In Ukraine these days, it's rare to hear somebody calling for more government.
But according to the head of Middle East and Asian sales for steel pipe supplier Centravis, Andrey Serdyuk, the Ukrainian government needs to expand its foreign presence in order to encourage local firms trying to win business abroad.
“The government should work more professionally and, I would say, with a greater effort,” Serdyuk told the Kyiv Post in a telephone interview.
By themselves, export-minded Ukrainian businesses have so far found a fertile business crescent in the Middle East.
Centravis has opened an office in the United Arab Emirates, while billionaire Victor Pinchuk’s steel pipe supplier Interpipe registered its UAE trademark earlier this month. Myronivsky Hliboproduct, a large agricultural supplier, also recently opened an office in the UAE, while plane manufacturer Antonov scored a deal to supply airplanes to Saudi Arabia not long ago.
Serdyuk will speak at the Kyiv Post’s Capturing New Markets Conference at the Hilton Kyiv on March 29.
Promoting expansion
Serdyuk, whose company is courting deals in Saudi Arabia and Iran, said that Ukrainian government officials fail to promote commerce in any meaningful or organized way.
“If you compare to benchmarks like Korea, we still have a lack of activity, a lack of promotion, and a lack of trade missions,” Serdyuk said.
The businessman added that while many countries like Saudi Arabia and the United States have international chambers of commerce that promote trade abroad, Ukraine has no such institution.
And, given that the country’s image abroad as a stable place for investment has been damaged by the ongoing Russia-backed war in the Donbas and the country’s economic troubles, Ukraine is in sore need of a promoter.
“I would say that if we improve, upgrade, lift up our image as a country, it would be the number one benefit for all export-oriented businesses from Ukraine,” Serdyuk said.
Serdyuk said that Saudi Aramco, the kingdom’s state-owned oil and gas firm, had been reluctant to enter into a deal with Centravis because of the war in the Donbas.
“Aramco is a more or less international company, and they were a little bit scared to send people to Ukraine for audits or inspections of orders,” he said.
Serdyuk added that effective international promotion could help business conditions by improving Ukraine’s image abroad and creating better connections with foreign regulators.
“We have industries and we have companies that could be very attractive to potential investors,” he said. “We have a really attractive international position.
Lucrative investments
Serdyuk added that the Middle Eastern nations and their companies are an extremely lucrative – albeit untapped – well of potential financing and investment for Ukraine.
Calling access to financial markets in the Middle East “critical” for Ukrainian firms, Serdyuk said that difficulties due to the drop in oil prices in Saudi Arabia and the UAE could force those countries to diversify their investments, making Ukraine a more attractive possibility.
The Centravis businessman added that a lack of extensive regulation over Middle Eastern companies makes it easier for them to take the risk of investing in Ukraine.
“Companies in the Middle East – they’re more flexible, in my opinion, in terms of investment decisions, compared to companies from Europe or the United States,” Serdyuk said.
He added that the agricultural sector stands to gain the most from further foreign investment, echoing a view held by many observers of the Ukrainian economy.
Serdyuk added that combined with the ongoing devaluation of the hryvnia, which saw a fall of seven percent during the month of February, foreign financing could be even more attractive for Ukraine.
“Basically, it had a positive impact on our business,” he said, adding that the benefits of devaluation had to be considered “over a longer time frame.”
“At first, you have more incentives to sell at a better price – foreign currency is more available,” Serdyuk said. “But after a few months, the inflation rate gets higher, so other costs like energy and raw materials get more expensive.”
Higher energy and raw material costs wind up canceling out the benefit of devaluation, Serdyuk said.
“Very strong investment levels still remain difficult,” Serdyuk said. “But we believe that there are more opportunities.”
