Practical Guide to Doing Business in Ukraine
By Walter Prochorenko, Pro-W International Corp.
Content:
1. Causes: a short explanation.
2. How to:
3. Legal System.
4. True Rulers of Ukraine
5. Nepotism and Cronyism.
6. Customs, Traditions, and Taboos
7. Financial Questions.
8. Regulatory Questions.
9. Opportunities.
10. Conclusion
Unique" is a term too often used in describing conditions
for doing business in various parts of the world. One can say that just
about every country has "unique" methodologies in the conduct of its
business practices. Certainly this is true of countries like Japan,
China, Vietnam, Indonesia, Saudi Arabia, etc. However, once the first
one or two layers of "uniqueness" are peeled away, one can actually
conduct business just as they would in any other country labeled "Western".
Thus once one has adhered to the basic customs and local practices of
any of these countries, there is no differentiation between conducting
business just as one would in New York or London or Frankfurt.
This is not the case in Ukraine. This is what makes Ukraine "unique"
and doing business there a truly unusual proposition.
What makes Ukraine so "unique"? The answers are as complex as they are
interesting to study and contemplate. However, if you are interested
in actually doing business in this country you are advised to do so
with your eyes open, and your mind clear of any preconceived notions
of "normal" business practices.
This article will only touch on the basic causes and difficulties one
can encounter in doing such business, but it should give the reader
an idea of what to expect. For a more detailed study of "causes" and
"effects" one should seek out professional consulting groups that can
provide in-depth information and studies concerning various aspects
of doing business in this Eastern European gem. Assistance with this
task can be provided by Pro-W (Ukraine).
Causes: a short explanation.
Lack of leadership, management,
and decision making.
Over 70 years of Soviet rule and the oppressive policies of the Soviet
regime have left an indelible mark on the decision making process of
the country. During the Soviet regime, this entire process which affected
every aspect of economic, industrial, agricultural, as well as social,
educational, and cultural life, was based in the centralized halls of
power in Moscow. All the leaders, managers, and decision makers were
located in Moscow. The so-called "managers" in Ukraine were actually
only executors of pre-determined orders and policies. They rarely did
any analysis or planning, or made any meaningful decisions. They never
worries about budgets, profits, sales, advertising, marketing, forecasts,
financing, or any of the myriad of large and small details that a "western"
company executive needs to contemplate. Then suddenly after independence
Ukraine and these middle-level managers were on their own.
Imagine General Motors or IBM or Citibank suddenly left without its
entire top layer of management. How would they function for the first
days, months, years?
This is what occurred in Ukraine. Suddenly, the country was without
its top layer of management and left to its own devices.
To its credit, and the credit of the people that took over the reigns
of power after independence, they avoided the one thing that would have
led the country to a total disaster: chaos. Also to their credit, these
people also maintained stability and order.
However, the underlying problem of lack of management and decision making
at many different levels of industry, government and business remained.
Rather than act with authority and rather than make real world decisions,
many opted to take the "wait and see attitude". Anyone familiar with
how business runs in this very fast paced world, can realize that inaction
leads to disaster. It is often better to make wrong decisions and learn
from them and move on, than just to sit and wait for "deliverance" while
the factories, farms, and industries wilt away.
If one can understand this basic problem that faced Ukraine after independence,
then one can begin to understand why things often don't work they way
they should. However, compounding there problems other problems surfaced
that Ukraine was not ready to deal with. Nature as well as business
abhors a vacuum and when one exists it is quickly filled with often
undesirable elements. Some of these will be discussed here, but others
need more in-depth studies that can only be provided in more analytical
works.
Corruption.
Corruption exists in just about every country of the
world. It is as old as business itself. I know of no country that it
without corruption. Having dealt with, or worked in, just about every
country of the world, I have seen every type of corruption that exists.
However, the type and level of corruption that exists in Ukraine is
far greater and different than even in countries such as Nigeria.
Corruption in Ukraine is all pervasive and reaches every level of the
economic spectrum. It is so ingrained and so pervasive that nothing
functions without it. Unfortunately, nothing functions with it either.
This is one aspect of the "uniqueness" of Ukraine that will be discussed
further.
Distrust of Middlemen.
A "unique" characteristic of Ukrainians is their non-acceptance or open
distrust of the "middleman". This probably has its root in the fact
that in the history of Ukraine, the Ukrainian peasants, farmers, and
land owners were very, very often cheated by the better educated and
more sophisticated "middlemen" of the surrounding countries. The rich
lands of Ukraine and the relatively passive populace, were fertile grounds
for the "middlemen" of old to prey on the people.
Thus they were then deprived of the land they fought for, worked and
owned, and too often became the slaves of the middlemen who cheated
them on their own lands. This led to the rebellions of the Zaporozhye
and Cossaks days which temporarily reversed the process and provided
short periods of independence. However, in the whole (over 1000 years
old) history of Ukraine, the periods of enslavement far exceeded the
periods of freedom.
Unfortunately, we all know that business cannot function without middlemen.
Where would business be without banks who are the middlemen in financial
transactions. Or without the distributors who bring the goods to distant
markets. Or without the resellers who make it convenient for you to
do your local shopping.
Can you imagine a world where you would need to go to the General Mills
factory to buy your box of breakfast cereal? Yet this is what many Ukrainians
were used to. They would (and often still do) buy shoes and boots from
factories. They bought (and often still do) buy potatoes from the farmers.
The examples are endless. However, the problem that this causes: lack
of distribution systems, wholesalers, warehousemen, and even retailers;
remain.
Mafyia. This term often
applies to the Russian underground element, but is just as applicable
in Ukraine. Shortly after independence, the vacuum caused by the lack
of authority and the uncertainties that abounded, were quickly filled
by the Mafyia. Initially, and as in western organizations of this kind,
the first order of "services" was the selling of protection. This provided
funds for the "Mafiosi" and gave them authority. In effect, this provided
some stability to the country and actually prevented outright abuses.
The initiators of the various mafyia groups were as varied as Ukrainian
political parties. In general it was the former KGB generals and colonels
that were left without work when the staff of this organization was
cut back while being recreated into a new structure. Others were retired
national policemen (Militsia). Others were former intelligence services
military officers, and then of course there were the "southern boys"
from countries and areas such as Armenia, Azerbaizhan, Chechnya, Georgia,
Kavkaz, etc. The mafyia quickly flourished but never became a grandiose
problem. There were some gang style shoot-outs throughout Ukraine and
many disappearances. A friend of mine who started a very popular bar
got beat up and sent back to the States. Of course he lost all his rights
to the bar. However in general most groups were afraid to act decisively
since everyone was in some way or other "protected".
Nowadays, the protection business has been largely taken over by legitimate
organizations. Surprisingly, for all you "westerners" out there, many
of these protection organizations are actually offshoots of the security,
police, and military services of Ukraine. Thus not only do you pay taxes
to have a Government security, police and military force, but if you
want that "extra" bit of protection, you are advised to hire these same
services and pay again. Double-taxation? This is one for you government
analysts out there to figure out.
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How to:
Following are some general but very usefull suggestions
concerning doing business in Ukraine:
Corruption.
Don't! One of the "unique" aspects of doing business
in Ukraine mentioned above, is that corruption in Ukraine does not function
the way it does in Western economies or even in other countries. The
mere fact that you bribe someone, does not guarantee you that what you
pay for will be done. Quite often, the contrary is true. Once you bribe
someone, there is a very strong possibility that you will have to keep
doing it "ad infinitum".
One of the favorite ploys of Ukrainian bureaucrats has always been to
"become unavailable" after being bribed. This necessitates another person
taking over the question and again asking for a similar or bigger bribe.
Similarly, the "shift of responsibilities" ploy has the same effect.
One bureaucrat replaces another and says: "Sorry, the person you were
dealing with is no longer in authority over this issue and you will
now have to deal with me". Then the cycle begins again.
Bribery does not always have to mean a sack of money to get things done.
Often it is as simple as a box or chocolates or a bottle of Champagne
(cheaper than a box of chocolates) that will smooth the paperwork process.
One fellow used to "get things done" by bringing a whole 5 to 10 kilogram
fish wrapped in newspaper to an official to get what he wanted. (I don't
know if it was the smell of the fish, or the fact that fish is a rare
commodity, that facilitated the process).
Even high officials of the Ukrainian government are victims (if you
want to call them that) of the problems of bribery. One friendly and
very high-ranking official, often complained to me that during the building
of his luxury dacha, he had to spend all of this "hard earned" money
to bribe officials to get permits and approvals for this process. How
he got that "hard earned" money to build a 4 million hryvnya dacha on
a 300 hryvnya monthly salary, he never explained.
Rank and power mean very little in Ukraine. If you have the cash, there
is little that cannot be done. I have seen very high officials over-ruled
and circumvented by "money". Ministerial decrees and laws mean absolutely
nothing when faced with middle level officials who are on the take.
Ukrainian law is so confusing and contradictory, that these officials
will always find a way to "cover" themselves in cases of investigation
or confrontation.
Sure, without the bribes to smooth the process, it may take much longer
to get things done, but eventually perseverance and propriety can accomplish
the same thing.
One major problem that can occur with bribe induced "oiling of the wheels"
is that the paperwork obtained as a result of this process may not be
correct, may not be "official", and then legitimate claims can arise
out of the process.
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TOP
Legal System.
If possible, avoid the Ukrainian legal system at all
costs.
As a Westerner or a Western company going against "locals", the cards
are immediately stacked against you. Chances of you winning a meaningful
settlement are virtually nil. Statistics are hard to come by in the
Ukrainian court system, but analysis of articles in the press about
various court cases show that 80-90 percent of all cases between foreigners
and locals are decided in favor of the locals.
The most pervasive problem facing the Westerner is the bribery issue.
However, high level pressure from officials is also a major problem.
In reading some of the decisions issued by the judges, one is often
appalled by the blatant disregard for fairness, procedures, due process,
and the codes and laws themselves.
We have seen court decisions made even before the losing party was notified
that a case was being heard. We have seen cases where the winning party
presented no documents, no proof, no real witnesses, nothing, and still
won. This is all while the losing party presented stacks of documents
and even official witnesses. Due process of law in Ukraine has much
to be desired. We have seen cases where there is official evidence of
document falsification and yet the judges disregard such evidence.
However, these are not the only problems. The rules of the system itself
are so confusing and so entangled that the process can cause premature
hair loss at every turn. With appeals, reverting back to lower courts,
higher appeals, etc, a case can be heard a dozen times. Thus if one
is entangled in the bribing process, one can easily lose more to judges
and lawyers than the case is worth.
Bribery of judges is not the only problem. The outright selling out
of a lawyer's services is another. What can be said of a system, where
your own lawyer can be bought off by the opposition?
Ethics? Ethics among western lawyers is hard to come by, but in Ukraine
where everything is for sale, don't even think about this term.
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True Rulers of Ukraine
If you are under the notion that the President's Administration,
the Cabinet of Ministers, the Verkhovna Rada (Parliament), the Oblast
Governors, or the city Mayors run the country, you may be surprised
to find out that that is not always the case. Except for the exceptional
case of the Mayor of Kyiv, the country is actually run by middle-level
bureaucrats. They are the true rulers of the country.
Never mind that decree from the President or some minister. The "petty
bureaucrat" will find a way around it. Try to get a building built without
a dozen signatures from the "petty bureaucrats". Try to run a factory
or build a golf course, or export the products you produce - you will
always run into the ever-present: "petty bureaucrat".
We were amazed recently when we tried to initiate a project where a
recent Presidential decree was involved. The project came to a dead
stop and after months still remains that way because a regional "petty
bureaucrat" did not want to let it pass. No amount of arm twisting,
no pressure from his superiors, no pointing to a dozen laws which showed
we were on the right track, not even a Ministerial request, could budge
the "petty bureaucrat" from his quest to get what he wants. (Yes - you
guessed it - a major bribe).
Why even have Ministers? No one now pays any attention to them. They
change as often as you change socks so that no one even remembers who
they are. The "petty bureaucrat" will always tell you that: The Minister
is "here today and gone tomorrow", while "I am forever in this country".
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Nepotism and
Cronyism.
Going up against a lawyer who is the son or daughter
of a judge is never a good idea. In most countries this would be cause
for disqualification. In Ukraine, it is a tool. If you find such a lawyer,
you're in luck (most of the time), but if you don't - say goodbye to
your case. Why "most of the time", because remember, in Ukraine "cash
is king" and a judge will even go against his own son if the opposition
bribe is big enough.
Ever wonder how the Oligarchs are created? This is the Ukrainian (and
Russian) version of "cronyism". The best businesses, the best lands,
the best properties, the best banks, somehow always seem to wind up
in the hands of the people close to the people in power. Unfortunately,
people who get things the easy way, never appreciate it and tend to
squander it. This is very true of the situation in Ukraine.
Why are there so many wrecks of buildings in Kyiv, where property values
are still very high? The answer can be found in the hall of records
that show who the owners of those buildings are. In most cases, it is
the oligarchs. So what do they care if the building is an eyesore? They
got the property for peanuts. Now they sit on it waiting to offload
it to some sucker who will give them top dollar for it without their
having to lift a finger to earn it.
Why are most factories in Ukraine bankrupt or on the verge of bankruptcy?
Usually because the owners got them for virtually nothing. Thus whatever
they have is still better than what they put into it.
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Customs, Traditions, and Taboos
Every country has its customs, traditions, and taboos.
Doing business and succeeding at it, requires some knowledge of these.
The Portal to Ukraine "Ukraine-Today" lists a number of these in the
"Culture" section. The list is extensive. However, a few of these must
definitely be learned early otherwise your business negotiations may
be doomed before they start.
• Most companies and even Foreign Governments are totally insensitive
to the language issue in Ukraine which recently has become more and
more important. They continue sending only Russian speaking representatives
that is now being regarded as a slap in the face to many Ukrainians.
Although this was not an issue in the past when almost everyone spoke
only Russian, now that the official Ukrainian language is catching on
more and more, this is becoming a serious issue.
• One of the main ones is never shake hands across a threshold. This
is believed to bring very bad luck.
• Another shaking hands taboo is not doing it across your desk or table.
Come around to face the person.
• In winter - remove your gloves before shaking hands. This is also
a courtesy in the west but very important in Ukraine.
• Don't be surprised when requests to take officials to lunch, dinner,
or drinks is ignored or not accepted. This is not common practice in
Ukraine. Only when you know an official well will you get an acceptance.
• If leaving on a trip with a Ukrainian friend or associate, show him
that you intend the trip to be a success. Do this by sitting down briefly
just before your departure.
• Similarly, don't refer to Ukraine as "theUkraine". Most Western news
agencies, particularly BBC and CNN (especially CNN Sports) still love
to make this gaffe but this is an irritant to most Ukrainians.
• When entertaining guests or business associates, don't place an empty
bottle on the table as this also signifies bad luck.
• Another drinking taboo is leaving your glass on the table when it
is being poured. If you don't you may be in for some bad luck.
• In gift-giving (as opposed to bribing) watch the number of flowers
you give. Only give odd numbers, never even ones. Even numbers will
put you in the dog-house immediately. By the way, Ukrainian women (all
women for that matter) love to receive flowers, and the best gift for
any occasion: birthdays, anniversaries, visiting the homes of new or
old friends, etc., is always - flowers.
• While on the subject of women, remember to toast the women in your
group (particularly the hostess if there is one) since the third toast
at any occasion is dedicated to women.
• Never seat an unmarried woman at a corner of the table. She will be
most unhappy and your evening may be spoiled, as this indicates she
will never get married.
• If offered one of the hundreds of thousands of fallen chestnuts that
litter the streets of Kyiv in the fall, keep it in your pocket, this
indicates that you will be loved and appreciated.
Ukraine has thousands of different kinds of "zabobony" or taboos. These
relate to ancient customs, beliefs, and traditions. Some take them very
seriously, but nowadays many are starting to see them for what they
really are. The make for an interesting stay if you don't get obsessed
with worrying about what you are doing wrong, and forget the real purpose
of your being in Ukraine.
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Financial Questions.
If you plan to invest in Ukraine - know the rules
first.
Repatriation of Funds
It is extremely difficult to repatriate your investments
once you have invested them in Ukraine (should you be lucky enough to
have some investments left to repatriate). Think of the three "cons"
when thinking about Ukrainian rules of law. The rules are confusing,
convoluted and contradictory.
Many laws, decrees, resolutions, etc blatantly contradict each other.
The National Bank will issue a decree that totally contradicts an existing
law. The VR (Verkovna Rada - or Parliament) fails to pass an amendment
regarding such a decree and a contradiction is born. The customs people,
the tax collectors and the bureaucrats all love such contradictions.
This is their bread and butter. They can make a nice "piece of change"
ruling on such contradictions. Thus they become the final authority
on the subject. Fighting them is virtually impossible unless you have
unlimited time, political muscle, a lawyer with several parents who
happen to be judges, and lots of "money" to throw at the problem.
Traveling and carrying cash.
Not withstanding Lazarenko and other like him who
have taken many billions out of Ukraine, taking money out of the country
is again virtually impossible unless you follow the rules totally and
completely. Be prepared to completely and fully document the funds you
may be taking out. This means: a copy of the law, a bank certification,
a customs declaration showing what you brought in, and whatever other
documentation may have been dreamed up between the time this article
was written and your departure.
It always amazes me that the very people they should control (the crooked
politicians, the petty bureaucrats who have amassed millions, the lawyers
and judges, etc) are not the ones that are being regulated. Through
their connections they have free access across the borders and can bring
and take out all the cash they want. It is the business people, such
as you and I, who are trying to make a difference in the business climate
and who want to show how business is conducted in the West, that are
subject to the greatest scrutiny. We are the "bad guys". We are the
capitalist monsters who are trying to rape and pillage the country.
They (the Ukrainian officials) love it when they catch someone from
the West breaking the rules. They can then point to us and say: "See,
the Western capitalists are here to cheat us and break our laws. They
must be severely punished."
Never mind that the business person brought in $2 million one year ago,
heaven forbid he should take out $500 more than was on his latest declaration.
This is a mentality that requires a radically new kind of analysis (or
radical lobotomy preferably).
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Regulatory Questions.
Customs.
If you happen to find that painting you fell in love
with at a Kyiv gallery, think about taking it out of the country. Customs
has some very strange rules about such exports.
Who cares about the priceless Icons, antiques, and works of arts that
have already left the country in the hands of the greedy politicians
and bureaucrats, as long as you, the legitimate buyer and collector,
can be hassled, they will do so.
Know the rules. Painting dated before 1965 need special licenses and
permits to be exported. Paintings and works of art by well known "national"
artists may require the same. Antiques and Icons - forget about it (although
I have friends and acquaintances who claim to make a nice business out
of exporting and importing such items).
Art
Ukraine has an enormous potential in the field of
art and culture. Someone once said that "a hungry artist is a great
artist". If that is the case, Ukraine can supply the world with great
art. Most artists in Ukraine are "hungry". Perhaps not in the literal
sense, but in the sense of being left behind in the scheme of things
Ukrainian. They no longer get the recognition, the medals, the nice
apartments and the bright studio lofts. Their studios are usually in
buildings that are just about ready to fall apart. Poor lighting, lack
of heat, no plumbing, halls and elevators in disrepair, are very common
in their buildings. To get their works displayed they have to pay or
bribe museums or gallery owners. They are truly exploited.
Yet despite of all this (or perhaps because of this), they create great
works. I have had the pleasure of personally meeting dozens of artists
and visiting their studios. I am neither a critic nor a connoisseur,
but I have a good eye, and usually whenever I select a painting from
among hundreds in a gallery, it is usually the best or most expensive
one. Having clarified this point, I can say that the potential of Ukraine
is truly staggering.
The "Ukraine-Today" portal has at present a collection of over 10,000
high quality photographs of the works of contemporary Ukrainian artists.
The collection is contained on 17 gigabytes of storage space, but represents
only 10% of the total available and the total that "Ukraine-Today" will
have available within one year. Stay tuned!
Exports.
Ukraine is one of the richest countries of the former
Soviet Union and definitely one of the richest in the world. Yet today,
it exports virtually nothing (when compared with its potential). Even
its agricultural commodities (wheat, corn, sunflowers, sugar, etc) have
taken a back seat to countries such as Spain, France, Argentina, and
many others.
Problem: lack of distribution systems, poor roads and railroads, a shipping
industry in disarray, ridiculous customs regulations, bureaucratic snafus,
etc, etc, ad infinitum.
Solution: Free Trade. Being in the International Business scene for
the past 35 years, I have come to appreciate the benefits of Free Trade.
Let the market forces be the guide. This is the main force behind true
growth. Protectionism and high duties are only temporary solutions that
actually impede the growth of market economies. If Ukraine wants to
join the world order and wants to succeed with its vast array of resources
and potential, it needs to take that step towards free trade. However,
the free trade must be a total commitment and not a veiled effort at
protectionism at one end and "almost free trade" at the other.
Unfortunately, I do not see free trade coming to Ukraine any time soon.
Ukraine is too distrustful and too closed-up to embrace free trade just
yet. The bureaucrats would have too much to lose from such a system.
Bureaucracy.
Back to our favorite Ukrainian character the "petty
bureaucrat". Since nothing can work without him, let's see what needs
to be done (besides bribery and corruption) to make your project work.
First of all make a plan of what you want to do. Be extremely specific
("petty bureaucrats" feed on nebulous notions). Consult with experts.
The few dollars you spend now on consultation will save you thousands
in the end. Consult with companies actually doing business in Ukraine.
Again - be very specific as to what you want. Forget lawyers - they
will only tell you half of the story. If your consultant finally does
tell you to see a lawyer, then you will have some specific questions
to ask.
Be aware that the bureaucratic process in Ukraine is very convoluted.
You may have to come back to the same "petty bureaucrat" several times
on the same question or the same project. Be prepared. When resolving
a question with the "petty bureaucrat" be sure that you will be covered
with him again once you are bounced back to him.
Contracts.
My Ukrainian attorney once informed me that there
is no contract in Ukraine that cannot be broken. And this is in the
totally legal sense. Imagine what this means when you introduce the
option of "money" into the equation.
Forget Western style contracts. Early in my Ukrainian business experience,
I made the extreme "error in judgement" that logical Western contracts
would work just as well in Ukraine as they would in the West. Boy, was
I wrong.
Rule 1) Make your contracts
simple, straightforward, and according to Ukrainian standards. The more
complex you make them the easier it will be for someone to find a way
to break them. A good sampling of standard Ukrainian contracts (both
in Eglish and Ukrainian) can be found at www.Ukraine-Today.com
or www.KPNews.com.
Rule 2) Be very specific when
it comes to money terms. The more specific you are, the easier it will
be to resolve any issues. Also again - know the rules. For example it
is illegal in Ukraine to set prices in convertible currencies or even
to directly tie the Hryvnya payments to such currencies. Such contracts
can be reversed or declared illegal. Payments that you make against
such contracts can actually be declared as your "income" once the contract
is voided. You are then liable to pay tax on your expenditures.
Rule 3) If possible and if
you have the time and money, consult several attorneys on the same contract.
There is a saying in Ukraine that there are as many opinions on proper
answers as there are attorneys in Ukraine "plus one" - the correct answer.
Many attorneys that are useless in court situations are actually excellent
in knowing the various ins and outs of the legal system.
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OPPORTUNITIES.
Okay, now that we got all the "doom and gloom" out
of the way, (and if you haven't already decided to do business elsewhere,
such as Azerbaizhan, or Khazakhstan), let's look at the possibilities.
Despite of all the problems and all the difficulties, business in Ukraine
does go on and in many cases presents unprecedented opportunities. The
country itself is extremely rich in natural and human resources.
One of the most successful enterprises in Ukraine "Chumak", was started
by 2 Swedes who decided to make pickles, catsup, canned and jarred vegetables,
and various condiments. They have succeeded where the huge Ukrainian
enterprises have not. On 1/10th the land they grow as many vegetables
as the big "kolhosps" (farm cooperatives). This is a perfect example
of how one can combine "Western" know-how with the richness of Ukrainian
land.
Similarly, western companies have started to appreciate the "human resource"
potential of Ukraine. A well educated, bright, and ambitious young generation
can provide much necessary talent for such enterprises as software development,
web design, programming, advertising, cartoon and movie making, and
many others. Ukrainian model, from the country reputed to have the most
beautiful girls in the world, now grace the pages of just about every
major publication that exists.
With proper training (particularly in the English language, which want
it or not, Ukrainians must realize is the business language of the world),
these human resources can offer untold potential to any business enterprise.
At present a programmer in Ukraine earns 1/20th the salary of his counterpart
in the Silicon Valley or in New York. Even taking into consideration
the loss of productivity (language, work habits, etc) it is still a
very great difference.
In the manufacturing and processing sectors, opportunities abound. Good
natural resources, an inexpensive labor force, proximity to existing
and untapped markets, and many other such factors present the potential
investor with a slue of potential businesses.
In the development sectors, particularly in the leisure activities area,
the potential is truly remarkable. Many Western analysts look at the
official income figures of the populace (which in Ukraine stands at
around $100 per month) and make quick deductions that a potential does
not exist. However they fail to take into consideration that Ukraine
has a "gray market economy" that is estimated to be 4-5 times larger
than the "official" one. One only needs to look at the numbers of Mercedes
and BMW automobiles lining the streets of Kyiv and the expensive luxury
shops along Khryshchatyk, to understand that all is not always as the
official figure lead us to believe.
One Ukrainian phenomenon is that Ukrainian parents tend to spend far
more on their children than their Western counterparts. What contributes
to this, no one really knows. Ukrainians do not normally think about
the future or their children's futures. They live for today. Perhaps
this "guilt" complex forces them to spend more available cash on their
children than do parents from other countries. Regardless of the reasons,
this presents some unusual opportunities for investors interested in
leisure activities such as waterparks, amusement parks, indoor amusement
centers, etc.
Ukraine's relatively mild climate and its proximity to other Eastern
European countries with less favorable conditions, also present an interesting
mix of criteria for such developments. Russians certainly looks at Ukraine
as an area where they would like visit and spend time if there were
availability of decent activities there. Cities like Lviv would certainly
vie for the position of a second Prague. Crimea would most definitely
become an "exotic" destination if properly developed. The Turks and
Lebanese certainly think so.
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CONCLUSION.
Problems? Yes - most definitely. Ukraine has more
than its share of problems. However, once one is familiar with their
scope, one can certainly contend with them.
Solutions? Yes - most definitely. I am a firm believer that nothing is impossible. If one can understand the difficulties and if one is prepared to take the good with the bad, then one can certainly appreciate the potential.
Walter Prochorenko is an International Business
Executive who has spent over 30 years of his business career
on diverse projects in most developing countries of the world.
He presently heads the Pro-W (Ukraine) group. His experience
includes consulting, development, technical supervision, investment,
and hi-tech material supplies for projects that ranged from
military installations, to schools, to housing developments,
to aircraft factories and aircraft fueling facilities, to
hotels, to golf courses, in countries like Japan, Philippines,
Saudi Arabia, Turkey, Kuwait, Korea, Egypt, Saipan, Guam,
Vietnam, Poland, Ukraine, and many others. Currently he is
in the process of building the first golf resort in the Kyiv
area, but due to the lengthy documentation and approval process,
he is also involved in the creating of Internet Porta www.Ukraine-Today.com,
and sites like www.GolfUkraine.com,
and www.Index-A-Site.com.
Mr. Prochorenko and Pro-W (Ukraine) also provide consulting
services to individuals, corporations and banks on questions
of doing business in Ukraine, Real Estate Investments, project
development, business planning and appraisal services.
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