You're reading: Infrastructure and IT on Odesa’s priority list, says Borovik

ODESA, Ukraine – Odesa Oblast Deputy Governor Oleksander Borovik sees a lot of potential in the region, especially as a transport hub.

So Borovik used the opportunity to highlight the importance of upgrading
Odesa’s long-neglected infrastructure when he spoke in front of about 300
Scandinavian and Ukrainian business representatives during the Nordic Business
Day on April 22.

The conference took place at the Banquet Hall Odesa, located in one of
the fastest-developing parts of the city, where business centers and glamorous
apartment buildings are being erected by Kadorr Group, a construction company
belonging to a Syrian native Adnan Kivan.

Odesa should be attracting much more foreign direct investment than the
$1.4 billion it has barely scraped in since 1995. Borovik wants the figure to
be closer to $2 billion per year, and says this is a completely realistic
target.

“If you fix the ease of doing business, the corruption perception, and
the ease of paying taxes – this will actually do the trick,” Borovik said.
“Then the region will start becoming prosperous.”

Ukraine’s Doing Business index is 83 points – it improved slightly when
former economy Minister Aivaras Abromavicius was in office. The corruption
perception index is at 130 points and the ease of paying taxes is at 107.

“Our administration took on a strategic task for the region and for the
country to bring these numbers down,” Borovik said.

Odesa is a key player in Ukraine’s economy. Located in southwestern
Ukraine, the oblast has a population of 2.4 million. But most importantly,
Odesa Oblast is the main sea gateway for the country’s economy, with 75 percent
of the country’s cargo passing through it ports.

Corruption in the way

“Right now cargo is passing through (the ports) in a very corrupt way,”
Borovik said. But “we are in confrontation, if you will, with the central
government right now… over how to fix the ports, how to make that 75 percent
pass through in a legal and transparent way.”

Odesa Oblast is also on major international trade routes across the
European continent, such as the Pan-European Transport Corridor set of routes.
Odesa International Airport is used by airlines such as Turkish Airlines and
Austrian, and the list will also include Lufthansa, Czech Airways, Estonian Air
and Belavia starting this summer, Borovik said.

The deputy governor of Ukraine’s third largest city says that Odesa’s
foreign direct investments should be similar to that of the Czech Republic,
which attracted about $1 billion per million people annually in the 1990s.

“The market is huge, the possibilities… are amazing, and at the same
time there are things that we have yet to do here,” Borovik said.

Healthy investments

Today almost half of the investments in the region come from Cypriot
companies, which are in fact usually “offshore investments that come from
Ukrainians through Cyprus,” according to Borovik. Only three percent comes from
German companies, whereas in most other Eastern European countries German
foreign direct investments are much more substantial.

“It should be up to 40 (percent) for Germany and up to 10 (percent), for
example, for Scandinavian countries,” Borovik said. “And we need to cut off
Cyprus because Cyprus is pretty much money that most of the time you don’t want
to be associated with.”

In theory, Odesa, like Ukraine in general, has much to offer to
investors: a well-educated population, a fairly high life expectancy, and cheap
labor.

“You could actually make (Odesa) a very prosperous part of the country
if you take into account these numbers,” Borovik said.

Fixing infrastructure, roads and the airport in particular, should be a
top priority, Borovik said. He gave the example of the Odesa-Reni highway, a
290-kilometer road that leads to Romania, which has been neglected by previous
officials for decades, and is now in a dilapidated condition.

‘Road mafia’

“About 95 kilometers (of the road) are technically not passable,” Borovik
said. “So what drivers do is drive along the sides of fields and drive through
fields to get through.”

On April 23, Ukrainian President Petro Poroshenko said that part of the
state budget and revenues from customs would be allocated to the reconstruction
of the highway, work on which is to start at the end of May.

Odesa Governor Mikheil Saakashvili
says that he has been working on promoting road construction since 2015.

“I hope that this time the
appropriate bodies will not sabotage the construction of this road,”
Saakashvili wrote recently on his Facebook page.

The governor also claimed during the A7 Infrastructure conference in
Kyiv on April 22 that there is “road mafia of Caucasian origin” that has been
making the construction of roads (in Odesa Oblast) very difficult and
non-transparent.

Borovik said that he plans to change this quickly.

“We must point out that over this year we will invest into the roads
more funds than the previous administrations invested over the last five
years,” Borovik said. “And that’s still not enough.”

That is why the oblast authorities are looking for reputable investors
to further develop the highways that connect Ukraine to the EU.

Borovik said investors interested in infrastructure projects should
contact the Odesa Investment Agency.

Odesa IT prospects

Borovik also highlighted the information technology sphere.

Today Odesa has over 150 IT companies, and around 8,000 professionals working
in the field.

“I’ll be very honest with you, I’ve established several startups in my
time, I’ve studied in Sillicon Valley, I’ve worked with startups,” Borovik
said. “It’s very good here in terms of the workforce, it’s great in terms of
the ideas.”

But as Borovik noted, that is not enough to tempt in IT investors, as
protections for intellectual property rights and a functioning court system are
still not present in Ukraine.

“This is where international investors can help,” Borovik said. “Because
you don’t just bring money, you bring what is known in Silicon Valley as smart
money – it’s when people come and they bring not only cash they also bring
habits, they bring their business attitude, and if something doesn’t work they
protest.”