Mariinsky Palce, Kiev, Ukraine
Inaugural meeting of Ukraine's National Investment Council
Mr President, Ministers, Ladies and Gentlemen.
Let me start by thanking you, Mr President, for those inspiring words. Very good to be here with you, your Government, EBRD partners and clients, most importantly, friends.
My contribution to today’s proceedings will be very much in line with your introductory remarks.
It is my great pleasure – and an honour – to be speaking at this inaugural meeting of the National Investment Council.
Ladies and gentlemen, it is my strong personal belief – and one shared by the EBRD as a whole – that Ukraine is a country with huge potential.
If anyone knows this to be true, it is the EBRD.
Our faith in your country is borne out by the scale of our investment here.
EBRD was set up in the year that Ukraine became an independent state. And since that time we have invested more in the country than anyone else.
The current total figure is over €12 billion. A large proportion of that has been invested over the last few years.
That upsurge in investment is, of course, a tribute to the progress made on so many fronts since the Maidan events.
When - and wherever - praise is due, the EBRD has been a vocal cheerleader for those achievements.
Indeed, we take pride in the way our investments and work on policy reform have also helped bring those achievements about.
Only yesterday, Mr President, you saw one of those achievements with your own eyes - the transport corridor linking Ukraine with the European Union taking dramatic new shape with the opening of the new Beskyd tunnel which the EBRD has financed.
At the same time we have not shrunk from our responsibility as a good friend of Ukraine to point out those areas where more energy and more determination are required to bring reforms to fruition.
But that is not my purpose today.
We can – and do – have those conversations with our Ukrainian friends and partners all the time.
Today, however, in front of this audience, I want to dwell on one challenge in particular that Ukraine needs to address if its promise and potential are to be fulfilled.
But I also want to highlight the significant opportunities that this challenge brings with it.
A challenge that you, the people in this room, are ideally placed to take advantage of. A challenge that presents an opportunity for investors.
The challenge I have in mind is that of improving the country’s productivity.
We know that labour productivity in Ukraine has stagnated for a quarter of a century.
One result is that the volume of economic output per worker in Ukraine remains far below the EBRD and OECD averages.
This is not true of every sector of the Ukrainian economy, of course.
Ukraine has chalked up some remarkable successes in certain areas in recent years.
Take agribusiness, for example. A decade ago, Ukraine, conventionally described in the past as the breadbasket of Europe, was uncertain as to whether it could feed its own population.
The very idea seems preposterous now!
Especially when it is now one of the leading exporters of grain - in the world.
IT is another major success story. It is no exaggeration to say that such cities as Lviv and Kharkiv have been completely transformed by the amazing growth of this sector.
There have been other sectors where there is lots of good news to report.
Food processing, pharmaceuticals and the manufacturing of vehicle parts come to mind.
But the big picture nevertheless is one of a production and export base still dominated by low value-added commodities.
Inefficient, poorly run state-owned enterprises continue to operate across large swathes of the economy, dragging down the overall level of economic productivity.
This is a major problem in itself, of course.
But it is also important because there is such a strong link between productivity, or the use to which a country puts its human capital, and national prosperity.
And, by the way, there is no doubt that Ukraine is, in fact, rich in human capital. The workforce is highly educated.
Rising national prosperity will reduce the temptation for that human capital – not just the best and brightest but everyone – to leave the country in search of opportunities elsewhere.
It will encourage the spread and growth of entrepreneurship – and more successes such as those we see in agribusiness and IT.
And it nurtures trust in the institutions which provide the stability - the inner strength – that every country needs.
The absence of such prosperity has the opposite effect, of course.
But, if we can close the productivity gap between Ukraine and some of its competitors, then the resulting prosperity will breed more prosperity.
And on and on until the country’s real potential can be realised.
The prerequisite for the higher productivity which generates this prosperity is investment. That is the opportunity to be seized by investors here today.
Investment that can be delivered by many of the people in this room today.
Investment that comes not just in the form of finance – though that too is very important – but of more advanced technology and better management as well.
And at the same it is incumbent on others who are also in the room with us today – and here I mean the government – to continue its good work to create the sort of investment climate that welcomes such investors.
The rise in the Ease of Doing Business Survey is truly remarkable. And you have mentioned the fight against corruption. And you have rightly stressed your personal commitment to that fight.
A great backdrop to the necessity of solving the productivity problem, which is partly in the gift of the people sitting in this audience today.
The opportunities to be had in the process will be, as I suggested earlier, significant.
I do not underestimate the difficulties here.
These are not easy wins. The experience of the last few years suggests that picking the low-hanging fruit is sometimes more difficult than it looks.
But I am convinced that these difficulties are NOT insurmountable.
The challenges CAN be met and overcome.
With the help and active engagement of the people in this room, Ukraine WILL put the era of low productivity behind itself.
To do so, Ukraine needs to modernise whole sectors of its industry.
Firms focussed on export will have to up their game to deliver even more added value.
And the country will need to spawn a whole new generation of productive enterprises.
Companies brave and fast moving enough to lead the way will reap substantial rewards.
And, make no mistake, the EBRD will be helping them to be even braver. And to move even faster.
For all this to happen, Ukraine has to undertake a series of structural reforms.
For example, I would urge the authorities to adopt the Concession Law as soon as possible. Its approval would be an important step towards mobilising capital for the PPPs in the infrastructure Ukraine needs.
I am sure that many of the people here today would be very interested in taking advantage of the prospective Concession Law.
Another of the reforms required is the opening up of state-owned enterprises to competition or partnerships with other actors in the economy.
We need clarity over the policy on state-owned enterprises and banks and privatisation. But, as a sign of our good faith and belief, we think now is the right time for EBRD to go ahead and consider taking a pre-privatisation equity stake in Oschadbank, a prominent state-owned bank. That is EBRD acting as a catalyst for privatisation.
Ladies and gentlemen, investment councils such as this one can be a safe space for the private sector, international institutions and governments to speak frankly and commit to such business–friendly reforms.
Indeed, we have seen that process take root in several other countries where we have set up investment councils.
They provide a platform for dialogue that simply does not exist otherwise.
Here the private sector and policymakers can meet and work together to inject new momentum into the reform debate.
There is one common message from such fora: businesses will not start up, thrive or expand unless the state can provide essential ‘public goods’, such as sound regulation, laws which support the market and are properly enforced by the judiciary, and a transparent procurement system.
Ukraine is making progress on all these fronts. That has been due to the courage shown by the President, dear Petro, and the Government.
But – as the President and Government often acknowledge - there is still some way to go.
And, through Investment Councils like this, the private sector can be of considerable assistance in keeping minds focussed.
We supported the creation of this one, because we believed it came at the right time for Ukraine.
We well remember how, only a few years ago, before the Maidan events, everything was done to block such dialogue.
It was almost as if the then authorities actively did not want anyone to invest in the country.
Those days are now very much over.
I mentioned earlier how much we at the EBRD believe in Ukraine’s potential.
Anyone contemplating investment here should take a look at the EBRD playbook.
Indeed, the EBRD might well turn out to be your partner of choice.
Our commitment, whether in the form of investments, technical cooperation or policy reform, is substantial.
We have been here right from modern Ukraine’s beginnings.
And we are here for the long haul, with more than 100 staff members on the ground in four offices across the country. Not forgetting the back up from our HQ in London.
Signs of our activity are everywhere in Ukraine and touch many sectors.
You can’t even travel to Kiev from the EU by road, for example, without using the motorway which we financed.
Our highway maintenance programme brought such welcome changes to some Ukrainian roads it recently earned star billing on TV under the title “200km of happiness”.
True to our mandate to further progress towards ‘market-oriented economies and the promotion of private and entrepreneurial initiative’, we invest substantial sums in the private sector.
And as part of our strong engagement in the private sector we are also looking to invest more through equity, rather than loans.
Of all the IFIs, only the EBRD and our friends at the IFC can offer the kind of support that private sector investors need.
Behind the scenes, we have also been active in creating the right environment for reforms. Reforms which can then unlock further investment.
With EU support, we have put reform support teams in key ministries.
And we were instrumental in the setting up of the Business Ombudsman Council.
This has proved to be a vital mechanism for the private sector to register complaints about unjust treatment.
The Ombudsman Council continues to play an absolutely vital role in improving the investment climate here.
In the first quarter of this year alone its direct financial impact on the economy was worth more than €6 million.
The Ombudsman Council now deserves to be put on a sound financial footing – the Rada needs to pass the necessary law as fast as it can.
One of our most distinctive calling cards, here in Ukraine and elsewhere, is our engagement with the governments at every level in the field of policy reform.
In Ukraine, certainly in recent years, that engagement has been very much one of partnership in a common cause.
And that is a common cause served by all the international financial institutions and Ukraine’s many friends in the European Union and beyond.
Ladies and gentlemen, we welcome the launch of this National Investment Council. And, as I said at the start of my remarks, I am honoured to have been invited to speak at this, its inaugural meeting.
For me, personally, a believer in the “new Ukraine”, this is a real labour of love. I am a believer in the country’s potential and prospects.
I am a believer that more investment in Ukraine will yield significant rewards.
For the investors themselves. Particularly those who invest early.
For the government that will reap the benefits too.
And – most importantly - for the people of Ukraine who stand to gain from rising national prosperity delivered via greater productivity.
We at the EBRD are already working with you all: investors, the government and Ukraine’s people.
I urge you to partner with us and follow our example by committing to and investing in Ukraine for the long term.
Thank you very much.