Turning Ukraine Into a Brand
What is Ukraine's main brand, the secret sauce of Ukraine's promotion? How "the country-in-smartphone" model is being implemented in Ukraine, and why this could help to fight corruption? This and more, the UATV correspondent Tom Bell and Chairman of Ukraine Invest Daniel Bilak discussed during the Mariupol Investment Forum RE: Think. Invest in Ukraine
You know, it is being a very interesting process. I mean, one of the things we found, when we started three years ago, was not just the people made a better impression about Ukraine. Many investors in many countries had no impression about Ukraine, no idea of what the country was about, where it is, who these people are. At least, in most people’s consciousness, it was now not Russia, it was actually a European country and there was a big plus. We had to really come up with a new narrative. When we really got into what essentially is become the country branding, and I needed it to find, instead of talking of all the different areas – we have one plus – four sector strategy that we would promote: there was infrastructure, agro-business, manufacturing, energy. All of which was informed by innovation technology. And as we started to move more and more to promote this staff, we saw that we would get further faster with finding this point of relevancy. That was really important because when you’re trying brand a country, you’re just overwhelming somebody with information, they just tune it out, it comes out as kasha, as they say. But we started focusing on innovation technology, not just IT, but innovation as a whole, because so much more is going on here in AI, NLP, I mean in a machine learning. We started to talk about the fact that the Mercedes-Benz infotainment system is developing in Ukraine, Ring, and the doorbell app on your iPhone was also developed here. And what we found was that even investors and people outside of Ukraine may not know a lot about Ukraine, everybody identified with Ukrainian engineers, they are the most creative, the best, they get the results done, they’re absolutely top workers. So we started really focusing on promoting this. This forum is important. Switching gears a bit, but this is still relevant. This forum is important because it is also introducing investors who are already in this country to eastern Ukraine. We have this great divide along the Dnipro river in terms of foreign investments. You have a high concentration in Lviv, Ivano-Frankivsk, all the way to Vinnytsia, Kyiv and when you hit the Dnipro, and then it starts to trickle over to the other side. We have some big investors on this side of the Dnipro, but you know, it’s getting more of that awareness, and especially removing the fear factor.
Why that is just a fear factor? I mean you mentioned Kyiv and Lviv and, more generally western and central parts of Ukraine, while Donetsk and Luhansk regions really lag behind.
I mean just simple geography. I mean logistically, I mean we are integrating into Europe at all levels, into European Union rather on all levels. I mean recognition that we are a European country, we have now the DCFTA, the deeper comprehensive, free trade agreement, EU-Ukraine association agreement. This is the constitution of the Ukrainian economy. And we’ve, actually, moved further, faster, than any of the parties that were signatories to this agreement expected. So, there has always been more of an entrepreneurial spirit on the right bank of the country, whereas on the left bank it has been more of a heavy industry, it has been more patriarchal, hierarchical socioeconomic system, where oligarchs were able to gather the wealth for the concentration of assets, the concentration of people. And people used to do what they were talked to do etc. That’s breaking up slowly. The market is breaking up these monopolies. But, you know, Mariupol was actually a pretty progressive place. It wasn’t really Donetsk.
It is different in away.
It is really different from the rest of Donetsk. I mean, it has more in common with Berdiansk and Zaporizhzhia. These are coastal communities. You know the fact that it’s on the water, the fact that it had a big port. I mean, obviously, Metinvest is a big plant here. So, they had a big influence on the city, which is proven to be a kind of double-edged sword, because there have been a lot of complaints about pollution and everything else. And then, of course, the invasion of the Donbas, and the fact that they were stopped ten kilometers from Mariupol really put… You know, Mariupolians had to define who they were, which side were they identified. And they ended up identifying very clearly and concisely with Ukraine.
With the port facilities and the other industry, I mean when you speak to investors what are the most common concerns or the most common queries that they have? Is it more to do with legislation or economic situation?
I think that there is a general lack of recognition coupled with a historical narrative based on the fact of problems with the rule of law, corporate raiding, a lot of nonsense that went on before 5 years ago. A lot of that has changed. There was always the corruption narrative. We still remember how Russia spent billions of dollars promoting this narrative because into this echo-chamber. And you know, we have lazy journalists who rather than check the fact and come to take a look, they just pick it up. Nobody has ever been criticized for writing aa bad article about Ukraine or an article about bad Ukraine. They would be taken on for writing something good. And you know that seems to get self-censorship and things like that. I mean I can complain about journalists all I want but a lot of them do a very good job. You know, actually, ironically, the situation with the United States right now seems to be actually playing to Ukraine’s benefit. First of all, we have got a lot of recognition. Secondly, we are not the bad guys in this. In fact, the president and his group come up relatively good because they said: look, we are not going to play this game. You know you would say things in a private conversation that you wouldn’t say publicly. But I mean if you are to publicize a conversation of other European leaders with the president of the United States, I think it would be some embarrassing moments as well. But leaving that aside, I think that this general understanding about Mariupol helps to form a general impression about Ukraine as a whole. And for Ukrainians. That’s not just for foreign investors.
Because they’ve seen it before.
Well, a lot of people who live in western and central Ukraine have never been to Donbas and vice versa. I mean when I was an advisor of the governor of the Donbas Serhii Taruta in 2014, I think less than 8 percent of the population had ever been outside the region. Even with all these things: “ah, they are all pro-Russian…” only 12 percent had ever been to Russia. 2 percent had been abroad, like beyond the borders of Ukraine. I mean very insular, very heavy industry mining of coal or iron ore production, I mean these were company towns. And Mariupol was not an exception. And then, what was happened post-Maidan it has been an enormous amount, especially… it started in the previous Poroshenko regime and really picked up with president Zelensky. Is the attention from the international community about developing Kherson, Mariupol for their own sakes, but also as an example to the people in the occupied territories and Crimea. You know what they’ve done brilliant in Kherson, Dzhankoi is that people from Crimea come to pick up their pensions. They cross the administrative line of control, and there’s a brand new spanking modern administrative center, where smiling young people in little kerchiefs and uniforms greet you, take your passport, help you have a coffee or if you’d like some tea. And people just show shock when they come back to Crimea and they are treated like goats. And this is important because this is the granular level at which you change perceptions of one person or other. Babusia [aged woman] comes here, gets her passport, picks up her pension. She backs her home and she tells her relatives: “You’re not going to believe what happened!” They have nice busses, they pick people up at the point and drive to the Kherson airport.
Do you think it’s the same with foreign investors? We talked about branding Ukraine. How difficult is it to take this to the international arena?
Business absolutely has a herd mentality. But you know it’s not rocket science at the end of the day. When I was appointed 3 years ago, I gave a presentation to the Cabinet. And I said them there, look, we will only succeed, all of us together if you, your ministries and agencies under you, all the way to the local level, treat investors as they would be guests in your own home. Truly simple: you don’t charge your guests to use a fork, you don’t charge your guest for a glass of water, you don’t charge him or her to go to the toilet. It’s very simple. You go out of your way like somebody feels welcome and they feel like home, like in a European country. Well, it’s about service. You know, I keep up my line that Ukraine is not a bride. There is no line of princes waiting to marry the princess. We have to go out and say, look, here we are, this is what we stand for, this is our values. We have the same values as you do. In fact, it’s a very strong argument. Ukraine is arguably the country in Europe that has most demonstrated its commitment to European values. We are the only country where people have died on the streets of the capital city for those values. Instead of burning the European flag, which seems to be increasingly popular in European countries, ours had bullet holes on them.
Also after the 2014 Revolution, a lot of painful reforms took place, including the energy sector, for example.
Well, there’s public procurement, the energy sector, automated VAT returns. People say, not enough has been done about corruption — true, I have my own list of people I would have liked to see put in prison. But when you look at what is being done on the institutional level, where… You fight corruption by shining light in dark corners. So you look at the transparency initiatives, the ones that we have just described now. These have saved between 6 to 8 billion dollars a year since 2015 to the state budget, just in terms of the transparency initiatives on their own. And this government is now going to rocketship that into turbocharge, as they say, these reforms, because they realize this government in a smartphone, aside from being convenient, is a huge anti-corruption measure.
I think about Estonia when you say that. Everything’s done through a smartphone, a tablet or a computer.
Estonia is the size of Kyiv. And it’s much easier to do this. Obviously, you need political will, I take nothing away from the Estonians there – they’re absolutely one of our role models. But I mean the scale on which you have to do it here and the diversity that you have to account for – regional, ethnic, linguistic, is something that most other countries don’t have to deal with. Having said that, everybody wants to have convenient services, right, so it’s not rocket science at the end of the day.
So, how has your work changed over the past three years, and how has the awareness of Ukraine changed?
I told the Prime Minister when I was appointed, that I was not going to be doing roadshows until I actually had something to say, and we would not have anything to say to new investors until we made existing investors happy campers. As a lawyer representing clients in Ukraine, I knew there were lots of issues, and systemic issues, not just the problems of my particular client, but across the board: tax, customs, land allocation, land permitting, the whole host. And, you know, the previous government worked very, very hard. They got rid of 600 regulations, amounting to almost 5,000 pages of documents, many dating back to the 1940-s, in Soviet times. Those things in the hands of a bureaucrat are just a goldmine, especially at the local level. We saw the transformation of the gas sector, the electricity sector. A 180-degree change in the electricity sector, so we’re now third energy package compliant based on European Energy Community Secretariat’s advice. I mean we’re now one of the leading examples in Europe of how an energy, electricity system is supposed to be run. And we saw profound changes in the judiciary. You know, it’s been popular to say: “Well, there’s a perception that judiciary hasn’t changed.” Well, perceptions are hard to beat, but the new Supreme Court that began its work in January of 2018 worked for a year and a half without a single scandal, without a single question about the… people may not have been happy with the decisions, but couldn’t say that they weren’t well-argued, that they weren’t properly adjudicated or that they were corrupt. And the Supreme Court heard 230,000 cases in the last year and a half because there were no filters. So, before you get rid of the Supreme Court, you should be focusing on the lower courts. I mean, there’re a lot of things that have taken place, that have really formed a firm foundation: the medical system was overhauled, we began the overhaul of the educational system, all of which is being continued. And this is the way to do things. So a new government comes in — ok, people didn’t like many things about the old government — that’s fine. But this doesn’t mean everything that was done was bad and of no value. There’re a lot of things that were done very, very well.
So, how exactly do you promote the Investment Promotion Office?
Well, we’ve put a weekly bulletin, but I mean this is just a finish on the reforms. In the second quarter of this year, we have 4.6% economic growth. They say: “Wow, my goodness, where did that happen from?” Well, there you go, that’s the result, there is a lag, but it catches up. And we promote all of this through events that we do: Ukraine houses – one of our key events, a multi-stakeholder platform, where we try to showcase the new Ukraine together with not just the government, but also the private sector, civil society groups, business. And we try to, basically, get that point of relevancy, where people… At the end of the day, what I want, and investor who listens to me, or my staff say or think is that “Holy smokes, I didn’t know that! Maybe I should get an analyst looking at this a little closer, I want to know more about this country.” That’s a success. Astounding success is when an investor thinks: “You know, I want to get a delegation together and we’re going to come.” And they come here. Once they come here we’ve got them, because the bar is so low, their expectations are so damped down that when they come they go to Kyiv, they go to Odesa, they go to Lviv, even in Dnipro, Kharkiv – they just go: “Oh my gosh, who are these people? This is fantastic!” And then, you know, you hit a tipping point after a certain period of time, the key is to build momentum, to continue doing the right things, to continued building investor confidence and trust. This is the secret sauce, you know, as they say, it’s not rocket science.