25 May 2012

10 Years in Ukraine

10 Years in Ukraine
Today is the tenth anniversary of my first visit to Ukraine. So I thought I would reflect on the changes I have witnessed during these past ten years. I will only talk about Kyiv city.
What I remember most about Kyiv back in 2002 and how it compares to present day 2012:

The People – At first sight anyone would assume that Ukrainian people are the most miserable people on the planet. Smiling in public is just not part of the culture. They can be offensive and rude. But we must remember one golden rule; who are we to judge? If we think people are offensive and rude…compared to what? Our ‘western’ view of life on the planet. Once you get to know Ukrainian people, you will find them to be very friendly and warm people. Back in 2002, I visited a Ukrainian home for the first time and tried to understand why our hosts had prepared a feast for twenty people when there were just four of us? Ukrainian people will give you all the food in their home to welcome you as a guest. Drinking vodka with a foreigner was considered a national sport as your host knew full well that you would be unable to stand up at the end of the party. During the 2002-2009 period I think Ukrainians remained very optimistic people, they were always talking and thinking about a brighter future for themselves and their country. 2012 = People are more pessimistic these days. Mainly as a result of the depressing political situation.  But they are a hardy people and will overcome the present climate of uncertainty.

Bureaucracy – I’m sure there has always been an obsession since Soviet Union times with paperwork and accuracy. The ‘Passport’ is required to complete almost any transaction in Ukraine. Plus the right paperwork is always required when dealing with a public sector office or even private company. In the early days from 2002, I was convinced that people were just determined to stop me from doing anything. The word NO has always been much easier than YES in Ukraine. The translation of foreign names from the Latin alphabet into Cyrillic has always been a challenge. If one document has just one letter different than another document, then you have a big problem. 2012 = Things have not changed much. Even though most organisations have computer systems, Ukrainians still have this obsession with original documents. The ‘stamp’ is one of the most important, as every organisation must use its ‘stamp of authority’ on all its documents. For Ukrainians this is like a signature. But they find it difficult to comprehend that we do not use these stupid things in other countries.

Traffic – Car Ownership.  I was amazed to find a city where you could travel in a taxi from one side of the city to another side without any traffic jams. There were very few cars on the streets. 2012 = Crazy situation with traffic these days. Private car ownership has increased significantly thanks to the banks providing easy credit during the boom years. Traffic jams in Kyiv are just as depressing as in other European capital cities.

Driving – In 2002 it was obvious that ‘safety’ was not a word commonly understood by anyone in Kyiv. Drivers would acquire a license, not as a result of a driving test or after many hours of learning to drive under the instructions of a qualified person. No, they just got a license. 2012 = A dangerous situation in Kyiv. Ukrainian people drive cars like they have been possessed by some evil spirit. There is no common courtesy for other drivers on the roads. There are not many cities in the world where driving along the pavement at speed is considered acceptable. The high number of deaths on the roads in Ukraine is also unacceptable.

Green City.  Most first time visitors to Kyiv will remember how impressed they are by seeing the ‘green city’. Trees still line most streets and is a refreshing change from other European cities. 2012 = Kyiv can still be called a ‘green city’, only because it has many trees. But what most people now understand by the phrase ‘green’, as in eco-friendly green, then unfortunately Kyiv has a long way to go.

Police/Traffic Police – I remember back in 2002 local people telling me that if you have a problem in Ukraine the last people to call are the police. The police have a reputation for creating problems not solving them.  Tourists and foreign visitors have always been looked upon as easy prey for the police.  The sole objective of any policeman in Ukraine is to extract money from anyone they come into contact with. Ukrainian policemen must be the most corrupt in the world. 2012 = Nothing has changed. However, I have never paid a bribe and I will never pay a bribe in Ukraine.

Public Transport – One of the plus points about Kyiv is the reliability and the choices of public transport. The metro (underground) system must surely be one of the best in the world. Old as it is (but only since 1960) it is reliable and you can travel around the city quickly and very cheaply. I remember when it was just 50 kopecks (GBP 0.04) to travel anywhere, today its UAH 2 (GBP 0.15). Kyiv also offers Trams, Trolleys Buses and an assortment of public and private sector buses at cheap prices compared to other European cities. 2012 = Getting even better.

Restaurants/Cafes/Bars – In 2002 I was amazed to find so many McDonalds restaurants in Kyiv. Later I found out that McDonalds were the best places to visit if you needed to find a toilet in Kyiv city centre. There are still very few public toilet facilities in Kyiv. Kyiv offers a range of different restaurants and cafes/bars. The food is not just Ukrainian but international and of good quality. HOWEVER, back in 2002 I was frustrated by the very very very very poor service provided in these places. 2012 = You will receive very good service in the very expensive restaurants in Kyiv city centre. But the prices in these restaurants are CRAZY. The prices on the menu’s at most Kyiv city centre restaurants will make London and Paris restaurants look cheap by comparison. In ALL other restaurants/cafes/bars the level of customer service remains very very very POOR. It still amazes me how long it takes to serve just two beers. The owners of the many restaurants/cafes/bars in Kyiv have taken the time to design these places with interest and have invested considerable time and money in getting these places looking good. However, they always fail to invest any money in the training of their staff. People in Ukraine just do not understand customer service.

Doing Business – The reason why so many foreigners choose to come and do business in Ukraine is initially due to the fact that very little competition exists in Ukraine. In 2002 it was obvious that Ukraine was a country that was developing and needed a whole range of new industries and services. This created many opportunities in Ukraine. But actually ‘doing business’ in Ukraine was and still is a challenge to foreigners. Ukrainians do not trust each other, why should they trust foreigners? The mentality of doing business in Ukraine still revolves around producing paper documents. Documents and stamps still continue to dominate the business culture in Ukraine.
However, there is one significant benefit to doing business in Ukraine. People expect to pay for goods and services in advance! This is refreshing and avoids any misunderstandings. People tend to focus when they have to pay BEFORE they receive the goods/services. Unfortunately, many Ukrainians still assume that to succeed in business you need to have an expensive looking office/reception/furniture etc. It’s amazing how many companies in Kyiv city centre operate from offices that look like a Hollywood film set. It’s all a fa├žade. 2012 = To avoid frustrations, It’s much easier to do things the Ukrainian way. It will be a long time before anyone can do business here according to normal European standards.

Banking – In 2002 the banking industry in Ukraine was dominated by local banks. ATM’s were already working but it proved difficult getting money during the long electricity black outs. Moreover foreigners were always ‘suspects’ when attempting to do any banking transactions. Trying to complete any banking business involving international transfers was a nightmare and people needed to dedicate many long days to tolerate the lack of know-how from banks in Ukraine. But then many foreign banks entered the Ukraine market and things began to change. The foreign banks started to provide staff training in how to take care of those people called customers. However the National Bank of Ukraine continues to demonstrate its power and the majority of banking employees live in constant fear of violating some NBU rules/procedures. Moreover, banks are still unpaid agents for the tax authorities. There cannot be many countries in the world where when you go to withdraw money from a business account, the bank will ask you if you have paid your taxes and may require you provide proof before they will allow you to withdraw money. 2012 = The situation has improved. But it can still take more than one hour to complete all the documents and withdraw cash from a simple banking account. Cheques are never used in Ukraine. Even today, if a company or individual receives a payment from a foreign account the bank may refuse to accept the funds until they see the agreement/contract you have with the ‘foreigner who sent you this money’. Still a long way to go.

Taxes – Ukraine has one of the most complex tax systems in the world. However, it’s obvious that very few people in Ukraine actually pay any taxes. During the period 2002-2012 I have witnessed very few changes in the system. Naturally the government will claim that they have made things easier, but many will disagree. The personal rate of taxation is very low between 15 – 17%, so much lower than other European countries. All salaries in Ukraine are negotiated net of taxes. Employees never discuss gross salaries as they do not consider taxes to be their responsibility but those of the employer.  However the corporate rates can only be described as prohibitive. The payroll tax is the killer and can be as much as 50% payable to the government. 2012 = Not much has changed.

The Black Economy – Back in 2002 it was almost impossible to pay by credit/debit card in Ukraine. Cash was king and is still the same today. The majority of people and businesses in Ukraine will try hard to obtain cash in most situations. Cash is difficult to trace for tax purposes. Plus the majority of people are still paid wages/salaries in cash. The driving factor for business operators is to avoid the dreaded payroll tax. Many Ukrainian business people will openly declare that if they had to pay all taxes they would go bankrupt. 2012 = Although it’s much easier to pay by credit/debit card these days in many restaurants/supermarkets etc., the majority of retailers will try to avoid non-cash payments. The usual excuse ‘Sorry, our card machine is not working’ is common. Some estimate that the black economy makes up more than 60% of the national economy in Ukraine.

Leisure/Sports/Pastimes – Due to the fact that the majority of people in Kyiv live in apartments (they do not have a garden), they tend to get out and do things collectively. Spring and summer is always a great time in Kyiv where thousands of people can be found taking a ‘shashlik’ (picnic) break in one of the many forests around the region or at the side of a lake or along the great Dnieper river. In Ukraine you can stop just about anywhere and have a picnic with a real fire for your barbeque meal. In most areas on the left bank of Kyiv, you will still find shared sports facilities from Soviet Union times including a running track. 2012 = Recently we have witnessed the development and growth of new sports/fitness clubs in Kyiv. These new places complete with all the latest equipment for busy people to go and keep fit are probably better than you will find in Western Europe. Kyiv city becomes a very quiet place in summer as people escape to their dachas.

Summary
Kyiv is not Ukraine. Those living in other cities and far off places in Ukraine will share different experiences. Plus the rest of Ukraine tends to be a low cost experience. But during the past ten years I have witnessed some interesting changes. Ukraine is one of those countries that you like very much one day and hate the next. There is always something interesting going on in Ukraine. The political situation is complex. The people of Ukraine deserve better governance and only if they could start to understand that THEY have power in their hands they can start to make changes.
It is possible to do business here if you are prepared to submit to the ‘Ukrainian way’, otherwise you could end up being a patient in a mental institution.  It’s worth remembering that the country has experienced only twenty years of freedom. Living in a developing economy is interesting and more enjoyable than some boring developed country.

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