Posts Tagged ‘Business’

Ukraine Test Drive: Zaporozhets versus Aston Martin Vantage S

Ukraine Test Drive: Zaporozhets versus Aston Martin Vantage S

February 3, 2011  |  Comments Off

Driving through the nondescript industrial city of Zaporizhia, situated on the Dnipro River, that is famous for the production of the Zaporozhets motorcar— a sort of Soviet Beetle and the cheapest car they produced — I was reminded of a Ukrainian friend whose boyfriend owned one of the vehicles.

“My mother was insistent I should marry him on account of his politeness,” she recounted to me. “He always opened the car door for me. What my mother didn’t realise was that the workmanship was so poor; he was the only one who could do it! In all other things, he was a real rascal.”

The company started life in 1908 as a producer of combine harvesters and quickly became the largest in the world. But by the late 1950’s the production shifted to the relatively new market of motor cars, and in particular the small car. The Zaporozhets quickly became the dream of many Soviet men.

Nowadays, it is an everyday sight to see the pre-1994 Malysh (meaning ‘little one’), with its air-cooled 746cc V4 engine, trundling along the highways of Ukraine. The factory continues to operate and manufactures more than 100,000 cars per year.

In contrast, I read with interest last week that Aston Martin has officially opened the doors to its first dealership in Ukraine, in Kyiv. Eager customers can wait in line to order the latest V8 Vantage S, powered by a 4,700cc V8 engine. Though the dealership won’t discuss the price over the telephone – which made me think, “If I need to ask, I shouldn’t be asking” – the price in the UK is approximately £105,000 for the standard Coupe version.

Out of curiosity I made a comparison.

Now, all things being equal you would expect Aston Martin to operate in those countries where the richest customers live. Including Ukraine, they now operate in 41 countries worldwide. But, Ukraine ranks 135th in the world in GNI per capita (gross national income per capita).*

Taking it a step further, if we compare the GNI of the UK versus that of Ukraine, the Vantage S Coupe costs only 4 times the average annual income in the UK versus 43 times in Ukraine. By comparing disposable income the gap is considerably wider.

The reason, of course, is income inequality. And for those interested in learning more about this fascinating country, you can do no better than to read the chapter “Steamy Business” in my book Among the Ukrainians, where I make the case that Ukraine has more billionaires than Russia, and is second only to the USA.

Well, after an exhaustive comparison of the two cars, on paper at least, I think the Aston Martin is the better car. The Malysh has the disadvantage of coming in only a limited number of colours, but on Ukraine’s decrepit roads it should outlast the Aston Martin. Um? More thought necessary, I think…

*2009 Report, World Development Indicators database, World Bank, 15 December 2010

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Steamy Business

Passport to Nowhere

Passport to Nowhere

May 13, 2010  |  Comments Off

When my Ukrainian friends respond to news with a mixture of laughter, embarrassment, and disbelief, I know it’s worth taking note.

Recently there was just such a story on the evening news. The company responsible for the printing of Ukrainian international passports-a serious job that has national security implications-said that it could no longer continue to produce them since it was owed several million US$ for work performed in 2009. They had not been reimbursed a single kopek and could no longer pay their workers.

The spokesman for the company said that they regretted the action, and they recognised the disruption it would cause to people waiting for their passport to be issued, but they had exhausted all lines of communication with the relevant government department. Hundreds of passport applicants were affected: students wishing to study overseas, fiancés due to get married in foreign places, Ukrainians intent on seeing the Winter Olympics in Canada, and so on. Many had bought air tickets, enrolled on foreign study courses, and made other financial commitments. A smorgasbord of emotions, financial commitments, and worries about the future was a potential tinder box.

The spokesmen for the administration criticised the company for their lack of responsibility and insensitivity to their clients. But it was what followed that elicited the mixture of laughter, embarrassment, and mild disbelief of my friends. The administration spokesman said the printer had put the government in the embarrassing situation of having to appoint another printer, a task that would not be easy given the specialised nature of the work.

The obvious question is, what happened to the passport fees collected by the administration? But the story highlights the more deep seated issue, which is, why should companies invest in Ukraine when there is no confidence that they will be paid a return for that investment?

Steamy Business

Steamy Business

March 17, 2010  |  Comments Off

Making the Chapter:

If there is one image that encapsulates the realnost of post-Communist Ukraine it is that of the oligarch rising to prominence as a result of opportunism and thuggery, whilst the beleaguered proletariat are traumatised by change they cannot understand or control. In Steamy Business I venture into the male bastion of the bathhouse, or banya. This informal venue – host of many business decisions – was informally banned to government officials during the Yushchenko presidency. There, I take a longer view on the rise of the rich and uncover how people became secret millionaires under Communism, and how money, and the desire to flaunt it, was a driving force in bringing down the Soviet Union. We also take a look at where the Austrian economists, who feature so much in the debate about the world’s current economic problems, really came from.

Excerpt:

I recalled that with hindsight it was now clear that Perestroika fed two contradictory demands that were its downfall. Civil society had hoped that it would bring greater democracy, whereas the rich thought it would legalize their privilege and enable them to live openly. The tension created by the open display of wealth quickly led to a rise in criminal violence and gangs that nowadays so epitomizes the post-Soviet republics.

Andrei continued, saying, “Most of those who became businessmen after World War II had been marginalised by the Communist Party. Perhaps they were Jews who were prevented from taking responsible positions in Government or others that didn’t have professional or academic standing. As the Soviet archives continue to be opened, legal cases are now coming to light of businessmen who amassed millions and were arrested, tried, and in some cases executed. In a society where everything was regulated, knowing that you had achieved something provided a tremendous inner freedom and defined who you were.”

“But how did they become rich?” I wondered.

At that moment one of the older men opened a hatch and threw water into the opening. The roar of steam being created temporarily drowned our voices and moments later a wall of heat hit my body, searing my skin. Surely this was how the universe had originally come into being, I thought.