The ongoing economic crisis makes experts and ordinary citizens pay more interest to investments and investment climate both in the world and in Ukraine. Due to the global economic crisis the key investors start to dispose of risky assets. The latest report of Bank of America Merrill Lynch proves that the share of monetary assets in the world investment portfolio increased to 5.3% in June (4.7% in May), which is maximum since the beginning of the crisis (January 2009). More and more investors expect active support from the governments of the developed and developing countries.
The share of pharmaceutical and telecommunication assets, as well as the share of food and commodities producers, has increased in portfolios, while the one of energy and heavy industry trends to decline. The IT sphere remains the most attractive for the moment.
As for our country, Ukraine has made certain progress in attracting investments for the past years, but the general situation still remains uncertain. The main positive 'milestones' are creation of the institute of National investment projects and implementation of a 'single investment-window'. In the first quarter of 2012 the direct investments in the country made $885.1 million, including $585.6 mln from the EU (66.2% of the total amount) and $66 mln from CIS countries (7.5%).
The current head of the state agency on investments and national projects Vladyslav Kaskiv is a popular figure in Ukrainian politics. In 1990ies he was a coordinator of some programs of the international fund "Renaissance" and headed various public organizations.
In 2007 he became a member of the parliament and at the end of 2010 he was appointed the chairman of the state agency on investments and national projects. Political scientists agree that Kaskiv have become a good specialist in the sphere of investments. He is also known to be a good orator, who can afford keen and precise expressions even being a state official. ForUm has learned first-hand from Vladyslav Kaskiv about the domestic and world investment climate and possible ways to improve it.
- Vladyslav, what are the main tasks of the development of the domestic investment market?
- When we created the institute of National projects we wanted to create an effective symbiosis of the state and private sector. The idea was to reduce the participation part of the state and to involve the business to do the job. These are the basic principles of National projects. The private capital can take part only if there is a support from central or local governments.
Ukraine's parliament recently adopted the law on industrial parks, which will enable us to launch another National project. The new law significantly increases the investment attractiveness of Ukraine and enables to bring about $8 billion of investments within 3-4 years. The document defines the legal and organizational basis of creation and operation of industrial parks. The law guarantees and protects the rights of investors and significantly simplifies the access to land plots on the territory of industrial parks. The allocation of a plot, already equipped with necessary engineering and technical instruments enables to reduce the time-to-market - to 6-9 months.
Taking into account the FTA with the EU, the industrial parks will play the key role in the economic and technical development of the country. We are talking about new industries and additional 300 thousand jobs. The world practice proves that investing into industrial parks is a promising business. The introduction FTA with the EU and implementation of the given law is the key factor for the arrival of new strategic investors on the Ukrainian market.
- What can you say about the problems of the investment climate and possible solutions, of course?
- Well, the investment climate of Ukraine is a part of the world process, and for the moment the investment process trends to decline. Big investors now prefer the developed and stable markets, and if they engage into developing economies the investors prefer Asia. Other emerging markets, including ours, are in a complicated situation. That's why the President has adopted the new concept on launching National projects. The projects focus on top-priority sectors of economy and create unique conditions for inventors there.
I'll give you some examples. Diversification of energy supplies is a matter of survival of our country, and here we have a National project on construction of LNG terminal with about one billion euro of private investments. The National project "Clean water" provides for the creation of special conditions for investors to work on the water market. For Ukraine the quality of drinking water is an urgent matter. For today the significant part of diseases is caused by poor quality of water, especially in cities.
The project "Clean city" provides for the development of domestic industry on waste recycling. I want to remind that more than 4% of the whole Ukrainian territory is covered with waste. Here we create a special regulatory system to attract foreign investments.
Generally speaking, the investment climate of Ukraine requires systemic solutions on property right, state control, licensing system.
- Some analysts say the investment attractiveness of Ukraine has worsened. What do you say?
- I don't think it is the case. We have pretty decent dynamics of investments inflow, including in 2011. The firs half of this year has also shown good results. However, the end of 2012 will be most important, as it must show whether the concept of National projects and the implementation of reforms work. The National plan of actions and the Program of economic reforms have been working for over a year now, and it is time they show some results.
It will be a success we manage to replicate the results of the previous year with $7 billion of investments. However, for the progressive economic growth we need at least $15 billion of investments annually for the next three-four years. Then we can expect some major breakthroughs.
Finally, the same $7 billion would not be a bad result for 2013 either.
- What are the sectors, which receive major investments?
- Agriculture and energy remain the most attractive for investments. In 2011 Ukraine took a huge step and opened its energy market for international companies. I am speaking about tenders on development of shale gas, Black Sea shelf and others. The third place is occupied by infrastructure. Euro-2012 pushed the development and it will remain active for years from now.
In addition, the tourism sector is for some reason underestimated. To attract investments in this sphere the government does need to do much, but to make some constructive decisions to strengthen the tourism competitiveness of Ukraine. Take for example winter tourism. There are tens of millions of people living in Russia, Ukraine and Belarus, but there is no developed winter tourism in these countries. Among them only Ukraine with its Carpathians can offer a good deal.
Following the above mentioned, the idea to hold winter Olympic Games-2022 is no-nonsense. With minimal efforts we can present Ukrainian Carpathians to the world. It will improve the employment situation in Western regions.
Now we are waiting for the Cabinet's approval of the technical and economic justification of the National project "Olympic Hope 2022", after which we will publish the main figures, including definitive estimate of the Games. Proceeding from the experience with Euro-2012 we now understand how to work with such project, how to attract investments and how to manage it in general. First we will focus on the development of the private sector - the "Olympic villages" and hotels. It will empower the bid and will push the development of tourism sector in Western regions.
- During the Depression years of 1930ies in the US the development of transport and other infrastructure became the key anti-crisis method. Can Ukraine apply the same means to overcome the crisis?
- Yes and no. Back then the United States used the state budget to finance big infrastructure projects. Ukraine, however, does not have those means in the state budget, hence it cannot afford such approach. Besides, we still have problems with proper application of funds, and it is not a fact that the allocated means will not be misused.
It would be more productive to define one infrastructure object, which can bring maximum benefit, and to focus on it, for example, the completion of Small bypass road and a bridge across Dnipro. Firstly, the road may become the first concessional highway, and secondly, it will improve the national transit potential. The creation of Small ring will bring billions of investments and will improve freight turnover. The success of this project will further attract private capital in the realization of other infrastructural projects.
- It is believed that 'home' savings of the population and capital amnesty can become additional investment resources. What do you think?
- This is an ocean-wide source of investment means, and government needs to find a way to open it. First of all the state needs people's trust and proper mechanisms. Without the developed fund market the people's choice of investment is rather limited. That's why we had such a price rise for real estate, as it was the only secure sphere of investment for the population. However, if we have an effective fund market, people will be able to invest in the whole range of businesses.
As for the capital amnesty, in my personal opinion the decision must be made sooner versus later. Though it may appear politically unpopular, it the only way to provide stable inflow of money in the country's economy. However, the amnesty should go along, but together with such processes as improvement of property rights, judicial system, corruption situation. And of course the capital amnesty should not be applied to the criminal turnover.
Andriy Boyarunets
The share of pharmaceutical and telecommunication assets, as well as the share of food and commodities producers, has increased in portfolios, while the one of energy and heavy industry trends to decline. The IT sphere remains the most attractive for the moment.
As for our country, Ukraine has made certain progress in attracting investments for the past years, but the general situation still remains uncertain. The main positive 'milestones' are creation of the institute of National investment projects and implementation of a 'single investment-window'. In the first quarter of 2012 the direct investments in the country made $885.1 million, including $585.6 mln from the EU (66.2% of the total amount) and $66 mln from CIS countries (7.5%).
The current head of the state agency on investments and national projects Vladyslav Kaskiv is a popular figure in Ukrainian politics. In 1990ies he was a coordinator of some programs of the international fund "Renaissance" and headed various public organizations.
In 2007 he became a member of the parliament and at the end of 2010 he was appointed the chairman of the state agency on investments and national projects. Political scientists agree that Kaskiv have become a good specialist in the sphere of investments. He is also known to be a good orator, who can afford keen and precise expressions even being a state official. ForUm has learned first-hand from Vladyslav Kaskiv about the domestic and world investment climate and possible ways to improve it.
- Vladyslav, what are the main tasks of the development of the domestic investment market?
- When we created the institute of National projects we wanted to create an effective symbiosis of the state and private sector. The idea was to reduce the participation part of the state and to involve the business to do the job. These are the basic principles of National projects. The private capital can take part only if there is a support from central or local governments.
Ukraine's parliament recently adopted the law on industrial parks, which will enable us to launch another National project. The new law significantly increases the investment attractiveness of Ukraine and enables to bring about $8 billion of investments within 3-4 years. The document defines the legal and organizational basis of creation and operation of industrial parks. The law guarantees and protects the rights of investors and significantly simplifies the access to land plots on the territory of industrial parks. The allocation of a plot, already equipped with necessary engineering and technical instruments enables to reduce the time-to-market - to 6-9 months.
Taking into account the FTA with the EU, the industrial parks will play the key role in the economic and technical development of the country. We are talking about new industries and additional 300 thousand jobs. The world practice proves that investing into industrial parks is a promising business. The introduction FTA with the EU and implementation of the given law is the key factor for the arrival of new strategic investors on the Ukrainian market.
- What can you say about the problems of the investment climate and possible solutions, of course?
- Well, the investment climate of Ukraine is a part of the world process, and for the moment the investment process trends to decline. Big investors now prefer the developed and stable markets, and if they engage into developing economies the investors prefer Asia. Other emerging markets, including ours, are in a complicated situation. That's why the President has adopted the new concept on launching National projects. The projects focus on top-priority sectors of economy and create unique conditions for inventors there.
I'll give you some examples. Diversification of energy supplies is a matter of survival of our country, and here we have a National project on construction of LNG terminal with about one billion euro of private investments. The National project "Clean water" provides for the creation of special conditions for investors to work on the water market. For Ukraine the quality of drinking water is an urgent matter. For today the significant part of diseases is caused by poor quality of water, especially in cities.
The project "Clean city" provides for the development of domestic industry on waste recycling. I want to remind that more than 4% of the whole Ukrainian territory is covered with waste. Here we create a special regulatory system to attract foreign investments.
Generally speaking, the investment climate of Ukraine requires systemic solutions on property right, state control, licensing system.
- Some analysts say the investment attractiveness of Ukraine has worsened. What do you say?
- I don't think it is the case. We have pretty decent dynamics of investments inflow, including in 2011. The firs half of this year has also shown good results. However, the end of 2012 will be most important, as it must show whether the concept of National projects and the implementation of reforms work. The National plan of actions and the Program of economic reforms have been working for over a year now, and it is time they show some results.
It will be a success we manage to replicate the results of the previous year with $7 billion of investments. However, for the progressive economic growth we need at least $15 billion of investments annually for the next three-four years. Then we can expect some major breakthroughs.
Finally, the same $7 billion would not be a bad result for 2013 either.
- What are the sectors, which receive major investments?
- Agriculture and energy remain the most attractive for investments. In 2011 Ukraine took a huge step and opened its energy market for international companies. I am speaking about tenders on development of shale gas, Black Sea shelf and others. The third place is occupied by infrastructure. Euro-2012 pushed the development and it will remain active for years from now.
In addition, the tourism sector is for some reason underestimated. To attract investments in this sphere the government does need to do much, but to make some constructive decisions to strengthen the tourism competitiveness of Ukraine. Take for example winter tourism. There are tens of millions of people living in Russia, Ukraine and Belarus, but there is no developed winter tourism in these countries. Among them only Ukraine with its Carpathians can offer a good deal.
Following the above mentioned, the idea to hold winter Olympic Games-2022 is no-nonsense. With minimal efforts we can present Ukrainian Carpathians to the world. It will improve the employment situation in Western regions.
Now we are waiting for the Cabinet's approval of the technical and economic justification of the National project "Olympic Hope 2022", after which we will publish the main figures, including definitive estimate of the Games. Proceeding from the experience with Euro-2012 we now understand how to work with such project, how to attract investments and how to manage it in general. First we will focus on the development of the private sector - the "Olympic villages" and hotels. It will empower the bid and will push the development of tourism sector in Western regions.
- During the Depression years of 1930ies in the US the development of transport and other infrastructure became the key anti-crisis method. Can Ukraine apply the same means to overcome the crisis?
- Yes and no. Back then the United States used the state budget to finance big infrastructure projects. Ukraine, however, does not have those means in the state budget, hence it cannot afford such approach. Besides, we still have problems with proper application of funds, and it is not a fact that the allocated means will not be misused.
It would be more productive to define one infrastructure object, which can bring maximum benefit, and to focus on it, for example, the completion of Small bypass road and a bridge across Dnipro. Firstly, the road may become the first concessional highway, and secondly, it will improve the national transit potential. The creation of Small ring will bring billions of investments and will improve freight turnover. The success of this project will further attract private capital in the realization of other infrastructural projects.
- It is believed that 'home' savings of the population and capital amnesty can become additional investment resources. What do you think?
- This is an ocean-wide source of investment means, and government needs to find a way to open it. First of all the state needs people's trust and proper mechanisms. Without the developed fund market the people's choice of investment is rather limited. That's why we had such a price rise for real estate, as it was the only secure sphere of investment for the population. However, if we have an effective fund market, people will be able to invest in the whole range of businesses.
As for the capital amnesty, in my personal opinion the decision must be made sooner versus later. Though it may appear politically unpopular, it the only way to provide stable inflow of money in the country's economy. However, the amnesty should go along, but together with such processes as improvement of property rights, judicial system, corruption situation. And of course the capital amnesty should not be applied to the criminal turnover.
Andriy Boyarunets
Спасибі за Вашу активність, Ваше питання буде розглянуто модераторами найближчим часом
1416
