Land reform has the potential to be the biggest ever reform in Ukraine – and it’s sorely needed, according to U.S.-Ukraine Business Council president Morgan Williams. He’s been in Ukraine almost since independence, and he believes that it could result in millions of dollars of revenue and GDP growth for the country. We spoke to Mr Williams at our studio in Kyiv to get his take on the impeachment inquiry in the U.S. Congress, where Ukraine plays a central role, as well as land reform and American and international investment in the country.
Ukraine is in the U.S. headlines. Many Ukrainians are following the news and they know that there are issues in Ukraine, there’s always this word, ‘corruption’, coming up in Congressional testimonies. How do you think this will impact the current political environment? How will it impact Ukraine-U.S. business relations?
U.S.- Ukraine business relations we think are very strong and can easily survive the kind of political atmosphere we’re in. Most of the international companies that we work with, they’re here for the long run. They’re here for many years already. They’re gonna be here for a long time. They’re not gonna go anywhere and they’re not changing very many of their plans because of the current political environment in Washington. That’s concerned them a little but not much. So business operates in a different way. They have a long-run strategy. They work in many countries, so they’re very strong here. I think the business environment is not overly affected by this.
What is the size of the U.S. companies’ investment in Ukraine compared to the region, approximately? How big is it? Compared to Poland, eastern Europe.
The U.S. companies that are here have a pretty strong presence for a country this size. They’re not as large here as they would be in Russia and some other countries, but they have a very strong presence here. Many have been here since ‘93 and ‘94, and many of them are expanding here. They’re building new port facilities, they’re building new warehouses. For companies concerned with an economy of this size, they have a large presence here.
I have spoken to some of the politicians in DC and elsewhere, and many of them say that now American business is not that ready to invest outside as it was a decade ago, 20 years ago – so we can see that the Chinese are coming to invest a lot of Europe, with huge, large, at first glance maybe even risky projects. But they’re not really here. That still, U.S. investment in Europe, in Eastern Europe – in Ukraine and the post-Soviet states, is not that large compared to the real potential.
I don’t particularly agree with that. I think that we’ve had large contracts recently from General Electric about locomotives, Cargill has just put over a $100 million into a new export facility, we do know that Bunge is continuing to expand. We know of a lot of companies that are here, beginning to expand. Some of these other countries and the companies, they’re just now kind of discovering Ukraine, but the U.S. companies have a long-run strategy. Particularly if the new government will implement land reform, privatization, de-monopolization, particularly in the infrastructure, the railroads, and the forest. That would substantially increase U.S. investment.
You mentioned the land reform. It’s a long-awaited reform by international business, but we see that there are ideas that for example the land won’t be sold to foreigners. How does that impact your view on how this reform is unfolding?
Well, the word ‘foreigner’ is about 100 years old and it’s out of date. These are not foreign companies. Coca-cola says ‘We’re an international company. We operate in 95 countries. We contribute to 75 Olympic committees.’ To be foreign is an outdated political word and should never be used again. Foreign is like the British when they settled into Hong Kong and they said ‘You give us Hong Kong for 100 years or we invade your country.’ That’s not the way these companies are. They’re not invaders. They’re not foreign. They’re not gonna come over here and try to steal anything. They are investors. They create jobs. They work all over the world. The land reform, sure, it should protect small landholders. It oughta protect some of the agribusinesses here that have gotten started, but international investors should have the opportunity to participate here. And anybody that says ‘These guys are foreigners, they’re gonna rob Ukraine’, they’re totally wrong, it’s totally wrong information and it’s totally misleading, and it’s going to hurt Ukraine bad. They’re not foreigners, they’re not invaders. They’re not going to take over Ukraine. That’s a concept that’s 175 years old. Unfortunately, it sticks in a lot of people’s minds here. But it’s totally misinformation.
But that’s still the government’s plan, to put this idea towards a referendum. They’re supporting the land reform, which as I mentioned earlier is long-awaited, but that could happen. Do you talk to the Ukrainian government on that topic? That it should be treated differently? And what potential do you think this opens up? What’s needed to ensure that this land reform really works?
Well, what we’re trying to do is establish a land market, we’re trying to give the people who own the land the rights to their property. It’s very important for investment and business that you have the right to own property, and you have the right to use that property. Right now the government has stolen that right from the people who own land for the last 28 years. It’s not right for the government to say ‘You can buy or sell your car, you can buy or sell your apartment, you can buy or sell your factory, but you cannot buy or sell your land.” That’s totally wrong, that’s totally counter-productive, and it’s cost Ukraine millions and millions of jobs and millions and millions of dollars worth of investment. What we’re saying to the government ‘You can work out a compromise here. You can protect some of these smaller companies, you can also bring in your large agri-businesses and protect all the investments they’ve made, but you could also have international investors.’ They bring the latest technology and seeds. They bring the latest farm machinery. They bring the latest grain elevators. They bring the latest market – they bring world-class technology. They bring money here. They’re gonna create economic value. They’re going to create jobs for the small towns. Everything is positive if you do it right. If they pass the land reform and do it wrong, they’re really gonna mess up things and they’re going to make it worse than it is now. It’s the most important piece of legislation for Ukraine. They need to get it right. They need to allow everybody to have a chance to play. And international companies should be able to launch their presence over time. They are a positive for Ukraine. It is a great bonus for Ukraine to allow international companies to come in here and work in the land market. It’s nothing but a plus.
What do you mean exactly by ‘doing it wrong’? Not letting the international companies in or something else? What are your concerns regarding this piece of legislation?
A big problem is that there’s not financing in Ukraine for financed land. So if you have 50 hectares, and you want to buy another 50 hectares, the financing is not really available. And to get the finances for operating – it’s very expensive. So the big problem is that Ukraine does not have – has a terrible, I mean very weak banking system, it has almost a nonexistent banking system or financial system to finance land. That’s the biggest problem. So we have to figure out some way where you’re protecting the smaller landowners, the smaller farmers, and help them have a way to finance if they want to expand. Then you have to make sure you just don’t upset or totally destroy all the large landholders that are producing most of the crops in Ukraine and you have to involve the international investors that are here now. The Swedes have been here, the Americans have been here, the Italians have been here, the French have been here. There’s a lot of them who have been involved in agricultural production and you have to remember that in the food system, the first half of the food system is where you produce the food, the second half is where you process it. 80% of all money in food is made in the 2nd half of the food system. It’s not the first half of the food system where you have land and production. The money’s in processing, and in warehouses, and in branding, and shipping to supermarkets. So these huge food empires that you have, 80% of the money’s in the 2nd half of the food system, not in the first half. But you have to put the whole thing together, and there’s a way to do it, but the biggest problem is the banking system is weak, the government’s never put into its plan anything to loan money on real estate, and loaning money on real estate is gonna be hard because its a new land market. You can’t mess up all the leases that are there now. So it is a very complicated issue, and it’s a very serious issue, and they better not get it wrong.
You’ve been here since the early 90s, and for all time, Ukraine has always been a ‘country with great potential.’ You know, like in the future it could realize this great potential. But it’s been a long time since we talked about this great potential. How have you seen the change in the country’s business environment, especially within the last years? 1127 Has it really become easier to work for international or American companies? What about in the last months, since we have the government? I know it's too short, but maybe there’s already been some sign for business?
Well, probably the best thing that’s happened in the new government is when they got control of Parliament because if you just had the presidency but not control of Parliament, they would not be able to move fast enough and pass the laws. When you wanna do major reforms, which the E.U. has been recommending, the United States, the business community, the President outlined all those reforms over the last 20 years that didn’t get done. The prime minister outlined all those that didn’t get done. Privatization, de-monopolization, land reform, court reform – you wouldn’t have any chance of getting all those done if you didn’t have control of Parliament. So the business community is very happy that the President got control of Parliament. Now you can pass the legislation you need. So the main positive is that the government now has for the first time the power to pass major reform. You don’t wanna do it too fast, but you don’t wanna do it too slow. Some of the new legislation is good – they need to get a new agreement with the IMF. They need to stop all this stuff on Privatbank. All these losses in the banking system, they gotta deal with that. They gotta keep the national bank independent. And quit playing around with that, it’s causing trouble with the international community. The international community is still very positive with the new president, and with the new parliament, and with the new sense of movement here, that they’re going to get the reforms done that we’ve been waiting 20 years for. That would unlock a huge investment opportunity here.
To what extent does new investment depend on the IMF loan?
It’s like a building block. Block 1, block 2, block 3, block 4. Block 4 was getting a new president with a new generation, which the people did. The people have spoken for the third or fourth time. ‘We want a better government. We want a better life. We want a better country.’ Then they spoke second, they said: We’re going to give the president control of Parliament. Then making sure the NBU is independent. Making sure they don’t mess up the Privatbank thing. And making sure to get an IMF loan. That’s another building block. Another building block is land reform. Another building block is privatization. Get rid of all these corrupt state companies. Another one is de-monopolization. Let the private sector also play the railroads and have railroad possibilities. Open up the gas market. Break up these huge monopolies that are stopping private investment out here, and improve the court system. The biggest problems U.S. companies have besides these is the Ministry of Infrastructure. The Ministry of Infrastructure is way too bureaucratic, too many rules and regulations. Nobody can own a railroad engine. Nobody can run a grain train. It takes 3 years and 89 different pieces of paper just to build a railroad spur to your plant, or to get permission on how you load a grain car. So the biggest impediments are in infrastructure building – the rivers, the roads, the railroads, the ports – they’re all bureaucratic, they’re all living in the past, and it’s hurting business, not just Ukraine-U.S. business, but all business is being curbed by an out-of-date, bureaucratic Ministry of Infrastructure and all the big corporations that they control that are government monopolies. So government monopolies are now a huge problem in energy, and ports, and rivers, and railroads, and particularly the major problem, and the major corruption, and the major one to stopping development is UZ, the railroad monopoly.
Now then, we look globally – there are countries at war, which have a lot more investment – which have a lot more international companies working, in areas where there is conflict. In Africa, in the Middle East, where the situation could be worse than in Ukraine in terms of the conflict. In countries with less democracy than in Ukraine – you mentioned Russia, as well, where you still have more foreign investors than in Ukraine. So how do you explain the absolute amount of foreign investment is relatively smaller than other countries that are less of a democracy, which are at war, and what could be done with that?
It’s very easy to explain because Ukraine is the only major democracy in the world that doesn’t have a market for land. It doesn’t have private land. That’s your number 1 asset, that’s your best asset, that’s the asset that performing less for Ukraine than any other major country you name, and it’s a major blocking to investment is the fact that you don’t have a land market. The second one is that you still have all these state monopolies. And these state monopolies don’t like the private sector. They’re trying to increase their monopolies, that’s where a lot of the corruption is. They say they like the private sector as long as it works for them. But not if they’re in competition with them. Foreign direct investment here is very low because of your no land reform, no land market. Your huge state monopolies, the fact that there’s been some instability. And the fact that your court system is been totally corrupt. And your court system does not protect property rights. If you just have one thing that says Ukraine’s not done, it’s the lack of protection for personal property rights – for land, for energy, for railroads, for banking, and particularly when you get into court cases. Hundreds of court cases – you couldn’t protect the rights to your land because the judges were corrupt. The new government says they’re going to change most of that. So it’s very easy to understand why foreign direct investment’s low – it’s easy to understand some things that need to be done to change that. We’ve been saying for a long time, it’s like beating on a drum, you gotta do something major and big. Land reform would be a major one. Breaking state monopolies would be another one. Not having a start-stop-stop-stop program with the IMF would be another. And unfortunately, a lot of the major changes here only came because the IMF said ‘No more money unless you do this.’ So at the last minute, the Rada would pass something, just to comply to get IMF money. They should’ve done it anyway. But there’s a new day here. There’s a new government. There’s a new parliament. There’s a new spirit. And the list of everything the Prime Minister said he wants to do, and the President, that’s the key to doing that quickly and properly to get a major boost in – I don’t like foreign direct investment, I like international investment – it’s all the international business community working here, they’re working in 60, 70, 80, 90 countries around the world. Ukraine is one more country that could be part of the international economic scene, not the foreign economic scene.
Have you met the prime minister and the president, and if so, what were your impressions?
We have met the president. The U.S.-Ukraine Business Council in September, we hosted the president up in New York during the United Nations meetings. We had 32 private businesses in to meet with him. He was very good, he made some opening comments, and then he mainly listened to 32 private businesses talk about their business in Ukraine, what they’d like to do here, and some of the impediments to the progress that they wanna make here. So the business community is very positive about the new president. The Prime Minister I haven’t met personally, but he’s met with business, and the main thing is that businesses want results. They’re saying ‘Okay, you’ve outlined these things, you said a lot of them are going to be done by December, it’s almost December.’ That was probably too optimistic. But they want to see building blocks. They want to see this done, this done, this done – not just talk. So this government has gotta be very careful. The honeymoon could be over, but they’ve gotta start putting more things that they’ve actually done and finished that the business community thinks is important to a better business environment. Right now it’s still very positive. We know it takes time to do these things. So there’s still lots of time, there’s still opportunity and everyone is looking forward to a much stronger economic system here that’s more integrated into the international economic system.
If to explain to the general public, what would be the spheres where in particular American companies are the strongest in Ukraine? What kind of business are they in?
U.S. companies are the strongest in the food system. They’re strongest in providing world-class farm machinery, world-class seeds, world-class crop protection supplies, all the major U.S. grain traders are in here. They process sunflower oil. They move high-value commodities out of here into the international markets, for instance, hard currency. The U.S. agriculture companies are the strongest ones here in terms of investment and in what pertains to the future, the U.S. also has a lot of consumer companies here, Pfizer’s here, and Johnson and Johnson’s here and Pepsi’s here, and Coca-cola. So in consumer goods and healthcare products, they’re also very very strong.
The issue which is now also discussed, the coming of U.S. companies to the energy market. Now it’s largely discussed that Secretary Perry in particular had been in Ukraine during the inauguration. But there are some concerns, such as that he provided the list of some of the American advisors working in the energy companies to the press. There was news that Secretary Perry’s supporters received some contracts here in oil and gas – how do you think this news is affecting the development? Some of this news could be seen as political influence or that his associates want to use it for business deals. Does this closeness to politics raise concerns? What could be the role of the U.S. in the energy sector?
It’s very unfortunate that this political issue that we have in the United States between President Trump and Mister Biden, and that Ukraine got caught in that. Ukraine’s been a total victim of that situation. We have many Americans that come here like Secretary Perry, and they have done exactly what they should do – they should’ve pointed out to the Ukrainian side that energy markets and monopolistic practices is not an open field, it’s not transparent, and it’s not open to international investors, which he did. He was suggesting various ways that the energy system could be opened up. It’s very obvious that there’s not one major U.S. energy company invested in Ukraine. They all came and they all left. It wasn’t just Mister Perry who talked to the E.U., who talked to the IMF, who talked to the World Bank – Mister Perry was saying exactly what all them were saying. We were trying to work together to open up the energy market for the people of Ukraine, so there would be more energy, so there would be more energy independence, so there would be more jobs and more wealth for the people for Ukraine, and that’s exactly what Perry was doing. When you get caught in a political mess, then everything gets distorted, and frankly a lot of these stories from the news media have not been accurate at all. They’ve put the total wrong spin on it, totally because it got caught up in politics. Your question is – Ukraine still needs reforms. The energy sector needs reforms. They need to open it up to international investors. Everything Perry was saying, was to open up to all investors, not just U.S. investors. If you open up the energy market. If you open up sharing agreements, any domestic company, and international companies around the world can have a better chance to compete and create more energy for Ukraine, and Ukraine’s never going to create all the energy they need without international investment. So it’s not just U.S. companies, it’s international investors that Ukraine needs. Everything that we’ve ever done is try to make a better business environment, and to make it easier to do business here. And bringing more investment is open to all investors all over the world, nothing’s restricted to U.S. investors. So the news media and all the pundits got it all wrong. Totally all wrong. Everybody is pushing for what’s best for Ukraine, to open it up, to create wealth, to create money, to create jobs for your people, which is very important.
Is a common practice for big Ukrainian companies to have in particular American and foreign advisors on their boards? We of course understand that there is the case of Hunter Biden and this question had been asked – is it a common practice? Is it usual to have the salary of $50,000 per month? I understand that it could depend on the company. But is it usual?
I wanna say that they’re not foreign advisors. You keep using that word foreign – they’re international advisors. They’re international-class advisors. Washington has thousands of people that are consultants to businesses around the world. They have thousands of people that are on boards around the world. So does England, so does France, so does Germany. Look who’s on that energy company board that Russia’s got to build that pipeline – five or six senior government officials from the government of Germany. It’s very logical and reasonable to have experts and people in government all over the world are hired by companies in developing countries and other places for their expertise. Sometimes this gets a little out of line, and I’m not saying anything bad about what happened here on this one high figure that you’re talking about – that may not be normal or usual. But in Ukraine where you’re trying to move from a Soviet system, a corrupt system, a system where certain interests controls everything to try to open it up, you do bring in international advisors. It’s not that you just bring in people from the United States, you bring in everyone. If you look at the Naftogaz board, if you look at the Ukrainexim boards, all these boards who have been trying to bring in international advisors to help them modernize. They’re not just U.S. They’re not foreign. They’re not evil guys, they don’t have horns. Everything is overblown. These guys are supposed to be hired when they’re required for their expertise and what they contribute, and it’s not limited in any way to U.S. advisors. But it’s very typical, it goes on all over the world, and there’s nothing evil or bad about it. I’m sure that anything that’s ever been done can be abused. There could always be bad uses of it. But basically it’s for improving business in Ukraine. You got British advisors here, you got French advisors here, you got E.U. advisors all over the place. You got people from Sweden and Norway. There’s all kinds of people that have been working here in Ukraine, not just U.S. citizens. And they’re not foreigners. They are people who are concerned about Ukraine, and who are international experts.
Mr. Williams – it’s true that Ukraine got in this unfortunate situation regarding U.S. domestic politics. But it’s everywhere in the headlines. How could this situation be used by Ukraine? Since there’s so much interest in the country?
We just had a meeting yesterday with Ambassador Bill Taylor. As you know, he’s been in Washington testifying in a very appropriate way. And he feels strongly that more people in the Ukraine in the United States than ever before. And he thinks that we need to continue to tell people about Ukraine. And if Ukraine conforms well here, and there’s no more fistfights in the Rada. And Ukraine always said ‘Oh well I’ll spend 10 million dollars on CNN to advertise about Ukraine.’ I said ‘No, just stop the fistfights in the Rada. That’s do more to lift opinion, because fist-fights are not – they make the 10 o’clock news. 10 million dollars worth of ads on CNN doesn’t do anything.’ Ukraine has to make sure that the positive news comes from. So all this in the long-run could be very positive for Ukraine.
/Interview by Nataliya Gumenyuk
/Text by Romeo Kokriatski