By Juliana Kinal
Is now the right time to invest in Ukraine? What are the potential pitfalls, and are they the same as several years ago? Have attitudes toward business between Ukraine and the United States changed since the first heady days of the transition to a free market? A gathering of over 70 private businesspersons, with the participation of U.S. Government officials, discussed these and other questions on January 10, 2000 at the“Business-to-Business Conference on Ukraine: A Matter of Perspective.” Eastern Economist magazine organized the conference, held in Washington, DC, which reviewed the experiences of foreign investors and factors influencing the business climate in Ukraine, and provided specific guidance for being successful in business in Ukraine.
The roundtable discussions began with a panel on the general legal, macroeconomic, trade, and investment climate in Ukraine. The moderator, former U.S. Commercial Attach‚ to Ukraine Andy Bihun, set the tone of the panel by asserting that now is the “right time” and the “ripe time” to go into Ukraine. Nestor Scherbey of CTRMS (Grand Rapids, MI) continued this theme by drawing parallels between Ukraine and other developing countries, such as Mexico and Brazil, giving examples of legislative and tax incentives that helped attract investment into those countries. He outlined steps Ukraine needs to take to get to that stage, including enforcement actions against government corruption, acceleration of privatization, and governmental trade facilitation efforts. John Hansen, an economic advisor at the World Bank, outlined a macroeconomic profile of Ukraine since 1991, concluding that the trend is in an upward swing. Markian Silecky of The Silecky Firm (Kyiv) commented on the main legal issues facing investors: corruption, repatriation of profits, and cultural legal misunderstandings. However, according to Mr. Silecky, legislative changes are taking place that will work Western legal concepts into Ukrainian law and improve the investment climate. Richard Shriver of the Lviv Consulting Group (Lviv) spoke about his firm’s survey of foreign investors, which concluded that the main problem for foreign investors is the reliability of the Ukrainian partner. He capped off this informative session by providing concrete, experience-based advice: avoid absolutes in reference to Ukraine, bring money not preachy advice, and take a long-term perspective.
Recommendations on how to approach the Ukrainian market from conference participants included:
q Learn from other businesses’ attempts.
q Adopt a long-term perspective, be patient.
q Perform due diligence and follow up on that research by keeping an eye on operations.
q Set out from the beginning how you’ll exit if you need to and how you’ll settle disputes if you need to.
qKnow your partner.
qKnow the legal and legislative context of your business in Ukraine.
qLearn the culture, history, societal norms, bureaucracy, and market conditions.
After the first session, the seminar shifted to discuss legal, cultural, and financial aspects of doing business in Ukraine. The legal session dealt with technical issues of setting up business, dispute settlement, tax issues, and exit strategies. Mr. Silecky moderated a panel consisting of Sarah Carey of Squires, Sanders & Dempsey (Wash., DC), Adam Mycyk of Altheimer & Grey (Chicago), and Dr. Irina Paliashvili of the Russian-Ukrainian Legal Group (Wash., DC). Ms. Carey discussed corporate structure choice and consideration of the government in a business’ operations in Ukraine, while Mr. Mycyk ran through the legal aspects of setting up a business. Dr. Paliashvili discussed different means and venues for dispute resolution and the pros and cons of each: local court settlement, foreign court settlement, international arbitration, and mediation. Mr. Silecky wrapped up the session by stressing building in an exit strategy from the beginning.
At the conclusion of the conference, participants offered ideas on how individual investors, the U.S. Government, and the Government of Ukraine can further the development of a market economy and a more solid investment climate. All welcomed the appointments of what appears to be a reformist government, with Prime Minister Viktor Yushchenko at the head, and expressed the hope that Ukraine is at long last creating a hospitable and steady business climate.
For market reports, announcements of trade events, and other information on doing business in Ukraine, visit BISNIS Online at www.bisnis.doc.gov/bisnis/country/Ukraine.htm.
Juliana Kinal covers Ukraine for BISNIS in Washington, DC.