The Café in Shanghai

A British investor calls on me at the embassy about a potential investment in Ukraine worth several hundred million dollars.  The investor says that because the Ukrainian authorities are behaving in an unpredictable fashion, the project may be abandoned.  I say I'll see if we can help by talking to contacts here.  

British business people asking for advice or help in approaching the Ukrainian authorities are some of the embassy's most important customers.  We can't always achieve the results we want; but sometimes we can help, and in some cases have scored important results.  Our efforts to make a difference are helped by the fact that many individual decision-makers in the Ukrainian authorities are keen to encourage foreign direct investment and are open to suggestions from embassies and others about how to make things work better.  They understand the damage which unpredictable decisions about, for example, VAT refunds, hydrocarbon exploration licences or planning permissions can do, not only to investment decisions by individual foreign companies but to Ukraine's whole reputation as a destination for inward investment.  

Reputation is what it's all about.  That why I quote in speeches in Ukraine the example of three imaginary top international business people sitting in a cafe in Shanghai.  Each investor controls funds worth tens or hundreds of millions of dollars.  As they look out at the Bund and sip their decaf cappuccinos, they discuss where they should invest their money.  Where, they muse, is the investment climate so straightforward for foreign businesses that it is easy to recommend that multinational companies make big investments?  In which countries are governments so committed to attracting inward investors that they welcome them with open arms?  Where can investors feel confident that the tax, legislative and regulatory framework is stable and predictable?  And where can they be confident that the courts will always enforce the rule of law in a transparent and fair way?  

The investors in the cafe in Shanghai are hard-bitten and experienced.  They know that not all countries meet all these criteria; and that in some cases, big risks can be balanced by big potential rewards.  But it's the job of every country seeking inward investment - including Ukraine - to make sure that when our Shanghai experts are looking at the global choice of investment opportunities, from China to India to Germany to Bahrain to Brazil to the United Kingdom and elsewhere,  their country is up near the top of the list.  This isn't always easy: it requires action across many different policy areas.  But the potential prizes are enormous; and there's no doubt Ukraine could realise its vast potential more quickly if it could attract more inward investment.

At the end of my discussion with the British investor, they say they'll keep trying to invest their money in Ukraine.  But the project won't go ahead if the investment climate here doesn't improve.  For the sake of Ukraine I hope that the Ukrainian authorities - including whatever administration emerges after the presidential election next January - can implement the measures needed to persuade all investors, whether in the UK or in that Café in Shanghai, that this week, this month, this year, Ukraine is one of the best places in the world in which to invest their money.