Posts Tagged ‘EBRD’

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Germany’s KfW and Oschadbank Ukraine look to SME financing in 2017

December 24, 2016

State owned KfW Bank of Germany together with State owned Oschadbank Ukraine will apparently target the ever under financed SME market in Ukraine following the signing of a memorandum to do just that via a vehicle called the “German-Ukrainian Fund”.

The “German-Ukraine Fund” is not exactly new.  It has been around since 1998 when it was created by Presidential Decree 574/98.  It’s creation was with the very same intent as the memorandum signed on 24th December 2016, and its structure 31.3% National Bank of Ukraine, Ministry of Finance Ukraine 31.3% and KfW 37.4% appears to be unchanged.

Needless to say that since its creation in 1998, judging by the woeful state of financing for the Ukrainian SME market, the results have been less than spectacular over the past 18 years.

Traditionally Oschadbank is not a bank that has ever had anything to do with the financing of SMEs.  It certainly has experience of financing large scale projects (all plundered naturally), but would not be on any list associated with the financing of SMEs.

Indeed it would be fair to state that Oschadbank has absolutely no experience of SME financing – a banking sector that undoubtedly has its own very specific competencies requiring sector expertise.

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KfW Bank, aside from being able to borrow cheaply due to being 100% owned by the German State, is split into 3 major banking subsidiaries.  Of most relevance to Ukraine is KfW Entwicklungsbank which lends to governments, commercial banks and public enterprises that engage in the microfinancing of SMEs.

It would appear that whatever the EBRD has done behind the scenes to the internal workings of Oschadbank, part of any result is to open up the banking horizons of Oschadbank and attempt to focus them upon what is an SME economic engine historically ignored.  If nothing else it would diversify the loan portfolio of Oschadbank if a significant number of loans actually take place.

(A reader may suspect that both the EBRD and KfW  will have to lend a good deal of experience regarding microfinancing to Oschadbank for the foreseeable future – though that too may be no bad thing in the short-medium term as the internal Oschadbank management develops.)

All in all, some reasonably positive news to (almost) close the year 2016 – particularly for Ukrainian SMEs or SMEs coming to Ukraine.  If 2016 has been a difficult year for Ukraine, 2017 unfortunately does not seem likely to get any better – that the environment Ukraine finds itself within will get worse is more probable.

So it is with this sliver of hope for Ukrainian SMEs and SMEs entering Ukraine in 2017, that the blog wishes all those who celebrate Christmas on 25th December a thoroughly enjoyable day.

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Chernobyl reactor entombed at last

November 29, 2016

A very short entry to firstly acknowledge a major piece of engineering, and secondly the symbolic entombment of a toxic Soviet legacy within a western funded and built sarcophagus – (Sarcastic readers are now pondering whether the Verkhovna Rada should be next perhaps?)

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The full facts and figures can be found at the EBRD website, together with a video showing the final settling of the sarcophagus in place, outlining what a major feat of engineering the project has been.

Bravo to all concerned.  A truly significant achievement.

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An impressive fraud even by the standards of City Hall Odessa

October 19, 2016

Unusually before a reader sallies forth into this entry, your author would recommend reading yesterday’s entry which by pure coincidence is very relevant to this one.

Particular attention is drawn to Mr Dubov, his control over Lithuanian company UAB Naster, and the patrons and puppets surrounding him – “It must therefore be clear to a reader why Invest Group have decided to circumvent the local system and appeal directly and publicly to the Prosecutor General when faced with yet another corporate raid by Mr Dubov (via a shell company called UAB Naster registered in Lithuania if Mr Lutsenko needs a place to start and work back from).”

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“As any occultist will say “As above, so below”.  If Ms Tymoshenko, Alexander Yanukovych and Mr Turchynov (among others) have all been (and perhaps still are) the “above” – then who and what constitutes the “below”?  Corporate raiding is a “dark art” in Ukraine after all.

If persistent and informed whispers are in any way accurate, then the exact construction of that local protection is divided between the political and the legal.  It would perhaps, if whispers be true, compromise politically of Messrs Krotyk, Kmyrenko, Shyvalov, Shamilov, Deide, Lutsenko (I), and Ms Syslova and Kuzel, whilst influencing the legal would be Mr Babenko, Mr Mazark with the SBU, the police and prosecutors by Mr Podolev, and Mrs Podoleva the courts.”

It is also to be hoped that among the readers of this entry, those from the World Bank and EBRD are among them and have pause for thought by the end of the entry.  If not, perhaps the usual diplomatic IPs will bring this entry to their notice.

At the beginning of the year, Lithuanian company UAB Naster (Mr Dubov) acquired via a City Hall auction (a reader will note the deliberate absence of the word “won”) a parcel of land known locally as “The Edge” and the large building thereon for UAH 11.5 million.

On 19th October, City Hall agreed to buy “The Edge” (back) from UAB Naster (Mr Dubov) for UAH 185 million – more than 16 times what Naster (Mr Dubov) paid for it just over 7 months ago.

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Clearly neither land nor building thereon, despite some refurbishment, has appreciated 16 times during that extremely short time frame.

City Hall has bought “The Edge” or “Development of the Elites” as UAB Naster has reframed/renamed it as the location to now centralise all City Hall departments.  City Hall considered no other options for relocation.  A long standing (and necessary) plan to centralise will be achieved – via what is in all likelihood an equally long standing prima facie criminal conspiracy.

The concept of placing all City Hall departments and services under on (fraudulently expensive) roof is of course not in question.  It is a good and necessary development for both City Hall and the local constituency when it comes to functionality and usability.

Indeed a proud (and in all probability now richer) Mayor Trukhanov stated “to concentrate all structural units of the city council in one building – it is a normal European practice.”   Quite – except that normal European practice doesn’t involve a Mayor renowned for organised criminality and mafia connections having his City Hall buy a property from a renowned corporate raider and criminal associate who bought the very same asset only a few months ago from City Hall at 1/16th of the price.

City Hall would have a reader to understand that the World Bank and EBRD will now finance equipping this asset acquired via criminal conspiracy and fraud.  After all by the time kick backs, and tributes are all divided horizontally and vertically from the grotesque spread on this nefarious deal, there probably isn’t the money left in the City budget to equip its newly acquired premises.

Further, whilst the centralising of all City Hall departments within “European City Hall”, along with the creation of an integral one-stop-administrative shop probably saves a small fortune in heating and maintenance costs across a sizable number of soon to be vacated city owned properties in the centre, a reader will question what will actually happen to those City owned premises?

This perversely impressive brazen fraud and criminal conspiracy simply cannot stop now when further and obvious opportunity still presents itself.  Cynically whilst the least attractive vacated City Hall real estate may be leased/rented, the reader will probably, and no doubt rightly with the passage of time, arrive at the conclusion that those involved in this blatant fraud will sell the prime centrally vacated property on the cheap to each other and then trumpet “gains to the City budget”.

Undoubtedly there will be no repercussions.  President Poroshenko has no real alternatives to Mayor Trukhanov (who will remain reasonably loyal as long as he can run amok criminally) so the Presidential Administration in no hurry to remove him, and clearly as yesterday’s entry makes plain, Mr Dubov has patronage (and puppets) too.

Irrespective of the $ figures actually involved, the sheer brazenness of this fraud and criminal conspiracy is impressive – even for Odessa which is well accustomed to such shenanigans.

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The gathering reform storm of 2017 – Ukraine

October 6, 2016

Many Ukrainian eyes are focused on 2017 and what external events will mean for the nation.

How will US policy change when a new president sits in the Oval Office?  What of the elections in France and Germany?  How much of a distraction will BREXIT be when it is eventually triggered?

All good questions – and as stated a few days ago “….. unless the Ukrainian leadership really start making strides (rather than tip-toe) with real and effective reforms US patience will expire sometime in 2017, just as the European patience will.  Real support will ultimately be reduced to little more than that surrounding territorial integrity and sovereignty.”

That statement fails to include Ukraine meeting its obligations to international institutions.  There are agreements with the IMF, World Bank, EIB and EBRD that will either be met – or broken.  This in turn will have a major impact upon FDI if (or possibly when) these agreements go unfulfilled.

To keep a watchful eye upon the external, currently” friendly” influences that will effect Ukraine in 2017 is understandable, but there are some extremely prickly and difficult issues internally that have the ability to magnify or reduce the thus far (surprisingly robust) goodwill of the international community (minus Russia) which seem destined to once again radically and negatively effect Ukrainian standing among its “friends”.

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In short there is a reform (or distinct lack of) storm brewing that is going to hit Ukraine in early 2017 and which when it does, the feckless domestic politicians will be once again at its core.  The issues are vividly clear, yet as normal, preparation, professionalism and policy are entirely absent.

Before looking at 2017 however, 2016 has yet to run its reform course.  The next tranche of IMF money, about $1.3 billion, is due in November.  For this tranche to be forthcoming there are but a few obligations to meet.

Clearly insuring reform progression thus far does not reverse is necessary.  The irreversibility of what has been done thus far is highly questionable.  What reforms, if any, can be claimed as being irreversible and consolidated?  Some may be close, but which are truly over the line?  The NBU has done a very good job, but a change of leadership and/or policy could undo almost all that has been done.  NABU is under direct assault by the PGO and Attorney General.  The new national police for the most part is refusing to buckle to corruption despite the police service remaining only half reformed and far from ethical as an institution.  The military are now a capable fighting force, yet its leadership remains poor and con tinuing corruption is as corrosive as the war of exhaustion with Russia in the occupied east.

Nevertheless, aside from holding the reform line that has be advanced thus far,  to meet the requirements for the next IMF tranche NABU should be given the right to wire tapping.  The list of SOEs for privatisation in 2017 completed (notwithstanding the November 2016 second attempt to sell Odessa Port Side – and the equally robust attempts to prevent its sale by vested interests.)  The e-declarations of politicians and relevant public office holders are to be filed in their entirety.  A “fair” budget for 2017 is to have been submitted.

All this to be accomplished by the end of this month so the IMF can give a timely nod of approval for November’s $1.3 billion.

Thus far, “fair” or otherwise, the budget has been submitted for consultation within the Verkhovna Rada.  The outcome of those consultations and the guaranteed subsequent amendments remain to be assessed by the IMF.  The budget however, is possibly the least problematic of the IMF requirements.

An independent NABU logically should not require the SBU to carry out wiretaps on its behalf.  The more people that know that “Mr X” is subject to a wiretap, the more chance there is that “Mr X” will find out.  Having to use a third party brings with it an unnecessary potential for leaks and/or tip-offs.  It should therefore not require stating that a nefarious elite and feckless parliament do not want a self-sufficient NABU that is far more difficult to infiltrate, influence or preempt.

The e-declaration fiasco remains just that.  The  declaration system still fails to meet the legislative framework requirements.  The e-declaration legislation itself also requires some amendment – just not the amendments to remove criminal liability that so many politicians want to see.

The sheer scale of opposition to the e-declaration reform is naked to the observing eye when considering it took EU conditionality to get the e-declaration law passed initially, and then months later it requires IMF  conditionality to actually get e-declarations completed by those who are required to do so (by the end of October).

At the time of writing about 1600 e-declarations have been submitted.  Of those only one of that number is of a parliamentarian (Mikhail Gavriluk).  None of the other 400+ MPs have yet filed.  Not a single member of the Cabinet has either.  About a dozen of the 300 NABU detectives have filed, and only two of the four NAPC members charged with policing e-declarations have done so.  Even if all e-declarations are submitted by the end of October, as stated long ago, court challenges are inevitable when the system still fails to meet the legislative framework it operates within.

In March the blog forecast that by the autumn Ukraine would not need external financing (although it would continue to accept it gratefully), but that it should nevertheless earnestly complete its obligations for reasons of external confidence in the nation’s governance.  Naturally the usual issues of fecklessness loom large, for when it is clear to the political class that there is no impending and immediate fiscal doom, the will to complete prickly reform legislation evaporates – which is where Ukraine finds itself today.

Reform orientated legislation has more or less stopped and requires resuscitation.  In fact it requires steroids if Ukraine is to meets its reform obligations to the IMF (let alone others) for 2017.

There are issues with compiling a list of SOEs ready for privatisation, liquidisation or remaining State owned.  There are at least 20 outstanding audits from those commissioned.

If the next few weeks in meeting the November 2016 and the $1.3 billion IMF tranche requirements appears optimistic, then meeting the obligations for the scheduled February 2017 tranche of $2 billion is perhaps as remote as riding a unicorn naked through the centre of Kyiv without once being snapped by a smartphone.

Despite the reform orientated legislative work completed in the energy sphere, the Ukrainian energy market remains entirely impenetrable, thus looking to 2017 the privatisation of Centrenergo is perhaps the only realistic chance of breaking into this market if it be sold to a foreign investor.  As such, the sale of Odessa Port Side in November has to be seen as a fair and transparent process by all onlookers.

Whatever the case, there is no way the list of SOEs for privatising, liquidisation or remaining State owned will be completed (and made publicly accessible upon the Ministry of Economic Development) by the year end.  Even if the only list of those SOEs identified for liquidisation is completed by then, there is simply little interest within the Verkhovna Rada to kill off such entities.  Gathering 226 votes for an exercise where none have any interests close to the New Year break is somewhat unlikely.  Auditors will not be rushed either.

Likewise “supervisory boards” such as that Naftogaz currently has (and which seems to be working well) for another 10 major SOEs is very unlikely to be achieved prior to 2017 as planned.  There is really no political will to do it – and a good deal of vested interests that will obstruct it.

Thus this reform requirement will roll over into 2017.

Fecklessness, lobbying/nefarious acts, and legislative short-comings aside – now to ever-present populism.

There two obligatory reforms by year end 2016 that seem simply beyond reach, will thus roll over into 2017, and yet are still unlikely to get through the Verkhovna Rada to facilitate the $2 billion February IMF tranche – thus finally breaking the IMF agreement and dealing a critical blow to “friendly” transatlantic assistance beyond issues of Ukrainian sovereignty and territorial integrity.

The first is the long-standing issue of pension reform that almost every government has stated it will tackle – but hasn’t.  Pensions from the age of 50 are simply unsustainable, and to be blunt most people continue to work way past being 50 because the pensions do not sustain them.

It is a policy that has to be addressed, but one that when push comes to shove, and despite a decade of rhetoric regarding the necessity of raising the pension age, every Ukrainian leadership succumbs to populism.

Nevertheless it simply has to be raised.

It is foolish to believe that any attempt to raise it significantly in one go will ever get through the Verkhovna Rada.  A system, for example, of raising the retirement age by 1 year every 2 years over 20 years (or a variation therefore) may stand a chance – however slim.  A system of greater contributions equating to greater pensions may also find some traction – but enough?  The populists however (Ms Tymoshenko, Mr Lyashko etc) will always seize upon pension reform for short term politicking and pre-election electioneering rather than looking at long-term policy necessities.

There are also existing process issues relating to checking the authenticity of claimants – something aggravated by the large number of internally displaced people.

Most difficult of all however, is the issue of land reform.  Ukraine has obligated itself to creating legislation regarding agricultural land reform by the end of October 2016.  That simply is not going to happen.  As of the time of writing the blog cannot even find a draft law registered regarding the issue.

It may be that the IMF will allow this sensitive/populist issue to roll over into 2017 and allocate the November 2016 tranche if all other conditions are met.  It will not issue the $2 billion tranche in February 2017 without this issue being tackled however.

Ms Tymoshenko is already noisily calling for the current moratorium upon the sale of agricultural land to be extended to 2022.  The Radicals being equally as populist will enthusiastically support her.

The sly oligarchy or slightly less mega-rich will look to provide/create agri-loan businesses with formidable foreclosure clauses to assume agricultural land of those farmers they lend to should the sale of agricultural land be permitted.  Huge ranges of State land will be swiftly leased through cronyism prior to any right to buy.  The farmers must be given more time to save the capital to buy the land they current lease and farm.  All such reasons will be presented not to create an agricultural land market.  Those farmers that do own their land will be tricked out of it by the unscrupulous, or simply coerced into selling it for a pittance – by continuing to stop them being able to sell the land they currently own, we are saving them from themselves (rather than infringing upon their rights to sell their own property).

There will be some societal “buy in” for some of that rhetoric, but that rhetoric can perhaps be employed to create safeguards within any laws creating a land market – if anybody actually drafts a law to create a land market that will be fair, regulated, and if necessary contain legislative restraints.  (Perhaps Ms Tymoshenko would like to draft a law that explains how a land market will be created after her 2022 moratorium expires?)

If it proves simply impossible (as is likely) to find the political will not only to lift the current moratorium but also prevent its extension, then perhaps legislation creating a fair land leasing market  is an alternative?

If the land cannot be bought and sold in a (regulated) free market environment, then create a transparent free market where leases for the land can be.  Some imagination might be required, but there is surely some way to create a land market that brings about transparent and fair benefits to all and around which Ukraine and its “friends” can agree as constituting positive market driven reform.

Although it is possible to continue with examples that are going to lead to a reform storm in 2017, it is perhaps unnecessary insofar as highlighting how swiftly matters are going to come to a head and when a probable breach of IMF conditionality occurs – with undoubted repercussions with a newly installed US Administration and immediately prior to both French and German electioneering.

Indeed it may also become the catalyst for the long anticipated early Verhovna Rada elections in Ukraine (which are unlikely to bring about a reformist critical mass as current election laws stand).

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A note to regular readers – For the next few days your author will be in Poland locked behind closed doors with a dozen sages and otherwise insightful boffins from across the region.  Although undoubtedly returning far wiser, the normal rambling and low-brow blog entries will continue upon return.

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Not a question of “why” but “who benefits” – Ukrtransgaz

September 17, 2016

It is no surprise to anybody that Ukraine takes two steps forward and one step backwards having opted for evolutionary rather than revolutionary reform.

Evolutionary by its very definition is a statement of change over time.  Evolutionary also manages to allow for grubby, if perhaps occasionally necessary, deals with those that once held power and/or significant control over the national economy.  Such deals theoretically (and empirically globally) set about the reduction of influence of old elites insuring that they and their patriarchy systems decide not to try and return to power and roll back to old methods in return for avoiding their otherwise deserved comeuppance – or at least the full force of justice.

That thinking perhaps works if the new leaders that come to power, recognising that this option is preferable to other radical and perhaps more risky options presented, are not products of the old system but are unsullied.

The “Revolution of Dignity” offered no such unsullied leaders to Ukraine in its immediate aftermath.  The presidential elections of 2015 essentially offered a choice between Mr Poroshenko and Ms Tymoshenko.  Mr Poroshenko won, which considering the choice facing the nation was the best possible outcome.  Ms Tymoshenko was, is and will forever be a political disaster for Ukraine should she ever hold the office of President, or become Prime Minister again.

Nevertheless, President Poroshenko is far from unsullied and is not a leader.  He is a manager that believes he can do deals with everybody keeping the elite more or less equally (un)happy, which whilst significantly slowing any reform progress, doesn’t actually stop it entirely – and to stop it entirely is simply politically impossible for reasons internal and external of Ukraine.

During the YES conference in Kyiv 16th/17th September, whilst President Poroshenko, Prime Minister Groisman, Prosecutor General Lutsenko and other senior political and institutional figures predictably put a veneer upon reform progress.

To be fair there have been a few reforms that are on balance probably irreversible, albeit most are certainly not irreversible, many are half completed, the majority poorly implemented or otherwise exist on legislative paper but are de facto all form and no tangible substance.

With so many intellectuals, lobbyists, journalists, opinion-shapers, policymakers and otherwise erudite and wise people gathered at the YES conference in Kyiv, a reader may ponder therefore why this time was chosen for an undoubtedly retarded and backward step within the halls of power.

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Contrary to agreement with the EBRD, perhaps inadmissible to Ukraine’s obligations to the EU’s 3rd Energy Package (which requires the “unbundling” of energy monopolies), flying in the face of understandings given to the US regarding Ukrainian energy and the font of corruption that it is, Ukrtransgaz was quietly moved from within the Natfogaz empire and transferred to the control of the Ministry of Economic Development for no apparent or justifiable reason.

This despite agreed plans about how to “unbundle” Naftogaz Ukraine with the EBRD prior to the EBRD jumping in to assist Naftogaz to the tune of $300 million.

Clearly the EBRD has expressed its displeasure publicly, and during the YES conference, calling for this retarded decision to be reversed post haste.

Further it jeopardises a World Bank $500 million loan to Naftogaz too.

Naturally given the YES conference circumstance, it does not put President Poroshenko, PM Groisman et al in a particularly good or comfortable light – whether they had any involvement or prior knowledge of the incident or not.

Unsurprisingly it does little for investor confidence if the Ukrainian State breaks its agreements with a major, frequent and reliable inward international investor – particularly when that investor is in the same YES conference room in Kyiv as a leadership telling the world that this government and executive can be trusted to meet its obligations.

In short, whatever decisions are made regarding Naftogaz, Ukrtransgaz etc., they necessarily have to be consistent with existing agreements.

Was such a retarded decision/action timed to deliberately project a poor image of the current leadership?

If complicit, did the current leadership expect the YES conference media noise to drown out or ignore a planned nefarious act?  On balance was it considered a good weekend to bury nefarious news?  If so it failed.

That Ukrtransgaz would be split from Natfogaz to meet the Ukrainian obligations to the 3rd Energy Package is an absolute requirement.  Resolution 496 of the Cabinet of Ministers dated 1st July 2016 clearly plans for this eventuality.  That Resolution calls for the Public Joint Stock Company “Main Pipelines of Ukraine” to be created under the management (temporary or otherwise) of the Ministry of Energy and Coal.  In summary the substance of that Resolution moves Uktransgaz from Naftogaz, renames it – or transfers the assets to be more accurate – to PJSC Main Pipelines of Ukraine which will operate under the Energy and Coal Ministry (at least initially).

This is all to have occurred within 30 days after a currently pending Gazprom v Naftogaz arbitration in Stockholm – but no asset transfer is to occur prior.

Does this decision affect the arbitration process in Stockholm in any way?  If so how?  To the benefit of Gazprom?

Without going too deeply into Resolutions and plans – suffice to say there are publicly available Resolutions and plans about how Ukrtransgaz was to be dealt with as declared by the Cabinet of Ministers – none of which caused angst or ire of the EBRD when published (or since).

It follows that with the current nonsense surrounding Ukrtransgaz, a reader is therefore asking “Why”?

A good question, but perhaps not entirely the right question of “Who”?  Or more precisely “Who benefits?”.

Whenever there is a retarded and backward policy step in Ukraine, the first question that should always be asked before any other is “Who benefits?”.  The next question is then “Why (this way from several possible ways was chosen)?

Recognising that the Ukrtransgaz issue will be resolved to the liking of the EBRD and to try and reduce reputational damage to President Poroshenko, PM Groisman etc., the full question is “who benefits from the fairly short window of opaqueness and unaccountable management decisions in and surrounding Ukrtransgaz during this time?”

For who exactly benefits from what damage can be done/what gains can be made during this time?  Cancelled tenders, or alternatively swiftly awarded tenders will ultimately come to light as will any asset sales, acquisitions, or theft.  The EBRD is not a complainant that the PGO or NABU can ignore when its contractual agreement is with the Ukrainian State.

As yet it is not entirely clear who specifically benefits – but somebody does for such a retarded act to have occurred.  Sooner rather than later it will become clear who benefits (and who clearly believes that any repercussions will be acceptable – as nobody within the elite goes to jail).

In the meantime sadly, as the incompetence of a mere breakdown of communication is rather unlikely, a reader is left to choose between either yet more dirty deeds within the current ruling elite (or at least some of them), and/or a complete lack of government control, or a brazen breach of its obligations.

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Planes, trains and automobiles – Odessa

August 4, 2016

Although it is a tale that probably hasn’t had the impact expected from Misha Saakashvili inspired events, and despite some highly questionable deals regarding the new Odessa International Airport Terminal between the Saakashvili administration and dodgy businessmen, matters regarding Odessa airport certainly appear to be going the right way.

Upon arrival, Governor Saakashvili managed to force out the Ihor Kolomoisky aligned (and thus MAU airline friendly) bureaucrat that effectively – indeed very effectively – managed to preserve the almost 100% monopoly Mr Kolomoisky’s MAU had over flights into and from Odessa airport – both national and international flights.

Having then made Odessa airport “Open Skies” – Odessa and Lviv being the only two Ukrainian airports that are currently – several new international and a new internal carriers have appeared at Odessa airport.  The 3rd August seeing yet another carrier moving one step closer to arrival.  Air Berlin may very well be flying Odessa to Paderborn from 2017.

The slowness of the story naturally has gathered little media impact – as slow stories generally don’t.  Nevertheless Governor Saakashvili can count this achievements as a win, for to be sure if he hadn’t taken on the challenge nothing would have changed.

However, his statements regarding the commissioning of the new Odessa terminal have been many.  It was first due to open in March 2016 – then the autumn – and now the year end.  The terminal has been built and the external building works completed.  There is a watertight finished exterior.

Internally however, the terminal is no more progressed today than it was when the foundations were first poured years ago.  There is a tremendous amount of work to do if it is to open by the year end – thus to be blunt, it seems very unlikely unless Odessa is given the Eurovision hosting city title which may then add some urgency.

Further, there is little point to a new terminal without necessary runway and associated groundworks – and the runway, like all Ukrainian runways is owned by the State as all are designated dual purpose civil/military.  Ergo Gov UA will have to find the cash for the runway works to make the new terminal anything more than an interesting structure.

Nevertheless, the new airport terminal is certainly far more advanced than the $4.5 billion road from Odessa to Reni (and beyond into Romania).  This is a project that will take several years – presuming the funding over those years flows.  That it is a necessary infrastructure link between the southwest of the oblast and the city perhaps is often eclipsed by the international theme of an infrastructure link connecting Romania to Odessa.  It is, to be clear, as much a political road as it is an economic road.

However, whilst the Governor and Air Berlin will dominate the local media headlines, wily parliamentarian (and uncrowned Tsar of Bessarabia/southwestern Odessa oblast) Anton Kisse was quietly progressing infrastructure projects of his own within his fiefdom.

On 2nd August Mr Kisse, together with Ukrainian Ambassador to Moldova Ivan Gnatishin, Vice-Chairman of the Odessa Regional Council Yury Dimchoglo, and Vladislav Fateev of Ukrzaliznytsia, met with Deputy Minister of Transport and Road Economy of Moldova Sergey Bucataru, and director of the Moldavian Railways, Yuri Topal.

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The aim of the meeting, to rehabilitate the Berezino (Ukraine) to Bessarabyaska (Moldova) rail track and return it to former glories as part of the regional infrastructure.

This 16 kilometer section of forsaken rail track would benefit both Moldova, de facto Transnistria through which it passes, and Odessa oblast – predominantly Ismail.  The port of Ismail, as well as the Tatutinsky region both likely to benefit from the ease of moving Moldavian grains for export, and also the movement of other goods and people.

It would also create another rail link to Bucharest and Sophia, changing at the Moldavian capital, Chisinau – and given the high ethnic concentrations from both Bulgarian and Romanian nations in the southwest of Odessa oblast, it is no bad thing for the local community either.

Matters seem likely to progress in September, and to be sure the 14 kilometers of track in Ukraine, and 2 kilometers in Moldova, would not take long to bring to working order.  Perhaps 6 weeks.

The estimated cost is about $10 million – which the EBRD has stated historically that it would be willing to fund – indeed it has said so on several occasions in the past.  Perhaps the only question is whether they are still willing to fund it – or not.

Undoubtedly, should funding be given, this rail link will be completed long before the Odessa-Reni road.  The question is whether it will be completed before Odessa Airport Terminal (which should have already been completed).  The answer, most likely will be – yes.

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EU4Business Programme – Ukraine

May 20, 2016

In April 2014 an entry appeared highlighting the absence of preparation for the implementation of the as then unsigned (let alone ratified) Association Agreement/DCFTA between the EU and Ukraine as far as the Ukrainians were concerned.

A year later in February 2015, post-signing (and ratification) of the agreement, the issue was revisited noting the continuing lack of information to SMEs in particular when it came to compliance with EU standards and assistance with EU market entry.

Both entries contained the following – “For those that are looking westward and desire greater integration, it is surely time to show just how attainable that actually is – in practical and tangible everyday ways.

One example was that of trade and Ukrainian products that already meet EU standards.

Somewhere between 20 – 30% of Ukrainian products already meet, and another 10% or so with simple changes to things like packaging, would meet, EU standards (not to mention ISOs).

Thus EU standards are not only achievable but have already been achieved by certain producers big and small across several market sectors – and yet nobody has produced a consolidated list that publicises what has already been achieved and is easily identifiable to a Ukrainian public that also buys those products.

Why not?

Would it not show quite clearly that European integration is not a pipe dream, but is something not only achievable, it is actually underway in practical and tangible terms?

Is it not an easy public relations win, psychologically fortifying for the believers, irrefutable for the detractors, and also cheap to do?

Considering the tens of thousands of spam commercial comments this blog gets advertising all and sundry each and every year – why, in all the years it has been running, has there never once been a comment offering/advertising a method of attaining EU standards?

Is there a campaign or programme to help Ukrainian businesses over the compliance line? 

If it is policy to talk the talk in an effort to make Ukraine walk the walk – why is it that those that can be held up as examples of success with regard European integration/standardisation aren’t?

As of the time of writing, more than 2 years since the initial entry, and almost 6 months after the Association Agreement/DCFTA became operational, access to such information, actual assistance in compliance and market entry is still, to be entirely blunt, nothing short of woeful for Ukrainian SMEs.

Undoubtedly that information is “out there” for those Ukrainian SMEs prepared to spend a lot of effort finding it – and a lot of time then trying to understand it.  What does the “New European Approach” mean?  Is it a way of making EU regulation flexible toward innovation, and if so, how?.  How to create “conformity declarations”?  When to involve an EU “Notified Body”?  Where to find an EU “Notified Body” if and when they were required?  What exactly are“Assumptions of conformity” and liabilities if products fail?

Who has the primary responsibility in clarifying such issues (and many others) for the bewildered Ukrainian SME?  Does the Ukrainian government have primary responsibility?  Does the EU have at the very least a requirement of goodwill, if not some responsibility, to effectively communicate what needs to be done for those searching for, and reaching out for, that needed assistance for EU standards compliance and market entry assistance?

ebrd

Lo it has come to pass, almost 6 months since the DCFTA became operational, and more than 2 years since this blog raised such basic preparatory questions, that the Ukrainian Government, EU and EBRD signed an agreement whereby the EU and EBRD will provide approximately EUR 28 million for business advice, information, educational and other support to SMEs in Ukraine under EU4Business program.

“The purpose of EU4Business initiative, to support creating jobs in Ukrainian business by developing small and medium-sized enterprises, new skills, and support their plans for the biggest neighboring market exports, ie EU common market with over 500 million consumers.  We combine efforts with our long-term partner the EBRD in order to significantly increase our support for small business in Ukraine and to help various companies to use the opportunities that emerged as a result of the creation of the DCFTA with the EU. We are determined to help local companies to become the driving force of economic growth in the regions of Ukraine and to compete successfully in world markets.” – EU Ambassador Tombinsky 20th May 2016

Quite – but would it not have been more timely to have done this prior to 1st January when the agreement became operational?

How much further along the road of compliance, certification (where needed) and preparation for market entry would many Ukrainian SMEs be if such information and assistance had been accessible 2 years ago when such issues were first raised by the blog when it was absolutely clear that the AA/DCFTA would be signed posthaste by then President-in-waiting Poroshenko?

Perhaps there are good reasons for such a delay, though it is difficult to identify any insofar as access (and promotion) of information and assistance is concerned.  (Financing/loans etc may be slightly different.)

Opening 2 new EBRD offices in Odessa and Kharkiv to compliment those in Kyiv and Lviv is a very welcome step when it comes to disseminating much sought after information, guidance, and funding access, as are the 15 (presumably non-EBRD institution) business support centres across the nation also to be financed.  (Hopefully judicial reform and the prevalence of rule of law in particular with regard to property rights will occur before SMEs benefitting from the EU4Business programme become prey to “raiders” and other nefarious interests/activities.)

Nevertheless, a reader may ponder why there is still no prominent and/or promoted (to the point of annoying if necessary) on-line or TV campaign to disseminate even the most basic information with regard to how and where to find preparatory information/assistance before those looking to EU markets begin darkening the doors of the two new EBRD offices, – or 15 business support centres – with a business plan that is nothing short of being scribbled hurriedly on the back of a cigarette packet and/or having absolutely no idea of what they are to actually comply with (if anything) when turning up.

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