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9 December, 2011  ▪  Bohdan Tsioupine

Reluctant Money

Foreigners lack a desire to invest in Ukraine despite the government’s positive reports about allegedly completed reforms

“A number of foreign companies who have found a place on the Ukrainian market are operating successfully here,” Horizon Capital CEO Natalia Yaresko said as she tried to convince the audience in the Dorchester Hotel, one of London’s most luxurious, where the Inside Ukraine conference organized by The Economist took place on December 6. Her American ties were obvious in her command of the English language and she was professionally quite courteous, a trait many purely Russian-speaking post-Soviet businessmen and government officials lack. She is the kind of person one feels like working with after meeting her for the first time. The half billion dollars investors entrusted to her and her colleagues proves this point. Ukraine needs many more business people like Yaresko – a lack of capital to develop business was identified by all participants as the key problem faced by Ukrainian companies and indeed entire industry sectors. Assessing the current condition of Ukraine’s economy, speakers often used the word underperformance. Ukraine’s economy is growing, they admitted, but a 4% annual increase is inadequate for Ukraine, especially after several years of rapid decline. This suggests many opportunities are being wasted.

Borys Krasniansky, Governing Director of PricewaterhouseCoopers Ukraine, exuded optimism: “We are doing so well in Ukraine that we can afford to sponsor this conference in one of London’s most expensive hotels.” But this fountain of optimism was one of very few positive assessments and came across as somewhat artificial. His cast-iron argument was that things in Ukraine must pick up because “they can’t get worse. There is virtually no room underneath; the only way is up.” Other speakers noted that his company’s success in Ukraine can just as well be taken as evidence of the problems other companies face and which PricewaterhouseCoopers charges to resolve. The word corruption was mentioned by almost every speaker in descriptions of the situation in Ukraine. And no-one had any hope that officials in Kyiv could solve it.

To Ukraine, graft has become something similar to a diagnosis of a disease which the patient acknowledges but is not going to have treated seriously. An American business consultant who often talks to Ukrainian officials said that Ukrainian leaders have chosen a peculiar way to fight this evil – top officials are prepared to punish corrupt officials at the bottom or mid-level but are not going to give up opportunities to enrich themselves: “They don’t want to grasp that corruption can only be eradicated completely as culture. Selective measures are fruitless.”


Deputy Prime Minister Serhiy Tihipko flew to London to admit that the growth of Ukraine’s economy will slip to 2-3% next year. This sounds like a fairly optimistic forecast against the background of reports about EU leaders scrambling to save the eurozone whose collapse poses a global threat. Conference participants warned that, as an export-oriented country, Ukraine will immediately be hurt by global economic hardships. Without a smile – a must for Western politicians who appear in public – Tihipko spoke about his efforts and recounted achievements. However, he admitted circumspectly: “There are problems with their implementation.” But even if scores of foreigners suddenly emerged with a great desire to invest in Ukraine, Kyiv cannot, in many cases, offer them clear-cut and guaranteed rules and possibilities. “We need rules!” business representatives said almost in unison. It is not critical if these rules are imperfect. It is much worse if they are missing altogether or lack meaning.

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