September 27, 2018 | Cbonds
|ICU's 5th annual Ukrainian Financial Forum took place in Odesa on 20-21 September. As in previous years, world-famous speakers from politics, industry, and academia discussed Ukraine's achievements and pending reforms. However, this time, more attention was on the global macroeconomic situation, international trade issues, new trends in asset management and investment, and Ukraine's venture-capital landscape and startup potential. In many cases, Ukraine's 2019 elections and negotiations with the IMF dominated the discussion.|
In the opinion of the keynote speakers, the conflict the US is embroiled in with its trade partners, in particular, China, is being used by the Trump administration for political purposes. However, China has the tools and policies in place to respond to the US and still maintain economic growth. Depending on how this conflict is resolved, there is the possibility of shifting the balance of power to Beijing. But, at the same time, possible disruptions in international trade can have a significant impact on other countries, including emerging markets and Ukraine.
Time and again, speakers gave credit to Ukraine's progress in achieving reforms, most of them delivered, remarkably, in the last four years, in contrast to the prior 20-year period. Yet, investors question if reforms will continue at this pace, particularly on the eve of presidential and parliamentary elections in 2019.
The panelists unanimously spoke of the necessity to cooperate with the IMF, as Ukraine remains heavily reliant on external borrowing. But, at the same time, Ukraine needs to focus on changes that will lead to stable money inflows from foreign direct investment (FDI).
One of ways to attract FDI is to put more emphasis on advertising stories of investors' success in Ukraine. More urgent than that, however, the government should take a more proactive role in creating investment opportunities, such as being more decisive about privatization. Several speakers indicated that a great deal of Ukraine's core assets remains under the control of the state and beyond the market's access. Also, speakers stressed the importance of the introduction of a land market, which alone could bring in at least $15-20bn of investments, and importance of reforms in the energy sector. Creating a predictable and transparent regulatory regime, developing a liquid stock market, and continuing pension reform were also named as key drivers that could deliver huge amounts of capital to the country.
Developing a local investor base is also important, and creation of attractive conditions for domestic banks and individuals in the domestic bond market can potentially bring an additional $20bn for private industry and the state. This year, NBU key rate hikes caused yields to rise, which added support for government bond demand. But to further strengthen the investor base, both corporate and government domestic bond markets should improve liquidity, support the secondary market, and insure transparency and credibility.
Ukraine's venture capital industry creates great opportunities for investors. This is particularly true for agritechnologies, cybersecurity, and blockchain infrastructure solutions. Founders of several Ukrainian top start-ups were on hand to tell their success stories to the Forum's audience. So, instead of the current zero support, the government should contribute to the IT sector by introducing tax incentives, creating fund of funds, and supporting tech education.
|Full company name||ICU|
|Country of risk||Ukraine|