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On the cover
Ļ7 (2014)
Tunnelling Towards Hope


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28 February - 6 March 2014

Ukraine History

A Stronghold of Rulers and Rebels

With the recent death toll jumping to nearly 100 and 1,000 injured, Hrushevskoho Street, one of the strongholds of EuroMaidanís three-month-long protests, made headlines around the globe. It was here, on 19 January the countryís stand against government corruption, abuse of power, and the violation of human rights turned from peaceful protest to all-out revolution. Having witnessed much over the years, Hrushevskoho is a street with a history, and not only care of recent days.

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Ukraine Today
Acelebrity using their status and intelligence to influence public views and opinion is rarely seen in modern society, even less so in Ukraine. Here, the majority of celebs use their time, effort, and money to enhance or further their career rather than put their name to something that can do good for others. However, as EuroMaidan intensifies, some are making themselves heard Ė and they fall either side of the EuroMaidan divide.
It used to be that when rebellion and revolution occurred, the intellectual, creative, and spiritual elite would be front and centre.

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Ukrainian Culture

When Walls Can Talk

People have been writing on walls since the dawn of civilisation, we call it graffiti, and ranges from simple written words to elaborate wall paintings. Sometimes it is merely the creator wanting to leave his or her mark; sometimes there is an underlying social or political reason. And it is due to the latter that graffiti has exploded across Kyiv in recent months. Anti dictator messages aside, we peel back a few layers of paint to look at graffiti in the city in general.

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My Kyiv

The International Voice of Renat Akhmetov

One of the great things about life in Kyiv is that you come across many interesting characters as you go about your daily routine. Few can be more interesting than Jock Mendoza-Wilson, international PR man for Systems Capital Management, owned by Ukraineís richest man, Rinat Akhmetov. And thatís what makes Jock doubly interesting. Not only has he the inside knowledge on the business workings of a man who has to be one of the most intriguing in Ukraine, heís also a character unto himself.

How long have you been here and what first brought you to Kyiv?
My first ever visit was back in May 2004. I was working for a global public relations firm, and was usually involved in projects in Ukraine, Russia or Poland. I worked on a consultancy project for Systems Capital Management (SCM) from February 2005 through to October. Although I wasnít an expert in Ukrainian or Russian, they must have liked what I did because they approached me and asked if I would consider joining the company full-time. It wasnít a tough decision. When you see something you really enjoy doing and realise thereís a great opportunity to see it through a major change, itís easy to make up your mind. I moved in October 2005, originally to Donetsk where I lived essentially full-time until January of 2011, when I moved to Kyiv.

How would you compare the two places?
In Donetsk, the infrastructure is excellent. Parks are very good. You can walk down Pushkinskaya, under an underpass into Sherbakova Park, almost four kilometres through landscape gardens and parks alone, right into the centre of the city. The centre is also well-maintained and laid-out, and will be great for Euro 2012 and the fan zone. Investment has gone in from individuals, the city and regional authorities Ė a fantastic job has been done of upgrading a former Soviet city into what is a good place to live. The difference is that you are moving from a very large and industrial city, Donetsk, to the capital, Kyiv, which is significantly more cosmopolitan. Donetsk is quite international. There are about 140 nations represented in terms of residence. But you come to Kyiv and there are a lot more international people and a very Western-orientated attitude.

Whatís your remit at SCM, what do you do?
There are three parts to the job. The first is international relations Ė ensuring weíve got the right relationships and understandings with key international institutions. In Kyiv, for example, that might be with embassies of countries whose banks are investing in us or we are investing in that country. Also, good relationships with the international institutions based here in Kyiv who have a significant influence on the countryís economy Ė particularly the World Bank, ERD and IMF. Internationally, itís ensuring we understand whatís going on in terms of politics, policy and the regulatory environment in key markets where we operate. The most important is probably the European UNI0N as we export significant quantities of product there Ė itís our single largest market for exports. The United States is a big player too as we have significant investments in the US, and the US, I think, has a significant influence in Ukraineís development, as indeed does the EU.  The next part is dealing with banks and institutions Ė investor relations. Here I often find myself explaining the political and economic environment in Ukraine, its political risk and how that impacts on business.

SCM is a very big and powerful organisation, which most people know for steel. How diversified is it these days?
We have a strategy of diversifying our business but we still have a lot of strengths in mining, metals and energy. Weíre well known for steel through Metinvest, but equally weíre the countryís largest private sector energy business through DTEK. With Metinvest itís an integrated mining and metals business Ė it mines coal, mines iron ore, produces steel and then sells and markets the steel globally and in Ukraine.  On the energy side, DTEK is an integrated energy producer, it mines coal, sells it to its own power stations and other power stations, produces electricity and sells and distributes it to the national grid plus European customers. They are our two biggest areas. 
Since 2005, weíve been pursuing a policy of diversifying our investment portfolio and are also looking at areas we have identified as having long-term potential for growth in Ukraine in the future. We are in telecommunications, banking and finance, real estate, retail, ports, media, agriculture most recently, and football. Some other areas, such as clay mining, machine building and pharmaceuticals, also feature. Itís a very diverse business. The main thing is that each one of the businesses has its own management team, own identity, own structure. We act as the professional investor looking at investment opportunities, looking at investment strategy and looking at the right direction.

You mentioned telecommunications. One of the big rumours over the past year is that the sale of Ukrtelecom to a Swiss holding company at a fraction of its market value, is actually a deal done by one of the countryís big oligarchs. Is it you?
Itís not us, but Iíve been asked that a few times.

You have a huge company with an owner known for being close to the current political administration. How at SCM do you view the current situation with regards to the move towards the West or the East?
The first thing is that itís not a zero-sum game. Itís not a direct choice between Europe and Russia. But from our point we are strongly supportive of Ukraineís European direction, and weíve been supportive of the deep and comprehensive free-trade agreement. We donít see that as exclusive of having good strong trading relationships with Russia, which is also very important for our business. Sometimes people present it as one or the other, but we donít believe that should be the case. You should have a strong relationship with Europe and take the advantages that exist of using the transformational aspect of getting closer to European standards to drive the changes in your economy. But of course you are going to trade with your existing partners in Russia and the East.  

The vast majority of Ukrainian people would be very much in favour of being in the EU. Would you agree?
I believe thatís correct. You definitely get the sense thatís the direction people in Ukraine want to go. Itís what they aspire to, particularly when it comes to visas. They wonder why Europe doesnít let them in and quite rightly find that a very difficult situation. For the past few years, European integration hasnít really been a political issue in that all the parties have agreed it. Economically, all parties have followed this idea of a deep and comprehensive free-trade area. From a business point of view, itís good for business Ė we are deeply invested in the EU with two steel plants in Italy, one in Bulgaria, one in the UK and businesses in Switzerland.

How do you feel about the recent distancing between Ukraine and the EU, which has come about over the situation with Tymoshenko?
From a business perspective, we donít get involved in politics or the judicial system. The reaction from the EU is disappointing but understandable. If the government thought the EU wouldnít use its soft power, they are now seeing that it is doing so. I hope a resolution will be swiftly affected, which will allow Ukraine to continue speedily in the European direction.

There are also rumours there is distance growing between the current administration and SCM. Is this true?
At SCM, I can say firmly that we donít have relationships exclusively with any political party. Iíve been here long enough to have had two presidents and I think four prime ministers, one of whom twice.  If you attach your wagon as a business to a specific political party itís a recipe for failure. You have to work with any party and government in power at the time, and do so on a professional basis. We were able to have constructive working relationships with the previous government as well as this one. 

What are your thoughts around the shoring up of power around Yanukovych weíve been witnessing recently? Is there a democratic belief-set within SCM or would it rather simply have a stable government?
From our point of view, as a business, we want to be distant from and independent of politics. Governments come and go, the most stable form of government is democracy and from our point of view as a business, the best thing we can have in Ukraine is a stable, democratic government. You also need an independent judiciary system, as with any country in the EU. Thatís currently a weakness in Ukraine, with the freedom to act outside the influence of any government agency or politician including presidents or prime ministers. Furthermore, you need a free media, which is able to be responsible in the way in which it reports. And then you need protection of private property rights. If youíve got something and you own it, there shouldnít be any way it can be removed from you other than by true breach of law. Ukraine, compared to some other post Soviet countries, has come a long way in achieving these objectives, and itís very important it continues on that journey. We, as a company, can in many ways only be as good as the country in which we operate. Weíre a Ukrainian company, weíre here and we want a good Ukraine which will be part of the countryís development and part of our development.

Can you comment on ongoing problems such as corporate raiding, which still takes place on businesses, and the effect that must have on investment?  
Clearly, if you look at Ukraineís standing in global indexes such as competitiveness, corruption and transparency, the country is not moving forward as it should be, and as a result is not getting the foreign investment it should. This is directly related to issues such as independence of the judiciary and the protection of private property rights.

For SCM, is inward investment a good thing?
Very much so. SCM is over 11-years old now and weíve spent a lot of time structuring our business so it runs like and is like a European-style business in terms of corporate governance, investment and the move towards competitiveness. We donít have anything to fear from foreign investors coming into Ukraine, quite the opposite. There are limits as to how much any single business can drive change forward. Even if youíre as big as we are, you need more people who have the same viewpoint and the same values. This is particularly likely if you have international investors. It will create a change in the economy and a change in process. Theyíll invest in education and training for their people, theyíll invest in the right facilities and do business in the right way. Foreign direct investment will be a significant multiplier effect; it wonít just be the money that comes in, it will be the learning, the knowledge, the processes and the attitudes. It will make a significant difference and we have probably the biggest business in Ukraine so weíll benefit from that. If Ukraine becomes a more successful, wealthier and more developed nation weíll be able to have better housing for employees, increased salaries, better training, healthcare and so on. A successful Ukraine is bound to be good for SCM. And that success would be increased by having investment come in because there isnít sufficient investment available in Ukraine to make these transformational changes at the moment. The government has recognised this and is taking some steps: theyíre doing a road-tour at the moment telling people about national investment projects. No oneís ever done this before. I wish them great success. 

You mentioned that the SCM group incorporates media. What does that include, and are they independent?
Television, newspapers and internet. And yes, they are.  We have a TV channel, Ukraina, one of the leading free-to-air terrestrial channels; weíve got the football channel; weíve got Sevodna, our best-known newspaper and a leading mid-market Ukrainian newspaper; along with a number of regional newspapers in the Donetsk area. Then we have tochka.net, one of the main internet portals. Media is a really promising direction for the future for Ukraine as itís been in every other developing country.

We like to see people who have amassed these massive fortunes giving something back. What is SCMís direction regarding CSR?
Corporate social responsibility (CSR) is about running your business in the right way for those who work for you. In our business where we have significant investment in mining and metals, the number one priority has to be safety. We invest in equipment but more importantly in training, as Health and Safety is also a cultural issue. Even if you have all the right technology and equipment, if peopleís minds arenít in a place where safety is first, you wonít be effective. We have a big investment in the training and development of people and weíre trying to push up salaries. Itís a very important objective for business Ė to improve efficiency and pay people more for doing a better job. Already our employees are in the upper 50% of payment in each industry category and we want to move that further on as well as giving them good conditions. As a leader, itís important to show an example and I think we do that. 
Then there are other areas, such as our shareholder Mr Akhmetov, who has put $50 million into founding the Foundation for Effective Governance. It uses Ukrainian and international experts to debate, discuss and develop policy on what is the right reform direction for Ukraine. In addition, there is Mr Akhmetovís personal foundation for the development of Ukraine that invests in hospitals, looking at how to improve cancer treatment, TB treatment, helps with cultural projects and works to construct and support childrenís homes and hospitals. There are not many other companies doing as much to give back to the Ukrainian economy both in sustainability of business and investing in people.

Akhmetov has spent a lot of money on the Donetsk football stadium, and EURO 2012 is coming. There is an issue of lack of accommodation, however. How do you think things will play out?
If I had the choice of somewhere to go and watch EURO 2012, Iíd go to Donetsk. The infrastructure is in place and they have experience in moving 55,000-plus football fans around, as Shakhtar gets those crowds for big Ukrainian and Champions League games. Itís tried, tested and it works. Accommodation is the biggest challenge for Ukraine and is certainly a challenge in Donetsk, but a number of hotels have been refurbished to a good standard. We ourselves are in the process of completing the refurbishment of a mid-range hotel we acquired, Park Inn by Radisson. Itís a good quality 3-star hotel of which there are too few. Of course we have the Donbass Palace, which will be taken over by UEFA. I think Ukraine in general has done enough to host the tournament successfully. Whatís important for it to be a real success is what the attitude of the people will be Ė the police, border control and security services. Will they give a warm welcome to people, be able to handle large volumes, most of whom will be coming here for the first time and probably wonít understand Cyrillic or speak Russian or Ukrainian?

How is business going for SCM following the financial crisis?
Last year had been a good year but then last summer changed that in a way. What happened was another crisis in confidence in the European economy. The European economy is very important Ė if it catches a cold, America gets the sniffles and thereís a reduction in growth in China. That situation will be compounded if there isnít a resolution to the crisis in the Eurozone. What started as a banking crisis, as countries bailed out their banks and saw reduced receipts so their debt increased, is now a sovereign debt crisis. That creates a crisis in the real economy, as either confidence is lacking or adjustment methods to deal with the crisis are reducing economic growth. Taking those factors of uncertainty, in terms of currency and economic growth, you find yourself in a position where Europeís growth is predicted to be negligible in the coming year. That then impacts not just the EU but on other successful trading blocs such as the US and China. It will be less severe if the Euro crisis can be resolved and confidence can be restored in the Euro. If confidence in the Euro disappears and more countries find themselves having to take emergency measures and even leaving the Euro, it will get worse. 

Do you see any chance of Ukraine defaulting?
No, not at present. Although things would be better if Ukraine were to be able to agree a stability pact with the IMF and have renewed access to   IMF funding.

To wrap things up, what things do you like to do here in Kyiv?
I still enjoy learning about Kyiv. Itís the nature of my job that I travel both here and internationally. When I do have time, I like going to the gym and taking my two daughters to their swimming lessons. I like shopping in the market, buying my fruit and vegetables and cooking at home. I love going out to restaurants for dinner, a couple of my favourite are Vernissage and Teatro Restaurant in the Opera Hotel. I like the Hyatt for brunch on Sunday and Shooters is great for a family lunch. Iím married with kids so tend to do a lot of family stuff. My days of late-night clubbing are over! 

Neil Campbell


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    Ukraine Truth
    Rights We Didnít Know We Had

    Throughout EuroMaidan much has been made of Ukrainians making a stand for their rights. What exactly those rights are were never clearly defined. Ukraine ratified the Univer≠sal Declaration of Human Rights in 1952. The first article of the Declaration states all human beings are born free and equal in dignity and rights, they are endowed with reason and conscience, and should act towards one another in a spirit of brotherhood. The ousted and overthrown Ukrainian government showed to the world they donít understand the meaning of these words.


    Kyiv Culture

    Pulling Strings
    Located on Hrushevskoho Street Ė the epicentre of EuroMaidan violence, home to battles, blazes and barricades Ė childrenís favourite the Academic Puppet Theatre had to shut down in February. Nevertheless, it is getting ready to reopen this March with a renewed repertoire to bring some laughter back to a scene of tragedy. Operating (not manipulating) puppets is a subtle art that can make kids laugh and adults cry. Whatís On meets Mykola Petrenko, art director of the Theatre, to learn more about those who pull the strings behind the show.

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