Ukraine National Projects seek investment

Igor Zhovkva, Head of FDI Department, State Agency for Investment and National Projects of Ukraine (SAINPU) explained to UBI the role of the agency and its recent international road show.

“The purpose of the roadshows is to stimulate investment in Ukraine by letting people know more about the country, what the reasons are to invest in Ukraine, and providing them with specific targets for investment,” explained Zhovkva.

This first set of road shows, visiting 25 cities, has targeted the US, Europe, the Middle East and Asia. Zhovkva adds, “We are already in discussions with the Kuwait Fund of Economic Development – and it is one of the social projects which they are interested in: The New Life Model Cities, which is to be built in 27 regions of Ukraine – with the state providing guarantees to attract strategic investment for the provision of a wide range of facilities and equipment.”

Zhovkva emphasised that investments would be transparent, and refuted any suggestion that there might be preferential access for favoured parties.

A proposed LNG terminal on the Black Sea is a key project, for which a public tender went out to 54 international companies to bid for the feasibility study. There were 10 companies that reached the second stage, none of which were Ukrainian, and the $1m feasibility contract was awarded to a Spanish company, which was four times less than had been anticipated.

However, at the launch of the road shows in London, Paul Shapiro, senior banker, Natural Resources at EBRD questioned the viability of processing ship-delivered LNG, compared to pipeline-delivered natural gas. Zhovkva implied that there were strategic concerns to ensure that Ukraine was not dependent upon others for its energy supplies, voicing the concern that abandoning the project and relying on Russian and other pipeline imported gas would leave the country vulnerable to unilateral price hikes, whereas the LNG plant would be able to buy from the international market.

The open tendering of the feasibility contract under the national projects programme “…has been a good model for the gas project. Any company will be able to bid for the construction or construction supply. This could include local Ukrainian companies (though the aim of the road show is more about attracting Foreign Direct Investment).”

Tourism is an area likely to attract interest from both local and international investors, with the Western region still under developed, including Winter sports in the Carpathians, plus other areas in Eastern Ukraine still open to further development. It was pointed out that regional authorities around the country will be competing for investors – with the SAINPU providing a one stop shop, working with the regions to facilitate investment.

Asked about whether Ukraine was interested in encouraging Russian investment, Zhovkva replied, ‘We’ll definitely include Russia in our road shows next year. We wanted to start with London as Europe’s main financial centre, particularly starting at the EBRD, to Vienna where we have investors, and to Frankfurt as an important financial centre, and Madrid where there are also investors interested in the energy sector.

He added, “We are already talking with investors from the Netherlands about a renewables project producing energy from waste, and with Austria, where Klenkhart providing a feasibility study for a waste recycling project.”

Strategic investments are being encouraged in five target industries to encourage further investments in those sectors , and work is already underway tackling potential targets.

Asked about whether the imprisonment of opposition leader and former Prime Minister Yulia Tymoshenko might act as a deterrent to potential investors, and thus whether the road show might have been better postponed Zhovkva responded, “We do economics not politics. We are doing our job and it would lose time to have postponed the road show as we are seeking investment for projects for which feasibility studies have already been conducted.”

It was pointed out that there has also been reform of investment legislation; with the intention that operating under free trade conditions raises investment levels.

The aim of the investment drive is to attract $7.5 bn of inward investment this year – so far $6.2 bn has been attracted this year, so Zhovkva says that this target is expected to be reached.

Asked to rank the priority targets, Energy is described as ‘probably top’, closely followed by infrastructure projects. “Now is the time to invest, as it has become something concrete to invest in – previously there were people wanting to invest generally. Our top five projects are intended to drive others to invest in these sectors – it’s not exclusive. We are trying to create new industries or tackle social problems, or manage assets from Soviet times in a more efficient way.\\r\\nZhovkva concluded, “We are also thinking about smaller community level projects, encouraging start-ups of smaller projects, and making a project-financing fund for these.”

Priority National Projects

Open World – creation of a nationwide information and communications network.

Olympic Hope 2022 – creation of sport and tourist infrastructure

LNG Terminal – Construction of a Black Sea LNG terminal of 10 bn cu m pa capacity

Clean City – solid waste disposal project aimed at building new facilities in several Ukrainian cities.

Renewable Energy (including National Biomass Energy Project) – creating energy from natural/renewable sources