Editor's Choice Interview Ukrainian macroeconomics

Burak Pehlivan: “Ukraine has vanquished 81 countries in the Doing Business rating. It is an immensely resulting. No other country could repeat such a success”

Burak Pehlivan, Chairman of the Board of the International Ukrainian Turkish Business Association, told how Turkey’s experience in economic advancement may be useful to Ukraine.

A Turkish businessman, who thoroughly and deeply analyzes the facts and events, as well as meticulously considers any item and does not make decisions on unverified information.  This is the way, which Burak Pehlivan, who lives and works in Ukraine for more than 9 years, applies to his job and he is confident that our country has the potential to make Ukraine prosperous during the shortest time.

In a conversation with , Burak told about the similarities between Ukraine and Turkey, especially in regard to the historical context, and how Ukraine can attract the flow of investments.

: Burak, please tell us, what is the interest of Turkey in Ukrainian business ?

B.Pehlivan: If I answer your question briefly my curiosity is caused by the similarity of our countries. 20 years ago in Turkey there were the same problems that Ukraine is experiencing now: both political and geographic. We were not able to attract foreign investment in the same way as you are doing now, and Turkish goods in Europe were also considered uncompetitive. But 20 years ago (in 1995) Turkey signed an EU Customs Union Agreement with the EU, after which our country began to actively implement economic reforms for several years. And when Europe saw that Turkey was on the path to reform, the first 80% of the investment came from European investors. By now the external trade between the EU and Turkey is 48%. In addition, today our country exports 5 times more goods than 20 years ago, namely electronics, cars, and auto parts

By the way, we have so well developed  automobile industry in our country, that today Turkey produces 1.5 million cars, and many European car manufacturers have opened their plants in our country. Yes, we do not produce rockets, but the production of consumer goods is very well developed.

: What is the market for Turkish goods?

B.Pehlivan:  Turkey does not have oil and natural gas, which means that we need to produce something and sell it somewhere, in the domestic market or  abroad. The domestic market is relatively small, so we go outside, because it always offers new opportunities. Now our goods are supplied not only to the EU, but also to countries of Africa, Asia, Russia, Ukraine, and we still continue looking for new and new markets. Of course, for high competitiveness, the quality of manufactured goods should be at a high level. And our goods meet these requirements. But I want to emphasize that the impetus to out growth has been done more than 20 years ago, as I have already said, it was the Agreement on the Customs Union of Turkey with the EU. And that fact gave great opportunities for the development of the Turkish economy.

: Burak, tell us, please, what, in your opinion, taking into account all the facts mentioned above, Ukraine needs  first of all?

B.Pehlivan: It`s a good question. There are many conversations on this subject, and the opinions of those who understand how the economy and business work are distinctive.  The first half of them assures that at the moment Ukraine is not able to attract foreign investment due to a conflict with Russia, political and economic instability, because of great corruption, poorly organized social system. The second part insists that in the presence of all these problems, investors are still looking into Ukraine, because there is  a convenient geographical location and a very good economic potential. And again, I want to give an example of Turkey: why, for example, after the signing of the Customs Union Union agreement with the EU, we could not attract investments for the first 5 years, and then it will be clear what Ukraine lacks.

Increasing of investment attractiveness is a long process aimed at informing the investor about the country’s opportunities. In addition, you can not hide the problem with the image. Yes, there is corruption in Ukraine, and investors know about it. But the fact is that corruption exists  in Poland, Italy, and in other countries, and in Africa, too, but many large international companies go to Africa and successfully conduct their business there. Does this mean that there is a better level of government control than here? Of course not. The danger is exaggerated and result depends on both people and government.

For example, I am sure that time is coming when Ukraine becomes a developed and prosperous country, but speed of this process depends only on the Ukrainian people and government. Let’s look at the Turkish experience again. Does it  mean that Ukraine should also wait for 5, 10 or 15 years? It is clear that not. Knowing the experience of other countries and having a desire to reform and develop, Ukraine can achieve high rates in its development much faster. Such a plan requires:

  • to continue reforms
  • to form a positive image of Ukraine in mass media,
  • to publish examples of successful business cases,
  • to attract foreigners as tourists, i.e. to use tourism as soft power.

: Is international image so important?

B.Pehlivan: Yes, it is. And do you know why? Because if a country has a bad image, tourists will not go there because of negative information: they constantly hear that there is a war in Ukraine and a threat to their lives. Turkey also has problems, but it is one of the most popular tourist destinations in the world. And all because we work on our global image, we show our sights, tell about the advantages of cooperation with Turkey and opportunities for other countries.

In my opinion, Ukraine should sign an agreement with Turkey on the Free Trade Zone. Right now, Turkish investors are ready to invest abroad and Ukraine can become a very good hub for a Turkish manufacturer.

I can explain why: Ukraine has an agreement on the Free Trade Area with the EU and Canada, and your country is bordered by four European countries, which gives new logistical opportunities to all parties. And one more reason to sign such an agreement is when Europe sees that Turkey is actively investing in Ukraine, it can become a catalyst for the arrival of European investors here.

: How does the Ukrainian government respond to the proposal to sign the Free Trade Area Agreement?

B.Pehlivan: You know, such negotiations started in 2007.  11 years has passed. It`s too long. Each party wants to have the result, but it does not succeed yet. Now we are still conducting these negotiations, and I hope that in 2018, we will sign this agreement. Moreover, the sooner the document is signed, the faster and more actively Turkish investors go to Ukraine.

: What is the most perspective sphere of business for Turkish investors in Ukraine?

B.Pehlivan: Ukraine is very strong in heavy industry. But, like in many countries of the former Soviet Union, light industry is not developed in Ukraine. And when we talk about light industry,   it  does not mean just textiles, it means all production besides the heavy industry.

  • I mean production of cars, auto spare parts, etc. For the Turkish investors this segment is very interesting. But Turkey will start investing in the light industry in Ukraine only after the Free Trade Area Agreement is signed.
  • Besides, Turkish investors are interested in alternative energy, because Ukraine has one of the best items (financially attractive) in Europe. And I know that some Turkish investors have already started investing and will continue.
  • The third direction – agriculture. But in order to attract more investment from Turkey in this area, I think that a land reform is needed. But this reform must be safe for the country and not to give any opportunity for monopolization.
  • Moreover, Turkey is very focused on IT and real estate spheres, although this segment of the market also needs some regulation.

: What is missed in Ukraine in this field?

B.Pehlivan: I think that there is not enough communication with the people. For example, the Turkish authorities are very active in informing and educating ordinary people, explaining many times that they will be given some or other reforms. And when people begin to understand this, reforming any industry becomes much easier, and especially when people are convinced that the government is not deceiving and reforms really produce a great result, then, of course, the country will change.

: It means that communicating with people is one of the most important components, does not it?

B.Pehlivan: It is true.  Communication is one of the key factors. Next, public-private partnership is very important. In Ukraine, one of the biggest problems is the lack of money. The banking system practically does not work, loans are not given, because for realization of large infrastructure projects a reliable private line is needed. Therefore, for Ukraine, as well as for Turkey, public-private partnership plays a very important role. For example, in Turkey over the past 15 years more than 200 projects have been implemented precisely thanks to a working public-private partnership, which is $ 150 billion. And all this is only through private funding. This case can be a great example for Ukraine.

The next point is –

to allow privatization. Thus, foreign investors will have the opportunity to manage more efficiently and more productively: new jobs will appear in enterprises  and companies  will start to generate profit and pay taxes. The main objective of privatization is to upgrade enterprises for private funds and restart them so that they start to make  profit.

: Burak, please tell us about the purpose of creating the Association you are managing.

B.Pehlivan: TUID – International Ukrainian Turkish Business Association was founded in 2004, when our Prime Minister, who now is the President, has visited Ukraine for the first time. He noticed that there was no Association of Turkish Businessmen in Ukraine, and advised to create it. Thus, Turkish businessmen founded TUID.

  • I want to say that, unlike Turkish business in other countries, Turkish companies in Ukraine work successfully not only in textiles, food and construction, but also in all other areas of the Ukrainian economy.
  • The second feature of our Association – our members are representatives of small business, as well as medium and large, for example, Turkish Airlines, Colin’s, LC Waikiki, Life Cell.
  • The third feature – our Association represents not only Turkish capital. Many Turkish top professional executives work in international companies such as Reckitt Benckiser, Panasonic, European Bank for Reconstruction and Development (EBRD), and many international companies are run by Turks. And these people and companies also are our members, which, in its turn, gives us great opportunities.
  • Fourth, among all Turkish business associations abroad, TUID has the largest network of branches. The head office is located in Kiev, but the branches work in Odessa, Zaporizhia, Kherson, Kharkiv, Vinnitsa, Lviv, and another representative office is in Istanbul.

By the way, in February 2018 in Turkey, TUID was recognized as the most successful association of Turkish businessmen abroad. And we got the prize (smiles). And in 2012 in Romania, we have become the most successful Association in Eastern and Central Europe.

: What is the most important task of TUID?

B.Pehlivan: Our main task is to raise the image of Turkey in Ukraine and the image of Ukraine in Turkey. We do our best for this in all spheres – culture, economics, art. For example, we implemented a project with one Ukrainian company to measure the image of Turkey in Ukraine. We investigated the activities of the Turkish airlines, construction companies, Turkish transport companies; examined whether Ukrainian people watch Turkish TV series, if so, what results are etc. In other words, we photographed the overall image of Turkey in Ukraine. This is a grand project that has shown us a lot. Now we will do it every year.

: Burak, you have been working in Ukraine for 9 years. What, in your opinion, has changed over the years?

B.Pehlivan: You know, over the past 4 years Ukraine has implemented many reforms, even more than during the past 23 years of its Independence. In 2010, Ukraine ranked 153th in the Doing Business World Bank list. Now – 76. Ukraine has surpassed 81 countries in this ranking. It is extremely well. Nobody could repeat such a success. As a citizen of Turkey as well as a Turkish entrepreneur and a Turkish businessman who works in Ukraine, I see and feel the difference. Now you  need to outrun 75 countries (smiles).

: We have a long way to go…

B.Pehlivan: When foreign investors choose where to invest, they estimate all countries, and not only those that have a positive development trend, although this is very important. Therefore, despite the fact that Ukraine is undertaking such enormous structural reforms, it could not attract investment. You need to work more and faster.

: What would you like to wish to our country and Ukrainians in particular?

B.Pehlivan: In my opinion, you have everything. But one must understand that Ukraine must be raised not by foreigners, but by its citizens. I think that Ukraine will be very successful  in the near future, will  export much more goods, at least you have everything  for these aims. You just have to be a bit more organized and quicker.

Please read: To be successful in Ukraine, you need to forget everything you’ve ever known before entering its market

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