UKRAINE BUSINESS NEWS - TEN ARTICLES
Next President's Task: End Energy Corruption
Roman Kupchinsky, a scourge of communists and post-communist kleptocrats alike.
Another Business Support Law: Real Help, or Empty Promises?
INDEX OF ARTICLES ------
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1. NEXT PRESIDENT'S TASK: END ENERGY CORRUPTION
Analysis & Commentary by Edward C. Chow, Senior Fellow, Energy and
National Security Program, Center for Strategic and International Studies (CSIS)
Kyiv Post, Kyiv, Ukraine, Fri, January 29, 2010
2. UKRAINE PLANS TO SELL UP TO $1 BILLION IN BONDS NEXT QUARTER
By Halia Pavliva, Bloomberg, Kiev, Ukraine, Thu, Jan. 28, 2010
3. FRANCE, GERMANY, POLAND, U.K. TO HELP UKRAINE WITH IMF
By Daryna Krasnolutska, Bloomberg, Kiev, Ukraine, Sat, Jan. 30, 2010
4. SAY NOT THE STRUGGLE NAUGHT AVAILETH
Roman Kupchinsky, a scourge of communists and post-communist kleptocrats alike.
Economist online, London, UK, Thu, Jan 28, 2010
5. ANOTHER BUSINESS SUPPORT LAW: REAL HELP, OR EMPTY PROMISES?
Ukraine Law Alert, Squire, Sanders, Kyiv, Ukraine, Fri, Jan 29, 2010
6. AMENDMENTS TO CERTAIN LAWS OF UKRAINE TO IMPROVE BUSINESS
Salans, Kyiv, Ukraine, Friday, January 29, 2010
7. VOLIA: BEST TELECOMMUNICATIONS/INTERNET SERVICES PROVIDER
KyivPost's Best of Kyiv 2009, Kyiv Post, Kyiv, Ukraine, Fri, Jan 29, 2010
8. LVIV BUSINESS SCHOOL AIMS FOR ETHICS AND EXPERTISE
By Yuri Bender, Financial Times, London, UK, Sun, Jan 31 2010
9. SOFTSERVE POSITIONED FOR TREMENDOUS GROWTH IN 2010
Company Launches Software Methodology, Opens Global Offices and Wins Industry Accolades
SoftServe, Inc, Ft. Myers, Florida, Friday, January 22, 2010
10. ERNST & YOUNG, BEST AUDIT, TAX AND CONSULTING SERVICES
KyivPost's Best of Kyiv 2009, Kyiv, Ukraine, Fri, Jan 29, 2010
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1. NEXT PRESIDENT'S TASK: END ENERGY CORRUPTION
Analysis & Commentary by Edward C. Chow, Senior Fellow, Energy and
National Security Program, Center for Strategic and International Studies (CSIS)
Kyiv Post, Kyiv, Ukraine, Fri, January 29, 2010
In this moment of crisis, the next Ukrainian president will have a unique opportunity to invest political capital gained from a national mandate to clean up the energy sector.
Both candidates in the Feb. 7 runoff election for president of Ukraine proclaim reform in order to tap into voters’ deep dissatisfaction with dysfunctional politics and their leaders’ failure to cope with concerns of citizens in an economic crisis. Neither has much credibility, given that both twice served as prime minister and are perceived to have been as much part of the problem as the solution.
Whoever is elected will have a small window of time to use the electoral mandate to recover from the sadly squandered opportunity of the 2004 Orange Revolution by setting a bold new path for reform.
Nowhere is this more evident and urgently needed than in the energy sector, which has suffered two decades of decay, inefficiency and massive corruption. This area also concerns Ukraine’s international partners, whose own interests are at stake and who can help if there is political will from Kyiv to embark on reform.
Consequently, what the next Ukrainian president does on energy in his or her first 100 days in office will be watched carefully at home and abroad as the key indicator on whether it will again be business-as-usual or whether Ukraine will at last get a leader to enact changes its society demands.
For energy, the first order of business is to stabilize the critical gas relations with Russia, which have been plagued by many years of non-transparency and designed instability. When Central Asian gas was cheap and West European gas prices dear, billions of dollars per year were siphoned off in corrupt schemes by the politically privileged at the expense of ordinary citizens in producing and transit countries.
The market conditions of the 1990s transition period are gone forever. The Jan. 19, 2009, gas supply and transit agreements go some ways toward modernizing the gas relationship between Russia and Ukraine. However, they are inadequate, as evidenced by constant adjustments of critical terms, such as volume obligations and transit tariff, in the first year of what were supposedly 10-year agreements.
Any agreement that requires frequent political discussion by prime ministers and commercial renegotiation by heads of Gazprom and Naftogaz is inherently unstable. The objective for Ukraine should not be the lowest possible price for imported gas or the highest possible price for gas transit as some suggest.
Three-quarters of the gas from the direction of Russia to West European markets are shipped through Ukrainian pipelines. The fragile Russian-Ukrainian gas relationship is steadily eroding this important asset, inherited from geography and Soviet legacy. Expensive new pipeline projects such as South Stream and Nabucco are proposed for the principal purpose of replacing Ukraine as the vital transit corridor for gas to Europe.
With a couple of billion dollars, Ukraine can renovate and expand its pipeline capacity to carry the volume of gas to be transported by new pipelines, which will cost tens of billions of dollars each. As long as it is recognized as an unreliable transit country, gas producers and consumers will seek economically sub-optimal solutions in order to bypass Ukraine.
Pipelines on the drawing board and imports of additional liquefied natural gas can replace in time all the transit capacity of Ukraine. Without updating its gas transit relationship with Russia as the principal if not only shipper, investment projects to upgrade Ukraine’s pipelines are simply not bankable, as should be clear by now despite the March 23, 2009, declaration by Ukraine and the European Union in Brussels.
Russia and Ukraine must first agree to reasonable gas transportation terms with financially-secure volume guarantees by both sides and a tariff mechanism that reflects operational cost recovery and maintenance, as well as economically justified reinvestment, for a period of 20 years or longer. Then Ukrainian pipeline revenue can be protected and increased through volume growth, not just tariff increases.
Internationally standard long-term contracts take many months to negotiate properly and cannot be concluded in a couple of evenings or weeks as had been the Russian and Ukrainian custom, only to be followed by frequent renegotiations.
The new Ukrainian president should chart a course for mutually beneficial gas relations with Russia, starting with extracting Ukrtransgaz [the gas transit daughter company] out of the black hole that is Naftogaz and compelling it to operate in a transparent and credible manner. Without this essential condition, no external funding of investments in the gas transit and storage system will be forthcoming.
Restructuring Naftogaz itself will be a much more difficult and laborious task. One of the principal, but by no means only, reasons why Naftogaz is a bankrupt (un)natural state monopoly is multi-tiered domestic gas pricing. Naftogaz is forced to sell to different classes of consumers at prices lower than what it pays for imports.
At the same time, domestic gas producers are disadvantaged by having to sell at an artificially low price which is a small fraction of the imported price. In effect, expensive imports are subsidized by cheap domestic supply, leading to highly-corrupt grey market operations. Small wonder unqualified financial statements and audit reports in this majority state-owned sector are difficult to find.
As a consequence, legitimate domestic and foreign investors are discouraged from fully developing Ukraine’s ample oil and gas endowment while revenue and asset stripping of state assets are prevalent. The average consumer endures poor and undependable service even though low energy prices are justified in his name.
State assistance and subsidy should target the truly needy in society. Low overall prices instead lead to wasteful consumption by those with special access to cheap gas, while the rest of the population suffers spot shortages. Ukrainian industry has the highest energy intensity in the world. Energy efficiency will not improve substantially without prices being freed to market-clearing levels.
Advocating real energy reform requires political courage anywhere in the world. In this moment of crisis, the new Ukraine president will have a unique opportunity to invest political capital gained from a national mandate to lead desperately needed energy reform. Without it, Ukraine’s energy economy will be in even more dire straits in five years’ time.
By then, international financial institutions, the European Union and United States may no longer be so interested to offer financial and technical assistance as they are today. The world will have moved on, with or without Ukraine.
Mr. or Madam President-elect, in spite of their past disenchantment, your own citizens and your international partners anxiously await your next move on the energy front.
NOTE: Edward C. Chow is a senior fellow at the energy and national security program of the Center for Strategic and International Studies in Washington. He has been an occasional adviser to various Ukrainian governments over the past 10 years.
LINK: http://www.kyivpost.com/news/opinion/op_ed/detail/58212/
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2. UKRAINE PLANS TO SELL UP TO $1 BILLION IN BONDS NEXT QUARTER
By Halia Pavliva, Bloomberg, Kiev, Ukraine, Thu, Jan. 28, 2010
KIEV - Ukraine will seek to borrow $500 million to $1 billion by selling Eurobonds as early as next quarter, Economy Minister Bohdan Danylyshyn said, as Europe’s hardest hit economy looks for ways to restructure its debt.
“We have been analyzing the whole debt system,” Danylyshyn said in an interview in Kiev yesterday. “We are in talks with potential participants of the restructuring from the European Union, the U.S. and Japan.” While the country is considering different currencies for the sale, Danylyshyn said he thinks the bonds should be denominated in euros.
The former Soviet state needs to get through a presidential runoff vote on Feb. 7 before turning to markets for financing, Danylyshyn said. Prime Minister and presidential candidate Yulia Timoshenko and her opponent Viktor Yanukovych have both said they’re ready to dispute the outcome of the ballot if they suspect vote rigging. That would prolong the period of political uncertainty that’s left Ukraine’s $16.4 billion International Monetary Fund loan frozen since November.
“The major risk to the economy is the political risk,” Danylyshyn said. Ukraine plans to choose banks to manage the placement in the second half of March, he said.
Ukraine last sold international bonds in June 2007, when it offered investors $500 million in notes at 6.385 percent. The country has $5 billion of foreign-currency bonds outstanding, including 35.1 billion yen ($388 million) of 3.2 percent securities due in December 2010, Bloomberg data show.
The cost to insure against nonpayment by Ukraine using credit-default swaps is the world’s third highest, behind Venezuela and Argentina. Ukraine’s five-year default swaps have dropped to 910 basis points from a record 5,384 basis points in March. This compares to 483 basis points for Latvia and 179 basis points for Russia, Bloomberg data show.
Markets
The extra yield investors demand to own Ukraine debt instead of U.S. Treasuries fell 10 basis points to 7.47 percentage points as of 10:20 a.m. in Kiev, down from a peak of 35.93 percentage points in March, according to JPMorgan Chase & Co.’s EMBI+ Index.
Acting Finance Minister Ihor Umanskyi said yesterday Ukraine is in talks to borrow abroad as early as April, and wants to sell debt that will mature in two to three years and pay a “one-digit” interest rate.
The IMF last month agreed to allow Ukraine access to $2 billion more than originally agreed from its foreign reserves to help the country pay for Russian gas. The concession was made to keep the government liquid through the election without releasing loan funds.
Reserve Floor
Even so, the central bank has signaled it may limit access to reserves, which stood at $26.5 billion at the end of December, as policy makers try to avoid fueling inflation. Consumer prices grew an annual 12.3 percent last month, from 13.6 percent in November, the State Statistics Committee said on Jan. 6.
Danylyshyn said the central bank should agree to print as much as $2.7 billion this year and next to help revive growth and resurrect the economy from 2009’s contraction, which he last month estimated at between 12 percent and 12.5 percent. Output shrank 15.9 percent in the third quarter after declining 17.8 percent in the second and a record 20.3 percent in the first three months of 2009.
“This money should be spent for production, not for consumption and that would allow us to keep inflation under control,” he said. “Inflation is not a problem and there are good chances it will stay below 10 percent this year.”
The winner of the presidential runoff vote will probably keep the current Cabinet in place until the next parliamentary elections, due in 2012, Danylyshyn said.
Cabinet Outlook
“There are no reasons for any talks about the new Cabinet in the near future,” he said. “The Cabinet is backed by the majority in the parliament.”
Gross domestic product will expand between 3 percent and 3.7 percent in 2010, as prices for Ukraine’s key exports such as metals, grains and chemicals recover, Danylyshyn said. If the central bank agrees to print more money to finance industrial projects, the economy will probably grow between 5 percent and 6 percent this year and next and 7 percent in 2012, he said.
“We have passed the peak of the crisis,” Danylyshyn said.
[With assistance from Denis Maternovsky in Moscow, Kateryna Choursina and Daryna Krasnolutska in Kiev. Editors: Tasneem Brogger, Chris Kirkham.]
To contact the reporter on this story Halia Pavliva in Kiev at +38-044-490-1284 or hpavliva@bloomberg.net. To contact the editor responsible for this story: Chris Kirkham at +44-207-673-2464 or ckirkham@bloomberg.net.
LINK: http://www.bloomberg.com/apps/news?pid=newsarchive &sid=a_CGJ7Y6C90s
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3. FRANCE, GERMANY, POLAND, U.K. TO HELP UKRAINE WITH IMF
By Daryna Krasnolutska, Bloomberg, Kiev, Ukraine, Sat, Jan. 30, 2010
KIEV - Ukraine’s next president will get help from France, Germany, Poland and the U.K. to renew cooperation with the International Monetary Fund, which was frozen in November, the four countries’ ministers for European affairs said.
Opposition leader Viktor Yanukovych, 59, and Prime Minister Yulia Timoshenko, 49, are vying for the presidency in a Feb. 7 runoff election. Yanukovych won 35 percent of the vote in the first round on Jan. 17, ahead of Timoshenko’s 25 percent.
“We are glad that both candidates in the runoff have programs that pledge closer ties with the European Union, cooperation with the IMF and good relations with Russia,” Chris Bryant of the U.K., Poland’s Mikolaj Dowgielewicz, Germany’s Werner Hoyer and Pierre Lellouche of France wrote in Ukrainian weekly newspaper Zerkalo Nedeli today.
Ukraine was forced to seek $16.4 billion in a two-year IMF bailout loan in November 2008 as the global financial crisis cut demand for its products on world markets, and dried up investment.
Ukraine has received $10.6 billion so far and has used some of the cash to cover the budget deficit and pay for Russian natural gas imports. Disbursements were frozen when the country failed to adopt the 2010 state budget and cut spending.
The European Union is ready to give additional financial aid to Ukraine if the country resumes cooperation with the IMF, the ministers wrote. The four also urged the new president to make changes, including in the energy sector, to promote economic growth.
“The businesspeople of our four countries are looking forward to Ukraine’s implementation of measures to set up a predictable and protected business environment without corruption and bureaucracy,” they wrote.
To contact the reporter on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net
LINK: http://www.bloomberg.com/apps/news?pid=newsarchive &sid=azCvZWBTqN5w
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4. SAY NOT THE STRUGGLE NAUGHT AVAILETH
Roman Kupchinsky, a scourge of communists and post-communist kleptocrats alike
Economist online, London, UK, Thu, Jan 28, 2010
LONDON - IN THEIR freedom they had no homeland. And in their homeland they had no freedom. Roman Kupchinsky, a warrior in and out of uniform, who died on January 19th aged 65, was one of the most remarkable of those who fought a seemingly hopeless but ultimately triumphant struggle against the Soviet seizure of power in the eastern half of Europe.
Much of what he did in the cold war is still secret. The son of Ukrainian émigrés to the United States, he served with the American army in Vietnam. Then he worked “for the government”. He campaigned for political prisoners and fought hard in the information war against Soviet rule in Ukraine.
RFE/RL
But unlike many of his fellow cold-warriors, he did not declare victory and retire in 1991. He turned his fire on a new, more insidious enemy: the overlap between organised crime and ex-Soviet intelligence services, and in particular the staggering corruption of the oil and gas industry.
He edited a gripping fortnightly digest on crime and corruption in the ex-Soviet region for Radio Free Europe/Radio Liberty. (For readers who know that outfit only in its pale modern incarnation, a trip into the archives is recommended.)
Those who read his reports there, and later for the Jamestown Foundation, a think-tank, found them eye-poppingly well-informed and insightful. Yet they were only dilute versions of what he really knew. Western energy companies and governments took him into their confidence, using him as a consultant to explain the monstrous menagerie of cronyism, spookery and greed that they encountered in the wild east. He kept their secrets.
Many people enjoy the title of a “walking encyclopedia”. Mr Kupchinsky deserved it. But that was only part of it. His companionship was uproarious; his determination to outwit the bad guys inspirational. Your columnist once needed urgent help against a seemingly unbeatable enemy from that world.
“Romko’s” salty humour calmed my nerves; his deep knowledge helped win the battle.
Mr Kupchinsky was emblematic of a generation that had escaped totalitarianism and found new homes in the west. Others of the same ilk can be found all over the region: Valdas Adamkus and Vaira Vike-Freiberga, the former presidents of Lithuania and Latvia respectively, or Toomas Hendrik Ilves, Estonia’s serving head of state. From the past 20 years you could find plenty more, of all ages, in and around public life in the ex-captive nations.
Their great asset was binocular vision. Having lived in the west, they understood far better than most of their compatriots at home how life in the rich, free world, for good or for ill, really works. But they also enjoyed a deep knowledge of their own countries’ history and traditions—more so, in some cases, than those who lived under Soviet rule. It didn’t always work: after 1991 some returning émigrés proved to be patronising, bombastic and outright flaky.
Some of them died too early: Stasys Lozoraitis, Lithuania’s top diplomat in the West, was struck down by liver cancer in 1994, aged 70, robbing his country of his integrity, charm and vision. But the best and luckiest of them have played a huge role in securing their countries’ future after the collapse of communism.
Mr Kupchinsky was one of the most formidable: equally at home in dealing with troubled bureaucracies such as the FBI and CIA or with Ukraine’s also ill-run intelligence bureaucracies, as well as the private sector, the media and think-tanks. He continued reading, writing and talking—fuelled by a prodigious intake of nicotine and alcohol—right up to his death.
What will we do without him?
LINK: http://www.economist.com/displayStory.cfm?story_id=15387379
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5. ANOTHER BUSINESS SUPPORT LAW: REAL HELP, OR EMPTY PROMISES?
Ukraine Law Alert, Squire, Sanders, Kyiv, Ukraine, Fri, Jan 29, 2010
KYIV - The end of 2009 marked another step in the Ukraine government’s efforts to support businesses during difficult times. Effective December 30, 2009, a law amending and revising existing laws to facilitate entrepreneurship (the "Business Support Law") went into effect.
The Business Support Law was created to remove the bureaucratic obstacles businesses face, stimulate economic activity and minimize governmental control over entrepreneurship. The law addresses establishing a business, licensing procedures and obtaining state or municipal approvals for activities, as well as specific matters such as the leasing of state or municipal property, or the licensing of seed sales.
Some of the more important changes introduced by the Business Support Law are described below.
1. Requirements for Limited Liability Companies in Ukraine
The Business Support Law reduces the required minimum charter capital for limited liability companies (LLCs). To establish LLCs, the charter capital required must now at least equal the amount of one minimal salary (869 UAH [1], or about US$108).
Such a small threshold will not only facilitate incorporation of LLCs. Under certain circumstances, the lower minimum may help prevent an LLC’s forced liquidation. Under Ukrainian law, a company is subject to liquidation if its net assets at the end of the second and each following fiscal year are less than the required minimum charter capital.
2. Licensing Procedures and Rules for Obtaining State or Municipal Approvals
The Business Support Law introduces certain "business-friendly" regulatory changes including:
(i) Allowing an unlimited term for licenses;
(ii) Making it more difficult to have a license annulled; and
(iii) Introducing the concept of "silent consent" for obtaining state or municipal approvals or permits.
According to the previous version of the Law of Ukraine "On Licensing of Certain Activities," the validity terms of most licenses had to be established by the Cabinet of Ministers of Ukraine. Pursuant to the "Regulation of the Terms of Licenses for Certain Activities and Amounts of Licenses Fees," approved by Decree of the Cabinet of Ministers of Ukraine No. 1755, dated November 29, 2000 (Licensing Decree), such terms were limited to five years.
The Business Support Law now dictates that licenses must be issued for an unlimited period of time. The terms of certain licenses may be limited by the Cabinet of Ministers of Ukraine, but those terms may not be less than five years.
In order to implement the Business Support Law, the Cabinet of Ministers of Ukraine has already amended the Licensing Decree. As of January 19, 2010 a five-year term was established for licenses for:
(i) Extraction of natural resources from deposits of state importance;
(ii) Transportation of oil and gas via pipelines;
(iii) Supply of natural gas and gas from coal deposits;
(iv) Storing natural gas and gas from coal deposits in amounts that exceed levels established by the licensing conditions;
(v) Development, production, testing, export and import of holographic safety elements; and
(vi) Other activities.
The terms of licenses issued under the old rules will not be extended; therefore, after a license expires, companies must renew their licenses according to the new rules.
The Business Support Law also changes the rules for annulment of licenses and further limits valid reasons for their annulment. For example, a licensing authority may not annul a license due to a company’s failure to notify the licensing authority about changes to documents that had been attached to a license application, such as the company’s address. In addition, any decision on license annulment will take effect after 30 days, instead of the previous 10 days.
That gives a license holder more time to appeal a decision on license annulment.
Other regulatory changes include:
(i) The establishment of a 10-day term for obtaining the permits necessary for business activities (unless a different term is specified by law); and
(ii) The introduction to the Law "On Regulatory Approval System in the Sphere of Commercial Activity" (Approval System Law) of a principle of "silent consent" that under certain circumstances allows companies that had failed to obtain certain municipal or state approvals or permits to operate without such approvals or permits. A company has the right to invoke silent consent once it has filed the required documents for obtaining or extending an approval or permit with an authorized state body and that body has not informed the applicant by the end of the required term that the approval or permit has been approved or denied. Effective 10 working days after the end of the time allowed for either issuing the approval or deciding to refuse the request, silent consent goes into effect and the applicant has the right to conduct the actions that would normally be contingent upon an approval or permit.
3. Change of Municipal and State Property Lease Rules
The Business Support Law makes it easier to lease municipal or state property by establishing a minimum lease term of five years, unless the lessee wants to lease for a shorter term.
4. Elimination of Licensing Requirements for Certain Types of Activities
The Business Support Law eliminates the need for licenses pertaining to certain types of activities, including those for certain "social services" including medical, legal, psychological and other services for people who find themselves in difficult situations (e.g. the disabled, disaster victims or the homeless); those involved in the sale of art, collectables and antiques or who organize auctions); and the design, construction and reconstruction, or reclamation of objects of cultural heritage. The new law also eliminates the requirement to conduct archeological or geological research prior to the design, construction, reconstruction or repair of objects of cultural heritage.
The Business Support Law also abolishes the licensing requirement for seed sales. This change may be quite important for agricultural traders who previously had had to obtain such licenses.
5. Support to Small Enterprises
The Business Support Law establishes certain benefits for so called "small enterprises," which Ukrainian law defines as entrepreneurs/individuals or entities with up to 50 employees and an annual income of not more than 70 million UAH (about US$8 million). Most of these benefits relate to the lease of state or municipal property. In particular, the Business Support Law:
(i) Prohibits, until January 1, 2011, the State Property Fund from increasing lease payments from small enterprises for state property under lease;
(ii) Recommends that the Supreme Council of Autonomous Republic of Crimea and municipal authorities not increase lease payments from small enterprises for municipal property and property of the autonomous Republic of Crimea until January 1, 2011; and
(iii) Establishes that lease agreements for municipal or state property entered into with small enterprises before December 30, 2009 will be extended for up to five years from the effective date of the agreements.
The Business Support Law also places a moratorium, until January 1, 2011, on inspections and other reviews of small enterprises by municipal or state authorities, except for:
(i) Inspections of high-risk enterprises, for example, heat or power generating companies. (The risk level of an enterprise is determined according to criteria approved by the Ukrainian Cabinet of ministers);
(ii) Scheduled and unscheduled field inspections by the State Tax Service of Ukraine (with certain exceptions);
(iii) Scheduled or unscheduled inspections of high-or-middle risk enterprises by the Pension Fund of Ukraine; and
(iv) Unscheduled inspections by consumers’ rights agencies which were initiated pursuant to consumer complaints.
If you have any questions regarding the Business Support Law, please contact your principal Squire Sanders lawyer or one of the lawyers listed in this Alert.
FOOTNOTE: [1] As of January 1, 2010.
Founded in 1890, Squire, Sanders & Dempsey L.L.P. has lawyers in 32 offices and 15 countries around the world. With one of the strongest integrated global platforms and our longstanding one-firm philosophy, Squire Sanders provides seamless legal counsel worldwide. Contacts: Peter Z. Teluk, +380.44.220.1414; Dmytro V. Sakharuk, +380.44.220.1407; Volodymyr B. Smelik, +380.44.220.1413. Squire, Sanders & Dempsey L.L.P., Leonardo Business Center, 19-21 Bohdan Khmelnytsky St., 16th Floor, Kyiv 01030, Ukraine.
USUBC NOTE: Squire, Sanders & Dempsey is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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6. AMENDMENTS TO CERTAIN LAWS OF UKRAINE TO IMPROVE BUSINESS
Salans, Kyiv, Ukraine, Friday, January 29, 2010
KYIV - On December 30, 2009 the law of Ukraine “On Amendments to Certain Laws of Ukraine to Improve Business Conditions in Ukraine” No. 1759-VI dated December 15, 2009 (the “Law”) entered into force. The aim of the amendments made by the Law is to create more favorable conditions for entrepreneurial business activity, in particular:
[1] amendments to the law of Ukraine “On Business Entities”, such that the minimum authorized capital for limited liability companies is set as the amount of one minimum monthly salary (from January 1, 2010 to March 31, 2010 – UAH 869), as opposed to being set as the amount of one hundred minimum monthly salaries, as previously;
[2] amendments to the law of Ukraine “On Licensing for Certain Types of Business Activity”, pursuant to which a license for conduct of a particular type of business activity is issued for an indefinite term, as a general rule. The amendments establish the right of the Cabinet of Ministers to limit the validity of a license to a specific term at the request of the authorized licensing bodies, however the minimum term of license validity may not be less than five years;
[3] amendments to the law of Ukraine “On the Regulatory Approval System for Business Activity”, which have introduced definitions of a “regulatory
approval document” and the “silent consent principle”. “Silent consent principle” means the right of a business entity to pursue business activity of a particular type (or types) without obtaining a regulatory approval document (if a regulatory approval document or a refusal to grant have not been issued) within the term established by the law, provided that all required documents have been submitted to the regulatory authority. Additionally, the general term for issuance of regulatory approval documents has been established as ten days, if another term is not provided for by the law;
[4] furthermore, the Law sets a moratorium on inspections of small enterprises until January 1, 2011, except for:
[a] inspections of small enterprises conducting business activity to which a high degree of risk is attributed;
[b] planned and random on-site inspections by the State tax service authorities;
[c] planned and random inspections by the State Pension Fund authorities of small enterprises conducting business activity to which a medium or high degree of risk is attributed; and
[d] random inspections by consumer protection authorities following consumer complaints.
In 2009 Salans was awarded the Chambers Europe Award for Excellence for 2009 in Central and Eastern Europe by the leading legal directory Chambers and Partners. In 2009 Salans Kyiv was recognized the Most Trusted Law Firm of the Year in Ukraine by ACQ Finance Magazine, the leading international publication for M&A industry and won the ACQ Country Award for Achievement.
For further information please contact: Oleg Batyuk, Managing Partner, Kyiv, E: obatyuk@salans.com; Volodymyr Monastyrskyy, Partner, Corporate/Real Estate/Employment, E: vmonastyrskyy@salans.com. . Salans Kyiv, 49-A, Volodymyrska Street, 2nd Floor, 01034 Kyiv, Ukraine, T: +380 44 494 4774
F: +380 44 494 1991, E: kyiv@salans.com.
USUBC NOTE: Salans is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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7. VOLIA: BEST TELECOMMUNICATIONS/INTERNET SERVICES PROVIDER
KyivPost's Best of Kyiv 2009, Kyiv Post, Kyiv, Ukraine, Fri, Jan 29, 2010
KYIV - Volia, a dominating telecommunications and Internet services provider, has covered Kyiv’s capital with fiber-optic and other types of cable. Its services are used by 1.4 million subscribers of TV programs and almost 400,000 clients of high-speed Internet – with the strongest position in Kyiv, but spreading out across Ukraine fast.
However, as the company’s network and client base expand, the main challenge for Volia is to improve the quality of its services. “Development and improvement of our services are permanent and do not stop,” said company spokeswoman Alina Sigda.
Volia was established in 2000, with the backing of SigmaBleyzer, an investment firm with a proven track record in designing and implementing strategies for doing business and improving company performance. But its official birthday is June 1, 2002.
The same year Volia launched state-of-the-art technologies and pioneered digital cable TV in Eastern Europe. In 2008, the company merged under one brand of Volia providers that operate in 19 of Ukraine’s largest cities. Now the company employs more than 3,000 people.
Eric Franke, a veteran business executive in Ukraine, last year joined the management team as first vice president as well as chief executive officer of Volia Regions. In a few months, Volia will switch off all outdated analog technology in Kyiv. The capital will be a digital one.
Volia, 27 Rayduzhna Street, Kyiv, 02218, Ukraine, +38 (044) 502–2250, +38 (044) 207–7092, www.volia.com.
USUBC NOTE: SigmaBleyzer is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
LINK: http://www.kyivpost.com/news/business/bus_general /detail/58249/
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8. LVIV BUSINESS SCHOOL AIMS FOR ETHICS AND EXPERTISE
By Yuri Bender, Financial Times, London, UK, Sun, Jan 31 2010
LVIV - As the 46m-strong population of Ukraine, browbeaten by political and economic crisis, moves towards the final leg of the presidential election, a recently established business school in the country’s western region may help revitalise a cynical business community.
Lviv Business School part of the Ukrainian Catholic University, was set up in 2008, in part with the support of three of the state’s business groups. In a country riddled with corruption, one aspect of LvBS’s mission is to inculcate Ukraine’s managers with an ethical approach to business.
Petrol station operator Galnaftogaz, software development provider Softserve and women’s clothing manufacturer Trottola, are all regional employers in
Ukraine hoping to expand their international footprint. They have given their support to the school and are also fielding members of the school’s advisory board.
The companies believe that endemic corruption has hampered Ukraine’s progress. They say that putting their managers through an ethically focused school will not only give their executives a clean bill of health morally, but also makes sound business sense.
With this in mind they approached the rector of UCU and former Harvard academic Father Borys Gudziak, (above left) with the suggestion of creating the business school to teach both their MBA hopefuls and ranks of middle managers requiring shorter courses. In the 2008/09 academic year, about 1,000 participants from the three companies and the wider community took part in short courses and seminars at LvBS.
“We want businesses to be ethical and managers to be ethical and we want those who control firms to love our land and be patriots,” says Fr Gudziak.
Chief executive of Galnaftogaz’s chain of 300 filling stations, Vitaliy Antonov, says a key factor in LvBS’s creation was the appointment of Sophia Opatska, then director of MBA programmes at Kyiv Mohyla Business School, in Kyiv, to run Galnaftogaz’s corporate university in 2005.
“At that stage . . . we began to understand it would be much more effective for several business organisations to join forces and create a business school,” says Mr Antonov. Ms Opatska has since been appointed chief executive of LvBS.
“LvBS represents . . .a particularly successful synthesis of business and ethics. At the moment, this is what everybody in the business community is interested in,” says Mr Antonov.
TARAS VERVEGA: LVIV-BASED SOFTSERVE
As the business community in Ukraine becomes more mature, “it’s no longer enough to just live on your wits; you need a classical education”, says Taras Vervega, business development director at the fast-growing Lviv-based Softserve, which employs 1,200 people. Mr Vervega needs LvBS to train middle managers to run regional offices, and branches in Florida and Manila, in the Philippines.
Trottola, with its 2,000 employees, has similar requirements. The company intends to create more jobs in Ukraine in sectors such as clothing design and marketing.
“The Kyiv Mohyla school is number one in Ukraine, but the fees are too high and not everybody can afford to go there,” says Yaroslav Rushchyshyn, Trottola’s chief executive.
“A business school is not just about an MBA, it’s about training people in the local area and the business mentality in Kyiv is very different from that in western Ukraine. Our focus on ethics differentiates us hugely from the competition.”
Business education is enjoying a surge of popularity in Ukraine, with approximately 30 business schools in the country. However, according to Alex Frishberg, senior partner of Kyiv-based law firm Frishberg & Partners, the most sought after management education is US or English.
Kyiv-based, foreign-owned consulting firms such as Boston Consulting Group, McKinsey and Bain typically retain Ukrainian graduates with Harvard or Yale MBA degrees, he adds.
The LvBS EMBA programme currently has 15 students and is taught by Ukrainian and visiting lecturers, including business specialists from companies such as Kraft Foods and Ernst & Young and academics from Moscow State University and the University of Michigan.
It is the ethical dimension of the school that Fr Gudziak, believes will help senior managers focus on legal and morally acceptable solutions to their problems early in their careers. But he does not expect changes to happen overnight.
“Many people in Ukraine are trying to do something about corruption. But it’s a systemic problem and it’s not easy to change the system,” he says.
LINK: http://www.ft.com/cms/s/0/ace65f08-0cf9-11df-a2dc-00144feabdc0.html
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9. SOFTSERVE POSITIONED FOR TREMENDOUS GROWTH IN 2010
Company Launches Software Methodology, Opens Global Offices and Wins Industry Accolades
SoftServe, Inc, Ft. Myers, Florida, Friday, January 22, 2010
FT. MYERS, FLORIDA - SoftServe, Inc., provider of software consulting, development, testing and lifecycle services to IT decision-makers, today announced the completion of a successful 2009, positioning it for further growth as it continues to expand its roster of leading independent software vendor (ISV) clients.
With the launch of its Abiliton™ methodology, expansion of its global headquarters in Ft. Myers, Fla., new quality control center in Manila, Philippines, and high-level recognition from top industry organizations, the company stands positioned for greater success in 2010, delivering best-in-class development services and support for its valued clients.
It was a watershed year for SoftServe, as the company publicly unveiled its unparalleled Abiliton methodology for software development lifecycle management. Beginning with the release of its “People” module, Abiliton changes the way commercial software is developed by employing exactly the right combination of people, process, tools and communication to fit any project.
Abiliton People focuses on selecting, training and certifying the best, brightest and most qualified professionals for development projects and instilling a commitment to teamwork and client service in every professional.
The Process module optimizes SCRUM methodology for agile development, leveraging distributed teams across multiple time zones to deliver better quality software in a fraction of the time of competing approaches. In the coming year, SoftServe will release the final components of Abiliton, the Tools and Communication modules, completing the recipe for delivering unmatched software to its ISV clients
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FT. MYERS, FL; PHILIPPINES; NEWPORT BEACH, CA; BOSTON, MA; LVIV, UKRAINE
In October 2009, SoftServe announced the expansion of its global headquarters in Ft. Myers and the opening of its new quality control center in the Philippines, enabling the company to provide round-the-clock service and support for its clients.
The newly established quality control center in the Philippines, in addition to SoftServe’s development resources in Ukraine, gives the company the ability to execute a complete development cycle in which quality control is performed, defects are corrected and quality software is delivered to clients – all within a single 24-hour period.
The expansion of its Ft. Myers headquarters further grows the company’s United States presence, which also includes its previously established locations in Newport Beach, Calif., and Boston.
This year, SoftServe was recognized as a leading software development service provider by several U.S. and international industry associations. Global Services and neoIT named SoftServe one of the “Top 10 Leaders in Emerging European Markets.” SoftServe was also recognized by Microsoft as a “2009 Partner of the Year” in Central and Eastern Europe. In addition, SoftServe participated in Microsoft’s BizSpark Incubation Week for Windows Azure in Atlanta.
PRESIDENT TARAS KYTSMEY
“This was a banner year for SoftServe’s global growth, and we can only expect greater things in 2010,” said Taras Kytsmey, president, SoftServe. “With the launch of our Abiliton methodology and the opening of new global locations, we demonstrated our commitment to providing clients with the best possible combination of software development. The fact that we have been recognized as a leading software development provider on an international level is only the icing on the cake – the real validation of our success comes from the feedback we receive from our trusted clients.”
In November 2009, SoftServe’s global user conference, SoftServe Innovations, saw its most successful event to date. Held in Bonita Springs, Fla., the conference featured presentations from industry luminaries such as Bob Evans, senior vice president and director of Global CIO, InformationWeek; Johna Til Johnson, president and senior founding partner, Nemertes Research; Omar Hussain, president and CEO, Imprivata; and Paul Hodgetts, founder and CEO, Agile Logic.
ABOUT SOFTSERVE:
SoftServe (www.softserveinc.com) provides commercial software product design, development, testing and lifecycle services to Independent Software Vendors and builds foundational strategic technologies for enterprise clients. Every SoftServe team member is Abiliton Certified for experience, knowledge and commitment to client service, and utilizes SoftServe’s proven Abiliton framework to drive successful project delivery.
Above all, SoftServe knows that its success is built on positive client relationships, and the Abiliton people, processes and tools that enable these relationships are the keys to that success. With headquarters in Ft. Myers, Fla., and an award-winning development organization based in Ukraine and the Philippines, SoftServe has successfully completed more than 2,000 projects for more than 100 companies worldwide.
USUBC FOOTNOTE: SoftServe, Inc. is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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10. ERNST & YOUNG, BEST AUDIT, TAX AND CONSULTING SERVICES
KyivPost's Best of Kyiv 2009, Kyiv, Ukraine, Fri, Jan 29, 2010
KYIV - For the second year in a row, the award for Best Audit, Tax and Consulting Services company went to Ernst & Young, one of the Big Four companies worldwide, and one of the first international professional services firms to establish its practice in Ukraine back in 1991.
Not only did Ernst & Young manage to beat its rivals in the Best of Kyiv contest, but it seems to also have managed to remain on top of the challenges of the economic crisis. In contrast to many other business players, the Ukrainian office of Ernst & Young finished the 2009 financial year (which ended June 30) with an almost 5 percent increase in revenues year-on-year.
In 2009, the Ukrainian company’s total net revenues reached almost $40 million. This is a great achievement, considering that the global revenues dropped by 0.2 percent to $21 billion.
“We significantly increased our market share in Ukraine. It was driven first of all by new anti-crisis services which we offered to clients — such as cost reduction, debt restructuring, and, secondly, by the enthusiasm of our executives,” explained Alexei Kredisov, managing partner for company’s Ukrainian office.
“We in Ukraine are a smaller and leaner practice as compared to Ernst & Young Global and we were able to make these changes and motivate our executives faster. As a result, we really reaped the benefits of the first mover in the crisis times,” he said.
Keeping a close eye on crisis-time demand, Ernst & Young launched a special anti-crisis course: a five-day mini master’s in business administration for people who lost their jobs because of the economic downturn and had some time to upgrade their knowledge. The demand for this service was several-fold higher than had been expected.
Of course, the company had to take some tough crisis-related decisions: out of 650 employees who worked in the Ukrainian offices before, only 519 are left. Partners had to tighten their belts as their part in the company profit shrunk.
But to motivate their employees, Ernst & Young’s management, in contrast to many companies in the country, didn’t cut wages and left them pegged to foreign currencies.
Among the company’s clients are Naftogaz Ukraine, UkrZaliznytsia, State Export-Import Bank of Ukraine (Ukreximbank), Industrial Union of Donbas and Raiffeisen Bank Aval, another Best of Kyiv award winner.
Ernst & Young, 19A Khreshchatyk Street, Kyiv, 01001, Ukraine, +38 (044) 490-3000, www.ey.com/ukraine.
USUBC FOOTNOTE: Ernst & Young is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
LINK: http://www.kyivpost.com/news/business/bus_general/ detail/58246/
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org
Promoting U.S.-Ukraine business relations & investment since 1995.