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Courtesy photos You now need your best team going after the best clients. If you think about Ukraine as a restaurant, its pre-crisis menu offered to investors was fatty, rich and high on calories. And, with asset valuations sky high, the bill was big.

The main course had nourishing steel, banking and energy entrees – often evaluated above the industry benchmark and offering high return on investment. The choice of appetizers was no less astonishing: consumer goods, construction, retail, pharmaceuticals among many other options.

With crisis, the binge came to an end. Eating healthy became a priority. And so in mid-crisis Ukraine, investors are taking a step back and changing strategy. In other words, they still have the same menu but choose carefully and eat slower.

With volatile world economic conditions, the game has changed for Ukraine as well. Prior to the crisis, business consultants had been helping companies to grow as aggressively as possible. “Now we are thinking how we can grow leanly. You need your best team going after the best clients for the best price realization in eight to 10 oblasts in Ukraine instead of the 25 you were covering before,” said Alexander Ulanov, senior principal of the Boston Consulting Group.

Lean growth, operational effectiveness and prioritizing investment projects have been the buzz talk across the industries.

However, the “feelings of Western investors are mixed,” said Robert Schaus, partner in Bain & Company Ukraine, one of the international consulting moguls. “There’s a left and a right brain, the irrational and rational side. On the rational side, Ukraine was doing very well before 2008, but the last 18 months have been very much of a disaster.”

In 2009, Ukraine ranked 145th in the World Bank’s Doing Business survey. After a boom decade, core metal and chemical exports almost halved, construction shrank twice and consumer moods have been very dull.

But the good news for Ukraine is that “if you look across markets in Europe, there are very few places where you can invest right now,” said Ulanov. “Most multinationals are eyeing Russia and Ukraine in this region, probably also Poland. There’s a lot more flexibility here in the investment climate and labor market because you are not dealing with the type of regulations you see in the European Union.”

In 2010, business consultants advise concentrating on anything tied to consumer demand, farming and retail. This menu, although vegetarian compared to meaty steel, mining and finance sectors, looks quite healthy given the 46-million people that eat, work, drive and go shopping in Ukraine.

In consumer goods sector, Schaus suggested cleaning up relationships with retailers, sorting out the brand assortment, and considering buying complimentary products and brands. “When Ukraine entered the 1996 crisis, there were 20 to 30 confectionary companies. By the time the crisis was over, only five relevant players were left,” said Schaus expecting more consolidation starting with 2010 as well.

In car manufacturing, metals, mining and agricultural machinery, local production has huge potential, according to a 2009 investment climate report produced by McKinsey & Company, the world’s top business consultancy.

“Ukraine uses four times fewer tractors per hectare of cultivated land than Turkey and six times fewer than France. To reach the level of Turkey would mean a total market of 60,000 to 80,000 units per year,” McKinsey concluded. So, setting up manufacturing businesses in Ukraine would stimulate domestic demand and unleash export opportunities.

Ulanov expects telecommunications, pharmaceuticals, private equity, and agriculture to pick up soon. Anticipating the growth, the head of BCG Ukraine said they are doubling staff towards the end of 2010 with an outlook to triple it next year. To perform in this market, he said that “you have to have a really strong stomach and understand the realities of working locally.”

The realities are harsh, at times reminding a jungle, according to Schaus. “Regulatory and administrative barriers are a number one issue keeping investors at bay and keeping the economy back,” he said. A lot of investors wait for the election storm to be over to deliver or readjust their plans.

Among structural challenges ahead, there are shrinking labor force, obsolete equipment and rising global competition. The McKinsey report calculated that to return to Ukraine’s gross domestic product growth levels from the booming 1998-2007 rates will require 29 million new people in the labor market at the current level of productivity. Right now, however, “a US worker does in a day what it takes a Ukrainian worker six days to achieve,” according to the findings.

Ulanov thinks that macro-economically Ukraine should invest into infrastructure and education. “If you look at Poland, it’s an interesting place as a sort of a proxy of where we could be. Driving from Warsaw to Krakow five years ago was unimpressive and tiresome. Now, their roads are as good as Germany’s. That’s a great story to tell potential clients.”

Education is “the biggest challenge” the country is facing long-term, said Schaus. “If you give up on upcoming generation, you’ve given up on everything.”Nevertheless, education, health, logistics, and tourism sectors seem to be off the menu for most investors.

Moreover, “the country is not marketing itself very well,” said Schaus. “All I read about Ukraine in the foreign press is bad news.”

However, these sectors are all likely to create large numbers of new jobs in the mid to long-term, provided that the growth environment is cultivated.

Kyiv Post staff writer Yuliya Popova can be reached at popova@kyivpost.com.