New and Unfinished Business in Ukraine

Hello and welcome to Ukraine Calling. Your weekly review of what’s been happening in Ukraine, with a focus on a main issue. I’m Bohdan Nahaylo for Hromadske Radio, and here’s a look at some of the stories that were in the news.

Ukraine is Already Turning around Economically. Car Sales were up 40% last Year. There’s a lot of development going on, many new companies moving in.

FOCUS INTERVIEW: Bohdan Nahaylo interviews James Brooke, editor of Ukraine Business Journal, about doing business in a country at war.

HEADLINES

CULTURE and MUSIC

LOOKING FORWARD

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FOCUS INTERVIEW: Bohdan Nahaylo interviews James Brooke, editor of Ukraine Business Journal, about doing business in a country at war.

Nahaylo: Hello, this is Bohdan Nahaylo at Ukraine Calling. In the new program this week we will look, among others things, into business opportunities in Ukraine and we will talk to James Brooke, an Editor in Chief of an exciting new journal, The Ukraine Business Journal. A new, fresh publication, providing fresh insights into the business world in Ukraine. James, thank you for coming here. Let me just say a few words about your eminent background. You spent 20 years with the New York Times. You were Chief of Bureau in Moscow and Brazil. You worked with Voice of America, and Canada. You come very well equipped for this. Before we get into the reasons what you are doing and why, I just want to tell the audience as we are recording this, a few hundred yards from us, a farewell service is taking place on Maidan for the brave, heroic young men. Three or four of them. I am not sure how many today are being sent off on their last voyage. Tribute is being paid to them by a large crowd, some of them are their comrades in arms. I would like to start with you, James, on this rather sombre note. You just came back from a trip to, almost, a frontline. Could you share your impressions on the atmosphere out there and what you saw? 

Brooke: Thank you, Bohdan. I went to about 2 km away from Avdiivka. I could hear the shelling. I was there partly, I almost hate to say it, out of curiosity. If you work and live in Ukraine, I think one should have to go down and see that part. I went through 5 check points. The soldiers were very well uniformed, alert, professional, cordial, friendly and quite. As you know, Ukraine is a massive country. But at the end of the final checkpoint there was a steel cable, very polite soldiers, and we could not continue. I could see the looming chimneys of Avdiivka coking plant, the largest in Europe. They produce coking coal for the steel industry. We could hear the shelling. It was something sinister when you go down: four lane divided and there is no traffic.

Nahaylo: Was the mood more of comprehension, nervousness, or you sensed that mood of population and soldiers was more confident?

Brooke: They seem confident. They were 15-20 km away from the front. They were doing their duties at the check point. Kramatorsk, a regional capital that we went through, was totally quiet. It was Sunday, and we did not know that 4 men were killed and now it is up to 8, I believe. It was the beginning of the rebel offensive.

Nahaylo: You probably agree with me that here in Kyiv, it all seems far away. You do not sense it on the streets, unless you occasionally see an injured soldier. You do not sense that in less than 1000 km from here you have this very vicious war continue.

Brooke: Yes. It is very far away. This is a massive country. As I went on the train I just thought what a delusion it is for Kremlin to think that they can actually occupy Ukraine. It’s massive, it’s larger than California. It is huge. In Ukraine Business Journal, we do not focus on the war. The war is affecting literally only 3% of the national territory, if you deduct Crimea. It is in the southeast corner. We are focusing on the other 97% that is working on investing and building up the country.

Nahaylo: Just before we get to the journal itself. If the war seems remote in Kyiv, it seems even more remote from Western Europe and Washington.

Brooke: That’s my feeling, and many other people’s feeling, about why this offensive started.  It literally started within hours of the Putin-Trump phone call, I think, by separatists, and their Russian backers saying,   “Do not forget us. We are players. We can cause problems. Make sure we have a seat at the table”.

Nahaylo: At least in the last day or two we have seen some actions and resolutions and statements being made at the Security Council in the UN, the European Union and others. Let’s hope that this has some impact this week. Anyway James, turning to your Ukraine Business Journal, is this a right time to start such a journal in Ukraine?

Brooke: There is always a risk associated with Ukraine. If you want boring and stable, move to Copenhagen, Denmark. Seriously, the game changer for Ukraine is this Free Trade Association with Europe. Canadian listeners would know what happen with NAFTA among Canada, United States and Mexico. Free Trade Agreements have enormous powers. In this case, as in Mexico’s NAFTA case, you are marrying very low wage rates in Ukraine with geographical proximity to essentially largest and richest consumer market of EU, with a half of billion buyers. So low wage rates, geographical proximity and free trade … So we have seen what happened in coastal China or Northern Mexico. In Northern Mexico at the beginning of NAFTA they were opening an assembly plant every day. 3000 in total. People think, “Oh, well. Ukraine is more expensive than Asia.” Unfortunately today, in dollar terms, the average Ukrainian wage rate is 200 dollars a month, which is a half of wage in China.

Nahaylo: What do you see as Ukraine’s main appeal area? The skills, the labour force, the resources that the country has, the infrastructure that is already in place? Some say it is quite old in many areas. What makes this country so attractive?

Brooke: It’s all that. The highly educated and cheap labour force and the proximity to Europe. Do not forget that the Chinese spend millions and maybe trillions of dollars to create Silk Road of ports, harbours, railroads, highways with a simple goal to get a container from costal China to Hamburg in two weeks. Anywhere in Western Ukraine it would take one to two days from most of European Union. So Ukraine has, delivered on a platter, access to the world’s richest market.

Nahaylo: But Jim, for many people in the outside world, Ukraine seems to be not a positive story, not a positive case. A failing state, some would say, because of this hybrid warfare and propaganda that Moscow is feeding. And one gets the impression that the economy is destroyed, stagnant. Do you see potential there for recovery, for growth, or is it already happening?

Brooke: Ukraine is already turning around economically. Car sales, I think, were up 40% last year. Airline traffic was up 25%, container traffic through the ports is up 24%. So the horseshoe has already happened. Ukraine is coming back. Obviously, the most dynamic area will be closest to Europe. I believe that the L’viv Oblast regional economy is growing at 6 or 7% a year. Now this is the area that will be most immediately affected by the Free Trade Pact. So, I see a lot of growth. You’ve got to think outside the box and Ukraine is Europe’s next frontier economy.

Nahaylo: Are the legal norms in place? Are the mechanisms in place to ensure transparency and Western ways of doing business?

Brooke: We all know Ukraine is very far from perfect and there’s unacceptably high corruption. But look at the World Bank’s club of the top ten fastest growing countries in the world. You’ll find places like Cambodia, Mozambique. Countries that are worse in terms of corruption than Ukraine. Just because you have corruption doesn’t mean that you can’t grow. And that club of Top Ten Economies, they’ve been growing at something like 7% for a decade. It isn’t just a flukey year. So there’s no reason why Ukraine cannot grow with corruption or while repressing and combatting corruption. One does not rule out the other.

Nahaylo: Do you see external investors showing a greater interest? Beginning to return, or to check out Ukraine?

Brooke: The pioneers are coming. One good indicator was the L’viv International Economic Forum, which was held in October. And the attendance, compared to the year before, the attendance was up 5 times. So Europeans are learning their geography and they’re discovering where L’viv is in the west, and Kharkiv is in the east, and they’re learning what is what and the distances. The distance from Kyiv to the war zone is the equivalent of driving from Paris to Marseille and back.

Nahaylo: You’re emphasizing Europe, you’re emphasizing the Euro-Atlantic, shall we say, partnerships and structures and markets. What about Turkey, for example. You see a lot of Turkish presence here and, on the surface, investment. How would you rate that?

Brooke: Well, Turkey, they’re wonderful in construction and they know the area, and for geopolitical reasons obviously they want to have good relations with Ukraine to balance off Russia. Russia wants to turn the Black Sea into a Russian lake, which the Turks obviously do not want. I think the Turks are very flexible businessmen. They work in places like Turkmenistan and Central Asia. There are many sectors, they’re first class, first world companies. It’s very positive. Let’s not forget Canada. The Canadian Parliament and the Ukrainian Parliament are on the verge of approving a Free Trade Association Pact between Canada and Ukraine which I think will have beneficial results.

Nahaylo: Yes, new government and a very dynamic Ambassador here, obviously making an impact.

Brooke: Correct.

Nahalylo: Jim, now that we’ve spoken about the general lay of the land, as it were, tell us a little more about your journal. What kind of product is it? Is it a hard copy one? Is it an electronic publication? How have you approached this task?

Brooke: The Ukraine Business Journal is all Ukraine, all business, all English, and all digital. The only paper and ink you will find is the brochure I gave you a while ago. We will not be in paper and ink but by being digital we’re accessible, based in Toronto, Fifth Avenue New York, Canary Wharf, UK London. Digital is the way to go. We focus on business, we focus on success stories. We focus on business opportunities and obstacles, new companies coming in. It’s extraordinary, there are green shoots. There is activity, but it’s just simply is not reported and when people read the Business Journal they get quite excited because they see that things are happening.

Nahaylo: I was impressed looking at it, how much news there is there and items that don’t seem to be covered anywhere else.

Brooke: Yes, because for various reasons, the press focusses on the war, the politics and the corruption. I actually met with a Ukraine correspondent for an American news service, who told me that his bosses, his American bosses in Moscow, said that he was only to report negative news from Ukraine.

Nahaylo: Interesting. Anyway, prospects for the next year or two. How do you see things shaping up? Obviously, the international environment is not as conducive, auspicious, as perhaps it was a year or two ago in terms of support for Ukraine. Do you think that this issue of a, is it a Ukraine fatigue, or other priorities taking over, that this will cause serious problems for this country?

Brookes: Yes I think the way out or the way forward for Ukraine is foreign investment. And the Ukraine Business Journal is dedicated to showing the opportunities and the obstacles. L’viv, for example, the construction projects underway will triple the Class A and B office space in L’viv in 5 years. There’s a lot of development going on, there’s a lot of new companies moving in.  Ericsson’s moving in, Intercontinental Hotel is moving in, Japanese auto parts manufacture, Fujicor’s moved in. Leoni, a German car parts manufacturer is in Ivano-Frankivs’k. Europeans are discovering western Ukraine, and that will move first and fastest.

Nahaylo: The IT sector here is particularly attractive, it seems.

Brooke: Yes Bohdan, it’s very big and Ukraine I think, graduates 120,000 engineers every year. Something like double the number of Britain and of course they work for a fraction, maybe 20%, of the pay. So the IT, the service sector, is very big and growing. It’s the third largest export now of the country.

Nahaylo: And what would your advice be, summing up, finally in this short interview, to young Ukrainians that are maybe listening or to those who want to come to this country to invest?

Brookes: Well I think Joint venture is the way to go with foreign companies. You have to be very careful who your partners are. Not just who your Ukrainian partners are, but who your foreign partners are. But I think that really is the way to go to create world class companies, find the niche, build on the competitive advantage, which is a highly skilled, low pay workforce essentially, right next to Europe. Cheek by jowl with Europe.

Nahaylo: Thank you, James. Let me just remind you, dear listeners, that you’ve been listening to a discussion with James Brooke, the Editor in Chief of Ukraine Business Journal, a new venture here that’s putting things in perspective, as far as business opportunities in the business situation is concerned. Jim, as I’ve said, is a veteran journalist of considerable note and it’s a pleasure to have you here, Jim, in the studio

Brooke: Thank you very much.

Headlines

It’s been a difficult week in Ukraine. Military attacks intensified to what the OSCE called ‘highest yet’ levels. There were over 10,000 explosions, focused on the towns of Avdiivka and Yasynuvata in the Donets’k oblast, on the Ukrainian side of the front line. The result is a looming humanitarian disaster, along the lines of what the world saw in Aleppo in Syria. An estimated 8-15,000 civilians, of whom about 2500 children, are living without power or heat, in below freezing winter temperatures. Ukrainian authorities are bringing in emergency supplies, as much as is possible, given the continued heavy shelling. Planning for evacuation of civilians is underway. There have been military casualties.

Progress Despite War

The constant tragedy of war sometimes overshadows the positive developments in Ukraine. This week, Ivanna Klympush-Tsintsadze, Deputy Prime Minister on European and Euro-Atlantic Integration, reported that in the past few years Ukraine has made more progress in reforms than in all the years of independence. She pointed to the positive results of the past 2-3 years in moving towards European integration. Highlights include reforms in the energy sector, the public procurement system, judicial reform, the creation of anticorruption agencies, and the introduction of e-system for asset declaration by government officials. The Deputy Prime Minister also noted that Ukraine’s trade with the EU increased by 6% in the first nine months of 2016, and that the EU has become Ukraine’s main trading partner. Ukraine is also planning to increase this further by decreasing non-tariff barriers.

Ukraine Becomes Chair of UN Security Council

Ukraine is chairing the United Nations Security Council for the month of February. As one of the ten non-permanent members of the Council, it’s Ukraine’s turn. When fighting escalated, the UN Security Council expressed its «grave concern» on Tuesday over the «dangerous deterioration» in eastern Ukraine and called for a halt to the violence. The new US Ambassador to the UN, Nikki Haley, condemned Russia’s ‘aggressive actions’ against Ukraine. She said, “I consider it unfortunate that the occasion of my first appearance here is one in which I must condemn the aggressive actions of Russia.” Haley also said that sanctions against Russia will remain in place until Russia returns control over Crimea to Ukraine.

Putin Blames Ukraine in Budapest

Russian President Putin blamed Ukraine for the escalation of war during his trip to Budapest. He said that Ukraine’s leadership needs money and therefore is trying to present itself as a victim. Putin also said that Ukraine’s government is using the war to deflect attention from domestic critics. We’ll post a link to his speech on our website. Hungarian Prime Minister Victor Orban, who has raised international eyebrows for his anti-immigration stance and limiting democracy within Hungary, said during Putin’s visit, «We hope that in the very near future, we will be welcoming new, good relations between Russia and the European Union.»

WAR

On Sunday, military attacks against Ukraine increased significantly. This was the day after US President Trump had his first phone conversation with Russian President Putin. Not much was reported about the details of the conversation, but from what is known, the war in Ukraine was mentioned only in passing.A statement from the White House read, “Both President Trump and President Putin are hopeful that after today’s call the two sides can move quickly to tackle terrorism and other important issues of mutual concern.” 

But over the past week, according to official sources, 10 Ukrainian soldiers were killed, and 79 were wounded. This is the highest rate for months. The escalation of war shocked Ukrainians, who have been living with war for almost 3 years. A ceremony for the recently fallen soldiers was held on the Maidan in the country’s capital on Wednesday. 

CULTURE

A trending topic of discussion in social media this past week has been the role of Ukrainian language in society, and the rights of Ukrainian speakers as compared to the rights of speakers of Russian. These passionate debates have been inspired by the fact that there are no less than three Bills on the Ukrainian language currently on the table in the Ukrainian Parliament, which present three alternatives for regulating and managing the status of Ukrainian. It is another step being taken in the direction of developing a relevant linguistic policy in Ukraine.

Someone who made an assured contribution to this debate was Sviatoslav Karavansky.

He was a writer, a language scholar, a compiler of dictionaries and Soviet dissident who lived out his 97 years, dedicated to defending the Ukrainian language.

January saw the publication of his last book of observations of Ukrainian usage. This work demonstrated through many specific examples, how the dominance of Russian in the linguistic environment, caused by various political, economic and social pressures, leads to the Russification of Ukrainian.

Proposing ideas such as this on the Ukrainian language was unacceptable in Soviet times and the defiant Karavansky spent 31 years, or a third of his life, in various Soviet prisons. The last third of his life was spent living abroad in the US, and that is where in his last years, he wrote the colourfully titled “The Idiotisms of Stalinist Yaryzhka in Ukraine’s State Language”, by BaK Publishers. Sadly, Karavansky did not live to see the publication of this book, as he died in December 2016.

New York’s Museum of Modern Art has opened a new exhibit, called, A Revolutionary Impulse: The Rise of the Russian Avant-Garde. The advertising for the exhibit says it contains painting, drawing, sculpture, prints, book and graphic design, film, photography, and architecture by leading figures such as Alexandra Exter, Natalia Goncharova, El Lissitzky, Kazimir Malevich, Vladimir Mayakovsky, Lyubov Popova, Alexandr Rodchenko, Olga Rozanova, Vladimir and Georgii Stenberg, and Dziga Vertov. This suggests that they are these artists were Russians, which is not the case. British journalist Jonathan Jones had a different critique. In the Guardian he wrote, “We cannot celebrate revolutionary Russian art – it is brutal propaganda.” We’ll post links for you. 

Ukraine’s influence on fashion runways is being noticed by Vogue magazine. In the latest issue there’s an article about how Ukraine’s impact is bigger than you think. How Ukrainian designers like Julie Paskal are showing on the runways of Paris Fashion Week. And how international designers like Jean Paul Gaulier, Gucci, and Dior, have influences of traditional Ukrainian motifs in their collections. Watch for Dior’s pre-Fall 2017 denim skirt, with the traditional Ukrainian wedding tablecloth (rushnyk) motif. 

MUSIC

This week’s song for you is by Kyiv’s Billy Millgan Band. It’s called Порох, which means powder. They’ve just recorded it, and it was first played on Hromadske Radio’s music show Pora Roku last Sunday. Powder has many meanings. In this song it’s about war, or rather, against war.

LOOKING FORWARD

Things are changing rapidly in Ukraine and the world around it. We’ll be following developments for you. Tune in next week for a new episode. If you’d like to receive our weekly podcast in your mailbox, or if you have any comments or suggestions, please write to us, our address is [email protected]. I’m Bohdan Nahaylo for Hromadske Radio. Thanks for listening.

Interview transcribed by Larysa Iarovenko, and Oksana Smerechuk. Headlines by Marta Dyczok. Culture Section by Oksana Smerechuk and Marta Dyczok. Sound engineer Andriy Izdryk. Web support Natalia Kucheriava.