Mikhail Merkulov: Investors need normal operating conditions

Mikhail Merkulov, Arricano Real Estate CEO, participated in a roundtable discussion on April 15, 2016 on the topic: "How to improve the investment climate and protect foreign investors in Ukraine", organized by the Ukrainian Real Estate Club.

Participants of the meeting, representatives of international companies that do business in Ukraine, representatives of law firms, market experts and government representatives discussed Ukraine's business climate, the ways of its improvement, the steps that need to be taken to ensure the protection of investors' rights in Ukraine and the aspects that may contribute to the increase of the investment attractiveness level of the country.

Tatiana Korotkaia, deputy business ombudsman, told about the body’s work results for the year, including direct business funding - return of more than UAH 3 billion to enterprises, emphasized that the business ombudsman is a mediator between business and the authorities and invited the participants of the meeting to create common recommendations to the government, in particular, concerning infrastructure development and real estate construction.

Marina Krestinina, head of consulting and analytics of the group providing consulting services in the field of real estate of Ernst & Young company in Ukraine, outlined the results of the blitz-survey of Ernst & Young corporate customers on the main obstacles for foreign investors in Ukraine. Among the negative phenomena, respondents named three main groups of problems - political factors, including "merging" of business and political elites, lack of law ruling and currency regulation that limits investors. The expert noted that the survey participants consider the rule of law to be a key issue in the formation of a favorable investment climate in Ukraine. "If the issue of the rule of law and the independence of the judiciary is resolved, all the other problems should be solved", - noted the expert.

Mikhail Merkulov, Arricano Real Estate plc CEO, told the roundtable discussion participants on the precedents of violation of rights of foreign investors in Ukraine (with examples concerning Arricano group objects). «Arricano invested more than USD 400 million in the economy of Ukraine, built 6 shopping centers, but we have to protect business instead of developing it", -  said the speaker and gave the examples of Sky Mall shopping center raider attack, arguments with the capital authorities concerning the payment of equity contributions that were previously paid, trials with Odessa prosecutors. "These examples prove that the state is trying to prevent investors from investing money in Ukraine at all", - emphasized Mikhail Merkulov. He noted that investors face outrage of judges, registration services, medium and minor officials, regulatory bodies that fulfill the "orders from above". Mikhail Merkulov believes that making information public, publicity and suppression of violations by law officials - these are the ways of changing the system: "If we make the violation of law by the judge or the prosecutor public, he would be fired or criminal charges may be brought, as it happened in the case of “bald birds”. The next judge or prosecutor will be afraid to break the law, fulfilling the will of the corrupt system. The louder we talk about violations, the greater is the chance to be heard and to change the situation". Mikhail Merkulov drew the round table participants’ attention to the fact that any investor, both local and foreign, or anybody who wants to invest resources in the country development, needs normal operating conditions.

Victoria Baliuk, director of Arricano Real Estate plc legal department (on work with non-residents), added: "International companies that work in a completely legal field, face the risks that seem unlikely when starting the project, but they can be very real in the absence of an effective functioning of judicial system and law enforcement bodies. First of all, we mean the risks of investments and assets loss in Ukraine. The situation with SKY Mall shopping center is a striking example of this. Arricano company is ready to invest in the Ukrainian economy, carry out new projects that contribute to the development of business tenants and the country economy as a whole. We are interested in new and unique projects and formats of cooperation, which company partners’ offer. But there is no escaping the fact that  it is still very difficult  to protect business and return the assets owned by the company in the presence of international courts’ decisions, but in the absence of the rule of law, unwillingness of the partners to follow the language of law and fulfill their obligations with due diligence. Therefore, the international community is concerned about this situation in Ukraine. Potential investors look narrowly at Ukrainian market and watch the conflict concerning SKY Mall shopping center, expecting for a fair solution in this case within legal framework. After all, this situation has become a litmus test of the investment climate in Ukraine".


Olga Solovei, director of the industry body Ukrainian Real Estate Club (the organizer of the event), noted that based on the results of the round table discussion URE Club will prepare an open letter to the Business Ombudsman and the Ministry of Economic Development and Commerce, where the main problems of the market and the wishes of its participants to form effective dialogue between business and government will be declared.