AMERICA INVESTS IN UKRAINE
USUBC Business Journal #6
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Friday, August 1, 2008
INDEX OF ARTICLES ------
Clicking on the title of any article takes you directly to the article.
Return to Index by clicking on Return to Index at the end of each article
1. U.S. & UKRAINE: A BLOSSOMING RELATIONSHIP
Ukraine finally starting to match export appeal of eastern
European markets for U.S. investors
Commercial Counselor Richard Steffens &
Economic Counselor Douglas Kramer
United States Embassy Kyiv
BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
2. BEYOND CHORNOBYL
US company Westinghouse succeeds in bringing greater
international competition to nuclear fuel market
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
3. SUNFLOWER OIL EMPIRE
America's Bunge expects to remain among leaders in
booming Ukrainian agribusiness
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
4. FINANCING THE FUTURE: CITI
Citibank looking to build on a decade's valuable experience
in Ukraine
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
5. VOLIA CABLE & SIGMABLEYZER'S REGIONAL
CABLE BUSINESS MERGE TO FORM PRE-EMINENT
UKRAINIAN CABLE PROVIDER
Providence Equity Partners Increases Its Investment in
the Combined Entity to over $300 million, Making It the
Largest Private Equity Investment in Ukraine
By BusinessWire, Kyiv, Ukraine, Monday, July 28, 2008
6. MAX-WELL: TRANS ATLANTIC MEDICINE
Unique pharmaceutical firm combines Ukrainian and
American practices
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
7. SOLID TEAM: CREATING A HUB
Kyiv Oblast town of Bila Tserkva set to become the air
cargo capital of Ukraine with US help
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
8. PIONEERING PROGRAMMERS
Software firm SoftServe expands thanks to US investment
and marketing expertise
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
9. BUYING BOEING
Ukrainian carrier AeroSvit invests in U.S. plane fleet but faces
U.S. government regulatory restrictions on expansion & Ukraine
government's endless political battles and incompetency.
By Jim Davis, BusinessUkraine magazine
Kyiv, Ukraine, Monday, July 28, 2008
10. WINNER IMPORTS UKRAINE, LTD, JOINS U.S.-UKRAINE
BUSINESS COUNCIL (USUBC), OFFICIAL IMPORTER
FOR FORD, JAGUAR, LAND ROVER, VOLVO & PORSCHE
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, July 28, 2008
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1. U.S. & UKRAINE: A BLOSSOMING RELATIONSHIP
Ukraine finally starting to match export appeal of eastern
European markets for U.S. investors
Commercial Counselor Richard Steffens &
Economic Counselor Douglas Kramer
United States Embassy Kyiv
BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
Until recently Ukraine had been comparatively neglected by US investors whencompared to the fast-emerging markets of EU-accession Europe. Between Ukrainian independence in 1991 and 2005, US firms invested less than USD 1 billion into Ukraine.
However, as global manufacturers search for lower cost skilled labour and
higher world prices drive US firms to widen their search for energy
resources, Ukraine is fast becoming a major area of economic interest for
the United States.
The country can further improve its chances of attracting more US presence
if it addresses the issues commonly cited as the main challenges to doing
business here, such as Ukraine's reputation for official corruption,
government instability, weak rule of law, and the primitive commercial code.
Other issues of particular concern to potential US investors into Ukraine
remain ensuring the sanctity of contracts, fulfilling the country's
commitments as the newest member of the World Trade Organisation (WTO), finding a way to resolve disputes that have prevented the US Overseas Private Investment Corporation (OPIC) from operating in Ukraine, and ensuring a fair, equitable and transparent tax regime, including the timely VAT refunds.
US Investment in Ukraine: an overview
The Ukrainian economy has been growing steadily since 1999, with real GDP
growth at about 7% in 2007. While Russian and European exporters dominate the Ukrainian market, US exports rose a remarkable 77% up to USD 1.3 billion in 2007, bringing the US into trade surplus with Ukraine for the first time since 1993
The stock of US foreign direct investment (FDI) in Ukraine reached USD 1.46 billion by April 2008. Most US investment was in a few key sectors:
agricultural processing, wholesale and retail trade, financial services, and
chemicals.
Despite recent increases, the total amount of FDI in Ukraine remains far
below the totals in most central and eastern European countries. Highly
qualified and relatively inexpensive labour, developed transportation and
communications infrastructure, and a favourable geographic location make
Ukraine attractive.
In the near future, Ukraine's efforts to prepare for hosting Euro 2012 will
bring strong investment and export opportunities in telecommunications,
commercial real estate, transportation infrastructure development, security
services and equipment, and financial services. Potential investors will be
looking to the government for a clear strategy to prepare Ukraine for this
massive event.
Ukraine's continued drive for energy security means significant investment
opportunities for US investors in the gas and oil industry, energy
efficiency, electrical power systems, and renewable energy.
To attract substantial foreign energy investment Ukraine will need to
develop a convincing long-term energy strategy that includes the
diversification of both domestic and imported sources of energy, market
pricing for all energy products, and the introduction of targeted subsidies
for poorer citizens.
Most importantly, investors will need assurances that the government of
Ukraine will honour its commitments, ensure the sanctity of contracts and be
prepared to pursue a dialogue with investors whenever problems arise.
Without such stability, Ukraine cannot expect to attract the sizable,
long-term capital investment needed to achieve its energy security goals.
Ukraine could also become an attractive place to deploy manufacturing sites
and service centres for customers located in the EU and Russia. The
country's geographic location, communications infrastructure and improving
political and economic environment can make it an effective transportation
corridor between the EU, Russia and the rest of the CIS.
However, the absence of the US Overseas Private Investment Corporation
[OPIC] from the market has deterred otherwise willing investors from
entering the market. A timely solution to OPIC's outstanding issues with
Ukraine could lead to potentially hundreds of millions of dollars of
additional investment in the medium term.
Directions for future development
Several major trends will strongly influence the Ukrainian economy in
2008 and beyond.
[1] These include the privatisation of the few remaining strategic state
enterprises through public tenders.
[2] A second trend is the continuing integration of Ukraine into global
financial markets. More specifically, this means the entrance of major
international financial institutions, primarily banks and insurance
companies, most of which are entering the Ukrainian market by acquiring
leading local market players.
[3] A third trend that will play a crucial role in the development of the
Ukrainian economy is the worldwide increase in energy prices.
Continued disputes with Gazprom over natural gas prices are a local symptom
of a global trend. Rising energy prices may hurt those sectors of the
Ukrainian economy that have generated the most export revenues (i.e. steel,
chemicals, sugar refineries, machine building), yet many leading firms in
these sectors have already demonstrated an ability to adapt to higher energy
costs. At the same time, higher world energy prices should stimulate
investment into new gas/oil deposit exploration, especially on Ukraine's
Black Sea shelf, as well as stimulating investment into improvements in
energy efficiency across the economy.
Building on Ukraine's famed agricultural wealth
A fourth trend is the global increase in food prices. Ukraine's vast
agricultural potential could help address current imbalances in the world's
food markets. Ukraine's agricultural potential is already well-known around
the world and investors are waiting in the wings for the government of
Ukraine to take the steps needed to kick-start an investment boom into the
sector.
These steps include the establishment of the institutions of a functioning
land market, a cessation of state intervention - in the form of export
quotas or price controls - into agricultural and food markets, and an
improved tax regime that ensures timely VAT refunds to exporters of
agricultural products.
Ukraine passed a major milestone this year with entry into the WTO. This
will bring increased market transparency and greater potential for sales of
industrial, food and consumer products, and greater access for Ukrainian
products in foreign markets. Subsequently, the United States and Ukraine
signed a Trade and Investment Cooperation Agreement, a consultative
mechanism for the United States and Ukraine to discuss issues affecting
trade and investment.
The United States applauds the intention of the European Union and Ukraine
to pursue a free trade agreement. Closer economic and commercial ties to
Europe, like WTO membership, will open up new trade and investment
opportunities in Ukraine, stimulate competition and innovation, further bind
Ukraine into international economic institutions and serve to accelerate the
pace of domestic economic reform.
Continued challenges to foreign investors
Successive Ukrainian governments have made improving the investment climate a top economic policy goal. In general, US investors report increased receptiveness to and understanding of investor concerns but few concrete improvements.
Over the past few years, Ukraine has liberalised its markets, reduced
regulation, eliminated licensing requirements, eliminated most restrictions
on foreign exchange and begun the transformation of the agricultural sector
from state-run farms to private agriculture.
Much remains to be done to achieve a liberalised economy strongly anchored in the rule of law, however, political will and vision coupled with sound economic policies can help Ukraine develop its full potential as a highly developed, competitive and open market economy.
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LINK: http://www.businessukraine.com.ua/a-blossoming-relationship
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
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2. BEYOND CHORNOBYL
US company Westinghouse succeeds in bringing greater
international competition to nuclear fuel market
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
The whole world has come to know the story of the explosion at the Chornobyl Nuclear Power Plant and its aftermath as the greatest atomic energy disaster in history. Unfortunately, the story of Ukraine's long-time and highly successful use of nuclear power to generate nearly 50% of its electrical power is less well-known.
On March 30, 2008, Westinghouse Electric won a contract that promises to
make nuclear fuel supply to Ukraine more competitive and help the country
assure a more reliable and secure supply of electrical power.
Westinghouse says the five-year contract, signed with the country's umbrella nuclear operating company, Energoatom, will provide nuclear fuel supplies to three Ukrainian reactors beginning in 2011.
A long-term commitment
The genesis of Westinghouse's introduction into the Ukrainian nuclear fuel
marketplace was an award in 2000 by the US government for the development of an alternative nuclear fuel supply which successive Ukrainian governments have supported.
This contract represents a major commitment from both Westinghouse and
Ukraine to ensure that alternative and competitive nuclear fuel supplies are
available for the benefit of Ukraine's nuclear energy provider and,
ultimately, its citizens.
Aris Candris, Westinghouse Senior Vice President, Nuclear Fuel, said this
contract is significant because it represents one of the largest energy
supply diversification commitments in the history of Ukraine, greatly
increasing the country's overall energy security.
Westinghouse Electric has roots in the power generation field which go back
to 1886 when the company was founded by George Westinghouse, acknowledged during his lifetime as one of the world's greatest engineers. During the 20th century, Westinghouse scientists and engineers were granted more than 28,000 US government patents, the third highest number for any company.
Westinghouse's signing of the nuclear fuel agreement with Energoatom is the first such contract ever signed by Ukraine with a western country. Although Westinghouse in recent years has been fully committed to the commercial nuclear power industry, the name Westinghouse has been associated with a large number of significant achievements, mostly related to electricity and electronics.
Among the company's milestones are the first commercial AC power generating station (1886); the first commercial radio broadcast (1920); the first diesel-electric rail car (1929); the electronic amplifier to enhance X-ray
images (1948) and the first commercial pressurised water reactor (1957).
Additionally, Westinghouse provided the cameras that enabled the world to
watch man's first walk on the moon in 1969.
Absorbing the painful lessons of Chornobyl
The Chernobyl nuclear event is rightfully remembered as one of the great
disasters in Ukrainian history. However, the lessons learned from Chernobyl
led to a level of safety consciousness that makes Ukraine's nuclear power
industry one of the country's greatest success stories.
Today, Ukraine remains heavily dependent on nuclear energy with 15
operational reactors. Ukraine still receives most of its nuclear services
and nuclear fuel from Russia, but implementation of the contract with
Westinghouse will enhance Ukraine's energy independence.
In 2004 Ukraine commissioned two large new reactors and long-term plans
call for the government to maintain nuclear's essential share in electricity
production at least to 2030 and probably far beyond. This reflects the
worldwide trend back toward nuclear fuel as a safe alternative to the
escalating costs and pollution problems with fossil fuels.
In 1991, due to breakdown of the Soviet Union, the country's economy
collapsed and its electricity consumption declined dramatically from 296
billion kWh in 1990 to 170 kWh in 2000, all the decrease being from coal and
gas plants.
Total electricity production in 2007 amounted to 195 billion kWh. 47.4% of
this power came from coal and gas (approx 20% gas), 47.5% from nuclear and 5% from hydro.
A major increase in electricity demand to 307 billion kWh per year by 2020
and 420 billion kWh by 2030 is envisaged, and government policy is to
continue supplying half of this from nuclear power.
Westinghouse looks forward to providing options that will help Ukraine reach
its nuclear power generation goals with the ultimate goal of making Ukraine
as energy independent as possible.
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LINK: http://www.businessukraine.com.ua/beyond-chornobyl
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NOTE: Westinghouse is a member of the U.S.-Ukraine Business Council.
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[return to index] [U.S.-Ukraine Business Council Website: www.usubc.org]
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3. SUNFLOWER OIL EMPIRE
America's Bunge expects to remain among leaders in
booming Ukrainian agribusiness
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
A fairly recent addition to Ukraine's major agriculture and food companies,
nevertheless Bunge has since 2002 gained a reputation for its community
involvement and outstanding human resource practices. Founded in 1818 in
Amsterdam as an export/import trading firm, Bunge has gone on to become a
recognised world leader in global agribusiness.
Bunge's integrated operations, now headquartered in the United States,
circle the globe, stretching from the farm field to the retail shelf. The
Bunge family in Ukraine is a part of 22,000 employees worldwide at over
450 facilities in 32 countries, all dedicated to improving the global
agribusiness and food production chain.
HELPING UKRAINE TO GLOBAL
SUNFLOWER DOMINATION
Bunge Ukraine's operations are an extension of the company's Agribusiness
and Edible Oil Products divisions. The Agribusiness division is one of the
world's largest oilseed processors and a major global grain trader, while
the Food products division is a major supplier of edible oils and
shortenings to food processors and foodservice customers, and is a leading
supplier of consumer edible oils and related products in select markets.
Bunge is the world's largest seller of bottled vegetable oils to consumers
and has played a major role in making Ukraine a world centre for sunflower
seed oil (sunoil) production and marketing.
A CHALLENGING ENVIRONMENT TO DO
BUSINESS
Dmitry Gorshunov, Managing Director of Bunge Ukraine made it clear in an
interview with Business Ukraine that the company considers its Ukraine
operations a part of the company's long-term strategic plans. "Bunge fully
intends to continue its growth in Ukraine. The Ukrainian environment is
challenging but with those challenges come opportunities," Mr. Gorshunov
says.
Bunge first invested in Ukraine through its 2002 purchase of Cereol, which
at the time owned a Dnipropetrovsk facility that processes sunflower seed to
make bottled cooking oil. Since that initial purchase Bunge has increased
the size of the Dnipro facility by 50%. In addition to its extensive sunoil
operations, Bunge has purchased several grain elevators and has also
invested in construction of another oilseed processing facility in
Illyichevsk.
Already a leading sunseed processor through its facility in Dnipropetrovsk,
the company has recently finished commissioning a jointly-owned sunseed
processing facility in Illyichevsk. Bunge plans to operate the new plant
during the coming season, and consider opportunities to crush alternative
crops there as well, such as rapeseed.
In addition, Bunge have substantially grown its capabilities in grain
origination over the past several years. In 2005/2006 (the last season in
which grain exports were not restricted by government quotas), Bunge was the
leading exporter of grains from Ukraine. Since then the company has invested
in its grain elevators.
INVESTING IN A FUTURE WORLD LEADER
However, Bunge believes it is more important that the company has built a
strong team to handle trading, risk management and logistical support. Bunge
has already negotiated a substantial throughput agreement with one export
grain terminal, and is working to negotiate another.
"High commodity prices have sent a call to farmers worldwide that more
grain and oilseeds are needed. Ukrainian farmers are uniquely positioned to
respond to that call, as there is a lot of room to improve farming practices
and inputs, especially as funding becomes increasingly available.
"We at Bunge believe that Ukraine will become one of the world's major
suppliers of grain and oilseed products, and we intend to participate in
that growth by investing further in the human and physical infrastructure
needed to bring Ukrainian products to the world," Gorshunov says.
On the food side of its operations Bunge is currently the second largest
supplier of bottled oil to Ukrainian consumers. Its flagship brand, Oleina,
was the first refined, bottled oil in Ukraine, and it remains one of the
strongest brands in the market. Bunge says it will continue to invest in its
food business and is actively exploring new avenues for growth including
other categories beyond bottled oils.
DEFYING THE RAIDERS: A LONG-TERM
COMMITMENT
Bunge has been the target of so-called raider attacks that have made life
difficult for some other foreign investors in Ukraine. However, Gorshunov
made it clear that such attacks will continue to be very vigorously repelled
and will not discourage company management and employees who support
the company's strong position as a good corporate citizen.
"Bunge has for the past several years suffered repeated attacks from
corporate raiders. These attacks have taken a wide variety of forms, ranging
from lawsuits regarding our shareholdings and brands, to media attacks and
even pamphlets making ridiculous allegations against the Oleina brand. These
attacks have caused us to divert a lot of time and effort from our business
into legal defences and public relations work, but they have not changed our
overall strategic direction in Ukraine.
"Throughout this process we have continued to build our business, invest in
our people and invest in our infrastructure. Moreover, we believe that as
Ukraine is increasingly integrated into the community of nations through
trade and through vehicles such as the WTO, such issues will subside and
Bunge will be able to focus its efforts on building its business, which in
turn will help to bring economic growth and individual prosperity to
Ukraine," Gorshunov concludes.
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http://www.businessukraine.com.ua/sunflower-oil-empire
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NOTE: Bunge is a member of the U.S.-Ukraine Business Council (USUBC).
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
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4. FINANCING THE FUTURE: CITI
Citibank looking to build on a decade's valuable experience
in Ukraine
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
As the financial institution with the largest global network, Citi, the name
that Citigroup/Citibank has used in recent years, has some 200 million
customer accounts in more than 100 countries. After opening in Ukraine in
1997 as a representative office, Citibank Ukraine was incorporated as a
wholly-owned subsidiary in 1998, making it the 100th country in Citi's
global network.
Now with over 120 employees, Citibank Ukraine has a decade of experience
offering a full range of services to corporate and commercial banking
clients. In recent years, Citibank Ukraine has significantly expanded its
customer base to over 400 customers, and has (via Citi London) participated
in or led important financing transactions for the Government of Ukraine, as
well as top tier Ukrainian companies.
On May 20 this year, the US Embassy in Ukraine awarded Citibank Ukraine the
US government's Certificate of Appreciation for Achievement in Trade to
recognise what Ambassador William Taylor described as Citibank's "aggressive
commercial efforts in Ukraine and constant willingness to provide financial
expertise to government entities."
Mr. Nadir Shaikh, Citi Country Officer for Ukraine and Chairman of Citibank
Ukraine, responded, "Citi has been committed to Ukraine throughout our
relatively short history in the country. Despite the challenging economic
and political environment, Citi has played an important role in some of the
most important capital raising, project finance and foreign direct
investments in Ukraine."
Looking to broaden financial horizons
After a decade of steady growth, Citibank now looks to expand its services
and is actively studying the option of entering the retail and SME market
next year. Such services are likely to include credit cards, personal loans,
investment products and transactional accounts, with a presence in key
cities. Citi expects to leverage off its success in the Russian market,
where it has established a leading position in retail services within a
relatively short period of time.
On April 16, 2008, Citibank Ukraine announced that it was expanding its
services to businesses and investors by providing direct custody and
clearing services (DCC) to clients in Ukraine.
Thus, Ukraine became the eighth new market Citi has opened in two years
taking its proprietary network of such services - the largest in the world -
to 52 markets. Citi currently serves 27 markets in Europe, the Middle East
and Africa with DCC services.
Andrew Gelb, Global Head of direct custody and clearing for Citi's Global
Transaction Services business said, "We are excited about the opportunities
Ukraine offers and will provide the same high quality standard of DCC
service, technology and support there that we do globally." Shaikh added,
"Ukraine is one of the most rapidly developing economies among the countries
of the former Soviet Union and we see many diverse opportunities for growth
in this market."
A leader in major industrial finance
Citi has been a pioneer in arranging major loan syndications that have
allowed Ukraine's industrial giants to upgrade and expand their
operations.During the last 2 years, Citi has arranged several innovative
debt finance transactions for Ukrainian companies in fast growing industries
such as beer, chocolate confectionary, paper packaging and petroleum
retailing.
These deals have included several European export credit agencies and
financial institutions from France, Holland, Austria, Belgium and Germany,
as well as market based investors who have bought into innovative structures
such as pre -IPO convertible bonds structured by Citi.
Citi has also arranged the issuance of Eurobonds for the Government of
Ukraine, Kyivstar, the City of Kyiv and Ukrainian banks to finance their
budgetary requirements and expansion plans. In 2006, Citi was sole arranger
of a Euro 280 million term loan for the State Roads Administration.
In addition to its obvious success as an active arranger of major
syndications and other efforts to provide financing to industry, Citibank
is an important participant in the day to day business of providing
foreign exchange, transactional and money market services to its clients,
having significant market share with the subsidiaries of global companies in
Ukraine.
It has also been actively involved in the creation of the "Kievprime" local
currency benchmark interest rate, the creation of which was coordinated by
the EBRD over the last 2 years.
OPIC CLOSED FOR UKRAINE
While Citi's Investment Bank has advised some of the largest foreign
investors entering the Ukraine market, one of the constraints facing
investors from the United States is a lack of political risk insurance, a
function usually provided by the US Overseas Private Investment Corporation,
a US government-owned export promotion entity.
Political risk insurance was actually available for Ukraine for a number of
years, but this was withdrawn in 2005 because of a dispute over a USD 17
million claim OPIC paid and subsequent Ukrainian governments have failed to
reimburse as required by the intergovernmental agreement.
The question has been discussed with previous Ukrainian governments and
appeared to be settled after then Prime Minister Viktor Yanukovych promised
during a Washington visit to settle the matter within 90 days. However, no
settlement was ever forthcoming.
More recently, top officials in the government of Prime Minister Yulia
Tymoshenko have grappled with the problem and final results of this effort
are still awaited. Citibank's Mr. Shaikh has participated in lobbying
efforts to promote a solution that would again make political risk insurance
available to investors from the United States who want to invest in Ukraine.
"We know from experience that the largest foreign firms come here fully
prepared to finance their own way into the Ukrainian market. Their
investments are based on advice from the most sophisticated sources in their
own companies or from professional advisors such as investment banks.
It is the smaller foreign investors who need the type of help and risk
coverage that OPIC is able to give. Settling the current dispute requires a
firm decision and the political will on the part of government to find a
financing mechanism to fund whatever agreement is reached," Mr. Shaikh
concluded.
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LINK: http://www.businessukraine.com.ua/financing-the-future
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
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U.S.-Ukraine Business Council Website: http://www.usubc.org
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5. VOLIA CABLE & SIGMABLEYZER'S REGIONAL CABLE
BUSINESS MERGE TO FORM PRE-EMINENT UKRAINIAN
CABLE PROVIDER
Providence Equity Partners Increases Its Investment in the Combined Entity to over $300 million, Making the Largest Private Equity Investment in Ukraine
By BusinessWire, Kyiv, Ukraine, Monday, July 28, 2008
KYIV, Ukraine - Volia Cable (Aquorn Limited) and SigmaBleyzer's regional
cable operations (Oisiw Limited) are merging to form Ukraine's pre-eminent
cable provider with operations in over 15 of Ukraine's largest cities. As a
result of the merger, the combined business, to be named Volia Limited, will
provide television service as well as high-speed Internet access to over 2.5
million Ukrainian households.
In a separate transaction, Providence Equity Partners, the world's leading
media and communications private equity firm, is making an additional
investment in Volia bringing its total investment in the combined entity to
over US$300 million. The transaction has been approved by the Antimonopoly
Committee of Ukraine.
"We are very pleased to extend our partnership with Providence, a leading
private equity investor and one of the largest and most experienced owners
of media and communications companies globally," said Michael Bleyzer,
President and CEO of SigmaBleyzer.
"Merging our two cable businesses makes a lot of strategic sense and will
allow us to provide best in class service from a unified operating platform
to our subscribers. We see Providence's increased investment in Ukrainian
cable also as a vote of confidence in the Ukrainian economy."
"The combination of Volia Cable and SigmaBleyzer's regional cable operations
creates a cable company uniquely positioned to meet the rapidly expanding
demand in Ukraine for the most advanced television and broadband services,"
said Jonathan M. Nelson, Providence Chief Executive Officer. "We are pleased
to expand our commitment to Volia and look forward to continuing to work
with Michael and Sergey and their teams to build value at Volia over the
long-term."
Sergey Boyko, President of Volia Cable, will be leading the combined
business and said: "I see tremendous potential in the combined operations.
We now have the platform and scale to build a unified cable brand across
Ukraine and bring to the regional cities the same level and quality of
service that our subscribers in Kyiv have come to rely upon."
Goldman Sachs International acted as financial advisor to Oisiw Limited.
ABOUT PROVIDENCE EQUITY PARTNERS
Providence Equity Partners is the leading global private equity firm
specializing in equity investments in media, entertainment, communications
and information companies around the world. The principals of Providence
manage funds with approximately $22 billion in equity commitments and have
invested in more than 100 companies operating in over 20 countries since the
firm's inception in 1989.
Significant investments include Bell Canada, Bresnan Broadband Holdings,
Casema, Com Hem, Digiturk, Education Management Corporation, eircom,
FreedomCommunications, Hulu, Idea Cellular, Kabel Deutschland, Metro-
Goldwyn-Mayer, NexTag, Ono, Open Solutions, PanAmSat, ProSiebenSat.1,
Recoletos, TDC, Univision, VoiceStream Wireless, Warner Music Group,
Western Wireless and Yankees Entertainment and Sports Network. Providence
is headquartered in Providence, RI (USA) and has offices in New York, Los
Angeles, London, Hong Kong and New Delhi.
ABOUT VOLIA LIMITED
Volia Limited is the number one cable TV and Broadband Internet provider in
Ukraine. As a result of the merger, the combined entity will have about 2.5
million homes passed and 1.8 million RGUs. Volia Limited provides services
such as analog cable TV, digital cable TV, high-speed cable Internet access,
VoIP and data services. New services, such as VoD and PPV, are under
development and will be implemented in the future.
Volia Limited was created through the consolidation of a number of companies
acquired by SigmaBleyzer over the past few years. Since acquisition, Volia
has worked on integrating and upgrading the activities of the original cable
operators.
ABOUT SIGMABLEYZER
Operating in the region for over a decade, SigmaBleyzer is one of the
largest and most experienced private equity investors in Eastern Europe.
With the strength of the company's local infrastructure, western-style
management and knowledge of local markets, SigmaBleyzer has created one
of the best investment management companies in the region.
SigmaBleyzer manages funds and special purpose investment vehicles with
approximately $1 billion in commitments and has made investments in over
100 companies in Ukraine since 1994.
As a manager of a family of private equity funds currently investing in
Ukraine, Romania, Bulgaria and Kazakhstan, SigmaBleyzer utilizes a hybrid
investment approach developed specifically for emerging markets and focused
on simultaneous value creation at the micro or enterprise level and at the
macro level.
Because of this unique approach and strong on-the-ground presence in a
region where many of its investors could not have invested directly,
SigmaBleyzer brings one of the most attractive pipelines of investment
opportunities found anywhere to its client base.
With offices in Kyiv and Kharkiv (Ukraine); Sofia (Bulgaria), Bucharest
(Romania), Astana (Kazakhstan), and a back office in Houston, Texas,
SigmaBleyzer has the infrastructure in its countries of operation to
successfully manage portfolio companies to help them reach their full
potential, while creating value for the investors, shareholders, employees
and other stakeholders.
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http://www.broadcastnewsroom.com:80/articles/viewarticle.jsp?id=466264
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NOTE: SigmaBleyzer is a member of the U.S.-Ukraine Business Council.
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
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6. MAX-WELL: TRANS ATLANTIC MEDICINE
Unique pharmaceutical firm combines Ukrainian and
American practices
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
The only US-owned pharmaceutical production facility in Ukraine is also is
the largest single high-technology American investment in Ukraine to date.
The Max-Well Scientific Oncological and Cardiological Production Centre,
a unique manufacturing complex producing immunobiological and
chemico-pharmaceutical products, opened on March 26 in the Kyiv Oblast
town of Boryspil.
Max-Well is the largest such specialised complex project in the former
Soviet Union, with production workshops for manufacturing drug products and
a scientific research centre.
This innovative Kyiv Oblast venture is a subsidiary company of MaxWell
Biocorporation LLC (USA), where the substances for biopharmaceuticals are
developed and produced and substance quality is controlled.
Max-Well's primary mission lies in increasing the lifespan and improving the
quality of life for Ukrainians by development and introduction into medical
practice of top quality drug products and advanced effective methods for
treatment of oncological, cardio-vascular and other life-threatening
diseases.
From Soviet Kazakhstan to America
Dr. Kenneth Alibek, president of Max-Well company, is an internationally
known scientist and professor of biological sciences and the author of
numerous scientific papers and 10 books. Dr. Alibek, a native of Kazakhstan,
was educated in the United States and became a U.S. citizen. "With my
cultural and linguistic background, I could have chosen to develop this
business in any of the former Soviet states.
However, I chose Ukraine because I felt comfortable here and I saw an
opportunity to have a profitable business while at the same time making a
positive impact on the health and quality of life of people throughout all
of the former Soviet Union," Dr. Alibek commented of his decision to make
Ukraine the centre of his operations.
Impacting on shocking health stats
As evidence of the health issues his company hopes to impact upon, Dr.
Alibek pointed to statistics that show Ukrainian men with a life expectancy
of 62.24 years and Ukrainian women with a much longer life expectancy of
74.24 years.
"We believe that by making top quality medications available at more
affordable prices, we will be able to make a very great impact on bringing
greater wellness and longer and more enjoyable lives to both men and women,"
Dr. Alibek says.
National wealth is not necessarily the best indicator of national health.
Russia, now the recipient of huge inflows of capital thanks to its
exploitation of its natural resource wealth, still has lower life
expectancies than Ukraine. In Russia, the life expectancy for men is 59.19
years and for women the number is 73.1 years.
Interestingly enough, Moldova, considered the poorest of the former Soviet
states, has a life expectancy superior to both Ukraine and Russia. Moldovan
men may expect to live for 66.81 years while Moldovan women may expect
to live 74.41 years.
"Our plans call for us to develop the markets for our pharmaceuticals
throughout the entire former Soviet Union with the idea that this will not
only make a considerable health impact, but also at a level of profitability
that allows a reasonable return to our investors while at the same time
pouring more money into expanding our range of drugs for our focus area of
cardiovascular and cancer treatments," Dr. Alibek says.
"The fact that 64% of our people die of cardiovascular disease at a
relatively young age is a situation that we are in a position to improve
today and keep making greater improvements in the future. We are here for
the long haul and dedicated to making a real impact on the former Soviet
health and wellness picture," he adds.
Pumping money into an convalescent economy
According to Dr. Alibek, Max-Well is actually the most intensive
international investor into integral methods of control of oncological,
cardiological and critical infectious diseases. The company's total
investment in this project already exceeds USD 90 million. Company plans
call for increasing the investment over time to USD 130 million and even
more over the years.
Of the company's USD 30 million investment in equipment, USD 9 million went
to equipment from Ukrainian manufacturers. Construction costs of USD 39
million made an even greater impact in Ukraine with USD 32 million going to
Ukrainian construction firms.
The development of funding for the pharmaceutical enterprise construction
project in Ukraine was headed by Mr. Mukhtar Ablyazov, Chairman of the Board
of Directors at JSC BTA Bank, a well-known businessman in CIS countries,
Europe and the United States.
Dr. Alibek is emphatic in his praise for the support the company has
received for its Ukrainian venture from the US embassy in Kyiv. Also, on
June 4, Carlos M. Gutierrez, US Secretary of Commerce paid a visit to the
Max-Well facilities along with Oleksandr Fedorovych Vosianov, President of
Academy of Medical Sciences of Ukraine.
Vladimir Bugaychuk, Max-Well's general director took the visitors on a tour
of the facilities that will permit manufacture over 200 million capsules,
about 150 million pills, 60 million vials, 30 million pre-filled syringes
and 30 million suppositories per year.
The production facility was designed and built according to GMP standards
(Good Manufacturing Practice), the world-wide regulations for the production
of drug products.
Also, both chemico-pharmaceutical and immunobiological drug products will
be manufactured at the production facility, which is innovative not only for
Ukraine, but for the CIS countries as a whole.
"We have made our initial investment in Ukraine and expect to see great
growth in the years ahead. I had the advantage of having language skills and
cultural knowledge that served me well. However, for other US investors,
there are still great opportunities and whole fields for development,"
comments Dr. Alibek.
"My advice to investors is to find a reliable local business partner who
understands the language and culture. The US-Ukraine Business Council
[USUBC] has also been a great help in making contacts and dealing with
problems. With the right partners, it is possible for anyone with good
business sense to find opportunities here."
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LINK: http://www.businessukraine.com.ua/trans-atlantic-medicine
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NOTE: Max-Well is a member of the U.S.-Ukraine Business Council.
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
===============================================
7. SOLID TEAM: CREATING A HUB
Kyiv Oblast town of Bila Tserkva set to become the air
cargo capital of Ukraine with US help
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
A feasibility study funded by the Unites States government has shown that an
abandoned military airport at Bila Tserkva in southern Kyiv oblast has the
potential to become a major building block of the improved logistical
infrastructure that Ukraine needs to forge ahead of competitors.
The study, conducted by a team of aviation professionals led by William J.
McLaughlin, general partner in the Claremont, California firm Solid Team
LLC, was recently presented to the mayor of Bila Tserkva by Solid Team and
representatives of the US Embassy in Kyiv.
A boost to the entire region
The principal findings of the study confirm the feasibility of the
conversion of the old Soviet air force base into a fully equipped and
modernised regional cargo airfield that could handle virtually any aircraft
that flies today, including the heavy lift aircraft pioneered by Ukraine's
Antonov Aviation.
The study says that completion of the planned air cargo facilities and other
improvements planned would result in great benefits to the city and the
entire region, including several hundred jobs directly related to cargo
airport operations and many more as adjacent areas attract high tech
manufacturing and other job creating businesses.
Solid Team's Vasily Lopata said that proceeding with development of the
cargo airport would require investment of nearly USD 200 million for such
improvements as installation of a modern air traffic control centre and
navigation aids that will enable the airport to meet international
standards. The airport would also be equipped with emergency fire and rescue
equipment and a security system, Mr. Lopata said.
Solid Team personnel also pointed out that developers of the airport would
be required to observe the most stringent precautions to avoid degradation
of the environment during the construction process, which is expected to be
completed by December 2009.
In addition to project management and engineering services provided by Solid
Team, a number of the top US-based equipment firms will be providing
services and equipment for the project.
These include navigational and communications equipment by Raytheon Company,
an 80 year old American company with 72,000 employees, USD 21.3 billion in
annual sales and a reputation as a world market leader in electronics of all
kinds.
Specialised fire trucks and other equipment for fire fighting will be
supplied by E-One, another well-known American firm and other special
purpose vehicles will be supplied by FMC.
Mr. McLaughlin says that the airport's current employees are considered a
valuable human resource and would be retained, and that architects,
engineers, construction workers and other specialists would be hired to work
on the facility's development beginning later this year.
The Solid Team report recommended that a jet engine testing facility formerly
in operation at the airfield not be revived, alleviating the community's noise
pollution concerns.
A prime location for regional commerce
Bila Tserkva was selected as the site for the air cargo hub because
considerable number of attributes. Firstand foremost, the airport's
proximity to Kyiv would allow easy access to the largest commercial centre
in the country.
This potential future cargo hub also lies close to the
Kyiv-Odesa highway, the country's major four-lane north-south artery,
providing quick connections to the Black Sea coast in the south, and
connecting with other major highways leading to Belarus and Russia.
Also, there is existing rail access to the cargo hub property. The Solid
Team credited the area's universities, skilled workforce and the experienced
staff that had worked with the former air force base as added incentives for
creation of the new hub.
Strong local, national and international support
E. Morgan Williams, president of the US-Ukraine Business Council, views
the forward movement on the Bila Tserkva cargo hub project as an immense
opportunity to improve logistics in Ukraine, both for importers and
exporters.
"From my observation of similar cargo hub facilities in Texas and
California, I have seen how a cargo hub can totally revitalise unused or
underused airport facilities. For those who are in the business of high
tech, high value manufacturing, everything from electronic parts and systems
to pharmaceuticals need the ability to move product to market by air in
order to make their marketing more efficient.
"Also, this cargo hub would allow the importation of specialised raw
materials from almost any point on the globe. As a result finished products
could have easy, direct connections to economic hotspots in China, India,
Europe, Africa and the United States. When the cargo hub is complete, I look
for it to develop into a major attraction for foreign investment," Mr.
Williams concluded.
Bila Tserkva Mayor Vasyl Savtchuk, who has been a very strong supporter of
the project, said that in addition to jobs created by the cargo hub,
hundreds more will be employed by area hotels, restaurants and related
industries that will serve the airport. Mr. Savtchuk has indicated that the
city will be among the project's investors.
Mr. Lopata added most of the funding necessary to move ahead with the
project has already been secured, and that Magisters, a Kyiv law firm, has
been retained to create a legal structure. He said he hopes that Solid Team
will be given permission to move ahead with the next phase of the project
soon and that the project will result "in eastern Europe's finest air cargo
hub, marking the centre of a strong new industrial base for Bila Tserkva."
Academic sees great long-term hub potential
Dr. Emilio Riccio, a professor of logistics who chairs the Society of
International Logistics and Operations, has a somewhat different and more
expansive view of the cargo hub's long-term potential. "While the logistics
possibilities of the proposed air cargo hub are immense and self-evident, I
see a potential that no one else seems to have mentioned.
Kyiv's explosive growth will put great pressure on Boryspil [International
Airport] facilities, and eventually its potential for expansion may be
exhausted. I have not examined the Bila Tserkva project in great detail, but
I can envisage a time when the cargo hub airport could also turn into a
major passenger alternative. Passengers and cargo must be handled
separately, but looking at the Bila Tserkva facility, it seems almost
inevitable that there would be adequate capacity and demand for passenger as
well as cargo operations there.
"Airline passengers might welcome a Bila Tserkva alternative, avoiding Kyiv
and making connections at Bila Tserkva with either land transportation or
regional airlines. The same factors that make Bila Tserkva so attractive as
a cargo hub -- its proximity to Kyiv and to the Kyiv-Odesa highway, the rail
access the property enjoys - could also be very attractive to build new
passenger airline capacity. This would seem to fit perfectly with the
current Ukrainian government's push to attract low-cost carriers to the
market. The Bila Tserkva facility could become the Ukrainian equivalent of
what the Luton and Stansted airports are to London," Riccio concluded.
Cargo hub as another engine of growth
Solid Team leader Bill McLaughlin summed up the project by comparing it to
similar projects worldwide. "We believe that the Bila Tserkva hub will have
the same employment multiplier impact that we have seen in other such
facilities in the United States and around the world. We expect to have
2,200 full-time employees between the airpark and the industrial park.
However, we also expect that there will be the usual multiplier effect in
other employment in the community that flows from our operation of between
four and five times our employment number. In effect, we're saying that when
the project is fully operational, Bila Tserkva will probably have 10,000 or
more jobs added to its economy," McLaughlin concluded.
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LINK: http://www.businessukraine.com.ua/creating-a-hub
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NOTE: Solid Team is a member of the U.S.-Ukraine Business Council.
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
================================================
8. Pioneering programmers
Software firm expands thanks to US investment and
marketing expertise
By Jim Davis, BusinessUkraine weekly magazine
Kyiv, Ukraine, Monday, July 28, 2008
Much like Microsoft, the world's leading IT giant, SoftServe began with
dedicated young founders who had a vision to build a software development
company that could compete with any in the world. Founded in 1993 by two
recent Lviv State University graduates, SoftServe recently celebrated its
15th anniversary in July with many of its more than 1,000 employees.
The company continues to operate from its Lviv base but now boasts software
development centres in several other Ukrainian cities and strengthened
infrastructure in the United States, its principal target market.
SoftServe has been aided in its American expansion plans by US specialists
and investors who have supported the growth and development of the company and played a crucial role in its success. After coming to the realisation that further development into the highly competitive US market would require additional financial and human resources, SoftServe sought out additional investment and high level marketing expertise, both from US sources.
Today, SoftServe's expanded marketing operations operate from a new US
headquarters in Fort Myers, Florida that co-ordinates the work of sales
offices in Boston, Massachusetts, and Santa Ana, California.
"The opening of the new US headquarters is a crucial milestone in our
business development plans," explains Taras Vervega, SoftServe's Executive Vice President of Business Development.
"Our US business was very rapidly expanding, requiring much more intense
coordination by top management. This occurred at a time when escalating
energy prices were driving travel costs through the roof. Now, instead of
top personnel commuting frequently across the Atlantic, we have much greater marketing expertise on the ground in the United States, operating in a much more efficient manner.
"When we combined additional financial resources and marketing expertise,
both from US sources, our company made a quantum leap in our ability to
compete at the highest levels of the international software development
market."
Software booming in central and eastern Europe
In 2007, Ukraine outstripped other central and eastern European (CEE)
countries, posting what were the region's highest IT industry growth rates.
With almost 40% growth and over USD 3.4 billion in volume, the Ukrainian IT
market ranks fourth after Russia, Poland and the Czech Republic, reports
IDC, the leading IT industry intelligence watchdog.
"This rapid growth explains the interest in the Ukrainian market of such
global IT leaders as Microsoft, which ultimately enhances our integration
into the global IT community," noted Volodymyr Pozdnyakov, regional manager and head of IDC in Ukraine, Belarus and Moldova.
As a part of his first-ever extensive CEE tour in May 2008, Microsoft CEO
Steve Ballmer visited Ukraine to demonstrate Microsoft's commitment to what is one of the most dynamic regions in the world in terms of economic and IT growth.
"The CEE region is Microsoft's fastest-growing market, and the Ukrainian IT
sector in particular is seeing strong expansion. Microsoft is committed to
contributing to Ukraine's ongoing transition to a knowledge economy, and to
helping government, business, and society use the power of information
technologies to create sustainable economic progress," said Ballmer during
his visit.
A reliable partner for global leaders
At a signing ceremony opening a Microsoft Innovation Centre (MIC) at Kyiv
National Taras Shevchenko University, the Microsoft CEO named SoftServe
among the company's reliable partners in Ukraine, a welcome acknowledgement that illustrates the maturity and credibility of Ukraine's leading IT firms.
"Naturally, we are delighted to receive such recognition from the head of
Microsoft. We hope that our profound relationship with Microsoft will
continue to strengthen based of trust and mutual advantage," says Taras
Kytsmey, Chief Executive Officer of SoftServe.
On July 11, when SoftServe celebrated its 15th anniversary, it also
celebrated the latest in a long series of international honours heaped on
the company.
In July 9 ceremonies held at Houston, Texas, Microsoft recognised SoftServe
as Mobility Solutions Partner of the Year in Central and Eastern Europe for
innovative use of Microsoft technologies. A Microsoft Gold Certified Partner
since 2004, SoftServe received this prestigious award for development and
implementation of solutions based on Windows Mobile technologies.
In February this year, SoftServe also made it to the Global Services 100
rating for 2008, a list representing companies who have the maturity and
capability to lead the next wave of services globalisation.
The ranking of elite offshore outsourcing vendors, based on leadership,
innovation, and outstanding performance is prepared by neoIT and CMP
Technology. SoftServe was ranked fifth in the Top 10 to Watch in Emerging
European Markets category which focused on the company's role as a leader in the international software development outsourcing market.
Education and training intrinsic to IT success story
Recognising the importance of continuous training and retraining as a leader
in a field of technology in which changes and improvements come at almost
breakneck speed, SoftServe has from its inception pioneered in-house
education and training as an integral part of its business. Mr. Vervega
explains how the company constantly invests in human capital as part of
their growth plans.
"Rapid expansion requires great human resources; that is why SoftServe
intensively invests in the education of its personnel. To increase the
professional level of prospective co-workers, we launched SoftServe
University, a full-scale educational institution giving students the
opportunity to receive the latest practical and theoretical education."
One of the greatest hurdles for software development companies in the region has been differences in language proficiency. This has been extremely important since most of the major software projects require English language proficiency of a very high level for developers, who must not only develop the software using English but also must be able to interact with clients in English.
"About seven years ago, we realized that staff proficiency in English was
essential for our business growth," Mr. Vervega says. "We solved this
problem by bringing highly qualified English teachers into permanent
full-time staff positions and making English-language training universal in
the company. Today, our English-language programme has expanded to include 15 full-time English teachers on staff."
Recognising that a strong grounding in business principles would be
important to its software developers, in order to give them a better
understanding of the business world in which their clients must survive,
SoftServe recently became a co-founder of the new Lviv Business School
(LBS).
The school, launched at the Ukrainian Catholic University in Lviv on
February 8, 2008, will combine the best world-class management curricula,
unique business development products, common human values and cultural
and spiritual components. In addition to SoftServe, other founders of LBS
include the Ukrainian Catholic University, Galnaftogaz and Trottola, a
Lviv-based clothing manufacturer.
From local success story to world-beater
As its 1,000 plus team gathered for the anniversary celebration on July 11
at the Viking Bay resort outside Lviv, top corporate leaders pointed with
well-deserved pride to 15 years of accomplishments that have brought the
company from its two founders to its current high level of worldwide
acclaim.
"The key drivers for the company's success seen over the last ten years have
been the commitment and dedication of SoftServe employees, consistent
investment in its services, as well as the partner relationships and support
we received from clients", says Taras Kytsmey, SoftServe's President and
co-founder.
Another founding member, Taras Vervega, EVP, Business Development, says, "I credit this milestone to our unique ability to create innovative solutions that enable our clients to maximise their efficiency, increase revenue and shorten the time-to-market."
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LINK: http://www.businessukraine.com.ua/pioneering-programmers
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
===============================================
9. BUYING BOEING
Ukrainian carrier AeroSvit invests in U.S. plane fleet but faces
U.S. government regulatory restrictions on expansion & Ukraine
government's endless political battles and incompetency.
By Jim Davis, BusinessUkraine magazine
Kyiv, Ukraine, Monday, July 28, 2008
Ukraine-based airline AeroSvit, has in 14 years gone from a bare bones
start-up to a dynamically growing international carrier with a large number
of international destinations as far east as Beijing and Shanghai, China and
as far west as Toronto, Canada and New York City.
However, as with most 14 year olds, the airline is anxious to keep growing,
but finds that it is blocked from expansion in the markets it wants most to
add service by regulations that penalise the airline because of failures of
the Ukrainian government and what airline officials claims is the abysmal
lack of operational safety among its competitors.
THE COUNTRY'S LARGEST CARRIER
AeroSvit Airlines is owned by State Property Fund of Ukraine (22%),
Genaviainvest (25%), Ukrinfoconsult (10%), Bureu (5%) and Gilward
Investments (Netherlands) (38%). The airline now has over 2,400 employees
in Ukraine and around the world.
Operating mainly from Kyiv's Boryspil International Airport, AeroSvit has
grown to become Ukraine's largest carrier, with scheduled domestic services
to 11 cities and international services directly or by codeshare to over 33
destinations worldwide.
AeroSvit was established March 25, 1994 and started operations in April that
same year with flights from Kyiv to Tel Aviv, Odesa, Thessaloniki, Athens
and Larnaca in co-operation with Air Ukraine.
AeroSvit first operated Boeing 737-200 aircraft and later added Boeing 767s
which allowed the commencement of its longest hauls to China, India, and
Thailand in the east and the United States and Canada in the West.
Last year was a landmark year for the airline, in which it carried over two
million passengers for the first time, an increase of 31.5% over 2006. The
total number of flights the airline performed increased by 17.2% compared to
2006, reaching 24,800. After first breaking into the list of the world's top
200 airlines more than three years ago, AeroSvit has continued to move
upward on the list.
BUILDING UP A FLEET OF US-MADE
BOEING AIRCRAFT
Since its founding, AeroSvit has been an almost totally Boeing-equipped
carrier and expects to it stay that way for the near-term future. In August
2007 Boeing announced that AeroSvit was ordering up to 14 Boeing 737-800
airplanes. The carrier signed an order for seven 737s valued at USD 523
million according to list prices, and secured purchase rights for another
seven.
This order marks AeroSvit's first direct purchase from Boeing since its 1994
founding. AeroSvit will gradually replace its fleet of 14 737 Classic
airplanes with the Next-Generation 737s which Boeing claims is today's most
technologically advanced single-aisle commercial jetliner. In addition to
other innovations, AeroSvit will equip the airplanes with fuel-saving
Blended Winglets.
"This order is significant for Ukrainian aviation. It demonstrates dedicated
execution of our replacement strategy and is an indicator of Ukraine's
current economic development and progress as an important player in
international business and tourism," says Aron Mayberg, director-general of
AeroSvit.
"Boeing demonstrated in-depth knowledge of our business and, with the
Next-Generation 737, presented a compelling solution to our future needs.
We look forward to continuing our excellent cooperation."
The order for Boeing 737s places AeroSvit in the long queue for delivery of
what has been the most successful commercial aircraft in history, with more
than 7,000 orders. Boeing has 1,500 unfilled orders for the Next Generation
737 worth more than USD 100 billion.
OUTSTANDING SAFETY RECORD,
DISAPPOINTINGLY LOW RATING FROM
U.S. GOVERNMENT
By any measure, AeroSvit has enjoyed great success in the last 14 years,
becoming an internationally known airline with great growth potential and
the largest air carrier in one of the region's economic hotspots. However,
AeroSvit Deputy General Director Yevhen Treskunov argues that operating
from Ukraine also carries with it immense frustrations.
"Since the very beginning we have made immense contributions to the United
States' economy, with large monthly payments in the past for the lease of
Boeing aircraft and large payments ahead as we expand our fleet of Boeing
737s and 767s.
"We also pay something in excess of USD 3 million per year in commissions
to travel agents in the United States. Of course, let me make it clear that we
are not complaining about these payments since they represent value for
money in our business.
"However, the rules of the US Federal Aviation Administration (FAA), place
Ukraine in Category 2, the same category to which it assigns countries in
Africa where there are armed conflicts and real dangers.
"In practical terms, this designation means that no matter how good our
safety record is at AeroSvit, Ukraine's overall low rating for air safety
means that we are totally blocked from expanding our services into the
United States," he explains.
"AeroSvit's overall record for air safety is outstanding and the FAA admits
that we are not the problem. However, because some other Ukrainian airlines
do not have good safety records, we are suffering for the misdeeds of
others.
"We must add to that this is also a result of the weakness of Ukraine's
Civil Aviation Agency (CAA) which has a lack of professionals and is not
sufficiently independent to do its job properly," Mr. Treskunov says.
THE SORRY STATE OF UKRAINE'S AIR
SAFETY REGULATIONS
Mr. Treskunov is in a good position to assess the state of Ukraine's
aviation agency as he was previously a leading light at the CAA. He
personally led a team in 2000 that put together a ten-year programme that,
if adopted, would have solved many of the problems that beset the CAA and
Ukrainian aviation as a whole.
However, Mr. Treskunov says that as so often happens, changes of governments
and changes of air safety personnel have crippled the agency's
effectiveness. The FAA reclassified Ukraine into Category 2 in 2005 and
there now appears no possibility that this classification could be changed
any time soon.
A number of local industry insiders point to incidents with some Ukrainian
carriers over the last year that seemed to have sealed Ukraine's aviation
fate for the near future and perhaps for many years to come.
During 2007, the CAA tried without success to close down one Ukrainian
airline that had what is generally regarded as a terrible air safety record.
After the CAA issued the order that would have closed it down, the order
was overturned by Kyiv's Higher Economic Court.
Since then the CAA's hands have been tied. Only firm action by the current
government to appeal the court's order to a higher court and get a
favourable ruling would allow the CAA to carry out its mandate for air
safety regulation.
AIR TRAFFIC AGENCY: VICTIM OF
UKRAINE'S ENDLESS POLITICAL BATTLES
Every airline and air safety official contacted was unanimous in their
condemnation of the CAA and cast doubt on the agency's ability to carry
out its functions in a satisfactory manner.
One source, speaking on condition of anonymity, told Business Ukraine:
"There is a complete lack of regulatory professionals in Ukraine's CAA.
Virtually every really competent staff person eventually gets frustrated
with the endless changes in leadership and the ability of some of the
Ukraine's oligarchs to bend air safety rules to their liking," the source
claimed.
Mr. Treskunov admitted that he was one of those who came to the CAA,
worked very hard with the intention of making real progress in Ukrainian
aviation, but finally got fed up and left for the airline industry. As one source
pointed out, each new government appoints their own people with their own
political agenda, far-removed from the interests of the agency.
Professor Galyna Suslova of the National Aviation University (NAU), one of
the world's most respected air safety professionals, confirms the situation
with Ukraine's CAA. In addition to teaching duties, Ms. Suslova is acting
director of the International Civil Aviation Organisation (ICAO) programme
in Ukraine. The professor points out that in Soviet times Ukraine was the
centre of aviation education, a fact reflected in the current student
population at the university of over 50,000.
Ukraine still has a good reputation as an aviation education centre and
draws students from all over the world. However, Prof. Suslova agrees that
very few of the top NAU graduates seek employment at Ukraine's CAA because
they recognise it is a dead end. Those who do go into the CAA soon tire of
their inability to do their job and leave for commercial airlines.
She stresses that the weakness of the CAA is not the fault of its personnel
themselves. "The CAA is now undergoing its 17th reorganisation since
Ukrainian independence. There is no air safety organisation in the world
that could do its job adequately under such circumstances," Prof. Suslova
says.
"Not only are there management problems, but Ukraine's main air code has not
really been updated since 1992. A revised air code that would comply with
ICAO standards has been presented to the parliament. It is not perfect, but
it would greatly improve the situation, if we could ever get it passed," she
opines.
OVERCOMING OBSTACLES & EXPANDING
SCHEDULE IN THE UNITED STATES
"We would like to expand our schedule in the United States," confirms Mr.
Treskunov at AeroSvit. "We want to provide an upgraded service to New York
and to begin a five times per week service to Chicago. We are convinced that
this would allow us to increase our purchases of US-built aircraft, and
would make it easier for business travelers to Ukraine to pursue their
interest in investing here. It is very much a win-win situation for both
countries.
"However, until such time as Ukraine improves its air safety regulation, we
are blocked from any further expansion in the US. We hope for a change as
soon as possible, but in reality we fear the changes may be years away.
Incidentally, it is not only AeroSvit but also other carriers who bear the
burden of this situation. Changes would be good for us all," Mr. Treskunov
concludes.
Dan Fenech, General Representative in Ukraine of Delta Air Lines, the only
United States carrier serving Ukraine directly, comments on the current
situation: "Delta Air Lines' operations into Ukraine at present are governed
by the US-Ukraine bilateral treaty and are not impacted by Ukraine's
Category 2 status.
"However, like all major carriers in the market we strongly prefer that the
Ukrainian government achieve all the necessary legislative and procedural
changes required to bring Ukraine back to ICAO compliance and Category 1
status. We believe this would be the best outcome for the people of Ukraine
and the airline industry as a whole."
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LINK: http://www.businessukraine.com.ua/buying-boeing
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NOTE: Boeing is a member of the U.S.-Ukraine Business Council (USUBC).
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[return to index] [U.S.-Ukraine Business Council Monitoring Service]
================================================
10. WINNER IMPORTS UKRAINE, LTD, JOINS U.S.-UKRAINE
BUSINESS COUNCIL (USUBC), OFFICIAL IMPORTER
FOR FORD, JAGUAR, LAND ROVER, VOLVO & PORSCHE
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, July 28, 2008
WASHINGTON, D.C. - The executive committee of the U.S.-Ukraine
Business Council (USUBC), on behalf of the entire membership, is most
pleased to announce that Winner Imports Ukraine, Ltd., has been approved for
USUBC membership. Winner Imports Ukraine, Ltd, is the official importer for
Ford, Jaguar, Land Rover, Volvo and Porsche.
During a Wimbledon championship in 1991 one of Ford's top managers in the
United States suggested to John Hynansky, the owner of Ford dealerships in
Delaware and Pennsylvania, known under the name of Winner, that he go into
a new business in Ukraine.
Mr. Hynansky had worked in the automobile industry for over 25 year at that
time. He had built a vast network of automobile dealerships on the East Coast
of the United States and won several awards which highlighted his commitment
both to business and to the customer.
John Hynansky, an American with Ukrainian heritage, said he was not quite
interested in buying another firm but liked the idea of helping Ford start a
network of dealerships in Ukraine.
Encouraged by this idea, John Hynansky first traveled to Ukraine in 1992,
shortly after the republic declared its independence. It was not long until he
came to love the country of his origin. His parents were born in Ukraine but
left the country in the late 1930's and came to the United States.
At the end of 1992, the first Winner Ford dealership was launched in Kyiv.
This flagship facility was deemed as the largest facility in Ukraine and set
the benchmark for an automobile industry that was still in its infancy.
VOLVO, JAGUAR, LAND ROVER & PORSCHE
Due to it's commitment to customer service and high level of professionalism,
Winner Imports Ukraine was awarded as the official importer of Volvo cars
to Ukraine in 1999. This was a monumental step as it was a commitment from
another major manufacturer to Winner Imports Ukraine.
In 2004, Winner Imports Ukraine was awarded the Jaguar, Land Rover, and
Porsche franchises for Ukraine. This again, was another prize for Winner as
it showed the high level of commitment and trust from the manufacturer to
the importer, as these marquee brands believed in Winner's commitment to
provide the best automotive experience to the consumer.
In 2006, Winner Automotive, a sister company of Winner Imports Ukraine
opened the largest multi-brand concept dealership in Eastern Europe. This
dealership, located in Kyiv, houses the Ford, Volvo, Jaguar, and Land Rover
brands. This $10,000,000 project reconfirmed Winner's position as the clear
leader in the Ukrainian automobile business.
35,000 VEHICLES SOLD, 50 SALES &
SERVICE POINTS
Winner Imports Ukraine, during the past 16 years has sold more than 35,000
vehicles and has developed a network of more than 50 sales and service points
throughout Ukraine. Winner Imports Ukraine constantly strives to optimize its
processes and personnel in order for the consumer to have the best automobile
purchase and service experience possible.
Mr. Bohdan Kulchyckyj is General Director of Winner Imports Ukraine. An
American with Ukrainian heritage, he has lived and worked in Ukraine for the
last 16 years.
Additional information about Winner Imports Ukraine, Ltd and Winner Automotive
can be found on their website at: http://www.winner.ua/en.
"The U.S.-Ukraine Business Council (USUBC) is most pleased to have Winner
Imports Ukraine, Ltd. join the rapidly expanding USUBC membership." said
Morgan Williams, SigmaBleyzer, who serves as President of USUBC. "Winner
has certainly earned its place among the leading automotive companies in Ukraine."
MEMBERSHIP IN USUBC KEEPS GROWING
Winner Imports Ukraine is the 36th new member for 2008, and the 66th new
member since January of 2007. USUBC membership has quadrupled in the
past 19 months, going from 22 members in January of 2007 to 87 members in July of 2008. Membership is expected to top 100 very soon.
The other new members in 2008 are MaxWell USA, Baker and McKenzie
law firm, Och-Ziff Capital Management Group, Dipol Chemical International,
MJA Asset Management, General Dynamics, Lockheed Martin, Halliburton,
DLA Piper law firm, EPAM Systems, DHL International Ukraine, Air Tractor,
Inc., Magisters law firm, Ernst & Young, Umbra LLC., US PolyTech LLC,
Vision TV LLC, Crumpton Group, American Express Bank, a Standard
Chartered group company, TNK-BP Commerce LLC, Rakotis, American
Councils for International Education, Squire, Sanders & Dempsey LLP,
International Commerce Corporation, IMTC-MEI, Nationwide Equipment
Company, First International Resources, the Doheny Global Group, Foyil
Securities, KPMG, Asters law firm, Solid Team LLC, R & J Trading
International, Vasil Kisil & Partners law firm, AeroSvit Ukrainian Airlines
and ContourGlobal.
The complete USUBC membership list and other information about USUBC
can be found at: http://www.usubc.org.
BUSINESS INVESTMENT DRIVES UKRAINE'S
INTEGRATION
Ukraine's Euro-Atlantic integration is first and foremost today being driven
by the private business community in Ukraine, Europe, and the United States.
"Ukraine's aspirations for Euro-Atlantic integration, to be a major member
of the world's community of strong, democratic, independent, prosperous,
private business sector driven nations, will be realized largely through the
present leadership and investments from the business community and then
hopefully with some real support later from the politicians and government
leaders," wrote Morgan Williams, SigmaBleyzer, who serves as President
of USUBC, in a recent article published by the "Welcome to Ukraine"
magazine.
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Mr. E. Morgan Williams, Director
Government Affairs, Washington Office
SigmaBleyzer Private Equity Investment Group;
President, U.S.-Ukraine Business Council (USUBC);
Trustee: "Holodomor: Through The Eyes of Ukrainian Artists"
1701 K Street, NW, Suite 903, Washington, D.C. 20006
Telephone: 202 437 4707
mwilliams@sigmableyzer.com; mwilliams@usubc.org
www.sigmableyzer.com; www.usubc.org