Trade deal with Ukraine a vote of confidence in country’s potential (Financial Post)

By Diane Francis 

LVIV, Ukraine – It’s hard to believe, while touring this charming medieval city, there’s a war raging in this country against Russia.

But the fighting is 25 hours’ drive east, and the psychology is even further away. There are reminders here and there, a memoriam to a lost loved one or volunteer soldiers in fatigues.

Lviv is Ukraine’s “west”, in more ways than geographically. The city has population of 800,000, more than a dozen universities and enterprising people with world-class businesses and skills. Along with Kiev and others, this region illustrates why this week’s Canada-Ukraine free trade agreement is a splendid idea. It’s a national vote of confidence by Canadians in Ukrainians, with a very credible upside.

 

Ukraine has two principal assets: One-third of the world’s rich “black earth” as well as an over-sized share of brainpower. The level of Literacy is 99.7 per cent, the education rate is the world’s fourth-highest and every year 16,000 software experts and 130,000 engineers graduate.

 

But it’s a country of contrasts. Just outside Lviv, I took a photo of two farmers in a horse-drawn cart commuting between fields. Despite such primitive conditions, Ukraine remains the world’s biggest producer of grains, sunflower oils, mushrooms for Europeans and is now blanketed with apple orchards and processing plants to produce juice and cider. The biggest upside for its agri-business is that the European Union has given the country full access to its market next year.

 

But the country’s human capital has found a major niche and been succeeding despite war and corruption. The world’s fourth-biggest cluster of certified IT professionals is here, after the United States, India and Russia. There are 100,000 software engineers and architects, proficient in English, building products and doing research for clients around the world.

 

One successful entrepreneur is Andrew Pavliv (who I met recently in Silicon Valley). He is CEO and founder of N-iX, with offices in Lviv, Sweden and Bulgaria. “We have long-term relationships, years in many cases, and 95 per cent stay with us to the end of their projects,” he said. We want to create a community, and encourage young people to embark on IT careers

 

Such commitments require stability and Russia since the seizure of Crimea and eastern violence, is losing out to Ukraine. Likewise, the war has displaced 1.3 million people including thousands of IT experts who have resettled in Lviv or Kiev.

 

N-iX has grown to 200 employees since 2002 and – like other software professionals – many are rallying to the country’s cause. Ukraine now has the world’s first “geek army” of thousands of volunteers who are helping rebuild and repurpose the rag tag national army. A succession of Russian puppets posing as Ukrainian Presidents downsized its forces and sold off its equipment to foreigners for personal gain.

 

“I would not really say that we are involved in the IT war effort much as a company, but some of our people are volunteering, and we support this,” Pavliv wrote.

 

His firm occupies three floors in a Soviet-style building with a security guard but no chairs or cheer in its lobby. However, Pavliv’s firm is an oasis right out of Silicon Valley with high ceilings, plenty of natural light, open plan seating, clumps of chairs for meetings, a spacious kitchen and a large room with gym equipment, video games, fussball and cots tucked away for those with client meetings in the middle of the night.

 

“We are 40 per cent to 50 per cent cheaper than Western countries but these people make the highest wages in Ukraine and clients pay hard currency,” said a spokesman.

 

“When the mess started a year ago we lost 20 out of 200 [to immigration], just one per cent, but the mood is less negative and we’ve stabilized. And people, and clients, are relocating away from the militarized zone. We’ve gotten a few people from there.”

 

Lviv is also embarking – with its mayor and the Ukrainian Catholic University – on a strategy of growing the sector. The university launches the country’s first computer sciences degree this fall and offers a Masters of Technology Management degree; and the city is providing facilities for startups, incubators and public land to build IT House, a bargain-rate condo residence that will eventually house nearly 300 IT professionals and their families.

 

“We want to create a community, and encourage young people to embark on IT careers,” said Stepan Veselovskyi, an IT entrepreneur who heads these initiatives on behalf of Lviv’s existing community of 16,000.

 

Most important, this sector proves that Ukrainians can match the best. It’s not coincidental that where corruption and meddling has been absent, Ukrainians create wealth and excellence. We are 40 per cent to 50 per cent cheaper than Western countries but these people make the highest wages in Ukraine and clients pay hard currency

 

The backdrop to trade deals is that the new government in Kiev is trying to eradicate corruption, but progress is slower than many want.

 

It’s tragic that Ukraine – the largest country in Europe, twice the size of Germany – has become Europe’s biggest under-achiever. Incomes are $3,082 per year, roughly the same as the West Bank’s. Meanwhile, Poles next door enjoy nearly five times’ more.

 

So far, the new government has tackled major problems: firing crooked traffic cops en masse (prosecutors and judges should be next); cleaning up its dirty natural gas monopoly that looted the national treasury; rebuilding its army with volunteer help; closing 50 dirty banks that laundered money; chopping regulations that gave officials shakedown opportunities; and appointing foreigners to undertake tough reforms.

 

Such reforms remain a priority. Ukrainians have staged two revolutions since independence – 2004 and 2014 – to rid themselves of the rot within. The next time won’t be peaceful because these 45 million people, gentle and smart, simply will have run out of patience.

 

Financial Post