It could have been a good year for Ukraine’s economy.

In January, Ukraine placed eurobonds with a historically low interest rate. Negotiations for another International Monetary Fund loan were underway. A new package of investment incentives was in the works. There were plenty of reasons for cautious optimism.

Then, the coronavirus knocked on the door.

As even wealthier nations struggled to find a balance between saving lives and saving their prosperous economies from collapse, Ukraine’s challenges were aggravated. It had a notoriously decrepit health care system and an underdeveloped economy that couldn’t handle the blow it was about to take.

How does one cushion it? This is what Yulia Kovaliv, deputy head of the president’s office in charge of economic affairs, has been busy with lately.


Since mid-March, Kovaliv has been coordinating the administration’s efforts to help the existing Ukrainian businesses survive quarantine and attract new investors.

“The COVID‑19 pandemic made the competition for investments even harsher than it was,” Kovaliv told the Kyiv Post. “We need to run faster.”

Corona crisis

As Kovaliv sat for an interview with the Kyiv Post on June 9, she did her best to radiate reassuring confidence despite the crisis unraveling. After promoting Ukraine to investors for years, it’s no wonder she has perfected that skill.

But sugar-coating Ukraine is especially hard today. Like in most countries, its economy suffered from the pandemic. At the start of the year, the World Bank projected Ukraine’s economy to grow by 3.7% in 2020; now it expects it to fall by 3.5%.

“The pandemic really undercut us,” says Kovaliv. “We need to give business time to recover, and we are ready to lend a hand.”

Ukraine can’t afford expensive stimulus packages like the U.S. did. Instead, it will accelerate economy-boosting measures it planned for 2020 anyway — introducing cheap loans for businesses and incentive packages to lure investors — and hope that they will speed up the recovery of the economy.


“95 percent of our efforts during the pandemic seek to help and develop small and medium business,” she says. “They include tax benefits, a temporary ban on inspections, and cheap loans for small businesses.”

Kovaliv praises the government’s decision to introduce a lockdown early on, when Ukraine had only a handful of COVID‑19 cases. As much as the quarantine hurt businesses, there was no way around it.

“Saving people’s lives has been the No. 1 priority,” she says. “We saved many lives and avoided the worst-case scenario. Now we need to help businesses recover.”

New administration

President Volodymyr Zelensky’s is not the first administration where Kovaliv has worked.

She headed a reform-focused advisory body associated with the administration of fugitive President Viktor Yanukovych, served as deputy economy minister after the EuroMaidan Revolution that ended Yanukovych’s presidency in 2014, and spent several years running the Office of the National Investment Council, an NGO associated with the administration of President Petro Poroshenko.

When Zelensky came to power in 2019, he replaced nearly every top official who worked for his predecessor. Kovaliv was one of the few people with a background in the Poroshenko-era government who were hired for top positions. In September, she took charge of the administration’s economic policy.


“Working here, I have many more tools to implement the changes we were developing when I was at the Office of the National Investment Council,” Kovaliv says. “It’s my personal challenge to bring to life the initiatives we were working on back then.”

Working with Zelensky’s administration has its perks. The main one is the president’s control over the majority in parliament — and the power to pass reformist legislation.

It’s a welcome change. In the last years of the previous administration, the parliament often was influenced by populism, and resisted reforms.

“Now I see that things that we’ve been talking about for years are finally happening. It raises people’s trust that there is a strong political will to bring in positive change,” Kovaliv says.

Zelensky’s power over parliament does have its limitations, however. The land market legislation had to be reduced to a softer form to be passed. And the bank bill, which went against the interests of oligarch Ihor Kolomoisky, took many weeks to pass.

Another difference of this administration is its specific focus on developing small and medium businesses. In his first month in office, Zelensky canceled over 160 presidential decrees that regulated business, including painful ones, like a 1995 decree that charged companies fines for even the slightest mistakes in documenting cash operations.


“We want to build a new class of active, entrepreneurial Ukrainians — people who start a business and achieve success,” Kovaliv says.

Investment nanny

In January 2020, just before the coronavirus outbreak threw the world in turmoil, Zelensky made it into headlines — and internet memes — with his suggestion of giving investors a “nanny” to care for their interests.

“You will have a manager, a nanny, who will speak five languages and be in touch with you 24/7,” Zelensky said during the World Economic Forum in Davos. “Any problem you have — you contact him and the problem is gone.”

What Zelensky referred to as a “nanny” is a package of incentives for investors that will be introduced in late 2020.

The idea is to give large investors a choice of several government benefits.

“It will be a menu for investors,” Kovaliv says. “It will offer things like allocating a land plot, or providing tax benefits, or building a road for them, or lifting customs fees for equipment they’re importing.”

To qualify, there will be three conditions: to invest at least €30 million, create at least 150 jobs and pay an average salary at least 15% above the wages in the oblast where it operates. The original threshold of €100 million was lowered due to the COVID‑19 crisis.


The “menu of benefits” will be available to both newcomers and existing investors (for their new projects), whether foreign or domestic.

Here’s how it will work, according to Kovaliv.

A potential investor files an application for benefits to the Investment Promotion Office (UkraineInvest), an advisory body for the Cabinet of Ministers.

There, a staff of some 40–50 people vets applications and negotiates benefits with the investors, consulting with the Economy Ministry.

When an agreement is reached, the investor signs a 10-year contract with the government to ensure the parties will fulfill their promises.

The whole process — from application to contract — should take 2–3 months, Kovaliv said.

To protect themselves from the risks of political instability, the investors can negotiate that their contracts are subject to English law — meaning that they won’t have to count on Ukraine’s notoriously corrupt courts.

“For many investors, this is more important than any benefits,” Kovaliv says.

The third component of the program is guidance and support provided along the way — with issues like communication with authorities, obtaining permits, or when they become victims of illegal treatment by state bodies.


“This aspect is what we refer to as ‘the nanny’,” says Kovaliv.

Zelensky filed the draft law that launches the incentives for investors to parliament on July 1. According to Kovaliv, it is most likely to be passed at the parliament’s next session, in September. If that happens, the program can start working by the end of the year.

It was Zelensky’s own idea to call the program a “nanny for investors,” Kovaliv admits with a smile.

Client-oriented state

One recent event showed both what is right and wrong in Zelensky’s administration’s approach to helping businesses.

In early June, the president was meeting with local business representatives in Khmelnytsky, a city west of Kyiv, when he heard complaints about the treatment they get from state-owned UkrEximBank.

The bank was taking months both to restructure existing loans and to lend money within the government’s new program of affordable loans for small businesses, known as the “5–7–9%” program. The program was Zelensky’s baby, so he snapped.

Right there, in front of the business owners and TV cameras, the president called the head of the bank and ordered him to solve the problem.

The move was controversial and revealing. On the one hand, it showed that Zelensky was passionate about helping businesses survive in the time of crisis.

On the other, he was openly breaching his authority by giving an order to the banker, demonstrating that the state still runs on “telephone justice” — a system in which a high-ranking official can give orders to one with a lower rank, even when they are illegal.

In surveys and interviews, investors consistently say that absence of the rule of law is the scariest factor for them.

Kovaliv loyally defends Zelensky, saying that he was frustrated by the bank’s inertness that was undermining a lending program that he was passionate about.

“It was a natural, emotional reaction,” she says. “When you put so much effort into something as we did into the affordable loans program, you really, really want it to work.”

She adds that requests like that come to the administration all the time. Companies ask to speed up obtaining a permit or getting a VAT refund. The administration tries to help.

“Sometimes our state agencies aren’t client-oriented. They will move slowly, take a month to consider applications. But in today’s crisis, businesses need money fast, or they will shut down.”

Focus on lending

The affordable loans are the core of a program that Zelensky calls “Come Back and Stay.” Its idea is to lure back Ukrainians who work abroad by giving out loans for small businesses.

According to different estimations, between 2.5 million and 5.5 million Ukrainians either permanently work abroad or travel regularly for seasonal work.

The program offers loans of up to Hr 3 million ($110,000) for up to 5 years to businesses with annual revenue under Hr 100 million ($3.7 million). The interest rate ranges from 5% to 9% depending on the size of the business and the number of jobs the loan helps create. It is available both for existing companies and startups.

For comparison, Ukrainian banks charge businesses an interest ranging from 13.5% to 29% for regular loans.

The program launched in May. As of the end of June, the participating banks gave out 899 loans for a total amount of Hr 810 million ($30 million) — meaning that the average loan was $33,000.

The second stage of the government’s plan to bring Ukrainians back to the country will be “The New Money” — another lending program, which will launch by the end of 2020 and offer two-year loans with a 3% rate. It is planned that the state will subsidize the difference between the 3% and the bank’s actual rate.

In a good year, these measures would come in handy for Ukraine’s small businesses. In a pandemic, it might mean their survival.

“We need to help businesses recover from the pandemic,” Kovaliv says. “Now is the time when we have to value and nurse every single job they create.”

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