KYIV – About $4 billion in new ‘greenfield’ investment from 20 multinational companies is in the pipeline for Ukraine over the next two years, says Dan Bilak, Chief Investment Adviser to the Prime Minister.

“We have unlocked $700 million in investment in 2017, and $350 million is carrying over into the new year,” Bilak said, reviewing the first year of his agency, UkraineInvest.

Bilak was interviewed in his car as he traveled to a members meeting of the American Chamber of Commerce of Ukraine. There, a surprise electronic poll was conducted of 400 members gathered at the Hilton Kyiv. Of respondents, 63% said their businesses grew in 2017. Looking ahead, 82% said they plan to expand their business in Ukraine this year.

For UkraineInvest, unlocking frozen investment by existing foreign investors was a priority for year one. The Business Ombudsman Council and other government agencies were enlisted to clear bureaucratic roadblocks.

Daniel Bilak (far right), director of UkraineInvest, meets with German investors in Munich last month on the sidelines of the Ukraine – Bavaria Economic Forum (Photo: Mariana Zbanatska)

Big Brands Investing in Ukraine

The $700 million in new Ukraine projects represents a list of multinational blue chips: ArcelorMittal, Bunge, Cargill, Louis Dreyfus, Radisson Blu, and Horizon Capital. Another $350 million by six multinationals is being unlocked for projects to start by June.

The next level of challenge is to persuade foreign investors outside Ukraine to take a second look at what Bilak bills as “Europe’s last big truly emerging market.”

“We try sell Ukraine less as a whole, but specific regions and specific sectors,” said of his tactic to deal with Ukraine’s poor overall image. “The more we talk about the added value, the innovation, the more people get excited.”

As evidence, he shows a slide of 20 “world brands” that are in various stages of investing a total of $4 billion. American, European and Asian corporate logos populate this group, all recognizable company names he cannot make public.

Bilak can cite the arrival in Ukraine this year of three new multinationals.

Next week, General Electric is to sign a deal to build 200 diesel locomotives in Ukraine. Ikea, the Swedish furniture giant, is to open in Kyiv by the end of this year. Ryanair, Europe’s largest airline, is to start flying this fall to Lviv and Kyiv Boryspil.

Ukraine: Easier to do Business than India

At last month’s World Economic Forum in Davos, Lenna Koszarny, an organizer of the Ukraine House, said she found many foreign CEOs were opening their minds about Ukraine.

She said global investors who think in terms of Brazil, Argentina and India were startled to learn that Ukraine is well ahead of India in the World Bank’s Ease of Doing Business ranking. Indeed, Ukraine’s current rank of 76 is not only well ahead of India’s rank of 100, but Ukraine is at half the level of its 2008-2012 average of 146.

By rolling out the red carpet for foreign investors – and keeping it unrolled, Bilak hopes to quadruple foreign direct investment here, from a cumulative total of $6 billion today to $25 billion in the near future.

“For us, FDI is a matter of national security,” Bilak said. “We need to grow at 5% a year for the next five years to catch up with Poland.”

Last year, the economy grew by only 2%, barely making a dent in the double digit losses of 2014 and 2015.

Foreign investment: Key to GDP growth

Ivan Miklos, an economic advisor to the government, says that foreign investment is crucial to growth.

"One of the most important priorities should be to bring more FDI,” Miklos, a former finance minister of neighboring Slovakia, recently told Channel 5 TV. “Today, for example, direct investment as their share of gross domestic product in Ukraine is around 15%. To have this growth [6-7% a year] -- and this is not a theory, this is the experience other countries -- the share of investment should be around 25% of GDP.”

Prime Minister Groysman speaks at the AmCham meeting Feb. 1, 2018 at the Hilton Kyiv. (UBJ Editor)

At the AmCham meeting, Prime Minister Groysman asked foreign investors to look at Ukraine’s accelerated privatization program.

“They are waiting for privatization, this will provide new opportunities for investment,” he said. “I believe economic growth of 5 or even 7 percent absolutely possible.”

On Feb. 14, the Prime Minister told government officials: ""Last year we attracted $2.3 billion in direct investment. This is a good figure, but not sufficient."

Investors interested in Ukraine

Bilak, who did most of UkraineInvest’s 28 overseas speaking engagements last year, reports back that he senses “an upsurge in interest from potential investors worldwide.”

“Investors are amazed by IT’s explosion in only five years from a fringe economic activity to Ukraine’s third largest export,” he said in a recent speech.

After a year of meetings with foreign investors, Bilak and his 18-member team believe they have identified areas of greatest interest.

UkraineInvest’s year end report list them: “The massive potential of Ukraine’s untapped agri-food value chain; the attractiveness of Ukraine’s green tariff relating to renewable energy projects; the growth of European supply-chain manufacturing clusters in the regions; the opportunities offered in rebuilding Ukraine’s Soviet-era port, road and rail infrastructure.”

Now, with labor migration to the EU accelerating and the government facing an election battle in one year, one question stands: This year, will the nation see results on the ground, in form of more, better paying jobs?

For comments and story ideas, please contact UBJ Editor in Chief at laurenson.jack@theubj.com

Posted Feb. 14, 2018