Financial Institutions Fuel Economy

While Ukraine lags well behind other Central and Eastern European countries in economic reforms and attracting foreign direct investment, financial analysts say that picture is beginning to change.

Complaints from potential investors over the lack of a transparent business climate in Ukraine have persisted since the nation gained independence in 1991, but analysts say Ukraine has made some strides over the last 10 years to become more investor-friendly. They say that despite numerous problems and a need to continue with reforms to achieve economic growth and prosperity, Ukraine's private business sector has begun to see more rapid development with an increase in foreign and local investment activity.

According to experts international financial institutions, which include donor organizations, foreign banks and investment funds, have played a major role in fueling the change. Following independence, donor institutions such as the World Bank, International Monetary Fund and the European Bank for Reconstruction and Development (EBRD) provided technical assistance to start up the country's undeveloped private sector.

As Ukraine's investment climate began to take shape, these organizations, along with foreign banks and investment funds, were among the first institutions to invest in the nation's economy and provide much-needed financing for its economic development. Analysts say that these institutions continue to provide a large part of Ukraine's investment capital.

In the ten years that the World Bank has been in Ukraine, the country has experienced significant economic development, and the World Bank has played a major part in this development. Institutions such as the IFC have assisted in the development of the private sector in Ukraine. Their projects have succeeded in introducing corporate culture to Ukraine's privatized enterprises. Although a lot of work is still ahead, they have laid the foundation for creating a healthy business environment in the country and attracting more foreign direct investment.

Analysts say the technical assistance that donor institutions provide has a number of elements. One is to advise the government on implementing policies and enacting laws that would make investing in Ukraine more attractive to investors.

The goal of the corporate development project for Ukraine at the International Finance Corporation (IFC) is to create an Internet information resource through which Ukrainian small businesses would be able to obtain financing. He said the IFC plans to connect all Ukrainian banks that make loans to small- and medium-sized businesses to a Web site through which entrepreneurs can submit business loan applications.

Another element in financial institutions' technical assistance is linking advice to investment.

Analysts say that more important than the technical assistance that financial institutions offer is their actual investments into the country's economic development. They say the goal of the investments is not to provide aid, but to take advantage of profitable opportunities that the Ukrainian economy offers.

Bankers say they are placing their bets on the growing number of Ukrainian blue-chip companies that export products.

"Blue-chip Ukrainian corporations with the ability to generate hard-currency cash flows are one very attractive market for foreign banks," said Hans Broucke, deputy board chairman and head of corporate banking at ING Bank Ukraine.

Bankers say that the securities market and insurance sector are two other industries with high potential.

Financial institutions are also beginning to look at Ukraine's retail banking sector as an attractive industry. "Ukraine has tremendous potential for the retail banking business," said Witold Zielinski, chairman of Citibank Ukraine. "Since there is still limited demand and the market is not developed, we are not yet ready to enter this segment. However, it will certainly develop in the future, and when it does, we will consider building retail operations in Ukraine."

Active Words and Phrases:

financial institution	фінансова установа	entrepreneur	підприємець
investment fund	інвестиційний фонд	to place bets on...	робити ставки на
World Bank	Всесвітній банк	blue-chip	високоприбутковий
International Monetary Fund (IMF)	Міжнародний валютний фонд (МВФ)	hard currency cash flow	потік готівки у твердій валюті
European Bank for Reconstruction and Development (EBRD)	Європейський банк реконструкції та розвитку (ЄБРР)	corporate culture	корпоративна культура
business environment	ділове оточення
technical assistance	технічна допомога	deputy board chairman	заступник голови ради директорів фірми
analyst	аналітик	securities market	ринок цінних паперів
investment capital	інвестиційний капітал	retail banking sector	сектор банківських послуг роздрібної торгівлі
small business	малий бізнес	succeed (in)	досягати (мети, успіху)
medium-sized business	середній бізнес	to lay foundation for…	закласти основу