Interview Ukrainian macroeconomics

Our first and foremost task is the development and deepening of trade, as well as economic cooperation between Ukraine and China

Ruslan Osypenko, the Chief Executive Officer of the Chinese Commerce Association (CCA), shared with his thoughts on the need to intensify economic relations between Ukraine and the People’s Republic of China, spoke about the problems that prevent the establishment of productive cooperation between the business of both countries, and also suggested ways of resolving these issues, emphasizing that the association can be an effective tool in this process.

: What were the prerequisites for the establishment of the Chinese Commerce Association? What sort of business are you in?

R. Osypenko: The Chinese Commerce Association was established in 2015 when we had a difficult financial, economic and security situation. The question was whether the Chinese business would work at all in Ukraine. However, given the fact that the PRC is a consistent country and had a signed declaration of strategic cooperation in 2011, and in 2013, a broad friendship and collaboration agreement was signed, the Chinese business decided to stay here by establishing its Association, in fact optimizing their expenses and intensifying the dialogue among the Chinese companies. In 2015, we started with 15 members, now, we have about 70 members. We are actively growing and working as a platform and a bridge for exchanging information between our Association members and the Ukrainian companies that come to us. We exchange information, communicate, help Ukrainian companies enter the Chinese market, and Chinese companies – enter the Ukrainian one.

: What does the Chinese Commerce Association do to improve the relations between Ukraine and the People’s Republic of China?

R. Osypenko: Our first and foremost task is the development and deepening of trade and economic cooperation between Ukraine and China. The second urgent task of our Association is to protect and support the interests of our member companies. This is the essence of any such organization to protect interests, create conditions for the development of member companies so that they can realize their potential effectively in the Ukrainian market. That is how the Chinese Commerce Association helps them and already has own success stories.

: Does Ukraine have a strategy for developing relations with China? What prospects do you see?

R. Osypenko: Ukraine has a declaration of strategic cooperation with China, as I noted above, signed in 2011, and a developed plan for its step-by-step implementation. The question is different: Ukraine, since 2015, having joined the Chinese initiative “One Belt, One Road,” has still not taken practical steps in this direction. The documents are signed, but in practice, we do a little to implement this plan. Why don’t we do anything? There is a complex of factors from geopolitics to existing stereotypes of the perception of the Chinese businesspersons, which are supposed to think differently so it is difficult to do business with them… But in fact, this is not true. However, this whole set of factors does not allow us to deepen and quickly activate our bilateral trade and economic relations. Despite this, they continue to develop actively and Chinese companies are entering the Ukrainian market, investing and developing technologies. Therefore, we can see enterprises creation in various regions of Ukraine. So, I can say that cooperation is deepening and the activity of Chinese companies is increasing now in Ukraine.

: Which sector is the most interesting for Chinese companies in Ukraine?

R. Osypenko: You cannot name one sector, the Chinese are very hard-working and enterprising people. They are interested in all sectors, but now they are concentrating on industry and infrastructure. They like to open factories, to introduce new technologies. We have a member of the association the company “Eco-Vtor”, which processes the plastic and greatly contributes to the raise of environmental friendliness in our country. They make fiber out of plastic, which is used in various industries and even exported to Europe. This company in Ukraine has created 350 new jobs. This is the largest factory in that region, as well as the largest taxpayer. Ukrainians have received new jobs, decent wages and confidence in their future. As far as I know, there are plans to expand production. Moreover, such examples are not unique.

: What problems does Chinese business face working in Ukraine?

R. Osypenko: Chinese business faces the same problems as all foreign investors – the insecurity of both the investor and his investments. Today, unfortunately, it can be stated that the business climate in Ukraine is not yet at such a level that there was a queue of investors and everyone wanted to invest in Ukraine. So far, we have the war in the East of the country, an unstable political situation continues, and moreover this year is the year of elections. In terms of the economy, Ukraine still has no clear strategy in which direction we should go. Also, we should not forget about the customs, which shows increased attention to investors (and not only to the Chinese one), and about our unpredictable judicial system… And when a foreign investor sees these issues he starts to think of countries with lower risk thresholds. Therefore, in my opinion, the priority task for any new Parliament of Ukraine should be the development of a clear strategy for speeding up the economy, where the main issues must be the demonopolization of domestic markets, increasing competition, provision of financing for the real economy sector by the banking system, the development of a system for reducing political risks and encouragement of foreign investors to invest precisely in Ukraine.

: Were there any cases when a Chinese company entered the Ukrainian market and, after working for a year or two, left it through certain problems?

R. Osypenko: There are such examples. I think that this concerns not only Chinese compaies, but also many others who enter the Ukrainian market. We must understand that Ukraine is not the only one state in the region, and that fact that, for example, in Slovakia, which is located nearby, there is a better business climate than ours. Or for example, in Poland. The investor has a choice in which country to invest money. Therefore, Ukraine should create such conditions for him so that he would not go to Poland or Slovakia, but prefer Ukraine. But nowadays we have examples when Ukrainians transfer their plants to the very Poland.

: This year, people learned that the new Silk Road would not yet pass through Ukraine. In your opinion, why did this happen?

R. Osypenko: In general, everything is in our hands. We have all the preconditions: the geographical location of Ukraine and our potential say that it is logical that the path have pass through us. China gets the shortest ways to several European countries at once, where it can supply its products. Ukraine receives transport, financial and commodity flows, which will go through its territory. Therefore, there is a question: if we have objective preconditions, but the paths go around, maybe it’s time to confess ourselves what the problems are and how to settle them. If the Silk Road go through Ukraine, I believe that this would give a significant impetus to the development of our economy.

However, as I mentioned at the beginning of the conversation, since 2015, Ukraine has not taken any practical steps in joint actions to implement the “One Belt, One Road” initiative. We were offered twice to enter into negotiations on signing an agreement on a free trade zone with the PRC, but so far we have not even answered. We confined ourselves to the oral statement by one of the vice-premiers in China at the protocol meeting. However, we have not made any practical steps. That is why China does not understand whether we want to develop this initiative or not. We must decide that if we want, we need to take practical steps. For example, to enter into negotiations on a free trade zone with the PRC, to declare that we will conduct trading in two currencies the hryvnia and the yuan, so as not to lose money at exchange rates. It should be realized that people are judged not only by words but also by their deeds. So far, we are even stingy with words. Therefore, I hope that the new Parliament, which will be formed after the parliamentary elections, will nevertheless develop a strategy for intensifying bilateral relations with China, which will be the key to the accelerated development of the Ukrainian economy. China is open for the cooperation and is ready to help us to create and place its own or joint ventures here, and in no way accompanies it with any political demands, does not impose any political conditions. Therefore, it is very beneficial for Ukraine to have such a partner. It’s my personal opinion. We could give a very significant impetus to our economy, attracting Chinese investments and their latest technologies into the Ukrainian economy, for example, building up a new infrastructure: railways, roads, seaports, airports… And the PRC can help us with this. If you now go to modern China, you will see that the infrastructure in this country is even better than in Europe.

: Can you name the amount of Chinese investment in Ukraine?

R. Osypenko: I can only operate the investment figures from our members. For example, the company CNBM has invested more than $1 billion in the renewable energy of Ukraine. The company “Eco-Vtor” has invested $11 million in the construction of the plant. The Fanda Company invested $7 million. The COFCO International company has built a terminal in Mykolaiv and a plant in Mariupol with a total investment of $200 million. Huawei has created an R&D center. The amounts are significant and these are only those that are on the surface, I’m not talking about many factories that are built in different regions of Ukraine both paintwork and agrarian. In each region, the project is implemented for an amount of about $5-10 million. Investments are coming, companies are interested in developing cooperation with Ukraine. China continues to support us, but the question to Ukraine is: “Will it take practical steps towards China?” If we take these steps, we will be able to increase the amount of direct Chinese investment in the country tenfold.

: What Chinese companies are planning to enter the Ukrainian market? Do you possess such information?

R. Osypenko: Sure. We are negotiating with several Chinese companies, including Beiken Energy Ukraine, Xian Electric, COFCO Engineering. Once again, I am emphasizing that we are talking only about those enterprises, which intend to join the Chinese Commerce Association soon. Many companies enter and implement projects in Ukraine, and by the second stage join our Association. For example, Beiken Energy Ukraine is already implementing several projects in the country’s energy sector, like the Xian Electric company, which manufactures and supplies electrical equipment for high voltage lines. COFCO Engineering plans to build processing plants and grain elevators in Ukraine on a turnkey basis.

: What are the plans of the Association for the next three years?

R. Osypenko: We have ambitious plans for the next three years. For instance, we are planning to strengthen our credibility as the Association and increase the number of our members, we would also like to contribute to the intensification and deepening of trade and economic cooperation between the PRC and Ukraine. This will allow Ukraine to develop its industry by attracting Chinese technology and investments. Now, China can transfer its excess industrial capacities to the countries that have joined the “One Belt, One Road” initiative. The transfer of such industries in Ukraine will allow us to dramatically increase the number of workplaces, and the state, in turn, will receive an increase in deductions to the budget.

We would also like more Chinese technology companies to enter the Ukrainian market. In the Celestial Empire, trains have been running at a speed of 350-450 km/h for more than 15 years. This has increased the capacity of the domestic market of the PRC, interconnected remote provinces with convenient communications. We, unfortunately, do not have such a high-speed railway yet. It would be great to implement such a high-tech project in Ukraine and increase our innovation. That is what we dream about and make every effort to do this.

Also, we will promote experts of both countries to begin consultations on the possibility of starting real negotiations between Ukraine and China on a free trade area. We already have a free trade area with Europe, but so far, there is no such agreement with China. If we sign this agreement, then the flow of goods from China to Europe will definitely go through Ukraine. Would Ukraine benefit from this? I am sure that not only Ukraine but also every Ukrainian would become a winner.

Please read: Doing business in Ukraine during the period of political instability: what to focus on

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