USAID LED project transfers knowledge of global investment game rules
The topic of investment seems to hold the stage in Ukraine, squeezing the football championships to the background. In fact, all the cities where the USAID Local Economic Development (LED) project has helped hammer out Economic Development Strategic Plans have highlighted investment attraction as either part of the strategic vision or a goal under the plan, or both. The central government also follows the investment mainstream, having established the Center for Foreign Investment Promotion in 2005, and identified a “radical increase in investment inflow” as one of main goals in its Ukraine Socioeconomic Development Program for 2007.
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Mega Design Director Jan Dinler (right), and Vitaliy Terkhanov, operator of a computer numerical control (CNC) machine. |
Valeriy Tudvasev, head of the Investment Attraction Section within the Pavlohrad Economy Department, is standing next to a plasma cutting machine at the Mega Design works. |
Ihor Kondratyev, a worker for Mega Design, is doing file bright on a tower part after galvanization. |
With such universal attention, the question is, why in the year 2005, the best one so far in Ukraine’s history in terms of foreign direct investment (FDI), did Ukraine manage to attract a €310 worth of FDI per capita, whereas, e.g., in the Czech Republic every citizen enjoyed €4,932, i.e., some 15 times as much?
Stephen Fitzpatrick, chief of the USAID’s Local Government Division, Office of Economic Growth, called FDI a “very serious and highly competitive global game.” Investors play this game to earn, and thus they are professionals. To match, local governments also need to have FDI pros in their teams, and be equipped with all necessary tools and skills. These include a full set of printed and electronic information answering probable questions of an investor, and showing the investor that he or she is dealing with serious people who think strategically and know how to provide professional services to investors.
When UDEC, a “Ukrainian company with Turkish capital,” came to Pavlohrad, Dnipropetrovsk Oblast, in search of a site for a GSM tower works, the USAID LED project had just started to help develop a strategic plan for the city. However, two important results of this effort had been already produced: the Pavlohrad Community Profile and the report on Business Attitude Survey. The former document provides detailed statistics-based information on Pavlohrad and its economy, and the latter describes the business climate in the city. Valeriy Tudvasev, the City Rada staffer responsible for the plan development on behalf of the local government, showed the UDEC delegation the two documents, and they asked him to email these to them.
We can’t claim that UDEC chose Pavlohrad from among several cities visited just because the city had the Profile and had conducted the Survey. Obviously, a lot of factors played a role, but the fact that this city’s management tried to look some fifteen years ahead and did it in a democratic, transparent manner, and that here an investor could know exactly what the local economy structure is, how many unemployed there are and what skills they have, what other businesses thought about their labor force and the city government, and more – all of this left a positive impression for the decision-maker.
And unlike soccer, the FDI game’s result, if any, is normally win-win. The investor wins, as the company expands and the investment begins bringing return. The community receives jobs and skills for its members, as well as some tax revenues for its budget.
By now, Mega Design, the tower-making company established by UDEC in Pavlohrad, has invested close to $3 million and created 170 jobs in this Eastern Ukrainian city. The company upgrades the local labor force directly, by training its key staff both abroad and on the job, and indirectly, by providing scholarships to students of a local technical school.
Says Jan Dinler, Mega Design director and main owner: “In a few months, when all four phases of the project are complete, we’ll have more than 300 employees.” He is young, optimistic, competent, and ambitious. “We’ll never stop expanding; our vision is much broader than supplying to UDEC only.” It means more jobs are to come – well-paid jobs, as it is rumored that Mega Design pays the highest wages in Pavlohrad after mines.
Besides scholarships, Mega Design also provides support to inmates of the old people home and orphanage. “It’s our company’s principle to help people,” Mr. Dinler says.
Valeriy Tudvasev now heads the just-established Investment Attraction Section within the Pavlohrad Economy Department, where he is a deputy department head. He is also ambitious, wanting more investors for his city. In July 2006, he was among the first 21 graduates from the USAID LED project’s training program for FDI professionals – an unprecedented curriculum in Ukraine’s history.
Mr. Tudvasev says there is a huge difference between his ideas of FDI before the training and now. “Investment attraction was always the topic of the day. Everybody used to say: we need to attract investors. But nobody knew the mechanism: what needs to be done first, second, etc. This is what we’ve learned under this training program. Plus they brought us to the Czech Republic to see with our own eyes how it worked.” (According to the Financial Times group’s FDI magazine, “the Czech Republic is one of the most successful transition economies in attracting foreign direct investment.”)
The Pavlohrad government seems to be quite decided about having a professional FDI team. Besides having established the investment attraction department in September, they sent two more staffers to undergo FDI training under the USAID LED project. According to Pavlohrad Mayor Volodymyr Kuklin, the city is highly investment-attractive. “But the matter is we’ve been highlighting the fact amateurishly as yet,” he said. “I think that professionals will do well in any field, and nonprofessionals in any field will bring about just troubles.”
The training program for FDI professionals was developed by a team of the best Ukrainian, Czech, Scottish and US LED experts. The USAID LED project launched the program on March 1, 2006, and on Aug. 30, 2006, resumed it with a second group of representatives from Ukrainian municipalities. In total, more than 50 representatives from various Ukrainian regions, including officers of state institutions, nongovernmental organizations, and local governments have been either trained or training in all aspects of FDI attraction.
USAID Local Economic Development Project aims at helping Ukrainian cities strategize and organize their economic potential to produce more jobs and increase investment. As of October 2006, the project has assisted 16 cities in elaborating their Economic Development Strategic Plans, and is lending them a hand with implementation of the plans. Ten more cities are currently preparing their strategic plans or investment attraction plans with assistance from the USAID LED project.
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