Sergiy Tsivkach, the country’s leading investment nanny: “Since February 24, 2022, we have helped attract more than USD 500 million in investments. These are industrial projects, not financial aid or loans.
Sergiy Tsivkach became the head of the Investment Promotion Office (UkraineInvest) in 2020. Employees of this institution are known as investment nannies because their main task is to help businesses, including foreign ones. In an interview with Gordon, Tsivkach told whether investors are interested in Ukraine during the war, which regions are the most attractive, how much money has been raised since the start of the full-scale invasion, which areas attract foreign businessmen, and whether Ukrainian companies invest in development.
– It seems very strange to me that we are talking about investments now. After all, who invests in a country that is at war?
– Only a nation that has not surrendered to the enemy talks about investments during a war. For the enemy, the main thing is that our economy collapses and they feel that they have won. Investments are an element of Ukraine’s struggle for life. And not only for survival, but also for the future. Therefore, we must look ahead to what will happen after the victory. And we must ensure Ukraine’s economic transformation. Ukraine is showing that we are fighting the enemy, but we are also helping investors, showing them the benefits, giving them the opportunity to work in Ukraine, and they feel confident too. This is a very important psychological effect.
Since February 24, 2022, the Investment Promotion Office and I have facilitated more than USD 500 million worth of investments. These are industrial projects, I want to emphasize, not financial assistance or loans. These are companies that have decided to build enterprises. Some of them started in 2023, and some are starting in 2024. I am talking about the so-called greenfields. What does it mean? When a company wants to build a plant, it chooses a field or an old territory and builds its facility from scratch. We also have brownfield, which is when companies take an old facility, modernize it, and operate there. But greenfield is something that every country in the world is fighting for – from the United States to Japan, to Saudi Arabia or Australia. These are jobs, technology, taxes, etc.
– Could you add some details: is it a lot compared to what it was before?
– In 2021, we had USD 7.3 billion in foreign direct investment. At the end of 2022, it was minus USD 328 million. The difference is more than USD 7.6 billion. This is the impact of the war. And the reduction of jobs by 3.5 million is government statistics. These are the factories in our country that worked less, closed or ended up in the occupied territories. But of these USD 7.3 billion in investments, the first was reinvestment (i.e., investments by companies that already operate in Ukraine, make a profit and do not withdraw it, but reinvest it in the development of the enterprise), the second was financing from parent companies, i.e., also in existing companies, and the third was new capital investments. So, in 2021, this is USD 1.2 billion out of USD 7.3 billion. And we are now talking about new capital investments during the war at the level of at least USD 500 million. But we must understand that this is not USD 500 million that will come to Ukraine at the end of 2023. They will come in over the next few years in stages of building enterprises. I believe that for a state of full-scale war, having such a small amount of investment for peacetime, but a significant amount for wartime, is a very serious indicator.
– Could you tell us what kind of companies these are?
– Our key investment that we were able to attract to Ukraine – this was our joint work with the Ministry of Foreign Affairs, the Ministry of Economy, and the Prime Minister of Ukraine – is Kingspan.
Kingspan is a global manufacturer of energy-efficient building materials. Their annual global turnover is over EUR 6 billion. They are an international corporation. They were one of the first to withdraw from russia, and they were the first to announce a significant investment of USD 300 million in Ukraine. They will build six plants in the Lviv region that will produce various products and building materials. They want to make this project a landmark project not only for Ukraine but for their entire group. Because they operate in more than 70 countries around the world and they want to show how you can combine many plants in one facility and do it efficiently. And even bring their employees there and show how it works. It’s very cool that they named the project “Cirshe”, which means “freedom from the invader” in the old Gaelic language. More than 800 people will be employed, will receive European-level salaries, and will work in a company with the most modern building materials technologies.
The second is the Polish company Cersanit. We worked with them even before the war started, but during the war they invested USD 20 million in a new production program for 2022. Their total investment is over USD 60 million.
Other companies include Carlsberg – USD 40 million, the Irish company CRH – more than USD 30 million. Nestle and Unilever are also investing USD 40 million and USD 20 million. Bayer is investing EUR 65 million. We also help and support them. They made their own decisions, we didn’t bring them to Ukraine because they were already working, but we provide them with support when they need it. That is, we work in the mode of investment apprenticeships.
In total, we have 32 projects under development worth USD 2.5 billion. These are both Ukrainian and foreign projects. And if you look at our results since 2020 (the year I was appointed), we, together with the team, have helped to raise more than USD 1.7 billion. For the past three years, we have been among the top five investment agencies in Central and Eastern Europe, covering 23 countries. Even during the pandemic and the war, we managed to secure third and fourth place out of 23 countries in Central and Eastern Europe.
– What other regions will be involved in the implementation of investment projects?
– These are Lviv, Volyn, Zhytomyr and Kyiv regions.
– We see the insidiousness of the russian invaders, who are shelling our infrastructure, production facilities, and warehouses throughout Ukraine, including in the Lviv region. It is dangerous, but investors are still coming in. What inspires investors?
– When an investor says: “I’m coming to Ukraine,” it doesn’t mean that he brought equipment and started working the next day. First, they contact us, they are interested in analytics. The first question they ask is when will the war end? We are not the Defence Intelligence of Ukraine Ministry of Defense of Ukraine, we are not special services that deal with this, so it is very difficult for us to predict when it will happen. We say that the active phase of the war is ongoing, but every investment project has a preparation phase. And this preparation phase can last up to 18-20 months. Choose a site, understand the analytics, understand how much production is needed, what capacities are needed to make the project profitable. Understand where to sell, how to sell, choose teams, go through permitting procedures, connect to electricity, water, gas, etc.
This period takes a lot of time and is not profitable for the investor. For investment projects, it can cost less than 1% of the investment. Because the key money is spent on equipment, which is 60-65% of the investment, depending on the project, and then to build everything. We always tell them: “You are waiting for us to win, but we will win, and we are working on it together with our partners. Here’s day one – we won, what are you going to do? Will you start counting down 20 months? How long will it take you to launch your facility? Do this now and you will be ready to come in on the first day of our victory and not only help us, but also earn money for yourself.”
You always have to show them the possibility of earning money, and they will understand. Ukraine will be, as The New York Times wrote, “the biggest construction site of the century.” Unfortunately, this is true. And investors understand this, they still bring their capital to produce products and earn money, but also to develop our economy.
– So now they are all in this preparatory process?
– Not all of them. Cersanit has already put in its first line. Companies like Bayer and others are already doing their first stages, they are not waiting. Because they already had production in Ukraine. It is easier for them to develop and do something.
Insurance is a very important issue. This is already happening at several levels. Recently, the World Bank’s International Investment Guarantee Agency (MIGA) announced insurance for the Dragon Capital project for more than USD 9 million. This is a small project, but it’s not the amount that matters, but the fact of insurance. Because when foreign investors see that an object is insured, even if it is in the Lviv region, it is like a green flag for them, if not green, then at least yellow. But definitely not red. Insurance means that the risks are understandable.
The German Ministry of Economy is very active, insuring all German investments in Ukraine. We are currently working on a project of a large German company, our new plant, greenfield, and the conversation is ongoing with colleagues from Germany, there is a positive understanding of commercial cooperation on insuring such facilities against military and political risks.
There are organizations such as the US Development Finance Corporation, we have provided them with 11 projects worth more than USD 1 billion. They are now considering whom to insure, but the train has left the station. Everyone is now in the active phase of selecting insurance projects, and this insurance will be available.
– Is Germany the only country that insures investments?
– From practical experience, we have seen Germany. The UK and France have sent messages about their readiness to consider more countries. And Poland has also passed a bill to insure investments in Ukraine for Polish companies and foreign ones. So, frankly, I believe in these bilateral stories, when a country that is a partner of Ukraine insures its investors entering Ukraine. It is beneficial for them, it is beneficial for us. It’s easy to coordinate, because they take care of their business, and that’s normal.
Ukraine is also working on this, we have a draft law No. 9015, which should enable the Export Credit Agency to insure investments in Ukraine. As far as I know, the National Bank of Ukraine is also working on such programs.
– All we talked about was foreign investment. You say that there are also domestic, Ukrainian investments. Do these investments help the Ukrainian investor?
– In fact, Ukrainian investors are very active, even more so than foreign investors. It is much harder to convince a foreign investor than a Ukrainian one to invest. These are not hundreds of projects, but dozens, but they are happening. Our mandate, our competence, is not only to support foreign investors. Our mandate is to support both Ukrainian and foreign investors to attract investment to the country. When we support a Ukrainian company, it is also aimed at attracting investments, and these can be foreign investments. This is about partnership. Now the president has signed the amendments to the law, the government is working on bylaws, and we have applications for three Ukrainian projects and one large foreign one ready. In total, they will bring in about USD 550-600 million.
In general, here’s how things work with our investment nannies. A company comes to us and says that it wants to receive state support under the law. Then we sign a memorandum with them and support them. What does that mean? We can look for a land plot for them, we can look for an investor for them, we can look for a partner for them, we can already move to the stage of developing a feasibility study and other documents that are needed to go through the entire process and receive government incentives. We have already done this, these applications were submitted in December 2021, when we applied for USD 100 million. We received positive conclusions in February, but the projects did not take place because financial indicators changed and some of the facilities were physically damaged. Now we are working on this list again, we have 10 such projects, the total amount is about USD 1.1-1.2 billion. We are already ready to apply for USD 550-600 million of which we have already documented projects. We need to go through the Ministry of Economy and then sign them in the Cabinet of Ministers.
So, our total investment portfolio includes investment projects that we support, both legal and nonlegal, and there are 32 such projects worth more than USD 2.5 billion. Out of these 32, 10 are subject to the law on investment nannies, about USD 1.1-1.2 billion. Out of these 10, we are ready to submit four or five projects worth USD 550-600 million.
Investment nannies are two components, although society perceives them as one. It is still very important to distribute it.
Investment nannies as a principle is when an investor comes to a state specialized agency and says: “Help me understand how to make an investment, what your legal framework is, who I should work with as partners, give me analytics, etc.” In other words, it’s like babysitting, explaining, doing something for them. It’s a kind of consulting, but it’s free. And this is from the Ukrainian government for foreigners and Ukrainians. Ukrainians usually come and say: “We have a project. Where can we get the money?” Foreigners come and say: “We have money. Where to invest?” This is the mode in which we have provided support for USD 1.7 billion since 2020. Of this amount, USD 866 million has already been invested, and the rest is still in testing mode for several years. That is, the principle of investment mentoring works effectively, it gives its results.
What do we need to understand? The principle of investment apprenticeships is not Ukraine’s know-how. This is a system called IPA (Investment promotion agency), which is an organization that works in accordance with the standards of the ODA (Organization for Economic Development). They exist in the United States of America, in all European countries. They exist everywhere. So, when people say that we have created a separate mechanism for individual companies in Ukraine, this is not true. We have brought Ukraine in line with global standards and managed to ensure that our country is competitive with neighboring countries. If you go to European countries, you will be reimbursed for your job with money, and you will not only be accompanied. It works even better for them. So this is the principle of investment.
Now about the law, it’s actually not so much about investment, it’s much deeper and more important. The law is called “On State Support for Investment Projects with Significant Investments.” The idea was to give an incentive to projects of EUR 100 million or more. After the Verkhovna Rada consulted with us, with our colleagues in the government, this threshold was reduced to EUR 20 million in 2020, because Ukraine is a developing country, and for us EUR 20 million is also a significant investment. After the recent events and changes, this project is reduced to EUR 12 million. This gives not only large investors but also small and medium-sized businesses the opportunity to participate. Most importantly, this law provides up to 30% of state support for capital investment. This means exemption from income tax for five years, VAT exemption on imported equipment, the possibility of obtaining a land plot for rent without payment, without an auction from local authorities or the state, and now, thanks to the changes signed by the President, this bill signed by the Prime Minister and submitted to the Verkhovna Rada, we now have the opportunity to compensate investors for connecting to electricity, gas, water networks, building roads, railways and other engineering structures that are needed for plants. Until this year, this provision was in the law on what the state can build, but no money was ever allocated for compensation or such expenses. As of today, the budget in Ukraine has passed the first reading in the Verkhovna Rada and UAH 3 billion has been allocated for this part.
When we are abroad, people ask us: “Why, since we are financing the Ukrainian budget, why is even a part of this money, even if it is small, because UAH 3 billion is only USD 80 million compared to billions, not used?” This incentive will enable the creation of a new enterprise, and every dollar of foreign direct investment will attract another USD 1 of local investment. Each job that will be created through this system will create three to four additional jobs. So, this additional dollar of investment and the additional three to four jobs will create more profits and more taxes so that we can pay off our debts faster and develop our country more efficiently.
– Can some dishonest person or company take advantage of this public money?
– Sometimes we hear: “Here, the money is pledged for their companies, etc”. I guarantee you that this is impossible. No company that wants to get money in some illegal or personal way can do it. Because the application goes through several instances. UkraineInvest attracts and checks the investor: who he is, where he is, where he is from, whether he really brings technology to the country, whether he really works. Then the application is passed to our partners at the Ministry of Economy, who do the same screening, and then the Ministry of Economy passes this application to other ministries, which do each screening of this investor. After that, a decision is submitted to the Cabinet of Ministers, and each minister votes for the project and support. I do not see any possibility for special arrangements here.
– There are many projects underway to produce weapons, drones, etc. Do you have projects and investors who are ready to invest in this?
– Yes, and we are working very hard on it, but we can say very little about it. I can only tell you from the reports that have been made. Rheinmetall and Baykar are the projects that have been announced. And you have seen that the European Commission has approved Rheinmetall’s work in Ukraine. Pay attention to the visit of President Volodymyr Zelenskyy to the United States and the messages that are publicly discussed, that we are building factories that will build military systems for Ukraine.
– Please tell us, are investors generally interested in this area?
– 100 percent. What has the terrorist state done? It not only attacked Ukraine, democracy, and people. It triggered, as they say, the process of developing defense production in many countries of Europe and the world. And this process has already started. And it will continue to gain momentum. We can see that this work is intensifying in all European countries. And Ukraine will be an outpost for the defense of democracy and the military industry.
– Do I understand correctly that there is supposedly investment now, but still, everyone is putting it off until later, when everything is over, when the war is over, when Ukraine wins, and then we will do something active…
– We feel it all the time, there are a lot of events, a lot of interest, a lot of companies want to supply services and products. It’s good, it’s natural, but it’s not for us, because we only work with those who want to invest. It takes 100-150 meetings to find one investment project that can be proven and worked on.
Yes, we are at war. But I will tell you that we have many more investment requests than we had in 2020 for new businesses from foreigners. Not all of them are ready to go right now, but they are all at a “low start”. It is very important to understand the psychology of businessmen: a businessman is always at risk, any investment is at risk. And they simply evaluate risk and return: the risk is high, but the return is also high in Ukraine. Accordingly, no one is taking Ukraine off the investment radar, that’s for sure, but our victory will multiply this hundreds of times.
– Do you think that when it’s all over, there will be a queue of investors in Ukraine?
– It will be for sure. And it is very important for us to prepare for this now. When a person stands in a long line in a store, and a person sits at the cash register and takes a long time to do everything, some customers may leave. We need to make sure that all incoming investors can quickly obtain permits, land, electricity and gas connections, and investment incentives. Everything should work like a Swiss watch. And we need to do this now, this is our homework – incentives and speed of work with investors.
To do this, we need to improve the system of land allocation (i.e., simplify and speed up), and understand exactly why connecting to the power grid is so expensive in Ukraine. This is the work of the entire state and the authorities responsible for this. Active legislative work is underway. I know that the President’s Office is working on it, and the government is working on it. Such things as public-private partnerships are also very important. I know that the Ministry of Economy and the Verkhovna Rada are working on making changes to public-private partnerships and concessions in particular, because this can be the basis for rebuilding Ukraine. This is all happening, and we need to be ready as soon as possible to welcome investors to our country.
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