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| Home > News & events > 2006 feature stories > Ukraine skipper steers toward success | ||||||
Ukraine skipper steers toward success |
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Striding briskly into his spartan office in the headquarters of Ukraine’s largest shipping company, Pavel Podlesnyi has the bearing of a naval admiral, resplendent in a deep blue officer’s coat, all gold braid and gleaming brass buttons. While maritime tradition is important in Ukrrichflot, the Kiev-based shipping firm is anything but hidebound. Modernity is the byword of the fast-growing firm which is owned by its workers. It’s not just the rapidly-improving fleet that is at the cutting edge: the company has, with EBRD, also adopted superior management and corporate governance practices. The results are impressive. Ukrrichflot today carries twice the amount of cargo it did in 1999. The company has raised four loans from the EBRD (the latest for $28 million) to finance construction of 16 ships; 11 have already been delivered. Navigating uncertain waters Sitting ramrod straight at a gigantic wooden table, Mr Podlesnyi describes how he learned to navigate not just seas and rivers but also the shoals of government, business and finance. “At age 14 I started at the Kiev River Shipping Trade School, studying to be a captain’s assistant. By age 34, in 1979, I became head of Chernigiv port, the youngest port head ever.” By the age of 40, he was the first deputy head of Ukrrichflot, a state agency encompassing 40 enterprises that managed ports, shipbuilding yards and shipping. Ukrrichflot’s ships and barges could winkle almost any product out of virtually any corner of the country thanks to the skein of navigable rivers cutting deep into the country and linking it to the Black Sea and beyond. The company was unusual in having the sea craft and the staff capable of handling both rivers and oceans. Grain, metals, clay, timber and the products of the country’s vast heavy industrial sector, mainly machinery and chemicals, filled Ukrrichflot vessels on their way to Russia and other destinations south and west. “In Soviet times we travelled through the Black Sea and on to Mediterranean countries, visited different ports and we knew how life was on the outside. It was probably our main advantage” when the time came to take Ukrrichflot out of state hands after the Soviet Union dissolved in 1991. Privatising Ukrrichflot Initially, the state property fund agreed to sell just 49 per cent to Ukrrichflot workers. “We were worried that ongoing state majority ownership would mean heavy state interference,” said Mr Podlesnyi. “The EBRD succeeded in convincing the government that partial privatisation was no privatisation at all. The Bank said it would only finance Ukrrichflot if the state held no more than 20 per cent. “So the government reduced its ownership to 20 per cent and EBRD immediately agreed to finance us. It would have been difficult for us to succeed without the EBRD, it would have taken years longer, if we managed at all.” The EBRD brought more than just money. It built into its loan agreements the requirement that Ukrrichflot upgrade its information technology systems and adopt international accounting standards. The first western-style audit was funded with 300,000 Ecus (a forerunner to the euro) provided by donors via the EBRD. The Bank also ensured that Ukrrichflot made provision to protect minority shareholders. No one holds a majority block in the company whose shares are widely held, mainly by current and former staff. “In order to invest in the expansion of our fleet, the EBRD insisted that shipbuilding regulations be improved,” Mr Podlesnyi recalled. Until recently, shipbuilding orders were filled in Romania, but today’s new fleet is under construction in a Dutch-owned Ukrainian dockyard, helping to revitalise the country’s shipbuilding industry which was hard-hit by foreign competition in the 1990s. No boundaries There are no national borders on the map in Mr Podlesnyi’s office, simply the rivers and seas that define the continent of Europe and connect its constituent parts. With a heavy red line marking a route from Kiev to London, the map reveals the company’s determination to further exploit prospects to the west. “At our own shipyards we’re constructing barges with capacity of 2,000 tonnes for use on the Danube. They will meet European Union standards and respect the rules of navigation set for the Danube and Rhine. We must observe these standards if we wish to do more business in western Europe, as is our plan. “If we hadn’t reformed the company all the way along, Ukrrichflot would not exist today. The reforms would not have been possible without the EBRD and without, I feel confident in saying, the management we have which, unlike many other privatisations, did not seek to cannibalise assets but instead opted to build on them.” Comments Olivier Descamps, the EBRD Business Group Director responsible for Ukraine: “It’s been gratifying watching Ukrrichflot change and grow over the years, even though its transition from a state entity to a player in the competitive international shipping market has not been easy. They have very committed managers and a good reputation. The company’s future is promising.”
By Kate Dunn, Senior Communications Adviser
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