EBA Personality Mr Jiro Olcott of ZvitNet LLC
This month, we ask Mr Jiro Olcott of ZvitNet LLC for his opinions on regional business development prospects and principles of management that foster successful business climate.
How has business in the Lviv region developed so far this year, and what are your predictions for 2012?
2011 is the time for seeds sown during the hard times to spring forth and blossom. The global economic climate, as well as changes in the Ukrainian political landscape have brought challenges and unique opportunities for businesses in Western Ukraine. Every cloud has a silver lining and it’s the well managed companies (Ukrainian and foreign) who have tightened their belts and redefined their strategic approaches, that will rise like a phoenix and define the business roadmap across the region in this decade. Merger and acquisition opportunities have increased this year and will continue beyond 2012. The World Bank has raised Ukraine's GDP growth forecast for 2011 from 4% to 4.5% and Western Ukraine will be a significant contributor to this. Naturally the Lviv Oblast is an attractive resource for Western European farmers. Rich lands, improved infrastructure, more reliable workforce, proximity to EC are all contributing factors. Ukraine has seen over US$300 million in EBRD agricultural investments in 2011-2012, of which a substantial percentage is coming to Western Ukraine. They have also invested EUR 50 million to improve Municipal and environmental infrastructure. Information Technology continues to blossom in and around Lviv, sustaining its position as Ukraine’s Silicon Valley. The excellent educational facilities and pleasant living environment contribute to this. But significantly, I think the Ukrainian government made a very wise decision in allowing software developers to maintain their status as Professional Entrepreneurs (PE) through 2011. The industry is still in its nascent stage and must be carefully nurtured in order to capture a significant percentage of the global market. Moving forward, Information Technology will play a central and strategic role in the development of the region and Ukraine as a whole. Not only as a contributor to GDP, but as a means of integrating and connecting Ukrainian businesses along the value chain and thus to the rest of world.
How do you envisage the mid-term development of Western Ukraine’s investment environment?
As an example, I want to mention that by the end of 2011, all Ukrainian companies involved in financial services as well as companies listed on the stock exchange must have IFRS reporting capabilities. Armies of accountants have hunkered down and are painting themselves into a corner, drowning in a sea of Excel Spreadsheets. The solutions currently proposed by the accounting/consulting firms to support the finances of growth oriented businesses through this decade are lukewarm to say the least. This is the ideal situation for Lviv’s ‘ber-Geeks’ to swing in like superheroes. IT professionals in Lviv are well positioned to take advantage of such circumstances. Software developers are working with IFRS accounting professionals, using advanced business languages like XBRL (eXtensible Business Reporting Language — widely deployed in the US, EC and Asia) to develop automated,
robust and transparent accounting systems compatible with international business standards. A Ukrainian company with eyes beyond its borders, adopting these IT systems, will certainly attract the attention of foreign investors who are looking for increased transparency while reducing their investment risk profiles.
In your opinion, what place does Western Ukraine occupy on the overall projection of Ukraine’s economy?
Ukraine and above all Western Ukraine is uniquely positioned between the EC and Russia. I believe that opportunities, both cultural and economic, lie in this strategic and privileged position. However, businesses and the people as a whole must strive to steer a middle ground between these vast networks of trading partners, taking advantage of both. Western Ukraine’s distinctive Western-European sophistication and Lviv’s multi-frontier location is very attractive to the EC. As Ukraine heads towards EC membership this region will play an increasingly vital role. Which industries demonstrate the most obvious potential for investors within today’s Western Ukraine market? Farming: This industry has vast potential. Careful planning is needed by local authorities and businesses alike to ensure sustainable productivity and the nurturing and wellbeing of local farming communities across the region
Manufacturing: With Western Ukraine’s border proximity, improving infrastructure, competitive cost and skilled labour force, the region is well positioned for growth.
Information Technology: Lviv is the Silicon Valley of Ukraine — Geeks flock together and multiply, as long as the working and playing ecosystem remains friendly Services: Financial, advisory and all aspects of ancillary services have growth potential hand-in-hand with other industries.
Tourism: Last but not least, tourism has enormous possibilities. Unfortunately folks in Western Europe and beyond scratch their heads when you mention Lviv. This industry could be a serious cash cow for the region if a concerted effort is made by the authorities to improve it.
What 5 steps would you advocate to the Ukrainian authorities in order to improve the business climate in Western Ukraine?
1. During periods of agricultural boom and farm land referendums the authorities should monitor and control the potential harm of ‘land grabbing’ and exploitation
2. Continue the PE status of young and blossoming industries (like IT and other services)
3. Define a clear roadmap for transparency of Ukrainian Accounting Standards (UAS) towards International Accounting Standards (IFRS/GAAP)
4. Facilitate the formation and investment in new companies by foreign investors
5. Improve infrastructure and services which support and encourage foreign business and tourism
Do you consider the efforts Ukraine and Lviv undertake in process of EURO 2012 being timely and leading to successful champion host?
Murphy’s Law: The time it takes to complete a task is equivalent to the time allotted, i.e. there will always be a rush to the last minute. Notwithstanding, I think the citizens of Lviv have shown great patience, sitting in endless traffic jams around the city while the authorities dig up roads and improve infrastructure. Foreigners quietly endure bumpy
landings in Dehavilland Dashes at Lviv airport amidst the $200m expansion project. Yes, I think Lviv will succeed fine.
How to reach the Stars in business?
Business aspirations are as endless as the imagination — the stars and beyond! The important ingredient is to temper one’s dreams to the reality of market demands. Will my idea in business bring satisfaction and happiness to the lives of others? And, how am I going to entice people into believing what I have to offer will gratify those needs?