10:50 23.05.2019

Appointment of people from Kolomoisky's circle by Zelensky threatening with outflow of investment from Ukraine – Dragon Capital CEO

4 min read
Appointment of people from Kolomoisky's circle by Zelensky threatening with outflow of investment from Ukraine – Dragon Capital CEO

Investors have negatively reacted to the first appointments made by Ukrainian President Volodymyr Zelensky, and further appointments people from the circle of businessman Ihor Kolomoisky to the top positions could entail outflow of investment from Ukraine, European Business Association President and Chief Executive Officer (CEO) of Dragon Capital Tomas Fiala has said.

"Unfortunately, investors – judging by their reaction to eurobonds and the Ukrainian hryvnia – have reacted negatively to these first appointments negatively. The first reaction is negative, he said during a forum entitled "Commitment, Trust, Inclusivity: Vision of Reforms for Tomorrow. Civil Society Proposals," organized by the Reanimation Package of Reforms (RPR) in Kyiv on Wednesday. RPR is the largest coalition of leading non-governmental organizations and experts from all over Ukraine who have pooled their efforts to facilitate and implement reforms.

Future appointments will be also assessed by investors as a signal, Fiala said.

"The more people appointed from Kolomoisky's circle, the more it will increase the cost of our borrowing, the more difficult it will be for corporations and the government to raise money both in Ukraine and abroad. This money will be very expensive, there may even be the outflow investments," he told the Interfax-Ukraine on the sidelines of the forum.

"We hope very much that the Presidential Administration head would guide efforts on the right track. However, there is certain skepticism about his track record and proximity to one of the country's oligarchs," Fiala said.

According to him, investors are skeptical about Ukraine's further potential to move towards the establishment of the rule of law, which is extremely important for attracting investment to the country.

"It is hard to imagine how a person from Kolomoisky's circle, who did reverse things, will now turn 180 degrees and will act not for the good of the oligarchs, but for the good of the country" Fiala said, speaking of the newly appointed head of the Presidential Administration Andriy Bohdan.

Fiala paid attention to the fact that the names of advisers mentioned by Zelensky on economic reforms, namely ex-Ukrainian Minister of Economic Development and Trade Aivaras Abromavičius and ex-Finance Minister Oleksandr Danyliuk, are not among Zelensky first appointments.

"We would consider the appointment of Abromavičius and Danyliuk as a positive signal. Zelensky presented them to investors and the outside world as people whose opinion he hears. But for now we have not seen them among the appointments," Fiala said.

"I would not call Gerus' appointment as president's representative in the Cabinet of Ministers a super-positive marker," he added.

Fiala said he does not see yet who in the presidential administration will be responsible for work with business or economic policy.

"I do not want the pessimistic predictions come true that these people [previously voiced by Zelensky's economic advisers] are used for the election campaign, and then minor and third-level roles will be found for them," Fiala said.

At the same time, he said that it is extremely necessary for Ukraine to attract at least one tranche from the International Monetary Fund until the end of 2019.

"Without this, we will not receive macro-financial assistance from the EU, the World Bank. We will have to borrow a huge amount on foreign and domestic markets. Investors can count this and in this case they will demand a much higher yield. It will cost us very dearly," he said.

According to Fiala, the cost of borrowing may remain at last year's level.

"Last October, we borrowed five-year money at 9%, and ten-year money – at 9.75%. I think in that case [if Ukraine does not receive the IMF tranche in 2019], borrowing will be at the same level, maybe, a bit cheaper. Depending on the amount... If the amount of borrowings is $2-3 billion, their value may exceed last year's level," Fiala said.

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