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The agenda sold, and during weeks of turmoil, his supporters camped out in front of government buildings protesting rigged elections and the corrupt regime. Their persistence (and a little help from the international community) paid off, and Yushchenko was sworn-in as the President of Ukraine. In my assessment of geopolitical climate, any visible commitment to embrace democratic and economic reform is a clear signal of growth potential and definitely warrants several trips to the area. Over the last year, my experiences have convinced me that Ukraine is a ground-floor opportunity. Fast forward. If you ask people on the street today about the Yushchenko government, most will shrug and wiggle their hand in that ‘so-so’ manner, indicating a neutral stance on their man’s performance thus far. Western ties are stronger (Secretary of State Rice recently visited the country), but economic growth has lagged in many sectors. As I investigated the country’s foundations, I eventually found myself asking the question ‘what does Ukraine actually do?’ If you go to a country, even as small as Panama, you will easily notice which industries attract international business - banking, transportation, tourism, etc. Ukraine still seemed, as it was 20-years ago, a country that exists solely to sustain itself. There is no famous Ukranian export, like oranges from Brazil or glassware from the Slovak Republic. When you think of South Korea, many images come to mind - electronics, Hyundai, Samsung, and of course the DMZ. When you think of Ukraine…. Chernobyl? A country famous for a nuclear reactor meltdown is in serious need of a marketing campaign. While Ukraine was the second most important of the Soviet Socialist Republics in terms of economic output, the mainstays of its economy remain, as then, agriculture and low-grade industrial manufacturing - pipe fittings, bearings, steel moldings…. nothing sexy about this economy, that is of course, unless you count their #1 export - women. The streets are teeming with some of the most beautiful women in the world, the majority of whom flaunt their looks as openly as they flaunt their desire to leave the country with a successful foreigner. Many westerners have been told tales of such beauty, and it is quite common to see an American or European in the seat next to you on the airplane in search of his next wife. For those interested, there are several agencies available to facilitate the match. Some more established companies like Miss Russia International (www.missrussia.com) specialize in custom tours for wealthier clients looking to meet the finest Eastern European debutants-- professionals, nobility, supermodels, etc. Others simply offer a database of email addresses for sale, though I’d be cautious of their authenticity. While Ukraine is still lagging behind nearby emerging markets such as Hungary and Estonia from a technological and modernization standpoint, significant improvements have been made as the country continues to upgrade. Since the .UA domain suffix recently came online, businesses have begun to develop international websites. As an example, check out one of the national airlines at www.aerosvit.com; the website gives the appearance that the airline is modern, but in stark contrast, they still rely on paper tickets! One of the more frustrating issues
is the lack of acceptance of major credit cards; high transaction fees
force most vendors to accept cash only, so be sure to check your ATM limits!
To improve the situation, the Central Bank of Ukraine recently unveiled
plans for a widespread encrypted electronic payment system. While certainly
making things easier for nationals with local bank accounts, foreigners
will have to wait for more widespread acceptance of major credit cards….
or to consider opening a local deposit account. Standard US dollar savings
accounts are paying out between 12–15%. You don’t even have to convert
your money to the local currency.
For now, the real estate market is already hot in many parts of Kiev; according to local information, returns have been in the double digits for over two years. For the first six months of 2005, average appreciation for apartments in Kiev was approximately 30%. Some locals are taking loans at 20% to achieve 30% returns on real estate (not including rental income). If you’re looking for a short-term Eastern Europe play, there may be better markets for your investment capital - Estonia, Croatia, Hungary, Czech Republic. Ukraine has the potential, but significant cultural change needs to raise the standards of service, and the government needs to do more to seek international partnership. Its EU aspirations are a long, long way off, but with the right proactive leadership, foreign investment will flow into the country to take advantage of its inexpensive, educated workforce. If you’re looking beyond 5 years, Ukraine is a great move and a great place to visit your money at 12-15%. As always, feel free to contact me with questions, comments, or your next crazy idea at james@blackknightgroup.com The following are James's previous articles for the magazine:
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Thoughts
On Offshore Investing ~ 
