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Monday, September 7

Ukraine Beckons Belarus IT...China’s Skyrizon Moves to Arbitration with Ukraine over Motor Sich...Middle East Becomes Ukraine’s Top Poultry Export Market...Real Wages up 5%...Corona Spreads: Ukraine Now Has Europe’s Third Fastest Rate of New Infections...
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Recruiting Belarus IT workers – Ukraine’s Digital Transformation Ministry has opened a special web portal for Belarusian IT specialists who want to move to Ukraine and has hired Denis Aleinikov, a Belarusian lawyer who developed a special, low tax IT zone in Minsk. “About our initiative to support IT professionals living in Belarus…there is technical support, which works 24 hours a day and already helps specialists from Belarus,” Mykhailo Fedorov, Ukraine’s digital minister, said Friday while introducing Aleinikov to reporters. Of the 4,500 Belarusians who have fled to Ukraine to escape the police violence in Belarus, more than 300 are IT workers, Fedorov said.

Aleinikov is to help the Rada draw up a low tax, liberal labor law IT park similar to the Hi-Tech Park he helped build near Minsk. The park now has 880 registered companies. Last week, President Zelenskiy signed a decree giving the Rada 90 days to draw up legislation. “The Presidential Decree is public support, the political will for this project to move forward faster,” Fedorov said Friday. “We will create the world’s most comfortable economic zone with low taxes, legal employment, high wages. Favorable conditions for startups and entrepreneurs.”

With this investment regime, Fedorov aims to create an additional 450,000 IT jobs in Ukraine by 2025, generating $12 billion in economic activity. Last year, Ukraine’s IT exports grew 30% yoy, to $4.2 billion. Currently, Ukraine’s 4,000 IT companies employ 200,000 specialists. Short of staff, Ukrainian companies look north to Belarus where 60,000 IT specialists work in Minsk alone.

“Belarusian tech companies leave their country amid protests, move to Ukraine” headlines a Kyiv Post article featuring interviews with Belarusian IT workers who are moving or considering moving south. After the largely discredited Presidential vote of August 9, 168 IT workers were arrested in protests. Since then, the internet has been repeatedly turned on and off. Over 2,500 IT executives and workers signed an open protest letter to President Lukashenko. “People can’t focus on work because of the constant stress,” George Kachanouski, founder of Scootapi, says from Minsk. “Many companies plan to relocate temporarily now, but if the dictatorship wins, then for good.”

German Chancellor Angela Merkel’s government is signaling that the poisoning of Russian Opposition leader Alexei Navalny, could imperil the Nord Stream 2, the Russia-Germany Baltic pipeline. German Foreign Minister Heiko Maas, told Bild am Sonntag newspaper said he hopes that Russian non-cooperation in the investigation would not force Berlin to “change our stance” on the pipeline. With the exception of the far right, political parties across the spectrum have called on Merkel to freeze Germany’s participation. The Financial Times reports from Berlin that the 1,230 km pipeline is 88% complete. Former German chancellor Gerhard Schröder, chairman of the Nord Stream shareholders’ committee, told a Bundestag committee in June that the pipeline total cost will be €12 billion.

China’s Skyrizon company has notified Ukraine’s Justice Ministry that it intends to start international arbitration against Ukraine over access to the Motor Sich aircraft engine factory, reports UNIAN. Noting that it bought 56% of Motor Sich shares in 2016, Skyrizon is demanding $3.5 billion in damages for being unable to enter the factory complex for the last four years. Skyrizon argues that moves by Ukraine’s State Security office and Anti-Monopoly Committee violate the China-Ukraine investment protection treaty adopted by both countries in 1992.

During the first half of this year, Ukraine’s poultry exports were virtually constant in volume – 212,300 tons – but down 12% in monetary terms, to $271 million, reports Poultry World. At a press conference in Kyiv, Sergey Karpenko, executive director of the Union of Poultry Breeders, warns  that a government plan to create a new agency to replace Gosprodpotrebzlyuzba, the state food safety regulator, could disrupt exports as new certificates will have to be negotiated with the veterinary agencies of importing countries.

The Middle East has displaced the EU as the top destination for Ukrainian chicken meat, reports The Poultry Site. The change is due partly because of new EU quotas and an avian flu outbreak in Vinnytia in January. In the first half of this year, the biggest markets were Saudi Arabia – 18%; the Netherlands – 17%; and UAE – 12%. For MHP, Ukraine’s largest producer, poultry exports were down by 10% during the first half, to 170,553 tons. Last year, MHP’s exports were up 25% yoy, to 357,400 tons. 

The number of new filings for unemployment aid have dropped steadily: from 149,000 in April to 68,000 in July, reports the Ministry of Economic Development, Trade and Agriculture. Since the government adopted corona quarantine measures in mid-March, the government has paid $272 million in benefits to 432,000 people, about $630 per person.

Real wages were up 5% in July yoy, reports the State Statistics Service. The biggest growth sectors, in nominal terms, were: medicine and social services – +18% yoy; and IT and telecom – +14.4% yoy.

ICU writes: “The recovery of wages confirms a quite rapid exit of the labor market from the coronavirus-induced recession. The rebound of workers’ income is also evidenced by the high growth rates of retail trade and production of consumer goods.”

After a record week of coronavirus infections, Prime Minister Shmygal vowed that there will be no repeat of last spring’s lockdown. “We understand, both the government and the state leadership, there can be no second lockdown in Ukraine — most countries realize this,” he told a business forum Friday evening at Kyiv’s UNIT.City. “Closing down the country over the quarantine as it was in the spring, is impossible.”

Even with Sunday’s dip to 2,107 new cases, Ukraine’s ranks third in Europe for new cases, behind only France at 7,071, and UK at 2,988, according to Worldometer’s Coronavirus tracker. Worldwide, Ukraine ranks in 9th place for new infections. Despite this surge, schools last week opened across Ukraine, with the exceptions of 5% of the nation, which is classified ‘red.’

Starting today, two regional capitals, Ivano Frankivsk and Ternopil, are classified red. In advance, the mayors of both cities sued the Cabinet of Ministers in Kyiv District Administrative Court. The list published by the Cabinet of Ministers shows that most orange and red areas are in Western Ukraine. Although Kyiv city registers about 300 new cases a day, it is classified yellow, largely due to the large population.

One upside of Ukraine’s increasing infection rate: the Health Ministry has reduced its list of ‘red’ zone countries to 35. Red zone countries – those with recent infection rates above Ukraine’s 80/100,000 – include the US, Israel, France, Spain, Croatia, Moldova, and Romania. Travelers from these countries have to self-isolate until they test negative for Covid-19. Ukraine’s borders are largely closed to foreign travelers until the end of the month. Due to Ukraine’s high infection rate, foreign travel and foreign flights from Ukraine are restricted.

The new spread of the virus has hit home for many Ukrainians with the news of the hospitalizations in Kyiv of two well-known figures. Filaret, the 91-year-old Patriarch of the Ukrainian Orthodox Church of Kyiv Patriarchate was in stable condition Friday at a Kyiv hospital. Yulia Tymoshenko, the 59-year-old leader of the Fatherland political party, emerged last week from intensive care. “Fighting off a serious disease for almost two weeks alters the perception of reality,” she wrote on Facebook from a Kyiv hospital. “Although recovery is still a distant prospect, now there is an opportunity to return to normal life, step by step.” She signs off: “Thank you and hug you tight. Everything will be fine!”

From the Editor: Belarus’ strongman Lukashenko may have soured on the IT industry after they became a pillar in the national awakening against his 24-year rule. Now, he may provide the world a reminder of how mobile IT can be. A few years ago, when I was getting consular work done at Ukraine’s Embassy in Bangkok, I chatted with a Kyiv programmer who was happily working for a Kyiv company – and living on an island in the Gulf of Thailand. One of my sons, William, has an IT startup in Brooklyn, NY. He employs two programmers in Ukraine, one in Lviv and one in Dnipro. His business partner is a Belarusian living in Sofia, Bulgaria. Many IT workers live by the motto: have modem, will travel. With Best Regards Jim Brooke

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Monday, August 25 – IMF Review Date Is Not Set

IMF Review Date Is Not Set…Reserves Hit New High.Miracle for Mykolaiv?....Ukraine’s G.I. Business Program…IKEA Boosts Goods…New Car Imports Down….No Combat Losses for 29 Days...
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

The IMF has yet to set a date for the review of the Standby Agreement, a review that was to be in September. IMF Ukraine representative Goesta Ljungman tells Hromadske that while “discussions on the implementation of the parameters and indicators of the liquidity program are ongoing, the The IMF has yet to set a date for the review of the Standby Agreement, a review that was to be in September. IMF Ukraine representative Goesta Ljungman tells Hromadske that while “discussions on the implementation of the parameters and indicators of the liquidity program are ongoing, the date of the IMF mission on the first revision of the program has not yet been determined.”

Ukraine received in June a first $2.1 billion tranche of what is to be a $5 billion loan program.

Prime Minister Shmygal says he expects Ukraine will receive the second tranche by the end of this year. Some economic analysts say the IMF switched to observation mode after President Zelenskiy unexpectedly switched the central bank leadership within a month of getting the first IMF tranche.

International reserves reached a new high this month at $28.8 billion, according to the National Bank of Ukraine. Boosted by the IMF tranche, this is the highest level in eight years.

Mykolaiv’s shipbuilding industry is to be revived with a government program designed to create 25,000 new jobs, President Zelenskiy and David Arakhamia, leader of the Servant of the People Rada, promised on a visit Friday to a city that was the Soviet center for shipbuilding in the Black Sea. “We want to restore the former glory of the city of shipbuilders,” Arakhamia said, referring to Mykolaiv whose modern history dates back to the creation of a Russian Navy shipyard in 1789.

The government promises “a national program to support shipbuilding, cheaper credit resources,” Arakhamia said. Later on Friday, Oleh Uruskyi, Minister for Strategic Industries visited the Okean shipyard in Mykolaiv, reported the company website.

Business education for combat veterans and soft loans for veteran-owned startups are government priorities, President Zelenskiy said during an International Volunteer and Veterans Forum in Kyiv. “It’s both military skills and the rules by which all successful companies exist,” he said. “One cannot ignore the experience of other countries, where many veterans are the founders of large, serious, powerful, well-known companies.”

With the minimum monthly wage set to rise to $182 (UAH 5,000) next Tuesday, Zelenskiy says the budget can “definitely support” the hike. On July 1, the minimum wage is to increase by 30%, to UAH 6,500, currently $237. Ukraine’s median monthly wage is $768.

Grain sales were down 18% yoy in July, reports UNIAN citing the Ministry of Economic Development, Trade and Agriculture. Due to bad weather, much of the harvest is late.

Steelmaker ArcelorMittal has transferred 50 million tons of slag to the government for the national road construction program, reports Interfax-Ukraine, citing the company. Earlier this year, Arcelor pushed the government to change regulations to allow construction of concrete roads with slag. Increasingly common across Europe, the use of crushed slag for road construction helps companies cut disposal costs. In turn it cuts costs for building concrete roads. So far this year, 100,000 cubic meters have been used to build roads in Donetsk, Dnipropetrovsk, Kharkiv and Zaporizhia regions. The goal is to use almost 500,000 tons this year for roadbuilding.

Interpipe, Ukraine’s largest pipe and wheel producer, will redeem at par 97 million of its 2024 notes this week, according to the company.

IKEA Ukraine plans to offer 5,000 items in its first physical store in Kyiv, says Florian Melle, Ukraine director of Ikea. He said: “A city-format store will open in Kyiv without a food department and restaurant, but we strive to launch them as soon as possible.” Earlier this year, IKEA started operating an online store that proved so successful that the company struggled to keep up with orders. Ikea’s first physical store in Ukraine is to open in Kyiv’s Blockbuster Mall by the end of this year.

Energy traders imported 345,000 megawatts of electricity in the first quarter of 2020, reports NERC. The imported electricity was from Slovakia, Hungary, Romania and Belarus.

New car imports are down 36% y-o-y, reports Ukrinform citing Ukravtoprom. The average value of an imported new car is $19,300. Japanese vehicles are the most popular.

Passenger transport is down 56.2% y-o-y, reports the State Statistics Service. Rail was down 58.2%. Motor transport was down by 44.3%.

There have been no combat losses in the eastern regions for the past 29 days,  Zelenskiy said  during his Independence Day speech. “A year ago, I talked about how every morning starts with an SMS message from the General Staff of Ukraine. SMS about the number of wounded and dead for the past day on the front line. The numbers are different, but only one message makes the morning good: wounded – zero, dead – zero. Today, for the 29th day in a row, is a really good morning for me and our whole Ukraine. Yes, we face many new challenges. But today is 29 days since we have no combat losses in the east of Ukraine.”

From the Editor – After Monday’s Independence Day holiday, the Rada – and the Ukraine Business News — are back today. One example of constructive work the Rada can do is the simple legislation passed earlier this year authorizing the use of metallurgical slag for road building. An increasingly common practice in countries with steel industries, this recycling will cut into Ukraine’s slag mountains and help provide the nation with decent roads. Writing tonight from western Turkey, I see clearly how Turkey’s good roads generate economic development. With Best Regards, Jim Brooke

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Monday, February 24

Global Warming Lengthens Road Construction Season...Turks Win Tender to Finish Zaporizhia Bridge...Russia’s ‘Inspections’ On Azov Cost Shippers $45 million...Kyiv Outshops Moscow...Price of Gas Imports to Drop in Half by Summer...Coal Mines to Close in 2020s
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Thanks to Ukraine’s mild winter, highway workers fired up their bulldozers last week and started work on 34 projects in 14 regions, reports the press service of Ukravtodor. “A record early start was caused by favorable weather conditions,” reports the national highways agency. Working through November, Ukravtodor plans to spend a record $3.5 billion this year to upgrade 4,000 km of national roads and 2,500 km of local roads.

Turkish construction company Onur submitted a winning $488 million bid to complete the long unfinished bridge across the Dnipro at Zaporizhia, Ukravtodor reports on Facebook. The ProZorro tender called for building a 9 km highway with six interchanges and two major bridges — the highway connects Khortytsia island with the right and left banks of the river. The unfinished bridge has been a city landmark since construction first started 16 years ago. The Zelenskiy Administration wants the project completed by the end of 2022.

Turkish construction company Cengiz has signed a memorandum of cooperation to upgrade the M14 road between Mariupol and Nova Kakhkova to the level of an international highway. Planner see upgrading this 350 km east-west route as key to easing the isolation of Berdyansk and Mariupol, Ukraine’s main ports on the Azov.

Russia has detained 2,249 ships since Kerch Strait naval clash of November 2018, Andriy Klimenko, editor in chief of the BlackSeaNews portal. With each detention for ‘inspections’ lasting an average of four days, shippers have lost $45 million, Klymenko told a European Parliamentary delegation last week in Brussels. He said: “More than half of the ships subjected to unreasonable detentions in the Kerch Strait are related to the EU — having a European flag, shipowner, or port of destination.”

Confounding stereotypes, the Kyiv metro area has 50% more ‘high quality retail space’ per capita than the Moscow metro area, according to new statistics by UTG, the Ukraine real estate consultancy. Kyiv’s metro population of 3.7 million people has 1.8 million square meters of shopping space, or two people per square meter. Moscow’s metro population of 12.5 million people has 4 million square meters of shopping space, or three people per square meter.

With Russia’s economy stagnant, the gap may grow.  Without counting 21 Kyiv region malls in ‘concept’ stage, Kyiv is to add 550,000 new square meters – a 30% increase from today’s levels — by the end of next year. This would raise Kyiv’s retail saturation to 1.6 people per square meter, about double Moscow’s.

In Kyiv, 241,000 square meters of new retail space went on the market last year. This is 50% more than the 159,000 square meters of gross leasable area that went on the market in 2018. With the new supply, Kyiv’s overall retail vacancy rate is creeping up, hitting 7.8% in December. For regional malls, the vacancy rate is twice as high – 15.4%, reports UTG.

Ukraine’s retail sales are expected to grow by 10% this year, matching last’s growth. Growing three times as fast as GDP growth, retail is fueled by $1 billion a month in remittances from workers outside the country and the large portion of Ukraine’s economy – as much as 50% — that is off the books.

Supermarket chain Novus plans to open 10 new stores in Kyiv by the end of 2021, Ihor Landa, CEO of BT Invest Ukraine, the company that runs Novus, tells Interfax-Ukraine. He says the chain plans to expand because purchasing power is growing in greater Kyiv, now home to 10% of Ukraine’s population. Novus has 750 unfilled job vacancies.

For the first time, Ukrainian regional real estate projects will have their own stand at MIPIM, the leading European investment exhibition for the international real estate market. On show will be Ivano-Frankivsk’s Promrylad, a $25 million project to convert a Soviet era factory into modern multiuse space, says Anna Nestuly, Ukraine organizer of Ukraine’s delegation to the March 10-13 fair in Cannes. Counting the Kyiv city stand and the Ukraine regions stand, Ukraine’s delegation is to number 100, double the size of 2018. Participants include: Altis Holding, City One Development, DELTA Ukraine, Dragon Capital, Intergal Bud, Invest in Projects, Mandarin Plaza Group, Midland Development, Toronto-Kyiv, TK Property Management and UDP.

Ukraine should aim to triple IT workers, to 650,000, and nearly triple IT export revenue, to $13 billion a year, Kira Rudik, a leader of the Rada’s Digital Transformation Committee, said in Zaporizhia. “The IT industry is growing fast,” said Rudik, former CEO of Ring Ukraine, now owned by Amazon.  “We are an agrarian country. We have every chance to become a technological country. What we need to do to achieve this is increase export revenue to $13 billion a year.”

With talks over the green tariffs adrift for the last six months, Prime Minister Alexei Goncharuk said Friday: “We anticipate serious problems for our energy sector to serve such high obligations…We also do not stand and do not support a retrospective change in the rules.” With investments frozen for many new projects, investors say the government is not showing adequate political will to forge a consensus with industry on tariffs.

Ukraine’s import price of gas may drop in half this summer – to $80 per 1,000 cubic meters – predicts Oleksiy Orzhel, Energy and Environmental Protection Minister. In January, Ukraine’s average price of imported natural gas was $175.26, already a 10-year low. With production sharing agreements coming up for auction in coming months, Orzhel warns ultra-low prices will turn off investment. He said Friday: “It will be very difficult to make decisions to invest in production…many companies have frozen their further extraction investment projects.”

The government plans to close most of Ukraine’s coal mines during this decade, Minister Orzhel said Friday at a presentation of a revised draft Concept for a Green Energy Transition To 2050. The cutoff level for production will be $40 a ton. “Very few facilities will be competitive,” Orzhel said, outlining a policy that he predicts will outlast the five-year Zelenskiy Administration. Referring to the social impact, he said: “It will not be shock therapy, but gradual closures.”

Russian health officials took a Chinese woman with symptoms of a respiratory illness off a Kyiv-Moscow train in Bryansk, Russia. The woman was hospitalized in quarantine. She and five Ukrainian passengers in the rail car later tested negative for coronavirus. The rail car was decoupled from the Ukrzaliznytsia train, sanitized., and isolated.

From the Editor:  With Ukraine’s new public/private concessions to expand from ports to airports, to railroad stations and to toll highways, foreign investor interest will be high next month at the Ukrainian Transport Infrastructure Forum. The Ukraine Business News is proud to be a media sponsor for Forum which the Strategy Council will hold March 31 at Kyiv’s Premier Palace Hotel. The schedule can be found here. With Best Regards, Jim Brooke jbrooke@ubn.news