Goal difference

2012 has been a milestone year for Ukraine, co-hosting the UEFA European Championship with Poland in the summer for the first time. It was an opportunity for Ukraine to shed its negative image abroad and welcome 1.8 million tourists to the country, but what longer term benefits have the Euro 2012 championships brought for the country?

“It was good for Ukraine and played well for the overall image of the country,” comments Vladimir Sayenko, managing partner of Sayenko Kharenko. “For a few weeks debates stopped, people were interested in talking about football, not politics, and it united the nation.”

After the whistle

But now the football euphoria has subsided and most lawyers are unconvinced that the championships have had a long-term impact.

“In terms of tourism the tournament was good and allowed a lot of people to see the country for the first time; but in terms of business, it hasn’t improved the investment atmosphere,” says Artur Yalovyy, head of the London office of Integrites.

Since the championships were ­financed predominantly by the Ukrainian government, along with money Ukraine borrowed on the international markets, the government put some exemptions in place to facilitate construction projects in the country, such as tax exemptions for hotel projects and on imported goods. However, these moves changed little in the longer term and did not promote foreign investment in the country.

“To be honest, the impact of the championships has been somewhat overemphasised,” notes Sayenko. “The government was trying to raise as much positive PR as possible out of the event and used this as an excuse to show some kind of progress. While we encourage the construction of hotels, no private business will build a hotel just to have the honour of having it fully booked with guests for one week.”

“Some of the exemptions have remained in place, such as the tax exemptions for hotels, but there’s generally a lack of hotels in large cities,” adds Oleg Batyuk, managing partner of Salans’ Kiev office.

“It’s been a little disappointing,” admits Asters’ senior partner Armen Khachaturyan. “We expected it to be more organised, but the impact of the political turmoil in Ukraine perhaps explains why we had to wait half a year for progress on many of the projects to speed up dramatically.”

However, most lawyers concede that in a bad year for progress in Ukraine, Euro 2012 was probably the best thing that could have happened to the country.

“We have achieved progress that would have been impossible at another time,” says Sayenko. “Normally, a number of construction approvals are required to commission a building, for example, and the fact that there’s been a lot of sympathy from government officials in granting exemptions has really helped to move things forward.”

“I’d say it’s been a boost for the Ukrainian economy in general,” agrees Khachaturyan. “It’s changed the face of the country and given

it a facelift that will remain for years to come, but that doesn’t ­negate the fact that in terms of foreign investment, in a nutshell we’re extremely limited and there’s been much less investment than expected this year and in recent years, ­despite Euro 2012.”

Foreign investment in Ukraine was only a quarter of the more than $200bn (£125bn) poured into Euro 2012 in co-host Poland.

In terms of the country’s future, many believe the political turmoil surrounding the imprisonment of former prime minister Yulia Tymoshenko and the question mark over the legitimacy of recent elections have impaired Ukraine’s prospects for investment.

“In terms of competition with other markets in the region, Ukraine is still the best in many spheres and huge for all oil and gas players. But my perception is that the investment climate really shows the attitude of state authorities and the tax authorities is not friendly to foreigners,” says Yalovyy. “There are no capital markets here, mostly bilateral financing, and there are numerous projects ready to develop but that still need a big push. There’s not much M&A in terms of inbound investment and the banks are struggling.”

Since 2009 a growing number of banks and financial institutions have opted to leave the country, including ING Bank, Home Credit Group, Credit Europe Bank, Société Générale, and Volksbank International. Sweden’s SEB and Swedbank have also closed down their retail operations; in July Germany’s Commerzbank said it had agreed to sell its 96 per cent stake in local subsidiary Forum to Ukrainian Smart Group; and in October Austria’s Erste Group Bank said it planned to sell its Ukrainian unit in the near future.

All these departures have done little to entice other financial institutions to set up shop in Ukraine, but Sayenko is optimistic that recent efforts by the government may improve the country’s prospects.

“Our stock market today is not as attractive as it was and we’ve also suffered a lot from the financial crisis, but the government is trying to encourage the development of an organised and functioning securities market, and there have been some developments in securities laws,” says Sayenko. “It’s also hoped that a draft of a prohibition on insider dealing will be implemented shortly.”

Strong point

However, as Khachaturyan notes, most people are banking on the fact that if Ukraine plays to its strengths in the energy sector, things will start to improve.

“Historically Ukraine has been dependent on gas supplies from Russia, but the country has been trying to find some solutions in alternative energy sources, the most liberal move being the green tariff law that was introduced a few years ago,” he says. “Now, we’re looking into solar and other renewable energy sources.”

Another positive has been the Ukrainian government’s progress in finally launching two tenders to explore shale gas earlier this year and this is keeping a number of law firms busy.

There are also strong indications that the government is preparing for another wave of privatisation.

“We know the government has prepared a privatisation programme and it’s thought that a large number of companies have already been earmarked for this,” says Sayenko. “At the moment in Ukraine, the law inhibits the privatisation of companies that can’t be privately owned and therefore the government is planning to privatise almost 1,000 companies. This may change and the government may reduce the list, but it will be a ­significant privatisation process in any case.”

The work should mean that while the football may be over, there is plenty more for lawyers to work on over the coming months and even years.