Inches from Greatness!

 or

how Ukraine’s business can unlock at least UAH15 Billion of American financing in 15 months

By: Alexander Gordin, Managing Director, Broad Street Capital Group and Co-Creator of the Fluent In Foreign
September 24, 2012 New York, NY

Last week I attended a business dinner with a high-level delegation from the Ukrainian Government. The dinner was organized by the US-Ukraine Business Council and sponsored by couple of large corporate players and a private equity fund.  During the event, Ukrainian attendees, which included Governor of the National Bank of Ukraine, Ministers of Finance, Agriculture, Ecology, as well as Customs and Tax Chiefs, tried to signal to the U.S. companies in attendance how Ukraine has evolved into an attractive investment destination.

As I was listening to the presentations and discussions by several large corporate players focused on investments into the Ukrainian Oil & Gas and Agri sectors, I could not help but think that, as the Government of Ukraine is making a massive effort to attract U.S. direct investment from Fortune 500 companies and restart the IMF financing, it is leaving on the table billions of dollars readily available debt and equity financing, as well as investment by smaller strategic players.  There is an entire medium size business and project development sector in Ukraine that is begging to be funded and there are funds readily available in the U.S. to fund tens, even hundreds of companies and projects in sectors ranging from hospitality, food security and ICT to agriculture and alternative energy.

Injecting significant funding into this slice of Ukraine’s economy will generate thousands of new jobs; increase corporate efficiency and productivity by introducing latest western technologies and production tools. It will also create a multiplier economic effect, which will reverberate throughout the country’s business and consumer sectors.  Yet, for the last couple of years, only a tiny sliver of the entire American originated debt and equity financings that could have been done in Ukraine has been completed.  In 2011, U.S. was the in 10th place of all the countries that had Foreign Direct Investment into Ukraine, with only $1bln invested.

The big question is WHY? For those of us both in the US Government Trade and Development Agencies and in the private sector, who are focused on financing projects, enterprises and trade, the answer is pretty simple – Disconnect, Distrust and Deficiency, or as I call them 3Ds.

There is disconnect in understanding of western financing process and of the requirements set forth by the U.S. Government agencies and private financial institutions.  Many Ukrainian businessmen spend a lot of time and effort in putting together sleek-looking presentations overloaded with information, setting up technical models and writing business plans using prepackaged software. Yet, most of them fail to truly understand the needs and requirements of the American financiers and their focus on project’s ownership, provenance, due diligence etc. They also do not understand that unless they commit financially to the capital raising process, they will not be perceived as serious players.  There is also a huge image problem that Ukraine has in the West. Although some of it is well deserved, a big part of it is gloom and doom that does not accurately portray the situation in the country.

Then there is distrust. Over the last two decades, Ukrainian business has been pillaged by every type of western con artist known to man. Many swooped in, promised Ukrainian businessmen untold riches, massive credits and investments, collected fees and then vanished.  No wonder today Ukrainian companies are wary, scared and mistrustful.

Finally, there is deficiency.  Deficiency of cross cultural knowledge among the process participants on both sides of the Atlantic; lack of early stage pre-project funding and absence of an integrated well-defined and officially endorsed process, which would nurture and properly prepare companies and projects to be able to take advantage of all the available opportunities.

Estimates are that in today’s environment only one of 20 potentially eligible projects and companies seeking financing in Ukraine get funded.  We at Broad Street Capital Group have been working on solving the above-mentioned problems in order to increase the quality of bankable projects for the last several years. We assembled a group of leading international experts in the fields of risk management, cross-cultural expertise, accounting and audit, corporate law, debt financing, equity funding and media public relations, Together, we have worked to develop a streamlined preparation process to help companies achieve their goals of cross-border market entry, international financing, technology partnerships and foreign direct investment.  The result has been a comprehensive multimedia platform called Fluent In Foreign Business™, which provides assessment, project screening, education, information resources, quality networking opportunities and expert mentoring support to government agencies, companies, investors, franchisors and project developers in over 100 countries.  What this process needs to unlock a floodgate of financing to Ukraine is a modest amount of UA Government support.  The Government should use one of its several investment promotion agencies to work with us in the private sector and to offer official endorsement, information dissemination, and participation leadership to encourage or even mandate Ukrainian businesses to take part in the process without fear of being duped.

Simply given the current portfolio of Ukrainian alternative energy, agriculture and ICT projects, which we are reviewing, we can confidently say that with just a modest amount of UA government support, combined with corporate focus, training and financial commitment, Ukrainian companies can attract at least UAH 15 Billion in low-cost debt, equity and trade financing in the next 15 months.  This is over two times the amount that Ukraine to receive from all International Financial Institutions (IFIs) in 2013 combined. Thousands of jobs and the multiplier effect generated by this initiative will help the government strengthen its business electorate base, improve country’s investment image and its overall economic condition. Thus if Ukrainian government officials are serious about improving the country’s economic situation, they should closely look at the what is needed to unlock a very significant slice of financial investment into a critical sector of its economy.  American businesses and professionals who are Fluent In Foreign Business stand ready to help Ukraine meet the challenge of successfully injecting UAH 15 Billion in 15 months.  November 28th-30th Broad Street Capital Group, along with Fluent In Foreign Advisory Board will hold a briefing and project review sessions for all interested companies, Ukrainian Central and Regional Government Authorities to select projects eligible for the 2013 financing and inclusion into UAH 15 Billion in 15 months Initiative.

About the Author: Alexander Gordin is a Managing Director of the Broad Street Capital Group (a USUBC Member since 2009) and co-creator of the Fluent In Foreign enterprise, which publishes Fluent Foreign online, Fi180 Global Business Atlas and weekly newsletter.  Since June, 2012 the edition has a dedicated section for Ukraine. Gov. Arbuzov’s interview with Mr. Gordin appeared in the inaugural edition of the publication. (https://fluentinforeign.wordpress.com/?s=arbuzov)

Mr. Gordin has been active in Ukraine as Direct Investor since 1995 and as Financier since 1996. Mr. Gordin and the Broad Street Capital Group have represented numerous Ukrainian Government and private entities and have been mandated for financing and political risk Insurance transactions totaling over US$1 Billion.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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