2020 could be a Crisis Trampoline for Ukraine, Igor Mazepa says

Concorde Capital founder and CEO Igor Mazepa comments on the risks and opportunities of 2020 for Novoye Vremia and The Economist.

Incredibly enough, Ukraine has spent most of its independent history in crisis – says Igor Mazepa. The economic experiments at the start of the 1990s, the financial crises of 1998 and 2008, and the painful cutting of economic ties with Russia prompted by its ongoing military aggression – all of this has amounted to independent Ukraine’s crisis years outnumbering the calm ones.

As we know, a crisis is not only a threat, but also an opportunity – says Igor Mazepa. It offers the chance to correct mistakes, relaunch or strengthen institutions, conduct reforms and select a new course. But to great regret, we as Ukrainians chose not to take advantage of these opportunities that would have softened the blow of the 2014 crisis, at minimum. Instead, we remained stuck on the prior course of populism and illusory stability – says Igor Mazepa.

This course consisted of freezing key utility rates, which prompted the collapse of infrastructure and energy, as well as created exorbitant pressure on the state budget. It became apparent in the government needlessly propping up the hryvnia, hindering the development of export-oriented industries, depleting our reserves and provoking the 2015 default.   

It was also evident in the absence of policies to diversify economic ties, which deepened the crisis of industrial production, just as our main economic partner stabbed us in the back. It was even more apparent in the ignoring of oligarchic banking practices, causing the country’s financial system to collapse like a house of cards – comments Igor Mazepa.

But that perfect storm, which came over us in 2014-2015, also forced us to change quickly, which we succeeded in doing. In particular, we had to reset the banking system in order for it to work for the whole economy, and not just the owners of banks. We had to radically change our utility rate and energy security policies, which saved our strategic enterprises from collapse and enabled us to cut budget expenditures. We had to reject our policies of “exchange rate stability” and currency restrictions, transitioning to an inflation-targeting approach, which restored trust in the national currency, though not immediately. As a result of such simple, though sometimes painful changes, we are gradually restoring the trust of investors in Ukraine.

Currently, Ukraine has earned a reputation in the investment world as a country with highly profitable opportunities in local debt and green energy. Every day, the number of investors grows who have made decent gains in these spheres. For many of them, it was their best return on investment, which is very positive. These people will automatically become friends of Ukraine. They will trust the country and no longer view it so warily, particularly its imagined risks. They will also be ready to consider new investment opportunities in Ukraine, which may not be as profitable, but more long-term.  

In light of all this, the coming global crisis that is being speculated is not a scary prospect for Ukrainians in the least. Having survived perhaps the most terrifying event for any nation, which is a military invasion, we are ready for anything. We have diversified our global economic ties, having found new trading partners. We began to actively invest in infrastructure, while raising the quality of life in the country and enhancing our potential for economic growth.  

Certainly, our economic and financial systems have not strengthened adequately enough to survive independently serious imbalances in external accounts if the global markets begin to severely weaken. But we have enlisted the trust and support of global financial organizations that will help us weather new storms.

Furthermore, we have the possibility to invest and add value to industries whose conditions don’t depend on the global economic cycle. The potential for agriculture will open to the extent that the farmland market is introduced. Healthcare reform will stimulate demand for quality medical services and pharmaceuticals. Changes in utility rates will stimulate demand for energy-saving projects. Transportation reforms and the launch of a farmland market will promote more active infrastructure development.

Most notably, Ukraine’s proximity to E.U. markets and relatively inexpensive resources, against the background of improved infrastructure and reduced economic risks, will stimulate a stream of foreign investment in industries that offer high added value and are oriented towards Western markets.

We can become not only an island of stability in a world of great uncertainty, but also strengthen our economic positions by taking advantage of friction between the top global players. I am confident we have something to offer to both China and the U.S., and both Great Britain and the E.U.

Ultimately, I would even say it’s positive that we have this hovering global crisis. It won’t allow us in Ukraine to relax and stop halfway towards changes that will make us more competitive in the long run – summarizes Igor Mazepa.

Igor Mazepa, investment banker, CEO and Founder of Concorde Capital, commented for Novoye Vremia’s 2020 special edition 

https://nv.ua/opinion/krizis-kakoy-shans-poluchit-ukraina-poslednie-novosti-50068971.html