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  • Drop a Dime, Earn a Dollar: Ze to Reward Whistleblowers
  • Bank Profits Nearly Quadruple
  • Central Banker Welcomes Foreign Investment in Hryvnia T-Bills
  • Ukrainians Account for 75% of Foreign Workers in Poland
  • Private Trains Knock-Knocking on Ukraine’s Western Door

Zelenskiy aides are drafting laws that would pay whistleblowers up to 10% of the value of state corruption they expose, Ruslan Ryaboshapka, deputy presidential chief of staff, has told NGO leaders, reports Public Finance International. “Whistleblowers who report large-scale corruption schemes that cause significant damage to the state will be encouraged by material remuneration,” he told anti-corruption activists on Monday. He said safeguards would protect whistleblowers from ‘persecution’.

Through July, net banking profits hit $1.5 billion, almost four times the level of the first seven months of last year. According to the National Bank of Ukraine, revenues increased by 30%, to the hryvnia equivalent of $5.6 billion. Expenditures increased by 6%, to $4.1 billion.

For the first time since February, foreign holdings of Ukraine hryvnia treasure bonds decreased reports the Finance Ministry. After Tuesday’s weekly auction, foreign holdings declined by 1.8%, to $3.4 billion. Foreigners hold 11% of Ukraine’s T-bills, a 14-fold increase since the start of the year.

Foreign investment in the T-bills is far from reaching a destabilizing level, Oleg Churiy, a deputy governor of the National Bank of Ukraine, tells UNIAN. By comparison to the 11% rate in Ukraine, he says: “In Peru, this figure is 55%, the Czech Republic – 40%. In Indonesia, South Africa, Mexico – about 30-40%.” Even with Ukraine’s bond yields dropping, he sees more investment: “The share of non-residents in the debt market in Eastern Europe is quite high. This can be, for example, 20-40% against a few percent yields.”

Ukraine’s ratio of state debt to GDP is 55%, lower than the 93% ratio in Egypt, a country with a B rating from S & P, better than Ukraine’s B-. The problem is that about 70% of Ukraine’s public debt is in foreign currency,” Churiy tells UNIAN. “This figure should be reduced – to replace foreign currency debt with hryvnia debt…the arrival of non-residents and the development of the domestic debt market will help reduce currency risks.”

This year’s surge of foreign investment into Ukrainian hryvnia T-bills broke an unwritten link between bond rates and Ukraine’s prime rate, the central banker says. “The arrival of foreign investors has changed the rules of the game. Since the beginning of the year, the short-term bond rate has fallen by about three percentage points, while the NBU discount rate has fallen by only one.”

With Ukraine’s dialogue with the IMF “ongoing,” the key impact of a new deal will not be the money, but the international seal of approval given to Ukraine’s economic policies. “Our forecast is to receive two billion dollars this year under the new IMF program. And next year, too. But it could be one billion, two or three,” Churiy says. “It doesn’t matter much to investors. The main thing is the presence of the program.”

Fast adopters of new technologies, Ukrainians increased their contactless payment cards this year by 36%, reports the National Bank of Ukraine. Contactless cards increased to 5.3 million and cards with electronic chips increased by 24%, to 1.4 million. Cards account for half of all payments in shops. Overall, there is 63.2 million payments card of all types in Ukraine, about twice the country’s adult population. There are now 71 card payment systems in Ukraine.

Ukrainians account for 75% of the 644,000 foreigners working legally Poland, Radio Poland reports, citing an interview with Wojciech Andrusiewicz, spokesman for Poland’s Social Insurance Institution. After the 483,000 officially registered Ukrainians, the next group is far behind – 38,000 Belarussians or 6% of the total. At least twice as many Ukrainians work in Poland at temporary jobs, taking advantage of the 90-day visa-free EU entry regime. The number in Poland have hit a plateau as other eastern European countries recruit Ukrainian guest workers, for higher pay.

As Zelenskiy aides debate allowing private passenger trains in Ukraine, RegioJet, a private Czech carrier, plans to break the taboo, launching daily trains from Prague to Lviv region next June. The trains will go to the end of Euro gauge tracks, at Mostyka 2 station, eight kilometers east of Poland. From there, passengers will take buses to Lviv, one hour further east. With all permits in place, company spokesman Aleš Ondrůj tells iDNES.cz: “We are witnessing a rapidly growing demand of Ukrainian citizens for trips to the Czech Republic and other EU countries – not only for work but also for tourism or study.”

With the summer travel season drawing to a close, two airports close on Monday Sept. 2 for runway repairs.
Kyiv Sikorsky (Zhuliany), the nation’s second-busiest airport, will close Sept. 2-12 for $1.3 million repairs on its sole runway. For the 10 days, all flights will be rerouted to Kyiv Boryspil, the nation’s busiest airport. With over 3 million passengers expected to pass through Sikorsky this year, the closure will affect about 100,000 travelers.Zaporizhia, the busiest airport in southeast Ukraine, will close Sept. 2 – Oct. 15 for a $12 million runway rebuild. Shortly after the runway work, Zaporizhia will open its new $30 million passenger terminal. With traffic up 27% y-o-y, the airport handled 51,000 passengers in July, making it the 6th busiest airport in Ukraine.  During the six-week closure, LOT, Motor Sich, Pegasus, SkyUp, Turkish, UIA and Windrose will either cancel their flights to Zaporizhia or reroute them to Dnipro, 100 km to the north.

On Monday, Odesa airport’s runway will be shortened by 16%, or 450 meters, to advance the two-year-old runway reconstruction project. With the project over budget and over deadline, Kyiv provided an additional $45 million this summer, asking for completion by the end of this year. Officials say passengers should not worry, as a 2,350-meter runway is almost as good as a 2,800-meter one. “Some restrictions on take-off weight will apply only to aircraft of the Airbus A321 type, but all carriers operating this type (Turkish Airlines, Azur, Windrose) have received warnings,” reassures the Center for Transportation Strategies news site. Motor Sich has canceled some of its Kyiv Sikorsky-Odesa flights.

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  • World Bank Boss Arrives as Zelenskiy Readies Farm Land Market Bill
  • Courts Switch: Now Favor Privatization
  • Consumer Confidence Up to Aug. 2013 Level
  • PM Proposes 50% Hike in Road Spending
  • Chickens Fly, Pigs Die

Creation of a farm land market in Ukraine will be a major topic for David Malpass, the new president of the World Bank Group, who arrives in Kyiv today. Malpass, an American, meets Friday with President Zelenskiy. For the last two years, the World Bank has advised Ukraine on creating a market for farm land sales. Zelenskiy promises to win Rada approval of a land market this fall and to start farm land sales next year.

In the latest Kyiv court decision to allow privatizations, Kyiv’s Commercial Court unblocked the privatization of the capital’s President Hotel, allowing Concorde Consulting and the State Property Fund of Ukraine to prepare the state-owned hotel for sale. In two other decisions in the last month, Kyiv courts removed unblocked the privatizations of Centrenergo, Odesa Port Plant, Krasnolimanska Coal Company, Elektrovazhmash, Indar, and the United Mining and Chemical Company. President Zelenskiy advocates privatization – and an overhaul of Ukraine’s judiciary.

Ukraine’s Consumer Sentiment Index jumped 7% from June to July, to 88 points, the highest level since August 2013. The Index “has reached a new peak,” reports Info Sapiens, which conducts the survey with GfK Ukraine and Dragon Capital. “Confidence in the new government contributes to the growth of positive expectations regarding the development of the economy as a whole.”

The outgoing Government proposes a 50% percent increase in road spending next year – $3 billion for the main roads linking regional capitals and $400 million for district-level roads. By November, 9,000 km of main roads will have repaired or rebuilt over the last three years, the largest amount Ukraine has seen since the road-building frenzy leading up to the 1980 Summer Olympics, Groysman said. Similarly, he said most of the nation’s 22,000 km of ‘territorial’ roads have not repaired since they were built – in the 1970s.

Farm production through July was up 12 % y-o-y, reports the State Statistics Service. Driving the growth, crop farming was up 20.4%.

Sunflower oil exports are up 9% y-o-y for the marketing season that ends next week. Ukraine, the world’s largest exporter of sunflower oil, has exported 5.2 million tons, APK-Inform said Monday. Ukraine’s top three markets are India, Turkey, and China.

Following a Japanese inspection mission here last month, Japan has agreed to allow the imports of poultry from Ukraine, reports Ukraine’s State Service for Food Safety and Consumer Protection. Over the last two years, 14 new countries have allowed imports of poultry from Ukraine. Seven new countries have opened up to imports of eggs from Ukraine. During the first half of this years, Ukraine’s poultry exports rose to 211,000 tons, largely to Saudi Arabia, the Netherlands and Slovakia. In July, Ukraine’s industrial poultry production was up 16% y-o-y.

In Ukraine’s worst case of African swine fever, around 100,000 pigs are marked for slaughter after a fever outbreak was detected last Saturday at Lviv region’s Halychyna Zahid, one of the nation’s biggest pig farms reports the Food Safety Service. Affecting 1.6% of Ukraine’s 6.4 million pigs, the case is Ukraine’s worst ever, reports Reuters. Since 2017, 351 cases have been detected in Ukraine, resulting in the destruction of 72,226 pigs.

  • Ze Aide: Cut Up State Company ‘Monsters’
  • Privatization Candidates: Big State Banks and Companies
  • Turkey, Ukraine Build Bomber Drone
  • Coal Comes from Colombia
  • In Donbas, Surge in Cross-Border Foot and Car Traffic

Naftogaz and Ukrzaliznytsia are “monsters that must be killed and dismembered,” Oleg Ustenko, President Zelensky’s official ‘Macroeconomic Policy Adviser,’ said Tuesday on Radio NV. In addition to cutting up the state railroad and state oil and gas company, Ustenko said Ukrspyrt, the state alcohol company, and the State Food and Grain Corporation should be privatized.

Separately, Oleksiy Honcharuk, deputy presidential chief of staff, has said that all of Ukraine’s state banks should be privatized and that minority shares in Ukrzaliznytsia and Ukrposhta, the state post office, should be put up for sale. Honcharuk is one of the ruling party’s four official candidates for prime minister, a decision expected this week.  With a privatization revolution brewing, Andriy Kobolyev, CEO of Naftogaz, says the new Rada should allow a Naftogaz IPO. The newly elected Rada is sworn in next week, on Aug. 29.

Chinese companies are interested in the privatization of Ukrposhta, Igor Smelyansky, the postal company CEO, said after meeting Chinese logistics executives from the Alibaba Group, the world’s largest e-commerce company. “I had negotiations with large Chinese companies,” he wrote on Facebook after a conference in Hangzhou. “Alibaba loves working through partners and sharing risks with them. But they want certainty, a clear strategy and clear rules at customs.”

Maxim Nefedov, the new head of the State Customs Service, promises businesses to enforce equal rules at customs.I promise you equal rules of the game,” he told a business gathering Tuesday. “But then do not ask for any preferences or benefits, and do not explain to me that without this your business will not be able to work.” He said the new Customs Service will be up and running by the end of September. His three priorities are mail, road crossing on the western borders, and containers at the Black Sea ports.

Container traffic at Ukraine’s seaports jumped 20% during the first seven months of this year, compared to the same period last year. With Ukrzaliznytsia inaugurating new container routes almost every month, the number of containers handled at the ports hit 545,803, according to the Sea Ports Administration.

Selling unused state property has caught on across the nation since the small-scale privatization started one year ago on the ProZorro.Sales election auction platform. In the first year, 1,142 state properties were sold, garnering $60 million for cities and for the State Property Fund. Competition bid prices up an average of 60% from starting levels. So far, 239 cities, towns and territorial communities signed up for the program which auctions state properties valued at less than $10 million. Top municipal privatizers are: Lviv – $17 million; Zhytomyr -$4 million; Kyiv – $3.6 million; and Vinnytsia – $1.4 million.

Ukraine, home to Europe’s largest lithium reserves, is bound to benefit from the projected surge in electric vehicles over the next 30 years, according to a study by Wood Mackenzie, the Scotland-based renewables, metals, and mining research group. World supplies of lithium, cobalt, and nickel will be exhausted if electric vehicle technologies do not evolve, warns Gavin Montgomery, head of research at Wood Mackenzie. Ukraine also has deposits of cobalt and nickel in the Krivorozhsky Basin. Next month, the Rada is to take up legislation to promote investment in electric battery and vehicle production in Ukraine.

Cut off from their coal mines in Donetsk, DTEK is importing coal from Colombia, a one month, 6,500-mile voyage from the Caribbean to the Black Sea. On June 1, Russia imposed new trade restrictions on Ukraine, cutting coal exports by 85%, to 129,300 tons for June. DTEK has contracted to buy 400,000 tons of coal from Colombia, the second-largest coal exporter in the Americas, after the US. Last week, the first shipment – 75,000 tons – arrived at Pivdennii (Yuzhne). In total, DTEK plans to import 1 million tons of coal this year, Maxim Timchenko, DTEK Group Director-General, told reporters last Tuesday.

Volodymyr Lavrenchuk is stepping down as board chairman of Raiffeisen Bank Aval, a bank he has led for 14 years. Oleksandr Pysaruk, a former first deputy governor of the National Bank of Ukraine, will take over the post. Last year, Raiffeisen’s Ukraine unit recorded $200 million in profits. Martin Grüll, CFO of the Austrian bank, said of Lavrenchuk: “He carefully and with great dedication led the bank, sometimes leading it through very stormy waters. He passes his successor a strong bank.”

The central bank does not expect volatility this fall in foreign exchange rates for the hryvnia. “We do not see the prerequisites for a radical change in the situation in the economy and the foreign exchange market,” Dmitry Sologub, a deputy governor of the National Bank of Ukraine, told reporters Tuesday. Predicting that Ukraine’s currency will float within a 10% band, he said: “We do not see the prerequisites for fundamental changes, looking at the macroeconomic situation in Ukraine.” The current exchange, 25.15 hryvnia to the dollar, is almost 15% stronger than the 29.4 hryvnia/dollar end-year exchange rate forecast in Ukraine’s 2019 state budget.

The central bank expects annual inflation to slow to 6.3% by the end of the year, Sologub said Tuesday. “The disinflation trend is there. We don’t see new inflationary trends,” he told reporters. Inflation in July was 9.1%.

  • Israel’s Netanyahu Promises IT Investment
  • China Offers UkrOboronProm $100 Million for Motor Sich
  • Germans, Norwegians Build $2-3 Billion in Wind Farms on Azov
  • Romanian Gas to Replace Some Russian Gas This Winter
  • Aslund: Privatize 97% of State Cos. ASAP

Saying “50,000 Ukrainian computer engineers, mathematicians, scientists,” work for Israeli companies in Ukraine, Israeli Prime Minister Benjamin Netanyahu promised Monday in Kyiv: “We will share technology and involve Ukrainians in our high-tech industry as we will make joint investments in this field in Ukraine. We do not only think about it but will also facilitate it.”

Netanyahu and President Zelenskiy promised to open high tech development offices in their respective capitals. We will involve Israel’s experience in the implementation of innovations, supporting start-ups, and holding scientific and research developments,” Ukraine’s president said at a joint press conference, well attended by the Israeli press. Zelenskiy invited Israeli companies to invest in road construction, infrastructure projects, medicine, education, and energy conservation. The two leaders agreed to expand their bilateral free trade agreement to include services.

China’s Skyrizon Aircraft and Xinwei Technology Group are offering UkrOboronProm a $100 million sweetener to agree to the sale of over 50% of Motor Sich, the state-owned aircraft engine maker, reports Interfax-Ukraine.  Under a deal under review by Ukraine’s Antimonopoly Committee, UkrOboronProm would retain a 25% blocking stake in the company. In 2015, the construction started on a planned Chinese-Ukrainian production site in Chongqing, about 1,700 km west of Shanghai. Last year, combined US-Japanese-Ukrainian pressure blocked the deal through court actions. However, the deal survived and is now before the Antimonopoly Committee. After losing $17 million loss in the first half of this year, the Zaporizhia-based company put its workers this month on a 4-day workweek.

Two wind energy farms costing a total of $2-3 billion are rising on the north shore of the Sea of Azov. They are designed to have a total capacity of 1,550 MW.

Wind Farm LLC is starting the first phase of an 800 MW wind farm about 25 km west of Mariupol. The first stage is to build a 32 km high voltage line to Mariupol, the most populous city in government-controlled Donetsk. Advised by Joachim Fuhrländer, the German wind power entrepreneur, Wind Farm will get its generators from Elekrotyazhmash and its towers, blades, and gondolas from Yuzhmash.

About 200 km to the west, Norway’s NBT is starting a second, 300MW phase of its Zofiya wind farm in the Yakimivska district of coastal Zaporizhia. The farm will hold 72 turbines of 4 to 6 MW, among the largest in Ukraine. At buildout, Zofiya is to have a capacity of 750 MW. Work is being done by Azovpromenergo, an NBT unit. JP Morgan led a syndicate of investors, including the EBRD, the Black Sea Trade and Development Bank, and the Nordic Environment Finance Corporation, or NEFCO.

Ukraine will work with Moldova to modernize border gas metering stations so Ukraine can receive Romanian gas, Ukrtransgaz said Monday. The investment would allow up to 1.5 billion cubic meters of Romanian gas to enter Ukraine, the equivalent of 15% of last year’s total imports. Ukrtransgaz plans to complete the work before Russia’s gas transit contract with Ukraine expires Jan. 1. The 50 km stretch of upgraded gas line will cross Transnistria, the Russia-controlled statelet in eastern Moldova. Ukrtransgaz did not address the issue of potential Russian interference in this gas flow.

Ukrtransgaz has finished upgrading five gas compressor stations to allow pumping gas from reservoirs in western Ukraine to supply eastern and southern Ukraine, the state gas transit company reports. This reverse mode of Ukraine’s gas pipeline is to be used if Russia shuts off all its gas shipments across Ukraine after the 10-year transit contract expires Jan. 1. Ukraine has not bought gas directly from Russia in almost four years. But in a swap operation with Slovakia, Poland, and Hungary, Naftogaz draws down Russian gas its passes through Ukraine, later paying Western companies for the gas. Last year, Ukraine imported 10.6 billion cubic meters of gas, one-third of the nation’s consumption.

Private stevedoring companies accounted for the largest amounts of grain exported – and the biggest increases during the first half of this year, according to logistics expert Alexander Gluschchenko. In contrast, state shipping terminal registered minimal increases, he wrote on his Telegram channel. The top three stevedoring companies, all privately owned, are: TIS terminals – 5 million tons; Nika-Tera SME – 2.6 million tons; and TransBalkTerminal – 2.5 million tons.

Of Ukraine’s 3,350 state-owned companies, “3,250 enterprises or their ruins should be auctioned off as soon as possible,” Anders Aslund, the economist, writes for the Atlantic Council.  “The 100 most valuable should be privatized carefully and their corporate governance be improved,” he writes in an advice column for the new government.

The former headquarters of Kreschatyk Bank goes up for auction on Aug. 29. A 1950s landmark at Khreschatyk 8a, between Hotel Kreschatyk and a Mafia restaurant, the building has 7,500 square meters of space. Setting a starting price of $17 million, the Retail Deposit Guarantee Fund plans to use the money to pay off creditors and large depositors of the bank, which was declared insolvent in 2016.

Ukraine uses road repair money half as efficiently as neighboring Slovakia, according to a new study by Kyiv’s Center for Economic Strategy. Ukraine gets fewer bidders on highway tenders, places more priority on road length than on intensity of road use, and fails to make adequate use of international aid money, the report says.

  • Grain Harvest to Break Last Year’s Record
  • Agro Business Drives Growth

With a strong corn crop starting to come in, the national harvest of all grains this year could hit 76 million tons, up 8% over last year’s record, Alfa-Bank Ukraine reports in its reading of the USDA’s latest World Agricultural Supply and Demand Estimates. Noting that farmers harvested a record 28 million tons of wheat this summer, Alfa research head Oleksiy Blinov writes: “It is clear that the country is about to set a new grain harvest record, but how high this record would depend on corn harvest, which is still in the fields waiting to be harvested in autumn.

Modern large farms are the nation’s economic locomotive, expanding crop production by 31.5% through July. By contrast, family farm production was up 5.5% through July, compared to the first seven months of last year, reports the State Statistics Service. Last year saw a similar split: agro-businesses increased production by 12.1%, and households by 2.2%. Households may underreport production to minimize tax payments, a harder practice for big companies.

Ukrzaliznytsia, the state railroad, has built its own grain terminal in Odesa, a first step toward launching its own grain export company next year. Equipped with 12 silos, rail and road access, and tippers for grain trucks and rail hoppers, the terminal has the capacity of storing 15,000 tons of grain at once, Andriy Ryazantsev, the railroad’s director of business development, writes on Facebook. Ukrainian Railways, a monopoly, moved about 70% of Ukraine’s grain exports to Black Sea ports in the marketing year that ended in June.

Cows, pigs, and sheep continue to gradually decline across Ukraine. Through August, cows are down 4.4% to 3.7 million – the same rate of decline registered in 2018, reports the State Statistics Service.  Pigs are down 1.5%, to 6.4 million. Sheep and goats are down 3.2%, to 1.5 million. These rates of decline are close to last year’s. African swine fever has decimated pig populations, raising costs for commercial piggeries. For cows, the growth of commercial dairies has not compensated for the dwindling number of cows kept by households. In contrast, chickens largely raised in industrial farms increased by 2.9%, to 258 million.

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