Warsaw Conversation
Evaluation of reforms in Ukraine by Polish investors, trends and prospects of bilateral cooperation, potential of separate sectors of the national economy and future investment decisions were discussed at the IV International Forum Ukrainian Business Day in Poland, which took place in Warsaw on 12 May 2016.
While moderating the first panel discussion, Yaroslav Romanchuk, President of the Association of Ukrainian Business in Poland and managing partner of ILC EUCON, noted that one of objectives of such a meeting is summing up results of economic cooperation between the two countries. “Some Polish investment projects, which were planned for implementation on the Ukrainian market, are now frozen. Therefore, 2016-2017 could be indicative in terms of activating Polish investment in Ukraine”, he said.
From the point of view of Andriy Deshchitsa, Ambassador of Ukraine to the Republic of Poland, the very fact that the number of partners and participants of the forum this year increased significantly is indicative of the rise in economic interest to our country. At the same time, the embassy recorded growth in the number of migrant workers in Poland and of Ukrainian companies, which entered the Polish market in the last year. Moreover, the Ukraine International Airlines doubled the number of flights between Ukraine and Poland.
Andriy Demchuk, Director of the Department of the Ministry of Economic Development and Trade of Ukraine, noted that the main task of the authority is to be a business operations moderator in the country. “One of my main missions here is to make contribution to arrangement of the intergovernmental commission meeting”, he said.
Piotr Tsiarkovski, President of the International Society of Polish Entrepreneurs in Ukraine, supported his colleague, noting that increase in social activity and cultural cooperation indicates expansion of relations between Ukraine and Poland. Among positive trends he specified creation of the Association of Ukrainian Business in Poland and creation of the League of Ukrainian Students in Poland.
At the end of the panel discussion the leaders of these two organizations signed a memorandum on cooperation.
Transport expectations
A special session of the forum, which was opened by famous Polish top manager Wojciech Balczun, was dedicated to the transport industry of Ukraine. He is set to become the new head of Ukrainian state rail operator Ukrzaliznytsia. Mr. Balczun admitted that taking up such a post is a great professional challenge, because the expectations of the Ukrainian government are indeed very high. “Huge unused capacities in the transport sector of Ukraine result in even more expectations”, he said.
Positive expectations as of railway transportation development were shared by the legal department director of Ukrzaliznytsia, Vitaly Makhinchuk. According to him, the transition to market economy for the company that for 68 years was subsidized by the state appeared to not be the easiest process, especially since the company has to provide 6.7% of GDP in 2016. At the same time, in spite of the situation that developed in the ATO area, the company did not cease to carry out transit carriages of strategic importance for exporters. As a solution to the transportation situation, arising from actions by Russia, Mr. Makhinchuk drew attention to the so-called third silk Chinese road, which allows supply to the Ukrainian-Polish border to be ensured in 10 days (without bypassing the Russian Federation — in nine days).
A representative of the Transport and Freight Forwarding Organizations of Ukraine UKRVNESHTRANS, Valery Lugovets, noted that currently there is quite high demand on the Ukrainian road transport market, and this leads to an increase in the number of specialist companies. He cited the example of a successful Ukrainian-Polish experiment — joint control at checkpoints under the principle of a single window, which was organized during Euro 2012. “This experiment influenced the development of infrastructure schemes for construction of checkpoints,” said Mr. Lugovets.
Talking about cooperation trends in the aviation sector, Andriy Rudenko, regional sales manager of UIA, pointed out the introduction of increase in the frequency of flights. UIA now performs 12 direct flights from Kiev to Warsaw. Moreover, in June of this year the UIA launched a new route, Vinnitsa — Warsaw, where the air fare will be USD 70 and Ivano-Frankivsk — Gdansk for USD 110. “At the same time, the company continues to look for ways to reduce the cost of air travel”, said Mr. Rudenko.
First success
Participants of the “Modern commerce and the state” session spoke of the possibilities Ukraine currently offers to investors, including through a series of reforms being undertaken now.
The first results of public procurement demonstrate successful examples of reforms. Ukrainian know-how PROZORRO was presented to forum participants by GPA Project Manager Alexey Mikhailichenko. According to him, the system already provides more than 12% budget savings of the total size of public procurement market in Ukraine, which is estimated at UAH 250 billion per year.
After years of preparation Ukraine has approached ratification of the agreement, and on 18 May joining this document was officially completed. As Mikhailichenko said, the launch of a fully-fledged GPA office in UA is currently planned. Its main objective is to promote participation of Ukrainian exporters in international public procurement, the size of which is estimated at USD 1.7 trillion per year. “We launched a pilot project in which we would like to fulfill complete the path of participation in international public procurement with five companies: from tender announcement to documentation submission and participation in the tender itself,” he concluded.
Yevgen Rokicki, head of financial company Ario Capital Group, UBIZ Portal advisor, analyzed the possibility of Polish entrepreneurs accessing the Ukrainian market of distressed assets in the segment of liquidated banks assets, credit portfolios of existing financial institutions, bankrupt businesses, and property sold by the State Enforcement (Bailiffs) Service. “With reform of enforcement proceedings the sale of assets will be significantly activated, which in value terms amounts to more than UAH 560 billion”, — he said.
Roman Matis, head of Investment Policy of Lviv State Administration, told participants that investors’ problems are currently being conveyed to all possible subjects of decision-making who can affect a situation: MPs, government and journalists. “Communicating with investors we have determined that today their concerns are about three major problems: prohibition on dividends withdrawal, mandatory sale of 75% of foreign exchange earnings and bureaucracy”, he said, at the same time noting that public pressure provides results. Thus, only recently the mandatory sale of 75% of currency, which comes in the form of investments, was cancelled, and changes on cancellation of compulsory state registration of investments were voted for. Mr. Matis also focused on the possibility of the production transfer to the territory of Ukraine and gave several recent examples, such as the opening of Fujikura with the creation of about 3,000 jobs, of the company Nexans that launches early next year, providing almost 2,000 jobs, Klingspor (up to 1,000 jobs). “We set ourselves the task to turn Lviv Region into a region with a large proportion of manufacturing”, emphasized Roman Matis.
Business plans
The final session of the forum was devoted to presentation of investment projects to be implemented in Poland. According to contest initiator, Yaroslav Romanchuk, the contest once again proved that there are many innovations in Ukraine that are in need of commercialization and financial resources.
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The next forum will, by tradition, be held in Kiev this November, and will be called the Days of Polish Business in Ukraine. Practical issues of Ukrainian companies’ entry into the EU market through the Republic of Poland are planned for discussion during the event as well as sectoral aspects of conducting business in Poland and prospects of receiving finance from European funds.
