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  • Zelenskiy Meets on FX
  • Labor Remittances: $1 billion a Month
  • Lviv To Get Better Roads and EU Gauge Track to Poland
  • Boryspil and Kharkiv Among Europe’s Fastest Growing Airports
  • Foreign Airlines Fly Over Ukraine Again
  • A String of Upgrades for Ukraine Bonds 

With the hryvnia up 15% against the dollar since the start of the year, President Zelenskiy discussed foreign exchange options yesterday with central bank officials and private bank executives, Bloomberg reports. The strong hryvnia hurts exporters, notably farming and metals companies. Ukraine follows a managed float exchange rate policy.

Adjusted for inflation, real hryvnia salaries have grown by 9.6% this year, Economy Minister Timofei Milovanov writes on Facebook. But for export-oriented companies that make their calculations in dollars, the salary appreciation looks more like 25%, due to the 15% appreciation of the hryvnia since Jan. 11. The average monthly salary in Kyiv is now $660.

Labor remittances to Ukraine this year are expected to be nearly $1 billion a month, Oleg Churiy, a deputy governor of the National Bank of Ukraine, tells UATV. Last year’s level, as clocked by the central bank, was $11.1 billion. “The numbers will be slightly higher than last year, but there is a clear tendency to slow down the pace of labor migration,” Churiy says. “This is due to the fact that incomes in Ukraine are growing quite quickly, the nominal growth in salaries is about 20%.”

To cover the ‘green tariff’ on electricity generated by solar and wind, the Energy Ministry has developed a draft bill where people who use more than 500 kWh per month will pay higher rates. Noting that half of Ukraine’s population uses less than 100 kWh per month, Konstantyn Chyzhyk, deputy Energy Minister, told the International Renewable Energy Forum: “Rich people will pay more.”

In the last five years, $4.8 billion has been invested in renewable energy in Ukraine, 
Prime Minister Honcharuk told Francesco La Camera, visiting director-general of IRENA, the International Renewable Energy Agency. Honcharuk said: “Today, a number of renewable energy projects with a total capacity of 2.5 gigawatts are being implemented in Ukraine.”

To protect roads after they are rebuilt, the government will install more than 100 weight in motion sensor systems for trucks, Infrastructure Minister Krikliy said Thursday in Lviv. Through 2021, the sensors will be installed where they have the best chances of catching overloaded trucks – border crossings and the entrances to seaports.

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Nearly $100 million will be spent next year to improve roads in Lviv Oblast, Minister Krikli said. Visiting the Lviv-Medenychi road, he ordered contractors to speed up the work. On this road radiating southwest from Lviv into the Carpathian foothills, only 37 km of 60 km have been completed in four years.

In “Western Ukraine’s biggest infrastructure project,” European gauge tracks will be extended 70 kms east from the Polish border to Sknilov, a western suburban station of Lviv. Sknilov would be a multimodal hub with an express train running on Ukrainian gauge tracks to Lviv airport (1 km) and on to Lviv’s central rail and bus station (5 km). Passport controls will be performed at Sknilov, which will be become the international rail station for Lviv.

“In one year, Ukrainians will receive direct, high-speed trains from Lviv to Krakow, Prague, Vienna,” Yevhen Kravtsov, Ukrzaliznytsia CEO, writes on Facebook of the project. Competing with air travel, a train ride from Lviv to Krakow would take 3.5 hours.

The main work would be to rebuild the existing track to the border as a double gauge track with three rails. In the last year, Ukzaliznytsia started running trains from Budapest and Kosice Slovakia, on Ukraine’s only significant stretch of European gauge track, to Mukachevo.

While UIA retires jets and cuts routes, SkyUp Airlines plans to increase its fleet by 50% over the next year, adding five jets, Eugene Haynatsky, the discount airline’s CEO, tells the Center for Transportation Strategies, in Lviv. After basing a Boeing in Lviv in October, SkyUp started flights from Lviv to Paris Beauvais and Tel Aviv. Next spring it plans to start flights from Lviv to Barcelona; Batumi, Georgia; Burgas, Bulgaria; and Heraklion, Crete.

With Ukraine’s internal air traffic tiny for the nation’s size, a foreign company is considering buying Antonov aircraft manufacturer and making short-haul commuter jets for Ukraine transport, Infrastructure Minister Krikliy tells UNIAN.  Antonovs are not certified for passenger traffic in the EU. However, they are used in the former Soviet Union, notably Ukraine, Belarus, Moldova, and Georgia. On Wednesday, Aleksandr Donets, president of the Kyiv-based company, said that Antonovs fixed assets are nearing the end of their life and without renovation within 5 to 8 years, aircraft production will be unviable.

Boryspil airport is the second-fastest-growing airport in Europe for its size, reports International Airport Council ACI Europe. Boryspil’s traffic was up 25.8% in the third quarter, compared to the same period last year. In this 10-25 million passengers per year group, only Milan Malpensa had a faster growth rate, 26.1%, partly due to the closure of Milan Linate for runway repairs. With Boryspil handling 1 million passengers a month, the airport announced Thursday that it has completed construction of three additional gates in Terminal D, the main terminal.

For the first time, Kharkiv airport has joined the ranks of Europe’s five fastest-growing airports for its size, under 5 million passengers, according to ACI Europe. In the third quarter, Kharkiv’s traffic was up 42% y-o-y. With faster growth were: Tirgu Mures, Romania – up 113.5%; Ohrid St. Apostol Pavel, Northern Macedonia – up 54%; and Turku, Finland – up 53%.

Bolstered by new flights, Kharkiv air traffic was up 70% in October, to 140,500 passengers. In recent weeks, this airport serving Ukraine’s second-largest city has started to offer direct flights to Lviv, Poznan, Sharjah, Tbilisi, and Vilnius. Next spring Ryanair and Wizz Air will start flights to Budapest.

Fitch upgraded DTEK Energy’s issuer default rating to B-/Stable. It also upgraded the company’s Eurobond rating to B- from C. The upgrade reflects DTEK’s “improved financial flexibility following the successful restructuring of the company’s debt.”

Moody’s Investors Service has improved the rating outlook, from ‘stable’ to ‘positive’ for seven Ukrainian banks:  PrivatBank, Oschadbank, Ukreximbank, Raiffeisen Bank Aval, Prominvestbank, Sberbank, and Pivdenny Bank. Moody’s also confirmed it basic credit rating of Ukrainian banks -Caa1. On PrivatBank, the subject of a takeover lawsuit by former owner Igor Kolmoisky, Moody’s wrote of the bank, nationalized three years ago: “Improving PrivatBank’s ratings is driven by an increase in Ukraine’s sovereign rating, stabilization of the banking system, and improved asset quality and profitability of PrivatBank.”

Concorde Capital’s Alexander Paraschiy writes: “The company’s rating is one notch below the sovereign level (B/Positive from Fitch), which is explained by its tough debt repayment schedule in 2023-2024 that implies refinancing needs…All in all, we remain bullish on DTEKUA bonds.”

  • Kharkiv’s IT industry has expanded
  • Odesa Reacts to Anti-Corruption Drive at Customs

Kharkiv’s IT industry has expanded by almost one quarter this year, to 31,000 specialists, reports PricewaterhouseCoopers and IRS-GroupTheir survey identified almost 500 companies. The average pay is $2,025 a month, about six times the regional average. If trends hold up IT will be a $2 billion industry in Kharkiv in 2025.

As part of the government’s effort to bring private-sector management skill and experience to state entities, the Infrastructure Ministry has posted a tender for representatives on supervisory boards for Boryspil airport, Sea Ports of Ukraine, and Ukrposhta, the state postal company.  The deadline for applications for Ukrposhta was Monday. For the airport and the seaports, it is today.

Prime Minister Honcharuk announced Wednesday an international tender for a contractor to complete a half-built, 15-year old bridge across the Dnipro in Zaporizhia. Work should start next year and the roadway portion should be completed by the end of 2021.

Competition rules Ukraine’s gas import market, where 65 companies import the fuel from 18 European suppliers, Andriy Kobolyev, Naftogaz CEO, writes on Facebook. Today, no supplier has more than 30% of the market, a sharp contrast to four years ago, when Gazprom supplied 90% of Ukraine’s imports. Ukraine stopped buying gas from Gazprom on Nov.25, 2015, preferring to buy gas at hub prices, largely from Slovakia. Much of the imported gas used by Ukraine originally comes from Russia.

Where there is smoke, there is fire. On Tuesday night, for the second time in one month, arsonists burned a car belonging to a new customs official in Odesa. In response to the burning of the Skoda belonging to Igor Reznik, acting head of the Odesa customs, Maxim Nefyodov, chairman of Ukraine’s new Customs Service, wrote on Facebook: “The fight against smuggling is a war – and we must win.”

Last week, the National Anti-Corruption Bureau arrested seven customs officials in the case of Vadim Alperin, an Odesa business man who allegedly offered $800,000 in bribes to protect his import businesses. Zelenskiy wrote on Facebook on Wednesday that Alperin is ‘one of the godfathers of smuggling in Ukraine.” In response, Aperin’s lawyer said the fugitive would turn himself in for questioning. Among the arrested was Serhiy Tupalskiy, who ran the Odesa Customs Service until last March.

  • Azeris to Invest $400 Million in Vodaphone
  • China’s Huawei Wants to Expand in Ukraine
  • Kharkiv IT up 24%
  • Foreign Investors Push Down Bond Yields
  • For EU Diners: Duty-Free Chicken Kyiv
  • With Flights to 30 EU Cities, Lviv Air Traffic Jumps by 45%, City Goes After Conferences

Azerbaijan’s Bakcell, which is buying Vodafone Ukraine, plans to invest $400 million in the mobile phone company, Davyd Arakhamia, secretary of the National Investment Council, writes on Facebook. “The new owners have already committed $400 million for development in Ukraine,” he writes. “Plus, the holding is considering a number of investment projects in the country.” Arakhamia, who also heads the majority Servant of the People faction in the Rada, adds, referring to MTS, the Russian seller: “A passive investor looking for exit has been replaced by an active one looking for expansion.”

Estonia’s 25-year drive to put 99% of government services online was studied last week by President Zelenskiy and Minister for Digital Transformation Mikhail Fedorov, in a day-long trip to Tallinn. At the Digital Forum, Zelenskiy talked about his government’s ‘state in a smartphone project. At the stand of the Estonian Center for Electronic Administration Systems, he tested KISS, or Keep It Simple and Short. This system simplifies access to Estonia’s e-government services.

In Kyiv, Jian Li, Europe president of Huawei, proposed that the Chinese telecom giant works with Ukraine’s new government to “transform Ukraine into the digital black soil of Europe.” After entering Ukraine in 1997, Huawei has grown to 400 employees, five offices, two service centers and joint projects with 50 Ukrainian companies and research institutes. Offering to help Ukraine install 5G mobile internet and build ‘e-government in the cloud,’ Li estimated that Ukraine’s four-year plan to expand broadband internet to 95% of the population will increase GDP by 3%.

Strong demand allowed the Finance Ministry to cut yields on its 4-year hryvnia bonds by nearly 1 percentage point in three weeks. In Tuesday’s weekly auction demand outstripped supply by a factor of 3 to 1. This allowed the ministry to sell $104 million in hryvnia equivalent with a weighted average yield of 12.4%, down from 13.3% three weeks ago. In contrast, no bids were made for 10-month bonds, and only one bid, at the previous rate of 14.1%, for 6-month bonds.

Ukraine attracted loans from Cargill totaling €250 million in October, according to the Finance Ministry’s monthly debt report. Last July, the government authorized the Finance Ministry to attract two loans from Cargill Financial Services International: €100 million for two years at 5.15% per annum and €150 million for five years at 6.25% per annum. The month before, Ukraine had placed its first Eurobond issue in euros in 15 years – €1 billion worth of 7-year Eurobonds at 6.75% per annum. With demand exceeding supply six times, this placement unleashed a string of Ukraine corporate bond issues in dollars and euros. Now, 10.6% of Ukraine’s foreign debt is in euros.

The central bank’s official exchange rate breaks the 24 hryvnias to the dollar barrier. The National Bank of Ukraine has set the rate at 23.98 hryvnia/dollar. This is the strongest rate for the hryvnia since Jan. 2016.

While the IMF stretches out talks with the Zelenskiy government, the Washington-based institution does not to push the new government into the hand of Russia, Timothy Ash writes from London. Noting that Ihor Kolomoisky recently urged the government to turn to Moscow for financial aid, Ash wrote Monday that IMF staffers “want to support the reformers in the Zelenskiy team and realize not agreeing a new IMF program would be a win for the opposing side. Without an IMF program, it would be easier for the forces set against reform to get what they want on the PrivatBank issue…I find it hard to see a new IMF program in place now before year-end – its more realistic that IMF board approval will be in Q1.”

Almost on cue, Moldova’s new prime minister on Tuesday raised the possibility of a “pause” in cooperation with the IMF, a day after he said Moldova is negotiating a $500 million loan with Russia. Ion Chicu’s comments came after a visit last week to Moscow, where he met with Russian Prime Minister Dmitry Medvedev. Chicu’s Socialist Party came to power two weeks ago, after Moldova’s 5-month old, pro-Western government was felled by a no-confidence vote.

The European Parliament has voted to triple Ukraine’s duty-free exports of poultry to 70,000 tons – about one portion of Chicken Kyiv per European per year. The amendment to Ukraine’s free trade agreement is to phase in over the next two years. Over the limit, exports will be taxed at €1 per kilo. EU chicken farmers fear Ukraine’s poultry industry, which is based on cheap grain.

With Lviv tourism growing strongly, a two-day international travel forum, ‘Win with the Lion!’, opens at the city’s international airport. During the first half of this year, tourist visitors were up 16.5%, to 1.2 million. Top nationalities were: Ukrainians – 30%; Poles – 25%; Belarusians – 8%; Turks – 7%; Germans – 6%; British -5.6%; Lithuanians – 5%;and Americans – 2%.

Ukraine’s fastest growing major airport, Lviv expects to see passenger traffic increase this year by 42% y-o-y, to 2.2 million people, Tatyana Romanovska, the airport director, said last Friday. She spoke on the occasion of 2 million passengers using the airport this year. In October, traffic was up 45% over one year ago. Next year, she predicts traffic will increase by 30 to 40%.

With direct, year-round flights to 30 different foreign cities, Lviv is served by Ukraine’s big four low coast carriers: Ernest, Ryanair, SkyUp and Wizz Air. In the last month, SkyUp opened these new flights – Lviv-Kharkiv; Lviv-Kyiv; Lviv-Paris Beauvais; Lviv-Prague and Lviv-Tel Aviv. Last month, SkyUp started to base a Boeing at Lviv airport. Wizz Air recently started Lviv-Larnaca. Next spring, Wizz Air and Ryanair start Lviv-Budapest.

With the growth in air links, Lviv plans to develop conferences and business tourism. Andriy Moskalenko, first deputy mayor, says that over the last four years, conferences increased by 81%, from 237 in 2015 to 430 in 2018. On presenting plans for business tourism at the city’s International Economic Forum earlier this month, he said the conference industry generates “big investments because it brings European cities about 4.5 times more profit than recreational tourism.”

On Dec. 13, !FEST Holding opens a 69-room! FEST Hotel in northern Lviv. The 7-story hotel will include a restaurant and a café. It is on 15a Lemkivska St,, near the Forum Lviv shopping center.

  • Tiny Bakcell Buys Big Vodaphone
  • Poll: Public Pushback on Free Market Moves 

Russia’s biggest mobile phone operator MTS has agreed to sell Vodaphone Ukraine Vodaphone to Azerbaijan’s Bakcell LLC for $734 million. Under pressure, after the war started, Moscow-based MTS first re-branded its Ukraine operation Vodaphone, then tried to sell it. According to analysts at Moscow’s BCS Global Markets interviewed by the Financial Times, Vodaphone “appears to have been sold at a discount.”

In the deal, Bakcell, Azerbaijan’s second-largest cell phone company, with 3.5 million subscribers, buys Vodaphone, Ukraine’s second-largest cellphone company with 20 million subscribers. According to a press release, purchase money comes from “international financial organizations” and Bakcell’s parent company, NEQSOL Holding, which includes several oil and gas companies.

In their first Ukraine investment, the Azeris enter a low margin market. Last year, Vodaphone Ukraine’s net profit dropped 20%, to $67 million, as the company invested heavily in expanding its 3G and 4G networks. Ukraine has one of Europe’s lowest average revenues per user – $14 per month.

The Zelenskiy administration’s ambition is to push Ukraine ahead of Japan and Singapore to become “first in the world” for digitization, Mikhail Fedorov, Minister for Digital Transformation, said in a interview with Radio Liberty.

Digital goals for December: Drivers licenses in smartphones; launch ‘Action’ or Дія – one window portal for citizen services, documents, and files; launch ‘Developers Office’ – to file construction documents “without the involvement of any official.”

Digital goals for next year: Add to Action: student id’s; retirement certificates, birth certificates, residence registrations; and national id cards (internal passports).

Five-year digital goal: 100% of services online and universal high-speed internet access in 2024, up from 60-70% of the nation today.

“Starting in the spring, we want to launch four services a month,” says Fedorov. “We want to make sure that in one year’s time, everyone does not think about plastic, but can safely move around the country with just a smartphone.”

Solar and wind energy investors should find compromises in 2020 between high green energy tariffs and the ability of consumers to pay, say officials of the Energy and Environmental Protection Ministry. “We expect voluntary restructuring from business, and for our part, we will show steps from the government that we are ready to do to address the deficit,” Konstantin Chizhik, deputy energy minister for European Integration, told reporters Monday. Reviewing the ministry’s goals for next year, Energy Minister Oleksiy Orzhel said: “It is very important that we find a common language with investors, that they go to the conditions of restructuring that are now proposed by the government.”

A new poll indicates majorities of Ukrainians do not support three key free-market initiatives of the Zelenskiy administration. In a nationwide poll completed last week, 58% of 2,041 people interviewed do not support the creation of a farmland market, 55% do not support the privatization of large state companies, and 49% do not support the legalization of gambling. Support for these three measures were: 24% for the land market; 22% for selling big state companies; and 38% for gambling. Only the legalization of amber mining won a majority – 71%. The poll was conducted by the Ilk Kucheriv Democratic Initiatives Fund with the Kyiv International Institute of Sociology.

  • IMF Talks Go to December
  • Wanted: Bakhmatyuk
  • World Steel Crisis Drags Down Ukraine Steel
  • $1 Billion for Kyiv-Odesa Highway, Lviv Bypass
  • Polish Permit Squeeze Creates Truck Jam in Uzhgorod 

The IMF will continue negotiations with Ukraine into December, the Fund mission leader said after a one-week-long visit here. Ron von Rooden, the leader, said: “The IMF staff team had constructive and productive discussions with the Ukrainian authorities and commended them on the considerable progress made during the last few months in advancing reforms and continuing with sound economic policies.”

Government officials do not appear overly concerned. We have had constructive negotiations,” Prime Minister Honcharuk said. “We are continuing to work on the new program in close cooperation.” Finance Minister Oksana Markarova wrote on Facebook: “Significant progress has been made and many parameters of the future program have been agreed upon.”

The IMF may be waiting for a Dec. 19 ruling by a Kyiv court on the legality of the 2016 nationalization of Ukraine’s largest bank, PrivatBank. Speaking on Friday morning at London’s Chatham House, Honcharuk said Friday: “We have a very clear understanding: I, the President, the government. The case of PrivatBank is indicative of Ukraine in the whole world. Therefore, of course, we stand on the fact that neither this bank nor the funds from it, should be returned to previous shareholders.”

A few hours earlier, the Kyiv Post published comments by Ihor Kolomoisky, half owner of PrivatBank before it was nationalized. The International Monetary Fund knows PrivatBank will be returned (to me) in the near future,” he asserted. He also intimated that workers from his Nikopol Ferroalloy Plant could storm PrivatBank’s Dnipro headquarters.

Timothy Ash writes: “Ultimately it was PrivatBank which blew up chances of an early IMF deal…The nightmare for the Fund is to agree with a program now — only for just around the time of the IMF board meeting in December to have the Ukrainian courts to rule against the PrivatBank nationalization…So all this will be pushed out to 2020.”

PrivatBank, Ukraine’s largest bank, recorded the hryvnia equivalent of $1.7 billion in profit in the first 10 months of this year, double the level during the same period last year. After the bank was nationalized, the state had to inject $5.5 billion into the bank to stabilize it. According to new central bank numbers, Ukraine’s solvent banks recorded $2.2 billion in profit through October, three times the level of the same period last year.

Oleg Bakhmatyuk, the agricultural tycoon and suspect in a $49 million embezzlement case, has been placed on a wanted list by the National Anti-Corruption Bureau, or NABU. The National Bank of Ukraine, says Bakhmatyuk owes the state $1 billion.

A Warning for Investors Rushing Into Ukraine: Foreigners lapping up Ukraine’s debt may get stuck in the downturn,” Bloomberg warns in an article blaming “an underdeveloped secondary market.” ICU analyst Taras Kotovych says: “It could be a problem to sell bonds to locals with an attractive price in a short period of time.” Although posted Friday, the article did not mention the plan announced Thursday by the National Bank of Ukraine to expand the secondary market in 2020. Year to date, trading of the Ukraine government hryvnia bond on the secondary market is up almost 70% y-o-y, to $2.7 billion.

Moody’s has changed Ukraine’s bond outlook from stable to positive. The long-term foreign debt ratings now are Moody’s – Caa1, positive; Fitch – B, positive; and S&P – B, stable.

The world steel crisis has hit Ukraine, dragging steel production in October down 12% y-o-y. Steel’s fall pulled Ukraine’s overall industrial production in October down 5% y-o-y. Sergey Belenky, chair of the Federation of Metallurgists, listed in a Channel 24 interview steel cuts around the world: ArcelorMittal South Africa cuts 2,000 workers; U.S. Steel cuts 1,800 workers; Germany’s Thyssenkrupp to cut 6,000 workers Jan. 1, and British Steel is on verge of bankruptcy, with 25,000 jobs at stake. In Ukraine, he said, steelmakers seek to keep their labor force intact by minimizing cuts and increasing the average monthly wage to $800.

Prime Minister Honcharuk signed documents Friday for nearly $1 billion in loans to fully rebuild the Kyiv-Odesa highway and to build a northern bypass highway around Lviv.In three years, the Kyiv-Odesa highway will become [Ukraine’s] first European-level motorway along its entire length!” Honcharuk wrote after the signing ceremony in London. The money is to come in two €450 million loans, one from the European Investment Bank, and the other from the European Bank for Reconstruction and Development.

With Poland refusing to issue sufficient transit permits, Ukrainian trucks backed up for kilometers last weekend, waiting to enter the EU through Ukraine’s Uzhgorod checkpoint with Slovakia. Ukrainian officials argue the Polish permit squeeze violates Ukraine’s free trade pact with the EU. Ukrainian drivers say Poland is pressuring them to move to Poland to work for Polish companies, which are short of drivers. Inside Ukraine, truck transport in October was up 22% y-o-y, largely to move grain to the seaports.

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.