Perhaps, everyone in investment society heard his name. Anatoliy Amelin who is the former owner and head of the company “Altana Capital” which ensured securities buy up for SCM Group, ex-Commissioner of National Securities and Stock Market Commission, who is currently a venture investor, founder of AmelinStrategyAgency and top-ranked mind on economic potential of the country. Stockworld.com.ua
succeed to talk with Mr. Amelin, despite his over business, on the role of stock market in the development of Ukrainian economy and innovations as key driving force for investments inflow.
While talking about stock market people are used to mean investment market. When they speak about investments they mean investment in innovations, e.g. in energy efficiency and development of infrastructure. How can you reconcile these two directions and what are the real needs for investment in Ukraine?
I’ll state the obvious, investments are critically important resource for economic growth. It’s a vivid energy which gives possibility to create a new product, new ideas and even transform all the world around. Investments are the vivid energy which gives possibility to... transform all the world around. If we consider the issue in terms of the whole country and speak about the experience of countries, so called economic tigers, that are often set up as an example for us, surely they wouldn’t become as they are without external investments. Drawing an analogy with a human body, I’d like to say that investment is the blood needed to renew this body, make it stronger and more successful.
Does Ukraine have enough such blood or it need one from donors?
We shall remember that there are external and internal investments. When we talk about these resources, the external investments are those we usually mean. But let me remind you that outside inputs won’t come if there are no internal investments. Look around. Have you noticed new companies to be established? How many people invest in them? In practice, it’s hardly to observe. Someone transfer his money to Cyprus, another one to Panama, and others just stuff money in a mattress. It evidences the very bad conditions for internal investors in Ukraine and in its turn shows that external investors would unlikely come here. And stock market is one of the elements of investment market. And until we have no complex police to attract investors to the country, there is nothing to talk about.
Who do you think have to manage? What is needed? Should it be notorious “political will’ or it might be something else? The conditions for internal investors in Ukraine are very bad.
I don’t want to speak in generalities, but let’s draw one more analogy. The country shall be operated by its “Management” – the Cabinet of Ministers as the effective manager operates the company through execution of its strategy and tasks. So, the Cabinet of Ministers must form clear economic policy which will be framework for reforms implementation. Off course, there are some authorities which implement different changes. However, the level of interconnection, correlation and whether they are conducive to the same goals, and that is the question. I think the interconnection is not provided, as the goals weren’t formed and declared. Key task of the economy development is the public wealth growth. A person, his/her income and welfare increase shall be in the center of the whole public system. And economy, in its turn, can’t develope without investments.
As usually, it’s very simple from one side, and very difficult from another side at the same time. It seems you are talking accepted truth but what is to be done to make the things you are mentioned real. A person shall be the center of state as well as economic systems.
Resolution of any problem starts with its consciousness. If we do understand the essence of the problem then we can make steps towards its resolution. Let’s have a closer look at our global task to attract investments into Ukraine. Tough luck, our country is absent on the world’s map as attractive jurisdiction for these investments. We console ourselves with the thought that Ukraine is a colossally rich country with unique natural resources, minerals, etc. But we still can’t see the queue of investors. Why? Having all the wealth we didn’t prove ourselves as reliable and predictable partners. At this, key task is to show our consistency and interest in investors.
How should it be done?
We draw another analogy with business. What does a company do if want to attract investors? It shows its business-plan, talks about its strategy and focuses of its activities. And only when management shows its competence, appears a chance the company might receive money. Unfortunately, today, we can’t see clear strategy of development of Ukraine, no coordination in the managerial team or necessary positive media coverage. We need to learn how to “market” ourselves, in a good way.
You mentioned Asian “tigers”. Could you name other countries which experience is useful and interesting for Ukraine or might be an example to follow?
Israel is the first country which comes to my mind. However, you can’t simply take the model of other country and “transplant” it in Ukraine. We need to learn how to “market” ourselves, in a good way. …. Recently, my colleague Yevgueniy Sysoyev (Managing partner of Ukrainian venture fund AVentures Capital – editor’s note) and I were discussing perspectives of development of domestic IT industry. Together, we are the participants of Task Force on High-Tech Strategy in Ukraine under the Ministry of Economy. We came to a single and evident conclusion that old raw material model of economy development won’t give possibility to compete for the capital. Those countries, which showed powerful economic development, focused on high-tech HVA product. And it’s the only strategy which can be useful for Ukraine. Additionally, such model was chosen by Israel. Old raw material model of economy development won’t give possibility to compete for the capital Also, I think we shall copy one more model from Israel. I mean rebirth of political powers. Moses wandered with Jewish people in the desert for 40 years to rid them from their mentality. The same way shall be changes our local political system. Unfortunately, there are only 30-35 people’s deputies of new wave in the new Parliament today. We need new political powers, classic parties, which center shall be a middle class and public persons those creative people who aim to create new products, new projects and are ready to work for prosperity.
Let’s back to the investments…
Really, current political situation doesn’t allow to speak about the bigger volume of investments, so, we shall focus on local investments. For example, we can look at regional start up market. Ukraine is a unique country where, as cliché as it sounds, are born and live talented people. Basing on my own experience I can tell that Ukrainian Academy of Science is one of the most rich organizations in Ukraine. It’s potential has never been assessed before.
What are the criteria of such assessment? Grants? Budget? Ukrainian Academy of Science is one of the most rich organizations in Ukraine.
It shall be assessed by its intellectual property which it possesses. Ukrainian research institutes has unique developments which are the “dead capital”. One of the possibilities for Ukraine is commercialization of domestic science. As an example, we can take the Silicon Valley. It is a fruit of synthesis of science, education and business. Science, education and business in our country are too far from each other. Business shall be allowed to invest in innovative elaborations of Ukrainian scientists which are really great.
Consequently, are scientific developments and startups the real possibility for investments?
… and for creation of internal market for innovations. It shall be done here and now. As you know, Ukrainians have rather big investment capital which is hidden under mattresses and abroad. Different sources assess it from 40 to 100 bill USD. And if we can use even the smallest its part, namely, 2 billions, as intended, so it should and could be worked with. We just need a transparent system which could assist in monitoring and analysis of inventions and developments whether they could be applicable. And then give business possibility to invest in them. If we can fill the market with these innovations, the next step might be towards external markets. We can create our own Silicon Valley with our specificity and it will make possible for science and stock market to rebirth and push economy to further development.
What are the more attractive industries for investment as for you? One of the possibilities for Ukraine is commercialization of domestic science.
If we look at the “tigers” we’ve mentioned earlier, none of them was a raw material state. Every state counted on HVA production. That's why if we speak about investments into industry it should be engineering, robotics industry, medicine or hi-tech instead of extractive industry. In one word, all those things that are still undeveloped in Ukraine. And our country needs new economy. I believe that there will be a necessity to introduce tax incentives for new direction companies. For example, in Batumi, which is known resort and consequently it’s less profitable in winter than in summer, they created medical cluster. Now, everyone can build a hospital there and don’t pay income and wage taxes. The task of each state is to create conditions to make people spend their money in the region during the whole year. This practice is normal however the pragmatic one. There are also shall be created conditions for investments inflow in Ukraine.
These are well-known phrases which are constantly repeated. What shall the state in general and each individual entrepreneur to do to earn confidence and investors’ capital? We can create our own Silicon Valley with our specificity.
I will continue with well-known phrases on positioning of Ukraine before foreign investors. We can play some roles in outworld. The first one is to provide Middle East and Asia with food products. We shall not count on grain sale but on ready products made in Ukraine. The second possibility is energy security of Europe. Our country is rich in hydrocarbons and it may be interesting for investors from America, Britain and Asia. The third aspect is defense. As for today, Ukraine de-facto is a buffer between Russia and EU. Our military-industrial complex and strong army could cover our belt. The fourth direction is investments in infrastructure. We usually speak about great logistic perspectives but let’s see our railway… I’d like to repeat once again, our future shall rely on new economy and HVA production. It will permit us not to dangle in the last car of the train and give us possibility to appear on economic map.
What were, are and will your personal investment priorities? Have they changed recently? Now, I’m investing in analytic center which creates right vision of Ukrainian economy development.
Earlier my investment focuses were real estate and hi-tech projects. I have been working as civil servant for the last five years, so I couldn’t carry out such activities. All the objects of my investments left on occupied territory, that’s why I can tell I’m starting out. Now, I’m investing in analytic center which creates right vision of Ukrainian economy development. Moreover, my colleagues and I are preparing to launch a startup. When it happens, editorial of StockWorld.com.ua will be among the first to know. Anyway, now I can tell that it will focus on the model for domestic energy production developed by Ukrainian scientists. In general, I’m engaged in investments attraction to large industrial projects. As you can see I haven’t left investment market.
Which current investment trend can you name as the most popular and innovative? It unlikely could be a stock market… It might be banking or something else?
One of the most illustrative examples, as to me, is the system of government procurement “Prozorro”. It’s a maximum automatization of all the processes with minimum human factor. еGovernment is the future. It will bring reduction of expenses, increase of confidence to officials as well to jurisdiction in general. And it may be one of the most important public investment objects, as the state itself shall be the primary investor of these sphere.
What are the priorities of investment directions in the nearest future?
Ukraine can obtain its own exchange or pool of startups. If someone from big players wants to create similar project it will be interesting as the demand for investment in Ukrainian startups is strong nowadays, and there is still no operator for such project. Ukraine can obtain its own exchange or pool of startups. One more attractive direction is agriculture. Many of my friends-investors have got involved in it over recent years. Some of them plant apple garden or arranged greenhouse business. I should admit that many of them leave Ukraine. As practice shows, investment abroad, e.g. in Silicon Valley, is more interesting and profitable then in Ukraine.
Let’s speak about obstacles. What are the primary factors slowing down the wish to invest in Ukrainian economy? You’vealreadymentionedtaxation. Whatelse?
Absolutely right, the first obstacle is taxation. Then I can name ineffective system of public services and currency regulation. Moreover, the absence of guarantees for private ownership and uncoordinated legal system. Unfortunately, people are not held equal before the law in Ukraine. The last factor is military security as well as physical.
We propose you to turn to positive. Who is an example of smart innovations and successful investments in Ukraine, and also holds the ideas you follow? еGovernment is the future.
It would be incorrect if I give you the concrete names. Just believe me, we have examples which make me believe in changes in political system. First step is that business unifies to interconnect and counteract against the power. Another step will be “imposing” on power of their own principles by business and public associations. ItisthefutureofUkrainianpublicsociety.
At the end we’d like to hear your summary. You are developing Ukrainian investment strategy. Please, name TOP 3 statements that will become commandment for our economy.
I will divide them, with your permission, into two groups: external and internal. Well, until internal investor don’t start working in Ukraine, the external one won’t come to us. Outside we shall be competitive rivals in fight for capital. We shouldn’t be as good as other countries. We must be better. And it’s not right to blame the authorities and point to their competence. We have the authorities we’ve chosen. And we are all responsible for it. We shouldn’t be as good as other countries. We must be better. I’d like to recall, Ukraine is a unique country. We don’t have to go around with hat in hand asking for charity and credits. We have to build mature partners relations which are possible only when we grow up. Immature person can’t be a part of partnership. We have to find points of mutual interest with each powerful country of the world. Then, we will be a subject to investment and geopolitical interests. And we must remember: our success is only a fruit of our labor and we can’t require or expect it from anybody.