Jaroslav Vesely, ABB

• Jaroslav Vesely
• Country Manager, ABB

Can we start with an introduction of yourself and an overview of your company? How do you position yourselves in the market?

ABB, a global leader in technologies for automation and power, has been working in Ukraine since 1992. Now we have about 180 people in Kyiv and six regional offices across Ukraine. ABB group is a public company with the head office in Zurich that operates in over 100 countries. In Ukraine, we supply solutions to industry and utilities bringing the innovative technologies that help our customers increase energy-efficiency and raise productivity. At the moment, we do not have production facilities in Ukraine, only engineering and service units, but we work actively on establishing one.

Do you have any plans for expansion? What are your growth ambitions?

I have spent almost four years in Ukraine as Country Manager for ABB and I am still thrilled to see the potential and growth opportunities that the country can offer. At the end of 2010 we developed a 5-year strategy for ABB in Ukraine that envisions five time growth of our business here. The results of 2011 already show that this is quite realistic to achieve. Our strategy relies on organic growth as well as on expansion through acquisitions.

What key market drivers are positively impacting your business?

Overall energy focus in Ukraine is what brings issues such as energy-efficiency, renewables, and modernization of infrastructure to the public agenda. This is where ABB can offer innovative solutions. First, understanding of the need to become less energy-intensive through energy-efficient technologies is growing both in industry and utilities sector. Second, already now we observe how Ukraine turns into an active player in the field of renewables. Solar plants and wind parks bring issues such as connecting to the grid to the public discussion. And third, we see an active interest in upgrade and modernization of existing power infrastructure in power and utilities and in a number of industries.

What are the main challenges for you to overcome?

Apart from a traditional set of challenges encompassing tax regime and customs rules, or barriers to investments that any company working in Ukraine faces, we also deal with different technical standards that Ukraine uses. This basically means that project documentation has to be prepared in line with two standards and additional certification is required in Ukraine. Scarce financing possibilities also challenge our customers and partners’ business development plans.

How do your latest trading/figures compare to the same period last year? What do you attribute the upturn/downturn to?

Actually, ABB Ukraine did really well over the last year: we are one of the fastest growing units within the group. Compared to 2010, we increased our business in Ukraine three times. A diverse combination of factors led to the upturn, in particular, projects with international financing, infrastructure projects in the run up to Euro-2012 Football Championship, traditional and alternative energy initiatives as well as energy-efficiency projects.

What is your top priority for the next 12 months?

Next year we will be delivering on large-scale projects with NPC Ukrenergo. ABB will replace almost the entire circuit breakers base at Ukrainian 750kV substations, including related control and monitoring system installation. We supply the equipment and provide technical training. The circuit breakers will be replaced in three phases, starting in 2011 and ending in 2014. New equipment will help modernize Ukrainian power grid and make it more efficient.

What has been the most important management lesson you have learned?

My four years of experience and observation in Ukraine helped me understand that it is possible to do successful business in Ukraine, despite many challenges confronting foreign and local companies here. I met many highly-motivated and skilled people among ABB employees and our partners in Ukraine. Obviously, risk management procedures and strong knowledge of how to deal with numerous obstacles should be in place.

What do you foresee as the next big trend in business climate of Ukraine?

I belong to those who remain hopeful with regard to the prospects of the Free Trade Agreement with the European Union. Signing this agreement would be a decisive step for Ukraine towards reform implementation and eventual simplification of procedures, certifications etc.

In our sector, I suppose, modernization of thermal power plants could be the next big thing in Ukraine.

The EBA focuses its actions on 7 vectors of economic development- Corruption fighting, Court system and Land reform, Currency regulation, VAT refund activation, Customs Procedures simplification and Technical barriers to trade elimination. Which one(s) so you foresee as the most vital and why?

Independent court system is the main prerequisite for efficient market economy. Therefore, I believe that reform in the court system and corruption fighting are of critical importance for the country and businesses operating in Ukraine. Corruption settles where there is a possibility, while people are pretty much the same everywhere. It is the matter of control and efficient governance to establish the system that would eliminate corruption. Other issues important for foreign companies such as ABB include simplification of customs procedures, removal of technical barriers to trade and VAT refund.

What in your opinion can be done to improve investment attractiveness of Ukraine?

Ukraine should start opening up its market to big foreign investors. The last time we saw a big investor entering the market was back in 2004 - Arcelor Mittal. Establishing real investment opportunities for big international companies would result in more competition in the market and new level of global business interest to the country. Successful investment cases would result in Ukraine’s strong reference list which would be the most persuasive tool for other investors to follow.

Could you please comment on the recent results of EBA Investment Attractiveness Index? As you know, the investor confidence in Ukrainian market has slumped from 3.39 to 2.56 points. What are the main reasons for such sharp downturn?

Increasing complexity of doing business in Ukraine and slow pace of reforms that raises dissatisfaction in the corporate sector.