Though much separates them now, Austria and Ukraine share a common past. At least, that’s the case for west Ukrainian hubs like Lviv or Chernivtsi, which were under Habsburg rule for over a century as capitals of the provinces of Galicia and Bukovina, respectively.
Current Ukraine-Austria diplomatic relations are friendly, though business ties are not as cozy as one would expect. Austria’s high rank on the list of foreign investors in Ukraine is mostly based on the acquisition of several Ukrainian banks. Companies from other sectors have been slow to come, discouraged by political uncertainty and poor rule of law.
In his interview with the Kyiv Post, Austrian Ambassador Wolf Dietrich Heim said the two countries are almost always of like mind, but admitted that this has not led to an influx of Austrian investment.
“For many years – and this isn’t something new – the overall context of doing business in Ukraine has been difficult,” Heim said.
He said the main problem that has pushed investors away is how the rule of law works in Ukraine. Investors want to be able to depend on the legality of processes related to tax, customs and other issues, but often this is not the case.
“We have some clear cut cases where one’s led to believe that the courts take outright wrong decisions,” he says. “There have been some reforms in some areas, but we are still far from seeing improvement when it comes to defending legitimate concerns, business or political, in the Ukrainian courts.”
Asked if the current government and President Viktor Yanukovych have met Austrian-investor expectations, Heim refused to make blanket statements, but admitted there was some sense of disappointment.
“A lot of people in Austria would have hoped that the overall climate would improve. And I think most people we talked to are somewhat disappointed that these improvements had not happened,” he says.
Austria expects Ukraine to pay attention to public procurement and energy efficiency. But when it comes to investors, political issues are also important, the ambassador added.
“I can’t say that economic decisions are now taken on the basis of daily political events. But I would assume that the overall political development is a strong factor,” he says. “And it’s one of the reasons why we’ve seen some preservation and sort of slow decision processes with investors. I think this is true for most European investors, not only potential Austrian (ones). In the last two, two and half years we didn’t see as much progress in establishing better business relations as we would have thought.”
Still, there are, according to Heim, about 250 Austrian businesses operating in Ukraine, excluding those that have trade relations with Ukrainian partners but don’t have local offices.
Austria is Ukraine’s fifth biggest investor with $3.4 billion of inflows, the bulk of which came from the purchase of three large Ukrainian banks in 2005-2008. Also, an Austria-registered company bought state-owned fixed-line monopoly Ukrtelecom in 2011.
According to Ukraine’s National Statistics Committee, Austria didn’t invest in Ukraine in 2012.
But Heim believes the situation could turn around, if only companies find the right conditions to operate successfully in Ukraine’s economy. It especially concerns small and medium businesses.
He acknowledges Ukraine is sending positive signals, too.
“For instance, serious efforts to get an IMF deal will likely lead to necessary reforms being taken,” Heim said. “Seeing that we have very competent and coherent negotiation in this context is very reassuring.”
Work on the Ukraine-EU Association Agreement also raises Ukraine’s international profile. Heim notes that there is “a clear understanding about the reforms that need to be initiated in the course of the next few months to be in harmony with the AA agenda.”
The ambassador is also upbeat about Kyiv’s potential. The city could learn much from Austria’s capital Vienna, regularly voted the world’s best place to live. One reason are its long term investments in infrastructure, an area where Kyiv lags.
Still, Heim notes, Kyiv is “a very livable place, with the quality of life being quite high.”
“Kyiv offers a lot in terms of culture. There are not many places in Eastern Europe and Europe in general that can offer that range of artistic and cultural events,” the ambassador noted.
Having lived in Kyiv since his appointment in 2010, Heim said his favorite spots include Horodetskoho, Volodymyrska, and Yaroslaviv Val streets and the botanical garden of Ukraine’s Science Academy in Pechersk.
He believes Kyiv should focus on its strong traits and use them to succeed. It could become a regional meeting center.
“We want, without any prejudice, to see a prosperous, independent Ukraine doing the best it can. It’s been Austria’s policy for decades and even centuries,” Heim said.
Kyiv Post staff writer Olga Rudenko can be reached at [email protected]
