If the European Bank for Reconstruction and Development is the way for many companies to access bank financing and capital markets, then it’s been Andre Kuusvek’s job since August 2008 to keep the path well-traveled.
Arriving to take over as EBRD’s country director as the world financial crisis started to hit, Kuusvek has overseen more debt and equity investments in the past four years than what the bank put into Ukraine in the previous 15 years since opening in 1993.
In 2012 alone, EBRD invested $1.2 billion, 71 percent of which in the private sector, with a focus on municipal energy efficiency projects, including solar, wind and small hydropower plants.
“Things looked gloomy in the beginning,” Kuusvek told the Kyiv Post in his office on Jan. 23. By 2010, however, with President Viktor Yanukovych taking power, Kuusvek noticed a “little bit of hope as things started to pick up, in the agricultural sector, in particular – it’s one of the markets to look at.”
But “2012 was very difficult, hardly anyone invested, things in the eurozone went from bad to worse…Ukraine’s prospect within the peer group lost a lot of credibility, which is unfortunate,” said Kuusvek.
Although EBRD loans aren’t that much cheaper than local interest rates, their advantage is longer-term financing rather than short-term loans. The international bank is noted for conducting thorough due diligence with strict governance and operating standards as lending criteria.
And because of its international status, companies have protection from a potential raider attack or hostile takeover with EBRD as an investor. “It helps to have EBRD as a partner, but let’s face it. We’ve never been in a court case. So it’s an untested territory even for us, so I hope we never have to do that,” he said.
Still, Kuusvek, 45, doesn’t divide companies into good or bad categories. He said he sees a pool of firms located in what he refers to as the “gray area” – those that should improve their standards and broaden their financing options.
Kuusvek continued: “Our whole point is to look at the gray area and try to move people over to the white side. And I think partially we’ve been able to do it gradually. Partially because they need our money, partially because they need our protection and our brand, and partially there is genuine interest in actually saying, ‘okay look we‘ve generated a business and now we want to take the step and do an IPO in two years’ time … It’s a step-by-step process, transition doesn’t happen overnight.”
But with his March departure date looming, Kuusvek still sees many of the same shortcomings in place when he arrived. The economy is still undiversified, leaving its export-oriented economy open to external shocks.
However, Kuusvek noted, President Viktor Yanukovych’s government is more organized and systemic than the previous one.
“There’s more substance. (But) the whole process is way too formalistic. It’s hierarchical. There’s little discussion, which is a pity,” Kuusvek said of the government reform committee of which he’s a member.
He said the tragedy is that although there are “great people” in government and the administration, ideas are valued less than the identities of those who voice them.
“Let’s do things because something is a good idea not because the EBRD is saying it,” he reflected.
Another shortcoming is the constant inability to get past short-term survival.
“Ukraine never had the time,” said Kuusvek. “It was always that the problem was today and the solution had to come tomorrow, rather than do the right thing and the solution will come.”
He thinks Ukraine should stop focusing on the redistribution of existing assets, mostly inherited from the Soviet economy, and emphasize starting new ones.
“Ukraine is not a very large economy, it’s a big country on the map and by population, but the truth is that following 20-plus years of redistribution rather than development, it’s now a poor economy,” he lamented.
He mentioned the oft-repeated problem of corruption that plagues the investment climate.
“There is too much of ‘let’s squeeze the lemon, and we get some juice out of it.’ But the lemon gets smaller in the process. And there comes a point where there’s very little juice left in it.”
Time is running out, he said, to fight corruption, create a level playing field and form independent courts.
Considering the drawbacks, it’s a miracle that Ukraine is doing as well as it is.
“It’s the magic of the Ukrainian hidden survival instinct that has kept it going,” he said. ”Nobody ever gives up in Ukraine at the individual and governmental level. There’s always a way to turn the page.”
But strengthening governing institutions and combating corruption doesn’t happen overnight, so Kuusvek said he sees “another difficult year ahead, to be honest.”
In his new assignment in London, Kuusvek will also be responsible for Ukraine in looking at local currency capital markets across the 30 countries where EBRD operates.
“In spite of all the difficulties, I’ve enormously enjoyed being in Ukraine, I’ve enjoyed the people, the expat community is fantastic, the Ukrainian community has fantastic examples of people who want to implement change. I’ll leave with memories of big battles but I’ll never have a bitter taste in my mouth. There have been genuine difficulties and genuine willingness to resolve these issues.”
Kyiv Post editor Mark Rachkevych can be reached at [email protected].
