The latest Korrespondent magazine ranking of the richest 100 Ukrainians shows that their net worth equals 38 percent of the nation’s entire economic output of $165 billion last year.
This is but one strong signal, experts say, of a national economy that is unhealthily characterized by wealth concentration, monopolization, low competition, technological lag and dependency on raw material exports.
Not only is this lack of economic diversity bad for nearly 46 million Ukrainians, it also causes the fortunes of the wealthiest 100 Ukrainians to ebb and flow considerably.
As the Korrespondent/Dragon Capital index found, the nation’s 100 richest people saw the value of their assets shrink by a quarter over the last year. Moreover, the largest financial-industrial groups, System Capital Management, Privat and EastOne, also saw a drop in their net worth.
The uber-wealthy top five – Rinat Akhmetov, Igor Kolomoisky, Vadim Novinsky, Gennady Bogolyubov and Dmytry Firtash — have a net worth of $30 billion, almost equal to the remaining 95 on the list.
The survey is one more sign that Ukraine’s economy may be headed for a recession in 2013, although one that is not expected to be as crushing as 2009, when gross domestic product dropped 15 percent and the currency lost almost 40 percent of its value.
Recession or not, boom or bust, Ukraine’s economy remains remarkably undiversified. Those who export raw materials will do fine, but what about the rest?
“The fact that the current profile of the richest people didn’t change much, yet the top’s share grew, indicates that Ukraine’s economy is stuck with the same model of growth, dependant just on a few sectors,” said ldar Gazizullin, senior economist at the International Centre for Policy Studies.
Gazizullin continued: “This of course makes the country more vulnerable to external shocks. One of the reasons why we do not see a more diversified economy is obviously the lack of competition – our country remains notoriously closed to foreign investors and hostile for many domestic investors, except for a chosen few. If Ukraine wants to continue trading with the world, the situation has to change.”
Across the border in Russia and in more developed economies, wealth concentration is not as high. The net worth of the 100 richest Russians equals about 20 percent of the nation’s annual gross domestic product. The comparable figures for Germany are 11 percent; for the U.S., 7 percent; and China, 3 percent, according to Korrespondent.
Eight of Ukraine’s 10 richest are mainly metallurgists, one is an egg producer and the other is a chemical producer. Altogether, 14 of the richest amassed their wealth mainly in metallurgy. Another 31 richest are involved in agribusiness and food production. Agriculture has an eye-catching place in the portfolios of 20 or so others.
There are regional disparities as well. About one in four of Ukraine’s richest hail from Donetsk Oblast, according to Korrespondent.
Dragon Capital, a Kyiv-based investment bank, conducted the valuations. This is Korrespondent’s seventh richest list.
As the magazine’s chief editor, Vitaliy Sych, concluded: “Ukraine needs some adjustments. Otherwise, we may witness this country slide to the economic level of the world’s poorest and least attractive economies.”
List includes 12 billionaires
Kyiv Post editor Mark Rachkevych can be reached at [email protected].
