A few days ago an entry appeared forewarning of changes at the top within the Ukrainian
political and civil service elite – forecasting that Boris Lozhkin would move
on from Head of the Presidential Administration (as he has been trying to do
for some time, wanting to return to the business world) and that in all
probability Igor Rainin would cease to act as Head of Kharkiv Regional
Administration and replace Mr Lozhkin (due to Mr Rainin being the least
controversial choice for those that will be remaining within the Presidential
Administration – and also the easiest to replace holding an Oblast level
position).
It went on further to
suggest Mr Lozhkin would not be completely released from the Presidential
grasp/circle but could very well be appointed head of the newly invigorated
National Investment Council.
Lo, all such predictions
came to pass on 29th August – with the minor deviation of Mr Lozhkin assuming
the position of Secretary to the National Investment Council.
(Nevertheless, hopefully most readers would agree the predictions made
were close enough for a free to read blog.)
Mr Rainin will be a
competent, adequately discreet (and fairly discrete) safe pair of hands as Head
of the Presidential Administration. Shocks to the system he will not
cause.
Mr Lozhkin thereby
leaves the Civil Service (prior to e-declarations going live with effect from
1st September) yet remains within the Presidential grasp and therefore presidential
team no matter how indirectly it may appear. Regardless of title and
position, his unofficial “shadow rank” within the elite of the Ukrainian elite
firmly keeps him within the inner sanctum of trusted Presidential advisers with
easy access to the body (President).
He is now therefore free
to return to the business world without annoying e-declarations and other such
bureaucratic requirements, whilst also promoting (and to be blunt he will be
driving) the National Investment Council.
Presumably the existing
Investment Support Office will be rapidly (although probably not officially)
subordinated to the NIC – and by extension to Mr Lozhkin. Reading between
the lines of Prime
Minister Groysman’s statement regarding Mr Lozhkin’s new position such inference can
certainly be drawn.
A reader may ponder who Mr Lozhkin will attract to the
newly invigorated National Investment Council as he is very well though of
internally and externally of Ukraine – and it was he that invited and convinced
the foreigners that formed part of the Yatseniuk Cabinet. Ergo it would be no surprise to see some very competent
people appear as leading lights within the NIC.
Clearly with Ukrainian
GDP growing at about 1.5% per annum that is not enough to provide a “feel good”
factor among the electorate to return President Poroshenko (and parliamentary
team) to power when elections arrive. Annual growth of approximately 5%
however could well (and probably would) do so as long as elections can be kept
to their projected timelines per statute and not forced to arrive early.
Although it may be
wishful thinking, 2.5 years with GDP growth of 5% (or more) consecutively wins
a lot of votes – especially in mercantile cities like Odessa.
Mr Lozhkin will
therefore be faced with the same existing statute that prevents significant FDI
that has frustrated Governor Saakashvili, whose long list of legislation that
requires repealing and/or amending has seen no traction within the Verkhovna
Rada.
It seems unlikely that
Mr Lozhkin will succeed without forcing some (if not the majority) of the very
same statutory and de-regulatory issues already raised and submitted to the
Verkhovna Rada by the Odessa Governor. The question therefore is whether
Mr Lozhkin can gather Verkhovna Rada momentum swiftly in order to give himself
a chance of changing the economic fortunes in time to support the president by
the time elections come around?
Further where is FDI
going to be most effective when it comes to national development (and no doubt
also in his mind, winning the Poroshenko political entities votes)?
The days of mining and
metals as economy leaders, and with both being major employers (and
exporters) are on the wain. Road and rail infrastructure projects,
of which there are innumerable, are potentially significant employers.
The necessity to bring
the Ukrainian Military Industrial Complex to the modern day also presents
significant opportunity.
The IT industry which
suffers no oligarchy market capture, and boasts a significantly high proportion
of globally recognised qualified people, simply has to be left to do its
innovative thing – with support where necessary/possible, but otherwise
unobstructed or interfered with.
Agriculture is and will
remain a major economic driver (and should any reader have $150 million(ish)
for investment in a 230 hectare, high tech farming corporation – this blog is
aware of one discreetly for sale “off market”). Thus the agro-industrial
complex will have to be a top priority for FDI if the sector is to become more
efficient.
The Ukrainian aerospace
industry appears to be doing fairly well, but can do much better with some
smart investment and a “harder” sales initiative.
The continuing clean-up
of the banking sector by the NBU presents an ever-improving market place for
entry (and if a reader has $40 million(ish) the blog is aware of a particularly
healthy bank for sale “off market”).
There is of course the
impoverished yet potentially
massive tourism industry (perhaps with the “added incentive” of legalised
gambling returning one day). The blog is aware of numerous experienced
international gambling entities waiting to enter Ukraine – Turkey, Israel,
Georgia etc have all contacted the blog regarding legislative updates and
visited potential locations for casinos in the past 9 months. FDI money
for this there is – legislation prevents. (Should a reader have $12
million(ish) the blog is aware of a small gated and profitable beach front
resort for sale “off market”).
There is also the
expansion of the existing pharmaceutical and chemical industry that should not
be overlooked – neither should energy extraction/production/infrastructure.
(Getting out of the way
of SME’s wherever possible will also bring about swift local economy benefits,
but clearly this falls outside of the competence of a National Investment
Council charged with finding and protecting big money investment.)
Thus it is not only
going to be a question of how many $ billions Mr Lozhkin can attract (and
protect) by way of FDI (and in what time scale), but also what areas are deemed
a governmental priority and his ability to nudge investors that way.
Investors can be strange creatures and want to invest in areas that are
not governmental priorities – unsurprisingly. Some have no interest in
PPP, others only in PPP. Some are quite rigid in their internal
governance and expectations, EBRD etc., where as others, for example
“Investment Fund X”, may be far more flexible.
Having now written all
this, a reader may perhaps ponder just how much time Mr Lozhkin will have to
return to his own businesses, and the business world – which was the reason for
his wanting to leave the Presidential Administration in the first place.
(As an aside – Teasers
for the “off market” assets mentioned (and others) are available for investors
subject to the usual NDA/contractual requirements.)
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