Washington, DC
Transcript
KENDRA GAITHER: Well, good afternoon, everyone. I'm Kendra Gaither, I serve as the head of our Coalition for the Rule of Law and Global Markets here at the U.S. Chamber of Commerce. And today during this panel, which is a conversation about removing barriers to investment, and focusing in on governance and reform, we're really going to dive into a number of the themes that you all have been hearing, and themes that have been discussed throughout the morning. And so, I'm really honored that we're going to be joined with leaders from business and government, who are going to help us to examine those issues, because as you know and as you've heard, really public-private partnerships, and the collaboration of both public and private investment and support are going to be really critical factors in the economic recovery and the rebuilding of Ukraine.
As part of our work in the coalition, one of the things that we've identified is how critical the rule of law is as a foundation for economic recovery, economic rebuilding, and really setting the tempo or the tenor for how companies can be partners in recovery stories and how they can work hand in hand. But that really involves creating the conditions that invite in that strong support.
So, today, we're going to hear from four luminaries that I'm here joined with on the stage, we're honored to have the Deputy Minister of Economy Mr. Taras Kachka, the Deputy Administrator for the U.S. Agency for International Development Dr. Isobel Coleman, the Director for the Center for Accountable Investment at the Center for International Private Enterprise Eric Hontz, and the President of our AmCham Ukraine Andy Hunder. Let me start, if I might with you, Dr. Coleman, since we just have the honor of hearing from the Administrator, in giving us some thoughts about those next steps. Would you share with us, given this conversation around the public-private partnerships and what each entity can bring to the table. What are two or three critical steps that can be taken to improve the Ukrainian investment climate for U.S. companies?
DEPUTY ADMINISTRATOR ISOBEL COLEMAN: Thank you. It's really a pleasure to be here. Thank you so much. I just want to start by emphasizing a theme that you've heard from several other speakers, including Administrator Power, which is, it's really remarkable what the Ukrainians have done in war with their economy. You know, Mustafa Nayyem was talking about how it's fully functioning, the government is fully functioning, and the financial system, the courts, everything is fully functioning, and I had the opportunity to spend several days in Ukraine in February, and it really is remarkable. And certain sectors have been growing, even though they've lost 20 percent of their population are now refugees in Europe, many millions are displaced. Their economy has lost about a third, but sectors have been growing. And it's just a remarkable testament to the determination, ingenuity, will of the Ukrainian people and resiliency of the economy – think what they can do in peace.
Now, the World Bank has estimated that reconstruction needs are going to top, right now, currently, more than 400 billion. And just to put that in perspective, that's about twice the size of Ukraine's prewar economy. So, how are they going to get there? How is this going to happen? They have to be able to attract private sector investment to do a lot of this. And we all know that Ukraine is on a path to EU membership. And thinking about what that looks like going forward, the opportunity there, because Ukraine when it joins the EU will be, you know, somewhere between the fourth and fifth largest economy, population, country size in the E.U., which is a big market and enormous potential. You know, when you look at its economy compared to Poland. Poland’s economy is three times the size of Ukraine's prewar economy with fewer people. So, just to give a sense of comparison. But what can it do to attract that investment? Listen, it needs very, we've talked about, a strong rule of law, strong competition policies, to make sure that there's transparency and an environment that really is that strong enabling environment. I think Administrator Power mentioned Advantage Ukraine that USAID has been supporting as a way of helping to focus some of that incoming but also the demand to prioritize the first priority needs for reconstruction. USAID has been providing some technical capacity, helping them get more people – Advantage Ukraine with investment banking skills, legal skills, everything to look at the deal flow.
The – but of course, the second thing is sticking with a very robust anti-corruption agenda. I mean, just as recently as 2020, a survey indicated that one of the top concerns for investment decisions – decision makers in Ukraine – is corruption. And so, it is a real issue. We all know that. I think the country has made great strides in that front and has gone not only made investments in anti-corruption entities, the high anti-corruption court, for example, but also in eGovernment, allowing a lot of the transactions and processes to be done electronically, which really can eliminate corruption. ProZorro, which is the e-procurement system, again, something USAID has invested in since 2015 that really brings a public-private partnership inside Ukraine to more transparent procurement, both doing it electronically as so that it can be seen every step of the way, but also bringing civil society to bear. We've worked with Transparency International Ukraine, on the set up of both ProZorro and Dozorro, which has 1,000 volunteers that are flagging high-profile, high-risk public procurements. And so, it's this type of partnership, I think, that can give investors confidence that the strides that have been made on the anti-corruption agenda will continue.
And I would just close by saying that this is truly an inflection point for the Ukrainian economy as it hopefully transitions soon from a wartime economy to a peace economy, and focuses on that ascension process to the E.U. to really continue with decentralization, transparency, and limiting the role of outsized persons and individuals in particular sectors. I think of it as the de-oligarchization of the economy, and not to lose this moment to push forward on that agenda. So, I think those are a couple of things. Having a strong investment promotion mindset and bringing to bear the resources, both at a national level, the prioritization but allowing it still to be directed at a more regional and local level, not losing that decentralization, and then sticking very, very tough with the anti-corruption agenda.
Thank you.
MS. GAITHER: Thank you. That's a perfect breakdown from the 30,000 foot to the very tangible things that are both being done by USAID and then the opportunities that that partnership is creating for the business community. Might I turn to you now Deputy Minister? Dr. Coleman talked about some of the anti-corruption initiatives and that's something that the Prime Minister talked quite a bit about this morning in his address and the efforts that the government was undertaking. Would you share with us and maybe elaborate on some of those initiatives that the Prime Minister mentioned that you all are working on to remove barriers to investment and create that confidence for partners?
DEPUTY MINISTER TARAS KACHKA: Of course, but I would like to start with the e-words that were quite often mentioned in previous panels, this the European integration on the energy and how the reforms and helps to improve investment attractiveness of Ukraine so that the first day of war in energy was the first day of our autonomous work of electricity detached from Russian and Belarusian system, and by the mid-March of 2022 – so, then, when we were close to remove Russian forces from key suburbs – we actually legally attached our electricity system to the EU one that helped us to live through the winter. But at the same time, what is important that last year, electricity was one of the top export products for Ukraine to the EU, because in summertime, we export a lot – up to 40, 50 million U.S. dollars cost electricity from monthly from Ukraine to the EU. And now, last week, we resumed the export of electricity to the EU from Ukraine, and it means that Ukraine is now currently an attractive place for placing generation of electricity, electricity generation in Ukraine. And we, as well, months ago, in Mykolaiv, in the very close to frontline. So, one of Ukrainian companies started the operation of wind power generation capacitors that will export the electricity to the European Union. So, this is the exact example how during the war we are integrating into the EU markets, and how it increased the investment and effectiveness of Ukraine. But it is based on the years of a very boring and long and almost invisible process of reforms, both technical and legal, and also transparency. And in the liberalization of markets, establishment, independent regulator, regulator Commission, et cetera, et cetera. And it was, in like, in this discussion, like this was like, very slow movement, like we are losing time. But these are the processes that requires time so that the same situation is, for example, with judicial reform.
So, with judicial reform we have a lot of complaints. But recently, in the last month, this year, we already have at least dozens of criminal convictions of corrupt judges, so that it also took several years to investigate the small corrupted, big corrupted cases in traditional community. But now we have the final criminal convictions of those corrupt judges. At the same time, we have about half of judicial positions in Ukraine are vacant now. And what will – what happened, like, during like, last seven years, the big debate about broad judicial reform community and the conservative, let's say, judicial community invested interest, they fight on the mechanism of selection of judges. And now what is very pleasing for me because one of my closest friends, Roman Maselko, which is the most radical fighter against judicial corruption, is a part of this council that will be responsible for selection of judges. So, it means that we are slowly winning in this battle in judicial corruption, which is extremely conservative. It takes years and years for every state, including the United States, to modernize their judicial system. And we are advancing in this. And of course, that, you know, I'm not a professional anti-corruption specialist. So, that requires, like, a lot of knowledge of different processes and rather responsible for boring trade agreements.
But what is interesting, that I came here from Toronto where we announced the completion of negotiations on modernized Canadian-Ukrainian FTA agreement. And it is like copy-paste of USMCA agreement, which is based on very profound trust to the domestic regulation, because it's related to services, to regulatory practices, et cetera. And, for me, this is a good signal that Canada actually checked, verified the quality of our domestic regulations. And in reality, it's not so bad as perceptive, so that it is really good for good business environment. And it means that we have really good opportunities based on the results of previous reforms. We are not slowing the pace of these reforms. It's otherwise. We are, like, speeding up with a lot of processes. And it provides, like fruits into the new economic opportunities for all of you. Thank you.
MS. GAITHER: And I would say that often it's those boring things like creating the frameworks at the FTA, the invisible work, as you noted, of creating the reforms, it's those bedrock decisions that are really what pay dividends. So, thank you for highlighting those efforts.
And if I might turn to you. Obviously, AmCham has been extremely active in supporting members who continue to operate and cope with the impact of the war. But at the same time, you have a very clear vision for what's needed beyond the present circumstances, and what conditions in particular for business – American business – will help them to be part of supporting Ukraine's future. I heard the Deputy Minister talk about judicial reforms. I know that's a priority for you. But would you share for our audience today some of those reform efforts that the business community has identified as, really, priorities to support the nation's efforts to rebuild?
ANDY HUNDER: Yeah, of course. Thanks, Kendra. I think the very first barrier that investors encounter when they even start thinking about investing in Ukraine is the perception, the perception of Ukraine as an investment destination. I've been working and living in Ukraine since 1996 – the last 27 years – and I've seen, I've seen the good, I've seen the bad, and I've seen the ugly.
So, if we start with the latter, I started my career on television. And what ended up with the TV channels in Ukraine, they were all taken up by the oligarchs. Many of them lost making but the oligarchs controlled them to control the hearts and minds of the electorate. Then I spent seven years at the largest mobile operator, which is now Vodafone – it's good to see colleagues from Vodafone here today. And at the time, it was majority state owned, together with the Germans, the Dutch, and the Danes. And then one day, the decision is made, that this is being sold off to the Russians. So, the Russians come and buy, and they were, they were buying up the jewels in the crown. And Russia and the Kremlin, they have wanted a corrupt Ukraine, it's the way they've done business, and they want to see corruption in Ukraine to continue.
I think, then, I spent time in the pharmaceutical sector. And again, you're seeing the ministers of health becoming millionaires very, very quickly. So, there is reason why this perception is there. But I think what we need to do now, and when I say we, it's really the companies that are already working in Ukraine together – together with the U.S. Chamber and together with this initiative, the business initiative, it's really to get the messages out about what's going on. And you know, let me share just some stories.
The largest bottling plant, the largest Coca-Cola bottling plant on the European continent, in terms of production volume, is just 25 miles out of Kyiv. And it, actually in February last year, it fell under occupation, the Russians came in, it's near Brovary. It was under occupation, then it was liberated, and Coke now has re-refurbished it and they're back fully operational. Not only is the plant operational, but they've also, they’re rebuilding a kindergarten in the community – really supporting the community. I saw Roberto here from PepsiCo, so, I have to mention also PepsiCo. PepsiCo have three plants in Ukraine, two very large ones in Mykolaiv doing the soft drinks, the juices, also now the Lay's potato chips and a plant in near Kyiv – Vyshneve – doing children's foods. When you go home or tomorrow morning when you're having your cup of coffee, the Nespresso coffee machine when you've had a cup of coffee, have a look upside down, turn it upside down, have a look where it's made. It's made in the plant, a U.S. company, big U.S. company, made in Uzhhorod. Eight trucks leaving the plant everyday. The actual factory is one mile from the border of the EU, and it continues to produce.
We have here the ABCDs – ADM, Bunge, Cargill, Dreyfus. The large agricultural exporters that are continuing, have been in Ukraine for many years, and are continuing this grain corridor. We see investments being made as we speak, Unilever have just announced a brand new $20 million investment in a brand-new factory outside Kyiv; Nestle already have three plants in Lviv, Kharkiv – which has reopened, and in Torchyn near Lutsk, which they're investing another 40 million euros. I see here Lenna Koszarny from Horizon Capital, Chair of the AmCham board, managing assets under management thinks about 1.2 million, a billion, with a B, and Lenna has managed to fundraise $125 million during the last year following the full-scale invasion. So, I think, you know, we see these companies, talking to companies like Citi, Visa – the banking system, it is up and running. And I think it's really changing that narrative. And the message is, we really need to change that perception. Because there is, there is still a lot we do, and we are kept busy. We are the largest AmCham in Europe, we have a full-time staff of 40 people, nearly 33 of them back in Kyiv now. So, we're supporting the members, the companies, many of you that are there. You know, we spoke with Uber today. They've just expanded up to 18 cities across Ukraine. So, I think it's really this narrative. And it's very important for the companies that are there to be the ambassadors. And our message is to the companies that aren't in Ukraine today: it's invest – firstly, Ukraine is open for business. Come to Ukraine, invest in Ukraine, and start investing now. I think, don't leave it too late. Don't miss the bus because the reconstruction has already started. We are seeing many of these plants that are being reconstructed. And don't miss this opportunity. Come to Ukraine and come now.
MS. GAITHER: Thank you. I'm sure the members very much appreciated the way that you highlighted the incredible work that they are continuing to advance.
Let me turn now to Eric Hontz, Director for the Center for Accountable Investment at CIPE. Maybe you could share with us, Eric, from your perspective since we've heard from, you know, the various leaders here on the stage. Can you share with us, maybe some of the policies that Ukraine might adopt to attract high quality investment with positive externalities for corporate culture? Specifically looking at that as an area of focus, as well as what can be done for Ukrainian citizens more broadly.
ERIC HONTZ: Yeah, thanks, Kendra. Thank you for having me here today. So, to piggyback off Andy's comments here, reputations are very hard to earn and easy to lose. And unfortunately, Ukraine has a poor reputation among the business investment community. Now, as of February 2022, Ukraine essentially had two private sectors – one private sector that many people are familiar with in their own mind’s eye, related to corruption and oligarchs and that sort of thing. But there was another private sector, and it was just getting its stride ready, 2022 is going to be the biggest growth in GDP and biggest FDI in Ukraine's history. Now, unfortunately, the Russians had other plans for Ukraine. What will happen in the rebuilding of Ukraine is a re-engagement of this progressive business community that was already there, those businesses are there, they're making investments, they're fighting for their lives and their businesses. Their assets aren't off in some tax shell somewhere, they're there on the ground, and they're fighting alongside their countrymen and women to fight for their lives and fight for their businesses and the investments that they've made over the past generation of a free and independent Ukraine.
Now, what type of policy should be – should the business community engage in? To my mind, the investments in judicial reform and regulatory policy are all needed and valid, but that takes a long time to pay off. So, the best policy that we can pursue or we can push forward is a policy of competition. Creating more investors, more pressure, and more eyes of investors on what Ukraine is doing, and pushing the country forward, and the private sector, in a positive direction to engage more with the EU, which already has sustainability standards, which already is committed to labor rights and human dignity. And that is the kind of community that the business community can be in Ukraine to drive those changes forward. There's – a long time coming to this point, and it's unfortunate that Ukraine had to suffer this much for people to realize how amazing the country is, in terms of human capital, in terms of innovation. Ukraine will be there, and it will go from a laggard to a leader in the E.U.
MS. GAITHER: Thank you for that, Eric.
I want to actually turn back now to the Deputy Administrator and something that you said in your first question where you said, we don't want to lose this moment. And I liked that Eric highlighted the policy of competition, which is something that you touched on in your first question. Would you share with us, from your perspective, what are some of the ways that the private sector can support improving the investment climate within Ukraine? I don't know if competition policy is part of that, but I'm certain you have a few recommendations that we could learn from.
DEPUTY ADMINISTRATOR COLEMAN: But before I jump to that, I just want to pick up on something that Taras said, because – and it relates also to other comments on this panel. This is – this moment has been a long time in the making. It didn't happen overnight. And there has been over the past decade, in particular, a lot of change and investment in increasing transparency, institutions, strengthening sectors, the work – and USAID has been a part of it. On the electricity, I remember it was the eve of Russia's invasion, and I was told wait, Ukraine’s about to disconnect from Russia and go into Island mode? What is that? But it worked out. But it was a long time coming, of all of these investments to get it to this point. And I think that – well, I can say that with certainty that USAID and the U.S. government more broadly, will continue to invest in that blocking and tackling those very boring but incredibly important investments in institutions, in capabilities, in transparency, in policies, competition policy, transparency, all of these things.
What the private sector can do is to recognize the changes that have happened, is to recognize the two different economies that have been noted here – there is a very vibrant economy – and to bring your skills, your expertise, your investment. And also make very clear with the Ukrainian government, which from every interaction I have, they are hugely responsive, they want to be an attractive place for investment, they recognize that it's critical to get their economy back up on its feet. When you've lost 20 percent of your population to Europe and you know the clock is ticking, the longer these people stay, they've got jobs their kids are in school, the harder it is to get them back. And they're very focused on that, you know, to invest in housing, the energy sector, retail, services, all of these things – I'm so glad to hear Uber's back, or expanding – you know, that it's making life what it can and should be and mutually benefiting along the way. So, it's really from me, a call to the private sector to ask questions, to bring your ideas to the table, if you see something that's not up to the world class standards that you require for your investment decisions, make it known, be a problem solver, and help the country get to where it can and should be. The track that it was on pre-invasion – pre-further invasion last year, it needs to be able to get back on that track, and it will only do so in partnership with all of you. So, come to the table with your skills, your expertise, your investment, and find the way forward together with a government that I know is very much open for business.
Thank you.
MS. GAITHER: Well, let me turn to you then and ask you the same question. How do you see that business community co-creating the investment climate that spurs additional investment?
DEPUTY MINISTER KACHKA: First of all, I think that we've all this list of examples, which I would like to extend further because, you know, that if you purchase this Nescafé that you don't need to turn it upside down because invoice for this machine is made in Lviv, because there is a factory of accountants that every invoice for Nescafé is made in Lviv, globally in all the world. But – and so that this list is incredibly long, but you mentioned ABCD, the global traders and usually trade is absolutely ambivalent to any politics. So, that whatever sanctions, wars and so traders usually remain everywhere globally, because this is the feature of this industry, and there are a lot of books on this, but this time is different. So, we see that global traders are actually leaving Russia, because of Russia is aggressive because of sanctions, but, as well, because of the business culture there, because it is really full of vested interest, oligarchs, centralization, everything of what we got read for in last decade. So, starting from 2000 – at least 2014. And it's otherwise, despite the war, all of them are operating in Ukraine. And despite all the blockages of seaports, complications of land border, we export and our agriculture works and operates – thanks to competition, because people don't want to leave Ukrainian market because they lose the market share for other competitors. It works with farmers as well. But at the same time, it's incredible pressure against the government. Because if you have a lot of companies and they say they're, like say, no to something that was proposed by government, it's really, you know, that this critical reassessment and dialogue with business, What helps us also to think twice about the quality of regulations we propose. So, that's why this dynamic is getting better and better every year.
And there is one tiny comment on this because I was part of AmCham for several years working permanently there. And I remember that when I started this, it was like still the habit that companies didn't stay and ask direct questions to the government. Didn't say that I am the CEO of particular trade or particular producer and I have problems with tax authorities. Now in our dialogue with business community it's completely different. So, companies are feeling safe to say that I’m particular company and I have a problem. I have suggestion, I have a policy objective. I'm advocating another topic. And this openness in dialogue that happens in Ukraine is a really good sign that the spirit of competition, open competition, is already embedded in Ukraine, is embedded in the engine of Ukrainian economy.
And last but not least, so that this time the issue of anti-corruption and justice is going beyond business, is going beyond the attractiveness of investments. So, we have really thousands of people, died on the front. And all of them have – it’s always difficult to talk about this. But they will say that ‘why our people die if they still have social injustice?’ So, that's why this time it’s absolutely different.
Thank you.
MS. GAITHER: Thank you, Deputy Minister, we know that you carry a –
DEPUTY MINISTER KACHKA: Sorry.
MS. GAITHER: No, no. It really speaks to the power of why this moment is so important and what we really need to do to make sure that those lives are not lost in vain and that that sacrifice is honored in what we do together in collaboration.
Let me turn to you, Andy.
MR. HUNDER: I just want to add to what Taras said. Two things. I think, firstly, the dialogue we have every fortnight. We have meetings with Taras to discuss international trade. That we have meetings with pretty much most of the ministers on a very regular basis. So, that dialogue is there. But I think Taras’ point, it just highlights that the sentiments in Ukraine – now is the time. Because the cost that Ukraine and Ukrainians are paying is so high and I think Ukrainians will not allow things to go back to the old ways. This is the game changer. And I think you can see the passion on the front lines, but also the passion in the business. So, be a part of this change. I invite you.
MS. GAITHER: So, Eric, I'm going to give you the difficult job of not only responding to that, but offering us any sort of last thoughts that you would leave the audience with, be it a call to action from what's been shared on this panel or from your work, where there can be better opportunities to work together to ensure that we are doing our part to strengthen the environment and to invite in more partners into this growth story.
MR. HONTZ: No pressure, right?
MS. GAITHER: No pressure.
MR. HONTZ: Just sum everything up. So, what is it to be a Ukrainian businessperson today in 2023? It's to be engaged in your country. It's to be a leader. It's to be a driver of reform and transparency. And it's to create a new Ukraine, one that is inclusive, one that is driving innovation, one that is a leader in Europe. And if you're sitting here in this room today, in this chamber – you're a part of that. So, be part of it, engage, engage more, and engage and drive the future of Ukraine, because we can only do this together.
MS. GAITHER: Deputy Administrator, any closing thoughts? Call to action?
DEPUTY ADMINISTRATOR COLEMAN: Yeah, you know, I'm just going to echo be a part of it. You know, this is, I think, important above and beyond Ukraine's economy. This is one of the most geostrategic issues facing the world today, it truly is. You know, the – as has been laid out. This is the moment for really good to triumph over really bad, and be a part of it. Thank you.
MS. GAITHER: Andy?
MR. HUNDER: Yeah, I fully agree. I think we are seeing this as an existential battle. The courage of Ukrainian women and men on the front lines is truly inspirational. I think Ukraine is inspiring the world. And now I think it's for us in the business community to really come together and support and build a new country. This is going to be the biggest recovery and reconstruction of a nation in Europe since World War II. And let's do this together.
DEPUTY MINISTER KACHKA: I will change the path of him and the motion of the final statements. But I would like to come back to the Deputy Administrator Coleman mentioned about the Advantage Ukraine, so the platform that is supported by USAID and the general cooperation between USAID, DFC, and Minister of Economy. So, after all these statements, I think that the – I hope that the interest to go and to invest in Ukraine from the stage will be bigger and stronger. So, that's why if you have any additional information so we have this platform Advantage Ukraine to take this competitive advantage here and now and we are open for you and we cooperate as well with AmCham on this particular project and generally so that's why if you have any additional inquiries, so then we are all open and we are really want to help you. Also to overcome these perceptions and to take the moments of this, to take this momentum. Yeah, and thank you.
MS. GAITHER: Well, ladies and gentlemen, I think you've heard that this is the moment. And we're inviting you all in, as you heard, to ask the questions, to be present, and to be willing to engage in the conversation that there is a dialogue that is emerging, that the long-term work that has been done up to this point, is making a pathway for you all. Obviously, there's been a number of discussions here. There's no sugarcoating that it is a challenging way forward, but the way forward is through partnership. And again, a special thank you to the Deputy Minister for reminding us that as we talk about policies, we talk about reforms and governance, at the heart of this is really a human story, a story of how we can work together to support the people of Ukraine during this special moment so that it's not lost. So, please join me in thanking our esteemed panelists.