Tough Times for Investors at Ukraine Plant

ARMIANSK, Ukraine -- Ukraine is not a rich country, and one of the poorest parts of it is Armiansk. Times are tough for just about every one here - even foreign investors pumping a cool 150 million dollars into the destitute north Crimea province.

RSJ's Chemical Factory in Armiansk, Ukraine

A German company called RSJ Erste Beteiligungsgesellschaft is, for practical purposes, the only major employer in this dusty city of some 40,000.

In contrast to Ukraine's booming metropolises, with skylines jammed with construction cranes and goods and services quite comparable with Central Europe, Armiansk appears unchanged from the downfall of the Soviet Union.

Buildings are ugly Soviet-era high-rises built of concrete panels sealed with tar. At the highway turn-off to one of RSJ's Ukraine projects, a chemicals factory called Krymsoda, a shabby store offers only fizzy water, candies, canned foods, and liquor. The selection familiar to any Ukrainian: it's what food shops offered during the days of hyperinflation in the early 1990s.

"We don't have anything here except the Germans (investors), without them there is no honest work in Armiansk at all," said Vadim Kononov, a young man hanging out in front of the store. "And now the powers-that-be are against the Germans."

Vadim's opinion is doubly worrying one for Ukraine's new government, which wants badly to attract foreign investment, and faces national parliamentary elections next march. The main issue of the campaign is already clear, and quite simple: how much do average Ukrainians think their well-being improved since the Ukraine's Orange Revolution?

"For us things got worse," Kononov said. "The 'Orangists' came to power and now they want our Crimean factories."

RSJ's top man in Ukraine, Briton Robert Shetler-Jones, has an opinion at root quite similar to Kononov's. He is, of course, more polite than Kononov when commenting on the ongoing legal problems faced by RSJ's other Ukrainian project, a plant for processing low-grade titanium called Krymskii Titan.

"We have experienced increased, and in our opinion unjustified, legal pressure on our Ukrainian businesses," he said. "We think this is inappropriate."

It is a testament to Shetler-Jones' experience in the region, dating back to the early 1990s that, unlike most large-scale foreign investments in Ukraine, both Krymskii Titan and Krymsoda are visibly functioning businesses.

Company officials in air-conditioned conference rooms rattle off statistics, generally confirmed by independent industry analysts, showing RSJ's investments are solidly profitable, and give work to nearly 10,000 Ukrainians.

Pay in the Crimean plants - and unemployment is higher in Crimea than almost any other part of Ukraine - averages about 200 dollars a month. Thats more than enough to support a typical Crimean family.

A recent visit by a Deutsche Presse-Agentur dpa reporter to both plants found the factories - though in places still equipped with lathes dating back to the Second World War - spick and span, and in obvious working order. Workers said they appreciated Shetler-Jones' efforts.

"We have to work hard but management treats people decently," said welder Antonina Sereda. "The pay is fair, and I don't want any one taking it from me."

The threat, Shetler-Jones says, is a series of legal challenges to RSJ's Ukrainian businesses, among them suits contesting rental agreements for raw materials needed to feed Krymsky Titan, punitive inspections by tax officials, and a possible listing of one or both of the state-owned firms for privatization by the Ukrainian government.

An RSJ court defeat, anywhere, could shut the business down, putting the 150 million dollars of foreign investment in jeopardy, and Sereda and thousands of others out of work.

In recent months the Ukrainian media has fingered Ukrainian Prime Minister Julia Timoshenko as being behind Shetler-Jone's problem.

Some reports claim Timoshenko has allegedly allied with Russian oligarchs wanting to take over the Crimean mills.

Others allege her government is playing to the populist vote.

Krymsoda and Krymsky Titan are successful Ukrainian big businesses, meaning - in the mind of the average Ukrainian voter - someone, somewhere cut a deal to keep the state-owned companies' profits in private pockets.

Shetler-Jones makes clear he believes his business is on the up- and-up, that he paid a fair market price to buy into the two plants, and that they operate legally. Timoshenko's office did not respond to a request for comment.

What is clear is that Shetler-Jones' legal hassles, and Sereda's worries, no matter their source, are a big headache for Ukrainian President Viktor Yushchenko.

"My goal is to make Ukraine a better place for foreign investors than it is for them at home," Yushchenko said last month. "But this will require work and members of the government looking beyond the next election."

"Frankly, I don't see things changing (in the Ukraine investment environment) until the March elections," Shetler-Jones said.

"I just hope I can keep my job," Sereda said. "I am a mother and my family depends on it."

Source: Deutsche Presse


Jan said…
It´s in fact a very interesting article. In my opinion, it underlines how directly the well-being of the Ukraine is linked to foreign investments.

The government should not bother foreign investors and concentrate on attracting more foreign capital to the country, so that many
more jobs will be created.

Jan, Simferopol