Foreign capital needs to be secure and respected in Ukraine
As we approach the second anniversary of Russia’s full-scale invasion of Ukraine, we must ask ourselves whether we are doing enough to support Ukraine and how we can contribute to the reconstruction of the country.
Supporting Ukraine in its fight against Russia and in its reconstruction has shaped our daily agenda at Ferrexpo for the last 22 months. The changes that we have made during this period have made us more adaptable and taught us to react fast to rapidly changing circumstances. The war and the constraints that it has imposed - in particular, the supply of energy and the disruption to logistics – have sometimes forced us to work only at a quarter of our full capacity. Despite this, we have been able to maintain our operations and continue to make a significant contribution to the Ukrainian economy.
Even though it is hard to think beyond the reality of today’s war, we are committed to developing our business. We intend to restore capacity to pre-war levels and plan to invest up to $3 billion to almost double our production thereafter. Ferrexpo’s high-grade iron ore pellets can be an important commodity that will contribute to the reconstruction of Ukraine and be the key contributor to green steel production in Europe.
In the meantime, we face several serious challenges. The first is human resources. The war has taken its toll on the business because some of our employees have left to fight, and others have left the country altogether. Our priority is to continue supporting all our workers through this difficult time, ensuring, in particular, that we reintegrate those who return from the army, and provide training to new staff so that we keep our operations running and provide much needed employment.
Currently, approximately 10% of our employees (around 750 people) are serving in the Army. Tragically, 34 have died since the beginning of the full-scale invasion. 50 of our colleagues have been demobilized and returned as veterans, 30 of them have re-started work.
We have introduced several measures to help us hire and train new people. It is now possible to acquire a working specialisation in our corporate educational centre in just three months. By investing in these projects, we are not just developing qualified personnel for Ferrexpo, we are contributing to the expansion of skills that will be needed to rebuild Ukraine.
Ukraine has already started re-building infrastructure damaged or destroyed by the war. Yet the substantial funding required for large-scale reconstruction will only arrive when Ukrainian and international private investors see reduced risks to their capital. Foreign businesses must also have certainty that the country is sufficiently defended from external attack and that robust legal mechanisms are consistently in place to uphold investor rights.
If foreigners see businesses harmed they will take their money elsewhere. Without foreign investment, reconstruction will be limited and economic growth will be slow.
For this reason it is important that the Ukrainian authorities treat fairly the foreign investors who are already in the country and who are contributing to the economy and helping Ukraine remain resilient against Russia’s aggression. Making foreign capital safe and welcome is an investment in Ukraine’s future security.
Unfortunately, Ferrexpo is experiencing unwarranted interference in our operations by the Ukrainian law enforcement agencies. Ukrainian courts have frozen shares in of our main subsidiaries as part of an effort to recover assets from Kostyantin Zhevago, Ferrexpo’s founder. These asset freezes violate Ukrainian law since the shares in the subsidiaries are owned by Ferrexpo AG, a wholly owned Swiss subsidiary of Ferrexpo plc, which is a FTSE 350 company, listed on the London Stock Exchange. As such, they are not the exclusive property of Mr Zhevago.
The dispute between Mr Zhevago and the Ukrainian authorities has nothing to do with Ferrexpo plc. Targeting Ferrexpo plc subsidiaries in Ukraine is also a violation of the legal principle that a company has a distinct and separate legal personality from its shareholders.
By such actions, the Ukrainian law enforecement agencies are penalising the international shareholders who are invested in Ferrexpo plc. These are global pension fund managers, and the many taxpayers who today are contributing economic and military support to Ukraine, and who in some cases, require persuading that their support is well spent.
As we look to the year ahead, and Ukraine focuses increasingly on the task of economic reconstruction, government and business must work together to agree the steps needed to create the investment environment that will help rebuild Ukraine quickly and faciliate the path to EU membership.
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Read the original article on The New Voice of Ukraine
