“The energy independence of Europe, versus Russia or any other supplier is now basically our topic number one for Europe,” says Frederic Rochat, managing partner at Geneva’s Lombard Odier Group. This theme, he believes, will “drive a lot of capital expenditure investment to help Europe build itself a fully independent energy mix. Next time such a crisis could occur, it means we may not have the same inflationary pressure which we just had.”
Mr Rochat calls the war “one of those watershed moments”, where the Ukrainian people are not only presenting “a remarkable lesson for all Western democracies, which were erring on the brink of populism”, but also innovating while threatened by “a much bigger aggressor”.
This resilience, he believes, will help massively in the reconstruction task. “They see this as an opportunity to wean themselves off a Soviet past of all the old infrastructure, much faster than others, and actually rebuild,” says Mr Rochat.
Ukrainian authorities are also promoting this sustainability angle to attract foreign investment.
“In order to rebuild Ukraine, we will need to reorientate our industry, to switch from a raw material exporting country to a mode where Ukraine has a strong manufacturing sector,” says Sergiy Tsivkach, CEO of UkraineInvest, the country’s investment promotion agency. “We need to process our raw materials in Ukraine and bring more value-added to them.”
Agricultural processing, currently Ukraine’s most important industrial sector, is under-diversified, he says, with over-reliance on raw products such as cereals, accounting for 47 per cent of exports. “If we compare that to other European countries such as France and Austria, where it’s closer to 20 per cent, we have a lot of room to improve,” he says.
Mr Tsivkach spends much of his time speaking to firms in Europe and the US about investment opportunities. One of the latest recruits is Kingspan, the Irish manufacturer of energy efficient insulation, which is planning to invest €250m in Lviv, creating up to 1,000 jobs in a global technology hub.
But the road to rebuilding will be a rocky one, even after Russia eventually withdraws its troops. While profit margins in Ukraine are much higher than in neighbouring European markets, so are the risks. Mr Tsivkach’s recent meetings in London, Washington and New York led to expressions of interest from at least “seven groups of investment bankers planning to build private equity projects” in manufacturing and construction of agricultural processing machinery.
While keen to invest, most required reassurance that their capital will be protected.
“We need to get ready for that moment when investors are ready to give money to our projects. This requires investment insurance programmes. Even if we win and the war ends, we cannot change our geographical location, and the threat of the next attack in the eyes of investors will be there for quite some time.”
But he also believes the people’s fast evolving identity will help persuade investors. “The will of the people of Ukraine will prove decisive. There are up to 1m men and women defending our country in battle,” he says. “When these people eventually arrive back at their workplaces and see what their friends, families and kids have been through, their level of tolerance to any corruption will be at zero level.”
Throughout history, Ukraine’s ambassadors have played a vital role in leading dialogue with the international community. For the likes of Mr Tsivkach and the president and country he represents, this conversation with investors today is more important than ever.
Read more: https://bit.ly/3mfcLKM
By Yuri Bender, PWM.Financial Times
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