wwhhaatt ddoo yyoouutthhiinnkk sshhoouulldd bbee ddoonnee ttoo ooppttiimmiissee ggoovveerrnnmmeenntt ooppeerr--aattiioonnss aanndd ccooooppeerraattiioonn wwiitthh rreepprreesseennttaattiivveess ooff bbuussii--nneessss ssttrruuccttuurreess?? On top of all the points that I have listed, it is neces-sary to bring in the proper legal framework. Raisingthe responsibility and discipline of officials, and es-tablishing over them the social and governmental con-trols on the legislative level is important. I believe thatwe can have different attitudes to the current tax codeand other defining codes that are adopted or are in theplanning stages. At least we finally have a compre-hensive document on the most important areas. Sim-ilarly, is the case for pension reform. You can easily raiseall sorts of populist slogans, and I want to give you anexample. Mariupol is one of the most important in-dustrial centres of Ukraine, accounting for 9 per centof gross domestic product of the state, despite the factthat the proportion of people living here, is only 1 percent, with almost a third of them being senior citizens.Pension reform is vital to us. Unpopular measures,which are now taken by the Government, are un-avoidable. We must have the strength to take them, justas France, Germany, Italy, Spain and other Europeancountries are doing. I repeat: there is no alternative tosuch measures. We must have the courage to startsuch reforms at the cost of popularity to benefit futuregenerations.

WWhhaatt ddooeess iitt mmeeaann ffoorr yyoouu ppeerrssoonnaallllyy ttoo bbee aatt tthhee hheeaaddooff tthhee ccoommppaannyy tthhaatt ppllaayyss ssuucchh aann iimmppoorrttaanntt rroollee iinnMMaarriiuuppooll?? You must understand that “Azovmash” is very diversi-fied. The main industrial centres and headquarters arelocated in Mariupol, but “Azvomash” is not limited bythis as it has a very complex structure. Moreover, Mar-iupol is not only “Azovmash”, which is good for ourcompany, by the way. There are, in addition to our plant,powerful iron and steel plants and ports. Thus, Mariupolis a poly-industrial centre providing the synergy of con-necting powers in different spheres of activity. Mari-upol is therefore a very important part of Ukraine, re-gardless of whether there is “Azovmash” or anotherenterprise. It is one of the largest industrial centres inthe country. However, “Azovmash” certainly contributesto the life of the city, being a significant part of a larg-er organism. Today in Mariupol at our facilities there aremore than 20 thousand employees. Furthermore, “Azov-mash” is the largest machine-building enterprise inthe entire state, not only with regard to production vol-umes, but the number of employees as well.

HHooww aarree yyoouurr eexxppoorrtt mmaarrkkeettss pprroocceeeeddiinngg?? There were times when we exported goods to morethan 40 countries, but the crisis has not spared us. To-day we should not talk so much about the countriesbut the results. For example, if we talk about our prod-ucts like carriages, we should note the following fact:railroad tracks found in the former Soviet Union andPoland are different from European tracks. They are wider.We also have other GOST requirements for railroad cars.For these kinds of products we are together with theRussian Urals railcar plant, located in Nizhny Tagil, shar-ing 30 per cent of the market. Thus, our work does notdepend on the number of countries in which we exportor the type of track. You can see one more example inthe metallurgical sector. We produce converters formaking steel. We do not cooperate with individual coun-tries. We are working with Arcelor Mittal, delivering prod-ucts to the factories in Krivoy Rog in Ukraine, as wellas in Algeria, India, Pakistan, Kazakhstan and othercountries. We work with international companies. Ourcooperation with “Severstal” does not mean that we on-ly supply products in Cherepovets. Working with the No-volipetsk MC, does not mean we only supply good inLipetsk. We work with the Industrial Union of Donbass,but send products to more places then just Alchevsk.For example their operations in “Dunaferr”, Hungary al-so need our products. The modern globalised world is

not based on how many countries you supply a prod-uct, but on the companies with which you work. Todate, only very large international companies have theresources to develop. This applies to companies oper-ating in our sector, and using our equipment becausethe equipment is very expensive and requires signif-icant investment.

YYoouurr yyeeaarr oonn yyeeaarr ssaalleess hhaavvee nneeaarrllyy ddoouubblleedd.. WWhhaattiiss tthhee rreeaassoonn?? There are no secrets. This is the consequences of thecrisis. In 2008, the crisis hit us, probably much hard-er than other companies, like ours, because just be-fore its onset, we invested more than $200 million inreconstruction and technical re-equipment of our plant,but did not manage to put it in action. That is when thecrisis struck and we should have been using it to ser-vice loans. It was a very difficult time for us, perhapsthe worst in the history of “Azovmash”. However, whenthe world began to emerge from the crisis, thanks tonew hardware and more modern technologies, we werebetter prepared to work. This allowed us to increase pro-duction volumes 50 per cent compared to pre-crisistimes. This figure is more correct, because during thecrisis, production figures fell by half. Compared to thepre-crisis period, we invested in modernisation, in-creased production by 505 and decreased the num-ber of employees by 20 per cent. The positive resultswe achieved were the result of these actions. Thus, af-ter a very hard period for us, we finally experienced anumber of advantages. This is the real specifics of“Azovmash” that explains a lot about our business.

WWhhaatt aarree tthhee mmaaiinn ccoommppeettiittiivvee aaddvvaannttaaggeess ooff tthheeeenntteerrpprriissee wwhhiicchh aalllloowweedd iitt ttoo aacchhiieevvee ssuucccceessss aannddrreeaacchh iittss ccuurrrreenntt lleevveell?? In fact, you asked a very difficult question. Our mainstrength is not one single factor, but a symbiotic rela-tionship and the sum of many terms. I want to note theimportance of our top managers. This is crucial be-cause of the scientific and technological base createdin the enterprise. Our market, like any other, has its lim-its. The crisis has forced us to revise our concept of de-velopment. We concluded that the main thing is qual-ity products and customer requirements. The marketcan not grow indefinitely. The leading position is occupiedby the one who offers the best products and most fa-vorable terms. Therefore, we don’t hesitate to spend hugesums on the development of new technologies as weunderstand that this is a necessary step. One of mywishes would be for everyone from general managerto the ordinary worker to get used to change. In thisrespect, the crisis helped us a lot, oddly enough. It isbecause of the crisis that our people realised that wemust differentiate ourselves from the competitionthrough higher quality and more efficient workflow, orwe will be without work. In Germany, I saw the mostpowerful production lines stopped because the peoplehad no incentive to work and upgrade. I once offeredto buy a lot of German and French companies that weremanufacturing wagons. These companies were in poorcondition, and one of the main reasons was the factthat people did not have the interest and desire to con-tinue the development of the company. Despite the factthat, for example, in Germany the state and legislativelevels have established all necessary conditions for thepromotion of its development such as exemption fromfederal and state taxes, and so on. It is useless to in-

vest in such enterprises, because it all depends onmentality. Mariupol is a working city, and people realisethat the factory is the breadwinner, on which the fu-ture of workers and their families depend on. In Mari-upol there are many examples of how people work atthe factory with their families for generations. Many fam-ilies exist in which the grandfather, father, and son havededicated their entire lives to working in “Azovmash”.For us it is important to keep these traditions and toassure people understand that the plant is also a fam-ily, and if someone from the family has problems, wecan help each other. These are the two main reasonsfor our success: technical upgrading and the mentali-ty of our people.

HHooww aarree yyoouu iinnvveessttiinngg iinn yyoouurr eemmppllooyyeeeess ffuurrtthheerr eedd--uuccaattiioonn aanndd pprrooffeessssiioonnaall ddeevveellooppmmeenntt??Of course, this aspect is of great importance for our com-pany. Without this, further work would be impossible.Each year, about 12 members of our staff receive spe-cialised training. We are very seriously engaged in this,sending employees to various business trips. For ex-ample, when we supply our products to the companyArcelor Mittal, the largest of our partners and cus-tomers, our people go to India, Algeria and other coun-tries to monitor the installation of equipment. They livethere for a long time, training local workers to the rulesof operation of our machines. In turn, our staff mustthemselves be competent and trained to the highestlevel. For us it is very important, so we give this issuea lot of attention. Moreover, we work hard to ensure thatpeople have developed an understanding of the im-portance of the educational process. Employees shouldbe aware that for them it is even more important thanfor us, because no courses will help if a person has nodesire to educate themselves.

WWhhaatt iiss yyoouurr vviissiioonn ooff tthhee ffuuttuurree ffoorr AAzzoovvmmaasshh oovveerrtthhee nneexxtt tthhrreeee ttoo ffiivvee yyeeaarrss??We always think about it, because our market is great,but the country has huge resources. We are now work-ing on a new car. The project is tentatively called “East-West”, and our aim is to build a train, we develop, thatcould go from Vladivostok to the English Channel. Thisis a very difficult task, because in the CIS tracks are widerthan in Europe, and require a special truck that can au-tomatically narrow. Therefore, the project is innovativeand not very easy. In another line of our products -Metallurgical Equipment – it should be noted that itsproduction is not particularly relevant for Europe atthe moment, because the steel industry is concen-trated mainly in Eastern Europe, Africa, India and Chi-na. But in this regard “Azovmash” has partnered withcompanies such as Siemens. For example, today weare launching a new line of casting steel using the lat-est equipment. This is important because Europe needsa high-quality alloy steel for the automobile and ener-gy industries. We closely work with companies fromSwitzerland, Germany and Italy, and I think that nextyear we will deliver our steel in Europe. We also have alarge project in the field of wind turbines.

DDooeess yyoouurr ffooccuuss iinncclluuddee aannyy BBrriittiisshh ccoommppaannyy??We cooperate with international companies. Some haveoffices in the UK, but we do not see Europe in terms ofcountries. For us European companies are everywhere.The world is changing, becoming more globalised, andnow there are no such boundaries as before. �

A snapshot of Ukrainian industry, as seen from the helm of Azovmash

Alexander Savchuk,President of Azovmash,speaks about the future ofbusiness in Ukraine

ALEXANDER SAVCHUK, President of Azovmash

UKRAINE8An advertisement supplement by UPPER REACH

Whether you talk politics or business in Ukraine,all roads lead to Donetsk

The Donetsk region boasts 12 per cent of thecountry’s natural resources, making it Ukraine’srichest in this regard. Its companies produce 22per cent of overall industrial produce; 45 per centof finished coal, aluminium and ferrous metals;46 per cent of steel; and 13 per cent of the na-tion’s energy. Well-developed infrastructure,modern telecoms and access to the Black Seamean that in terms of external trade Donetsk isone Ukraine’s leaders.

In-depth professional training is also key to theregion’s economic strength. Workers are highlymotivated and it ranks top in terms of on-site spe-cialised research and training. Donetsk’s GDP percapita is one third higher than the national average.

Donetsk accounts for 25 per cent of Ukraine’sinnovation-related spending. Business leadershave been far-sighted in cooperating with bodiessuch as the AER and OECD. Furthermore, theyhave clearly identified the needs of overseas in-vestors. Ralf Goldmann, head of the European Of-fice Donetsk Chamber of Commerce and Industryexplains: “We formulated a way to give compa-nies a helping hand. So far, we have had a num-ber of success stories.”

Gennadiy Chyzhykov, president of the Donet-sk Chamber of Commerce, highlights the can-doattitude of the workforce and says: “People comehere to focus on their business and to be prag-matic. We have a positive future based on the hu-man resources here.” President of Investmentsand Developments (I&D) Vasyly Mikulin says:“We have seen many positive political changeswhich indicate the future direction of the coun-try.” I&D’s chief strategic officer Alexey Gavrishexemplifies the confidence shared by the na-tion’s business leaders. Of the challenges ahead,he says: “Bring them on.”

The landscape of Donetsk is changing, witha new stadium and roads, for example. “Thecity is becoming more beautiful,” says Alexan-der Tislenko, chairman of the board of direc-tors at Altcom. “We are constructing a modernairport that will become a hub between East-ern Europe and Asia.”

He adds: “A considerable number of country in-tellectuals are concentrated here. The world’sflagship technologies are coming to the city, andnot only thanks to Altcom: nearly every entrepre-neur tries to be maximally effective in the mar-kets, using innovative methods and technolo-gies. New, modern business-centres are beingconstructed; it will be beautiful, hospitable andinvestment-friendly here.”

DONETSK IN THEDRIVING SEAT

Ukraine will get aresult at Euro 2012

ACCORDING TO a report by UMG International, spend-ing by the Ukrainian government for 2012 UEFA Eu-ropean Football Championship (Euro 2012) hasseen a 3.7-fold increase in the building of bridges,overpasses, tunnels and underground facilities,while there has been a 1.6-fold increase in the con-struction of roads, air-facilities and sports surfaces.

In fact, 83 per cent of all works in this beautiful,busy country is on new construction, reconstruc-tion and technical re-equipments surrounding theprestigious event. UMG also predicts that hostingthe competition, along with Poland, will have a posi-tive effect on the country’s image and will attractmore foreign investment.

Ukraine’s reputation among the “Big 8” (USA,Japan, Germany, Britain, France, Italy, Canada and

Russia) has already increased by 6.7 per cent, ac-cording to a recent Reputation Institute study. Fore-casts from the Cabinet of Ministers of Ukraine indi-cate that Euro 2012 should accelerate GDP growthby 1.5 per cent, while keeping inflation stable.

Popular support has also been garnered. As Vi-taliy Klitschko, former boxer and current partychairman of the Ukrainian Democratic Alliance forReforms (UDAR), says: “It will promote our countryand encourage investment. I was so happy whenwe won.”

The UMG report shows an overwhelming 80.9 percent believe Euro 2012 will have a positive impact athome, while 77 per cent feel the event will have apositive effect on image abroad.

Worth noting is that Canada rose to first place inFuturebrand’s 2010 Country Brand Index thanks tohosting the Winter Olympic Games that year.

UEFA’s Euro championships have a track record ofpositively impacting host countries, not only per-ception-wise, but also in terms of triggering newrevenues. Portugal’s hosting of Euro 2004 improvedoverall perception by 74 per cent, and 75 per cent oftourists who visited expressed willingness to re-turn. Ukraine currently attracts tourists from Rus-sia, Belarus and Moldova, a host of other post-Sovietnations, with Germany and the USA as the only rep-resentatives from developed high-spending nations.

Ukraine intends to leverage the Euro 2012 com-petition to draw interest from other high-spendingnations. To this end, a series of advertising cam-paigns recently launched on CNN and Euronewsthat showcase the country’s fascinating 1,000-yearhistory. Joint projects with the Discovery Channeland National Geographic, showing the extraordinarycultural diversity, have also been developed. Mediatargeting of key foreign markets, strong presence atmajor tourism expos, and trained foreign languageguides are among other key initiatives.

There is also the Discover Ukraine 2012 strategy.This unites the efforts of businesses, public sectororganisations, media, destination marketing andcommunications experts to further showcase thebest of Ukraine and to highlight the many steps thecountry is taking to raise its profile.

One of the project’s key elements is its website:www.discoverukraine2012.org. The portal hasbeen designed to attract both foreign visitors and

investors alike. President of the Football Federa-tion of Ukraine Hryhoriy Surkis – a major drivingforce behind the event – says: “All those involvedin the preparations for Euro 2012 have clearly syn-chronised their work. The results are really im-pressive.”

Mr Surkis, a Ukrainian businessman and politi-cian listed on Top-100 compilations of the mostpowerful people in Ukraine, says: “FIFA gave us achance to build not just new stadiums, but a newcountry.”

Ukraine is building up not just its infrastructure,but a also new, enviable reputation. Alexander

Starchenko, general director of the highly success-ful KNAUF Marketing concurs: “British project com-panies are actively working in Ukraine and we hopethat construction and developer companies will alsocome to this market as objects constructed byBritish companies are very famous: DisneylandParis, Hong-Kong’s airport, the Olympic complex inAtlanta, and now Donbass Palace in Ukraine. Theground for investors to come to Ukraine is ready.”

Mr Klitschko adds, “Euro 2012 has the power tochange Ukraine. It is a huge opportunity. Many peo-ple will watch the championship and many willcome to Ukraine. The country is beautiful; the peo-ple are friendly and hospitable. It will promote ourcountry a lot and will encourage investment.” �

As co-hosts of the tournament, the country will receive valuable, worldwide exposure – and has already enjoyed a massive boost to its infrastructure

The reconstructed Kyiv Olympic Stadium will host the Euro 2012 Final

FIFA gave us achance to build

not just new stadiums, but a new country.”

HRYHORIY SURKIS, President of the FootballFederation of Ukraine“