EFFECTIVE DATA! Ukraine’s economy needs attracting foreign capital. What should we do?
It is well-known that no matter how many repeat the word “halva”, it will not be sweet in the mouth. Apparently, this should be borne in mind, and then, when it comes to attracting investment in the domestic economy. It is mentioned all the time, relatively speaking, from rural to the national stands. Dozens, if not hundreds, of delegations of different levels at the expense of state and local budgets annually visit near and far abroad to establish contacts, acquaint themselves and introduce the know-how in the field of social and economic life. But very rarely after such trips you can see or hear information about their effectiveness.
Is not it interesting to us?
Not always, representatives of our establishment can be seen in international forums, which not only deserve attention, but also require their active participation, networking and lobbying at such a level of national interests. For example, few people in Ukraine have heard of the world’s largest Global Infrastructure Summit (The Global Summit), which lasted four days in Berlin. It was also ignored by the domestic mass media. Though it has gathered more than two thousand senior representatives of international financial institutions and consultants, the most influential practitioners of the infrastructure industry, institutional investors and fund managers, whose total capital amounts to a trillion dollars. They took part in this forum to exchange views on current trends in infrastructure development, discuss new projects in this field, and build partnerships for their implementation.
Are these issues not the most important for us? However, the state interest of our country, which was first invited to participate in the summit, was represented by the heads of departments of one of the ministries and Kyiv City State Administration (KCSA). By the way, at the request of the author of the publication, to share thoughts on this forum, the representative of the ministry replied that this could be done by an official with a rank not lower than the deputy minister or head of the department, and he does not belong to such. Further, as the expression goes, no comments.
Here we should pay tribute to the Ukrainian representatives of the non-governmental sector - the Ukrainian Centre for Promotion of Public and Private Partnership, the City Development Fund and the Public and Private Partnership Academy, who not only participated in the summit, but also duly represented our country on it. The Chairman of the Ukrainian Centre for Promotion of Public and Private Partnership (PPP) and the founder of the PPP Academy, Professor Iryna Zapatrina, spoke in one of the panels discussing the issue of overcoming the global infrastructure gap. The topic of her speech was the discussion of problematic issues of attracting finance for infrastructure development in emerging countries and the possibilities of unlocking the financing of infrastructure projects by private business in order to increase the productivity of this sector.
And learn from others…
Iryna Viktorivna, by the way, is a recognized authority of the international level in the field of PPP, a member of the expert group on the issues of the PPP of the UN Economic Commission for Europe, a consultant of the World Bank and the European Bank for Reconstruction and Development on the issues of the PPP, co-author of the profile law, textbooks on this issue and a teacher at higher educational institutions of many countries. Therefore, her thoughts and judgments are worth paying attention to at the national level.
“I think that participation in such events is extremely useful to the representatives of Ukraine. First of all, this is an opportunity to hear and chat with interesting people who identify new trends in infrastructure development and feel the pulse of this market in a global sense. For example, at the summit it was possible to communicate with Jim Yong Kim, President of the World Bank Group (2012-2019), Dr. Garrett Eric Reismane, NASA astronaut, and now Development Director at SpacеX where he works with Ilona Mascom, Julia Prescott, Commissioner for National Infrastructure of the UK Commission and MERIDIAM Partner, who cares about the strategic development of this fund, and other interesting personalities. Discussions with them and other summit participants - practitioners with significant experience in infrastructure development - are very useful for understanding how to structure the processes of managing infrastructure development in our country”, Iryna Zapatrina said.
She is convinced that participation in such level of forums is an opportunity to present infrastructure projects and find partners for their implementation. But there are certain precautions, since the attitude towards investing in long-term infrastructure projects in our country is very cautious. The reason for this, according to Iryna Viktorivna, is the lack of successful experience of the participation of well-known foreign companies in the creation (modernization) of infrastructure objects in Ukraine, the complexity and obscurity of the institutional environment in this area, the uncertainty of the state’s priorities for infrastructure development in the long run due to the lack of national and urban infrastructure plans.
“There is almost no open access to detailed information on large-scale infrastructure and projects that the public authority intends to implement with the participation of private business. This also applies to official websites of government bodies responsible for infrastructure development of the relevant field and global information resources that are traditionally used by representatives of international investment business to search for infrastructure projects that are interesting for them”, the Chairman of the Ukrainian Centre for Promotion of PPP Development said.
But, she believes, it is necessary to present Ukrainian infrastructure projects at the events similar to the Global Infrastructure Summit, even despite the very cautious attitude to investing in our country. “It is desirable to elaborate in detail the projects proposed for discussion and to ensure the distribution of relevant information among the key players in the infrastructure market. For example, take advantage of the opportunities offered by the Global Infrastructure Hub which considers our country as one of the priority areas for investment in infrastructure. Applying this approach will allow counting on serious talks with potential investors and ensuring active participation of private capital in building critical infrastructure for Ukraine: roads, bridges, heat and water supply systems, household waste management, etc.”, Iryna Zapatrina said at the conclusion of our conversation.
To make the changes irreversible
Another Ukrainian participant of the Global Infrastructure Summit - the Chairman of the Public Organization “City Development Fund”, the candidate of economic sciences Volodymyr Pirus drew attention to the fact that last year foreign direct investment grew by 8% compared with 2017 and amounted to 2.5 billion dollars, however this is at times less than in neighboring Poland or the Czech Republic. In his opinion, Ukraine does not sufficiently use the opportunities of the public and private, or, as we say, state and private partnership.
And about these opportunities Volodymyr Olehovych knows not theoretically, but from practice. Since the Public Organization “City Development Fund”, which he heads, has developed projects for almost $ 70 million, has found private investors who initiated and are ready to invest these funds in the development of infrastructure of Ukrainian cities. But the search for partners and investors for future projects does not end there. The main task set by the representatives of the Fund was to participate in the summit, which was achieved during the negotiations, to establish communication with potential investors to attract foreign capital to the Ukrainian economy.
Since, according to the Chairman of the Public Organization, the biggest paradox is that state and private partnership, which by attracting private investment globally is the engine of a radical improvement of the living conditions of citizens and the creation of smart cities, we have been developing very slowly. Although at the national level, according to Volodymyr Pirus, a significant step forward was recently made. In particular, a legal framework for investing and developing state and private partnerships has been established, legal guarantees for investors are in place, guarantees that foreign investments are not subject to nationalization, parliament ratified intergovernmental agreements on the promotion and mutual protection of investments.
But in order for the changes to become irreversible, it is necessary not only to radically change the attitude to state and private partnership, but also to remove administrative obstacles, complicated licensing system, high level of taxation, etc.
Volodymyr Pirus is convinced: “To create a favourable investment climate in Ukraine and attract foreign capital to the development of the economy, it must be realized at all levels that investments are not a rain; it will not fall from heaven. Appropriate prerequisites and appropriate efforts must be made to attract them”.
Apparently, everyone will agree with this. It remains to make real steps on this path.