• Central Bank Cuts Prime
  • EBRD Wants to Double Investments in Ukraine
  • Foreign Investors Wait Fall Rada Election
  • China Signs Deal to Build $340 Million Bridge Over Dnipro
  • EU, Ukraine Stop Russia Oil Imports
  • Rada Approves Radical Language Bill

In the first interest cut in two years, the central bank reduced the prime rate to 17.5%, from 18%, effective today.Currently, a steady downward trend in inflation towards the 5% target allows the National Bank to begin the cycle of reducing the discount rate,” Yakiv Smoliy, governor of the National Bank of Ukraine, told reporters Thursday.

Inflation will end this year at 6.3%, Smoliy predicted. Last year’s inflation rate was 9.8%. In March, the year over year rate was 8.6%. Asked about the impact of Russia’s June 1 restrictions on exports to Ukraine, Smoliy told reporters: “I do not see that this can significantly affect prices in the current year.”

The EBRD wants to double its new investment in Ukraine this year to $1 billion, Marina Petrov, a deputy head of the bank’s Ukraine office, tells the European Business Association. She said more lending depends on the future Zelesnskiy continuing to work with the IMF reform program. “We hope that, first of all, the work on the IMF program will continue,” she said. “We already see investors ready to come to the economy. The most important thing is not to frighten investors, not to make unexpected economic decisions.”

Two thirds of foreign investors are waiting for the outcome of Ukraine’s parliamentary elections before making new investments, according to a new survey of 75 investors conducted by Dragon Capital and European Business Association. Conducted the week before the April 21 presidential runoff vote, the survey found that 88% are interested in expanding their investments here. On Thursday, President-elect Zelenskiy accused election authorities of dragging their feet in declaring official results, a delay that would rule out advancing parliamentary elections from the Oct. 27 date. Top investor demands were: creating a real judiciary system, reducing corruption and preserving the independence of the central bank.

With an IMF mission to visit Ukraine next month, a Zelenskiy administration will continue cooperation with the IMF and free market reforms, Finance Minister Oksana Markarova predicts in a Bloomberg TV interview. “Economic policies – monetary and fiscal policies – are in place, and we are optimistic that our policies will continue,” Markarova said Thursday. “The messages that we see from President-elect Zelenskiy’s team are aligned with the economic policies of our government and also with the full support of the IMF program.”

With strong foreign investor interest in hryvnia bonds, there is no immediate need for a Eurobond sale, Markarova said. Separately, the central bank improved its forecast on the level of Ukraine’s year end international reserves by 3%, to $21.2 billion.

Separately, Oleksandr Danyliuk, her predecessor as finance minister and now a key economic advisor to Zelenskiy, said Thursday: “As for the IMF: naturally, the position is to continue cooperation. We look forward to a successful review in May.” Speaking to members of the European Business Association, he said: “We understand that any threat to interaction with the IMF will destabilize the situation in the country. Therefore, the position of Vladimir Zelenskiy to prevent this.”

China and Ukraine signed a deal for $340 million in financing to build a new highway bridge across the Dnipro at Kremenchuk, replacing a 70-year-old bridge built after World War II. An executive of China Road and Bridge Corporation and Slawomir Novak, head of Ukravtodor, signed the agreement in Beijing at the Second International One Belt, One Way Forum. Construction of a new highway bridge will route transit traffic away from the city center. The old bridge will be retained for railroad use and possible construction of a light rail connecting city neighborhoods on different banks of the Dnipro.

With Chinese-EU container trains starting to roll across Ukraine, Economic Development Minister Stepan Kubiv offered at the forum to build “a trade and industrial corridor China-Ukraine-EU.” “Ukraine is ready to offer profitable transport routes on the territory of Ukraine to connect China with the countries of Europe,” he said in Beijing. “We offer our Chinese colleagues a joint project portfolio: development of port infrastructure, alternative energy facilities, construction of highways and bridges, development of railway and airport facilities, high technology, cooperation in the aerospace sector, agricultural processing.”

Ukraine, Poland, Germany and Slovakia suspended imports of Russian oil on the Druzhba pipeline network Thursday, citing contamination by organic chloride at 100 times normal levels. Used to boost oil output, organic chloride must be separated before shipment as it can corrode and destroy refining equipment, Reuters reports. With Druzhba handling 1% of the world’s global oil supply, prices hit $75 a barrel for the first time this year. Russia’s Transneft says contaminated oil will stop flowing through the pipeline by Monday. Rare in Russia, chloride contamination last hit oil supplies 10 years ago, but at a lower level.

In Poland’s latest Ukraine-friendly move, Warsaw plans to end roaming charges for Ukrainians using their mobile phones in Poland. “Abolition of roaming charges will be very noticeable for ordinary people, including Ukrainians living in Poland,” Marcin Przydacz, Poland’s top foreign ministry official for Eastern affairs, tells PAP news agency. Faced with a growing labor shortage, Poland encourages Ukrainian labor migration, offering Ukrainian-language on city transport systems and such Facebook pages as “Pick Strawberries in Poland.”

President Poroshenko is expected to sign a sweeping language law that will impact business in Ukraine.

As approved by the Rada Thursday, the bill requires:

– All foreign businesses operating in Ukrainian must have Ukrainian versions of their websites

– All computer software distributed in Ukraine will have to be either in Ukrainian, English or one of the 24 official languages of the European Union. Russian is not an official language of the EU.

– All print and online media are to be in Ukrainian, or have Ukrainian versions. Exceptions are media in English, Crimean Tatar of one of the 24 official languages of the EU.

– Ukrainian-language content on national TV and radio increases from 75% to 90%; for regional broadcasters, the quota increases to 80%

– All movies produced in Ukraine must be in Ukrainian. All foreign language movies must be dubbed into Ukrainian. Foreign language movies with subtitles can only be shown at film festivals.

– Theater performances must be in Ukrainian, with a few exceptions

– Publishing houses must print at least 50% of their books in Ukrainian. Book stores will have to sell at least 50% of their books in Ukrainian.

– All education is to be in Ukrainian and all service sector employees must first address customers in Ukrainian.

 Vote Indicates Ukraine’s Population is 41 Million

Chinese Trains Charge Across Eurasia

Venture IT Investments up 30%

Addressing President-elect Zelenskiy, the American Chamber of Commerce in Ukraine issues its Ten Commandments for responsible stewardship of Ukraine’s economy. They include: advancing on integration with the EU, real judicial reform and an Anti-Corruption Court, investment and property rights, investment in infrastructure, transparent privatization of state property, cutting labor migration by improving investment conditions at home, achieving energy independence through a free and open energy market.

On Monday, the European Business Association came out with a similar, seven-point list. Addressing key upcoming presidential appointments, the EBA called for the selection “of professionals with an impeccable reputation and lack of ties with oligarchs and big business.”

Both chambers stress the importance to investors of macro economic stability. Timothy Ash sees this as a key Poroshenko legacy to Zelenskiy: “Ukraine’s macro backstop is also much better these days, with much smaller twin deficits (2-3% of GDP), lower public sector debt (just over 60%), a stable currency, over $20 billion in foreign exchange reserves at the National Bank of Ukraine (more than four months of import cover), and with respected technocrats at both the NBU and the Ministry of Finance. It was also encouraging today that Zelenskiy appeared to rule out a move to replace incumbent central bank governor, Yakiv Smoliy, highlighting that he has a fixed seven-year term.”

In a country without a census for almost two decades, presidential election indicated that the current population may be 41 million. In 1991, 31.9 million Ukrainians voted, out of a 1991 census population of 52 million. In 2019, 18.5 million Ukrainians voted. Adjusted for different turnouts – 84% in 1991 and 62% in 2019 – today’s total population appears to be around 41 million.

Where did 11 million Ukrainians go? About 6 million were lost due to Russian expansionism — 2.3 million in Crimea, 2.3 million in occupied Donetsk, and 1.5 million in occupied Luhansk. The other 5 million vanished through emigration and Ukraine’s falling birthrate. The loss of 21% of Ukraine’s population in one generation gives post-Independence politicians a poor report card. It undoubtedly boosted Zelenskiy, the 41-year-old post-Soviet challenger, who trounced President Poroshenko by a 3:1 margin.

Behind the start of China-EU container trains through Ukraine is tidal wave of transcontinental train traffic, reports World Railways, a Moscow-based news site. Last year, 6,363 freight trains traveled between China and the EU – almost one an hour and nearly equal to the 8,328 trains that made the trip during the previous seven years. From a first China-EU train in March 2011– from Chonquing to Duisburg, Germany – the China-EU network has grown to link 62 Chinese and 51 EU cities. Initially one sided, the rail traffic is more balanced, increasingly carrying EU exports to China. With traffic backing up at the Poland-Belarus gauge break border, Chinese shippers are experimenting with routing freight trains through Ukraine.

Finland’s Konecranes is using its Ukraine unit, Zaporizhkran, to make the chassis for 86 shipping cranes for the Virginia Port Authority. This US-bound order is part of a 98% export orientation of the Zaporizhia company, reports the Kyiv Post.

Venture investments in Ukrainian IT startups increased by 30% last year y-o-y, to $337 million, reports a study by Deloitte and the Ukrainian Venture Capital and Private Equity Association. Similarly, the number of deals increased by 29%, to 115. The average investment increased by 12%, to $918,000. Mergers and acquisitions appeared for the first time, with seven deals registered for a total of $25 million. With the collapse of the bit coin boom, the number of ICOs fell from 19 to four. For the smallest of startups, crowdfunding platforms remained popular, with seven campaigns raising a total of $1.4 million.

Ukrainian legal-tech startup AxDraft has attracted $1.1 million in funding on graduating from Y Combinator, the prestigious Silicon Valley-based acceleration program. Founded in Kyiv by Yuriy Zaremba, a former lawyer at Avellum, AxDraft use IT to detect codable patterns to develop contract templates. “For MHP we helped save more than 1,150 hours of lawyer time by automating corporate documents and land leases,” Zaremba says, referring to agro giant Mironivsky Hliboproduct. After working in Ukraine with MHP, FOZZI, Carlsberg and British American Tobacco, Zaremba says AxDraft “helps in-house legal departments of corporation spend 70% less time on drafting routine legal documents and delegate more legal work to non-lawyers.” As Zaremba looks for US sales managers, the startup now is valued at $10 million.

Telephone number portability starts in Ukraine on May 1. Resisted for four years by the three mobile telephone companies, the new system allows subscribers to switch telephone companies without losing their numbers. Ukraine’s three mobile operators are: Kyivstar, Vodafone, and lifecell.

EU Refiners Fill Gap

Landmark Properties in Central Kyiv Sold

Post-Election Bond Demand High

Retail Sales Strong

Canada’s Bombardier Wants to Sell Electric Locomotives

Facing gasoline and diesel restrictions from Russia and Belarus, Ukraine can meet its needs from other countries – possibly with slightly higher prices at the fuel pump – the Ukrainian Oil and Gas Association said Tuesday. “The degree of diversification of the Ukrainian market exceeds the level of many European states,” reports the industry association. “Starting in 2017, fuel comes to Ukraine from more than 10 countries using all sorts of logistics – maritime, rail, road and pipeline, which allows to organize any deliveries in a short time.” Warning in of “slight fluctuations in the cost of fuel,” the Association said Ukraine can get alternative supplies from Poland, Romania, and Hungary

 Funding for a $1 billion ‘autobahn’ to cut the drive time between Kyiv and Odesa to four hours is being negotiated with international financial institutions, Prime Minister Groysman said Monday during a highway inspection. Currently, it takes six hours to drive the 475 km road between the two cities, a highway that connects 15% of the nation’s population. During this road construction season, the government is spending $10 million to main the highway linking the capital with the Black Sea.

In central Kyiv, Dmitry Firtash is selling and Sergey Tigipko is buying.

Tigipko’s TAS Group has bought most of Kyiv’s landmark’s Arena City restaurant and entertainment center from Firtash’s Group DF, according to Novoe Vremya. Tigipko bought 10,000 square meters, or 71% of the complex, for $13-15 million, well below the $20 million asking price. Restaurants in Arena pay at least $50 per square meter rent, double the Kyiv average, Olga Naaonova, director of Restaurant Consulting tells NV.

Last week, Firtash sold the St. Petersburg Hotel for about $15 million, reports NV. Located, 200 meters from Arena City, at Taras Shevchenko 4, the 140-room hotel has been closed for renovations for six years. The new owner Vladimir Zubik’s Intergal-Bud, plans to complete renovations and reopen the 1901 building as a four star hotel in two years. In 2016, Firtash transferred to his partner, developer Vagif Aliyev, a 50% stake in the Parus business center, also near Arena. Since 2014, Firtash has been living in Austria fighting extradition to the US on corruption charges. He is under house arrest with bail set at €125 million.

In contrast, Tigipko is buying, amassing a major holding on Velyka Vasilkivska, a 10-minute walk from Arena. Earlier this month, his TAS Group paid million $6.7 million to state-owned Ukrgasbank for the business center at Velyka Vasylkivska 39. Six months earlier, he acquired the adjacent empty lot, at Velyka Vasylkovska 35, 35b, and 37.

Across town, at Podol’s Rybalsky Peninsula, Tigipko recently bought the Forge property from President Poroshenko and Rada deputy Igor Kononenko. Tigipko and partner Valery Kodetsky plan a $600 million development that is to include 50,000 square meters of office space and 36 residential buildings with a total of 6,200 apartments.

Two days after the presidential election, strong demand from bond buyers allowed the Financy Ministry to cut yields on short term bonds and to sell 5-year bonds for the first time in eight months. For the popular 4-month hryvnia bonds, demand was more than double the 1.5 billion hryvnia offer, allowing finance officials to lower the annual rate to 19%, from 19.5%. In the first effective placement of 5-year bonds since August, the government sold 3.5 billion hryvnia at 16%, during down one 290 million hryvnia offer at 16.2%.

Retail trade in Ukraine jumped 9% in March y-o-y, for 7.4% jump for the quarter, compared to last year, the State Statistics Service. Fueling this growth were: a 10.5% y-o-y growth in salaries in February; a 15% growth y-o-y in average monthly pensions in March, to $109; and a pickup in consumer confidence, to 65-67 points in January-March, All growth figures are adjusted for inflation – 8.6% a year in February.

Moving mining permits to auctions on the ProZorro.Sale online trading platform, the State Geology Service sold rights last Monday to seven deposits. In all auctions, prices were bid up, in one case 20-fold. Mining permits were sold for beryllium, graphite, titanium, zircon, amber, clay and underground drinking water.

Canada’s Bombardier is to join France’s Alstom and China’s CRRC in testing their electric freight locomotives in Ukraine, the Center for Transportation Strategies reports, citing Infrastructure Minister Volodomyr Omelyan. With testing to start place this summer, Ukrzaliznytsia stresses it wants foreign financing and a high degree of production in Ukraine. Henri Poupart-Lafarge, CEO of Alstom, said in Kyiv in February that his company is ready to supply 500 locomotives to Ukrzaliznytsia.

Lampooned by the Kyiv press at its launch five months ago, the Boryspil Express train to the airport is proving such a success that Ukrzaliznytsia plans to put an additional train on the route. With a record 2,500 people taking the train Monday, most of the 27 train trips took place with some passengers standing for the 35-minute, 80 hryvnia ride.

Poroshenko Allies Called for Questioning in Economic Cases

Transparency for Defense, Modernization for Health

A Sin City for Ukraine?

Markets Calm

Online Delivery Services Spread Across Ukraine

The Prosecutor General’s Office is summoning several top allies of President Poroshenko for questioning in embezzlement and money laundering cases, reports the Kyiv Post and Interfax-Ukraine. Those summoned include: Valeria Gontareva, the former head of the National Bank of Ukraine; Kostyantyn Stetsenko, managing partner at ICU investment bank; Borys Lozhkin, Poroshenko’s former chief of staff; Oleksiy Filatov, former deputy chief of staff; and Mykola Zlochevsky, Ukraine’s former ecology minister and owner of Burisma Holding, the natural gas company. Gontareva, who lives in London, told Interfax-Ukraine she would not go to Ukraine for questioning. She invited Ukrainian prosecutors to come to London.

Markets reacted calmly to the Zelenskiy landslide. The official exchange rate, traditionally ‘guided’ by the central bank, increased by 16 kopecks – less than 1% — to 26.66 / 26.69 hryvnia to the dollar. In neighboring Russia, the Moscow markets rose, reportedly on the belief that a Zelenskiy government will offer the window for a Russia-Ukraine détente and the easing of US sanctions.

Nova Poshta, the privately owned delivery company, has successfully placed bonds for UAH 300 million, or $11.2 million, Raiffeisen Bank Aval, the underwriter, tells Interfax-Ukraine. Maturing Aug. 14, 2020, the bonds have an annual yield of 22%, says Victoria Masna, head of investment banking at Raiffeisen. The money is to go to buying new trucks, new computer servers and modernizing the company’s 2,886 branches. Last year, Nova Posta delivered 174 million packages, 20% more than in 2017. As part of strategy to grow again by 20% this year, the company has opened 164 branches since Jan. 1. Reflecting the growing popularity of online shopping, one of all Nova Posha branches are in towns with less than 10,000 people.

Barcelona-based Glovo starts deliveries this week in Lviv, its fifth Ukrainian city, after Dnipro, Kharkiv, Kyiv and Odesa. After opening last fall in Ukraine, the delivery service has 5,000 couriers and a list of 10 additional cities for expansion including Mykolaiv, Vinnytsia, and Zaporizhia. “Of all European countries, Ukraine needed the least time to reach 100,000 orders per month,” Dmitry Rasnovsky, Glovo’s Ukraine manager, said at the SUP Day Forum Thursday in Kyiv. “I believe that we can reach a figure of 1 million orders per month by the end of 2019.”

With Kyiv restaurants unable to keep up with food orders, Glovo plans to open a ‘remote kitchen’ in August. Four ‘non-competing’ restaurant would cook under one roof at a central Kyiv location. “Already, restaurants in the center of Kiev are not coping with orders….they do not have the capacity to provide such a flow,” Rasnovsky said of surging online demand. He also is considering opening a ‘remote kitchen’ in Troieschchyna, a Left Bank district, where costs are low and restaurant offerings are poor.

Next month, Kyiv is to become the third city in world to have Uber Shuttle service. Currently, only Cairo and Monterrey, Mexico have the service, which allows passengers to book seats in minibuses operating along fixed city routes. Uber launched its taxi service in Ukraine in 2016, its regional headquarters in Kyiv in 2017, and, earlier this year, Uber Eats food delivery service and Uber Green electric car service.

Chinese Technology for Europe’s 2nd Largest Solar Plant

With UIA Cutting Flights, Kolomoisky Could Clip Wings of Competitors

Two of DTEK’s eight power generating plants run on anthracite coal which no longer is produced in government-controlled areas of Ukraine. DTEK has planned to entirely fuel these two plans with 2.2 million tons of coal imported from Russia, some from its own mines. Concorde Capital’s Alexander Paraschiy writes: “If DTEK won’t be able to supply coal to Luhanska from Russian territory (either from DTEK-related mines, or from other Russian suppliers), the plant will have to either switch to burning natural gas (which is too expensive) or halt its operations altogether…All in all, we continue to consider DTEKUA Eurobonds as the most exposed to political risks of 2019.”

Metinvest, Ukraine’s largest steelmaker, may face a shortage of coking coal. Concorde Capital calculates that Metinvest’s mines can only cover 57% of the 9.1 million tons of coking coal the company needs. On Thursday, Metinvest told Interfax-Ukraine that it has a long-term supply strategy that guarantees sufficient coal. However, Anatoliy Starovoyt, general director of Ukrkoks, the national association of coking coal consumers, worries that Ukraine’s seaports cannot handle an onvernight doubling of coking coal imports. Last year, Ukraine met almost half of its needs for 13.3 million tons of coking coal by import coal from Russia, by rail.

Russia’s outright import and export bans will cover $250 million worth of goods a year, estimates Russian Prime Minister Dmitry Medvedev. But, Ukraine analysts say these items are replaceable, analysts say. Last year, Ukraine imported most of its oil from Azerbaijan and only 20% of its bitumen – used for paving roads — from Russia. Interpipe only exported only 61,600 tons of pipe, 9% of its total exports, to Russia.

Foreign investment in Ukraine’s hryvnia treasury bonds rose by 20% last week, hitting a total dollar equivalent of $1.1 billion. Attracted by high interest rates and not put off by the presidential election, foreign investment in the bonds has increased almost 5-fold this year, to UAH 31 billion. Last year, foreign investment in the bonds increased by 22%.

With Chinese equipment, DTEK inaugurated Europe’s second largest solar power station on Friday in Nikopol, Dnipropetrovsk region. Costing $243 million, the 200 MW capacity plant is second only in Europe to France’s 300 MW plant in Cestas, Gironde region. China Machinery Engineering Corporation built the 400-hectare plant, using 160 PV inverters manufactured by China’s Shenzhen Kstar Science and Technology and 750,000 solar panels made by China’s Seraphim Solar System and Trina Solar. CMEC President Han Xiaojun told Xinhua news agency: “The Nikopol plant is based on advanced solar modules and inverters made in China, as well as on advanced power plant control systems.”

After opening a 10.5 MW plant last year in Nikopol, Canadian renewable energy company TIU has its second Ukraine plant, in Mykolaiv region, on Thursday. With an investment of about €11 million, the plant was built in Kalynivka, 150 km northwest of Mykolaiv city.

Delay of delivery of three Boeing 737 MAX passenger jets is prompting UIA to cancel its Kyiv-Vinnytsia flight and to cut frequencies on its flights from Kyiv Boryspil to Amman, Ankara, Athens, Baku, Geneva, Istanbul, Ivano-Frankivsk, Kherson, Minsk, Riga, Yerevan and Zaporizhia. Compounding UIA’s difficulties, the airline lost $100 million last year.

With Kolomoisky owning a major share of UIA, the election of his protégé, Zelenskiy, could result in government favors extended to the national flag carrier, analysts tell The Kyiv Post. While a frontal confrontation with discount airlines would be highly unpopular, a Kolomoisky-influenced government could cut aviation fuel taxes for Ukraine-based airlines and cut navigation fees, charges that the UIA already is fighting in court.


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