Driving through the rain towards brighter economic future of Ukraine

About a month ago, during a Washington round-table on Ukraine hosted by the US-Ukraine Business Council (USUBC), someone asked me what do my colleagues and I expect from the new President of Ukraine and his administration? My answer, which was picked up by the Voice  of America and other publications, was essentially – I have no idea. But since we have been and continue to be bullish on the Ukraine for almost twenty five years, our strategy is to move forward despite the political climates, as we always hope for sunny investment weather, but carry a sturdy umbrella in case it starts to rain. 

Well, it is raining now.  Raining hard and much sooner than expected.

The events of this passed week have created a vicious firestorm with  “Ukraine” being mentioned practically non-stop.  In this post I will not address the politics of the situation, as this has been done by practically every major media outlet in the world ad nauseam. My focus will be on business opportunities and financing tools available to those wishing to invest into the Ukrainian economy, as despite this week’s “torrential downpour” nothing has fundamentally changed to make Ukraine a less attractive place to invest.

First, some basic assumptions under which we have been operating in Ukraine for almost quarter of the century:

• Massive institutionalized corruption exists in Ukraine and it will probably take two-three generations for it to be rooted out;
• Ukraine is a very risky place to do business;
• Many people who accumulated capital in the ’90’s played by the “fast and loose rules” and cut multiple corners;
• As business in the country evolves, most astute business people understand that by playing by the transparent and well-defined rules set out by the western markets they can unlock the value of their holdings, obtain access to low-cost financing and protect their assets for the generational asset transfer;
• Ukraine has fantastic potential for economic growth in multiple sectors;
• Terrific opportunities exist for US, Canadian and European companies to supply goods and services to Ukraine and to bring world-class Ukrainian goods into the Western markets;
• Ukraine has a superb pool of smart and educated labor force;
• Country is of a strategic geopolitical importance and will always be a subject of political pressure and outside influence;

Given the above, it is important to take a long view and not be terribly concerned with current politics, because by definition Presidents, Ministers, Ambassadors and Senators change every few years. Once such long-term philosophy is accepted, then it is necessary to construct one’s proverbial umbrella. Namely, risk mitigation, corruption resistant mechanisms must be incorporated into one’s approach to doing business in the country.  What this means in practice is the following:

• Targeting for investment and financing primarily those sectors where corruption is either low or  non-existent. From our standpoint exports of Ukrainian natural foodstuffs, renewable energy, electro-transport production, IT, nuclear waste containment are some of those.
• Utilizing US Government financing tools, such as those offered by OPIC and US-EXIM  Having these tools part of a business transaction not only provides low-cost, long-term financing, which improves economics of practically any project, but having government-backed financing in a deal, also improves quality of due diligence and acts as fantastic corruption deterrent and protection for investors.
• Obtaining political risk, trade credit, or breach of contract insurance for every significant deal or trade transaction. US  Government and certain well-rated global  insurance companies offer protection to investors from such perils as expropriation, creeping expropriation, currency  inconvertibility, non-payment for goods supplied, or services rendered and for breach of contract.  Such insurance is not terribly expensive, but  de rigueur for anyone looking to invest into the Ukraine, or into any  foreign market, for that matter.
• Creation of a so-called Grey2White® program to allow investment where original capital, or business formation had murky roots, but can be fully re-mediated with application of strict compliance procedures, financial restructuring and accounting oversight.
• Finally, despite of the current rainy weather, we are moving hard to add one more extremely effective tool, which has been missing in Ukraine’s economic development. Creating a safe umbrella for individual American-Ukrainian, Canadian-Ukrainian and members of Ukrainian diasporas in other countries to invest into the future of Ukraine.

What this means is a focused investment platform listed on a stock exchange and subject to a recognized US, or Canadian authority such as Securities Exchange Commission (USA), or Canadian Securities Administration (CSA). Such platform would will further be secured by protection of the political risk insurance and will, for the first time since Ukraine’s independence, allow individual investors with as little as $500! to invest,  to participate in Ukraine’s economic development, while having the umbrella of protection of the western laws, rules and regulations.  We call this platform “Develop UA”™ and expect to formally roll it out to the world in the middle of October, 2019 regardless of whether it is raining, or sunshine in Kyiv and Washington, DC.

relevant links

http://www.usubc.org/site/recent-news/doing-business-in-ukraine-now–usubc-roundtable-in-washington

https://ukrainian.voanews.com/a/amerykanksy-biznes-ukrayina/5051657.html

 

Grey2White Workshop Hosted by the USUBC, Puts an Exclamation Point on the International Trade Mission

 

On Wednesday, September 12th, US-Ukraine Business Council (USUBC), in cooperation with the law firm of Brown Rudnick, Broad Street Capital Group and Ankura Consulting, held its second Grey2White ™ workshop in Kyiv. Over 45 guests attended, including the Former First Lady of Ukraine, Kateryna Yushchenko.

The Grey2White workshop resulted in consensus among the participants on the need of Grey2White program in Ukraine and in other post-Soviet countries. The lively and spirited discussion continued after the official part of the program was concluded.

The workshop’s presenters featured financiers, former prosecutors with the US Department of Justice and enforcement attorney with the US Securities Exchange Commission.

Grey2White workshop served as the exclamation point on the highly successful International Trade Mission through Ukraine and Uzbekistan, in which the speakers of the Forum participated, along with representatives of eight companies from four countries.

During the Mission, its participants conducted a number of high-level government, NGO and private sector meetings to identify and engage projects in the areas of healthcare, ICT, energy savings, agriculture and aerospace. Over $1.32 billion of project mandates are expected to be awarded to the Mission Participants in the next 60-90 days. Companies wishing to participate in the projects, which have started the development during the Trade Mission, will have an opportunity to learn more during the upcoming International Opportunities conference in November, hosted by the Broad Street Capital Group.

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“Fly Me To The Moon” UA-USA Air & Space Forum Program Announced

Alert! An International Business Development Opportunity

We are pleased to announce an all-star roster of speakers and panel participants for the upcoming “Fly Me To The Moon” UA-USA Air and Space Cooperation Forum. Do Not Miss one of the most anticipated Air and Space events of the year, as a high level delegation led by the Deputy Chief of the National Space Agency of Ukraine, presents Ukraine’s capabilities in the Air and space Arena and discusses cooperation options with US companies.  Register Today!

 

 

 

 

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 10^th 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 28^th-30^th 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.